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TMI Tax Updates - e-Newsletter
March 24, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
TMI Short Notes
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Non deduction of tds u/s 195 - assessee is not liable to deduct tax at source when the non-resident agent provides services outside India on payment of commission - section 9 of the Act is not applicable to the case on hand - HC
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Entitlement to exemption under Section 11 - anonymous donations received - supply of fodder to cattle and animals is not only a good religious trust but it is also a good charitable trust - HC
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Transfer to the General Reserve on amalgamation - amounts transferred by the assessee company to the General Reserve on amalgamation is not in the nature of any benefit or perquisite and thus not taxable under Section 28(iv) of the Income Tax Act, 1961 - HC
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Exemption u/s 11 - as two Authorities under the Act have concurrently come to a finding of fact that the amounts received by the respondent-assessee on account of letting out of its property is income taxable under the head "income from house property". Thus, no occasion to apply Section 11A (4) - HC
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Exemption u/s 54F - long term capital gain - The approach of the authorities that once a habitable (Residential) asset is acquired, any additions or improvements made on that habitable asset is not eligible for deduction, is contrary to the statutory provisions. The said reasoning is unsustainable. - HC
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Disallowance of exemption u/s.11 - it is only the income from such investment or deposit which has been made in violation of section 11(5) that is liable to be taxed and violation under section 13(1)(d) does not result in denial of exemption u/s 11 to the total income of the assessee - HC
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CIT(A) was right on the issue of set off of profit on sale of depreciable assets of ₹ 1.13 crores against long term capital gain which arose to the assessee on indexation method and also allowing brought forward long term capital gain against the said profit on sale of depreciable assets - HC
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Exemption u/s 10B - Profits on sale of incentives received from the Ministry of Commerce, Government of India - Vishesh Krishi Upaj Yojna - assessee is not entitled to the claim of deduction under section 10B of the Act on the said incentives - AT
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TPA - The assessee has to choose a method in accordance with the Act and the Rules. On production of such evidence, the Transfer Pricing Officer will have to give the basis of his price, if he disputes the assessee's claim with comparable cases - assessee can demonstrate on a sample basis item expenditure comprised in the management fee - AT
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Penalty under section 271(1)(c) - bona fide or mala fide with an intention to evade taxes - not exigible to levy of penalty under section 271(1)(c) of the Act where the claim of the assessee vis-a-vis expenditure incurred on establishment of an international airport had been rejected - AT
Customs
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Exemption from customs duty for goods imported to India for the purpose of carrying out job work in India and for export of the job worked (finished) product - whether documents furnished to the authorities or not - this is a disputed question of fact - matter remanded back - HC
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Levy of anti dumping duty - dumping of Pentaerythritol - interested party - designated authority (DA) has violated the principles of natural justice in not giving an opportunity of hearing to the petitioner. And, that is fatal. - HC
Service Tax
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Service elements in a composite (works) contract (involving transfer of property in goods and rendition of services), where such services are classifiable under "Commercial or Industrial Construction"; "Construction of Complex" or "Erection, Commissioning or Installation" (as defined), are subject to levy of service tax even prior to (01.06.2007) - AT
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CENVAT Credit - Utilization of credit of the service tax on the insurance premium in respect of a Transit Insurance of induction furnace and transformer, Group Personal Accidental Policy and. Group Health Guard Policy of Company staff - credit allowed - HC
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Refund claim - excess refund of the service tax paid by commission agent - notification does not indicate that the words ten percent' shall be effective in the Notification 41/2007-ST from the date when it was issued. - AT
Central Excise
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Evasion of duty - Ignorance of law - Imposition of penalty u/s 11AC - Taking note of the specific provision of Section 11AC where there is a specific mandate that the assessee shall be liable to pay penalty, the mere payment of duty even after the show cause notice is not a ground to waive penalty - HC
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Availment of CENVAT Credit - Outdoor Catering Service - where the input service used is integrally connected with the business of manufacturing the final product and the cost of that input service forms part of the cost of the final product, then credit of service tax paid on such input service would be allowable. - HC
