Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 14, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Wealth tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Advances given by a company to its shareholders should be treated as payment out of accumulated profits of the company, whether capitalised or not, and must be treated as dividend and would go to reduce the tax liability - HC
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Deduction u/s 80P of the Act - the expression “the amount of profits and gains“ used in sub-section (2) of section 80P cannot be understood in a different sense - HC
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Share of member from Association of persons (AOP) - Return of loss u/s 80 - The relief that has to be considered for the purpose of Section 67A is not dependent on Section 80 - HC
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Reopening of Assessment – Claim of depreciation was not considered earlier - if there is no sanction as required under section 151 of the Act, the reopening would still be permissible - HC
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Lifting up of corporate veil - Recovery of amount u/s 179 from the director – Hin absence of any previous material indicating that the show cause notice and any bipartite hearing on such issues by the Income Tax Officer, such question need not be gone into. - HC
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Personal liability of directors due to negligence on their part - Provision of Section 179 of IT Act are not appliationto Deemed public limited company due to S. 46A of the Companies Act, 1956 - HC
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Chit Fund - Income from chit dividend – dividend income received over and above what had been subscribed by the assessee liable to be assessed as income of the assessee - HC
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Mat credit – MAT credit should be given before charging interest under Sections 234B and 234C of the Act - HC
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Contribution made to PF - the word “contribution” used in Clause(b) of Section 43B means the contribution of the employer and the employee - payment made before due of filing of return allowed - HC
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Allowability of deduction – the claim of provision for warranty stating that with making of provision on the basis of estimated present value of contingent liability holds good during the assessment years in question qua warranty claims - HC
Customs
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Enhancement of declared FOB value - revenue cannot pick and choose depreciation method in respect of some parts and adopt the Chartered Engineer’s assessed value in respect of some other parts/components - AT
Wealth-tax
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Deletion of penalty U/s. 18(1)(c) of the W.T. Act - just because there was a difference in opinion in the method of valuation and a subsequent variation in valuation, that would not tantamount to furnishing of inaccurate particulars of wealth - HC
Central Excise
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Whether the installation and Commissioning charges in respect of Packing and Wrapping Machines manufactured by the respondent are required to be added in the assessable value of the same or not - Held no - AT
Case Laws:
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Income Tax
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2014 (3) TMI 404
Computation of STCG and LTCG - Purchase and sale of shares through PMS - Whether the CIT(A) has erred in confirming the action of the AO in assessing short term capital gains & long term capital gain earned by the appellant on sale of shares and securities through Portfolio Management Services under the head “Income from Business or Profession” – Held that:- The decision in Shri Nalin Pravin Shah, Shri Manan Nalin Shah Versus Addl. Commissioner of Income Tax [2014 (1) TMI 708 - ITAT MUMBAI] followed - PMS Manager was authorized to purchase, acquire, obtain, take, hold, sell, transfer, substitute or change all or any of the investments made on behalf of the assessee - PMS Manager was also authorized to hold all or any of such investment in his name or at his discretion on behalf of the assessee and make every effort to maximize the value of investment - The PMS Manager was required to provide the assessee with quarterly statement of investment - the PMS Manager had sole and absolute discretion to make investment for and on behalf of the assessee and the assessee had no role to play - The assessee had not taken any borrowed funds for placing money with the PMS Manager - the average holding period of the shares was more than two months - the income earned from PMS has to be assessed as capital gain - STCG earned by assessee and LTCG earned by assessee on sale/purchase of shares and securities through PMS is to be assessed under the head “capital gains” and not as business income of the assessee - the department has not been able to bring any distinguishing facts – thus, the order is liable to be set aside. Sale of shares - Income from business or income from capital gains - Whether the CIT(A) has erred in assessing the short term capital gains and long term capital gain earned by the appellant on sale of shares and securities carried out independently under the head “Income from Business or Profession” - Held that:- The treatment in the books of an assessee will not be conclusive and if the volume, frequency and regularity at which transactions are carried out indicate systematic and organized activity with profit motive then it becomes business profit and not capital gains – Whether a particular holding is by way of investment or form part of stock-in- trade is a matter within the knowledge of the assessee and it is for the assessee to produce evidence from the records as to whether he maintained any distinction between shares which are held as investment and those held as stock-in-trade - The important factor is the intention of the assessee at the time of purchase, which has to be gathered from the actual conduct of the assessee while dealing with the shares subsequently and not only on the basis of entry in the books of account – Decided in favour of Assessee.
