Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 21, 2015
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Sale of land - Assessing Officer in bringing to tax the short term capital gains arising from the sale of agricultural land under the head ‘business income’ - land in question sold by the assessee, being agricultural land, the profit arising from the sale of the same, is not chargeable tot ax in the hands of the assessee as capital gain - AT
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Interest u/s 244A on the tax refund - as per provision of sec. 244A(2) of the Act the decision of Chief Commissioner of Income Tax or Commissioner of Income Tax shall be final on this issue and, therefore, revenue authorities are duty bound to refer the matter to the competent authority for determination of the issue regarding exclusion of period as per provisions of the Act - AT
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Penalty levied u/s.271(1)(c) - revised return filed - assessee has adopted the recourse of avoiding litigation, therefore, revised the return to buy peace of mind - no penalty - AT
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Receipts not shown by the assessee - even if the receipts as per TDS certificate are to be considered as income of the assessee then the payment made by the assessee has to be allowed as expenses and it will not result in addition in the hands of the assessee - AT
Indian Laws
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Highlights of the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015 Introduced in Lok Sabha Today.
Service Tax
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Club Membership - charitable organization or not - Services are being provided in respect of the export of goods to their members - certification fees, membership fees and various export activities - prima facie case is in favor of assessee - AT
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Import of services - associated enterprises - though the services were provided period prior to 18.04.2006 when Section 66A had been introduced but payment was made after 18.4.2006 - Demand of service tax on the basis of date of payment is not valid - AT
Central Excise
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Cross Utilization of CENVAT Credit - wrong utilization of Additional Duty of Excise (T&TA) for the payment of Basic Excise Duty and AED (GOSI) - levy of interest confirmed - though penalty set aside - HC
VAT
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Imposition of penalty - Delay in filing of report due to accountant leaving the job abruptly - the penalty imposed of ₹ 1,70,747/- in the first appellate order has been brought down and reduced to ₹ 1,00,000/- in the second appeal by the Tribunal - further relief denied - HC
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Imposition of penalty - Sales tax registration not obtained - Bonafide belief that registration not required as doing second sale of goods within the State - no merit in the present writ petition - HC
Case Laws:
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Income Tax
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2015 (3) TMI 652
Cash receipt of ₹ 1 crores - deletion of the sum of ₹ 1 crores directed by the CIT(A) and upheld by the ITAT - Held that:- We are of the opinion that given the fact-intensive nature of the matter, and - as noted by the CIT(A) - the rare instance where cash transactions were indeed reflected in the books of one of the assessees which had an intimate connection with the present assessee, any further enquiry would involve more weighing of evidence rather than interpretation of law. Barring exceptional cases where the findings are based on no evidence or after overlooking material evidence, the scope of appeal under Section 260A of the Act involves examination of substantial questions of law. We see none in respect of this transaction. - Decided against revenue. Unexplained expenditure - unexplained loan - amounts were based upon seizure of handwritten notes containing particulars of demands made by the assessee - CIT(A) confirmed part addition on unexplained loan and deleted on unexplained expenditure - Held that:- The CIT(A) subjected the record to close scrutiny and the ITAT thereafter went into the record by examining the actual entries. It is not as if the ITAT deleted the entire amount. The rationale for retaining ₹ 6.93 lakhs has been clearly mentioned, i.e. that it pertained to a specific transaction for which a date was attributable or discernable. However, with respect to the other notings, no definitive date or period could be ascribed. Therefore, the ITAT concluded that the said amount of ₹ 44,47,500/- could not be brought to tax . No substantial questions of law - Decided against revenue.
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2015 (3) TMI 651
Computation of disallowance of interest - Tribunal rejected the computation made by the AO as per Rule 8D - Grievance of the revenue is that in terms of decision of Godrej Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT) reasonable disallowance of expenditure in relation to exempt income has to be made even in respect of Assessment Year prior to Assessment Year 2008-09 when Rule 8D of the Income Tax Rules, 1962 is applicable - Held that:- So far as the issue of disallowance of reasonable expenditure to earn exempt income is concerned, we find that the impugned order has followed its decision in case of the respondent-assessee for the Assessment Year 2005-06 [2014 (8) TMI 457 - BOMBAY HIGH COURT] where disallowance was limited to 2% of the exempt income and the same was held to be fair and reasonable. The revenue being aggrieved by the order of the Tribunal in case of respondent-assessee for the Assessment Year 2005-06 has preferred an appeal to this Court. However the above appeal of the revenue was dismissed. - Decided against revenue.
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2015 (3) TMI 650
Taxability of the gross total income - assessee has not paid any federal tax in USA as evidenced by the W-2 furnished by the assessee for the FY 2008-09 - whether Tribunal was justified in not adopting the grossing up concept in respect of the assessee's Indian taxes borne by the employer in reference to Section 17 (2) (iv) r/w Section 192 (1B)? - Plea of the Revenue that there is no specific indication as to what is the gross total income of the assessee and, therefore, there is no clarity in the order of the Tribunal, deserves to be rejected - Held that:- A cursory look at the order of the Tribunal reveals that there is no such confusion in the order of the Tribunal, as portrayed by the learned standing counsel for the appellant/Revenue. The Tribunal, in para-7 of its order, has clearly stated that consequent to the withdrawal of hypothetical tax payable in US, certain amount has been paid towards tax liability of the assessee in India. Taking into consideration the amount paid towards salary and deducting the hypothetical tax payable in the US,the Tribunal has determined the salary received after deduction made by the employer towards the hypothetical tax. A cursory look at the above calculation made by the Tribunal would reveal that the computation is just and proper and no clarification is required to be given by the Tribunal, as it is for the assessee to explain as to how this amount should be treated for the purpose of determining the tax. - Decided against revenue.
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2015 (3) TMI 649
Disallowance of deduction u/s 80-IA - AO held that since there was sale of going concern and formation of Private Limited Company, there was capital gain, for which tax was liable to be paid by the assessee under Section 50-B of the Act and disallowed the deduction claimed by the assessee under Section 80-IA - Tribunal allowed the claim - Whether the assessee is entitled for claiming deduction under Section 80-IA when more than 20% of old plant and machinery were used in the reconstructed unit as contemplated under Sub-section (3) of Section 80-IA? - Held that:- In order to claim deduction under Section 80-IA assessee has to satisfy that Industrial undertaking must be set up on or after 01.04.1991 and before 31.03.1995.Industrial undertaking is not formed by splitting up or reconstruction of a business already in existence (subjected to certain other conditions as specified in Section 80-IA.)The transferred assets of old business should not exceed 20% of the total value of the machinery or plant used in the new business. & It should not manufacture or produce articles specified in the Eleventh Schedule. The records placed for perusal show that the assessee has not fulfilled the above conditions and therefore, the Assessing Officer and the Appellate Authority had rightly disallowed the benefit. The Tribunal without any just and cogent reasons has reversed the orders passed by the Assessing Officer as confirmed by the Appellate Authority. The Tribunal while setting aside the order of the Appellate Authority has erroneously held that the unit established in Shed No.C-54 is a new unit and the products manufactured in both the units are identical. Thus, the findings of the Tribunal in setting aside the concurrent orders of the Assessing Officer as well as the Appellate Authority are unsustainable in law. - Decided in favour of revenue.
