Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 20, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Highlights / Catch Notes
Income Tax
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Extra depreciation on computers 60% depreciation claim made on video conferencing equipment - entire video conferencing system cannot be the termed as part and parcel of the computer as such - AT
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Though the assessee bank had obtained Form No. 15G and Form No. 15H but the same was not submitted to the jurisdictional Commissioner of Income Tax within due time. - Demand of tax with interest set aside - AT
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Penalty u/s 271(1)(b) failure to comply with the statutory notice u/s 142(1) - assessee sought the adjournment of the case to January/ February 2011 but AO refused to grant adjournment - penalty set aside - AT
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Chargeability of income u/s 5(1) - Deemed to received in India the amount was received in various tranches in the bank account maintained by the assessee abroad it cannot be said that the amount was received in India - AT
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Addition towards difference between the value of the shares allotted and consideration paid - provision of s. 56(2)(vii)(c) shall not apply and the amount cannot be assessed as income in the hands of the assessee on the ground of inadequate consideration- AT
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Addition was confirmed by the CIT(A) and ITAT by rejecting the explanation of the assesses that the jewellery belong to mother in law and the wife of the brother in law of the assessee, does not automatically mean that penalty u/s. 158BFA(2) is leviable - AT
Customs
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Evasion of custom duty - appellants having been enriched at the cost of the state and also having their hands in glove and caused prejudice to the interest of Customs, they do not have a case in their favour even at the prima facie stage - Stay denied - AT
Service Tax
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Penalty u/s 76 & 78 - Even accepting the submission that there was a mis-declaration on the part of the assessee in calculating service tax, the intent to evade tax does not flow from this submission - penalty waived - AT
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Management Consultancy Service or not - clause 2 of the agreement clearly shows that he activities are advisory in nature - demand confirmed - AT
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Interior Decorator service - assessee are not advicing by way of consultancy or by way of technical assistance, in respect of planning or designing of the space, but undertaking the other work as per the design and drawing supplied - demand set aside - AT
Central Excise
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The department having accepted the excise duty on the final product cannot be permitted to deny cenvat credit on the inputs used for the manufacture of the final product on a technical plea of department - AT
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Valuation - inclusion of pool lifting charges into the value of motor vehicles - these charges prima facie are required to be added in the value under Section 4 of the Central Excise Act - AT
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Levy of duty on intermediate products, manufactured by Job Worker, used by the assessee in exempted final products - prima facie duty can be demanded only from Job Worker - AT
VAT
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Imposition of penalty u/s 54(1)(14) of UPVAT - By keeping column 6 of Form 38 blank, such declaration form can be repeatedly used for successive import so as to evade payment of tax - penalty confirmed - HC
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Maintainability of writ petition - Time-barred petition Writ proceedings are not for the purpose of granting extension of time - HC
Case Laws:
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Income Tax
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2014 (3) TMI 540
Disallowance of extra depreciation Claim made on video conferencing equipment - Whether the CIT(A) has erred in deleting the on account of disallowance of extra deprecation claimed on video conferencing equipments ignoring the fact only computer and computer software will be entitled for depreciation @ 60% and the same cannot be extended to the other equipments where computer is used Held that:- The process of video conferencing may involve the help of computer system, but the entire video conferencing system cannot be the termed as part and parcel of the computer as such - Income Tax Rules specifically provide depreciation @ 60% only on computers and computer software - The depreciation rates as mentioned cannot be extended to the other equipments where computer is used. Whether printer, scanner and server are integral part of computer or not Held that:- The decision in CIT vs. BSES Yamuna Power [2010 (8) TMI 58 - DELHI HIGH COURT] followed - computer accessories and peripherals such as printer, scanner and server etc. forma an integral part of computer system - the computer accessories and peripherals cannot be used without the computer they are the part of the computer system and they are entitled to depreciation at the higher rate of 60% - the above analogy cannot be extended to TV sets used in the video conferencing equipments. The TV sets used by the assessee cannot be a part of the computer system - The TV sets can function independently - As such they cannot be allowed depreciation @ 60% as applicable to computers thus, in the list of the video conferencing equipments as mentioned in the AO's order, the TV sets cannot be allowed depreciation as per computer thus, the order fo the CIT(A) modified and the AO is directed to allow depreciation @ 60% on other items mentioned in the list except TV sets - The other items mentioned in the list except TV sets can be considered a part of the computer system Decided partly in favour of Revenue.
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2014 (3) TMI 539
Demand u/s 201(1) and 201(1A) with interest for Non-deduction of TDS Though the assessee bank had obtained Form No. 15G and Form No. 15H but the same was not submitted to the jurisdictional Commissioner of Income Tax within due time. - Held that:- Apart from sub-section (1A) of section 197A which merely requires a declaration to be filed by the payee of the interest and once it is filed, the payer of the interest has no choice except to desist from deducting tax at source from the interest paid the provision does not impose any obligation on the payer to find out the truth of the declaration filed by the payee the decision in Vipin P. Mehta Versus Income-tax Officer, Ward-24(3) (4), Mumbai [2011 (5) TMI 503 - ITAT MUMBAI] followed - if the assessee has delayed the filing of declaration with the office of the jurisdictional C.I.T., within the time limit specified in sub-section (2) of Section 197A, that is a distinct omission or default for which a penalty is prescribed. The contention of the assessee is accepted that since the assessee Bank had the declaration of the payees in the prescribed form with it at the time when the interest was paid to the respective customers, the assessee cannot be held to be liable to deduct tax therefrom u/s 194A of the Act - if the assessee Bank was not liable to deduct tax at the time of payment of interest, then section 40(a)(ia) of the Act is not attracted and the assessee cannot be held liable to pay tax as assessee in default and interest - for non-filing of Form No. 15G and 15H within the prescribed time, there is a provision of penalty u/s 272A(2)(f) of the Act which is not a case of the department in the present appeal thus, the order set aside Decided in favour of Assessee.