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2014 (3) TMI 403
Disallowance of provision for outstanding expenses – Held that:- The CIT was of the view that the assessee has restricted the disallowance on the ground that the assessee has made payment before finalization of books of account but for the amount of credit note has been issued or actual payment has been made after finalization of books of and the balance amount was written back on 31.3.2011 –thus, the total amount liability has not been ascertained and quantified till the finalization of books of account – the assessee did not dispute the fact that the above amount which has been disallowed by CIT(A) was ascertained and crystallized after finalization of books of account in the next financial year - thus, there is no reason to interfere in the findings of CIT(A) – Decided against Assessee. Proper compliance of provision of section 145A of the Act – Method of valuation - Whether the CIT(A) (A) erred in holding that the provisions of section 145A of the IT Act, 1961 have not been adopted by the appellant fully and thereby directing the AO to recompute the profits of the appellant in respect of unutilized modvat – Held that:- CIT(A) has wrongly/due to typographical mistake has mentioned that as per section 145A, the assessee has followed compulsory exclusive method as against practice of following the same by inclusive method - CIT(A) after considering the submissions of assessee has directed the AO to recompute the profit after making adjustment with reference to the opening stock, closing stock, purchases and sales after considering the Modvat credit available to the assessee which is to be included while valuing the closing stock - The unutilized modvat is not to be included in the closing stock as the assessee has adopted exclusive method in respect of purchases of raw material and accordingly, the closing stock has been valued – thus, the addition of unavailed modvat credit set aside – Decided in favour of Assessee.
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2014 (3) TMI 402
Rejection of application for grant of certificate u/s 80G of the Act – Held that:- The satisfaction qua the genuineness of the activities of the applicant fund/institution as an independent condition, even as it is open to be argued that the same, i.e., the said satisfaction, is not a separate or independent condition, and has to lead to a finding as to the non-fulfillment of any of the conditions specified in clauses (i) to (v) of section 80G(5) inasmuch as an order rejecting the application u/s. 80G(5)(vi) has to record a finding to that effect, along with the reasons for the same - Relying upon CIT vs. Sarladevi Sarabhai Trust [1988 (3) TMI 53 - GUJARAT High Court] - the assessee-trust as a matter of regular course made donations out of its corpus funds, thus dissipating them, while the same are required to be retained and/or capitalized, forming part of the capital structure of the recipient - The activities of the assessee would qualify for exemption only subject to application u/s. 11(1)(a) – thus, the competent authority is directed to grant approval u/s. 80G(5)(vi) – Decided in favour of Assessee.
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2014 (3) TMI 401
Disallowance of claim of “Miscellaneous provision” - Held that:- The deduction towards “Miscellaneous provision” made by the assessee may be allowed to an extent - the submissions made by the assessee and the copy of voucher produced have not examined or considered by the AO – thus, the deduction of Rs.22,81,707/- may be allowed to the assessee after due examination of the transactions relating to its payment – thus, the order of the CIT(A) set aside and the matter remitted back to AO to allow the claim to the extent directed - the balance amount has already been offered as income in the succeeding year - Since the very same amount is getting taxed in the year, it is required to be excluded from the total income in the succeeding year since, under the scheme of Act, double taxation of same income is not permissible – Decided partly in favour of Assessee.
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2014 (3) TMI 400
Re-opening of assessment u/s 147 of the Act – Addition made u/s 69 of the Act – Held that:- The AO issued notice under section 148 of the Act instead of invoking provisions of section 153C, the proceedings stand vitiated - When it was pointed out that section 153C is not applicable in the instant case because the documents/books of account seized do not belong to the assessee, the learned counsel for the assessee did not seriously press his contention but raised an alternative plea that even for initiation of proceedings under section 148 of the Act. Revenue could not furnish the contents of the assessment made in the case of D.Y. Patil group or the reasons recorded in the Settlement Commission’s order - It is not known as to whether the D.Y. Patil group has accepted the cash entries as unexplained income in their hands or claimed it as donations received from students - No material could be placed to indicate that in the case of educational institutions it is a standard practice to collect donations and in fact donations were collected from several parties and some of them have accepted that they have made the payment and in respect of others proceedings were initiated by the Assessing Officer’s concerned. The explanation of the assessee with regard to would not be of any help to justify the reduction of addition - This also shows the lacklustre attitude of the AO and the routine manner in which addition was made by the AO, which was routinely approved by the CIT(A) - The assessee consistently pleaded before the Tax Authorities that no material was placed before him and no opportunity was given to him to controvert the material collected by the AO, which was the basis for making the addition - In the absence of any material placed by the revenue, there is no basis for making the addition – also, in the absence of any efforts made by the Revenue it may not be proper after long lapse of time to send back the matter for further investigation as it would amount to paying premium by the assessee for lethargy of the Revenue – thus, the additions made by the AO set aside – Decided partly in favour of Assessee.
