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TMI Tax Updates - e-Newsletter
March 16, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Disallowance of Privilege fee paid u/s 40(a)(ii) or (iib) - sharing of revenue with the state - The privilege fee payable by the petitioner to the State Government would be taxable with effect from 1.4.2014 and not prior thereto - HC
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Adoption of Profit Level Indicator (PLI) of OP/TC to determine ALP - , in the absence of identification or segregation of capital employed with regard to AE's transaction and those with others, the RoCE method would not indicate the appropriate margin for determining the ALP. - HC
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Disallowance of interest u/s 36(1)(iii) - it can be said that amount invested in the subsidiaries company was arising out of commercial expediency and was thus for the purpose of business of the assessee. - AT
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Sale of factory land at Guindy, Chennai - Capital Gain OR business profit - without bringing any material on record merely based on some remote circumstances, an inference cannot be drawn that the Assessees indulged in an adventure in the nature of business or trade. - AT
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Penalty u/s 271(1)(c ) - after taking into consideration the human conduct and preponderance of probability clearly indicate that the assessee became a willing party to nefarious black money racket for obtaining bogus gifts. Such acts cannot be taken lightly as they lead to scourge of black money in the country. - AT
Customs
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Clim of refund - Excess payment of CVD at the time of import - there was indeed no assessment order as such passed by the customs authorities - The order of the Assistant Commissioner (Refund) rejecting the refund claim of the Petitioner on the ground of maintainability was, for the aforementioned reasons, plainly erroneous. - HC
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Import of goods - Change in standards under the FSS Act - The legitimate expectation of the importer would always subject to the policy change of the State. If the law is changed as on the date of release, the importer is bound by the law on the date of release. - HC
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Release of property - seizure of gold and Indian currency - violation of provision of Customs Act. - the petitioner has to establish his ownership over the property before the Adjudicating Authority. Whether the adjudication proceedings are initiated legally or not, is not a question at the time of invoking the power under Section 110A of the Customs Act but what is contemplated under Section 110A is that the said person making the claim should be the owner of the goods to be released - HC
Service Tax
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Cenvat Credit - input service - Outdoor catering services - a notification issued in Notification No.3/2011 dated 1.3.2011 excluding the outdoor catering services came into effect on 1.4.2011 but here the period relates to a period prior to 1.4.2011. - credit allowed - HC
Central Excise
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Reversal of CENVAT credit - whether the appellant while clearing the imported inputs which were found to be defective and unusable and later re-exported from their premises, is required to pay an amount equal to the credit availed on such inputs as per Rule 3(5) of the Cenvat Credit Rules, 2004 - Held No - AT
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Claim of exemption on Air conditioning unit, condensing unit, chillers, walk in cold rooms - the institution is not engaged in commercial activity and the goods are required for research purposes - respondent has complied with the Notification 10/97 dated 01.03.1997 - benefit of exemption allowed - AT
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New case cannot be made out after issuance of show cause notice and after passing the adjudication order. Both the lower authority have wrongly denied the Cenvat credit on the Capital goods - AT
Case Laws:
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Income Tax
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2016 (3) TMI 464
Capital gain v/s business income - nature of income - Held that:- All the facts concluded that the respondent assessee has subsequent to the Resolution of its Board made investment in shares as investments. The gains / loss earned on these investments were held to be chargeable to tax under the head capital gains on consideration of all facts and application of applicable law i.e. well settled test to distinguish between gains of trading and capital gains. In the above view, as two authorities have come to concurrent findings of fact that the claim made for short term capital gains and long term capital gains by the respondent assessee was justified. This findings of fact has not been shown to be perverse and / or arbitrary giving rise to any question of law.
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2016 (3) TMI 463
Deduction under Section 80HHC - whether calculated without excluding the profit of Daman Unit of the assessee on which 100% deduction allowed under Section 80IB as held by ITAT - Held that:- Same question came up for consideration in the case of Commissioner of Income Tax Vs. M/s. Atul Intermediates [2014 (4) TMI 676 - GUJARAT HIGH COURT ] wherein held Sub-section (9) of section 80IA was enacted to have universal application to all deductions under sub-chapter C of Chapter VI - It was neither possible nor expected of the Legislature to make individual matching provisions in large number of statutory provisions recognizing deductions under various situations - Such provisions are often times made for a limited period, new deductions are introduced from time to time and old deductions withdrawn - different formulae have been provided for manufacturing exporter and trader and in case of an assessee whose exports comprise of both the sources - at the stage of sub-section (3) of section 80HHC effect of sub-section (9) of section 80IA would apply - clause (baa) to explanation to section 80HHC defines a term 'profits of the business' - While working out the business profits as specified therein, in terms of sub-section (9) of section 80IA the profit or gain which had already been allowed deduction to the extent mentioned therein would have to be ignored. In IPCA Laboratory Ltd. v. Deputy Commissioner of Income-Tax reported in [2004 (3) TMI 9 - SUPREME Court] it has been held that Section 80AB is also in Chapter VI-A - It starts with the words "where any deduction is required to be made or allowed under any Section of this Chapter" - This would include Section 80HHC - Section 80AB further provides that "notwithstanding anything contained in that Section" - Thus Section 80AB has been given an overriding effect over all other Sections in Chapter VIA -Section 80HHC does not provide that its provisions are to prevail over Section 80AB or over any other provision of the Act. Section 80HHC would thus be governed by Section 80AB - Section 80AB makes it clear that the computation of income has to be in accordance with the provisions of the Act - If the income has to be computed in accordance with the provisions of the Act, and then not only profits but also losses have to be taken into consideration – Decided in favour of Revenue.
