Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 22, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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The amount deposited in the bank account was in fact sale proceeds of the goods, against whom the assessee issued cheques to various dealers and earned commission addition u/s. 69 is wholly unwarranted and unjustified - AT
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Computation of Arms length price - Selection of comparables by TPO The foreign exchange fluctuations income cannot be excluded from the computation of the operating margin of the assessee company - AT
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Disallowance of capital loss Genuineness of the transaction - Merely because the transaction is between the relatives, it, per se, cannot be said to be sham or bogus transaction - AT
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Jurisdiction of the ACIT to pass the order - there was failure on the part of the AO in not following the procedure prescribed under Section 124, but this would not make the assessment in the first round a nullity - HC
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Claim of deduction u/s 80IB - the assessee manufactures is the foam in the shape of seats and therefore it cannot be stated that new product with the help of the PT foam comes into existence by any process - HC
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Since no search was conducted on the premises of the assessee and the search conducted was conducted on a premises not owned by the assessee, the proceedings u/s 153A of the Act are invalid and bad in law - AT
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Payment of interest on refund u/s 244A - refund of excess tax deposited u/s 195(2) - assessee is entitled to get interest from the date of payment of such tax - SC
Customs
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Confiscation - Mis declaration of quantity of goods - As goods are not prohibited goods, therefore, they are allowed to be redeemed on payment of redemption fine - AT
Service Tax
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Tour operator service - Liability on seat reservation charges - the bus reservation is for conduct of the tours and therefore, it forms rightly part of the tour operator services as defined in law. - AT
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Rent a Cab Operator Service - Lower authorities have not examined the issue whether the activity of the appellant falls under the ambit of hiring or as the case may be renting - matter remanded back - AT
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Violation of principle of natural justice - minimum number opportunities of hearing as laid down under Section 33A of the Central Excise Act, 1944 made applicable to the Service Tax cases has not been adhered to in the present case. - AT
Central Excise
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Waiver of pre deposit - Denial of CENVAT Credit - input services - the custom clearance service is an arguable and contentious topic - stay granted partly. - AT
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SSI Exemption - Merely because the goods are distributed by some other Company/Agency and their name and logo are printed on the cartons of specified goods, it cannot be said that they are identified with the user of the brand-name in question - stay granted - AT
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Denial of CENVAT Credit - Non receipt of foreign exchange after export of goods - There is no condition, as regards receipt of foreign exchange, in the Cenvat Credit Rules - AT
VAT
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Opportunity of being heard - While applying the principles of natural justice the court must also bear in mind the theory of useless formality and the prejudice doctrine Justice is not only be done but manifestly seem to be done - HC
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Rejection of request for Issuance of C form declaration on the ground of arrears of tax and penalty filing of writ petition when alternate remedy is available is not valid - HC
Case Laws:
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Income Tax
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2014 (3) TMI 628
Levy of FBT - Nexus between levy of FBT to the employees - Whether the CIT(A) erred in confirming the order of AO levying Fringe Benefit Tax in respect of expenses not related to employees and their families Held that:- The AO has estimated Fringe Benefit amount at 20% of the expenditure - He has not brought any material on record to show that the above expenditure gave any benefit to the employees of the assessee company - In absence of any such nexus being proved by the Assessing Officer, levy of Fringe Benefit Tax on the expenditure is not warranted Relying upon M/s. Toyota Kriloskar Motor Pvt Ltd. vs. ACIT [2012 (6) TMI 484 - ITAT, Bangalore] the levy of Fringe Benefit Tax is set aside Decided in favour of Assessee.
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2014 (3) TMI 627
Addition made u/s 69 of the Act Held that:- Meager opening and closing balance shown in the bank account clearly prove that money so deposited in the bank account were only the sale proceeds of goods sold by the assessee against whom periodically and consistently payments have been made to the traders through banking channel - the amounts deposited in the bank account should not have been treated as unexplained investment in the bank account of the assessee. The amount deposited in the bank account was in fact sale proceeds of the goods, which were sold by the assessee from time to time against whom the assessee issued cheques to various dealers and earned commission thus, the addition u/s. 69 of the IT Act is wholly unwarranted and unjustified in the case of the assessee the total deposits in the bank account are the sale proceeds of the assessee, the profit rate should have been applied instead of considering the entire sales of income of the assessee Relying upon Commissioner of Income-Tax Versus President Industries [1999 (4) TMI 8 - GUJARAT High Court] - Since the total deposit being the total sales of the assessee are only Rs.31,62,300/-, thus, the turnover of the assessee did not exceed the amount of Rs.40,00,000/- and as such, the provisions of section 40AF of the Act would apply in the case of assessee for the purpose of computing the profit and gains of retail business, which provides that sum equal to 5% of the total turnover in the previous year on account of such business shall be deemed to be the profit and gains of such business Decided partly in favour of Assessee.