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2014 (3) TMI 399
Wrong claim of credit of TDS - Addition of closing balance of customer advance – Held that:- The receipt of the amount being advance for mobilization would not change the work actually completed by the assessee till the end of the financial year relevant to the assessment year under consideration - The advance is not for the work completed but it is only the advance to be adjusted over the period of term of contract as per the terms and conditions agree between the parties - the receipt of amount does not effect the income recognize on mercantile system of accounting and as per AS-7 - the addition made by the authorities were purely on the ground that the assessee has claimed credit of TDS in respect of advance receipt is highly arbitrary and unjustified when the assessee has withdrawn the said claim though, it was not allowed by the AO – thus, the AO is directed to delete the addition made on account of wrong TDS claim and disallowed the credit of TDS claimed by the assessee. Disallowance u/s14A of the Act – Held that:- The Assessing Officer has not given specific finding that the assessee has utilized the borrowed fund for the purpose of investment in the mutual fund yielding the exempt dividend income - Thus, the disallowance of interest u/s 14A is set aside and the matter remitted back to the AO for a limited purpose of verification - Rule 8D is applicable for the year under consideration therefore, the disallowance of administrative expenses has to be computed as per the formula provided in Rule 8D - the disallowance work out under Rule 8D cannot exceed the total expenditure claimed by the assessee which can be apportioned to the exempt income – thus, the AO is directed to recompute the disallowance. Disallowance of community development expenditure – Held that:- The AO has shown total disregard and defiance to the orders of the FAA by picking and choosing the particular words instead of the finding of the Appellate Authority - the AO has acted in a most irresponsible manner - When the Assessing Officer did not choose to challenge the order of the CIT(A) then it is highly inappropriate to not give effect to the same – thus, the AO is directed to allow the claim of the assesse - Decided partly in favour of Assessee.
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2014 (3) TMI 398
Cancellation of penalty u/s 271(1)(c) of the Act – Manufacturing activity stopped – Claim of depreciation rejected - Held that:- The assessee could not be said to be lacking in bonafide when it made the claim for depreciation because at that stage, its intention to abandon the manufacturing activity was not in fact crystallized – Relying upon Addl. CIT v. Rajindra Flour and Allied Industries P. Ltd. [1980 (9) TMI 75 - DELHI High Court] - the intention of the assessee not to carry-on manufacturing activity was in fact borne out not only in the order in question but also in subsequent orders and that the claim for depreciation was inherent and known - Thus, it attracted Section 271(1)(c) of the Act - The claims of depreciation is also to be viewed in the light of the “block of assets” concept introduced w.e.f. the assessment year 1988-89 – Decided in favour of Assessee.
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2014 (3) TMI 397
Deemed dividend u/s 2(22)(e) of the Act - Substantial business - Whether the findings of the ITAT that money lending does not constitute 'substantial business' of the lending company is correct – Held that:- Neither the company nor the assessee having the license of money lending business - Any payment by any company of any sum representing a part of the assets by way of advance would come within the mischief of deemed dividend - deposits made by a closely-held company would also be covered by the expressions advance or loan - Advances given by a company to its shareholders should be treated as payment out of accumulated profits of the company, whether capitalised or not, and must be treated as dividend and would go to reduce the tax liability. Whenever such tax liability is required to be determined as observed in the case of CIT vs. Narasimhan G. [1998 (12) TMI 5 - SUPREME Court] - the assessee has failed to establish that substantial part of the business of the company is money lending - When it is so then we finds no reason to interfere with the impugned order passed by the lower authorities who have rightly observed that the amount is to be included in the income of assessee as deemed dividend under Section 2(22)(e) of the Act – Decided against Assessee.
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2014 (3) TMI 396
Deletion on account of claim of bad debts u/s 36 (1) (viia) r.w.s. 36 (2) of the Income Tax Act.– Held that:- Provision for doubtful debts written back has to be seen in the context of whether the provision had been allowed as deduction in order to determine the taxability at the later point of time of write back – Relying upon Commissioner Of Income-Tax Versus Lal Textile Finishing Mills Pvt. Limited [1989 (5) TMI 30 - PUNJAB AND HARYANA High Court] – thus, the deduction was not allowed - the condition precedent for application of Section 36 (1) (viia) and 36 (2) on the one hand are applicable and the Section 41 (4) would not apply – Decided against Revenue. Deduction u/s 80P of the Act – Held that:- The circumstance that the provision for bad debts was either added back or not added back would be irrelevant, since the deduction is with reference to the income from the activities listed in Section 80P (2) which is part of the gross total income – the decision in Commissioner of Income Tax vs. Nagpur Zilla Krishi Audyogik Sahakari Sangh Ltd. [1992 (9) TMI 18 - BOMBAY High Court] followed - the words "gross total income" referred to in section 80P(1) must be given the defined meaning which means total income computed in accordance with the provisions of the Act, but before making any deduction under Chapter VI-A or section 280-O - Computation in accordance with the provisions of the Act must mean computation in accordance with section 29 - the expression "the amount of profits and gains" used in sub-section (2) of section 80P cannot be understood in a different sense - The expression must mean income as computed under section 29 – thus, there is no substantial question of law arises – Decided against Revenue.