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2016 (3) TMI 462
Depreciation allowable under Section 11 - whether there is no double claim of capital expenditure? - effect of amendment to Section 11(6) - Held that:- The question involved in this case is no more res integra. This question was considered by this Court as far back as in the year 1984, in the case of Society of the Sister's of ST. Anne [1983 (8) TMI 44 - KARNATAKA High Court ] held that the income derived from property held under trust cannot be the total income because s. 11(1) says that the former shall not be included in the latter, of the person in receipt of the income. The expression "total income" has been defined under s. 2(45) of the Act to mean "the total amount of income referred to in s. 5 computed in the manner laid down in this Act". The word "income" is defined under s. 2(24) of the Act to include profits and gains, dividends, voluntary payment received by trust, etc. It may be noted that profits and gains are generally used in terms of business or profession as provided u/s. 28. The word "income", therefore, is a much wider term than the expression "profits and gains of business or profession". Net receipt after deducting all the necessary expenditure of the trust (sic). Depreciation is the exhaustion of the effective life of a fixed asset owing to 'use' or obsolescence. It may be computed as that part of the cost of the asset which will not be recovered when the asset is finally put out of use. The object of providing for depreciation is to spread the expenditure, incurred in acquiring the asset, over its effective lifetime; the amount of the provision, made in respect of an accounting period, is intended to represent the proportion of such expenditure, which has expired during that period. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of section 11. The questions proposed have, thus, to be answered against the Revenue and in favour of the assessee. The plain language of the amendment establishes the intent of the legislature in denying the depreciation deduction in computing the income of Charitable Trust is to be effective from 1.4.2015 and is prospective in nature - Decided in favour of the Assessee
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2016 (3) TMI 461
Disallowance of Privilege fee paid u/s 40(a)(ii) or (iib) - sharing of revenue with the state - scope of any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains - Scope of any amount (A) paid by way of royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge, by whatever name called, which is levied exclusively on; or (B) which is appropriated, directly or indirectly, from, a State Government undertaking by the State Government. - disallowance with effect from Assessment year 2014-15 or prior to that. - Held that:- The privilege fee payable by the petitioner to the State Government would be taxable with effect from 1.4.2014 and not prior thereto. The unreasonableness of the privilege fee payable is also not a ground to hold that it is a device by which the petitioner and the State Government are avoiding payment of tax. In this regard, reliance is placed on Har Shankar [1975 (1) TMI 89 - SUPREME COURT] which is clear on this aspect and therefore, it was not open for the Assessing Officer to opine that privilege fee appears to be relatable to the profit earned and a large chunk of it is transferred to the State Government in the name of privilege fee. It is settled law that there is no illegality committed by the petitioner in paying such privilege fee on the State Government having fixed such privilege fee. There is no legal prohibition in this regard and therefore, it cannot be said that the same could have been disallowed by the Assessing Officer. It requires to be emphasized that the Supreme Court in Har Shankar [1975 (1) TMI 89 - SUPREME COURT] has expressed that, 'the power of the Government to charge a price for parting with its rights and not the mode of fixing the price is what constitutes the essence in the exercise of the matter', are the words used by the Supreme Court in dealing with the privilege of the State Government to fix such a privilege fee. Therefore, it would aptly apply in the facts and circumstances of these cases insofar as the Assessing Officer having expressed an opinion of the State Government having exercised its power "unscientifically, illegally and irrationally". (sic) Consequently, these petitions are allowed. The impugned assessments are set aside insofar as it treats the privilege fee paid as being taxable to income. - Decided in favour of assessee
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2016 (3) TMI 460
Computing deduction U/s.10A - non exclusion of expenses incurred in foreign currency from export turnover for the purpose of computation of deduction under Section 10A - Held that:- Question raised in the present appeals are covered by the decision of Commissioner of Income Tax vs. Tata Elxsi Ltd. [2014 (9) TMI 1013 - KARNATAKA HIGH COURT] held that any exclusion from the export turnover, it should also be excluded from the total turnover for the purpose of computation of deduction under S.10A of the Act.
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2016 (3) TMI 459
Adoption of Profit Level Indicator (PLI) of OP/TC to determine ALP - Tribunal rejected the TPO's PLI of 'Return On Capital Employed' (ROCE) - Held that:- We find that in terms of Rule 10B1( e) (i) of the Income Tax Rules, it is open for the authorities to determine the net profit margin by applying as its base either cost or sales or any other relevant base. It is for the authorities to determine the appropriate base while applying the TNMM entirely depending on the facts and circumstances of the case before it. Although the RoCE could be a basis to determine the profit margin to arrive at ALP having regard to capital employed as a base. In the present facts, as correctly emphasized by the Tribunal, there is a common pool of capital used both for International Transaction with AE's and also others. Thus, in the absence of identification or segregation of capital employed with regard to AE's transaction and those with others, the RoCE method would not indicate the appropriate margin for determining the ALP. Thus, the RoCE method has not been accepted by the Tribunal to determine the ALP. Further, even before us, as also before the Tribunal, the Revenue has not been able to show any determination of margin by RoCE method to arrive at the ALP of International Transactions in the Respondent-Assessee's industry. View taken by the Tribunal is a reasonable and possible view
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2016 (3) TMI 458
Constitutionality of Section 234-E of the “Income Tax Act, 1961” of Chapter XVI - Held that:- In view of amendment to Section 200 A Counsel for the respondents-Department has stated that the impugned demand notices are appealable under Sections 234-E and 246-A of the Income Tax Act. Counsel for the petitioners has also not disputed this legal position. In view of the above, we find that the impugned orders are appealable before the Forum CIT (A) and in consequence of the amendments if the appeals as required are filed before the Competent Authority within a period of 15 days' from today; limitation if any shall not stand in the way of the petitioners.
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2016 (3) TMI 457
Additional depreciation U/s 32(1)(iia) on wind mill - Held that:- The assessee produced the electricity through windmill and claimed additional depreciation U/s 32(1)(iia) of the Act. The assessee had acquired new machine, which comes under manufacturing and produce. Accordingly, the assessee has claimed additional depreciation following the decision [2009 (10) TMI 140 - MADRAS HIGH COURT ]. The ld DR has not controverted the finding given by the ld CIT(A). Accordingly, we uphold the order of the ld CIT(A). - Decided in favour of assessee
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2016 (3) TMI 456
Reopening of assessment - Held that:- The case has been reopened U/s 148 on the basis of search conducted in the case of M/s B.C. Purohit and company group on 12/4/2005. M/s Bansal Oil Mills Ltd. (assessee) also found beneficiary and had received accommodation entry of ₹ 3 lacs from M/s K.G. Petrochem (P) Ltd. Therefore, the Assessing Officer had reason to believe to reopen the case U/s 147 of the Act. Accordingly the action of the Assessing Officer on reopening is confirmed. Addition u/s 68 - non providing of cross examination - Held that:- CIT(A) had not provided cross examination of the party whose statement had been used against the assessee as an evidence, which was asked to be cross examined by the assessee vide letter dated 30/11/2010. By respectfully following the order of the Hon'ble Supreme Court in the case of Andaman Timber Vs. Commissioner of Central Excise, Kolkata-II [2015 (10) TMI 442 - SUPREME COURT], this issue is set aside to the Assessing Officer and the ld Assessing Officer is directed to provide copy of statement and required copy of seized material for explaining the cash creditor by the assessee. Accordingly, this issue is set aside to the Assessing Officer for denovo. - Decided partly in favour of assessee for statistical purposes only.
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2016 (3) TMI 455
Levy of fees under section 234E - intimation issued under section 200A in respect of processing of TDS - Held that:- We find that the issue in all these appeals is now squarely covered in favour of the assessee by the decision of ITAT Amritsar Bench in the case of Sibia Healthcare Private Limited vs. DCIT [2015 (6) TMI 437 - ITAT AMRITSAR] adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed, and as the related TDS statement was filed on 19th February 2014, such a levy could only have been made at best within 31st March 2015. That time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234E is unsustainable in law. We, therefore, delete the impugned levy of fee under section 234E of the Act. - Decided in favour of assessee.