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2014 (3) TMI 538
Penalty u/s 271(1)(b) of the Act failure to comply with the statutory notice u/s 142(1) - assessee sought the adjournment of the case to January/ February 2011 but AO refused to grant adjournment - Held that:- The AO was wrong in assuming that the assessment for the Assessment Year 2009-10 was getting time barred on 31.12.2010 and on that mistaken belief he has proceeded to estimate the income of the assessee u/s 144 of the Act - the reason given by the Assessing Officer not to give adjournment was clearly on an erroneous basis - AR of the assessee could not represent before the Assessing Officer on 10.11.2010, since he was pre-occupied with matters getting time barred - there was reasonable cause for the assessee not to have attended before the AO on 10.11.2010 thus, the order of the CIT(A) set aside Decided in favour of Assessee.
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2014 (3) TMI 537
Chargeability of income u/s 5(1) of the Act Services rendered by the NRI outside India Income deemed to accrue or arise in India u/s 9(1)(vii)(c) of the Act - Held that:- The assessee rendered services in relation to setting up of fund in Mauritius and looked to find seed investors abroad - income in respect of services which were rendered outside India, accrue or arise to assessee outside India and it was not derived from business controlled in or profession setting up in India - the assessee's case is covered by the proviso to section 5(1) of the Income-tax Act, 1961 and the income is not chargeable to tax in India the amount was received by the assessee in his bank account maintained outside India and it has been transferred to India only after receiving the same first outside India relying upon Keshav Mills vs. CIT [1953 (1) TMI 5 - SUPREME Court] - the word "received" shows that the point of first receipt has to be seen also in CIT vs. A.P. Kalyanakrishnan [1991 (6) TMI 32 - MADRAS High Court] what is contemplated u/s 5(1)(a) of the Income-tax Act, 1961 is that the amount received in India after having received in another country was not assessable in India. It is a matter of fact that the amount was received in various tranches in the bank account maintained by the assessee abroad thus, it cannot be said that the amount was received in India - Thus, the amount was received outside India is remitted to India on the subsequent dates - Decided in favour of Assessee.
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2014 (3) TMI 536
Deduction u/s 36(1)(viia) of the Act Claim for provision for bad & doubtful debts - Held that:- As decided in assessees own case for the previous assessment years, it has been decided that the disallowance to the extent of Rs.243,28,84,423/- claimed u/s 36(1)(viia) of the Act requires to be restored Decided in favour of Revenue. Admissibility of additional grounds Held that:- As decided in assessees own case for the previous assessment years, it has been decided that the additional grounds sought to be raised by the Revenue cannot be admitted for adjudication - The deduction under the first proviso to sec. 36(1)(viia)(a) of the Act is in addition to what is allowed under sec. 36(1)(viia)(a) of the Act and the assessee is given the option to claim deduction under the proviso - In a nut-shell, in conformity with the findings of the earlier Bench on the issue of admissibility of identical additional grounds, the Revenue's applications for seeking permission for raising the additional grounds are rejected or in other words they cannot be admitted for adjudication Decided against Revenue. Claim of interest reversed on NPA Held that:- The decision in CIT v. Industrial Finance Corporation of India Limited [2011 (7) TMI 87 - DELHI HIGH COURT] followed - The un-amended section 36(1)(viii) allowed the deduction to a financial institution for an amount not exceeding 40 per cent of the total income carried to a special reserve - It is clear from the reading of the provisions of clause (viii) of sub-section (1) of s. 36 that the words 'and maintained' were inserted only by way of amendment made w.e.f. 1.4.1998 - As per the un-amended provision which is applicable, only requirement was for creation of reserve equivalent to Rs.40 per cent of total income by debit to the profit and loss account thus, the order of the CIT(A) upheld Decided against Revenue. Claim of deduction u/s 35D of the Act - Claim being 1/5th of public issue and bond issue expenses Held that:- As decided in assessees own case for the earlier assessment year, it has been decided that, the provisions of section 35D of the Act were applicable only when the expenses are incurred after commencement of business in connection with expansion of industrial undertaking or in connection with setting up of a new industrial unit - the assessee was not an industrial under-taking - the capital raised by issue of shares is for meeting the working capital requirement or otherwise, will not be a relevant consideration thus, the CIT (A) was not justified in deleting the addition made by the AO - the claim of the assessee is allowable u/s 37(1) of the Act as expenditure wholly and necessarily incurred in connection with the business of the assessee - The assessee has claimed only 1/5th of the total expenses and has amortized the claim of expenses for the period of the bond thus, the order of the CIT (A) is upheld partly Decided against Revenue. Interest on securities on accrual basis Held that:- The decision in CIT v. Tamil Nadu Mercantile Bank Ltd [2007 (1) TMI 128 - MADRAS High Court] followed - the assessee has been following the method of offering interest on securities to tax on receipt basis on maturity and the same has been accepted by the Revenue in the past thus, there is no reason to interfere in findings of the CIT(A) Decided against Revenue. Loss on re-valuation of investments Trading in securities - Held that:- As decided in assessee;s case for the earlier year's, the claim has been decided in favour of Assessee - thus, there is no need to interfere in the findings of the CIT(A) - Decided against Revenue. Disallowance under section 14A of the Act - Expenditure related to the earning of exempt income Held that:- As decided in assessees own case for the earlier assessment years, it has been decided that, The decision in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] followed the Assessing Officer is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act - The Assessing Officer can adopt a reasonable basis for effecting the apportionment - While making that determination, the Assessing Officer should provide a reasonable opportunity to the assessee of producing its accounts and relevant or germane material having a bearing on the facts and circumstances of the case there is no infirmity in the order of CIT(A) thus, the applicability of the provisions of section 14A of the Act to the assessee's case is upheld thus, the matter is remitted back to the AO for fresh adjudication of applicability of Rule 8D Decided in favour of Assessee. Applicability of section 115JB of the Act - Banking company Held that:- The decision in Krung Thai Bank PCL Versus Joint Director of Income Tax - International Taxation, Mumbai [2010 (9) TMI 18 - ITAT, MUMBAI] followed - The provisions of Section 115 JB can only come into play when the assessee is required to prepare its profit and loss account in accordance with the provisions of Part II and I II of Schedule VI to the Companies Act - The starting point of computation of minimum alternate tax under section 115 JB is the result shown by such a profit and loss account - In the case of banking companies, however, the provisions of Schedule VI are not applicable in view of exemption set out under proviso to Section 211 (2) of the Companies Act - The final accounts of the banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act. The provisions of Section 115 JB cannot thus be applied to the case of a banking company thus, the provisions of section 115JB of the Act are not applicable to the assessee which is a banking company Decided in favour of Assessee.