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2014 (3) TMI 626
Computation of Arms length price - Selection of comparables by TPO Accentia Technologies Ltd. Held that:- The view of the DRP is upheld that extra-ordinary event like merger and de-merger will have an effect on the profitability of the company in the financial year in which such event takes place - It is the contention of the assessee that in case of the aforesaid company, there is amalgamation in December, 2006, which has impacted the financial result - This fact has to be verified by the TPO - If it is found upon such verification that the amalgamation in fact has taken place, then the aforesaid comparable has to be excluded. Mold Tek Technologies Ltd. - Eclerx Services Ltd. Held that:- The DRP has rightly accepted the assessee's contention that this company cannot be treated as comparable because of exceptional financial result due to merger/de-merger - the assessee's contention is accepted that this company cannot be treated as comparable - the company has shown super normal profit working out to 113% - Relying upon Teva India (P.) Ltd. Versus Deputy Commissioner of Income-tax, Range 8(2), Mumbai [2011 (1) TMI 1210 - ITAT MUMBAI] companies showing supernormal profit cannot be treated as comparable thus, this company cannot be treated as a comparable. Maple e-Solutions Ltd. & Tricom Corp Ltd. Held that:- The decision in ITO v. CRM Services India (P) Ltd. Delhi [2011 (6) TMI 398 - ITAT DELHI] followed - overall profitability of the company cannot be applied in the case of the assessee as it will amount to comparing incomparable cases - In view of a question mark on the reputation of the owner, it would be unsafe to take their results for comparison of the profitability of the assessee - these two companies cannot be accepted as comparables. HCL Comnet Systems & Services Limited, Infosys BPO Limited & Wipro Limited Held that:- The TPO has excluded the companies whose turnover is less than Rs. One Crore, on the ground that they may not be representing the industry trend - That very logic also applies to the companies having high turnover of over ₹ 200 crores as against the assessee's turnover of only ₹ 60 crores, and therefore, it would be fair enough to exclude those companies also The decision in Agnity India Technologies (Formerly Genband Pvt. Ltd.) Versus Income-tax Officer, [2010 (11) TMI 852 - ITAT DELHI] followed thus, the orders of the DRP as well as the assessment order passed under S.143(3) read with S.144C of the Act set aside the matter remitted back to the TPO for fresh examination of ALP Decided in favour of Assessee. Foreign exchange fluctuation gain/loss not considered Held that:- The decision in Sap Labs India (P.) Ltd. v. Asstt. CIT [2010 (8) TMI 676 - ITAT, BANGALORE] followed - The foreign exchange fluctuation gains is nothing but an integral part of the sales proceeds of an assessee carrying on export business - foreign exchange fluctuation gains form part of the sale proceeds of exporter-assessee - The foreign exchange fluctuations income cannot be excluded from the computation of the operating margin of the assessee company - even for the year under appeal also the same principle should be applied, and while computing the margin for determining the ALP for the assessment year under appeal, the foreign exchange gain/loss has to be taken as part of the operating margin the AO is directed to treat the foreign exchange fluctuation gain/loss as part of the operating margin of the comparable company Decided in favour of Assessee.
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2014 (3) TMI 625
Disallowance of capital loss Genuineness of the transaction - Increment in the value of land not proved - Held that:- There was no evidence or basis for holding the sale of shares to assessees wife as sham transaction - Merely because the transaction is between the relatives, it, per se, cannot be said to be sham or bogus transaction revenue contended that the company M/s Karma Lakelands Pvt. Ltd. has substantial agricultural land, its value has increased manifolds and, therefore, the sale of shares at book value is not correct but, there is no such reason is given either by the Assessing Officer or by the CIT(A) and, except the bald statement, no evidence is produced to point out that the market value of the assets was much more than what is shown in the balance sheet thus, there was no justification for the disallowance of capital loss thus, the order of the CIT(A) set aside Decided in favour of Assessee.
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2014 (3) TMI 624
Jurisdiction of the ACIT to pass the order - transfer of case u/s 127 - Whether the ITAT was correct in law in holding that the order of assessment passed by the ACIT, Investigation Circle 8(1), New Delhi were without jurisdiction and therefore void ab initio Held that:- As decided in KK. Loomba Versus Commissioner Of Income Tax & Ors. [1998 (11) TMI 61 - DELHI High Court] - each year is separate and distinct year and in case the assessee shifts his residence or place of business or work etc. - the Assessing Officer of the place where the assessee has shifted or otherwise, will have jurisdiction and it is not necessary that an order under Section 127 of the Act should be passed This does not mean that the Assessing Officer where the returns of income were earlier filed ceases to have jurisdiction, provided the assessee has residence in his area, place of business, class, income etc. Residence can mean permanent residence as well as current or temporary residence of some permanence - There is no specific finding by the Tribunal with reference to Section 124 of the Act on the question of jurisdiction on the basis of residence, class, income etc. The AO, Delhi was wrong in assuming that as returns for the assessment years 1980-81 to 1983-84 were filed in Delhi, he would alone continue or had exclusive jurisdiction for assessment year 1985-86 onwards as well - ITO, Dimapur wrongly accepted the contention and had erroneously understood the legal provisions - the question of jurisdiction or the place of filing has to be examined each year with reference to provisions of Section 124 of the Act - thus, there was failure on the part of the Assessing Officer, Delhi and ITO, Dimapur in not following the procedure prescribed under Section 124 of the Act, but this would not make the assessment in the first round a nullity - The assessment order passed should have been set aside as was directed by CIT(Appeals) and assessments remitted for a fresh decision Decided in favour of Revenue. Jurisdiction of WTO officer - Whether the Tribunal was correct in law in holding that the Wealth Tax Officer has no jurisdiction to pass the assessment order Held that:- The assessee did not challenge and object to the jurisdiction of the Assessing Officer at any stage - Reference to the Commissioner/Commissioners was not required as per the Section 124 of the Act - There was waiver and assessee had accepted jurisdiction of the AO, Delhi - Tribunal could not have held to the contrary Decided in favour of Revenue.