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2016 (3) TMI 454
Deemed dividend u/s 2(22)(e) - whether deemed dividend u/s 2(22)(e) cannot be assessed in the receipt is not the registered share holder of company advancing loan or advance, although recipient person has beneficial interest by way of share holding in both the companies? - Held that:- Jurisdictional High Court in the case of CIT V Ankitech Pvt. Ltd. and Ors. [2011 (5) TMI 325 - DELHI HIGH COURT] has held that a concern which is given loan or advance by a company cannot be treated as shareholder / member of the latter simply because a shareholder of the lender company holding voting power of toper cent or more therein has substantial interest in such concern. We further note that the Hon'ble High Court has further held that if the intention of the legislature was to tax such loan or advance as deemed dividend at the hands of the deeming shareholder, it would have inserted deeming provision in respect of shareholder as well. It was held that deemed dividend u/s 2(22)(e) cannot be taxed in the hands of a nonITA shareholder. Respectfully following the judgment of the Jurisdictional High Court, as aforesaid, we are of the considered opinion that the assessee company (M/s AVA Merchandising (P) Ltd.) not being a shareholder of the creditor company (M/s AMPL), the amount of debit balance cannot be added in the hands of the assessee company as deemed dividend u/s 2(22)(e) of the Act. Therefore, the Ld. CIT(A) was right in deleting the addition - Decided in favour of assessee
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2016 (3) TMI 453
Eligibility of deduction under section 80IB(10) - Held that:- All these issues had arisen in the assessee's own case in the earlier assessment year, i.e., A.Y. 2009-10 and this Tribunal has upheld the order of the Ld. CIT(A) in holding that the assessee is eligible for deduction under section 80IB(10) as the permission was obtained for the project and it was not really important that the permission was in the name of the land owners. As regards the excess of the constructed area and the allowability of the deduction on the entire building and also on the estimation of income, we find that for the year under consideration also, the issue needs re-consideration by the A.O. on similar lines as in the earlier assessment year. - Decided in favour of assessee and Revenue for statistical purposes.
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2016 (3) TMI 452
Estimation of rental income - determination of annual value of the property - Held that:- By the Finance Act, 2001 (14 of 2001), substitution was made in the section for and from A.Y. 2002-03 in place of than existing section 23 for the purposes of determination of annual value of the property. As per section 23(1), for the purposes of section 22, the annual value of any property shall be deemed to be :- -The sum for which the property might reasonably be expected to let from year to year (Section 23(1)(a) or -Where the property or any part of the property is let- (a) And the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in section 23(1)(a), the amount so received or receivable (section 23(1)(b) or If the aforesaid provision of the Act is kept in juxtaposition with the facts of the present appeal, undisputedly, the assessee received rent of ₹ 5,89,600/- from M/s West Coast Construction Pvt. Ltd. in respect of property no. 51 and 52, which are of the same size and located in the same building, thus, the receipt of actual rent is not in dispute, therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). - Decided against assessee
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2016 (3) TMI 451
Applicability of provisions of section 56(1)(vii)(b) - income from other sources - market value of the property for stamp duty purpose is higher than the consideration paid by the assessee - undisclosed investment - Held that:- Property at Bhilawan, Lucknow has been shown at ₹ 3 lac + stamp duty ₹ 1,74,500/- and legal fees ₹ 10,000/-, total ₹ 4,84,500/- and we do not know from where the CIT(A) has noted the actual sale consideration of ₹ 43,55,200/- in his chart on page No. 23 of his order. Regarding a property at Habibullah Estate, Hazaratganj, Lucknow said to have been acquired by the assessee on 19/10/2006, the value appearing in the above chart is ₹ 20.50 lac + stamp duty ₹ 12,68,500/- + legal fees ₹ 10,000/- and cost of construction ₹ 1 lac, total ₹ 44,28,500/- but CIT(A) has stated in the chart on page No. 23 of his order that market value of this property is ₹ 1,26,84,600/-. It may be that market value of the property for stamp duty purpose is higher than the consideration paid by the assessee but section 50C is not applicable in respect of acquisition of property and amendment in section 56(1) has been made by the Finance Act, 2015 with effect from 01/04/2014 as per which, if any immovable property is purchased for a consideration which is less than the stamp duty value of the property by an amount exceeding ₹ 50,000/-, addition should be made as income in respect of stamp duty value of such property in excess of the stated consideration. Hence, the provisions of section 56(1)(vii)(b) are not applicable in the present year because the same are applicable from assessment year 2014-15. In the similar manner, for the remaining properties also, the basis of CIT(A) is that market value for stamp duty purposes is higher than the value of consideration paid by the assessee as per purchase deed but such an addition in the present year is not sustainable in the eyes of law unless evidence is brought on record to show that extra price was paid by the assessee to acquire the property in question. In the present case, no such evidence has been brought on record by the A.O. to show that extra price was paid by the assessee to acquire the property in question. Hence, we delete this addition. - Decided in favour of assessee Disallowance of agricultural income - treating the same to be from undisclosed source - Held that:- an amount of ₹ 20,000/- per bigha per anumn can be considered as agricultural income and on this bass, out of total amount received from these two persons of ₹ 12.24 Lacs, an amount of ₹ 6.00 Lacs should be considered agricultural income. The balance land is about 40 Bighas because one hectare is equal to about 6.2 Bighas. Hence total 11.737 Hectares of land is about 70 Bighas. After excluding 30 Bighas from it, the balance land is about 40 Bighas. From this balance land, income of ₹ 8.00 Lacs should be considered as agricultural income on the same basis of ₹ 20,000/- per Bigha per anumn. In this manner, total agricultural income of ₹ 14.00 lacs out of the claim of ₹ 35.25 Lacs deserves to be accepted. - Decided partly in favour of assessee Addition on unsecured loan from Shri C. P. Goel - Held that:- In remand proceedings, summon u/s 131 issued by the A.O. was served on Shri C. P. Goel and reply was filed by him directly to the A.O. in which he has confirmed that this amount of loan was given by him to the assessee. This also establishes his identity. He also requested the A.O. to depute some body for recording his Statement at his residence but the A.O. did not do so but under these facts, his identity cannot be doubted. Regarding his creditworthiness, this fact that he was enjoying overdraft of ₹ 40,85,584.29 on 26.03.2007 as per Bank Statement of Shri C. P. Goel from Bank of India, Indira Nagar Branch, in our considered opinion, his credit worthiness for advancing loan of ₹ 39.50 Lacs to the assessee also deserves to be accepted. Regarding non providing of detail of Cheque Nos. etc., it is worth noting that it is stated by Shri C.P. Goel in his letter dated 18.09.2014 that he is suffering from Glaucoma and Hernia and was advised complete bed rest. Medical certificate is also enclosed with this letter and therefore only because details of Cheque Nos. etc. could not be provided by him because of his bad health position, no adverse inference can be drawn. Therefore, under these facts, it has to be accepted that the assessee has been able to establish the identity of the lender and his creditworthiness as well as genuineness of the transaction and therefore the addition u/s 68 is not justified.- Decided in favour of assessee Addition as Sundry Creditors for expenses - Held that:- In Para 6.6, the CIT(A) has noted down three outstanding amounts of ₹ 1,37,217/- from Vijaya Bank, ₹ 86,500/- from HDFC Bank and ₹ 96,954/- from Standard Chartered Bank. The relevant bank statements are available in paper book to which our attention was drawn and therefore, these three credit amounts has to be accepted as explained. Regarding the balance amount of ₹ 2.10 lac, it is noted by CIT(A) that this amount was stated to be not traceable. Hence, we confirm this amount of ₹ 2.10 lac and delete the balance amount of ₹ 3,20,715/-.- Decided partly in favour of assessee
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2016 (3) TMI 450
Disallowance of interest u/s 36(1)(iii) - finance provided by way of Share Application/loan to its subsidiaries/sister concerns out of commercial expediency - Held that:- It is true that no allowance no sham or colorable transaction is permissible. If the object of the borrowing is illusory or colorable and not genuinely for the business purposes, then the provision has no application. To be admissible as an allowance under the section interest must be paid in respect of the capital borrowed. Where the money borrowed have been utilized for “business purposes” and also earning income under the residuary head “income from other sources” the interest paid on money so borrowed should be bifurcated proportionately between the “business income” and “income from other sources” (H.K. Investment Pvt. ltd. vs CIT [1993 (12) TMI 19 - GUJARAT High Court ]. However, in the present case, the facts are entirely different as the assessee advanced the funds to its subsidiaries for “business exigencies”, wherein, the assessee is a holding company, thus, it is not a colorable device. The money was advanced by the assessee holding company to its subsidiaries for “business expediency”, which has to be judged by the business man itself. The facts brought before us are that the assessee has pleaded before the lower authorities that the amount invested has been used by the subsidiaries for the purpose of business. The assessee has significant interest in the business of subsidiaries, as these subsidiaries are in same business as that of assessee. It is further noted that major portion of the amounts were invested in the earlier years. No disallowance has been made in assessment year 2007-08 or earlier. Thus, keeping in view, the legal position as discussed it can be said that amount invested in the subsidiaries company was arising out of commercial expediency and was thus for the purpose of business of the assessee. Therefore, we reverse the decision of the ld. Commissioner of Income Tax (Appeals) and allow the appeal of the assessee. - Decided in favour of assessee