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2014 (3) TMI 535
Disallowance of interest u/s 36(1)(iii) of the Act Diversion of Interest bearing borrowed funds Held that:- As decided in assessees own case for the earlier assessment year, the assessee had interest free funds available at its disposal at a higher figure then the amount advanced to its sister concern, the closing balance of which has been reported Relying upon CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - if there are interest free fund available with the assessee sufficient to meet its investment and at the same time, loan has been raised, it can be presumed that the investments were made from interest free funds - From the very prescription of section 36(1)(iii), it is discernible that the amount of interest paid in respect of capital borrowed, for the purpose of business or profession, is allowed as deduction - So long as the purpose of utilisation of the capital borrowed is towards business, no disallowance can be made - the advances were made by the assessee to its sister concern for effecting purchases, the CIT(A) cannot be held to be justified in restricting the addition on account of disallowance of any interest Decided in favour of Assessee. Disallowance of motor car expenses Held that:- The mere fact that the vehicle not standing in the name of the assessee, cannot be a reason for making or sustaining any disallowance on the account of motor car expenses Relying upon CIT vs. Mirza Ataullaha Baig and other [1992 (10) TMI 52 - BOMBAY High Court] the assessee to be entitled to depreciation on vehicle purchased which was not registered in the assesses's name the reason of the AO for making the disallowance of expenses cannot be sustained thus, it will be just and fair if 10% of the total motor car expenses, in respect of all the 9 cars, are held to be relatable to be personal use by the partners of the firm Decided partly in favour of Assessee. Disallowance of depreciation and interest paid on loan Held that:- The sustenance of the disallowance of depreciation on that ground cannot be sustained the disallowance of depreciation is sustained @ 10% on account of personal use by the partners in respect of all the motor cars - the interest part towards loan on motor car is deductible in view of the fact that the cars were purchased by the assessee firm and were standing in its balance sheet Decided partly in favour of Assessee. Disallowance of sales promotion expenses Disallowance of Travelling and conveyance expenses Disallowance of Telephone and Mobile Charges - Nature of Expenses Personal OR Business - Held that:- The CIT(A) was justified in sustaining the disallowance at 10% of expenses in view of the facts that these expenses were not properly substantiated with bills etc. Only kutcha bills and vouchers were produced for Travelling and conveyance expenses - Decided against Assessee.
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2014 (3) TMI 534
Validity of assessment of income - addition on account of inadequate consideration - Difference between the value of the shares allotted and consideration paid u/s 56(2)(vii)(c) of the Act Held that:- The court cannot read anything into a statutory provision which is plain and unambiguous - a statute being an edict of the Legislature - The language employed in a statue is a determinative factor of the legislative intent, the foundational basis of any interpretation, is to be found from the words used by the Legislature itself Relying upon Padmasundra Rao and others vs. State of Tamil Nadu [2002 (3) TMI 44 - SUPREME Court] and Britannia Industries Ltd. vs. CIT [2005 (10) TMI 30 - SUPREME Court] - the consequences cannot alter the meaning of a statutory provision where such meaning is plain and unambiguous, though could certainly help to fix its meaning in case of doubt and ambiguity. The provisions/s, though no doubt a charging provision, is an extension of the deeming provisions of Chapter VI of the Act, laying down the statutory rules of evidence, incorporating the principles of common law jurisprudence - No ambiguity or absurdity or unintended consequence has been either observed by us or brought to notice - The provision is well founded, even as it is settled that hardship in a case would not by itself lead to supplying casus omissus or reading down the provision thus, no property however being passed on to the assessee on the allotment of the additional shares, no addition in terms of the provision itself shall arise in the facts of the case - the provision of s. 56(2)(vii)(c) shall not apply and the amount cannot be assessed as income in the hands of the assessee on the ground of inadequate consideration Decided in favour of Assessee.
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2014 (3) TMI 533
Addition on account of transfer pricing adjustment Clubbing of transactions - Held that:- The assessee clubbed transactions of import of raw material, sub-assembles and components, payment of technical assistance fees, payment of royalty, payment of software and purchase of fixed assets under one segment of 'Manufacturing of the automotive components' and analyzed all such transactions on a combined basis - This type of combined benchmarking of all the international transactions is not in accordance with law - The mere fact that the overall profit earned by the assessee is more, would not ipso facto lead to the interference then all the international transactions are at ALP the decision in LG Electronics India Pvt. Ltd. Vs ACIT [2013 (6) TMI 217 - ITAT DELHI] followed thus, the approach adopted by the assessee in combining so many international transaction for determining ALP on a consolidated basis, is incorrect. Determination of ALP Projected operating profit margin considered - Held that:- The requirement under the relevant provisions of the Act along with the rules is to consider the `actual' figures and not any `projected' figures - It is beyond the comprehension as to how the projected figures can be substituted for the actuals when the requirement is to benchmark actual international transactions at ALP thus, the methodology adopted by the assessee cannot be accepted. Percentage of operating margin Held that:- Rule 10B(4) provides that the data to be used in analyzing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into - Proviso of this rule for use of multiple year data is only an exception and not a rule, which can be invoked if the data for the current year does not result into the determination of correct prices - Nothing of the sort has been shown as to why the data of the comparables for the current year was not appropriate thus, the view of making comparability by the assessee cannot be accepted. Determination of ALP Held that:- Neither the assessee followed correct methodology for determination of ALP of this international transaction, nor the TPO/DRP applied the CUP method for determination of ALP in correct perspective thus, the order passed by the AO making addition proposed by the TPO, cannot be upheld thus, the order is set aside and the matter remitted back to the AO for freesh determination of ALP Decided in favour of Assessee.