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2015 (3) TMI 648
Reopen of assessment invoking Explanation 2 to Section 153 - remission or cessation of liability during the relevant assessment year - Tribunal directing AO to reopen the assessment of an earlier year which would amount to enhancement of income - Held that:- In the case on hand, admittedly, credit balances are lying in the names of third parties for long number of years and there are no purchases by the assessee from those parties after 1996-1997. That apart, it was found that no such persons reside in the addresses given by the assessee. Under such circumstances, necessarily these amounts have to be determined under one head or the other. If Section 41(1) of the Act does not apply to the facts of the present case, it has to be determined how the credit balances should be treated. The assessee had conceded before the Tribunal that assessment of the earlier assessment years relating to such purchases can be reopened and he has no objection to the same. The purpose of such concession is to determine the correct tax liability. It was under such circumstances, the Assessing Officer was directed to reopen the assessment of the year in which such purchases were made from third parties to examine whether such purchases were bogus or not. The net result of such a direction may also go in favour of the assessee, if he is able to prove the bona fides. The effect would be that the correct tax liability will thereafter be determined. We find that such a direction is in consonance with the provisions of Explanation 2 to Section 153 of the Act. Such a direction passed by the Tribunal in the present factual scenario, in our considered opinion, cannot be said to be erroneous. - Decided in favour of the revenue
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2015 (3) TMI 647
Suppressed profit - AO in upholding addition that out of the total business activity carried on in the same premises, 50% belonging to the father and son respectively - CIT(Appeal) sustaining addition to the extent of 50% of the business - Held that:- One of the contention of the assessee that he is engaged in the business of retail trade, and its total turn over did not exceed the prescribed monetary limit and AO ought to have computed profit @ 5% of total turn over as prescribed u/s 44AF of the Act but admittedly, the assessee has not claimed in return of income that it is entitled for the rate as prescribed u/s 44AF of the Act for computing the business profit. Therefore, at this stage, this contention of the Ld. Counsel for the assessee cannot be accepted and same is rejected. Another contention of the assessee is that there is no basis to attribute 50% of the profit to the assessee is devoid of any merit. It is not disputed by the assessee that he has been carrying out the business activity from the same premises. No evidence is placed on record proving the volume of business carried out by the assessee. The AO has given a categorical finding that no separate stock was maintained by the assessee and his father. It is contended that the addition has been made by the AO without considering the explanation offered by the assessee but is contrary to the records as it is admitted position that the assessee was not maintaining proper books of accounts, therefore the AO was justified in computing the profit on the basis of the material available before him. Hence, we see no reason to interfere in the order of Ld. CIT(A) same is hereby upheld. - Decided against assessee. Undisclosed debtors - AO had made addition on the basis that the assessee neither furnished list of sundry debtors as on 31.03.2008 nor could he explain the sundry debtors despite various opportunites - contention of the assessee is that everything was explained before the assessing officer and there was no undisclosed sundry debtors - Held that:- After considering the totality of the facts that if the sales effected to these debtors has been included into the suppressed sales and addition made thereof. Therefore, it would not be open to the Revenue to make addition of same amount. This aspect requires verification by the Ld. AO, therefore this ground is restored to the file of AO for verification. The AO is hereby directed to verify whether sales effected to the debtors in question is included into the supported sales or not and profit on such sales is estimated or not. If AO finds that sales have been included he would delete the addition. - Decided in favour of assessee for statistical purposes. Unexplained cash - Held that:- Ld. CIT(Appeal) observation that the amount could not be satisfactory explained at the time of survey cannot be sustained. In case, the assessee is able to demonstrate from the records that the amount so found during the course of survey was in fact collection made in respect of sales. The assessee has pointed out that in the impounded material collected during the course of survey itself the assessee has shown that the cash so found was out of the sales collections. This fact requires to be verified at the hands of the assessing officer. Therefore, the issue is restored to the file of AO for verification, whether the cash found during the course of survey was collection of the sale amount. In case, the amount pertains to sale collection same be deleted.- Decided in favour of assessee for statistical purposes. Unaccounted deposits / gifts - assessee submitted that no addition can be made in the assessment year under consideration since these deposits / gifts pertain to the assessment year 2007- 2008 - Held that:- CIT(Appeal) has observed that the gift given by father is not proved and observed that the total gifts far exceeded the income shown by the donor and thus cannot be held to be explained. It was incumbent upon the assessee to produce the relevant documentary evidence in support of its claim. The assessee is required to furnish the evidence to prove genuineness of the transaction and creditworthiness of the donors. The authorities below have given a finding on fact that the donors were not having sufficient fund to give gifts to the assessee. This finding on fact is not rebutted by the assessee by placing any contray material on record. Therefore, we do not see any reason to interfere into finding of the Ld. CIT(Appeal) to this extent. However, the contention of the Ld. Counsel for the assessee is that these gifts / balances pertain to earlier year i.e. assessment year 2007-08. This fact requires verification at the end of the assessing officer. - Decided in favour of assessee for statistical purposes. Unaccounted transfer in the bank account - Held that:- revenue has not placed anything on record suggesting that the amount deposited by Raj Bahadur Chand in fact belonged to the assessee. On the contrary, the assessee has produced evidences in the form of bank statement etc., therefore, we hereby direct the assessing officer to delete the addition. - Decided in favour of assessee. Discrepancy in balance sheet - CIT(A) allowing relief of ₹ 2,75,OOO/- to the assessee out of addition of ₹ 5,25,000/- - Held that:- this amount is treated as explained in part only. It is seen that vide report dated 26.09.2011 (which has been rebutted by the ld. AR) it has been mentioned that the gift amount of ₹ 2,50,000/- shown received from father does not stand proved since there is a finding that Shri Ganesh Shanker Punetha’s total income for the year was ₹ 2,30,884/- and he is shown to have even gifted an amount of Rs, 270,000/- to the wife of the appellant in this very year. Thus the sum total of gifts far exceeds the income shown in the return and thus cannot be held to be explained. Thus, out of ₹ 5,25,000/-, ₹ 2,75,000/- (i.e. 5,25,000 - 2,50,000=2,75,000) is held as explained and the addition to this extent deleted. The remaining amount of ₹ 2,50,000/- is upheld as an addition. Thus finding on fact by the Ld. CIT(Appeal) is not controverted by the revenue by placing any contrary material on record. - Decided against revenue. Addition on account of benami transactions - CIT(A) deleted the addition - Held that:- CIT(Appeal) has given a finding that no action is taken against the recorded bank Account holder, no inquiry was made by the assessing officer to find out involvement of the appellant. The Ld. CIT(Appeal) has given a finding that the assessee was merely an introducer of bank account. However, it is transpired from the assessment order the Assessing Officer has observed that according to material available on records there were certain deposits in account no. 10925759010. Thus we are not able to accept the argument that the assessee was merely an introduced of the account if he was merely introduces of the account then how the details related to the account of third party was found during the course of survey at his premises. Therefore, we hereby set aside this issue to the file of the assessing officer as to give a clear finding in respect of addition made what was the basis and material available before him for making such addition. - Decided in favour of revenue for statistical purposes.
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2015 (3) TMI 646
Computation of interest u/s.244A - AO did not allow interest on interest - CIT(A) confirmed the action of the AO - Held that:- When the refund of tax becomes payable as a result of orders passed in appeal or other proceedings under the Act, this refund is to be given along with interest, which is to be calculated as per sec. 244 of the Act. If that interest is paid along with the excess tax, no further payment is to be made. It is only when the excess amount of tax is refunded but the interest is not refunded along therewith, the retention of interest amount would become unjustified and interest on interest would also become payable. The reason is simple. It is the tax which was paid in excess by the assessee which became refundable. The assessee would be compensated by paying interest thereupon. It is only when the interest is not refunded along with excess tax that the withholding of the said interest becomes unjustified and it becomes an amount due" to the assessee on which the assessee can claim further interest. Such a situation has not happened in the present case as the amount of interest is calculated and refunded along with the refundable tax amount. The Hon'ble Supreme Court has made adverse remarks about the decision of Sandvik Asia Ltd. [2006 (1) TMI 55 - SUPREME Court] in the decision of Gujarat Fluoro Chemicals [2012 (8) TMI 740 - SUPREME COURT], wherein held that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest. Therefore, following Gujarat Floura Chemicals and the decision of Hon'ble Delhi High Court in case of The Motor & General Finance Ltd. vs. CIT [2009 (10) TMI 51 - DELHI HIGH COURT], the stand of the AO is upheld and the grounds of appeal of the appellant are dismissed.