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2016 (3) TMI 449
Disallowance u/s 43B on account of Provision for Leave Encashment written back - CIT(A) deleted the disallowance - Held that:- When the Assessee files return of income for any Assessment year, he has to add back the provision for leave encashment and declare income from business for the purpose of determining total income, because it is not actual liability but contingent. If the Assessee in an Assessment year adds back provision for leave encashment of say ₹ 100 when filing return of income, his total income to that extent stands increased. When later, when actual liability is incurred by the Assessee on account of leave encashment and it is realized that the Provision that ought to have been made was only ₹ 85, than the excess provision which was made earlier and had gone to increase the profit of the Assessee, had to be neutralized and ₹ 15 should be removed from the income in the Assessment Year in which the Assessee based on actual liability discovers that excess provision made in the earlier years. The Assessee has not claimed any deduction while determining its profit from business on account of Provision for leave encashment but has claimed such deduction only on the basis of actual incurring of liability which is paid in accordance with Sec.43B(f) of the Act. That has got nothing to do with the write back off excess provision for leave encashment. The CIT(A) has clearly brought out these aspects in his order. We are of the view that the factual conclusions and the legal inference based on those conclusions drawn by the CIT(A) are just and proper - Decided against revenue Disallowance on account of loss in Foreign Exchange Fluctuation, a contingent liability - CIT(A) deleted the disallowance - Held that:- We are of the view that in the light of the judicial pronouncement in the case of Woodward Governor India Pvt.Ltd. (2009 (4) TMI 4 - SUPREME COURT ) for the proposition that loss or gain on account of foreign exchange fluctuation as on the last date of the accounting year has to be allowed as a deduction u/s.37(1) of the Act on accrual basis, if such loss in account of loans availed on revenue account and the decision of the Tribunal in Assessee s own case on identical issue and keeping in mind the fact that the liability in question is on revenue account, the order of the CIT(A) does not call for any interference - Decided against revenue Disallowance of obsolete stock written off - Held that:- AO has not disputed the fact that the Assessee conducted physical inspection of its stock upon which obsolete, non-moving and damaged stocks were identified having no realizable value. The fact that the expenditure in question was written off against revaluation reserve and not charged to profit and loss account cannot be the basis to disallow a legitimate revenue expenditure and that entries in the books of accounts are not always conclusive in the matter of deciding whether a claim for deduction has to be allowed or not. The created a value for its brand Eveready and disclosed in the Asset side of the Balance Sheet and reduced therefrom the value of obsolete stock instead of reducing from the profit and loss account. Such presentation in the books of accounts will not in any way affect the claim of the Assessee for deduction of legitimate revenue expenditure. Write off in the profit and loss account of the previous year is not a condition for allowing deduction under Chapter IV D of the Income Tax Act, 1961 (Act). Any expenditure which is otherwise to be allowed in computing income from business under Sec.28 to 43 has to be allowed as a deduction. Entries in the books of accounts is not decisive or determinative of the question whether the Assessee is entitled to a deduction or not while computing income from business. The deduction on account of write of obsolete stock is also allowable as held by the Cuttack Bench of the ITAT in the case of National Aluminium Co. Ltd. Vs. DCIT (2005 (11) TMI 483 - ITAT CUTTACK) - Decided in favour of assessee Disallowance of expenses for shifting of Chennai Plant - Acquisition of new asset or deriving of any enduring benefit - Held that:- The reasons for shifting the Guindy Plant to Tiruvottiyur Plant was a business decision and taken keeping in view four factors, viz., completion from Chinese battery makers as a result of free economy, Centralizing operations with a view to reduce costs and better control and location of the Plant being in a residential area and the industrial waste in the process of manufacture creating environmental issues for the Assessee. By shifting of Guindy plant there was no increase in the overall production capacity but it was a decision to reduce costs, improve productivity and profitability and eliminate duplication of processes and costs besides environmental considerations. Hence, it cannot be said that either there was acquisition of new asset or deriving of any enduring benefit to the Assessee. Nor can it be said that the expenditure in question was not for the purpose of business but for the purpose of selling the land over which Guindy Plant was located - Decided against assessee disallowance on account of upfront fees paid to ICICI Bank - Held that:- Similar expenditure had been allowed in the past and there can be no other reason not to allow the expenditure in question as deduction while computing income from business - Decided in favour of assessee Sale of factory land at Guindy, Chennai - Capital Gain OR business profit - Held that:- without bringing any material on record merely based on some remote circumstances, an inference cannot be drawn that the Assessees indulged in an adventure in the nature of business or trade. We are of the view that the conclusion of the AO in this regard cannot be sustained. We also find that even in the decisions referred to by the learned AO, intention is an important factor which has been highlighted. On facts and circumstances of the present case, we are of the view that the Assessee never intended to plunge into the waters of trade. We therefore uphold the order of the CIT(A) whereby he held that the income from sale of the property by the Assessees was to be assessed under the head Capital Gain - Decided in favour of assessee
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2016 (3) TMI 448
Penalty u/s 271(1)(c ) - income offered by the assessee in the revised return by treating it as unexplained - Held that:- The entirety of the facts reveals the facts narrated above reveals that the assessee’s entire defense qua penalty is to the effect that he filed the revised return voluntarily. The statement of the assessee is to be examined in the back drop of the facts, human conduct and preponderance of probabilities; not on mere assessee's assertion. It is not disputed that search in the case of B.C. Purohit Group (Tax Consultant) having office at Jaipur and Kolkata was undertaken on 12-04-2005. The news of the massive search operations on this Group engaged in network of black money operators must have spread like a wildfire in the hawala circles. In reply filed by the assessee, the knowledge about search on B.C. Purohit Group (Tax Consultant) had not been denied. In these circumstances, it cannot be assumed that assessee became Saint by sheer dawn of wisdom and filed revised return voluntarily. I find merit in the arguments of the ld. DR that revised return as contemplated by Section 139(5) of the Act is to correct any omission or wrong statement in the computation of income and not to correct tax evasion. These provisions did not give any immunity from any bogus transactions declared in the original return. The interpretation given by the assessee to the claim of revised return is not tenable and not in accordance with law. The Hon’ble Apex Court in the case of Union of India and Others vs. Dharmendra Textiles Processors and Others (2008 (9) TMI 52 - SUPREME COURT ) has clearly held that penalty is a civil liability and there is no onus on the Department to prove mensrea on the part of the assessee. The facts of the case as examined in the case of Sumati Dayal vs CIT (1995 (3) TMI 3 - SUPREME Court) i.e. after taking into consideration the human conduct and preponderance of probability clearly indicate that the assessee became a willing party to nefarious black money racket for obtaining bogus gifts. Such acts cannot be taken lightly as they lead to scourge of black money in the country. Thus in view of the foregoing, the penalty order of the ld. CIT(A) is confirmed. - Decided against assessee
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2016 (3) TMI 447
N.P. determination - Held that:- AO adopted net profit rate of 6%. No reason has been given by the AO to adopt this figure. And AO while working out the closing stock had ignored all other expenses debited by the assessee in P&L account and only included the construction expenses. The AO erred in adopting net profit rate at 6% without valid reasons and exclusion of other expenses as pointed out to value the closing stock, makes the order of the AO erroneous and not sustainable. We concur with the finding and reason given by the ld. CIT (A) to delete the said addition of ₹ 39,20,490/-, so we uphold the order of the CIT (A) and dismiss these grounds of revenue’s appeal.