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2014 (3) TMI 532
Deductibility of the interest expenditure Held that:- CIT(A) has correctly appreciated the facts and the law to hold that the matter of grant of interest being sub-judice before the Special Court, the same may be allowed where so granted for the relevant year - the order is confirmed subject to a modification that the interest to be allowed, in-as-much as the same is to be by way of deduction against interest income, assessable as income from other sources, cannot exceed the rate at which the interest on deposit/s stands earned by the assessee, on an average, for the relevant period - only the expense incurred for the purpose of earning the interest income is to be allowed u/s. 57 of the Act - Payment of interest at a higher rate implies a gross loss, with no contractual obligation to pay interest having been established, so that the payment of interest at a higher rate cannot either conceivably. Computation of book profit u/s.115-JB of the Act Held that:- CIT(A) has also held o that his order merits being upheld - the assessee has suo motu disallowed Rs.110.86 lacs out of the total interest claim of Rs.118.96 lacs u/s.14A of the Act - The same being qua a direct interest expenditure would also have a direct bearing on the computation of the book profit under Explanation 1(f) below section 115JB(2) - the reduction of the sum in computing the book profit u/s.115JB shall be subject to the interest liability being ascertained - only to the extent it does not represent a direct interest expenditure covered under Explanation 1(f) - the assessee having itself disallowed Rs.110.86 lacs u/s.14A, so that it is in respect of an expenditure booked in accounts and, further, in relation to income that does not form part of the total income Decided partly in favour of Assessee. Deletion of the interest charged u/ss.234A, 234B and 234C of the Act Held that:- The decision in CIT vs. Divine Holdings Pvt. Ltd. [2012 (4) TMI 100 - BOMBAY HIGH COURT] - The levy of interest under the provisions of Sections 234A, 234B and 234C is mandatory in nature - the Tribunal was in error in coming to the conclusion that interest under Sections 234A, 234B and 234C cannot be levied on an assessee thus, the levy of interest under the relevant sections is upheld Decided in favour of Revenue.
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2014 (3) TMI 531
Allowability of amortization - Premium of securities sold before the maturity date Held that:- The CIT(A) has noted that certain requirements as stated in the RBI circular is required to be followed by an Assessee for conversion of security from HTM to other category - to ascertain as to whether the Assessee has correctly classified the securities as HTM and followed the guidelines prescribed by RBI, the Assessee was asked to furnish the details, which the Assessee failed to furnish - CIT(A) has noted that the Assessee has failed to follow the RBI guidelines - In view of the contrary submissions of both the parties, the issue needs to be re-examined more so with respect to following by the Assessee of the applicable guidelines prescribed by RBI with respect to the valuation, accounting treatment and other procedural requirements thus, the matter is remitted back to the CIT(A) for fresh adjudication Decided in favour of Assessee.
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2014 (3) TMI 530
Restriction of disallowance u/s 14A of the Act Compliance of Rule 8D not made - Held that:- It is an undisputed fact that the revised working based on which CIT(A) had reduced the disallowance and thereby granted relief to the Assessee was not furnished by Assessee before AO nor any report on the alternate working of disallowance was obtained during appellate proceedings by CIT(A) from AO in view of all fairness and to meet the ends of justice, the AO should be granted an opportunity to examine the working of disallowance u/s. 14A which has been accepted by CIT(A) thus, the matter remitted back to the AO for verification Decided partly in favour of Revenue. Deletion of disallowance u/s 36(1)(vii) of the Act Held that:- The CIT(A) while deleting the addition has noted that the Assessee had clamed the expenditure u/s 37of the Act and not as bad debts u/s 36(1)(vii) of the Act - CIT(A) has further given a finding that that 1/5 of the expenses as claimed by the Assessee was allowable u/s. 37 of the Act - Revenue could not controvert the findings of CIT(A) nor has brought on record any contrary material in its support - the Revenue is contesting the disallowance u/s. 36(1)(vii) and not the deduction u/s. 37 of the Act thus, there is no reason to interfere with the order of CIT(A) Decided against Revenue. Deletion on account of loss on sale of property Held that:- CIT(A) while deleting the addition has noted that Assessee had submitted sufficient documentary evidences and explanation before the AO but A.O. had ignored and over looked - CIT(A) has further accepted the submissions of the Assessee that the property sold was kept as investment, it was given on rent in earlier years, the income from rentals from the property has been offered to tax under the head "income from house property" and no depreciation has been claimed on the property which was sold during the year - the treatment of sale consideration of property was in conformity with the provisions of Section 45 of the Act and had accordingly directed the A.O to work out the capital gain/loss under the head "capital gains" during the year - the Revenue could not controvert the findings of CIT(A), nor has brought any contrary material in its support on record thus, there is no reason to interfere with the order of CIT(A) Decided against Revenue.