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2014 (3) TMI 395
Set off of depreciation loss – Share of member from Association of persons (AOP) - Return of loss u/s 80 - Held that:- Section 67A of the Income Tax Act no doubt uses the phrase 'computation' of total income of the association having relevance to the computation of a particular share of income of persons in body of individuals – the apportioning of the share of a member in the income or loss of the association or body under the various heads of income has to be in the same manner in which the income or loss of the association or body has been determined under each head of income - determination of loss or income at the hands of association or body of individuals leads to the determination of the same at the hands of the member in his assessment and such determination of the share of the income of a member in the association is not left to the computation by the individual member in his return showing his share of income. The AOP in which the assessee was a member had not chosen to declare the loss within the time prescribed under the provisions of the Act by filing a return - The assessee was entrusted with the task of availing the loan and organising the affairs of the AOP - When the AOP was under the legal obligation to file its return declaring loss or income and had defaulted in filing the return within the time prescribed, the assessee cannot take advantage of the absence of reference of Section 67A in Section 80 of the Income Tax Act - The relief that has to be considered for the purpose of Section 67A is not dependent on Section 80 - Section 80 has nothing to do with the computation to be done under Section 67A by the assessee - the computation on Section 67A has to be done in the manner prescribed and the provisions of Section 67A is not dependent on what has been given under Section 80 of the Income Tax Act – Decided against Assessee.
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2014 (3) TMI 394
Application of Proviso of section 145(1) of the Act - estimation of GP Rate in relation to manufacturing of Dhodha a renowned sweet - Rejection of books of accounts – Held that:- ITAT upheld the view of the CIT(A), the CIT(A) in estimating total sales, application of G.P. rate and in granting a relief is most reasonable and well discussed and is based on the proper analysis of facts and the circumstances of the case of the assessee – The weight of sweets manufactured is estimated after giving a discount of 10% on account of burning losses, pilferage, wastage and other factors like consumption of milk and milk products etc. by the assessee's employees - The weight of dhoda manufactured is taken to 65% and weight of other sweets is taken at 35%. This is being taken at estimated figure since assessee has not disclosed the formula for manufacturing dhoda being a trade secret - the entire issue concerns facts and attending circumstances and there is no legal issue for consideration – Decided against Assessee.
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2014 (3) TMI 393
Disallowance of huge commission paid to relatives being nephew - Interpretation of Sections 2(41) and 40A(2)(b) - genuineness of expenses - Whether the relationship of the Assessee and Sh. Anil Kumar Gupta not falling within the ambit of Section 40A(2)(b) the disallowance of expenditure by ignoring the provision of Section 2(41) of the Income Tax Act can be legally sustained – Held that:- The Tribunal had come to a definite finding that it was not on account of being a nephew of the assessee that he was paid such huge commission. It is also clear that it was well within the cognizance of the Tribunal that a nephew was not included in the term 'relative' as per Section 2(41) of the Act. This aspect is not at all concerned with regard to rejection of plea of the assessee and with making of addition in his income. It was on entirely different grounds. All the three revenue authorities on facts had come to one and the same conclusion and there is concurrent finding that payment of commission shown in books of accounts of the assessee was merely a subterfuge to reduce the tax liability of the assessee – as such no substantial question arises from the appeal – Decided against Assessee.
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2014 (3) TMI 392
Reopening of Assessment – Claim of depreciation was not considered earlier - Held that:- The revenue has met with both the grounds of the petitioner - the original file containing the reasons recorded shown - statement cannot be read out of context and in any case as explained in the affidavit would not mean that the reasons were not recorded before issuance of notice - The original assessment was not framed after scrutiny - The issue of depreciation on meters and capacitors therefore was never examined by the Assessing Officer - The question of change of opinion therefore would not arise. Relying upon Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. reported in [2007 (5) TMI 197 - SUPREME Court] - reopening in such a case would be permissible - The additional legal contentions raised by the assessee are based on factual matrix, foundation for which has not been laid in the petition - if there is no sanction as required under section 151 of the Act, the reopening would still be permissible – the findings of the ITAT upheld – Decided against Assessee.
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2014 (3) TMI 391
Lifting up of corporate veil - Recovery of amount u/s 179 of the Act from the director – Held that:- The show cause notice is bereft of any details - It merely calls upon the petitioner to show cause why tax recovery, which could not be made from the company be not made from him under Section 179 (1) of the Act - in absence of any previous material indicating that the show cause notice and any bipartite hearing on such issues by the Income Tax Officer, such question need not be gone into. Even from the order under section 179, we do not find that the Assessing Officer had based his case of lifting the corporate veil, as was referred to by this Court in case of Pravinbhai M. Kheni [2012 (12) TMI 494 - GUJARAT HIGH COURT] The order u/s 179 of the Act set aside – Decided in favour of Assessee.
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2014 (3) TMI 390
Personal liability of directors due to negligence on their part - Deemed public limited company - Application of section 179 - company had ceased to be a private company by virtue of provisions of section 43A of the Companies Act – Held that:- It was not a case of the Assessing Officer that the facts asserted by the petitioner were not correct or that for any other reason, the company had not become a deemed public company under section 46A of the Companies Act, 1956. – the decision in M. Rajamoni Amma and another v. Deputy Commissioner of Income tax (Assessment) and others [1992 (2) TMI 3 - SUPREME Court] followed. The Company being a public limited company, proceedings against the directors for recovery of the tax due from the company cannot be taken, and certainly not proceeded with, under Section 179 of the Income Tax Act, 1961. - Decided in favour of Assessee.