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2015 (3) TMI 645
Disallowance u/s 69C - @ 2% of bogus billing as unexplained expenditure - CIT(A) restricting the disallowance lowing the order of his predecessor for the earlier assessment years on the same issue - Held that:- The facts are not in dispute inasmuch as it is also not in dispute that the A.O. has accepted the purchases and sales as disclosed by the assessee and has not rejected the books of accounts as maintained by the assessee. While making the addition of undisclosed commission of ₹ 2,51,698/-, the A.O. has relied upon the statement of Mr. K.K. Gupta recorded on oath by the DDIT (Inv.) on 25-7-2007 u/s 131 of the Act. However, during the course of assessment proceedings it was stated by the assessee that at the time of statement recorded by the DDIT (Inv.) it was inter alia stated by the assessee that unless all facts with respect to the statement made by Mr. Gupta were given, proper cross examination could not be carried out and hence right to cross examination was reserved. However, during the course of assessment, the assessee has asked for the cross examination which was denied by the A.O. on the ground that the same is untenable and unacceptable. In absence of any contrary material placed on record by the Revenue to show that the cross examination of Mr. K.K. Gupta was provided to the assessee, we respectfully following the ratio of precedents of the earlier years and keeping in view that the assessee in his submissions dtd. 19-12-2008 stated that he is showing profit ranging between 40 to 45% on the purchases has not been uncontroverted by the Revenue even at this stage and also keeping in view the books of accounts have not been rejected, we are of the view that the ld. CIT(A) was not justified in sustaining the addition of commission of ₹ 2,51,698/- and accordingly we delete the same. The grounds taken by the assessee are, therefore, allowed. we uphold the order of the CIT(A) sustaining the commission payment at the rate of 0.25% instead of 2%. - Decided against revenue. Disallowance of depreciation on plant and machinery - CIT(A) deleted disallowance - Held that:- It is not the case of the Revenue that the plant and machinery were not installed at the assessee’s business premises or the same were not used for the purpose of the business of the assessee or the rate of depreciation claimed by the assessee is not according to the Rules, we are of the view that the estimated disallowance of depreciation made by the A.O. is not sustainable in law and accordingly we are inclined to uphold the findings of the ld. CIT(A) in deleting the same. Thus following the earlier years decisions, we uphold the order of the CIT(A) deleting the disallowance of depreciation - Decided against revenue.
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2015 (3) TMI 644
Long term capital gain - treatment to agriculture land - whether the assessee is liable to pay tax only on the capital gain earned on the sale of its agricultural land situated at village Kishora, Sonepat, Haryana, as the same being out of the purview of definition of capital asset as per Section 2(14)(iii)? - Held that:- We find that the A.O. has relied upon the information dated 14.03.2013 of the District Town Planner, Sonepat and the learned CIT(A) has also referred their letter dated 16.05.2014 in this regard that village Kishora is within 8 kms. limits of Municipal Council, Sonepat. This information has been contradicted by the District Town Planner, Sonepat, vide its letter dated 30.12.2013 that village Kishora is more than 8 kms. from the Municipality, Sonepat (page 106). We thus find that the District Town Planner is not clear on their stand nor they have mentioned about the mode, either aerial or motorable road adopted for the measurement of the distance. We, therefore, in the interest of justice, set aside the matter to the file of the Assessing Officer to examine the veracity of these two letters, one issued by Tehsildar, Sonepat and the another by Council Engineer, Municipal Council, Sonepat, as well as the mode i.e. aerial or motorable road for calculation of the distance adopted by the District Town Planner, Sonepat, followed by the A.O. as well as learned CIT(A) and decide the issue afresh about the distance in view of notification dated 06.01.1994 as land in question has been sold during the period falling in the A.Y. 2010-11, and our observations, after affording opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of business expenses - AO disallowed the claim of the assessee on the basis that there were no business receipts - Held that:- Genuine expenditure incurred in the business cannot be denied only on the basis that there was no business receipts. The further contention of the learned AR remained that similar expenditure was allowed to the assessee in the assessment years 2006-07 to 2008-09 while in the assessment year 2009-10, there was no interest expenditure claimed by the assessee company. In the present year under consideration, interest income has been declared and various expenditures under the different heads was claimed. The further contention of the learned AR remained that the business expenditure relates to business activities of the assessee and during the year, no such expenditure was found which was either capital or personal in nature and there is nothing personal in nature, once expenditure relates to the assessee company. It was also submitted that the assessee has declared not only business income from agricultural activities but also earned interests on the funds kept in the bank. We find that the AO has made disallowance merely on the basis that no business activities were carried during the year, without examining the nexus between those expenses and the purpose on which those were spent for. We thus set aside the matter to the file of the A.O. to examine the claim and dispose of the issue by passing a speaking order after hearing the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of agricultural income - Held that:- Issue raised needs fresh consideration also keeping in mind that the assessee has not claimed benefit of exemption of agricultural income and the affidavit of the farmer confirming that the land was on batai filed as additional evidence before the learned CIT(A) has remained to be examined. The Assessing Officer is thus directed to decide the issue afresh after verifying the above submission of the assessee as well as the affidavit filed before the learned CIT(A) and after affording opportunity of being heard to the assessee.- Decided in favour of assessee for statistical purposes. Treatment of interest income - income from other sources or business income - Held that:- when interest income is part of assessee’s business activities and regularly been assessed, the action of the A.O. in making assessment under the head “income from other sources” cannot be justified. We also find substance in the alternative contention of the learned AR that even otherwise interest income has to be assessed after deducting interest expenditure. We thus set aside the matter to the file of the Assessing Officer to verify the above claim of the assessee and decide the issue afresh, after affording opportunity of being heard to the assessee - Decided in favour of assessee for statistical purposes.