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2014 (3) TMI 529
Allowability of deduction u/s 80IB(10) r.w.s. 80IB(1) of the Act - Revenue was of the view that the assessee is not the owner of the land but has acted only as a contractor Held that:- The CIT(A) has passed a cryptic order while allowing the claim of deduction of Assessee the decision in DY. COMMISSIONER OF INCOME TAX Versus RADHE DEVELOPERS INDIA LTD. [2009 (4) TMI 21 - GUJARAT HIGH COURT] followed - various requirements needs to be fulfilled by a developer so as to become eligible for claiming deduction u/s. 80IB(10) - there is no finding by the lower authorities in the case of Assessee about the compliance of all the conditions prescribed u/s 80IB(10) - To verify the compliance of the conditions as stipulated by the co-ordinate Bench, the matter needs re-examination thus, the matter is remitted back to the CIT(A) for verification of compliance of the conditions Decided in favour of Revenue.
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2014 (3) TMI 528
Addition made u/s 68 of the Act Unexplained cash credit - Held that:- CIT(A) while deleting the addition has noted that the individual capital accounts of the partners showed transfer of capital into the Assessee firm and at the same time the Assessee's books showed the receipt of capital on identical amounts the only difference was in dates Relying upon CIT vs. Pankaj Dyestuff Industries [2005 (7) TMI 601 - GUJARAT HIGH COURT] - no addition could be made in the hands of the firm of the sums introduced by the partners as unexplained cash credit and if at all any addition was to be made, it could only be made in the hands of individual partners - the Revenue has not brought any material to controvert the findings of CIT(A) thus, there is no reason to interfere with the order of CIT(A) Decided against Revenue. Disallowance of labour charges Held that:- CIT(A) while deleting the addition has given a finding that Assessee has acted as a sub-contractor of Ranjit Construction who had been given the contract of construction of Fly over by SMC - the payments are made to Assessee on running account basis for which bills are raised from time to time and there was always a time gap between the raising of a bill and the actual receipt of payment - there cannot be a one to one co-relation between the payment of labour expenses and the raising of R.A. bills and the receipt of payment from the contractee. Supply of material by Ranjeet Construction and SMC Held that:- CIT(A) has noted that the material supplied by SMC and Ranjit Construction were in the nature of reimbursement of expenses thus, the material provided would necessarily have to be credited to the accounts and the labour expenses would have to be compared with the total of receipts - if the materials received from SMC and Ranjit Construction were reduced from the gross receipts, the percentage of labour expenses to such net receipts worked out to 30.81% which was quite reasonable. Difference in the account of Mukhtar Foundation Held that:- CIT(A) has held the difference as fully explained - the Revenue could not controvert the findings of CIT(A) nor has brought any contrary material on record in its support thus, there is no reason to interfere with the order of CIT(A) Decided against Revenue. Deletion made on account of material recovery Held that:- The CIT(A) while deleting the addition made by the AO has noted that AO made lot of assumption and presumption while making the disallowance and further the assumptions were not based on facts associated with the type of business of the Assessee - the AO was not in a position to show that the purchases made by the Assessee and in the name of Ranjit Construction has been utilized elsewhere, nor the AO was in a position to prove that the project was completed by the Assessee with materials purchased from outside its books - SMC had permitted Ranjit Construction and the Assessee to purchase cement and steel on its own and hence in order to complete the project, the two parties had to proceed with the purchases. Disallowance of purchase value of wire Held that:- CIT(A) has noted that there was no basis for the AO to observe that the purchase of wire was disproportionate to the quantity of steel provided by SMC - the quantity of wire purchased shown in the purchase bills tallied with the quantity shown in R.A. bills - no material has been brought on record by Revenue to controvert the finding of CIT(A) thus, there is no reason to interfere with the order of CIT(A) Decided against Revenue. Restriction of disallowance of carting expenses Held that:- CIT(A) had restricted the disallowance to 25% instead of 50% of the expenses - From the list of parties from whom the TDS has been deducted, it is seen that in a few cases though Assessee has stated it had deducted TDS but in the list no PAN numbers of some of the parties have been indicated - Considering the totality of facts and peculiar circumstances of the case and nature of the business and activity carried out by Assessee, the disallowance is restricted to Rs. 10 lacs Decided against Revenue. Addition made on account of valuation of closing work in progress Held that:- The material worth Rs. 16,05,932/- were purchased on the last 2 days of the year and the Assessee could not prove that the same was consumed and was not in the stock at the end of the year and in such circumstances, the action of AO in considering the same as part of closing stock cannot be faulted - it is also an accepted principle of accountancy, that closing stock at the end of the year becomes opening stock of the next year thus, the contention of the assessee is accepted that the amount which is considered as closing stock in the relevant assessment year be considered as opening stock of subsequent year thus, the AO is directed to give credit of the addition made to the closing stock at the yearend as opening stock in the immediate succeeding year Decided partly in favour of Assessee. Disallowance on account of difference in sales tax payment Held that:- Assessee contended that sales tax was paid by Ranjit Construction on behalf of Assessee but, there is no finding on this factual aspect by the AO - this aspect needs verification at the end of AO thus, the matter is remitted back to the AO for verification Decided in favour of Assessee.
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2014 (3) TMI 527
Allowability of prior period expenses Held that:- Major portion of prior period expenses is on account of interest expenses - the Assessee has also not produced any evidence with respect to the terms and conditions on which the Assessee had borrowed the amount - CIT(A) while upholding the order of AO has given a finding that the AO had allowed opportunity to the Assessee to give the details of prior period expenses and to prove as to how those expenses crystallized during the year but no such details were submitted by the Assessee either before AO or CIT(A) - the Assessee had submitted details and proved that the expenses crystallized during the year but no such details were submitted - Assessee has not placed any material to controvert the findings of CIT(A) there was no material has been placed to prove that the liability of interest crystallized during the year thus, there is no reason to interfere with the order CIT(A) Decided against Assessee.