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2014 (3) TMI 389
Deduction of interest u/s 80HHC of the Act – Income of interest from the FDRs - Held that:- The ITAT has not gone into the merits of the case, nor the issue of consistency as alleged by the assessee or the applicability of the decision in COMMISSIONER OF INCOME TAX Versus SHRI RAM HONDA POWER EQUIP [2007 (1) TMI 86 - HIGH COURT, DELHI] - While the CIT (Appeals) did deal with the application of the judgment in Shri Ram Honda, the ITAT has taken a liberal and beneficial view of the matter by remanding the case to the AO to reconsider the assessment in light of that decision and the conclusions reached as regards interest income in previous years, as the order dated 27.10.2008 was silent on that question - The ITAT has not made any findings in the order, let alone determined or discussed any issue of fact or law relevant to the assessment of interest income in the case – no substantial question of law arises for adjudication – Decided against Assessee.
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2014 (3) TMI 388
Claim of exemption u/s 28(iii) of the Act– Income derived from chit dividend – Held that:- The assessee is just a subscriber to the Chit Scheme – thus, it is difficult to draw the principle of mutuality to hold that the surplus received as by way of dividend was merely distribution of what was contributed by the assessee – Relying upon Soda Silicate and Chemical Works vs. CIT [1989 (4) TMI 63 - PUNJAB AND HARYANA High Court] - chit transaction being one, where the members of the chit made contributions to the fund by monthly installments and receive lumpsum amount, but at a discount - the discounted amount would be distributed to the members as dividend and the contribution made to the chit fund - the contribution made to the chit fund could not be treated as business expenditure or the receipt of lumpsum amount or the dividend could be regarded as business activity of the assessee - the nature of the business of the assessee, the Court held that the receipt from the Chit fund could not be regarded as 'income from business activity' – the order of the Tribunal is upheld in disallowing the assessee's claim of loss in the chit fund during the year. Principle of mutuality – Held that:- The decision in CIT vs. Bankipur Club Limited [1997 (5) TMI 392 - SUPREME Court] followed - the assessee is only a subscriber to a chit run by another concern - thus, the question of invoking the mutuality principle does not arise by the mere chance of other participants subscribing to the chit scheme - the dividend income received over and above what had been subscribed by the assessee liable to be assessed as income of the assessee – thus, the order of the ITAT upheld – Decided against Assessee.
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2014 (3) TMI 387
Mat credit – Levy of Interest u/s 234-A, 234-B and 234-C of the Act - Whether the Tribunal were correct in holding that the difference between the tax payable on its total income and tax payable by it under the provisions of Section 115JB of the Act – Held that:- The decision in COMMISSIONER OF INCOME TAX v. M/s. DECCAN CREATIONS PVT. LTD. [2011 (1) TMI 1174 - Karnataka High Court] followed – MAT credit should be given before charging interest under Sections 234B and 234C of the Act - when once this benefit is confirmed from 01.04.2007, when Section 115JAA was introduced, the legal position is the same and the Explanation introduced by Finance Act, 2006, which came into effect from 01.04.2007, is only clarificatory – thus, the condition is not applicable for the assessee for the period prior to 01.04.2007 – Decided against Revenue.
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2014 (3) TMI 386
Disallowance under Section 36(1)(va) r.w.s 43B – Contribution made to PF - Whether the Tribunal was justified in denying the appellant’s claim of deductions of the employees contribution to PF/ESI – Held that:- By itself it is not sufficient to hold that the employer is not entitled for deduction as contemplated under Section 36(1)(va) of the IT Act r/w Section 43-B of the IT Act - The word “contribution” is used not only to mean contribution of the employer but also contribution to be made on behalf of the member employed by the employer directly - the word “contribution” used in Clause(b) of Section 43-B of the IT Act means the contribution of the employer and the employee - That being so, if the contribution is made on or before the due date for furnishing the return of income under sub-section(1) of Section 139 of the IT Act is made, the employer is entitled for deduction – thus, the assessee is entitled for deduction – Decided in favour of Assessee.
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2014 (3) TMI 385
Allowability of deduction – Provision for Medi-claim made – Warranty expenses - Held that:- The decision in Rotork Controls India (P) Limited vs. Commissioner of Income Tax [2009 (5) TMI 16 - SUPREME COURT OF INDIA] followed - the claim of provision for warranty stating that with making of provision on the basis of estimated present value of contingent liability holds good during the assessment years in question qua warranty claims - the matter remitted back to the Tribunal for fresh adjudication. MAT income - Whether the tribunal was correct in holding that the provision made for doubtful debts cannot be added back for computing MAT income – Held that:- AO held that the debts is a charge to the profits which get reduced and consequently is an unascertained liability - Section 115JA has been amended vide Finance Act, 2009 with effect from 1-4-1998 - assessee does not dispute the statement made by the revenue and also agreed for remanding the matter for deciding the question in the light of the amendment – thus, matter remitted back for fresh adjudication – Decided in favour of Revenue.
