Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 23, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Non deduction of tds - payment made for the purchase of software from the non resident for the purpose of downloading of licensed software is liable for deduction of tax under section 195 - AT
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Depreciation on wind electric generations - wind mill generator is nothing but wind mill equipment on which depreciation is allowable @ 100% as per the statutory provision - AT
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Registration u/s 12AA denied - name of the company shown as "MAHINDRA EDUCATIONAL INSTITUTIONS" indicates plurality of institution - plurality is common Indian practice in names such as 'enterprises', 'industries', 'firms', 'projects', etc. - registration to be allowed - AT
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Revision u/s 263 -opinion of CIT in treating the amount already allowed as contingent liability can certainly be considered as change of opinion. On the principles governing the issue of jurisdiction, we cannot uphold the direction of the Ld. CIT - AT
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Deduction u/s.80IA(4)(i) - CFS - Where no specific agreement with the State Government was entered into but from the approvals granted to the assessee it was inferred that assessee should be deemed to have entered into an agreement with the State Government. - AT
Customs
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Eligibility for concessional rate of additional duty on import of car - Notification No. 64/93-CE - it was almost impossible to visualise a situation where a foreign manufacturer would import the saloon cars in this country and would utilise those cars for tourist taxis - refund of CVD allowed - SC
Service Tax
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Availment and utilization of CENVAT Credit - Capital goods - Merely because the tower parts etc. are assembled together, it would be totally unreasonable to suggest that Cenvat Credit on them is not admissible despite Rule 2(k)(ii). This Rule has to be interpreted as it stands - AT
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Whether the services provided to the Member by the cooperative society registered under the Karnataka Cooperative Societies Act 1959 is liable to service tax under Banking and other Financial Services or not - prima facie case is against the assessee - AT
Central Excise
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If the Assessee in this case has paid duty at the tariff rate namely 20% and not availed of the exemption under the subject notification, and subsequently sought refund of the duty paid over and above 10%, or has made payment from the accumulated amount or the credit accumulated in his Modvat account, the Tribunal found that he could not have been denied the relief - HC
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Denial of MODVAT Credit - Tribunal could not have disposed of the assessee's appeal, even in his absence, without considering the issue as to whether the products are classifiable as patent or proprietary medicaments or medicines other than proprietary and generic name. - HC
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Through Rule 12 CCC of the 2002 Rules, the Central Government enabled the concerned assessing authority to place restriction as to the facility of making deferred payment of central excise duty, in case it is noticed that the manufacturer is resorting to evasion of duty or other unlawful activities. Similarly, if a manufacturer is said to be resorting to such acts and omissions, the authority is also conferred the power to place restriction on the utilization of CENVAT credit facility for a specified period, as provided in Rule 12 EEE of the Rules - HC
VAT
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Classification of Cord wire - Electronic good or Electrical good - the cord wire connecting the main switch with the instrument would not fall under the category of "electrical goods" and should be treated as "electronic goods" - TNGST - HC
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Constitutional validity of Government notification dated 1.10.2012 - subsidy of sales tax or VAT, as the case may be, to small fishermen on purchase of high speed diesel - notification is valid - HC
Case Laws:
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Income Tax
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2015 (3) TMI 684
Non deduction of TDS - assessee in default u/s. 201(1) - BIOCON, an Indian company and CIMAB,a Cuban company entered into a joint venture agreement hereby they agreed to form a joint venture company (JVC) in India - shares ought to be issued to CIMAB against of transfer of technology is payment which could be said to be "royalty" as per AO - Whether the provisions of Sec.195(1) of the Act are not applicable when shares are issued to a Non-resident (which is a foreign company in the present case) because it cannot be said to be a payment of "any other sum chargeable under the provisions of this Act" within the meaning of the said expression used in Sec.195(1) of the Act? - Held that:- As rightly contended by the learned DR, the expression "any other sum chargeable under the provisions of the Act" used in the earlier part of Sec.195(1) of the Act has to be read in conjunction with the words "at the time of credit of such income to the account of the payee or at the time of thereof in cash or by issue of a cheque or draft or by any other mode". Thus payment in terms of the money is not the only mode contemplated under the provisions of Sec.195(1) of the Act. The use of the expression "or by any other mode" in Sec.195(1) of the Act, makes the intention of the legislature clear that those provisions are attracted even to cases where payment is made otherwise than by money. We are therefore of the view that the argument canvassed by the Assessee cannot be accepted. - Decided against assessee. Whether the issue of shares by the Assessee on 30.3.2004 and 30.9.2004 can be said to be covered by the order of non-deduction of tax at source issued by the AO in his order dated 22.2.2005 and therefore in respect of issue of shares on the above two dates the Assessee cannot be proceeded against u/s. 201(1) & 201(1A) of the Act? - Held that:- In the application filed by the assessee on 13.01.2005 u/s. 195(2) of the Act, there is no reference to the shares having already been issued by the assessee to CIMAB on 30.03.2004 and 30.09.2004. The order u/s. 195(2) of the Act does not grant immunity to the shares which are already issued prior to the date of application u/s. 195(2) of the Act by the assessee. The order, if at all, can be valid for issue of shares between 22.02.2005 [the date of order u/s. 195(2) of the Act] and 31.03.2005. Admittedly, during the above period, the assessee had not issued any shares to CIMAB, therefore it cannot be said that the assessee cannot be treated as an assessee in default in respect of issue of shares to CIMAB for failure to deduct tax at source.We do not think that the proposition canvassed by the ld. Counsel for the assessee can be accepted. There cannot be an estoppel against statute. The AO derives his powers by virtue of various provisions contained in the Act. If u/s. 195(2) of the Act, the AO does not have a power to issue a Nil deduction of tax at source on an application filed by the payer, then it would not be proper to say that an order given in contravention of those provisions would be binding on the revenue authorities. Apart from the above, in the present case, factually the order dated 22.02.2005 issued by the AO u/s. 195(2) of the Act did not operate or was not in force for any of the issue of shares made by the assessee non-resident CIMAB. This contention therefore is devoid of merits and in any event, does not arise for consideration in the present proceedings. In that view of the matter, we are of the view that there is no merit in the contentions put forth by the assessee before us. - Decided against assessee. Whether the Revenue is precluded from proceeding against the Assessee for failure to deduct tax at source u/s.201(1) of the Act, in respect of issue of shares made on 30.9.2005 and 31.3.2006 by reason of the application of principle of estoppel? - Held that:- As already stated, the order u/s. 195(2) dated 22.02.2005 is non est in law and therefore the assessee cannot be heard to say that he acted on the basis of the said order. Moreover, u/s. 195(1) of the Act, the assessee was obliged to deduct tax at source while making payments to the non-resident. If the assessee fails to do so and ultimately if it is found that the assessee was obliged to deduct tax at source, then the plea of estoppel cannot be raised by the assessee.The AO can pass a general or special order on such application. The order dated 22.2.2005 cannot be said to be general order so as to be valid for all future issue of shares. We have already extracted in the earlier part of this order the operative portion of the order dated 22.2.2005, which clearly specifies that it is valid only for issue of shares upto 31.3.2005. This order was in response to the Assessee's application dated 13.1.2005 in which the Assessee did not disclose the facts regarding issue of shares to CIMAB on 30.3.2004 and 30.9.2004. Therefore the Assessee cannot take any benefit under the order dated 22.2.2005 for any issue of shares to CIMAB which is not in accordance with law because that order which was passed u/s.195(2) of the Act, was in response to an application by the person responsible for making payment in which the dispute can be only with regard to the rate of tax and not the question whether tax at all is deductible at source or not, which remedy is available only to the recipient of the payment u/s.195(3) or 197 of the Act. - Decided against assessee. Can it be said that proceedings u/s.201(1) & 201(1A) of the Act are not valid on the application of the principle "Actus Curle Neminem Gravabit", which means "an act of Court shall prejudice no man".? - Held that:- It is well settled that Tax and equity are strangers. In interpreting tax legislations or determining tax liability equitable considerations have no role to play. The provisions of Sec.195 of the Act are clear and are not ambiguous. As already stated the order u/s.195(2) dated 22.2.2005 operated only for a limited period. Fortunately for the revenue during that period, the Assessee made no issue of shares to CIMAB. The provisions of law are clear that each of the payments to non-resident or foreign company requires specific order, unless there is any other general order operating for an indefinite period of time. - Decided against assessee. Whether the issue of shares by the Assessee to CIMAB would constitute a payment of "Royalty" by the Assessee to CIMAB which can be said to accrue or arise in India to CIMAB and therefore taxable in the hands of CIMAB in India and consequently the Assessee be held as liable to treated as an Assessee in default u/s.201(1) of the Act? - whether assessee can be said to be 'an assessee in default' to the extent of tax on capital gain? - Held that:- From a perusal of the aforesaid clauses-3, 4, 6, 7 & 9 in the TT Agreement, it is clear that there was no transfer of the know-how by CIMAB to the assessee. It is thus clear from the terms of this Agreement that the assessee did not acquire the know-how through a transfer within the meaning of section 2(47) of the Act from CIMAB and therefore the arguments of the assessee on the arguments resulting in a transfer of know-how deserve to be rejected. The JVA read together with the JVA contains two parts. The first part transfers right to use know-how. This part is a separate contract and the right to use know-how so transferred was "Royalty" within the Explanation 2(iv) to section 9(1)(vi) of the Act. The second part is the mode of payment of the consideration payable under the JVA & TTA for providing technology by CIMAB to the assessee (right to use the know-how) which is in the form of issue of shares in the JVC. Accrual of income from the second part of the contract has to be brought to tax subject to fulfillment of conditions specified in section 9(1)(vi) of the Act. The fact that the consideration payable under the Agreement is discharged by issue of shares in a JVC will have no effect on accrual of income in India and its taxability in India. In the present case, as we have already seen, operations are effected and services are rendered in India. There is nothing on record to show that there was delivery of technical know-how abroad. On the other hand the circumstances suggest that there has been delivery of technical know-how in India. We have already seen in the present case that under clause 2.1 of the JVA provides that the JVC will manufacture cancer drugs using the technology developed by CIMAB. The technology brought in by CIMAB would be its capital contribution. The terms on which technology was to be brought in by CIMAB is contained in a TTA. We have already seen the terms of the TTA and have come to the conclusion that there was no transfer of any intellectual property in the technology by CIMAB to the Assessee. Therefore it cannot be said that the Assessee had acquired any right to intellectual property in the know-how. - Decided against assessee.