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2014 (3) TMI 526
Levy of Penalty u/s 158BFA(2) of the Act - the appellant has completely disclosed jewellery pertaining to the large family in his wife's locker Held that:- The decision in CIT vs Becharbhai P. Parmar [2012 (4) TMI 418 - GUJARAT HIGH COURT] followed - The right from the date of search till the date of assessment proceedings, the appellant has stated that the jewellery belongs to his mother in law and wife of the brother in law - No inaccurate particulars were filed by the appellant - the addition was confirmed by the CIT(A) and ITAT by rejecting the explanation of the assesses that the jewellery belong to mother in law and the wife of the brother in law of the assessee, does not automatically mean that penalty u/s. 158BFA(2) is leviable thus, there is no need to interfere in the findings of the CIT(A) Decided against Assessee.
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Customs
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2014 (3) TMI 525
Evasion of custom duty - Forging of signature of Customs Officers on the bill of entry - Non-existent DEPB scrips were utilized for clearing imports - Held that:- There is no rebuttal to the forgery of the signature and fabrication of TR6 challans as well as destroying the same later by the appellants. Mentioning of fake DEPB scrips on the bill of entries remaining undisputed has caused sabotage to Revenue. Customs was given an impression that DEPB scrips were genuine. But investigation proved that there were no such scrips in existence to discharge duty liability. Once fraud and forgery came to record that nullified every solemn act. Prima facie the appellants do not deserve any consideration for waiver of pre-deposit. Considering mischief played by the appellants and their notoriety, prima facie, we are unable to appreciate that they were innocent and have come out with clean hands. They had pre-meditated mind to cause subterfuge to Revenue to satisfy their ill will and have been unjustly enriched at the cost of Customs. This we say because one after another consignment they proved their continued mischievous conduct of defrauding Customs which does not require further dialteration in view of proved investigation result and their confessional statement recorded by investigation - appellants having been enriched at the cost of the state and also having their hands in glove and caused prejudice to the interest of Customs, they do not have a case in their favour even at the prima facie stage - Stay denied.
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2014 (3) TMI 524
Confiscation of goods - Imposition of redemption fine - Undervaluation - Import of old and used CRT monitors - requirement of licence under foreign trade policy 2004-2009 - Difference of opinion - Whether the appeal has to be rejected by upholding the order of Commissioner (Appeals) vide which he has enhanced the assessable value of the imported goods and has confiscated the goods with redemption fine of Rs. one lakh and has imposed penalty of Rs.2 lakhs? OR The appeal has to be allowed in respect of assessable value, by accepting the transaction value as correct value of the imported goods and the redemption fine and penalty has to be reduced to 10% and 5% of the declared value? Matter referred to larger bench.
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Service Tax
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2014 (3) TMI 545
Penalty u/s 76 & 78 - Rent-a-cab service - Mis declaration of service - Held that:- the appellants had filed the return correctly but made the mistake in calculation of tax payable and as soon as the same was pointed out and a show-cause notice was issued, the appellants paid the amount with interest. There is no specific finding that the mis-declaration was with intention to evade duty/tax. If the intention was to evade the tax, naturally the amount received would not have been declared correctly. Even accepting the submission that there was a mis-declaration on the part of the assessee in calculating service tax, the intent to evade tax does not flow from this submission. Therefore the fact remains that appellant paid the tax and interest after the issue of show-cause notice and what remains is only the dispute about the penalty - impugned order is set aside and the service tax paid with interest is confirmed as paid correctly and penalties imposed are set aside by invoking the provisions of Section 80 of Finance Act, 1994 - Decided in favour of assessee.
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2014 (3) TMI 544
Penalty u/s 77 - Applicant had already deposited 25% of the penalty under Section 78 - Held that:- The assessee has paid both the service tax and interest for delayed payments before issue of show cause notice under the Act. Sub-Sec.(3) of Sec. 73 of the Finance Act, 1994 categorically states, after the payment of service tax and interest is made and the said information is furnished to the authorities, then the authorities shall not serve any notice under Sub-Sec.(1) in respect of the amount so paid - Therefore, penalty u/s 77 is set aside - Following decision of CCE vs. Adecco Flexione Workforce Solutions Ltd. [2011 (9) TMI 114 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2014 (3) TMI 543
Management Consultancy Service or not - appellant was streamlining distribution, C & F arrangements, arranging bank and finance, rearranging human resources department, pay roll function and overall restructuring of general administration etc - Demand of service tax - Held that:- The above mentioned terms of the agreement clearly show that the activities undertaken by the appellant is adviser in nature. The definition of the Management Consultancy Services includes any person who is engaged in providing any service, either directly or indirectly in any manner and also includes rendering any consultancy or technical assistance, relating to conceptualizing, devising, development, modification, rectification or upgradation of any working system of any organization. The clause 2 of the agreement clearly shows that he activities are advisory in nature and therefore there is no infirmity in the impugned order - Decided against assessee.
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2014 (3) TMI 542
Interior Decorator service - Scope of taxable service - Section 65(59) - drawing and design is supplied to the applicants for execution of work contract - Held that:- As per the definition of scope of interior decorator as per the Finance Act. Is in respect of advice, consultancy or technical assistance relating to complying drawing or design or number of space. In the present cased drawing and design is supplied to the applicants for execution of work. The copies of the work orders which are produced by the respondents the work is in respect of civil work, electrical work etc - execution of civil work, sanitation work, plumbing, electrical work and wooden furniture is not covered under the scope the interior decorator service. As there is no evidence on record to show that respondents are advicing by way of consultancy or by way of technical assistance, in respect of planning or designing of the space, rather applicants are undertaking the other work as per the design and drawing supplied - Decided against Revenue.
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2014 (3) TMI 541
Waiver of pre-deposit of service tax - Penalty u/s 76, 77 & 78 - Appellant had rendered taxable services to NTPC, at Bhagalpur, Bihar, but failed to discharge service tax on the said services - Held that:- Advocate has fairly accepted that the issue of wrong calculation of demand was not raised before the adjudicating authority and hence could not be considered and verified. The Ld. A.R. for the Revenue has no objection in remanding the case for re-verification of aforesaid facts. However, he has pleaded that the appellant should be put into terms. Accordingly, in the interest of justice, the appellant is directed to deposit an amount of Rs.1.00 Lakh (Rupees One Lakh only) within a period of eight weeks from today and report compliance directly to the adjudicating authority - Matter remanded back with order of pre deposit.