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2014 (3) TMI 623
Eligibility for deduction u/s 80IB of the Act Transport subsidy, insurance subsidy, power subsidy and central excise refund Held that:- The decision in Commissioner of Income-tax Versus Meghalaya Steels Ltd. and M/s Pride Coke Pvt. Ltd. [2013 (7) TMI 175 - GAUHATI HIGH COURT] followed the assessee is eligible for the deductions u/s 80IB of the Act - the appeals filed by the revenue are dismissed and the order passed by the Tribunal is affirmed - Decided against Revenue.
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2014 (3) TMI 622
Claim of deduction u/s 80IB of the Act - Whether the Tribunal was correct in holding that the assessees claim for deduction u/s 80IB of the Act is not hit by the exception provided in Section 80IB(2)(iii) r.w. Schedule 11th (Item 25) to the Act, as polyutherim foam used by the assessee in the manufacture of automobile seat results in commercially different product then that mentioned in the 11th schedule Held that:- The end product could not be called commercially different from the PT foam as mentioned in the Eleventh Schedule - The assessee is not involved in any further process including stitching of seat covers - It simply produces the PT foam seats which are used for making end product to be fixed in different vehicles - the assessee do not manufacture the end product, namely seats to be fixed in vehicles. The decision in Commissioner of Income-tax Versus Vinbros & Co. [2012 (9) TMI 802 - SUPREME COURT] followed - the end product is totally different and is commercially different commodity than the major input rectified spirit which is not fit for human consumption - the changes made to the original product results in a new different commercial commodity which is recognized as to in the trade - the assessee manufactures is the foam in the shape of seats and therefore it cannot be stated that new product with the help of the PT foam comes into existence by any process Decided in favour of Revenue.
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2014 (3) TMI 621
Rejection of declarations filed under Kar Vivad Samadhan Scheme, 1998 (KVSS) Held that:- It cannot be said that there was no appeal pending before the Department inasmuch as there is no categorical denial of the fact that the petitioner filed the appeal before the Department though the same has been addressed to the Deputy Commissioner of Income Tax (Appeals-II) - The petitioner having never been informed of its appeal not being accepted on the technical ground that the same was addressed to the Deputy Commissioner of Income-tax (Appeals-II), it is not open for the Department to turn round and say that the appeal was not filed before the competent authority thus, there was no lapse on the part of the petitioner in filing the declaration and the authorities ought to have considered the declaration filed by the petitioner the order is set aside and the revenue is directed to process the declaration filed by the assessee Decided in favour of Assessee.
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2014 (3) TMI 620
Nature of Expenses Capital or Revenue - Expenses on foreign travel and on repairs Held that:- The Tribunal has come to a finding that the assessee has renovated rented premises - the Department has no case that the amounts spent by the assessee will be reimbursed or compensated by the lessor Relying upon CIT v. TVS Lean Logistics Ltd. [2007 (6) TMI 44 - HIGH COURT, MADRAS] - The assessee did not acquire a capital asset but had put up a construction of the building only for business advantage with the result that the entire construction cost was admissible as revenue expenditure. The authorities below have found that the assessee had incurred the expenditure for the purpose of business or profession of the assessee in the property taken on lease, the assessee did not acquire any capital asset but was only making certain expenditure for business advantages thus, the authorities below had not committed any error in treating the expenditure as revenue expenditure.
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2014 (3) TMI 619
Deletion on account of reserves and surplus Expenses treated as capital receipt Held that:- The amount was received essentially for restoration of the capital structure by recoupment of net worth - The assessee company had incurred accumulated losses and this has resulted in erosion of net worth - The parent company received non-refundable financial assistance of up to Euros 6 lakhs from its shareholder company thus, the CIT(A) was right in his factual findings that the amount was received towards erosion of net worth of the company Relying upon Handicrafts and Handloom Export Corporation of India vs. CIT [1981 (12) TMI 25 - DELHI High Court] the order of the FAA is upheld Decided against Revenue. Deletion made u/s 92CA(3) of the Act Transfer Pricing Adjustment Held that:- Infomedia India Ltd. is a company which is engaged in the business of printing and publishing which is totally a different line of business vis-a-vis assessee's business of trade fares and exhibitions - the rejection of this comparable by the CIT(A) is upheld - The only other relief given is that the TPO was directed to exclude domestic transactions in computation while computing adjustment based on ALP of international transactions there was no infirmity in the finding as transfer pricing adjustments are to be confined only to international transactions Decided against Revenue.
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2014 (3) TMI 618
Addition u/s 68 of the Act Unexplained cash credits - Revenue was of the view that the assessee issued bearer cheque to his loan creditors and the same were deposited in the accounts of two persons who are other than the loan creditors of the assessee Held that:- Nowhere AO has mentioned the fact that assessee had taken loan of Rs. 22.46 lacs during the year the FAA has given a finding of fact that the said loan amounts were taken as loan by the assessee in the earlier AYs and they were opening balances for the year under consideration - Provisions of section 68 of the Act are very clear for invoking the said section-the first and foremost condition is the credit of some amounts in the books of accounts of the assessee for a particular year - If the assessee does not offer any explanation about such credit or explanation offered by him is not satisfactory, then only AO can make additions for such cash credits - as stated by the FAA, there is no finding that assessee had taken loan of Rs. 22.46 lacs during the under appeal thus, the order of the FAA does not suffer from any legal infirmity Decided against Revenue.