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2015 (3) TMI 683
Non deduction of tds - payments made by the appellant towards the purchase of software to non-resident entities - whether the payments made by the appellant for the use of copyrighted software are in the nature of “royalty” as defined in Explanation 2 to section 9(1)(vi) of the Act - Held that:- Right to make a copy of the software and use it for internal business by making copy of the same and storing the same In the hard disk of the designated computer and taking back up copy would itself amount to copyright work under Section 14 (1) of the Act and licence is granted to use the software by making copies, which work, but for the licence granted would have constituted Infringement of copyright and licencee is in possession of the legal copy of the software under the licence. Therefore, the contention of the learned senior counsel appearing for the respondents that there is no transfer of any part of copyright or copyright and transaction only involves sale of copy of the copyright software cannot be accepted. As relying on Citrix Systems Asia Pacific Pty. Limited (2012 (2) TMI 258 - AUTHORITY FOR ADVANCE RULINGS ) has held that sale or licensing for use of copyrighted software is grant of right to use copyright and payment thereof is ‘royalty’ and is liable for deduction of tax at source under section 195 of the Act. CIT(A) is justified in his conclusion that the payment made for the purchase of software from the non resident for the purpose of downloading of licensed software is liable for deduction of tax under section 195 of the Act. Therefore, we are of the view that the CIT(A)’s order is correct and in accordance with law and no interference is called for. - Decided against assessee.
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2015 (3) TMI 682
Non deduction of TDS - payment for purchase of a property - CIT(A) held the assessee as an ‘assessee in default’ - payment of sale consideration made to a non-resident - Held that:- Order of the CIT(Appeals) can be sustained in part only i.e., with regard to the quantum of tax that needs to be deducted at source and consequential levy of interest u/s. 201(1A) of the Act. It is not in dispute that Mrs. Shyamala Vijai and Mrs. Poornima Shivaram were entitled to half share each over the property that was sold to the appellant. In fact, as we have already seen, the sale deed clearly acknowledges the receipt of sale consideration of ₹ 1.20 crore by both the vendors in equal shares. In law, Mrs. Shyamala Vijai and Mrs. Poornima Shivaram are entitled to half share each over the property. The share of each of the vendors would therefore be ₹ 60 lakhs. Mrs. Shyamala Vijai is, admittedly, a non-resident and to the extent of ₹ 60 lakhs paid to her, the provisions of section 195 are attracted and the assessee ought to have deducted tax at source while making payments to the non-resident through Mrs. Shyamala Vijai. Thus we allow the appeals of the assessee in part and hold that the assessee can be considered as an ‘assessee in default’ only to the extent of ₹ 60 lakhs paid to the non-resident. Levy of consequential interest u/s. 201(1A) should be modified accordingly. - Decided partly in favour of assessee.
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2015 (3) TMI 681
Jurisdiction of Assessing officer - transfer of jurisdiction over the case under section 127 - Held that:- The assessee has itself filed return with Circle 6(1). No doubt the Department has also not handled the issue very well (i.e. original return and revised returns were transferred to Circle 2(1) and again transferring the same to Circle 6(1)). However, as far as the assessee is concerned, it submitted itself to jurisdiction of Circle 6(1). Secondly when the assessee filed revised return and a notice under section 143(2) was issued by Assessing Officer Circle 6(1), the assessee did not raise the objection as required under section 124(3)(a). This clearly shows that the assessee had no objection on the jurisdiction but this issue is being raised merely as a matter of technicality to get the assessment annulled which is not possible because even if the assessment was to be made by the Assessing Officer, Circle 6(1), no inconvenience was caused to the assessee. Thirdly inherent jurisdiction of the assessee being located at Mohali lies with the Assessing Officer, Circle 6(1). In view of these facts and the above detailed discussion, we set aside the order of the learned Commissioner of Income-tax (Appeals) and hold that the Assessing Officer Circle 6(1) holds jurisdiction over the assessee. We also hold that the learned Commissioner of Income-tax (Appeals) has no power to entertain the additional ground in respect of the jurisdiction. In the result, ground raise by the Revenue in this regard is allowed. Change in accounting policy - whether Commissioner of Income-tax (Appeals) has failed to appreciate the fact that the assessee has adopted cash system of accounting, and as such its income from different sources is required to be computed under cash system of accounting - Held that:- It is a settled position of law that whenever a system of accounting is changed such change has to be bona fide and the system should clearly reflect the income of the concerned year. It has not been explained before us why the profit in respect of two schemes was not recognised in the assessment year 2002-03 earlier simply by saying that it was not done by mistake, is not enough. Even if assuming that because of the change in system the income of the earlier year has come to this year then the assessee has no right to change income to the earlier year, i.e., assessment year 2002-03 by simply saying that the income belongs to that year and was not recognised in the earlier year. This cannot be done particularly in view of the fact that in the assessment year 2002-03 the income was exempt under section 10(20A). Moreover the assessment which has become final cannot be reopened again. The assessee has no time left in terms of section 139(5) to revise the return. Therefore, we are of the opinion that the learned Commissioner of Income-tax (Appeals) has erred in giving relief by simply stating that this income actually belongs to the earlier year without giving any reasons how and why this income was not recognised in the earlier year. Accordingly we set aside the order of the learned Commissioner of Income-tax (Appeals) and restore that of the Assessing Officer in this regard. - Decided in favour of revenue. Increase in income shown from sales of houses and flats and interest on instalments - CIT(Appeals) deleting the addition - Held that:- the assessee sold certain houses and flats under the hire purchase agreement. The allottees were treated as tenant during the completion of such hire purchase agreement till all the instalments were paid by such allottees. The instalments as well as expenditure incurred by the assessee, was being accumulated in various schemes and was reflected in the balance-sheet because the assessee was following mercantile system of accounting till the assessment year 2002-03. However, in this year the assessee has changed accounting system and now adopted cash system of accounting. We have already expressed our surprise on adoption of cash system by the assessee but admittedly this system has been adopted and therefore, the assessee has to bear the consequences. The first contention was that houses and flats were sold on hire purchase basis and under the Hire Purchase Act, 1972, the buyer does not get the ownership right till the completion of the purchase as provided in the agreement and as per the agreement till all the instalments are paid such buyer or allottees will not become the owners. However, we find no force in this contention because no other Act can override the provisions of the Act and this has been clarified by the hon'ble Supreme Court in the case of Southern Technologies Ltd. v. Joint CIT [2010 (1) TMI 5 - SUPREME COURT OF INDIA]. Therefore, the instalments received against such sales which are in the nature of revenue receipts, are required to be taken into consideration for determination of income in this year because the assessee has adopted cash system of accounting during the year. The next contention was that the assessee was following continuously project completion method and therefore, no income can be determined unless the projects are completed. Again as discussed above in detail the issue of system of accounting and the meaning of cash system of accounting, this contention cannot be accepted because the assessee cannot follow two different systems of accounting under the same head. Therefore, in our opinion, the Assessing Officer has correctly included all the instalments received from the allottees of the houses and flats in the income of the assessee. set aside the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to include instalments received on sale of various houses and flats under hire purchase agreement and at the same time allow corresponding expenditure which has been expended by the assessee in cash (including through cheque). Further in the year of completion of a particular scheme effect has to be given in respect of accumulated instalments as well as accumulated expenditure which has not been already considered in a particular year on cash basis as observed earlier. We have observed right in beginning that this issue is involved in all the years before us therefore, similar treatment as observed by us, should be given in each of the year. - Decided in favour of revenue. Addition on amount received from the hire purchase debtors - CIT(A) deleted addition - Held that:- On principle the issue remains the same as in ground No. 5 and since the facts as well as the arguments are same principally we decide this issue against the assessee following our decision in ground No. 5. Since we have held that the instalments received during the year have to be added to the income, this means instalments received earlier remaining unreconciled cannot be added to the income in the later years. Therefore, we set side the order of the learned Commissioner of Income- tax (Appeals) and remit the matter to the file of the Assessing Officer with the direction to consider only those instalments which have been received during the particular year