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2015 (3) TMI 643
Disallowance of Bad Debts - failure of the Appellant to prove revenue recognition of such debts in earlier years - Held that:- We note that assessee has claimed before the ld. CIT(A) that details of bad debt were furnished by the assessee regarding offer for taxation in the respective year and all such debts carried over for long periods arising out of hotel operations. However, we find that the detailed as referred in the above submissions have not been produced by the assessee before us. The ld. CIT(A) has given finding that the assessee has not proved that the amount of bad debts was taken into income of the assessee in the earlier years. We find that there is contradiction between the submissions of the assessee and the finding of the ld.CIT(A) as to whether the details were furnished that the income relating to bad debts were offered for taxation in the earlier years. In this view of the matter, in our considered opinion the issue needs to be remitted to the file of the AO to make factual examination of the assessee’s claim after giving the assessee adequate opportunity of being heard. - Decided in favour of assessee for statistical purposes. Deduction u/s. 43B of municipal taxes - CIT(A) allowed the claim - Held that:- CIT(A) has allowed the impugned payment on the basis of provisions of section 43B of the I.T Act 1961. The said section mandates that the statutory dues should be allowed if they are paid during the year or subsequently prior to the due date of filing of return irrespective to the year to which they pertain. In this case, the ld. CIT(A) has given a finding that liability of municipal tax though pertaining to earlier year crystallized during the year as necessary bill was raised during the year. This was paid before the due date of filing of return. Hence, the amount involved is allowable as per provisions of section 43B of the Act. It is not the case of the revenue that the concerned payment has not been made before the due date of filing of return. The revenue has taken the ground that the said amount should not be allowed if it was paid in subsequent financial year. We find that this ground is not sustainable as section 43B itself mandates that the amount involved can be allowed if the same is paid after the close of the financial year, but before the due date of filing of return. Hence, we do not find any infirmity in the order of the ld.CIT(A) - Decided against revenue. Disallowance of expenses on apartment and board - CIT(A) granted part relief to the assessee - Held that:- CIT(A) has noted that AO in his remand report has stated that though the details of the expenses have been furnished but no names, addresses or bills of suppliers etc were furnished. Therefore, expenditure remained unverifiable. The ld.CIT(A) has dislodged this finding of the AO by holding that AO’s objection is not good because the accounts of the assessee are subjected to audit and the auditors have not mentioned any short coming on that account, in assessee’s books, in their Audit report. We find that AO’s remand report indicates that the bills submitted in this regard were not proper inasmuch as names, addresses or bills of suppliers etc were not mentioned in the vouchers. This finding of the AO cannot be dislodged only by plea that the accounts of the assessee were audited and the auditors have not pointed out any short coming. Income tax laws do not provide that the auditors report should be treated as sacrosanct and the AO need not make proper examination. Hence, assessee’s claim of expenditure in absence of proper supporting by way of cogent vouchers cannot be allowed. In such circumstances, we set aside the order of the ld.CIT(A) on this issue and restore that of the AO. - Decided in favour of revenue. Disallowance of management fees - CIT(A) deleted addition - Held that:- assessee had entered into agreement with Sarovar Park Plaza Hotels & Resorts P.Ltd for operation of hotel of the assessee and also to render supervisory services. The amount paid was based upon percentage of gross revenue and gross operating profit. The ld. CIT(A) has given a finding that after availing services of the above referred reputed hotel chain the business position of the assessee in subsequent years improved. In such situation, it cannot be said that the amount paid as management fee, was not allowable. The ld.CIT(A) has rightly held that management fee is directly attributable to income from operations and is fully allowable as business expenditure. There is no basis for AO’s observation that the assessee cannot pay the management fees, if it has also paid director’s remuneration, director’s salary, and any other administration expenses. There is no basis for such observation of the AO. By no stretch of imagination, it can be inferred that since the assessee has paid management fees, hence, services of the directors and salary to the staff are not required. In this respect, we also refer to the case of CIT Vs. Walchand & Co. Pvt. Ltd reported in (1967 (3) TMI 2 - SUPREME Court). In this case, it was held that in applying the test of commercial expediency for determining whether the expenditure was wholly and exclusively made out for business reasonableness has to be judged from the point of view of businessman. - Decided against revenue.
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2015 (3) TMI 642
Sale of land - Assessing Officer in bringing to tax the short term capital gains arising from the sale of agricultural land under the head ‘business income’ - CIT(A) changed the head of income as determined by the AO as falling under ‘adventure in the nature trade’ to ‘capital gain’ - Held that:- It is observed that by an ‘Agreement of sale with possession-cum-Irrevocable power of attorney’ dated 12th March, 2007, the land in question was transferred by the assessee to M/s. Varun Constructions alongwith other 13 land owners who were owners of the adjacent lands. The said thirteen parties had also claimed the profit arising from the transfer of their land to M/s. Varun Constructions as exempt on the ground that their lands, being agricultural lands, were not capital assets within the meaning of S.2(14). In their cases also, the claim was not allowed by the Assessing Officer and when the matter reached the Tribunal in the case of six of the said assessees, namely, M/s.Bhavya Constructions Pvt. Ltd., Shri M.S.Raghava Reddy, Shri R.Srinivasa Rao, Shri R.Uma Maheswar, Shri P.Shivakumar and Shri G.C.Subbanaidu, the coordinate bench of this Tribunal vide its order [2014 (9) TMI 85 - ITAT HYDERABAD] decided similar issue in favour of the assessee, holding that the land sold by the said assessees were agricultural lands, and therefore, the profits arising from the transfer of such lands, was not chargeable to tax in the hands of the assessee. In the present case, considering the facts and circumstances of the case it cannot be considered as an adventure in the nature of trade. The intention of the assessee from the inception was to carry on agricultural operations. Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade or capital gain. The period of holding should not suggest that the activity was an adventure in the nature of trade. The land is not situated within the Qutubullapur municipality, but, the same situated in the Dundigal village and the evidence brought on record suggest that the land is an agricultural land, hence, it is not liable for taxation. Further, we make it clear that when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income. the land in question sold by the assessee, being agricultural land, the profit arising from the sale of the same, is not chargeable tot ax in the hands of the assessee as capital gain - Decided in favour of assessee.
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2015 (3) TMI 641
Denial of claim for exemption under Section 54 / 54F - assessee failed to invest the capital gains of ₹ 70,16,326 before the due date of filing the return of income for Assessment Year 2008-09 i.e. 31.7.2008, as laid down u/s. 139(1) of the Act or to deposit the same by this date, i.e. 31.7.2008, in the Capital Gains Account Scheme of the Govt., the assessee is not eligible for exemption under Section 54 / 54F - CIT(A) allowed the claim - Held that:- We find the co-ordinate bench of the ITAT, Bangalore in the case of Nipun Mehrotra (2007 (3) TMI 283 - ITAT BANGALORE-B ) held that if the sale consideration / capital gains is utilized for the purchase or construction of the new asset before the date of filing the return under Section 139(4) of the Act, the assessee is entitled to exemption under Section 54F of the Act. In the case on hand, the facts clearly establish that the assessee has utilized the sale consideration / capital gains for a) purchase of a residential site for ₹ 52,08,164 on 3.4.2008 and b) for cost of construction of the Ground to 2nd floor of the residential construction of the Ground to 2nd floor of the residential building upto 31.3.2010 amounting to ₹ 72,91,836. In this factual matrix, we are of the opinion that the assessee is eligible for exemption under Section 54F of the Act. In coming to this finding we draw support from the decision of the co-ordinate bench of the Tribunal in the case of Nipun Mehrotra (supra),wherein following the decision of the Hon'ble Gauhati High Court in the case of Rajesh Kumar Jalan (2006 (8) TMI 126 - GAUHATI High Court ), it was held that when the sale consideration / capital gains has been utilized for the purchase or construction of the new asset before the due date for furnishing the return of income under Section 139(4) of the Act, the assessee is entitled to exemption under Section 54F of the Act. The learned CIT (Appeals) in the impugned order has, also observed that the claim for exemption, in respect of the other co-sellers of the said property, has been allowed by the Department. In this view of the matter, following the decision of the co-ordinate bench of the ITAT, Bangalore in Nipun Mehrotra (supra), we find that revenue has failed to controvert the decision of the learned CIT (Appeals) and therefore uphold the impugned order of the learned CIT (Appeals). - Decided in favour of assessee.