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2016 (3) TMI 446
Addition on photography and Band Baza - Held that:- In this regard, as submitted that in the marriage of son, all the expenses on fooding and other marriage functions are incurred by the bride side and therefore, no addition can be made in the hands of the assessee because the marriage was of the son of the assessee and not of his daughter find force in this submission of the assessee. In the assessment order, the Assessing Officer has mentioned that evidence was found in course of search in the form of details of refreshment, lunch, dinner etc. but this is not sufficient to make addition because even in the case of marriage of the son, the details are agreed by both the sides but it is customary that the expenses are generally incurred by the bride side. The Assessing Officer has not examined the bride side before coming to this conclusion that the expenses are incurred by the assessee and not by the bride side. Apart from list of refreshment, lunch, dinner etc., there is no other mention of any evidence which could show that the expenses were incurred by the assessee and under these facts, in my considered opinion, the addition made by the Assessing Officer without bringing any cogent adverse material on record, is not sustainable. Addition on jewellery found - search and seizure - Held that:- It is noted by the Assessing Officer in Para 5 of the assessment order that the jewellery found from the room of Smt. Radhika Dalmia and Shri Ashish Dalmia during the course or search was 420 gms. Gold jewellery and 6.90 Ct. precious stones and silver utensils 4 Kg. total value at ₹ 7,91,280/-. The Assessing Officer accepted the gold jewellery but made addition of ₹ 97,200/- being value of precious and semi precious stone of 6.90 Ct. and also value of silver utensils of 4 Kg. valued at ₹ 1,26,000/-. It was submitted by Shri Anand Kumar Dalmia, father of the assessee, that although all these items were found in the bedroom of Shri Ashish Dalmia and his wife Smt. Radhika Dalmia but no addition was made in the hands of Smt. Radhika Dalmia. He submitted a copy of the assessment order in the case of Smt. Radhika Dalmia in support of this contention. In my considered opinion, total jewellery and silver utensils of ₹ 7,91,280/- found from the bedroom of Shri Ashish Dalmia and Smt. Radhika Dalmia cannot be considered to be excessive or unreasonable and this much jewellery and silver jewellery are generally possessed by a married couple having been received from parents and relatives at the time of marriage and therefore, no addition should be made on this account. Hence addition deleted
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2016 (3) TMI 445
TDS u/s 194C OR 194J - royalty and connection charges - disallowance u/s 40(a) - Sort deduction of tax under different or wrong provision of the section - AO'S case that such payment is on account of “royalty” covered within the ambit of section 9(1)(vi) and therefore the TDS should have been deducted under section 194J - Held that:- If there are two conflicting decisions of non-jurisdictional High Courts, then the decision in favour of the assessee should be taken. We agree with such a contention raised by the assessee that, if there are to conflicting decisions and in absence of any jurisdictional High Court, decision one favourable to the assessee should be preferred and this proposition has been long back settled by the Hon’ble Supreme Court in the case of Vegetable Products Ltd (1973 (1) TMI 1 - SUPREME Court ). Thus, we hold that, no disallowance under section 40(a)(ia) should be made on short deduction of tax under different or wrong provision of the section. Moreover, in this case, Ld. Counsel has pointed out that the amount paid to Hathway Cable and Datacom Ltd. has been offered to tax in the return of income filed by the said concern, therefore, in view of the second proviso to section 40(a)(ia) no disallowance under section 40(a)(ia) should be made. This proposition now has been settled by the Hon’ble Delhi High Court in the case of CIT vs Ansal Land Work [2015 (9) TMI 79 - DELHI HIGH COURT], wherein held that such an amendment is directory and curative in nature. Thus the assessee succeeds on this issue also. - Decided in favour of assessee.
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2016 (3) TMI 444
Addition made on account of adjustment due to deviation u/s 145A - accounting entry made for adjustment of element of excise duty in the closing stock u/s 145A - Held that:- Since the payment of excise duty on grey cloth had to be made w.e.f. 01.4.2003, the assessee had to make adjustment on account of valuation of grey cloth as at the end of the year. Assessee carried out this exercise in the computation of income, wherein the assessee made addition of ₹ 35,16,309/- u/s 145A of the Act. The assessee has also placed Annexure-1 being a computation of the P & L a/c, by both methods, viz. inclusive and exclusive method, i.e. in terms of section 145A of the Act, as per which the business profit increased by ₹ 35,16,309/-; i.e. from ₹ 62,90,312/- to ₹ 98,06,621/-, Thus, the above amount of ₹ 35,16,309/- which was offered for taxation by way of adjustment u/s 145A of the Act, was the amount of profit after increasing the value of inventory with the amount of excise duty paid on the same. In the computation of income filed along with the return of income for the year under consideration, the above said amount has been reduced for the purpose of adjustment u/s 145A of the Act. The Assessing Officer has considered the same as claim of deduction. The said impression of the Assessing Officer was for the reason that net effect of increasing the opening stock and the closing stock by the value of excise stock shall be nil. However, w.e.f. 04.10.2004, the assessee surrendered its excise registration, which meant that the assessee was not availing Cenvat Credit. The assessee has also enclosed Annexure-2 with the computation of income filed alongwith the return of income for the year under consideration, which is placed on record, wherein it has shown that the profit of ₹ 35,16,309/- by way of adjustment u/s 145A of the Act in the immediate preceding Assessment Year i.e. AY 2004-05 was added to the opening stock in the year under consideration. Thus, there is no confusion that whatever is added to the closing stock in any year, automatically becomes the opening stock in the next year, and it is precisely what the assessee has done u/s 145A of the Act, as far as the amount of ₹ 35,16,309/- is concerned. CIT(A) rightly deleted the addition - Decided against revenue Whether any excise duty is deemed to be added to the closing stock of the assessee? - Held that:- When because of surrender of excise registration w.e.f. 04.10.2004, no cenvat credit was available at the end of the year, the closing stock has been valued at cost or market value whichever is lower. Therefore, it was the presentation made by the assessee which gave the impression that profit has been reduced by ₹ 35,16,309/-. If the assessee had not separately carried out the above adjustment u/s 145A of the Act in the statement of income and had given the above effect in the P & L a/c., then also the business profit would have been ₹ 1,03,82,028/- and not ₹ 1,38,98,337/-. The action of the Assessing Officer in adding back the amount of ₹ 35,16,309/- means the above amount was not utilized by the assessee and remained at the end of the year was not correct. In view of the above discussion, the CIT(A) was justified in deleting the amount of ₹ 35,16,309/- made by the Assessing Officer u/s 145A of the Act.- Decided against revenue
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2016 (3) TMI 443
Deemed dividend addition u/s. 2(22)(e) - Held that:- From the evidence available on record it is clear that the actual transfer of shares took place only on 30.8.2008. The wrong mention of date in the annual return filed by GCP was the only basis on which the entire addition has been made. The Annual return has since been rectified by GCP by mentioning the correct date of transfer of 20,000 shares in the name of the Assessee as 30.8.2008. The other documentary evidence showed that there was legal transfer of 20000 shares of GCP in the name of the Assessee only on 30.8.2008. In the given facts and circumstances, we are of the view that the mere claim of the revenue that all the documents are not contemporaneous and have been brought about by the Assessee to get over the rigours of Sec.2(22)(e) of the Act cannot be accepted. In this regard it is seen that even in the remand proceedings the AO did not make any enquiries nor examined concerned persons to establish his case. In such circumstances, we are of the view that the order of the CIT(A) deleting the addition does not call for any interference. - Decided in favour of assessee