as income of the assessee - Decided in favour of revenue . Disallowance on account of C.P.F and interest on C.P.F. contribution - contributions have neither been made to a provident fund approved by the Chief Commissioner or Commissioner of Income-tax nor to a provident fund established under a scheme framed under the Employees Provident Funds Act, 1952 - CIT(A) deleted addition - Held that:- The fixed deposit receipts have been debited and made in the name of the CPF FDRs which means separate FDRs have been made but how it has clearly been controlled by the managing committee, is not very clear. Therefore, to this extent we set aside the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to examine whether provident fund was independently monitored in the light of the directions issued by the hon'ble Supreme Court in the case of Textool Company Ltd. (2009 (9) TMI 66 - SUPREME COURT). Another contention was also raised that the funds have not been invested in the long-term FDRs. We have seen various notes issued by the committee where FDRs have been made only for one year and justification for the same has been given that presently interest is on lower side and interest is likely to go up therefore, FDR was made for one year. This aspect also need further examination by the Assessing Officer where regularly FDRs have been made for a period of one year or longer period and where no justification for such shorter period is there or not ? Therefore, the Assessing Officer should examine this matter further and decide the issue in accordance with law.- Decided in favour of revenue for statistical purposes. Addition made being interest income on FDRs - CIT(A) deleted addition - Held that:- provisions of section 145 which mandates that the assessee can follow either cash system of accounting or mercantile system of accounting in respect of the profits and gains of the business or profession and income of other sources. Thus the assessee had the right to follow the cash system of accounting even in respect of income to be assessed under the head "Income from other sources". Though in the assessment order income has not been computed head-wise but even if assuming that the income on account of interest is assessed under the head "Income from other sources" even then the assessee had right to offer the same on receipt basis. Therefore, we find nothing wrong in the order of the learned Commissioner of Income-tax (Appeals) and confirm the same. - Decided against revenue. Depreciation on flats/SCOs/booths as well as PUDA building at Sector 62, Mohali and PUDA building at Ludhiana, PUDA building at Patiala, community centre, swimming pool and store shed disallowed - CIT(A) allowed the claim - Held that:- the learned Commissioner of Income-tax (Appeals) has correctly adjudicated this issue. The Revenue has not shown anything to prove that the value of the land was also included in the cost of building, when the first appellate authority has decided the issue in favour of the assessee, the burden was on the Revenue to prove otherwise. In this case the assessee came into existence in 1995 after inheriting Punjab Housing Development Board. The assessee is being a Government authority, may have large chunks of land and it is not possible to identify only plots used for buildings for capitalisation and therefore, there is merit in the argument that value of land was considered in various schemes. In these circumstances, we find nothing wrong with the order of the learned Commissioner of Income-tax (Appeals) and confirm the same.- Decided in favour of assessee. Disallowance of administrative and maintenance expenses - Held that:- Basically once the cash system of accounting is followed then all receipts which relate to the revenue field, have to be taxed. Similarly all cash outgoings which are in the revenue field, had to be allowed as expenditure. Since the assessee is in the business of purchase and developing the land and selling the same after the development of the same and therefore, administrative expenses incurred is clearly in the field of revenue. Further the assessee was following cash system of accounting, therefore, once cash has been spent or outgone from the assessee the same has to be treated as expenditure - Decided in favour of assessee. Addition on account of legitimate claim of the assessee of bad debts under section 36 of the Act - Held that:- Section 36(1)(vii) provides for allowing of claim of bad debt which means good debt cannot be written off. No doubt after the amendment from April 1, 1989, the claim for bad debt can be made merely by writing off the amount which has become bad but this claim cannot be made by writing off the good debt. In the case of South India Surgical Co. Ltd. v. Asst. CIT [2006 (1) TMI 111 - MADRAS High Court ] the assessee was carrying on the business of manufacturing and marketing of surgical instruments. The assessee has sold the goods to Government hospitals during the year and made the claim for bad debts. It was observed that the concerned hospital has in fact delayed the payment of dues to the assessee on account of paucity of funds and the claim was not paid during the year. Therefore, such claim cannot be said to have become bad. In our opinion, this decision is still valid because what can be written off is only bad debt and not good debt. In view of this discussion, we find nothing wrong in the order of the learned Commissioner of Income-tax (Appeals) and confirm the same. - Decided against assessee. Addition on earnest money from prospective buyers - Held that:- While adjudicating the Revenue's appeal for the assessment year 2003-04, it was observed that once houses and flats, etc. were allotted to the allottees and possession was given, the same was in the revenue field. However, same logic cannot be applied if no allotment has been made at all. The assessee authority may have invited the application for allotment of proposed houses and some of the public members may have applied for the same and authority may not have allotted the houses/flats therefore, unless the allotment is made the same cannot be called sales. Further if no money has been received during the year then no addition is possible under the cash system of accounting because under cash system of accounting addition can be made only if the money was received during the year. At the same time all these details are not available on record and even learned counsel of the assessee did not file these details before us, therefore, in the interest of justice, we set aside the order of the learned Commissioner of Income-tax (Appeals) and remit the matter back to the file of the Assessing Officer to find out the exact nature of earnest money received by the assessee. If the same is received from public without making any allotment of the house/flat/plot then the same cannot be brought to tax. However, if allotments have been made then the situation would change. - Decided in favour of revenue for statistical purposes. Disallowance of expenses for land for International Air Port (AAI) at Mohali - main contention of the assessee is that the amount was spent for the purpose of business and this was allowable expenditure under section 37 - Held that:- Any expenditure in the case of Government Corporations is allowable if the same are established under some enactment of the Central or State. However, at the same time under this provision, the capital expenditure is not allowable. Since we have already observed that the expenditure is of capital nature, therefore, the same is not allowable under this section.In view of the above discussion it becomes absolutely clear that firstly the expenditure has not been incurred for the purpose of business. In any case the expenditure is in the nature of capital expenditure and therefore, the same is not allowable - Decided against assessee. Contribution to the development of airport at Mohali disallowed - Held that:- refinery was causing some pollution in the area therefore, the assessee felt obliged to provide certain facility to the local residents and spent this money. In the absence of this contribution the assessee could have faced legal problems because the manufacturing facility of the assessee was causing pollution in the surrounding villages. Therefore, this case is distinguishable. But as we have already observed in the case of PUDA that the assessee has basically contributed towards acquisition of land which was contributed to the joint venture against which the Government of Punjab through GMADA was to receive 24.5 per cent. stake and therefore, the expenditure was in nature of capital expenditure. As observed earlier an identical issue in the case of PUDA has been decided by us for the assessment year 2008-09 and following the same we decide this issue against the assessee.
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2015 (3) TMI 680
Penalty u/s 271AAA - search operation u/s 132 - whether the manner in which the undisclosed income derived was specified and substantiated by the assessee to avoid the application of penal provision u/s 271AAA of the Act? - Held that:- In view of facts of the present case where from it is evident that during the course of search proceedings the authorized officer of the department had not raised any specific query regarding the manner in which the undisclosed income has been derived and on the contrary the assessee has tried to explain the earning of the undisclosed income in question in its reply during the course of recording of his statement u/s 132(4) of the Act and thereafter. We thus respectfully following the ratio of above cited decisions of CIT vs. Radha Kishan Goel (2005 (4) TMI 47 - ALLAHABAD High Court ) and CIT vs Mahendra C. Shah (2008 (2) TMI 32 - GUJARAT HIGH COURT) to hold that in absence of query raised by the authorized officer during the course of recording of statement u/s 132 (4) about the manner in which the undisclosed income has been derived and about its substantiation, the AO was not justified in imposing penalty u/s 271AAA of the Act specially when the offered undisclosed income has been accepted and due tax thereon has been paid by the assessee. We thus while setting aside orders of the authorities below in this regard direct the AO to delete the penalty of ₹ 12,50,00,000/- levied u/s 271AAA of the Act. - Decided in favour of assessee.