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Customs
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2014 (3) TMI 384
Modification of the Stay Order - Demand of pre deposit - Notification No.138/2002-Cus - Held that:- On a plain reading of the notification, it appears that anti-dumping duty could be imposed on CFL without choke and with choke. The Board's clarification in respect of items duty would be levied on two types of CFL such as Complete, ready to use wherein the choke is integrated within the lamp and choke is external - The issue of classification is a factual aspect which cannot be decided at the stage of hearing of application for modification of stay order - it is appropriate that applicant should be granted extension of time for compliance. Accordingly, the period of compliance of stay order is extended for a further period of 6 weeks - Decided partly in favour of assessee.
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2014 (3) TMI 383
Valuation of goods - Enhancement of declared FOB value - Chartered Engineer’s certificate - Held that:- assessing officer has adopted the value declared by the appellant importer on the basis of the Chartered Engineer’s certificate with some minor modifications. The Board’s circulars prescribes arriving at the value on depreciation method based on the value of the new machinery - value of second-hand machine on the basis of Chartered Engineer’s certificate and scaling down the price of the machine by giving depreciation is not an arbitrary method for ascertaining the value. However, whichever method the Revenue wants to adopt, there has to be consistency. If the Revenue wants to adopt depreciation method, the same should be followed uniformly in respect of all the parts/components consisting of the machinery. They cannot pick and choose depreciation method in respect of some parts and adopt the Chartered Engineer’s assessed value in respect of some other parts/components merely because the assessed value is higher the one arrived at following the depreciation method. As the popular saying goes “one cannot have the cake and eat it too”. Rule 8(2)(ii) specifically prohibits a system which provides for the acceptance for customs purposes of the highest of the two alternative values - Therefore, we are of the view either the Department has to accept the declared value of the machinery as certified by the Chartered Engineer (subject to minor modifications, if any required) or follow the depreciation method, by applying the same uniformly and consistently in respect of all the parts/components/sub-assemblies of the machinery under import and decide which of those two values they want to adopt – Matter remanded back - Decided in favour of assessee.
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Service Tax
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2014 (3) TMI 409
Waiver of pre-deposit of tax and penalties - Auctioneering Service - Held that:- Board has clarified that the auction by the Tobacco Board would be required to pay tax for auction of the tobacco - Prima facie activities as mentioned in the impugned order would come under the category of Auctioneering Service . In view of that, we direct the applicant to make pre-deposit of tax within eight weeks - Conditional stay granted.
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2014 (3) TMI 408
Waiver of pre-deposit of service tax liability - Invocation of extended period of limitation - Held that:- entire issue needs to be gone into detail as to the retrospective amendment on the valuation of the same done by the legislature in May 2010 in respect of renting of immovable property; whether the balance sheet income shown by the appellant only has to be considered for raising a demand on the appellant is an issue which may take considerable time of the Bench for coming to a conclusion - Conditional stay granted.
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2014 (3) TMI 407
Demand of service tax - Penalties under sections 76, 77 and 78 - Availment of CENVAT credit - Held that:- CENVAT credit taken based upon the invoices which are not in the name of the applicant is not disputed. The Show Cause Notice was issued in April 2009 and through medium of the Show Cause Notice the applicant was made aware of the discrepancy. In the last four years they could not bring the corrected invoices. In view of this the applicant has not made out a case for waiver of pre-deposit of the disputed amount - Conditional stay granted.
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2014 (3) TMI 406
Waiver of pre deposit - Telecommunication service - Denial of CENVAT Credit - Revenue contends that applicant could not have availed CENVAT credit on any of the equipment in view of Rule 3(5) of CENVAT Credit Rules which required that the applicant should have reversed CENVAT credit on all capital goods removed from the premises of the assessee, if it is not returned within 180 days from the date of removal - Held that:- since the provision in Rule 3(5) of the CENVAT Credit Rules, has been deleted the demand made for the reason that the goods have not been returned, is not sustainable at this stage. Therefore prima facie, we find it proper to grant waiver of pre-deposit of dues arising from the impugned order for admission of appeal and there shall be stay of collection of such dues during the pendency of the appeal - Stay granted.
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2014 (3) TMI 382
Undue hardship - waiver of pre-deposit - Whether the learned Tribunal is correct in law in holding that financial difficulty is not a primary criteria for deciding the issue of undue hardship as mentioned 35F of the Central Excise Act, 1944, which has been adopted by the appropriate Finance Act - Held that:- The word 'undue' adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant. - The other aspect relates to imposition of condition to safeguard the interest of revenue. It is clear that prima facie case is not only criteria, but the financial hardship has also to be considered side by side. Here the learned Tribunal has taken note of the case of financial hardship, but did not feel to decide or consider the same as the prima facie case was assessed. We are therefore of the view that the impugned judgment and order is completely contrary to the provisions of law as well as the principle laid down by the Supreme Court in the aforesaid case. - matter remanded back for fresh decision - Decided in favour of assessee.