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Customs
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2016 (3) TMI 432
Validity of Adjudicating Authority's order - Cross-examination of persons request declined - Partners of the importer acted in collusion with the Petitioner in making the illegal imports - Held that:- it is an admitted fact that the Respondent Department is placing considerable reliance on the statements of Mr. Shyam Lal and Ms. Preeti, the partners of the importer, in support of the case made out in the SCN. The impugned order of the AA does not indicate that any prejudice would be caused to the Department by providing the Petitioner the right of cross-examination. On the other hand the denial of such right would prejudice the Petitioner since the said statements are adverse to the Petitioner. Therefore, the AA order declining the request of the petitioner for cross-examination of persons is set aside. - Decided in favour of appellant
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2016 (3) TMI 431
Clim of refund - Excess payment of CVD at the time of import - Rejection of refund claim on the groun of maintanability filed under Sections 27(1)(a)/ 27(1)(b) of the Customs Act, 1962 - Petitioner claimed that it was liable to pay 1% CVD as per Notification No. 12/2012 – CE dated 17th March 2012, as amended by Notification No. 4/2014 and further amended by Notification No. 12/2015-CE dated 1st March 2015 whereas paid 6% CVD and also in case of a self-assessment, a refund application could be maintained under Section 27 of the Act, as it stood prior to 8th April 2011 - Held that:- there was indeed no assessment order as such passed by the customs authorities. Although under Section 2(ii) of the Act, the word ‘assessment’ includes a self-assessment, the clearance of the goods upon filing of the B/E and payment of duty is not per se an 'assessment order' in the context of Section 27(1)(i) as it stood prior to 8th April 2011, particularly if such duty has not been paid under protest. In any event, after 8th April 2011, as noticed hereinbefore, as long as customs duty or interest has been paid or borne by a person, a claim for refund made by such person under Section 27(1) of the Act as it now stands, will have to be entertained and an order passed thereon by the authority concerned even where an order of assessment may not have reviewed or modified in appeal. Therefore, the order rejecting the refund claim of the Petitioner on the ground of maintainability was, for the aforementioned reasons, plainly erroneous. - Decided in favour of petitioner
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2016 (3) TMI 430
Writ petition - Provisional release of goods - As per Circular No. 34/2015 dated 29/30th December 2015, petitioner is required to furnish 100% bank guarantee for the duty element - Held that:- in relation to the alert Circular No. 34/2015 dated 29/30th December 2015, the court has observed that, to the extent that it curtails discretion of the quasi judicial authority exercising powers under the Customs Act, 1962 to order provisional release of goods subject to conditions, it cannot be sustained in law. In other words, it is not open to the Directorate of Revenue Intelligence ('DRI') to issue a circular to insist that in all cases of provisional release, the quasi judicial authority considering such request must impose a condition of providing a bank guarantee equivalent to differential duty. To that extent the alert Circular dated 29/30th December 2015 is directed not to be given effect to. Therefore, following the aforementioned order of the Court, it is directed that the provisional release of the goods will be allowed in favour of the Petitioner subject to the Petitioner executing a bond for a sum equivalent to the 100% of the value of goods and furnishing a security in the form of a bank guarantee for a sum equivalent to 30% of the differential duty, with an auto renewal clause and as per RBI guidelines. - Petition disposed of
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2016 (3) TMI 429
Writ petition - Entitlement to renewal of registration - For 10 years - Held that:- respondents agreed to correct a bona fide error that they have committed in making the earlier orders. They also conceded that the order was passed and as the operative portion would clarify, conjointly, on the so-called enquiry and the application for renewal. This is an infraction of the regulations and particularly the exercise of the power set out in the manner therein. The respondents would now correct themselves and pass a fresh order after issuance of the show cause notice. This show cause notice would contain the relevant allegations and reference to material documents. It would also put the petitioners to notice as to what circumstances and events have led the respondents to form a prima facie belief that the registration as claimed by the petitioners cannot be renewed. After the detailed reply to the show cause notice is issued, a composite order would be passed within a further period of four weeks from the date of receipt of such reply and which would deal and dispose of the prior enquiry as also the request to renew the registration for a period of ten years as made by the petitioner. - Decided against appellant
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2016 (3) TMI 428
Import of goods - change in the policy - Whether the goods imported are required to satisfy the standards those prescribed in Regulations framed under the FSS Act or not and at the time of import or at the time of release - Appellant imported betel nuts but an Authorised Officer under the Food Safety and Standard Authority of India refused to issue NOC on the ground that the betel nuts did not satisfy the standards for dry fruits and nuts - Held that:- the petitioner's right to import is always subject to the policy of India. The importers have no right to import any food articles which is hazardous or injurious to the public health. The regulatory mechanism and the standards under the FSS Act are to ensure and protect the public from possible health hazards and risks and not intended to confer any right on the importer or the distributor or the manufacturer of the product. Therefore, the standards under the Food Safety Act will have to be looked into from the stand point of view of the general public. The legitimate expectation of the importer would always subject to the policy change of the State. If the law is changed as on the date of release, the importer is bound by the law on the date of release. The standards are prescribed for protecting the public. Therefore, the date of release is relevant not the date of import for the purpose of reckoning standards. - Decided against the appellant
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2016 (3) TMI 427
Writ petition - Seeking release of goods - Appeals pending before the CESTAT - Petitioners are willing to furnish bank guarantees for the entire amount of redemption fine and penalty to enable the goods to be released - Held that:- upon each of the Petitioners furnishing a bank guarantee in favour of the Department, for the entire amount of redemption fine and penalty as ordered by the Order-in-Original dated 5th February 2015, the goods in question shall be released to the respective Petitioners. - Decided in favour of petitioner
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2016 (3) TMI 426