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2015 (3) TMI 679
Reopening of assessment - suppression of sales - CIT(A) upheld the rejection of books of account and estimation of sales made by AO but redusing the quantum of addition to ₹ 3 lakhs as against ₹ 18,30,818 done by AO - Held that:- Only because assessee could not produce stock register, for whatever may be the reason, sales suppression cannot be inferred by adopting the value of stock at ₹ 55 per sft. when absolutely no defect or deficiency was found in the books of acocunt. Moreover, on perusal of the observations made by ld. CIT(A), it is evident that ld. CIT(A) on the basis of facts and materials on record was convinced that there is no basis for AO to presume sales suppression. That being the case, it would have been fair and reasonable on the part of ld. CIT(A) to delete the addition made by AO entirely instead of sustaining the amount of ₹ 3 lakhs. There being no evidence on record brought by AO to even remotely established the fact that assessee has indulged in sales suppression, even part of the addition made by AO cannot be sustained. Thus we delete the addition of ₹ 3 lakhs sustained by ld. CIT(A). - Decided in favour of assessee.
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2015 (3) TMI 678
Income from undisclosed sources - production of Baggase & its sale without accounting for in the books of accounts - CIT(A) deleted the addition - Held that:- Clear finding is given by the CIT(A) that the main product is sugar, which is excisable commodity and the production is under the control and supervision of Excise Department and not a single specific instance has been pointed out by the Assessing Officer where the sale of baggase has been made outside books. The yield of main product or byproduct is not constant in each and every case and every year. It is dependable on so many factors and therefore, merely on this basis that in the case of one assessee in one particular year, higher yield was recorded and that should be considered as yield of baggasse for all the assessees in all the years, is not correct. There is no other reason given by the Assessing Officer for doubting the yield of baggasse reported by the assessee in the Tax Audit Report. - Decided in favour of assessee. Suppression of production of sugar and its sale - CIT(A) deleted the addition - Held that:- Apart from giving one case of Kisan Sahkari Chini Mill, Puranpur, no other basis has been indicated by the Assessing Officer for doubting the yield percentage reported by the assessee. In this regard, this is very important to note that production of sugar is directly under the control and supervision of Excise Department and this is not the case of the Assessing Officer that any adverse finding has been recorded by the Excise Department. In the absence of any material brought on record by the Assessing Officer indicating sugar production suppression, thus no reason to interfere in the order of CIT(A)- Decided in favour of assessee. Addition u/s 43B - dispute on account of cess on tax - CIT(A) deleted the addition - Held that:- Amount of cess is same i.e. ₹ 70,13,524/- at the beginning and end of the year. When this amount was outstanding on the first day of the accounting year, no addition is called for in the present year although the assessee would have been eligible for deduction if any payment would have been made by him in the present year. Therefore, the addition made by the Assessing Officer is not on scientific basis. Since the order of CIT(A) is cryptic, we feel it proper that this matter should go to the file of the CIT(A) for fresh decision by way of passing speaking and reasoned order. - Decided in favour of revenue for statistical purposes. Late deposit of employees deduction to Provident Fund for Factory and Federation Staff - CIT(A) deleted disallowance made u/s 36(1)(va) - Held that:- Entire amount of P.F. contribution was deposited by the assessee before the due date of filing of return of income and therefore, the same is allowable as per the amended provisions of the Act. Therefore, we decline to interfere in the order of CIT(A) - Decided in favour of assessee. Addition of closing stock of sugar at ₹ 1,59,03,900/- including the excise duty of ₹ 9,70,660/- - CIT(A) deleted the addition - Held that:- There is no finding given by CIT(A) regarding the main objection of the Assessing Officer that the same stock for which the assessee adopted rate of ₹ 1,630/-, ₹ 1,665/-, ₹ 1,700/- and ₹ 1,735/- respectively per quintal as on 31/03/2006, in the present year, the assessee has applied a rate of ₹ 1,250/- ₹ 1,285/-, ₹ 1,320/- and ₹ 1,355/- per quintal respectively. If the same stock is lying then what is the basis of applying lower rate in the present year is not clear and CIT(A) has not given any finding on this aspect. Hence, on this issue, we set aside the order of CIT(A) and restore the matter back to his file for deciding the issue afresh by passing reasoned and speaking order - Decided in favour of revenue for statistical purposes.
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2015 (3) TMI 677
Bogus share capital - Addition u/s 68 on account of share application money - CIT(A) deleted the addition - Held that:- The assessee company had discharged the initial onus to prove the genuineness of the transaction along with identity of the investor and its creditworthiness cast upon it by furnishing details, PAN Nos., addresses and confirmations in the form of affidavits of share applicants/contributors. In the present case, when the summons issued to the alleged investors could not be complied with, without any further effort and verification, the AO proceeded to make an addition u/s 68 of the Act merely relying on the information received from the Investigation Wing of the department which is not a proper approach. From the assessment order, we observe that the assessee claimed to have received share application money of ₹ 1,01,77,000 during the year under consideration but the AO disputed the four transactions on the basis of information of Investigation Wing of the department. The AO issued summons u/s 131 of the Act to these four entities. The summon to M/s Samrendra Leathers Pvt. Ltd. was returned by postal authorities with the remark “Lock closed” and the summons u/s 131 of the Act to other three entities was received unserved with the common remark “no such person at the given address”. Thus respectfully taking note of decision of CIT vs Lovely Export (2008 (1) TMI 575 - SUPREME COURT OF INDIA) wherein held that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO, then the department is free to proceed to reopen their individual assessment in accordance with law but no such exercise has been conducted by the AO in the instant case. Hence, we are unable to see any perversity, ambiguity or any other valid reason to interfere with the impugned order and we uphold the same. - Decided against revenue.
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2015 (3) TMI 676
Depreciation on wind electric generations - CIT(A) allowed 100% claim as against @ 25% allowed by AO - Held that:- On perusal of the invoices raised towards sale of wind mill equipment and erection and commissioning of the same, it is to be noted that the price has been charged for supply, erection and commissioning of wind electrical generators. The seller of the wind mill equipment has also issued a certificate, clarifying that the equipment supplied by them to assessee is not just wind electric generator but the complete wind mill unit. Further, assessee has also obtained an opinion from a technical expert i.e. M/s Servel Krishna Engineers Pvt. who opined that wind electric generator is an integral part of the wind mill and it is specifically designed, so that they can convert mechanical energy into electrical energy when installed in a wind mill. Without the generator unit, the wind mill cannot achieve the desired purpose. Thus it has to be accepted that wind mill generator is nothing but wind mill equipment on which depreciation is allowable @ 100% as per the statutory provision. - Decided in favour of assessee.
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2015 (3) TMI 675
Adoption of net profit rate for estimating the income from transport business - CIT(A) restricted the estimation of income made by the AO by adopting the net profit rate of 5% instead of 10% applied by the Assessing Officer - Held that:- The assessee firm is not having vehicles of its own and thus, there is no question of claiming any depreciation allowance. The entire business of transportation is carried on by the assessee by engaging the vehicles of third parties, and as rightly contended on behalf of the assessee the net profit margin of the assessee is bound to be lower since the assessee is required to share some profit with the owners of the vehicles. Thus the net profit rate of 5% applied by the learned CIT(A) to estimate the income of the assessee from transport business is quite fair and reasonable, and upholding the impugned order of the CIT(A) on this issue - Decided against Revenue. Inclusion of incentive and bonus in the gross transport receipts for the purpose of applying the net profit rate by CIT(A) - AO adding the said amounts separately to the total income of the assessee - Held that:- the income by way of incentive and bonus is directly linked to the transport business of the assessee, and since the same, forms an integral part of the gross receipts of the assessee’s transport business, it cannot be added separately for the purpose of computing the income of the assessee by applying a net profit rate. Moreover, once the books of account are rejected and the income of the assessee is estimated by applying a net profit rate, the net profit rate so adopted is required to be applied to the gross receipts of the transport business and as held in the case of Maddi Sudarshanam Oil Mills Co. (1959 (2) TMI 27 - ANDHRA PRADESH HIGH COURT), the business receipts relating to the same business, such as incentive and bonus cannot be added separately.- Decided against Revenue.