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Circulars issued by the Board are binding on the Departmental authorities. - In the absence of any such show cause notice, which is mandatory, the Department cannot seek recovery of the amount. - HC
Case Laws:
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Income Tax
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2015 (3) TMI 723
Validity of an explanation added retrospectively to Section 26(4) of the Karnataka Agricultural Income Tax Act - Held that:- From a cursory reading of section 26(4) read with section 27, it becomes clear that any sum received after discontinuance of business by a firm is deemed to be the income of the recipient and charged to tax accordingly, if such sum would have been included in the total income of the person who carried on the business had such sum been received before such discontinuance. Section 27 went one step further and also spoke of income of a firm which is dissolved as opposed to a firm whose business had been discontinued. With respect to such income, every person who was, at the time of discontinuance or dissolution, a partner of such firm was liable to be jointly or severally assessed on such agricultural income as also to pay the same by way of tax penalty, etc. In the amended Section 26(4), two changes are made. Whereas in the original provision, no express reference was made to companies or associations of persons, and no reference whatsoever was made to a dissolved firm, both have now been added. By the explanation, which is for the removal of doubts, the legislature declares that where before dissolution of a firm, full payment is not received in respect of income that has been earned pre-dissolution, then notwithstanding such dissolution, the said income will be deemed to be the income of the firm in the year in which it is received or receivable and the firm shall be deemed to be in existence for such year for the purposes of assessment. It will be noticed that by this amendment, the basis of the law as it stood when Cardoza's case [1997 (4) TMI 61 - KARNATAKA High Court] was decided has been changed. Cardoza's case noticed that there was no deeming procedure that continued a firm that had been dissolved to be an assessee for the purposes of income that was earned by it pre-dissolution but received post-dissolution. The deeming fiction has now been introduced by the explanation (and with retrospective effect from 1975) thereby making it clear that the basis of the law as it stood when Cardoza's case was decided has now been changed with effect from 1975. The position which therefore, emerges is that instead of such income being taxed at the hands of the "recipient", it is now taxed in the hands of the dissolved firm. . All that the legislature has done in the present case is to say that with effect from 01.04.1975, dissolved firms will by legal fiction, continue to be assessed, for the purposes of levy and collection of agricultural income tax, insofar as they receive income post dissolution but relating to transactions pre-dissolution. In no manner has the legislature in the present case sought to directly nullify the judgment in Cardoza's case. All that has happened is that the legal foundation on which the Cardoza's case was built is retrospectively removed, something which is well within the legislative competence of the legislature. Appeal allowed.
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2015 (3) TMI 722
Application for Advance Ruling declined - application seeking an Advance Ruling is in respect of a transaction designed prima facie for tax avoidance in terms of Section 245 -R (2)(iii) of the Income Tax Act, 1961 (the Act) as revenue's stand that two Indian residents namely one Mr. Dhruv Khaitan and Mr. Piyush Khaitan (Indian residents) are the ultimate beneficiaries of the sale of the shares by the Petitioner - Petitioner is a Company incorporated in Mauritius - Held that:- The facts and submissions of law put-forth by the Petitioner to meet the objections of the Revenue have not at all been considered. Similarly, so far as prima facie case is concerned, the impugned order besides adverting to the legal position has not given any reason as to why in the present facts, the entire issue/ transaction had been designed prima facie for the purposes of avoiding income tax. The facts arising in this case for consideration have to be examined in the light of the prevailing law. The issue raised are fairly contentious. However, the impugned order after setting out the law in respect of what is exactly meant by words 'control and management' and the understanding of the word 'prima facie' concluded by holding that the factual scenario projected by the Revenue clearly establishes that the transaction in question was designed prima facie for avoidance of income tax. Accordingly, we decline to entertain the application, which is accordingly, rejected. We find that the impugned order has after recording the submission of the Petitioner and the Revenue concluded that the view canvassed by the Revenue establishes a prima facie design to avoid tax. The impugned order gives no reasons which would indicate why the Petitioner's contention is not acceptable. We do appreciate that very detailed reasons need not be given for a prima facie view but some consideration must be evident from the order. This reasoning is absent in the impugned order. Thus he impugned order suffers from the vice of being an order without reasons. Therefore, the impugned order is quashed and set aside. The Authority shall consider de novo the application of the Petitioner dated 3rd January, 2011. - Decided in favour of assessee.