Release of property - seizure of gold and Indian currency - violation of provision of Customs Act. - Applicability of provisions of Sections 451 and 452 or 457 Cr.P.C - Held that:- when there is no inquiry or trial, neither Section 451 Cr.P.C. nor Section 452 Cr.P.C. are applicable. Had the property been not produced before the court below in an inquiry or trial, the parities could have invoked the procedure under Section 457 Cr.P.C. In all cases wherein the property is produced before the Magistrate, the court of the Magistrate is not powerless to rely on Section 457 Cr.P.C., for the disposal of such property. Only when the property is produced before such court 'in an inquiry or trial', the embargo to invoke the power under Section 457 Cr.P.C. comes. On looking into the scheme of the Code of Criminal Procedure, it seems that all such cases, which do not fall under the provisions of Sections 451 and 452 Cr.P.C., it squarely falls under Section 457 Cr.P.C. Here, the stage at which the property was produced and even the stage at which the court below has passed the impugned order was neither the stage of inquiry nor trial. Therefore, the court below could have considered the matter only with the aid of Section 457 Cr.P.C. Matters being so, the court below ought not have allowed the claims mooted under Section 451 Cr.P.C. The impugned order passed by the court below by releasing the property under Section 451 Cr.P.C., is therefore, not in accordance with law. Possession of property - Seizure of goods - Section 102(3) Cr.P.C. - Held that:- when it is possible to take a view that the property was produced by the police on seizure under Section 102(3) Cr.PC. before the court below, not in an inquiry or trial, the court below could have decided the question as to who was the person entitled to possession of that property at that stage. At that stage, no doubt, the Customs Authorities were the persons entitled to the possession of the said property. Even though, it was through an order which was not in accordance with law, it seems that the property is handed over by the court below to the Customs Authorities for custody, for invoking the provisions of the Customs Act. The ultimate decision taken by the court below can be reckoned as one under Section 457 Cr.P.C. Provisional release of goods, documents and things seized pending adjudication - Section 110A of the Customs Act, 1962 - Held that:- the petitioner has to establish his ownership over the property before the Adjudicating Authority. Whether the adjudication proceedings are initiated legally or not, is not a question at the time of invoking the power under Section 110A of the Customs Act but what is contemplated under Section 110A is that the said person making the claim should be the owner of the goods to be released, and he shall furnish such security and abide by such conditions as may be imposed by the Adjudicating Authority for the release of the goods to him. - Matter disposed of
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Corporate Laws
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2016 (3) TMI 425
Winding up petition - Circumstances in which company may be wound up by Court - “Just and equitable” principle - Held that:- No case is made out for winding up the respondent-company. Learned counsel for the petitioners has not been able to prove on the basis of the material and the evidence on record that it is just and equitable to make out an order for winding up the respondent-company. Consequently, finding no merit in the petition, the same is hereby dismissed.
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Service Tax
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2016 (3) TMI 442
Writ petition - Legality, validity and vires of Notification No.24/2007 dated 22.5.2007 and circular No.98/1/2008-ST dated 04.01.2008 - Service tax levied on the “renting of immovable property” as oppose to service tax on a service provided “in relation to renting of immovable property” - Section 65 (90a) and Section 65 (105 (zzz)) of the Finance Act, 1994 as amended by Finance Act, 2007 errorneously interpreted - Held that:- the issue involved is no more res integra and covered by the decision of this Court in the case of Cinemax India Limited v. Union of India [2011 (8) TMI 71 - GUJARAT HIGH COURT] where in the context of challenge to notification No.24/2007. S.T. Dated 22nd May, 2007 and with regard to question of law involved therein about validity of Sub-clause (zzzz) of clause (105) of Section 65 of Finance Act, 1994 as amended by Section 75(5)(h) and Section 76 of the Finance Act, 2010 came to be rejected and even SLP preferred before the Apex Court was also rejected. - Matter disposed of
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2016 (3) TMI 441
Cenvat Credit - input service - Outdoor catering services provided to the employees of the factory - Held that:- the Commissioner did not dispute the fact that the outdoor catering services were rendered to persons engaged by the assessee in or in relation to their business activities. On the contrary, the Commissioner, in his Order in Original, recorded a finding that the services of outdoor catering involved mere subsidisation of food consumed in the canteen by the employees and therefore, it was in the nature of perquisites enjoyed by the employees. Hence, when there is a clear finding of the Commissioner in his Order in Original that these services were actually consumed by the employees of the assessee, the question of the Tribunal recording a finding does not arise. Also a notification issued in Notification No.3/2011 dated 1.3.2011 excluding the outdoor catering services came into effect on 1.4.2011 but here the period relates to a period prior to 1.4.2011. Therefore, the Tribunal's order is correct. - Decided against the revenue
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2016 (3) TMI 440
Validity of Tribunal's order - Tribunal only considered and discussed the contentions of Respondent and not of Appellant - Held that:- the Appellant's appeal is allowed and there is no discussion in the body of the order with regard to the appeal preferred by the Appellant while allowing the appeal of the Respondent. Therefore, the tribunal's order is set aside. - Decided in favour of the revenue
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Central Excise
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2016 (3) TMI 439
Reversal of CENVAT credit - whether the appellant while clearing the imported inputs which were found to be defective and unusable and later re-exported from their premises, is required to pay an amount equal to the credit availed on such inputs as per Rule 3(5) of the Cenvat Credit Rules, 2004 - Held that:- In the instant case, the imported inputs were directly used and found to be defective and not upto the appellant's quality parameters. The impugned order is liable to be set aside for the reason that in the Board's circular No.283/117/96 dated 31.12.1996 it has been clearly stated that the credit availed on inputs which are re-exported as such under Bond need not be reversed. The issue being covered by the judgment in the case of Zydex Industries [2007 (4) TMI 545 - CESTAT, AHMEDABAD ], the demand for the availment of cenvat credit which is alleged to be incorrect is unsustainable - Decided in favour of assessee
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2016 (3) TMI 438
Interest not paid and penalty imposed under Section 11AC read with Rule 25 - goods cleared to the DTA unit in the month of January, April, May and August, 2011, without payment of duty - as per assessee they already paid the entire duty demanded and the same was appropriated in the OIO itself - Held that:- The adjudicating authority had rightly computed the interest amount from the due date to till the date of payment in respect of demand for the month of January, 2011. Since the appellants paid the amount on 8.10.11, 12/12/2011 and 31.03.12, Revenue has correctly worked out the interest @ 13% upto 31.03.2011 for 54 days and for the remaining period the interest was computed by adopting 18% rate of interest. Whereas, on perusal of the computation done by the appellants at page 16 and 17 of the paper book for the total delayed payment of duty for the month of January, 2011 they have computed by taking the rate of interest @13%. Therefore, we do not find any merit in the appellant's contention and they are liable to pay the total interest of ₹ 17,35,425/-. Since they have already paid the interest of ₹ 15,45,788/-, the differential amount of interest of ₹ 1,87,637/- is liable to be reversed. As regards penalty, on perusal of the show cause notice, we find the penalty was proposed under Section 11 AC of the CEA as well as under Rule 25 of CER. The adjudicating authority recorded in his findings that they have indicated the duty amount in the column "duty payable" but the column under “duty paid” was left blank. We find that the entire case is basically of delayed payment under Rule 8 and the consequential demand by the department. We find that the show cause notice was issued on 20.01.2012. Before the issue of SCN itself, the appellant paid ₹ 25,00,000/-, ₹ 20,00,000/- was proposed for appropriation in the SCN and the balance amount was paid with interest before issue of adjudication order. Therefore, we hold that there is no mensrea or intention to evade payment of duty so as to invoke penalty under Section 11 AC. Accordingly, the penalty imposed under Section 11AC is not sustainable and liable to be set aside. As regards penalty proposed under Rule 25 of CER, the adjudicating authority imposed penalty by invoking Section 11 AC read with Rule 25 of CER. We hold the appellants are liable for penalty under Rule 25 of CER. - Decided partly in favour of assessee