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2015 (3) TMI 674
Addition of unexplained credit notes - AO's view to addition / disallowance of 50% of the value of the credit notes was to be made due to the fact that, though required to furnish the details of claims made to M/s. ITC Ltd. and the details of expenditure incurred with supporting vouchers, the assessee was unable to furnish the list of claims made to M/s. ITC Ltd. and the assessment was getting barred by limitation - Held that:- Before us, the learned Authorised Representative submitted that all details of the expenditure of ₹ 2,19,93,412 incurred on behalf of M/s. ITC Ltd. on account of sales promotional activity were fully vouched for and the details of claims made from M/s. ITC Ltd. for reimbursement thereof were always available for verification, but the Assessing Officer primarily made the disallowance due to paucity of time, since the assessment was getting barred by limitation. As find from the impugned order, that the learned CIT (Appeals) has just upheld the adhoc disallowance made by the Assessing Officer without any examination or cross verification. In this factual matrix, we are of the view that the authorities below have failed to fully and thoroughly examine the assessee's claim of the incurring of expenditure on sales promotion on behalf of M/s. ITC Ltd. and its reimbursement, due to paucity of time. We also find that there has been a failure on the part of the authorities below to cross verify the claims of the assessee in this regard with M/s. ITC Ltd. and whether at all there was an element of income therein. - Decided in favour of assessee for statistical purposes.
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2015 (3) TMI 673
Registration u/s 12AA denied - name of the company shown as "MAHINDRA EDUCATIONAL INSTITUTIONS" indicates plurality of institution - Held that:- The word "institutions" was placed in the name only to identify different colleges in different locations as forming part of one entity. The name is indicative to the public that there was only single entity but it consists of different colleges/institutions forming part and operating under such single entity. Further, plurality is common Indian practice in names such as 'enterprises', 'industries', 'firms', 'projects', etc., which are used as singular noun rather than to bring more than one entity. Since the assessee has complied with all the conditions which are necessary for grant of registration u/s. 12AA and we are of the opinion that 'institutions' is used as singular Noun rather than to bring more than one entity and also that Mahindra Educational Institutions is only a single entity but consists of different colleges/institutions operating under such single entity, we direct the DIT(E) to grant registration to the assesseecompany u/s. 12AA of the Income-tax Act, 1961. - Decided in favour of assessee.
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2015 (3) TMI 672
Computation of capital gain - CIT(A) replacing the sale consideration to the stamp duty valuation invoking provisions of section 50C - Reference to DVO - CIT(A) considering the Cost of Acquisition of the Land as on 01.04.1981 and treating the Cost of Acquisition of the Development Right as on 01.04.1981 against sale value of entire Land - Held that:- Respectfully following the case of CIT vs. Pooja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT ] we hold that no adjustment to the value as on 01.04.1981, as returned by the assessee, could be made with reference to the DVO's report dated 27.12.2012. The DVO's report dated 27.12.2012, in-as-much as it relates to the determination of FMV of land as on 01.04.1981, thus, could not be taken cognizance of; the reference in its respect to the DVO being bad in law. - Decided in favour of assessee. Whether the cost of acquisition to be set off is to be of the cost of land or of development rights therein - Held that:- The sale value having crystallized (at ₹ 48.695 cr.), it is the value of the same asset, both quantitatively and qualitatively, value of which has been accepted, that, as on 01.04.1981, shall stand to be set off there-against in computing the LTCG arising to the assessee on its transfer. - Decided in favour of assessee.
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2015 (3) TMI 671
Revision u/s 263 - Disallow claim of ‘brand owner’s surplus’ and payment of ROC fee - Held that:- Though there is dispute with reference to quantification of the amount, there is no dispute with reference to basic liability. What assessee was entitled was already determined by way of agreement and any excess collections made by the assessee are to be paid to M/s. Shah Wallace Distilleries Ltd. Therefore, even though there was a dispute between the parties with reference to quantification of the amount, the basic liability is an ascertained liability, as is evident from the subsequent events. The liability in fact, was crystallized at higher amount of ₹ 5.50 crores. Even though assessee has not claimed higher amount at the time of assessment, it could have reduced its taxable income as the A.O. made certain additions to the returned income. Assessee has limited its claim to the amount provided in the books of accounts. We are of the opinion that the amount is ascertained liability and not a contingent liability. Even though the same was reported in the notes to the account as one of the contingent liability and disclosed as a material fact, the amount is not contingent liability and therefore, we are of the opinion that order of Ld. CIT directing the A.O. to disallow is not correct on the facts of the case. Moreover, as seen from the record, the assessment order passed by the A.O. was under the provisions of section 147 in which A.O. has examined the books of accounts and in fact made additions with reference to the merger/conversion of the erstwhile firm into a company as on 01.07.2005. We are of the opinion that A.O. has examined all the issues before completing assessment. Similar claims in the hands of firm were also made. Therefore, opinion of CIT in treating the amount already allowed as contingent liability can certainly be considered as change of opinion. On the principles governing the issue of jurisdiction, we cannot uphold the direction of the Ld. CIT. Therefore, we modify the same and direct A.O. to allow the amount as originally allowed in the assessment order. The order of Ld. CIT is modified to that extent and assessee’s grounds are allowed accordingly. - Decided in favour of assessee.
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2015 (3) TMI 670
Unaccounted cash credit - CIT(A) deleted addition - assessee voluntarily surrendered an amount of ₹ 10,00,000/- out of the credit balance of ₹ 80,27,616/- for taxation - Held that:- IT(A) has given categorical findings on merits as also on the admissibility of surrender, the Assessing Officer has raised grievance only against the latter. The issue raised before us is thus infructuous inasmuch as even if the surrender is in order but the addition was not warranted on merits, it is only elementary that merely because the assessee has, under misconception of facts or law, surrendered an income, no addition can be made in respect of the same. We have also noted that as evident from the observations of even the Assessing Officer, there were no specific reasons for making the addition of ₹ 10,00,000 save and except for the alleged surrender made by the assessee. - approve the conclusions arrived at by the learned CIT(A) - See ACIT Vs Satya Narayan Agarwal (2002 (3) TMI 207 - ITAT CALCUTTA-B) - Decided against revenue. Disallowance made u/s 40A(3) - whether covered by clauses (1) of Rule 6DD and find support by clause (f) and (h) of Rule 6DD? - CIT(A) deleted this disallowance - Held that:- As is the settled position, even a payment to kacha aaratia is to be taken as a payment to the farmer as such aaratia holds agency relationship; he does not receive payment in his own right. We have also taken note of coordinate bench decisions in the cases of Shri Renkushwara Rice Mills vs ITO (2004 (8) TMI 319 - ITAT BANGALORE-B ) and DCIT Vs Hind Industries Ltd (2008 (9) TMI 413 - ITAT DELHI-C) which support this proposition. Once the payment is treated as having been made to the farmer, Section 40A(3) will not come into play. In view of these discussions, as also bearing in mind entirety of the case, we approve conclusions arrived at by the CIT(A) and decline to interfere in the matter. - Decided against revenue. Addition made u/s 40(a)(ia) - CIT(A) deleted addition - Held that:- Once it is accepted, as has been accepted by the CBDT itself, that Hon’ble Allahabad High Court in the case of CIT vs. Vector Shipping Services Pvt. Ltd. (2013 (7) TMI 622 - ALLAHABAD HIGH COURT) has decided this issue in favour of the assessee, the rigour of disallowance under section 40(a)(ia) must stand relaxed in the area falling within the jurisdiction of Hon’ble Allahabad High Court. It cannot, therefore, be said that there for the purposes of disallowance under section 40(a)(ia), so far as the assessee before us is concerned, it is necessary that the assessee should have deducted tax at sources so far as payments made during the relevant previous year are concerned - Decided against revenue.
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2015 (3) TMI 669
Non deduction of TDS on composite work contract u/s 194C - supply of plant & machinery of windmill, for civil/electrical works and erection and commission of windmill - interest demand for differential TDS was raised u/s 201 & 201(1A) - Held that:- It has not been disputed that the assessee acquired the windmill plant by way of different invoices. The amount referred to in column no. 5 of the above table represents the amount of the purchases of the machinery and column no. 6 represents the contract value liable for Section 194C. The assessee has not deducted TDS on the amounts mentioned at column no. 5 which is not a contract amount but it is the amount of purchases. We are unable to agree with the ld. DR that because there was turnkey project, therefore, each and every part of the transactions comprised therein is liable for TDS u/s 194C of the Act. Various benches of ITAT as referred to above have held that in case of composite contract also, the portion of purchase of machinery is to be excluded while determining the liability u/s 194C of the Act. In view of these facts, material on record , arguments raised before us and the case laws cited, we hold that the assessee is not liable for deduction of tax u/s 194C on the amounts of purchase of windmill machinery. The consequent demand raised in this behalf is deleted. - Decided in fvaour of assessee.