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Central Excise
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2014 (3) TMI 381
Waiver of pre deposit - Whether in the facts and circumstances of the case, the Tribunal was right in directing the appellant to predeposit the 25% of the duty demanded and confirmed by the Order in Original dated 24 June 2013 passed by the respondent - Held that:- that since none of the decisions relied upon by the appellant is directly on the items which are the subject matter of the present appeal, the same would have to be examined at the final hearing of the appeal. The notification granting benefit has also undergone changes from time to time. Moreover, prima facie the exemption is to one of the items of windmill system i.e. wind operated electricity generator and its components and parts and not an entire windmill system - However, time to make pre deposit is extended - Decided partly in favour of assessee.
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2014 (3) TMI 380
Duty demand - Availment of CENVAT Credit on inputs used by the Job worker - Held that:- CENVAT credit of duty paid on inputs used in manufacture of product cleared without payment of duty by jobworker for further utilization in manufacture of final product, which are cleared on payment of duty by principal manufacturer, the jobworker is not required to reverse input credit. assessee is not required to reverse CENVAT credit on inputs which has gone into manufacture of final product by jobworker which were ultimately suffered duty at the end of principal manufacturer - Following decision of M/s Sterlite Industries (I) Ltd. [2008 (8) TMI 783 - BOMBAY HIGH COURT] - Decided against Revenue.
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2014 (3) TMI 379
Availment of CENVAT CRedit - Reversal on SAD - manufacture of exempted and dutiable goods - Held that:- as per Chapter 25 of the Central Excise Tariff Act the activity of sieving and repacking does not amount to manufacture. Therefore, BML is not manufacturing exempted goods. Although BML cleared LBU 30 and LBU 60 as such they are required to reverse CENVAT credit availed on these inputs which have been cleared as such. In these circumstances relying on the decision of S.D. Fine Chem Ltd. (2012 (6) TMI 44 - CESTAT, MUMBAI) we hold that BML is required to pay 4% SAD availed on the inputs LBU 30 and LBU 60 and cleared as such by them - they are not required to pay 5%/10% of the value of the exempted goods. - Decided in favor of assessee.
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2014 (3) TMI 378
Calculation of duty - Manufacture of galvanized and corrugated sheets - whether process manufacture of galvanized and corrugated sheets amounts to manufacture or not - Penalty - Held that:- Commissioner (Appeals) is not attributing any mala fide to the appellant and has made a clear finding that the dispute was a bona fide dispute supported by the Supreme Court’s decision. The said finding of the Commissioner (Appeals) is not challenged by the Revenue. Accordingly, we are of the view that when the dispute was a legal and a bona fide dispute and no mala fide is attributable to the appellant, the question of imposition of penalty does not arise - Decided in favour of assessee.
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2014 (3) TMI 377
Contempt of court - Held that:- Registry has no regard to the directions passed by the HC [2009 (10) TMI 707 - DELHI HIGH COURT] and that amounts to contempt. It is experienced that names of certain Advocates appear in Cause List whose Vakalatnama is not available on record and name of the Advocate does not appear in Cause List in spite of the files Vakalatnama. This sends a bad message to the Society that records of the Tribunal are not maintained properly and some Advocates control the Registry causing detriment to the interest of justice - Registrar is directed to place his report within one month showing reason why appropriate order shall not be passed against erring officials.
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2014 (3) TMI 376
Denial of exempted from payment of duty in terms of Notification No. 30/2004-C.E. - Appellant were manufacturing both dutiable as well as exempted final products, they were availing credit of duty paid on the inputs, used in both types of their final products - However, at the time of clearance of exempted yarn, they were reversing 5% of the amount in terms of the provisions of Rule 6(3)(b) of Cenvat Credit Rules - Held that:- ‘NEY 210 denier’ attracts the tariff rate of duty at 8% of the value of the same. Even if we are prima facie agree with the Revenue’s stand that the benefit of Notification No. 30/2004 is not available to them, we note that there was an alternative Notification No. 29/2004-C.E. The said notification provides concessional rate of duty of 4%, subject to availment of credit. As such, even if it is held that the appellant has availed credit of duty paid on the inputs, the effective rate of duty would be 4%, in terms of Notification No. 29/2004. Admittedly, the appellant at the time of clearance of their goods had paid back 5% of the credit availed by them, which is admittedly more than the effective rate of duty - Notification No. 29/2004 would prima facie cover the disputed issue but we find that the applicability of the said notification was not examined by the adjudicating authority as the appellant did not place reliance on the same - Matter remanded back - Decided in favour of assessee.
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2014 (3) TMI 375
Valuation of goods - Whether the installation and Commissioning charges in respect of Packing and Wrapping Machines manufactured by the respondent are required to be added in the assessable value of the same or not - Held that:- such charges are recovered separately by the assessee from their buyer and are in no way connected with the value of the goods manufactured by them. The said charges are subsequent to the clearance of the goods and has no nexus with the assessable value of the goods. We are of the view the Commissioner (Appeals) rightly allowed the respondent’s appeal and no infirmity can be found therein - Decided against Revenue.