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2015 (3) TMI 640
Validity of notice issued u/s. 158BD - non recording of satisfaction with respect to the undisclosed income belonging to the Assessee - Held that:- While framing the assessment order u/s. 158BC vide order dated 30th January, 2001 in the case of Janak Kansara, A.O at para 10 on page 14 has noted that the transactions pertains to J.B. Construction that is the Assessee, cash of ₹ 3,93,689 was made to Ambica Timber Mart and Ambica Timber Depot and ₹ 17,647/- was made Decent Sales Corporation. Before us, ld. A.R. has relied on the reply received under RTI Act about the non availability of satisfaction note to which we find that subsequently DCIT Circle-9 vide letter dated 10.05.2012 address to CIT has stated that the query of the Assessee was misunderstood by him to be with respect to the satisfaction note prepared by the investigation wing. In the letter it is further submitted that the reasons recorded by the A.O are on records and can be given to the Assessee at any time. Considering the aforesaid facts and in the light of the decision of Hon’ble Apex Court in the case of Calcutta Knitwears (2014 (4) TMI 33 - SUPREME COURT), we are of the view that in the present case the A.O had recorded the satisfaction as required under the Act and therefore the assessment framed was valid and thus this ground is dismissed. - Decided against assessee. Additions in respect of payments made to M/s. Raj Granites and Decent Sales Corporation - Held that:- CIT(A) while deciding the issue has concluded that the cash payments were made by the Assessee and were not recorded in the books of account and further as the source of payment was unexplained, the cash payments represents unexplained expenditure. Before us, no material has been placed on record by ld. A.R. to controvert the findings of CIT(A). We therefore find no reason to interfere with the order of CIT(A).- Decided against assessee. Addition on account of settlements of unaccounted cash loan - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition has noted that the amount has been already been taxed in the hands of Gopalbhai Patel in the block assessment and thus the source of money stands proved. Before us, no material has been brought on record by Revenue to controvert the findings of CIT(A) - Decided against revenue. Addition on account of on money received on flat booking - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition has noted that the addition of the same amounts have been made in the block assessment of Janak Kansara and has also been accepted by him and the additions have been confirmed in appeal and therefore if the addition is made in the case of Assessee, it would amount to double addition. Before us, no material has been brought on record by Revenue to controvert the findings of CIT(A) - Decided against revenue. Addition on account of deemed income in respect of flats allotted - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition has given a finding that the properties were not owned by the family member of Kansara Group and further the construction expense pertains to the Society and not of the Assessee. He accordingly deleted the addition. Before us, no material has been brought on record by Revenue to controvert the findings of CIT(A) - Decided against revenue. Addition on account of unexplained cash credit - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition has noted that Varshaben Kansara is a partners of the Assessee firm, is regularly assessed to tax and thus are identity is fully established. He has further noted that addition was made without providing any opportunity to the Assessee. Before us, no material has been brought on record by Revenue to controvert the findings of CIT(A) - Decided against revenue.
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2015 (3) TMI 639
Interest u/s 244A on the tax refund - as held by the ITAT that the benefit u/s 72A of the Act was to be granted in the assessment year relevant to the previous year in which the amalgamation takes place - since the scheme of amalgamation was to take effect from 01/04/1994, the benefit of tax credit was to be allowed to the assessee company for the A.Y. 1995-96 and not for 1996-97 as held by the CIT(A) in terms of his order passed u/s 154 - whether delay in proceedings is not attributable to the assessee? - whether assessee is entitled for interest for the period of 01/04/1995 to 23/08/2007? - Held that:- As per provisions of sec. 244A(2) of the Act the issue of exclusion of any period for the purpose of grant of interest u/s 244A(1) of the Act was mandatorily to be decided either by the Chief Commissioner of Income Tax or Commissioner of Income Tax and the authorities below did not work in accordance with the provisions of law and to that extent the order of the AO and the CIT(A) suffers from legal infirmity. Respectfully following the decision of ITAT in the case of Power Finance Corporation Ltd. Vs. ACIT (2008 (12) TMI 432 - ITAT DELHI) and keeping in view the entirety of facts, circumstances and the relevant provisions of the law, we are of the considered opinion that it would serve the interest of justice if the matter is restored back to the file of AO with a direction to refer the issue regarding exclusion of period as prescribed in sub-section (2) of sec. 244A of the Act either to the Chief Commissioner of Income Tax or Commissioner of Income Tax, as the case may be, to get it determine. We may also point out that as per provision of sec. 244A(2) of the Act the decision of Chief Commissioner of Income Tax or Commissioner of Income Tax shall be final on this issue and, therefore, revenue authorities are duty bound to refer the matter to the competent authority for determination of the issue regarding exclusion of period as per provisions of the Act. - Decided in favour of assessee for statistical purposes.
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2015 (3) TMI 638
Penalty levied u/s.271(1)(c) - revised return filed - CIT(A) deleted penalty levy - Held that:- As far as the question that whether the return was revised suo motu prior to any notice from the Revenue Department, we hereby hold that in the light of the evidences filed from the side of the Revenue in the form of paper book there was sufficient evidences that Revenue Department had issued notices prior to the filing of the revised return; therefore, merely on that ground penalty cannot be deleted. But on the other hand, we are of the view that in a situation when the quantum as disclosed in the revised return was not found to be incorrect or indicate the concealment of income and that the assessee further suffered losses therefore in one of the case an alternate tax procedure u/s.115JB adopted, we hereby hold that in all these cases it was not justified to hold that there was concealment of income on the part of the assessee. We have noted that the assessee has adopted the recourse of avoiding litigation, therefore, revised the return to buy peace of mind. We have also noted that merely on the basis of a third party statement the impugned action was taken against the assessee. There was no incriminating material recovered from the factory premises of the Assessee so as to establish that the particular income was deliberately concealed by the Assessee; hence under the totality of all those circumstances as discussed in detail hereinabove, we hereby confirm the findings of learned CIT(A), both legal as well as factual and dismiss the grounds of the Revenue. - Decided in favour of assessee.
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2015 (3) TMI 637
Reopening of assessment - assessing the total income at ₹ 93,30,260/-, by bringing the transfer value of the ‘goodwill’, i.e., by the assessee-firm to its partners on its dissolution on 01.04.2006 to tax, as against the returned income of nil - CIT(A)held the condition of section 47(xiii) was satisfied, so that it would not be a transfer liable for charge of capital gains u/s.45 of the Act - whether CIT(A) in allowing relief to the assessee, admitted additional evidence, in contravention of Rule 46A of the Income Tax Rules, 1962 - Held that:- While the A.O.’s objection, with reference to the terms of the conversion deed dated 01.04.2006, was that the shares in the successor company stood allowed to the erstwhile partners in their profit sharing ratio in the firm, the ld. CIT(A) found it as not so; the shares being allocated in the ratio of their capital balances as on the date of the conversion, i.e., in terms of section 47(xiii). Both the conversion deed and the allocation of shares, as well as the firm’s balance-sheet, both as on 31.03.2006 and 01.4.2006, were before the A.O., whose objection was on merits. Qua merits, the conversion deed clearly states that the partners shall be allotted shares as per the profit sharing ratio as on the date of conversion (i.e., 01.04.2006) (refer clause 2). With regard to the allotment, the actual allotment would prevail over that specified in the conversion deed, recording agreement qua share allocation in the profit sharing ratio. A contract can, besides being reduced in writing, also be oral and, therefore, to the extent the subsequent allotment, being undisputed, is at variance with that agreed to, could only be considered as a novation or in modification of the written agreement to that extent. This is as the allotment would only have been returned, as stated before us, to the Registrar of Companies, so that all the legal formalities of registration of the said allotment stand completed, finalizing the allotment process. We are therefore, in principle, in agreement with the assessee that the mention of a different ratio in the conversion deed would not be by itself fatal to its case; what being relevant is the actual satisfaction, or not so, of the conditions of section 47(xiii). - Decided against revenue.
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2015 (3) TMI 636
Receipts not shown by the assessee - receipt on account of freight alleged to be short accounted - CIT(A) deleted the addition - Held that:- Regarding the method of accounting of the assessee, it is observed that he has examined the books of accounts maintained by the assessee and the receipt of freight by the assessee has been credited in respective tanker accounts and in the accounts of the parties who had made payment to the assessee. He has also noted that such freight amount was payable to the tanker owners and the same was paid from time to time. This is the objection of CIT(A) that if such receipt on account of freight alleged to be short accounted for by the assessee is added as income of the assessee then corresponding deduction on account of expenses has to be allowed, which has not been allowed by the Assessing Officer. He has noted that such expenses were in fact not incurred by the assessee but by the tanker owners. No such fact has been brought on record by the Assessing Officer that the assessee was in fact not working as commission agent but as a transport operator. Hence, even if the receipts as per TDS certificate are to be considered as income of the assessee then the payment made by the assessee has to be allowed as expenses and it will not result in addition in the hands of the assessee. - Decided in favour of assessee. Non deduction of TDS on payments made to various parties - CIT(A) deleted the addition - Held that:- There is no privity of contract of carriage of goods between assessee and his clients and therefore, the assessee was only facilitator and therefore, not required to deduct TDS u./s 194C of the Act. Respectfully following the judgment of Hardarshan Singh [2013 (1) TMI 314 - DELHI HIGH COURT] we hold that the assessee in the present case was not required to deduct TDS and therefore, disallowance made by Assessing Officer in respect of payment of ₹ 22,69,756/- is not proper and the same was rightly deleted by CIT(A) - Decided in favour of assessee.