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2015 (3) TMI 668
Deduction u/s.80IA(4)(i) - Container Freight Station [CFS] - dis-allowance on ground that ICDs, and CFSs are not ‘ports’ located on any inland water way, river or canal and therefore they cannot be classified as "inland ports" for the purpose of section 80(IA)(4) - Held that:- CFS is an inland port whose income is entitled to deduction u/s.80IA(4) as relying on Container Corporation of India Ltd., Vs. ACIT [2012 (5) TMI 260 - DELHI HIGH COURT] and All Cargo Global Logistics Ltd., Vs. DCIT [2012 (7) TMI 222 - ITAT MUMBAI(SB)] - Decided in favour of assessee. Absence of specific agreement with the Central/State Government, local authority or Statutory Body - whether the assessee is entitled to claim the benefit of section 80IA(4)(i)? - Held that:- It is evident that the proposal of the assessee was accepted by the Government on certain conditions which were duly complied with by the assessee. There may not be any specific agreement, but the sequences of events clearly show that the assessee is providing CFS facility in accordance with the conditions laid down by the Government. In such circumstances there is no need to insist for the specific execution of agreements. The co-ordinate bench of the Tribunal in the case of United Liner Agencies of India (Private) Ltd., Vs. Joint CIT (2013 (9) TMI 302 - ITAT MUMBAI), has taken a similar view, Where no specific agreement with the State Government was entered into but from the approvals granted to the assessee it was inferred that assessee should be deemed to have entered into an agreement with the State Government. Thus, we are of the considered view that the assessee has complied with all the provisions of section 80IA(4)(i) and is eligible to claim deduction under the said section. - Decided in favour of assessee.
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Customs
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2015 (3) TMI 690
Eligibility for concessional rate of additional duty - Notification No. 64/93-CE - Refund filed on import of Honda Accord car which was manufactured abroad - In this refund claim the assessee sought refund of 10% of total CVD - Held that:- levy under Section 3 of the Tariff Act is in the nature of a countervailing duty and is with a view to levy additional duty on an import to counter balance the excise duty payable on a like article indigenously manufactured. The Court also adverted to the scope/effect of Section 3 of the Tariff Act, particularly the expression, "Excise Duty for the time being leviable on a like article in produced in India" and the explanation thereto - for the purpose of saying what amount, if any, of additional duty is leviable under Section 3(1) of the Customs Tariff Act, it has to be imagined that the articles imported had been manufactured or produced in India and then to see what amount of excise duty was leviable thereon. Since we are dealing with exemption notification issued under Rule 8 of the Rules, which was the position in Thermax Private Limited (1992 (8) TMI 156 - SUPREME COURT OF INDIA) as well, for the purpose of extending benefit of concession contained in Notification No. 64/93-CE, the principle in Thermax Private Limited (1992 (8) TMI 156 - SUPREME COURT OF INDIA) would clearly become applicable. We may point out that a specific query was put to the learned counsel for the Revenue to the effect that if the importer is not deemed as manufacturer for the purpose of applicability of the said notification, then there cannot be a situation where such benefit of this Notification would be extended to any person, inasmuch as, it was almost impossible to visualise a situation where a foreign manufacturer would import the saloon cars in this country and would utilise those cars for tourist taxis. Revenue had no answer or reply to our query. It is obvious that the purpose of exemption Notification No. 64/93-CE was to extend benefits to the importers of saloon cars to use the said cars for tourist taxis. Going by the spirit and the objective behind this Notification, the irresistible conclusion would be to apply the principle of Thermax Private Limited (1992 (8) TMI 156 - SUPREME COURT OF INDIA) in the present case as well. - assessee shall be entitled to refund of 10% CVD paid by him - Decided in favour of assessee.
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2015 (3) TMI 689
Detention of goods meant for export - amount of interest Reason: is ₹ 102 crores - Held that:- applicant shall submit an undertaking within one week from today that he will deposit an amount of ₹ 40,00,00,000 with the respondent no.1 and he will deposit ₹ 40,00,00,000 within six weeks from today. On such undertaking being given, the items which are lying at the Chennai Port Trust and Bangalore Airport/Customs Depot shall be released on payment of usual duty. - Decided conditionally in favour of assessee.
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Corporate Laws
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2015 (3) TMI 688
Valuation of shares - Valuation by independent valuer - Binding nature of valuation - Held that:- This apprehension of the respondents is misconceived. When the Company Law Board says it is binding on both the parties then it is binding on them, if they do not challenge the said finding. If they are aggrieved, they are at liberty to challenge it. Nowhere in the order it is said that the respondents have to purchase or sell at the rate to be fixed by the valuer. The Court has made it clear that it will proceed with the matter if the valuation made by the valuer is agreeable by both the parties. -Appeal dismissed.
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2015 (3) TMI 686
Violation of clause 16 of the listing agreement - Time gap between the book closure and record date for interim dividend - Held that:- On perusal of clause 16 of the listing agreement, it is seen that in a year there could be more than one book closure for the purpose of declaration of dividend or the rights issue or bonus shares, etc. If more than one book closure is postulated under clause 16, then obviously time gap of 30 days under clause 16 would be referrable to the time gap between two book closures. Fact that the word ‘and’ is used between the words ‘two book closures’ and ‘record dates’, it cannot be inferred that the time gap should be between a book closure and a record date. If the intention was to keep the time gap of 30 days between a book closure and a record date, then the word “two” would not have been used prior to the words “book closures”. In other words, the very fact that the word “two” is used prior to the words “book closures” is suggestive of the fact that the time gap is intended between two book closures and two record dates and not between a book closure and a record date. Since SEBI is permitted to pass order on merits on the interpretation of clause 16 of Listing Agreement, we see no reason to keep the appeal pending. SEBI is directed to pass order on merits after hearing the appellant.
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2015 (3) TMI 685
Petition for winding up under Section 433(e) and 434 of the Companies Act - Amount not paid but reflected on income tax website under 26AS - Petition filed after a gap of 2 years - Held that:- In my view, the respondent company has raised factual disputes that would require examination and there is no clear admission on the part of the respondent company of the amount claimed by the petitioner. The mere fact that income tax was deposited with the tax authorities for a payment that was proposed to be made to the petitioner prior to the discovery of the alleged manipulation done by the petitioner would not amount to a clear admission of debt on part of the respondent. It is the settled position of law that where a bonafide defence is raised in the winding up petition that merits an examination, a Company Court has to direct the petitioner to prove its claim in a civil suit. The entry with respect to the said tax to the credit of the petitioner in the form 26-AS would have been reflected by the Income Tax Authorities in the year 2010 itself. No plausible explanation is averred in the petition as to how the petitioner missed this type of entry for a period of over two years. - Winding up petition dismissed.
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FEMA
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2015 (3) TMI 687
Misuse of telephone line - one ISDN line was made a permanent channel at each of the above premises and thereafter by using sophisticated equipment international calls were being distributed to Delhi & nearby areas illegally through PSTN (Public Switch Telephone Network) - One ISDN line has a bandwidth of 144 Kbps and this bandwidth was misused to make about 24 voice calls in one single ISDN call, which caused loss equivalent to the charges for 22 lSD calls to the Govt. of India in terms of foreign exchange - Held that:- statutory requirement of issuance of notice under proviso of Section 61(2)(ii) of the FERA, its date and manner as well as the failure to consider the petitioner's reply has resulted in manifest error in the exercise of jurisdiction by ACMM . The order taking cognizance in the instant case and issuance of summons is contrary to law. Thus impugned order of cognizance and summoning of petitioner by ACMM vide order-dated 27th May, 2002, is illegal and is against the settled law and is liable to be quashed as the petitioner was not given opportunity as envisaged in law under Section 61 of the FERA which is apparent from the fact that complaint was filed and initiated in a haste manner before the ACMM even before the expiry of the period of opportunity granted to petitioner and the Trial Court in utter ignorance of the right given to the petitioner under Section 61 (2) and the bar imposed upon. The Trial Court thereby upon taking cognizance, issued process against the petitioner, which is apparent from the fact that the trial court did not even record in the impugned order about the fulfillment of statutory and mandatory requirement of Section 61 (2) of the FERA. With regard to Show Cause Notice for adjudication proceedings dated 4th April, 2002, which was served upon the petitioner on 22nd August 2002 i.e. after filing of the complaint, which was replied by petitioner vide reply dated in 19th September, 2002. - It is admitted fact that no proof of service of notice was filed by the respondent at the time of filing the complaint on 27th May, 2002 to establish that an opportunity in terms with Section 61 (2) was given to the petitioner and the petitioner failed to respond the same by showing that it has permission from the RBI or not making him liable for prosecution under Section 56 of the FERA. Legal bar imposed in proviso to Section 61 of the FERA, is ought to have satisfied himself at the first instance before issuance of the process about compliance of proviso to Section 61 (2) about the factum of opportunity given to the accused and his satisfaction to this effect must be there before taking cognizance against the petitioner in exercise of his legal duty, as there is a statutory bar imposed upon the ACMM from taking cognizance. If the trial court would have exercised his legal duty diligently in terms of Section 61 (2) of the FERA the cognizance could not have been taken for want of granting an opportunity to the petitioner, as done by the trial court in a mechanical manner. - Impugned order is liable to be set aside - Decided in favour of appellant.