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2014 (3) TMI 617
Deletion of addition made on various expenses Held that:- The assessee raises bills/invoices by estimating net realizable value (i.e. gross sales value in US minus US expenses) and under the relevant custom rules and ARE-1 was field by the assessee in respect of all goods leaving Indian custom boundaries and same detail was duly declared in ARE-I by the assessee and total amount for the same was amounting to Rs. 9.65 crores - The AO concluded the assessment on contradictory finding because on the one hand, the Assessing Officer has considered gross sales realized value in USA as sales of the assessee for the financial year under consideration and on the other hand the AO held that the export sale was completed when the consigned goods left the Indian Customs Border and all expenses incurred thereafter were post sale expenses thus, the first part of findings of the Assessing Officer are correct that the gross sales realized value in USA is the export sales of the assessee but export sales was not completed when the goods left the Indian Custom Borders because it was consignment which was intended to be sold through consignment agent of the assessee i.e. M/s Global Reliance In. in USA. All US expenses incurred by the consignment agent on behalf of the assessee were the responsibility of the assessee as per MOU dated 19.9.2002 and subsequent agreement dated 30.3.2004, which were also certified by CPA audit report, when actual export sale was effected at USA through consignment agent on behalf of the assessee, then expenses claimed by the assessee for the purpose of business cannot be treated as post sales expenses and observations and findings of the Assessing Officer are not correct and justified in this regard and we set aside the same to this extent only - The decision in GE India Technology Centre Private Ltd. Versus Commissioner of Income Tax & Anr. [2010 (9) TMI 7 - SUPREME COURT OF INDIA] followed thus, Circular No. 715 dated 8.8.95 is not applicable. Principle of consistency - The CIT(A) has granted relief to the assessee in the AY 2003-04 pertaining to the same claim of the assessee there is no reason to interfere with the same - the department does not have any valid reason to take a different stand on this issue which the Commissioner of Income Tax(A) has taken in favour of the assessee for AY 2003-04 thus, the CIT(A) has granted relief on reasonable, justified and cogent grounds Decided against Revenue. Partial disallowance of expenses Proper bills could not produce Held that:- The CIT (A) has given benefit to the assessee after detailed examination of the claim of the assessee but a minor part of the claim has been disallowed in absence of any details or evidence regarding the expenditure there was no cogent or relevant details or evidence which could substantiate or establish the claim of the assessee related to the part disallowance made by the CIT(A) thus, the order of the CIT(A) upheld pertaining to part disallowance - the assessee miserably failed to substantiate its claim with cogent and reliable evidence and the assessee could not discharge its onus in this regard Decided against Assessee.
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2014 (3) TMI 616
Penalty u/s 271(1)(c) of the Act Inaccurate particulars furnished Held that:- The assessee had given his premises on rent and the income therefrom was shown as subscription fees in the P&L A/c - penalty cannot be imposed where issue is debatable or where the AO and the assessee have difference of opinion - As far as disallowance in quantum appeal is concerned it should not result in automatic levy of penalty - For invoking provisions of section 271(1)( c) of the Act, AO has to mention as which particulars were inaccurate the decision in COMMISSIONER OF INCOME TAX Versus AMIT JAIN [2013 (1) TMI 340 - DELHI HIGH COURT] followed - if amount in question, which forms the basis for the AO to levy penalty, is truthfully reported in the returns and the AO chooses to treat the income under some other head them it cannot be held that the assessee has filed inaccurate particulars or has suppressed the facts - by claiming rental income as business income cannot be held to be furnishing of inaccurate particulars of income - the order of the FAA reversed Decided in favour of Assessee.
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2014 (3) TMI 615
Penalty u/s 271(1)(c) of the Act - Revenue was of the view that the assessee had neither in the return of income nor in the accompanied documents, disclosed that the bonds were sold within the period of three months and the assessee did not suomotu disallow the short term capital gain on sale of these bonds to the extent of dividend received Held that:- The assessee has purchased units of Sundaram Mutual Funds for Rs. 40 lakhs on 26th December 2003, which is a record date - the assessee had received dividend income the units have been redeemed on 26th March 2004 after incurring a loss which has been claimed by the assessee as a short term capital loss in the return of income - As per the provisions of section 94(7), the loss, if any, arising to the assessee on account of purchase and sale of securities or units, then such a loss has to be ignored if the securities has been sold or transferred within the period of three months. The Assessing Officer has calculated the period of three months on calendar basis which perhaps is correct - it cannot be held that the assessee has furnished any inaccurate particulars or concealed any income - the assessees belief or explanation cannot be held as wrong which was given during the course of quantum proceedings as well as penalty proceedings is not bonafide - thus, the order of the CIT(A) upheld Decided against Revenue.
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2014 (3) TMI 614
Interest from bank Principle of Mutuality - Held that:- The decision in Bangalore Club v/s CIT, [2013 (1) TMI 343 - SUPREME COURT] followed - the amount of interest earned by the club from the bank will not fall within the ambit of principles of mutuality and will be exigible to the tax in the hands of the club - thus, there is no merit in the grounds of the assessee Decided against Assessee.