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2014 (3) TMI 374
Interest for delayed payment of refund of duty - Refund u/s 11B - Held that:- Section 11B does not make any distinction with regard to duty charged as per Section 3 of the act or Section 3A of the Act. Rule 96ZQ only provide the machinery provisions to decide whether duty liability was discharged correctly. In the case of levy under Section 3 refund can arise due to notifications issued under Section 5A of the Act and if excess payments arise refund has to be granted to subject to provisions of Section 11B - papers filed with Deputy Commissioner, Erode in pursuance of the sanction order dated 26-3-2009 issued by the Commissioner was the application as envisaged in Section 11B for refund of duty. All along the stand of the department has been that the Assistant/Deputy Commissioner, Erode was not the competent authority to sanction the rebate amount but the competent authority was the Commissioner. The applicants had filed the claim before the Commissioner on 29-3-2000 and 27-1-2000 itself and those applications have been sanctioned by the Commissioner, albeit with delay. So those applications are to be treated as applications for refund and not the papers sent to Deputy Commissioner of Central Excise, Erode for getting the money consequent to the sanction order issued by the Commissioner - appellant is eligible for interest as claimed, subject to verification of calculation of quantum of interest with regard to applicable rates but accepting the date of filing of claim as 29-3-2000 and 27-1-2000 - Decided in favour of assessee.
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2014 (3) TMI 373
Denial of Cenvat credit - Cenvat credit on LSHS furnace oil - penalty - Held that:- no hesitation to hold that two units are consist of one factory. Further, we find that single registration was granted for both the units by department themselves which also constitute that both the units consist of one factory. - assessee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption). Regarding supply of electricity to JV and levy of penalty - Held that:- They are not entitled to CENVAT credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors etc., which is sold at a price - Following decision of M/s. Maruti Suzuki Ltd. Versus Commissioner of Central Excise, Delhi-III [2009 (8) TMI 14 - SUPREME COURT] and DHAMPUR SUGAR MILLS LTD. Versus COMMISSIONER OF C. EX., MEERUT [2001 (1) TMI 129 - CEGAT, COURT NO. IV, NEW DELHI] - penalty set aside - Decided against Revenue.
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Wealth tax
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2014 (3) TMI 410
Deletion of penalty U/s. 18(1)(c) of the W.T. Act - Voluntary filing of particulars - Validity of tribunal's order - Held that:- The Tribunal has furnished reasons for deletion of the penalty. The Tribunal has noted that the assessee had adopted the cost index prescribed for computation of capital gains whereas the Assessing Authority had adopted the circle rate fixed by the registering authority for stamp duty purposes, in determining the valuation. When the matter travelled to the CIT(A), the valuation of the AO was reduced and the Tribunal further reduced the valuation as confirmed by the CIT(A). In the present case, the Tribunal noted that the assessee had valued his assets in accordance with cost index prescribed by the Rules for computation of capital gains and no fault could be found with that. Though the assessee had not filed the wealth tax return suo moto, he had in fact filed a statement of chargeable wealth along with the income tax return disclosing the assets. In this background, the Tribunal held that the conduct of the assessee was bona fide and just because there was a difference in opinion in the method of valuation and a subsequent variation in valuation, that would not tantamount to furnishing of inaccurate particulars of wealth. The levy of penalty on this ground under Section 18(1)(c) was held to be not warranted - No substantial question of law would arise - Decided against Revenue.
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Indian Laws
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2014 (3) TMI 405
Specialized service in the Department of Company Affairs - Central Company Law Services Rules, 1965. - merging Grade-II with Grade-I as also the seniority list - eligibility criteria prescribed for promotion - Held that:- In view of aforesaid emphatic and categorical direction given by the Tribunal in its judgment dated October 03, 1997 to the department to treat the date of appointment of the officers working in Grade-II on July 12, 1990 as January 01, 1986, it is not at all open to the petitioners to challenge the action of the department to effect promotions to the Senior Administrative Grade on the basis that the officers working in Grade-II on July 12, 1990 were 'deemed' to be appointed to Grade-I on January 01, 1986, particularly when the petitioners chose not to challenge the judgment dated October 03, 1997 passed by the Tribunal as also accepted the seniority assigned to them vis-ŕ-vis the officers working in Grade-II on July 12, 1990 in the provisional/final seniority lists dated October 22, 1997/January 28, 1998. In the instant case, the officers working in Grade-II on July 12, 1990 were deemed to have been appointed to Junior Administrative Grade/Grade-I on January 01, 1986 in view of the directions contained in the judgment dated October 03, 1997 passed by the Tribunal. The DPC in question had met on May 19, 1998 by which time the officers working in Grade-II on July 12, 1990 had rendered five/eight years of approved service in the Junior Administrative Grade/Grade-I and thus were rightly considered by the DPC for promotion to the Senior Administrative Grade. There was no requirement in the CCLS Rules, 1965 or 1997 that the officer concerned should have 'actually worked' for five/eight years in the Junior Administrative Grade/Grade-I as sought to be projected by the learned counsel for the petitioner. - Petition dismissed
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