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Service Tax
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2015 (3) TMI 703
Demand of service tax - renting of immovable property - Service Tax Voluntary Compliance Encouragement Scheme 2013 - Held that:- Issue has been settled by this Court in [2010 (11) TMI 32 - PUNJAB AND HARYANA HIGH COURT] (M/s Shubh Timb Steels Limited v. Union of India and another) wherein it has been held that the provisions of Section 65(90a) and Section 65 (105) (zzzz) of the Finance Act, 1994 imposing service tax on renting of immovable property are not ultra vires the Constitution. It has further been held that giving of retrospective effect to the amendment effective from 1.6.2007 on which date levy was initially provided is also not bad. However, as regards prayer for deposit of service tax under the Service Tax Voluntary Compliance Encouragement Scheme 2013 is concerned, it shall be open for the petitioner to file representation to the appropriate authority at the first instance and claim benefit of the same, if available, in accordance with law. - Decided against assessee.
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2015 (3) TMI 702
Availment of CENVAT Credit - Utilization of CENVAT Credit instead of cash for payment of ST on GTA services - Held that:- sub-Rule 4 of Rule 3 of Cenvat Credit Rules 2004 relate to utilization of Cenvat credit. That sub-Rule makes it clear that credit can be utilized for payment of excise duty as well as service tax on any output service. Thus, payment of service tax is a specifically authorized item in regard to service tax credit. In the present case, the appellant is treated as a service provider when he it service tax on transport service Corollary of it is that the transport involved is an output service. Therefore, the finding of the Commissioner that since the appellants are manufacturers of excisable goods they cannot be treated as provider of output service is not sustainable. This Tribunal's decision in the case of Nahar Industrial Enterprises Ltd. also supports the appellant's case. - Following decision of Commissioner of Service Tax Versus Hero Honda Motors Ltd. [2012 (12) TMI 734 - DELHI HIGH COURT] - Decided against Revenue.
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2015 (3) TMI 701
Availment and utilization of CENVAT Credit - Capital goods - Business Support Service - Held that:- There is no denying the fact that the resultant output service provided by them is 'Passive Telecom Infrastructure' i.e. Business Support Service. Therefore, there is direct nexus of the output services and the credit taken on the goods procured such as steel, racks, bolts etc. which are excisable and were cleared under Central Excise invoices showing payment of Central Excise duty. The payment of Central Excise duty on these goods and their assessment has not been questioned at the end of the supplier. Without use of these duty paid towers/parts as inputs, the Business Support Service in the firm of Passive Telecom Infrastructure could not have been provided. The appellant availed credit under Rule 3(1)(i) which allows Cenvat credit on any inputs or capital goods received by the provider of output service. The appellant received inputs such as structural steel for providing 'Passive Telecom Infrastructure'. Merely because the tower parts etc. are assembled together, it would be totally unreasonable to suggest that Cenvat Credit on them is not admissible despite Rule 2(k)(ii). This Rule has to be interpreted as it stands. Reliance is placed on the High Court of HP judgment in the case of Gujarat Ambuja Cement [2008 (6) TMI 213 - HIGH COURT OF HIMACHAL PRADESH AT SHIMLA] and the Tribunal decision in the case of Commissioner of Central Excise Raigad vs. JSW Ispat Steel Ltd. [2013 (11) TMI 1389 - CESTAT MUMBAI] in which it was held that excise duty paid on parts of components would be admissible even if they are assembled into goods which are immovable or exempted. - appellant is entitled to Cenvat Credit. In turn, the question of penalties does not arise.- Impugned order is set aside - Decided in favour of assessee.
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2015 (3) TMI 700
Waiver of pre deposit - Whether the services provided to the Member by the cooperative society registered under the Karnataka Cooperative Societies Act 1959 is liable to tax under Banking and other Financial Services or not - Held that:- Only a charitable trust or other organization which is established for not making profit can be considered as a non-commercial concern and in this case, the society obviously undertakes banking activity for making profit for the members. As regards Madhav Nagrik Sahkari Bank Ltd., (2012 (3) TMI 283 - CESTAT, NEW DELHI) the decision was rendered when commercial concern were not part of the definition. Therefore that decision is not applicable. Similarly, Punjab Ex-servicemen Corporation is not a cooperative society and it has not been stated so. Therefore, it may not be appropriate to apply this decision to the present case. In the result, we are left with a decision of the Tribunal wherein this Tribunal had taken a view that cooperative society is not a commercial concern in the case of ex-services security cooperative society Ltd. This decision is squarely applicable to the facts of this case. In this case, the appeal itself had been allowed. In any case for prima facie waiver of predeposit and stay against recovery, in our opinion this decision can be taken into account. - wherever service tax has not been paid or partly paid, the appellant shall deposit the amount payable towards tax liability within eight weeks and report compliance on 2.12.2014. Subject to compliance with the above requirement, the requirement of predeposit of balance dues is waived and stay against recovery is granted during the pendency of appeals. - Partial stay granted.
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Central Excise
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2015 (3) TMI 699
Availment of CENVAT Credit - Where the assessee has cleared the manufactured goods for export on payment of excise duty at 20% by debiting the Modvat Credit Account and subsequently obtained rebate of the said duty paid under Rule 12 of the Central Excise Rules, 1944 and later on if it is found that the correct duty payable was 10%, whether the excise authorities can claim cash payment of the excess duty debited to the Cenvat Credit Account - Held that:- The notification dated 1st March, 1994, itself clarifies that there is a partial exemption to specified goods falling under Chapters 28, 29 and 30 of the Central Excise Tariff Act, 1985. A copy of this Notification dated 1st March, 1994 (Notification No.6 /94- C.E .) denotes that serial no.6 are bulk drugs on which 10% Adv. duty can be paid. There are no conditions attached and appearing in the table. - exemption as partially granted by this notification was available in both the cases namely clearance for home consumption and for export. If the Assessee in this case has paid duty at the tariff rate namely 20% and not availed of the exemption under the subject notification, and subsequently sought refund of the duty paid over and above 10%, or has made payment from the accumulated amount or the credit accumulated in his Modvat account, the Tribunal found that he could not have been denied the relief. Show cause cum demand notice itself was without any authority and jurisdiction. No demand could have been raised in the present circumstances and such a finding is essentially emanating from the purported factual position. The finding of fact, therefore, really raises no substantial question of law. We find that the Tribunal's reasoning and particularly in paragraph no.4 , does not warrant our interference because, the Tribunal's view is a possible and plausible one. It is consistent with the factual materials on record. Hence, it is neither perverse nor vitiated by any error of law apparent on the face of record. There is no prohibition in law for the course adopted by the Assessee that we must sustain the impugned order. - Decided against Revenue.
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2015 (3) TMI 694
Denial of CENVAT Credit - Capital goods - Removal of capital goods as such - Whether the Honourable CESTAT was correct in holding that 'Capital Goods removed as such' would mean without putting the machinery to any use - Held that:- Following decision of Commissioner of Central Excise, Salem Vs M/s.Rogini Mills Ltd. [2010 (10) TMI 424 - MADRAS HIGH COURT] - Decided against Revenue.
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2015 (3) TMI 693
Denial of MODVAT Credit - Classification of goods - whether products of the respondent assessee are proprietary classifiable as patent or proprietary medicaments for they are solely generic drugs therefore, classifiable as such - Held that:- Tribunal could not have disposed of the assessee's appeal, even in his absence, without considering the issue as to whether the products are classifiable as patent or proprietary medicaments or medicines other than proprietary and generic name. It is only then the issue whether the Modvat credit is admissible, if the final product attracts Nil duty could have been determined by the Tribunal. In the circumstances, the Tribunal's order does not deal with the entire controversy as projected by the parties. It was the bounden duty of the Tribunal to apply its mind to some vital and basic issues. The Tribunal's approach therefore, is clearly faulty and as a result, it failed to perform its duty as last fact finding authority. Then, its order does not satisfy the requirement in law. - Matter remanded back - Decided in favour of Revenue.