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2014 (3) TMI 613
Disallowance u/s 40(a)(ia) of the Act Proper evidences not furnished - Held that:- The CIT (A) held that the sum are inter-state purchases and section 194C is not applicable - The CIT (A) came to the above conclusion, after verifying the purchase bills and also the confirmations from the concerned parties that these sales were inter-state purchases - A sum of Rs.44,85,686/- comprising of purchase by the assessee from M/s. Ratiram Ramvinod Sarees (P) Ltd, for Rs.41,77,206/- from Shankar Selection (P) Ltd, for Rs.21,430/- and from M/s Roop Ranjan, Ahmedabad for Rs.2,87,668/- are nothing, but inter-state purchases affected by the assessee - The finding of the CIT (A) has not been dispelled by the Revenue in any manner whatsoever thus, the order of the CIT(A) upheld Decided against Revenue. Disallowance of rebate and discount Held that:- Discount and rebate are common in this line of business - Assessing Officer has not doubted the genuineness of the rebate and discount - Assessing Officer made an adhoc disallowance of discount and rebate of a sum exceeding 4% of discount granted in a sale invoice - The CIT (A) after examining the accounts of the assessee had held that the discounts are accounted on the basis of sale bill and reflected in each party's account - The findings of the CIT (A) does not call for any interference thus, the order of the CIT(A) upheld Decided against Revenue. Disallowance of interest as not relating to the business Held that:- The CIT (A) rightly pointed out that disallowance u/s 14A is limited to expenditure attributable towards income which is not liable under the Income Tax Act - The Assessing Officer has not brought out on record any evidence that the interest expenditure has been incurred by the assessee for earning exempted income thus, the order of the CIT (A) deleting the disallowance of expenditure is upheld Decided against Revenue.
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2014 (3) TMI 612
Validity of jurisdiction u/s 153A of the Act - Search conducted u/s 132(1) of the Act - Whether in the absence of the assessee's name being mentioned in the Panchnama, jurisdiction u/s 153A of the Act was not validly invoked - Held that:- The Warrant of Authorisation contains the name of the assessee thus, absence of the assessee's name in the Panchnama is not fatal to the conduct of the search - If the authorization is valid, absence of the name of the assessee in Panchnama will not render the search operation invalid, if other requirements of law are fulfilled Relying upon M/s Rajat Tradecom (P) Ltd. vs. DCIT [2008 (9) TMI 424 - ITAT INDORE] - for applicability of Section 153A, the initiation of search is necessary - Section 153A would be applicable where a search is initiated u/s 132 - before invoking the provisions of Section 153A, it would be necessary to comply with the provisions contained in Section 132 (1) - Decided against Assessee. Whether since the premises searched was not owned by the assessee, the search conducted was not a search as envisaged u/s 132 of the Act, thereby vitiating the invocation of jurisdiction u/s 153A of the Act Held that:- It cannot be denied that this is an issue pertaining to jurisdiction - It goes to the very root of the matter - It is not that the premises was owned by the assessee but was rented out - the premises searched does not belong to the assessee - non-compliance of the provisions of the Income-tax Act by the authorized officer renders a search invalid and illegal - Relying upon Dr. Mansukh Kanjibhai Shah vs. ACIT, Central Circle-2 [2010 (5) TMI 536 - ITAT, AHMEDABAD] - Since no search was conducted on the premises of the assessee and the search conducted was conducted on a premises not owned by the assessee, the proceedings u/s 153A of the Act are invalid and bad in law Decided in favour of Assessee.
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2014 (3) TMI 611
Depreciation - finance lease or operating lease Addition on fixed assets Difference in the accounting treatment of computers taken on lease - Held that:- The assessee has added a sum being value of leased computers in the block of assets and depreciation under Companies Act was computed and debited to the profit loss account - For income tax purposes, the assessee added back the depreciation under the Companies Act which was debited to profit and loss account - In the depreciation that under Income Tax Act, the assessee did not include Rs. 2,58,71,588/- worth of the computers instead assessee claimed Rs. 85,73,228/- being amount paid to the lessor as lease charges in terms of section 37(1) of the Act - As such no depreciation was claimed on such lease computers under the provisions of the Income Tax Act - The assessee has not at all made any depreciation claim in this regard in the Income Tax Act and AO has not disallowed any depreciation - thus, the basis of CIT(A)s adjudication is wrong. For depreciation u/s. 32 of the Act there is no distinction between a finance lease or operating lease and it is the owner / lessor only who is entitled to claim depreciation in all leasing transactions - the contention of the assessee is accepted that the Accounting of the leased computers has been done as per the Accounting Standards and provision of Companies Act and Income Tax Act is correct - assessee has not claimed any depreciation on this lease computers - the contention of the assessee have not been noted or discussed either in the AOs order or in the CITs order thus, the matter remitted back to the AO for fresh examination Decided inf avour of Assessee.
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2014 (3) TMI 610
Payment of interest on refund u/s 244A - refund of excess tax deposited u/s 195(2) - Whether the revenue is legally responsible u/s 244A of the Act for payment of interest on the refund of tax made to the resident/deductor u/s 240 of the Act - Whether the resident/deductor is also entitled to interest on refund of excess deduction or erroneous deduction of tax at source u/s195 of the Act Held that:- Interest on refund is a kind of compensation of use and retention of the money collected unauthorizedly by the Department - When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited - Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded - There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/foreign company. Refund due and payable to the assessee is debt-owed and payable by the Revenue - The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies - The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances - The obligation to refund money received and retained without right implies and carries with it the right to interest. The payment of tax made by resident/depositor is in excess and the department chooses to refund the excess payment of tax to the depositor the interest requires to be paid on such refunds - The catechize is from what date interest is payable, the present case does not fall either under clause (a) or (b) of Section 244A of the Act - In the absence of an express provision as contained in clause (a), it cannot be said that the interest is payable from the 1st of April of the assessment year - the payment is not made pursuant to a notice issued u/s 156 of the Act, Explanation to clause (b) has no application - as the opening words of clause (b) specifically referred to "as in any other case", the interest is payable from the date of payment of tax - the resident/deductor is entitled not only the refund of tax deposited under Section 195(2) of the Act, but has to be refunded with interest from the date of payment of such tax Decided against Revenue.