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2015 (3) TMI 635
Reopening of assessment on the basis of audit objection - CIT(A) held he reopening to be incorrect - Held that:- Comparison of audit objection with the reasons recorded by the AO would show that the AO has simply copied the audit objections in verbatim and it clearly shows that the assessing officer has not applied his mind independently. Though, the audit objection can be a source of information, yet AO has to independently apply his mind in order to arrive at the conclusion that he had reason to believe about escapement of income. The high-lighted the portion in the reasons recorded for reopening, viz., “seems to have been included” and “since the value of assets pertaining to paper and chemicals divisions could not be ascertained separately out of block of assets, no tax effect has been computed” would only show that the AO did not have any reason to believe about the escapement of income, which is the vital ingredient to uphold the reopening of assessment. One more point to be noticed is that the AO/audit party is making reference of a letter dated 11.12.2008 furnished by the assessee during the course of original assessment proceedings, meaning thereby, a reference is being made to the very same material, which was examined by him in the original assessment proceedings. It was not shown to us that the assessing officer could not have considered the above said letter during the course of original assessment proceedings. This fact also supports the case of the assessee. - Decided in favour of assessee
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Corporate Laws
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2015 (3) TMI 655
Re-examination of claim by the official liquidator - Refund of amount to the official liquidator - Violation of principles of natural justice - Held that:- We find substance in the contention of the learned counsel for the appellant that re-examination thereof behind the back of the appellant by the Chartered Accountant and the filing of the application being C.A.No.01/2010 by the official liquidator behind the back of the appellant was contrary to the binding principles of natural justice as well as law. It is pointed out by Mr. Vikas Sharma, learned counsel that in terms of the order dated 18th of April, 2006 the appellant has been granted interest up to 1st of October, 1997 only and nothing beyond that. The computation of the interest is based on the hire purchase agreement as well as fixed deposit receipt of the company.The rates of interest and the computation stood verified by the official liquidator and the court in 2006. We are informed that there is an amount of ₹ 15,00,000/- lying credited with the office of the official liquidator. No further claims are pending. We are informed that Smt. Madhu Bala is a senior citizen who is residing in Meerut. Her husband is stated to be a pensioner who has been compelled to contest the case in Delhi since 2010 when notice in Co. Application No.01/2010 was issued. We are of the view that they have been unreasonably harassed. For all these reasons, the order dated 28th May, 2013 directing the appellant to refund the amount to the official liquidator with interest is hereby set aside and quashed. The appellant shall be entitled to costs which are quantified at ₹ 20,000/- which shall be sent by demand draft to the appellant at her address on the memo of parties within a period of four weeks from today.- Decided in favour of appellant.
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2015 (3) TMI 654
Application for Scheme of Arrangement / Amalgamation - Sections 391 to 394 of the Companies Act, 1956 - Regional Director observation regarding undertaking to comply with FEMA and RBI regulations , No objection from RBI with regard to proposed scheme , arrangement is not proposing to write off or reduce the value of any liability - Carry forward of losses - Held that:- It is submitted that all the Petitioner Transferor and Transferee Companies are Core Investment Companies (CIC) as defined in the Core Investment Companies (Reserve Bank) Directions, 2011, issued by the Reserve Bank of India, and as per the said Directions, Core Investment Companies are not required registration from the RBI as NBFC. Further, RBI NOC is also not required for amalgamation of Core Investment Companies. The Petitioner Transferee Company has undertaken and confirmed that it will comply with all the compliances of the Reserve Bank of India and will take other necessary steps in this regard, if any. Further submitted that all the Petitioner Transferor and Transferee Companies are profit making companies and do not have any accumulated losses and un-absorbed depreciation except the Transferor Company No. 9 which has a small amount of loss of ₹ 9.68 lac as on 31.3.2013. The aforesaid loss has been fully set off against the income of the Transferor Company No. 9 during the Financial Year ended 31.3.2014 and as on date there is no loss in the Company. In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies, representation/report filed by the Regional Director, Northern Region and Official Liquidator attached with this Court to the proposed scheme, there appears to be no impediment to the grant of Sanction to the Scheme. Consequently, Sanction is hereby granted to the Scheme under Sections 391 and 394 of the Companies Act, 1956. The Petitioner Companies will comply with the statutory requirements in accordance with law. - Scheme of amalgamation approved.
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Service Tax
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2015 (3) TMI 667
Club Membership - charitable organization or not - Services are being provided in respect of the export of goods to their members - certification fees, membership fees and various export activities - Extended period of limitation - Held that:- In the decision in the matter of Federation of Indian Chambers of Commerce and Industries & Other (FICCI) Vs CST, Delhi [2014 (5) TMI 183 - CESTAT NEW DELHI] it was held that, Services provided by the appellants to non members and the consideration received for rendition of such service, fall outside the scope of the definition of "club or association" service and the taxable service defined in Section 65(25a) read with Section 65(105)(zzze) of the Act, prior to 01.05.2011. The Memorandum of Association of the applicant are similar to the memorandum of Association in the case of M/s. FICCI (supra). It is also noted that CBEC vide Circular No.145/14/2011-ST dt. 19.8.2011 clarified that service tax paid on technical inspection and certification of export goods is eligible for refund under Notification No.17/2009-ST dt. 7.7.2009. Prima facie case is in favor of assessee - stay granted.
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2015 (3) TMI 666
Import of services - associated enterprises - though the services were provided period prior to 18.04.2006 when Section 66A had been introduced but payment was made after 18.4.2006 - Held that:- The department has confirmed the service tax demand of ₹ 3,18,73,116/-on the ground that on account of amendment to Section 67 by introducing Explanation - w.e.f. 10.05.2008, the appellant company would be treated as having made payment on this date and, therefore, serviced tax would be chargeable. In our view, the ground on which this service tax demand has been made is totally wrong, as when undisputedly this service tax demand is in respect of the services received by the appellant company from their Holding Company located abroad in respect of services received during the period prior to 18.04.2006 and when the taxing event for the service tax is the provision of service and not the receipt of payment, in view of the judgment of Hon'ble Bombay High Court in the case of Indian National Shipping Owners Association [2008 (12) TMI 41 - BOMBAY HIGH COURT], no service tax would be chargeable on the service received by the appellant company from the holding company located abroad during the period prior to 18.04.2006 and accordingly, this service tax demand is not sustainable. - Decided in favor of assessee.
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2015 (3) TMI 665
Waiver of pre-deposit - valuation - credit on inputs supplied to the job worker for fabrication of excisable goods on which job worker on which job worker did not avail credit - Held that:- The first issue on the availment of cenvat credit twice, is an arguable issue and the second issue on the difference between the billed amount and the actual amount received on the basis of the ST-3 returns over which an explanation has been given, however, not accepted by the Department, is a matter for reconciliation by the Tribunal. - Taking note of the total amount of demand under the adjudication order amounting to ₹ 74.00 lakhs (approx.), the Tribunal ordered pre-deposit of ₹ 20 lakhs. Tribunal has not considered the legal aspect of the prima facie plea that whether cenvat credit is eligible or not in respect of inputs as well as finished products, as contended by the assessee. However, insofar as inputs consigned by branch office and the claim of service tax on the basis of ST-3 returns, we find that there are some prima facie case in favour of the Department. Therefore, pre-deposit requires to be ordered. The order of the Tribunal dated 07.01.2015 is modified to the effect that the appellant shall make a pre-deposit of ₹ 10,00,000/- (Rupees Ten Lakhs only) towards pre-deposit on or before 31.03.2015 - Decided partly in favor of assessee.