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Central Excise
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2014 (3) TMI 523
Rectification of mistake - Revenue contends that appellant ought to have applied for remission of duty in respect of the control samples of pesticides which became unfit for consumption/marketing after the expiry date - Held that:- The bench also considered the fact that none of the control samples was cleared from the factory for testing or for any other purpose whatsoever. It was in this scenario that the decision in Positive Packaging Industries case was taken into account. The decision is to the effect that duty should be paid by the manufacturer, unless exempted by any notification, once the samples are cleared from the factory. In the said case, samples were cleared from the factory for testing quality unlike in the instant case where the practice was to test the control samples, if need be, in an in-house laboratory, which procedure did not involve any clearance of the goods from the factory - What is said to be apparent mistake does not exist in this case. Moreover, the application appears to have made an attempt to re-argue their case, which is beyond the scope of Section 35C (2) of the Central Excise Act. An error to be rectified under this provision should be one manifest on the record and should not be one which may be brought out through a long-drawn process of arguments - Decided against revenue.
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2014 (3) TMI 522
Review petition - Stay application - Stay on recover of duty and penalty - Held that:- Perusal of the grounds of appeal reveals that no ground has been taken relating to financial hardship. The order of the Tribunal has not been challenged on the ground that the financial hardship has not been considered inasmuch as there was a financial hardship and, therefore, the order of the Tribunal was not justified. No substantial question of law has been framed relating to financial hardship. In the order dated 10.9.2013, it has been categorically observed that no argument has either been advanced or pressed by the learned counsel for the appellants in respect of the financial hardship. This observation has not been disputed. The counsel, who argued the appeal, has not come forward to dispute the above assertion. Therefore, when the appellant has not pleaded and raised any argument about the financial hardship, there was no occasion to consider the same. The pleading in this regard in the review application cannot be entertained - Decided against assessee.
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2014 (3) TMI 521
Cenvat Credit - denial of cenvat credit on the ground that activity undertaking by the assessee not amount to manufacture - process of printing and laminating the bare polyester / metalised film - whether an individual and distinct product has come into existence - manufacturing of packaging material falling under Chapter 39 and other final products, falling under Chapters 47, 48, 74, 76 and 84 of the Central Excise Tariff Act, 1985 - Held that:- It is clear that the appellant after purchasing the bare polyester/ metalised film on payment of duty, first subject those film to printing as per the requirement of the customer and thereafter those films are laminated either in two layers or three layers, thus the aforesaid process changes the character of the bare polyester film (inputs) in terms of its user as also the thickness and lamination falling within the definition of manufacture as defined under Section 2(f)- The department having accepted the excise duty on the final product cannot be permitted to deny cenvat credit on the inputs used for the manufacture of the final product on a technical plea of department - Following decision of Markwell Paper Plast Pvt. Ltd. vs. Commissioner of Central Excise, Noida [2012 (7) TMI 290 - CESTAT, NEW DELHI] - Decided in favour of assessee.
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2014 (3) TMI 520
Availment of CENVAT Credit - Revenue contends that the waste of cotton arising out of the manufacture of cotton fabric is not entitled for credit availed by the appellant - Held that:- Appellants are entitled to avail CENVAT credit on cotton which is being used for manufacturing of cotton fabrics but during the course of manufacture of cotton fabrics, cotton waste is arising which is a by product. Therefore, they are entitled to avail CENVAT credit on cotton involved in cotton waste and same view has been take by Tribunal in Gobald Textiles P. Ltd. [2004 (11) TMI 367 - CESTAT, CHENNAI] - Decided in favour of assessee.
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2014 (3) TMI 519
Waiver of pre deposit - Valuation - inclusion of pool lifting charges into the value of motor vehicles - Held that:- Scheme of pool lifting charges the dealers placed orders for number of vehicles and certain type, model, colour required by them in future for ultimate sale to their customers. But in case later on, they received more orders for the vehicles dealer can lift these vehicles from the pool created by the applicant. In order to receive these vehicles from this pool he has to pay extra charges to get these vehicles. The applicant is clearing the goods to their dealers on the invoices on which Central Excise duty has been paid. The dealers in turn sell these cars to their customers by adding their original invoice amount plus the pool lifting charges. We find that pool lifting charges are being recovered from the customers. Accordingly we are of the view that these charges prima facie are required to be added in the value under Section 4 of the Central Excise Act. Therefore the applicant does not have a prima facie case in their favour - Conditional stay granted.
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2014 (3) TMI 518
Waiver of pre-deposit - Levy of duty on intermediate products, manufactured by Job Worker, used by the assessee in exempted final products - Benefit of exemption Notification No. 76/1986 - Captive consumption - manufacture of catechu like substance containing an abundance of catechins by Job worker - manufacture of katha as final product - Held that:- It is settled law that when a principal manufacturer gets his goods manufactured from a job worker on job work basis and the transaction between them are on principal to principal basis, it is the job worker who would be liable to pay duty not the principal manufacturer - Following decision of assessee's own previous case [2012 (9) TMI 708 - CESTAT, NEW DELHI] - stay granted.
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2014 (3) TMI 517
CENVAT credit - Credit denied in respect of structural materials (plates, channels and angles) which were claimed to have been used for repairs and maintenance of capital goods - Lower authorities, contended in the construction of factory shed/building/laying of foundation/making of structures for support of capital goods - Held that:- Even any statement indicating the manner of use of the materials is not forthcoming. In the circumstances, the appellant cannot be considered to have made out prima facie case against the above denial of CENVAT credit. The appellant has pleaded limitation against the demand - there will be a direction to the appellant to pre-deposit the entire amount of CENVAT credit within 6 weeks - there will be waiver and stay in respect of the penalty imposed on them - Stay granted partly.