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Customs
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2014 (3) TMI 602
Valuation of goods - Rejection of transaction value adopted by assessee - Held that:- The description of the goods shown by the appellant is as per the invoice issued by the supplier. During the course of investigation the Revenue has relied on the catalogue supplied by M/s Ved. International with regard to the goods having description as TL-20W/05 SLV the catalogue indicates that 05 stands for blue colour but the catalogue 4 TL-20W/05 SLV stands for ultra violet radiations. Therefore, the fact that the tube lights imported by the appellants are of ultra violet radiations or not cannot be ascertained without examination of the goods through Test Lab. Admittedly, the tube lights imported by the appellants are of blue colour but the colour description as per the catalogue relied upon by the Revenue is of actinic but the tube lights imported by the appellants are not actinic, in the absence of any evidence on record. As no samples were drawn by the Revenue to examine whether the tube lights imported by appellants and having ultra violet radiations and not test was conducted to ascertain this fact, the description of TL-20W/05 SLV cannot be relied blindly. To reject transaction value declared by the appellants, Revenue is duty bound to first ascertain the fact that goods imported by the appellants are similar to the goods imported by M/s. Ved International and to ascertain this fact, some tests are conducted, which Revenue has failed to do so. In these circumstances, it cannot be ascertained whether the impugned goods are of ultra violet radiation or not - goods are not similar goods as imported by M/s Ved. International. Therefore, the price adopted by M/s. Ved International having no relevance to the goods imported by the appellant. In these circumstances, transaction value declared by the appellant is accepted - Decided in favour of assessee.
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2014 (3) TMI 601
Confiscation of goods - Import of Malaysian Round Logs - Mis declaration of quantity of goods - Valuation of goods - Imposition of redemption fine - Demand of differential duty - Held that:- Revenue has failed to prove that the respondent has paid any amount over and above the transaction value. Therefore, although there is an excess quantity of the goods but transaction value is not affected, therefore that transaction value is accepted. Accordingly question of demand of differential duty does not arise. Further, we find that as quantity of goods have been misdeclared by the respondents, therefore goods are liable for confiscation. As in the impugned order the learned Commissioner did not confiscate the goods, we hold that goods are liable for confiscation. Therefore, the impugned goods are confiscated. As goods are not prohibited goods, therefore, they are allowed to be redeemed on payment of redemption fine. As the goods have been cleared after adjudication, therefore we direct the respondent to pay the redemption fine - Decided in favour of Revenue.
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2014 (3) TMI 600
Denial of refund claim - Import of medical instruments and kits from assessee's principal in USA - Mistake in mentioning value of goods on invoice - Refund claim regarding extra duty paid - refund claim was rejected on the ground that the appellant has failed to produce documents in support of their refund claim - Commissioner (Appeals) has observed that the clerical mistake creeping into the assessment documents which can be remedied by taking recourse to Section 154 of Customs Act, 1962 by way of reassessment - Commissioner remanded matter back - Held that:- this is case where originally there was no lis between the Revenue and the importer and there was no decision by the proper officer on the same. Admittedly, it was the case of clerical mistake - Commissioner (Appeals) has properly remanded the matter to the lower authorities for examining the assessees claim, after scrutiny of the documents, we find no reason to interfere with the impugned order of the Commissioner (Appeals) - Following decision of Aman Medical Products Ltd. v. CC, Delhi [2009 (9) TMI 41 - DELHI HIGH COURT] - Decided against Revenue.
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Service Tax
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2014 (3) TMI 606
Demand of service tax - Tour operator service - Liability on seat reservation charges - Penalty u/s 76 & 78 - Held that:- The Bus reservation agreement is for booking of the buses for the tours undertaken to Nasik, Ellora, Ghrisneshwar, Siddharth Garden, etc. and the tour starts at 5.00 a.m. on 22/11/2007 and concludes at 7.00 p.m. on 23/22/2007. Thus, the bus reservation is for conduct of the tours and therefore, it forms rightly part of the tour operator services as defined in law. Two penalties have been imposed, one under Section 76 and another under Section 78. Section 76 penalty is imposable if there is a delay or default in payment of service tax and no mens rea is required to be proved. However, imposition of penalty under Section 78 is for suppression of facts, collusion, fraud etc. In this particular case, since the activity has been in dispute since 2004, the department cannot allege suppression or willful mis-statement of facts. Therefore, the penalty under Section 78 is neither justified nor warranted in the circumstances of the case - Following decision of CHOUDHARY YATRA CO PVT LTD Versus COMMISSIONER OF CENTRAL EXCISE. NASHIK [2012 (11) TMI 251 - CESTAT, MUMBAI] - Decided partly against assessee.
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2014 (3) TMI 605
Rent a Cab Operator Service - Scope of the term Motor Cab - Renting or Hiring - Penalty u/s 77 & 78 - Held that:- assessee has been supplying vehicles such as Maruti Van/Maruti Suzuki/Alto having seating capacity 4+1 including the driver and Ambassadors having seating capacity 4+1 and 5+1 including the driver to M/s. NEEPCO Ltd., Shillong as stated by the said assessee in his statement on 27.05.2009 and also the documents submitted vide their letter dated 15/06/2009 indicates that all the vehicles supplied by them to NEEPCO Ltd. are vehicles having seating capacity of 4+1 and 5+1. As the said vehicles are constructed or adapted to carry not more than 6 passengers excluding the driver, therefore, they conform to the definition of Motor Cab" as per Section 65 (70) w.e.f. 14.05.2003 of Chapter V of the Finance Act. Definition of Rent a Cab Scheme Operator was amended w.e.f. 16.10.1998 vide Finance (NO2) Act 1998 which reads as "Rent a cab Scheme Operator'" means any person engaged in the business of renting of cabs, thus the requirement of operator being registered under the Rent a Cab Scheme Operator had been dispensed with. Consequently, any person engaged in the business of renting of cabs was required to pay service tax irrespective of number of vehicles engaged by him in providing this service. Lower authorities have not examined the issue whether the activity of the appellant falls under the ambit of "hiring" or as the case may be renting. - appellant's case requires re-examination in light of each of their contracts entered by them and the various service recipients. - matter remanded back.