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Central Excise
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2015 (3) TMI 661
Denial of CENVAT Credit - credit on MS Rod Sheets, M.S.Chennel, M.S.Plates, Flats etc. used in the fabrication of fly ash hooper, fly ash bin, fly ash handling system & kiln brick laying work to bold refractories - Held that:- there is no change in the circumstance and this Court had already considered the issue and held that the decision reported in [2011 (8) TMI 4 - SUPREME COURT OF INDIA ] (Saraswati Sugar Mills V. Comissioner of Central Excise, Delhi - III) is distinguishable on facts. This Court applied the principles laid down in the decision reported in [2010 (7) TMI 12 - SUPREME COURT OF INDIA] (Commissioner of Central Excise Jaipur V. Rajasthan Spinning & Weaving Mills Ltd.) and held that the Tribunal was justified in allowing the assessee's contention in respect of the very same assessee. - Decided in favour of assessee.
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2015 (3) TMI 660
Denial of refund claim - Refund claim of accumulated CENVAT Credit - Claim barred by limitation - Duty drawback claim - Tribunal, by following the decision of the Madhya Pradesh High court in the case of STI India Ltd. V. CCE reported in [2008 (10) TMI 246 - HIGH COURT OF MADHYA PRADESH AT INDORE] dismissed the appeal holding that the limitation prescribed under the provisions of Section 11B of the Central Excise Act will not apply to the case - whether the refund claim is filed within the period prescribed under Section 11B of the Central Excise Act - Held that:- In exercise of the powers conferred by rule 5 of CENVAT Credit Rules, 2002, the Central Government hereby directs that refund of CENVAT credit of specified duty allowed in respect of inputs used in or in relation to the manufacture of final products which are cleared for export under bond may be allowed subject to the safeguards, conditions and limitations, set out in the notification No.11/2002-C.E.(N.T.). The application in Form A along with the proof of due exportation and the relevant extracts of the records maintained under the said rules or the deemed credit register maintained in respect of textile fabrics, as the case may be, in original are lodged with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 - Section 11B, prescribes the limitation date and the Notification 11 of 2002 dated 1.3.2002, which the Department failed to enclose in the typed set of papers and in all fairness produced before this Court by the counsel for the first respondent, it is clear that refund application should be filed before the expiry of the period specified in Section 11B of the Central Excise Act. - Here is a case, where the claim for refund is filed after a period of one year and hence, the same is clearly hit by the provisions of Section 11B of the Central Excise Act read with Notification No.11 of 2002 dated 01.03.2002 - Decided in favour of Revenue.
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2015 (3) TMI 659
Cross Utilization of CENVAT Credit - utilisation of AED (T&TA) - Demand of interest and penalty - contravention of the provisions of Rule 3(6)(b) read with Notification No. 24/99CE( NT) dated 1st March, 2000 - wrong utilization of Additional Duty of Excise (T&TA) for the payment of Basic Excise Duty and AED (GOSI) - Malafide intention of evasion of duty - Held that:- any cross utilisation or cross availment is not permissible. Appellant would rely upon the words “the Cenvat Credit may be utilised for payment of any duty of excise on any final products” separated by further word 'or' “for payment of duty on inputs or capital goods themselves if the further condition stipulated thereunder is satisfied”. The words “any duty of excise on any final products” cannot be read in such a manner as to enable cross utilisation. This subrule does not support the argument of Appellant that in payment of additional duties under the 1957 Act, the credit thereof can be obtained so as to enable payment of duty of excise specified under the 1978 Act. Appellant's argument, as already held above, fails to take note of the fact that one is the additional duty on goods of special importance, whereas later on is only additional duty on textiles and textile articles. Independent of this order, the Appellant has addressed us extensively on the construction/interpretation of the Rule 57AB. Once we are not in agreement with the Appellant, then, any further reference to these Rules or decisions of the Tribunal is unnecessary. We also need not enter into the controversy as to whether the Tribunal erred in not following or applying its decision in the case of Reliance Industries Limited and Ors. [2002 (7) TMI 168 - CEGAT, MUMBAI] while deciding the Appeals by the impugned order. Once our independent satisfaction enables us to reach the conclusion as above, then, we are not required to go into this question any further. The inputs and the final product dealt with by 1957 Act and the 1978 Act are not one and the same. This aspect is clear if note is taken of the nature of the goods specified in the Schedules to these Acts. As the title indicates one category is of goods of special importance whereas the other is textiles and textile articles. The fact that these goods are separately and distinctly classified in the Schedules to these Acts and equally in the Central Excise Tariff is enough to reject the submissions of the Appellant. There is no substance in the argument that between 1st March, 2002 to 9th September, 2004 the credit of AED(T&TA) can be used for payment of any of the specified duty referred to in SubRule (1) of Rule 3. Further, the nonobstante clause appearing in Rule 3(6) is so worded because the entitlement to credit is spelt out in Rule 3(1). Thereafter, Rules 3(2) and 3(3) sets out the mode and manner of availment thereof. It is clarified by Rule 3(3) that Cenvat Credit may be utilised for payment of any duty of excise on any final products or for payment of duty on inputs or capital goods even if the inputs are removed as such or after being partially procured or such capital goods are removed in that State. Hence, Rule 3(6) contains the nonobstante clause and read as above. It does not mean recourse to Rule 3(3) is permissible for cross utilisation. In fact subsection (3) of section 3 of Additional Duties of Excise (Goods of Special Importance) Act, 1957 was substituted by section 63(a) of the Finance Act, 1994. That clearly states that the provisions of Central Excise Act, 1944 (1 of 1944) and the Rules made thereunder including those relating to refunds, exemptions from duty, offences and penalties, shall, so far as may be apply, in relation to the levy and collection of the additional duties as they apply in relation to the levy and collection of the duties of excise on the goods specified in subsection (1). Merely because the language of subsection (3) of section 3 of both Acts has undergone some change does not mean that interest is not leviable and recoverable. In fact, the provisions of Central Excise Act, 1944 and the Rules made thereunder including those relating to refunds, exemption from duty, offences and penalties, shall, so far as may be, apply in relation to levy and collection of the additional duties of excise on the goods specified in section 3(1). Such broad and wide stipulation would definitely include interest. There is no justification for imposition of the penalties. Merely because the orders have been challenged and right up to this Court does not mean penalties were imposable. The Penalties on the Appellant in each of these Appeals are therefore set aside. - Decided partly in favour of assessee.
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2015 (3) TMI 658
Denial of refund claim - deposit under protest - Whether Customs, Excise and Service Tax Appellate Tribunal was right in holding that the refund claimed by the appellant was governed by provisions of Section 11B of the Central Excise Act, 1944 and was barred by limitation - Held that:- The occasion for the Commissioner (Appeals) to go into the matter was because the Assistant Commissioner, i.e., the authority of the first instance who adjudicated on the refund claim did not consider it necessary to address the question whether the refund application was made within time. It was apparently assumed that the show cause notice culminated in the Order in Original on 23.6.2004 and the refund application was made within six months if it were to be reckoned from that date. In a sense, there was an assumption that the application was within the stipulated time and that the second proviso did not come into play. On appeal, however, the Commissioner went into the materials and rendered the finding of fact. That finding of fact has not been upset by the CESTAT. The assessee/appellant’s attempt to have that order rectified in miscellaneous proceedings too was unsuccessful, as is evident from the further order dated 4.8.2010 of the CESTAT. In these circumstances, this Court is of the opinion that in fact no question of law arises in the facts of this case. - Decided against assessee.