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2016 (3) TMI 437
Exemption u/s Notification 10/97 dated 01.09.1997 on Air conditioning unit, condensing unit, chillers, walk in cold rooms - Held that:- Notification 10/97 dated 01.03.1997 grants exemption to certain goods supplied to specific research institutions, provided the institution is a public funded research institution and the goods should be scientific and technical apparatus including computer for research purposes. Apart from this, the institution has to be registered with the Government of India, Department of Scientific and Industrial Research and an officer, not below the rank of Dy. Secretary to the Govt. of India has to certify that the institution is not engaged in commercial activity and the goods are required for research purposes. Further, in this case the respondent has produced the required certificate to claim benefit of Notification 10/97 dated 01.03.1997. The only ground for denial is that the impugned goods are used for the general purposes and are not attached to any scientific instrument and therefore not eligible for exemption. We also find that the respondent has complied with the Notification 10/97 dated 01.03.1997; therefore we do not find any infirmity with the impugned orders and the same are upheld. - Decided in favour of assessee
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2016 (3) TMI 436
Valuation of chewing tobacco - Section 4 or Section 4A - multiple packing / bulk packing - pouches of 6 gms. and 7 gms. - These are then packed in multiples of 52/42/40/32 pouches in a plastic bag and are cleared on sale. - Held that - the CBEC vide their Circular dated 28/2/2002 (para 7) clarified that in case of doubt in situation like this, the matter should be got clarified by the concerned Department of State Government. We find as pointed out by the respondent/assessee the State Government Authorities (Haryana and Maharashtra) and also legal Metrology Unit of Government of India, New Delhi have clarified that packages below 10 gms. are totally exempt from purview of SWM Rules. Packages containing 10 or more retail packages are considered as wholesale packages and need not carry “retail sale price” declaration. - Decided against revenue
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2016 (3) TMI 435
Mounting charges inclusion in the assessable value of the bodies - demand of duty in respect of the bodies which were being cleared by them after being mounted on the chassis on the ground that the mounting activity is part and parcel of the manufacturing activity in terms of the provisions of Chapter Note 3 of Chapter 87 and as such the mounting charges are required to be included in the assessable value of the bodies Held that:- The Revenue was happily accepting the same and at no point of time any objection was raised. The manufacturing as also the mounting was being done by the appellant, under two purchase orders, Revenue, probably, was also under the bonafide impression that mounting charges are not required to be added in the assessable value of their final product and as such was accepting the appellant's style of payment of central excise duty and service tax. The extended period of limitation, is available to the Revenue only when an assessee acts with a malafide intention and there is a positive suppression or misstatement by him with an intention to evade payment of duty. Otherwise also, we note that the appellant was working under a job work Notification No. 214/86 in which case there would be no duty liability on the assessee if the procedure as envisaged under the said Notification is duly followed by them. However, having paid the duty on the value of the bodies only and having paid the service tax on the mounting charges, it cannot be said that the appellant was guilty of any malafide. The duty so paid by the appellant was available as credit to its principal customers i.e. M/s Volvo India Ltd., who were in a position to use the same for payment of tax on their final product, The entire exercise seems to be revenue neutral. In view of our foregoing discussion, we agree with the appellant’s stand a part of the demand out of the total period April 2002 to July 2005 shall be barred by limitation. Accordingly we hold so. However a part of the demand would fall within the limitation period for which the matter is being remanded to the original adjudicating authority for quantification of the same. While judging the appellant's liability to pay the central excise duty, the benefit of the service tax already discharged by them would be given to them and their liability would be neutralized to that extent. As we have already held that there is no malafide on the part of the appellant, we find no reason to impose penalty on them. - Decided in favour of assessee
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2016 (3) TMI 434
Recovery of Cenvat Credit - demands for Cenvat Credit on the said goods on the grounds that the same have not been used for the manufacture of dutiable final products - Held that:- The appellants are not required to reverse the Cenvat Credit as alleged in the show-cause notice the credit on inputs which has written off obsolete in the financial accounts but were physically lying in their stock. As the appellants have succeeded on this issue, therefore, we are not dealing with other issues. See RPG. CABLES LTD. Versus COMMISSIONER OF C. EX., MUMBAI [2003 (2) TMI 117 - CEGAT, NEW DELHI] - Decided in favour of assessee
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2016 (3) TMI 433
Disallowance of Cenvat credit on Wires and Cables falling under Chapter 85 and on refractory falling under Chapter 69 - isallowance of the credit on the aforesaid items on the ground that these are not Capital goods in terms of definition of Capital goods - Held that:- The wires and cables being covered under Chapter 85 is specified under sub clause (A)(i) of Clause (a) of Rule 2 of Cenvat Credit Rules, 2004 and refractory and refractory material the covered under sub clause (v) accordingly the appellant's goods are undoubtedly falling under the definition of Capital goods, hence the credit cannot be denied. As regard the issue that the invoices bear two addresses and therefore it is not established that the capital goods were received in the factory of the appellant, find that this ground was taken by Ld. Commissioner(Appeals) while passing the impugned order, this is a matter of fact and it is necessary on part of the Revenue to investigate that only on the basis that two addresses mentioned on the invoices whether the Capital goods received in the factory and used in the factory, however no such exercise was carried out by the Revenue and issue was not raised in the show cause notice, even adjudicating authority also was not given any finding on this issue. Thus agree with the Ld. Counsel that this fresh issue raised first time in the impugned order and the same was not raised in the show cause notice. The appellant was not put to notice on this issue therefore it is not open for the Revenue to decide the matter on a issue which is not embodied in the show cause notice. Thus it is settled law that new case cannot be made out after issuance of show cause notice and after passing the adjudication order. Both the lower authority have wrongly denied the Cenvat credit on the Capital goods - Decided in favour of assessee
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Indian Laws
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2016 (3) TMI 424
One Time Settlement in respect of the dues of the applicant - Held that:- The opponent No.5-IDBI Bank has accepted One Time Settlement in respect of the dues of the applicant agreeing to accept crystalised amount of ₹ 66.38 lakhs, following directions are issued. (i) Applicant and opponent No.5-Industrial Development Bank of India Limited are permitted to give effect to their One Time Settlement of dues as above; (ii) Registry of this Court shall issue a cheque after breaking Fixed Deposit, if required, out of the amount lying with it pursuant to order dated 15th January, 2009 in Special Civil Application No.11524 of 2002 so as to issue cheque in the name of “Industrial Development Bank of India Limited”; (iii) Since under the One Time Settlement Scheme deadline for acceptance of the amount if fixed 15th March, 2016, Registry shall see to it that cheque is issued on or before 15th March, 2016; (iv) Upon receipt of the aforesaid amount, opponent No.5-IDBI Bank shall issue No Due Certificate to the applicant within two week; (v) Balance amount shall remain invested in the Fixed Deposit.
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