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2014 (3) TMI 604
Waiver of predeposit of Service Tax - Imposition of penalty u/s 76 & 78 - Held that:- service tax liability on the Applicant has been fastened on the ground of rendering taxable service namely, commercial as well as residential construction services for the period from 2004-05 to 2007-08 - after allowing the abatement and ignoring the principle laid down in Jaihind Projects Ltd.s case (2010 (1) TMI 186 - CESTAT, AHMEDABAD), the liability would be reduced to Rs.42.00 lakh. - Considering the financial hardship pleaded by the Applicant, we are of the view that the offer made by the ld. Chartered Accountant to deposit Rs.20.00 lakh out of the said liability of Rs.42.00 lakh, is reasonable. - stay granted partly.
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2014 (3) TMI 603
Penalty u/s 78 - Violation of principle of natural justice - Held that:- allegations were labeled on the Appellant for non-payment of Service Tax on the gross taxable value received and reflected in their balance sheets for the respective years. However, from the records we find that the Appellant was not given sufficient opportunity to explain his position in relation to the allegations made in the show cause notice - minimum number opportunities of hearing as laid down under Section 33A of the Central Excise Act, 1944 made applicable to the Service Tax cases has not been adhered to in the present case. In these circumstances, we are of the view that the case be remitted to the original authority for re-consideration of the matter afresh - Decided in favour of assessee.
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Central Excise
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2014 (3) TMI 599
Waiver of pre deposit - Denial of CENVAT Credit - input service - custom clearance service - four services availed by the appellant i.e. construction service, tour operator service, custom clearance service and photocopier service. - Held that:- there are many decisions in respect of construction services, tour operator services and photocopier services laying down that the same are used in relation to the business. As regards the custom clearance service the contention of the ld. SDR is that the said service is post export and as such cannot be held to be in relation to the business. - the custom clearance service is an arguable and contentious topic - stay granted partly.
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2014 (3) TMI 598
Waiver of pre deposit - Condonation of delay - Held that:- appellants factory was lying closed during the relevant period and a photo copy was procured by them subsequently. As such, the date of receipt of the photocopy of the order is relevant for the purpose of counting the period of limitation for filing the appeal. As per the Revenue, the impugned order of original adjudicating authority was sent to the appellant by registered post. However, it is not their case that it was sent by registered AD. As such by extending the benefit of doubt to the appellant, the delay in filing the appeal, if any is not actual delay in as much as the limitation period has to be considered from the date of receipt of the order. We accordingly, after condoning the delay in filing appeal before the Commissioner (Appeals), dispense with the condition of pre-deposit, set aside the impugned order and remand the matter to the Commissioner (Appeals) for decision on merits - Decided in favour of assessee.
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2014 (3) TMI 597
Cenvat Credit - Supply of SEZ unit without payment of duty - Challenge on the strength of certain provisions of the Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006 - Held that:- necessity of considering the question whether Rule 6(6)(i) as amended by Notification No.50/2008 dated 31.12.2008 can be applied retrospectively does not arise in this case. The issue stands decided against the Revenue by a decision of this Tribunal in SUJANA METAL PRODUCTS LTD [2011 (9) TMI 724 - CESTAT, BANGALORE] which pertains to a period prior to 31.12.2008. The period of dispute in this case is also prior to the said date - Decided in favour of assessee.
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2014 (3) TMI 596
Waiver of duty - Denial of credit - Credit availed on triplicate copy of invoice - Duty paying document - Held that:- as the applicant has availed credit on the strength of triplicate copy of invoice which is not a valid duty paying document, therefore, prima facie, the appellant has not made out a case for total waiver of duty demand - Conditional stay granted.
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2014 (3) TMI 595
Waiver of pre deposit - SSI Exemption - Brand Name - Denial of benefit of Notification No. 8/2003-CE dated 1/3/2003 - Held that:- Appellants have written the expression Marketed By DERMEN PHARMACEUTICALS, Promoted by UNISHARP PHARMACEUTICALS, Manufactured for DYMIX PHARMACEUTICALS (P) Ltd., Manufactured Under Technical Guidance of K.M.S. PHARMACEUTICALS and Sale in Association with ZEE PHARTMA etc. The lower authorities have held that such writing of words indicate a connection with the general public and would be covered by the definition of brand names - Following decision of DCI Pharmaceuticals Pvt. Ltd. vs. Supdt. Of C. Ex. (Div.), Panaji [1999 (3) TMI 90 - HIGH COURT OF BOMBAY AT GOA] wherein it was held that, Merely because the goods are distributed by some other Company/Agency and their name and logo are printed on the cartons of specified goods, it cannot be said that they are identified with the user of the brand-name in question. - Stay granted.
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2014 (3) TMI 594
Availment of CENVAT Credit - Whether CENVAT credit can be allowed on welding electrodes used in repair of plant and machinery - Held that:- appellants had given exact place of use of the impugned items. If the adjudicating authority or the appellate authority was in doubt in accepting the declaration they should have themselves verified the declaration by making a visit to the factory. Since no such effort has been made, I am inclined to go by the declaration given by the appellant and prima facie it would appear that these items were parts and accessories of capital goods or used as inputs for fabricating capital goods in the factory and there is no reason to deny CENVAT credit on these items. Therefore, I grant waiver of predeposit of dues arising from the impugned orders for admission of the appeals and stay its collection during the pendency of the appeals - Stay granted.