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2015 (3) TMI 657
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:- In the facts and circumstances peculiar to the Assessee , it was held by the Tribunal that the matter does not fall within the tests which are laid down by the Hon'ble Supreme Court in the case of Metlex (I) Pvt. Ltd. (2004 (2) TMI 387 - SUPREME COURT OF INDIA). That Judgment is clearly distinguishable. Once such is the exercise undertaken by the Tribunal, then, no substantial question of law arises for our determination and consideration in this Appeal. The Appeal is devoid of merits. We are surprised that such an Appeal has been brought by the Revenue . For, once it is the Assessee who admits that what he is doing is manufacture of goods and products which are sold and marketable and known to the market as such. In the circumstances a clear rethink is necessary when blindly some ratio of a Judgment of the Hon'ble Supreme Court and dehors the factual position is relied upon to file frivolous Appeals. - Decided against Revenue.
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2015 (3) TMI 656
Maintainability of appeal - SSI exemption - Notification No.8 of 2010 - Use of other person's brand name - Held that:- Court in the case of The Commissioner of Central Excise, Chennai - II V. Vadapalani Press and another [2015 (1) TMI 318 - MADRAS HIGH COURT] while dealing with the objection raised by the assessee as to the maintainability of the appeal, after following the above-said decision of the Supreme Court in Navin Chemicals Manufacturing & Trading Co. Ltd. - Vs Collector of Customs (1993 (9) TMI 107 - SUPREME COURT OF INDIA), and that of the Gujarat High Court in the case of in Commissioner of Central Excise v. JBF Industries Ltd., [2010 (12) TMI 437 - GUJARAT HIGH COURT], held that appeal is not maintainable. - Court is not inclined to deal with the matter, while disposing off the present appeal as not maintainable, is inclined to grant liberty to the appellant/Revenue to pursue the matter in accordance with law, if so advised. - Decide against Revenue.
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CST, VAT & Sales Tax
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2015 (3) TMI 664
Imposition of penalty - penalty was imposed on the present appellant/dealer for not filing the report within the meaning of sub-Sections (1) and (2) of Section 61 of the Maharashtra Value Added Tax Act, 2002 - Delay in filing of report due to accountant leaving the job abruptly- Held that:- The discretion that is vested in the Tribunal in matters of imposition of penalty is circumscribed by the fact that if the report is filed within the period as specified in proviso, namely, one month and the dealer proves to the satisfaction of the Commissioner that the delay was on account of factors, beyond his control, then the penalty is not to be imposed at all. Sub-Section (2) of Section 61 contains this proviso and which, thus, enables the Tribunal to condone the delay, which occurs beyond the period stipulated therein. However, the Tribunal is empowered to impose penalty and that discretionary power is not being challenged or questioned. In the present case, the Tribunal imposed the penalty after recording a finding that the Accountant may have left the job on 30th August,2008. But there is no reasonable explanation forthcoming for the delay in filing the report thereafter belatedly in April, 2009. That the appellant, therefore, was not prevented by any factors, beyond its control, is apparent from the reading of this finding of the Tribunal. In these circumstances, so as to discourage the dealers or parties like the appellant from delaying the filing of the report that the penalty has been imposed. In fact, the penalty imposed of ₹ 1,70,747/- in the first appellate order has been brought down and reduced to ₹ 1,00,000/- in the second appeal by the Tribunal. In such circumstances, we do not find that the order raises any substantial questions of law. - Decided against assessee.
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2015 (3) TMI 663
Rate of taxability of Bitumen Emulsion - first respondent issued a clarification stating that Bitumen Emulsion is taxable at 16% under Entry No.7(v) of Part-E of First Schedule to the TNGST Act, 1959 and if imported, it is taxable at 20% under Entry No.9 of Eleventh Schedule to the TNGST Act, 1959. - Held that:- Commissioner has stated that the rate of duty to be collected for Bitumen Emulsion is 16%. But, the clarification does not spell out as to under what circumstances the clarification was issued and what was the necessity to issue such a clarification and the effect of its ramification. These questions were never been considered by the Assessing Officer nor it is apparent on the face of the clarification. When revision notices were issued based on the clarification, the petitioner explained the manufacturing activity and contended that the product is purely water base containing 50 to 57% of water and the Commissioner had earlier issued a clarification, dated 13.02.2002, which stated that 'Bitumen Emulsion', though a petroleum product, is not specified in the Eleventh Schedule. Therefore, it is clarified that Bitumen Emulsion sold by the petitioner is taxable at 12% under residuary Entry No.40 of Part-D of First Schedule to the TNGST Act. It was further pointed out that there is contravention between the clarification issued on 13.02.2002 and 15.11.2005 for the same commodity. The Assessing Officer merely recorded the objections given by the petitioner in a single line stating that the dealer has filed their contentions and the contention was carefully examined and found not accepted. Therefore, the Assessing Officer was purely guided by the clarification issued and the manner in which the Assessing Officer has proceeded to confirm the proposal is untenable in law. - Further more, in the written instructions, the justification for issuing such a clarification has not been brought out. Neither the person at whose instance the clarification was issued nor what are the materials, which was the basis for issuing such a clarification, has been disclosed. Hence, it has to be held that the impugned clarification has been mechanically applied to the cases of the petitioner, de hors the factual position. there is no necessity for quashing the impugned clarification, in so far as the petitioner is concerned, and it is suffice to observe that the clarification could be the sole basis for reopening or revising the assessment of the petitioner. - Petition disposed of.
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2015 (3) TMI 662
Imposition of penalty - Sales tax registration not obtained - Bonafide belief that registration not required as doing second sale of goods within the State - Held that:- In view of the specific findings of the 3rd respondent in Ext.P6 order, and in the absence of any vitiating circumstances that would justify an interference with the said order in proceedings under Article 226 of the Constitution of India, I see no merit in the present writ petition - Decided against assessee.
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Indian Laws
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2015 (3) TMI 653
Criminal Complaint under Section 138 of the Negotiable Instruments Act - Amount in dispute already paid - Amicable settlement - Held that:- From the records of the case, I find this is not a case wherein the offence for which the petitioners have been charged can ‘stricto sensu’ termed to be an offence against the State. Even otherwise, taking into consideration the fact that the complainant /respondents do not want to pursue the case, therefore, possibility of conviction of the petitioners is not only remote but impossible. Therefore, this is a case where the continuation of criminal case against the petitioners would put the petitioners to great oppression and prejudice and extreme injustice would be caused to them by not quashing the criminal case. This court is not powerless in such situation and adequate powers have been conferred upon it, under section 482 Cr.P.C. (hereinafter referred to as the Code) for accepting the settlement entered into between the parties and to quash the proceedings arising out of the proceedings, which have consequently culminated into a settlement. This power has been conferred to subserve the ends of justice or/ and to prevent abuse of the process of any court. Though, such power is required to be exercised with circumspection and in cases which do not involve heinous and serious offence of mental depravity or offences like murder, rape, dacoity etc. The law on this subject has been summed up in a recent judgment of the Hon’ble Supreme Court in Narinder Singh & Ors. [2015 (2) TMI 1042 - SUPREME COURT]. The parties have already reached an amicable settlement and at best it was the complainant, who could be said to be affected and aggrieved party, but herein even the affected and aggrieved party i.e. complainant is not interested to pursue the complaint and does not want to hold the petitioners responsible for the offence under the Act. Therefore, quashing of the complaint initiated at the instance of the respondent/complainant would be a step towards securing the ends of justice and to prevent abuse of process of the Court. Keeping in mind the aforesaid exposition of law, it is clear that the facts of this case do not in any manner fall within the exception culled out by the Hon’ble Supreme Court in Narinder Singh case. - Accordingly Criminal complaint quashed.
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