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2015 (3) TMI 692
Maintainability of appeal - Held that:- Section 35G of the Central Excise Act, 1944 provides that an appeal on the issue relating to rate of duty of excise or value of goods for purposes of assessment would not lie before this Court - Court in the case of The Commissioner of Central Excise, Chennai - II V. Vadapalani Press and another reported in [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. - while this 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. - Appeal not maintainable.
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2015 (3) TMI 691
Evasion of central excise duty by removing finished product i.e. Non-Alloy Steel Ingots without issuing statutory invoice and without payment of central excise duty - Held that:- In the scheme of the Central Excise Act and the rules made thereunder, a manufacturer can remove the finished goods from the premises, only after payment of the central excise duty. Since the prepayment of excise duty for each consignment may lead to some hardship, the facility of payment of excise duty, periodically, is extended to the manufacturers. Wherever such facility is extended, the manufacturer can remove the goods without prior payment, but the excise duty payable thereon must be remitted at certain intervals. Secondly, the Central Government has created the facility of adjustment of duty on raw-materials and other components that go to the process of manufacture, against the duty payable on the finished product, at their level. This would, inter alia, lessen the burden of payment of excise duty. Through Rule 12 CCC of the 2002 Rules, the Central Government enabled the concerned assessing authority to place restriction as to the facility of making deferred payment of central excise duty, in case it is noticed that the manufacturer is resorting to evasion of duty or other unlawful activities. Similarly, if a manufacturer is said to be resorting to such acts and omissions, the authority is also conferred the power to place restriction on the utilization of CENVAT credit facility for a specified period, as provided in Rule 12 EEE of the Rules. The petitioner is unable to convince this Court that the rules, referred to above, are contrary to any specific provisions of Central Excise Act or for that matter the Constitution of India. Except taking a vague, general and espacious plea, no specific grounds are urged nor any precedent cited. - The judgments rendered by the Delhi High Court in Vinay Wires and Poly Products Pvt. Ltd. Vs. Member (Central Excise), Central Board of Excise and Customs, New Delhi [2010 (1) TMI 30 - DELHI HIGH COURT ], and Gujarat High court in Vishal Engineering Vs. Union of India & Ors. [2011 (7) TMI 1090 - GUJARAT HIGH COURT] are in cases where the parties are said to have been denied the opportunity of being heard. This, however, is a case where the petitioner persistently refused to participate in the proceedings. - Decided against Assessee.
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CST, VAT & Sales Tax
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2015 (3) TMI 698
Reassessment - Returns, trading and profit and loss account and audited balance sheet not filed - Proposal confirmed filing objections - Held that:- Though the petitioner has been served with the pre-revision notice and they had received the same and sought for time for filing their objections, they did not file their objections and therefore, the proposal in the notice was confirmed. In the light of the stand taken by the petitioner by relying upon Section 87-A of TNVAT Act, this Court is of the view that the petitioner should be granted an opportunity to submit their objections. - Matter remanded back - Decided in favour of assessee.
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2015 (3) TMI 697
Classification - Cord wire - Electronic good or Electrical good - Held that:- In the case on hand, during the relevant assessment year 1991-92, the cord wire was not included in the entires and there was uncertainty as to whether it is electrical or electronic device. It is beyond any cavil that for the earlier assessment years and all subsequent assessment years, the department has assessed cord wires as electronic goods. That being the position, the onus lies on the department to prove that cord wires are not electronic goods. The department has not produced any material evidence to show that cord wires are electrical goods. The said view is fortified by a decision of the Supreme Court in Ponds India Ltd. [2008 (5) TMI 46 - SUPREME COURT], wherein it has been emphatically held that if an entry had been interpreted consistently in a particular manner for several assessment years, ordinarily it would not be permissible for the Revenue to depart therefrom, unless there is any material change; and that the burden of proof is on the taxing authorities to show that the item in question is taxable in the manner claimed by them. Further, the cord wire, which connects the main switch with the instrument, is transmitting electricity from the main switch to the instrument. Of course, the cord wire functions based on the electrical energy it receives from the main switch and transmits to the instrument. These cord wires are manufactured for a special and limited purpose for transmitting electricity to tape recorder. In other words, they are specially designed for a specific purpose, namely, to supply external power to the tape recorder. They cannot be regarded as electrical goods in common parlance. This aspect has been overlooked by the Tribunal. In such view of the matter, we have no hesitation to hold that the cord wire connecting the main switch with the instrument would not fall under the category of "electrical goods" and should be treated as "electronic goods". - Decided in favour of appellant.
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2015 (3) TMI 696
Levy of surcharge - whether if tax is not leviable, could the Revenue recover a surcharge and which is stated to be nothing but a levy on the tax as claimed. - Held that:- In the given facts and peculiar to this public sector unit, the Tribunal would have been justified in granting an unconditional stay of recovery of taxes/surcharge pending the disposal of the Revision Applications and Appeals, but by calling upon the Petitioner to furnish an undertaking that in the event the final orders are adverse to them, subject to their legal rights, they would deposit the sums as demanded and confirmed by the Revisional/Appellate Authority. - Writ Petition is disposed of by substituting the order and direction of the Appellate/Revisional Court and instead of deposit of monetary sums in terms of the operative order, there would be an unconditional stay of recovery of the taxes pending the disposal of the Second Appeals and Revision Applications. However, the Petitioner shall give an undertaking to this Court that in the event the final orders are adverse to their interest and the demands are confirmed either fully or in part, then, they would deposit, subject to their rights, the sum together with interest, surcharge, if any, within a period of 12 weeks from the date of communication of the order. Upon such an undertaking being filed within a period of 15 days from today in this Court, there shall be stay of the recovery in terms of our directions above. - The Revisional and Appellate Authority also shall endeavor to dispose of the Appeals expeditiously and if the Petitioner does not cooperate with the Tribunal in that regard, it would be open for the Tribunal to issue appropriate direction including making a report to this Court. It would be open for the Revenue to bring to this Court's notice any tactics, which may be adopted to stall the proceedings or to delay the disposal of the Revision Applications and Second Appeals, before the Tribunal. These additional directions are issued because of the apprehension of Mr. Sharma that in other matters when coercive steps were initiated, no recovery was possible. - Petition disposed of.
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2015 (3) TMI 695
Constitutional validity of Government notification dated 1.10.2012 - Whether Notification illegal, unlawful and violative of Article 14 of the Constitution - Held that:- Principal policy changes made by the Government from time to time. Right from the year 1981, the whole purpose of the Government scheme is to provide subsidy of sales tax or VAT, as the case may be, to small fishermen on purchase of high speed diesel. This would necessarily create two price regimes. Small fishermen would purchase diesel at subsidized rate and rest of the consumers would pay the price inclusive of the VAT component. To block the pilferage from time to time, various provisions were made. In the year 2003, it was noticed that the existing scheme of supplying diesel to the cooperatives of fishermen which were recognized and which were operating petrol pumps was not working out quite satisfactorily. In the year 2003, therefore, a major change was introduced. All petrol pumps were allowed to sell such diesel to the fishermen, but the subsidy was made directly to the fishermen concerned. In the year 2012, further major changes have been made. While reverting back to the original scheme of allowing only GFCCA and recognized fishermen cooperatives to sell such subsidized diesel, the scheme for reimbursement of VAT subsidy directly to the fishermen is maintained. While doing so, various stringent provisions have been made to ensure that such subsidy is not frittered away. Subsidy is made available to those fishermen who have mechanized boats of less than 20 meters in length. Such boats are registered and enjoy current fishing license. At the time of sale of diesel, various details have to be noted down. Such details included, time, date and quantity of sale, total VAT component, etc. Diesel would be sold only on the proof of sorties that the boat would make for fishing. All these provisions are aimed at controlling and reducing the misuse of subsidy. - Government has not committed an error in issuing the impugned notification. The task of selling such high speed diesel to the fishermen cooperatives cannot be stated to create hostile discrimination. With a dual purpose of encouraging fishermen cooperatives and to keep some semblance of control over various details required to be noted down at the time of supply of such diesel, if the diesel cards are to be issued only through such recognized cooperatives, the petitioner who does not fall in such categories cannot complain. The petitioner’s right to sell petroleum products is not taken away. The petitioner would continue to operate its petrol pump, of course, with a limitation of not being able to supply subsidized diesel to the fishermen. - When the petitioner is not forming the class of persons who can quality for such recognition, at the hands of the petitioner, we are not interested in examining such a challenge. - Decided against assessee.
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