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2014 (3) TMI 593
Maintainability of appeal - Non compliance of provision of Section 35F - Held that:- The stay order having been passed in December 2011 and the appellant have not deposited even a single penny till date. We are of the view the appeal is liable to be dismissed for non-compliance with the provisions of Section 35F of the Central Excise Act - Decided against assessee.
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2014 (3) TMI 592
Denial of CENVAT Credit - Business auxiliary service - Held that:- demand is confirmed after denying credit of service on the Chartered Accountant service. As the service tax in question is regarding accounting and auditing and is specifically covered under the scope of input service as provided under Rule 2 (l) of Cenvat Credit Rules . Hence, the impugned order denying credit of Rs.3,338/- is set aside - Decided against Revenue.
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2014 (3) TMI 591
Penalty under Rule 25(1)(a) & (b) of the Central Excise Rules, 2002 read with Section 11AC - Held that:- 5 year period for invoking extended period will start from the date of knowledge by the Department. The Revenue came to know about their payment of duty when audit party raised objection. Therefore, the demand is rightly made by invoking extended period - demand of duty is confirmed which is not contested by the Revenue under the provisions of Section 11AC of the Act by invoking extended period. Therefore, ingredients of Section 11AC of the Act are not fulfilled - penalty confirmed - Decided against assessee.
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2014 (3) TMI 590
Denial of CENVAT Credit - Non receipt of foreign exchange after export of goods - Vehicle stands exported under Rule 19 under bond and Export Completion certificate stands issued to the appellant, but they have not received the foreign exchange for the said cars - Held that:- there is no dispute about the completion of export in terms of Rule 19 of Central Excise Rules. There is no condition, as regards receipt of foreign exchange, in the Cenvat Credit Rules - Following decision of Flex Engg. Ltd. Versus Commissioner of Central Excise [2012 (1) TMI 17 - Supreme Court of India] - Stay granted.
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CST, VAT & Sales Tax
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2014 (3) TMI 609
Opportunity of being heard - order u/s 21(2) of the U.P. Trade Tax Act 1948 reassessment proceedings - Held that:- Decisions in SK. Traders Versus Additional Commissioner [2007 (7) TMI 573 - ALLAHABAD HIGH COURT] & Rajesh Kumar And Others Versus Deputy Commissioner of Income-Tax And Others [2006 (11) TMI 135 - SUPREME Court] followed - Only because certain consequences would ensue if the principles of natural justice are required to be complied with, the same by itself would not mean that the court would not insist on complying with the fundamental principles of law - If the principles of natural justice are to be excluded, the Parliament could have said so expressly - ordinarily unless excluded by operation of a statute, the superior courts while exercising power of judicial review shall proceed on the basis that assignment of reasons is imperative in character. While applying the principles of natural justice the court must also bear in mind the theory of useless formality and the prejudice doctrine Justice is not only be done but manifestly seem to be done - Opportunity of hearing has to be given to every assessee by the AC or C while considering the proposal for sanctioning/issuing of notice for reassessment under the proviso to Sub-section (2) of Section 21 of the Act and reasons are also to be recorded while granting sanction - Order set aside AC had not given any reasons for granting permission/sanction to proposal to reopen the assessment thus all proceedings taken in pursuance of the order also set aside - Decided in favour of assessee.
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2014 (3) TMI 608
Exemption from export duty - Inter-State sales of Rectified and Denatured Spirit - Held that:- The decision in Commissioner of Sales Tax UP. Versus M/s. Upper Doab-Sugar Mills Ltd. [2014 (2) TMI 1003 - ALLAHABAD HIGH COURT] followed - United Provinces Sales of (Motor Spirit, Diesel Oil and Alcohol) Taxation Act, 1939 is a 'sales tax law' within the meaning of Section 2(i) of Central Sales Tax Act, 1956 - The alcohol being taxable under the 1939 Act, payment of central sales tax on inter-State sale of alcohol not exempted as per provisions of Section 8 (2-A) of the 1956 Act even though there was general exemption under section 4 of the 1948 Act - The orders of the Tribunal in revisions set aside - Decided in favour of revenue. Inclusion of export pass fee in taxable turnover Held that:- Judgment in Commissioner of Income-Tax Versus Rampur Distillery And Chemicals Co. Limited[2004 (11) TMI 88 - ALLAHABAD High Court] followed - export pass fee is the liability of the exporter to pay while getting the export permit - there was no liability of payment of export pass fee on the dealer under the Excise Act - No question of treating the export pass fee as part of the turnover Decided against revenue.
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2014 (3) TMI 607
Rejection of request for Issuance of "C" form declaration on the ground of arrears of tax and penalty maintainability of writ petition when alternative remedy is available - Held that:- The impugned order was passed on 8 September 2010. The petitioner has filed this writ petition on 6 October 2010. Therefore it is clear that even before the expiry of the period prescribed for filing statutory revision, the petitioner has approached this Court and as such, opportunity should be given to file a revision petition. - Judgment in Commissioner of Income Tax & others Versus Chhabil Dass Agarwal [2013 (8) TMI 458 - SUPREME COURT] followed - The petitioner is given time till 21 March 2014 to file a revision petition before the Commissioner, Commercial Tax Officer, Puducherry - Writ petition dismissed.
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