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2014 (3) TMI 516
Penalty - Waiver of pre deposit - Stay in respect of CENVAT credit - Denial of CENVAT credit on works contract services, catering services, event management services - Bar of limitation - Held that:- demand is within the normal period. In the other case, it is for the extended period. The argument of the learned counsel is that all the services in question were mentioned in the service tax returns filed periodically during the period of dispute. It is claimed that relevant extracts from the CENVAT credit register were also produced with the returns. In this scenario, according to the learned counsel, the appellant cannot be held to have suppressed any fact with intent to avail undue benefit. Nevertheless, no documentary proof is available on record. Not even a specimen copy of the service tax return, nor even a specimen extract from CENVAT credit register has been produced. The plea of limitation, therefore, remains unsubstantiated. Mangalore Refinery and Petrochemicals Ltd. has not pleaded financial hardships - Conditional stay granted.
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2014 (3) TMI 515
Waiver of pre deposit - Cenvat Credit of service tax paid on input services where invoices were addressed to Head office - Duty paying documents - Held that:- appellant seems to have prima facie case in respect of some of the input services which, by the very nature thereof, were linked only to the factory. These services include technical inspection & testing services and consulting engineer s service. In relation to other services, prima facie, the factory cannot claim exclusive coverage inasmuch as such services could be used by the Head Office also viz. audit services, security services, manpower recruitment & supply services etc. - Conditional stay granted.
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2014 (3) TMI 514
Dutiability of goods - Applicant is a manufacturer of cement and they have supplied some quantity of cement to SEZ - Revenue was of the view that since the final product is exempt from duty, duty should have paid on the clinker which is an intermediate product which had come into existence in the factory and which was captively consumed - Held that:- Apparently there is some contradictory in the decisions of the court while dealing with the meaning of export for the purpose of charging export duty and the manner of granting exemption from excise duty, while supplying he goods to the SEZ. The Boards Circular dated 27.12.2006 clearly states that supplies to SEZ has to be treated as export and benefits granted accordingly. Considering all these facts, we find it appropriate to waive pre-deposit of duty for the purpose of admission of appeal and we also grant stay on collection of such duty during the pendency of the appeal - Stay granted.
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CST, VAT & Sales Tax
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2014 (3) TMI 548
Imposition of penalty u/s 54(1)(14) of U.P. Value Added Tax Act, 2008 - Non filling of details under Form 38 Intention to evade tax - contravention of Section 50 or Section 51 r/w Rule 56(1) - Held that:- Decision in M/s. JSW Steel Ltd. Versus The Commissioner, Commercial Taxes [2014 (2) TMI 858 - ALLAHABAD HIGH COURT] followed- Declaration form was not "duly filled" in, as required u/s 50 and 51 r/w Rule 56(1) thus, there was contravention of provision of Section 50(1) of Act, 2008 - The Assessing Authority has recorded that by keeping column 6 of Form 38 blank, such declaration form can be repeatedly used for successive import so as to evade payment of tax - These are all concurrent findings of fact and satisfy requirement of Section 54(1)(14) so as to justify imposition of penalty. The relevant charging incidents u/s 54(1)(14) of Act, 2008 are that there must be contravention of provisions u/s 50 or 51 and the contravention must be with a view to evade payment of tax of sale of such goods or goods manufactured, processed or packed by using such goods etc. Mere contravention of Section 50 or 51 but without any intention to evade tax would not attract penalty - Before imposing penalty, authority concerned has to record a finding either on the basis of material before it or produced by the dealer or any other person or the Department, which may include incomplete form 38 that there was an intention to evade payment of tax - The order of the Tribunal upheld - Decided against assessee.
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2014 (3) TMI 547
Maintainability of writ petition - Time-barred petition option to file appeal in front of Appellate Authority present Jurisdiction of writ court - Held That:- Decision in the case of State of Madhya Pradesh vs. Bhailal Bhai [1964 (1) TMI 33 - SUPREME COURT OF INDIA] followed - Section 47 of the Puducherry Value Added Tax 2007 provides that appeal shall be filed within a period of thirty days Proviso u/s 47(1) gives extra time of thirty days if there is sufficient cause to explain the delay - Therefore a total period of sixty days is prescribed under the statute to file an appeal - If the appellate authority do not have the power to condone the delay after sixty days, the writ Court would not be justified in giving further extension - Writ proceedings are not for the purpose of granting extension of time Although there is no fixed period of limitation for initiating proceedings under Article 226 of the Constitution of India - But when there is a statutory remedy available alongwith maximum period of limitation No need to entertain a writ petition long after the expiry of the limitation - Appellants open to re-present the belated appeals filed before the Appellate Authority Decided against assessee
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2014 (3) TMI 546
Exercise of revisional powers - Imposition of Penalty u/s 28A(4)(b) Karnataka Sales Tax Act, 1957 - Whether the appellant has violated section 28A(2)(b) & (d) of the KST Act - Held that:- No document has been produced to show that the order passed by the Appellate Authority is prejudicial to the interest of Revenue and it is erroneous in law - The invoices produced by the appellant clearly disclose that the tax was collected on the bill and there is no attempt of evasion of tax and the penalty cannot be imposed u/s 28A(4) on the ground of violation of any of the provisions u/s 28-A(2) and 28(3) of the Act r/w Rules 23-B There is no violation of any of the provisions of the Act - The interest of government is fully protected - The order passed by the Revisional Authority is contrary to law - There is no allegation with regard to evasion of tax - The revisional power can be invoked, only if any order prejudicial to the interest of the revenue is passed by the Authorities - Revisional Authority order set aside and Appellate Authority order is confirmed Decided in favour of assessee.
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