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2015 (3) TMI 721
Disallowance of loss - Tribunal remanding the issue to the file of Assessing Officer without giving any independent finding and cogent reasons as to how the CIT (Appeals)'s finding were incorrect - Held that:- If the notice was issued calling upon the assessee to produce certain documents and the assessee failed to produce the document, the power by the AO was required to be exercised judiciously to examine and to find out to what extent, the disallowance could be made, but it could not be to the fullest extent that too without any discussion and on a mere ground that the assessee failed to produce the document in support thereof. The aforesaid aspect was not appreciated in the appeal and therefore, the Tribunal has remanded the matter. It is not that in every case, the Tribunal may examine the material on its own if there is failure to consider the material by AO or in appeal by the CIT (Appeals). But when no material whatsoever was considered and just an adverse inference was drawn in disallowing the claim and such was not interfered in the appeal, if the Tribunal has exercised the discretion of remanding the matter in view of the reasons recorded herein above, such an exercise of discretion could not be said to be perverse. We do not find that any substantial question of law would arise on such a point. The attempt to rely upon the decision of this Court in case of Rajesh Babulal Damania (2000 (6) TMI 5 - GUJARAT High Court) is ill-founded, because in the said case, the CIT (Appeals), at the appellate stage, had already examined the material and had given finding of facts, which was not appreciated by the Tribunal after considering the material and therefore, the observations were made by this Court in the said decision. Such are not the fact situation in the present case since no material is examined neither by the AO nor by the CIT (Appeals). - Decided against revenue. Disallowance of claim of revenue expenses - Tribunal remanding the issue to the file of Assessing Officer without giving any independent finding and cogent reasons as to how the CIT (Appeals)'s finding were incorrect - Held that:- Discretion exercised by the Tribunal cannot be said to be perverse, which may call for interference in the present appeal before us, which is limited to substantial questions of law. No substantial questions of law would arise as canvassed. - Decided against revenue. Disallowance of claim, rebate and reversal of claims and claim of writing off - Tribunal remanding the issue to the file of Assessing Officer - Held that:- Tribunal having found that the examination was required on the part of the AO to decide the issue in light of the decision of the Apex Court in case of TRF Limited (2010 (2) TMI 211 - SUPREME COURT ) and therefore, the discretion has been exercised for sending the matter back to the AO. Such an exercise of discretion cannot be said to be perverse. Disallowance of the claim for deduction of interest - Tribunal remanding the issue to the file of Assessing Officer - Held that:- The investments were made out of interest free funds and not borrowed funds and on the other hand, we find that ClT (A) has given finding that assessee does not have any surplus funds. In view of the contrary facts, we are of the view that the factual position needs to be re-examined. Tribunal found that the factual aspects including that of the availability of the free fund at the time of making investment was required to be examined and therefore, the discretion has been correctly exercised by the Tribunal to send the matter back to the AO - Decided against revenue. Disallowance of hire charges - Tribunal remanding the issue to the file of Assessing Officer - Held that:-CIT (Appeals) as well as the Tribunal has gone by the earlier decision including that of the Tribunal for the Assessment Year 1999-2000. The learned counsel for the revenue has brought to our notice that the decision of the Tribunal, which has been relied upon for the Assessment Year 1999-2000, was carried before this Court [2011 (2) TMI 1349 - GUJARAT HIGH COURT] decided on 21.2.2011 and the said appeal has been dismissed, as no substantial question of law was found for consideration by this Court.- Decided against revenue.
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2015 (3) TMI 720
Capital gain v/s business Income - Whether the transaction in question was rightly held by the Tribunal in the nature of investment and not in the nature of trade? - Held that:- In the present case, there is no dispute that the opening investment cost for the relevant year AY 2006-07 was ₹ 2.60 crores; the corresponding closing value was ₹ 4.70 crores. Furthermore, the Court notices that the assessee derived, in addition to the short term capital gains, dividend income to the tune of nearly ₹ 10 lakhs. The authorities have all emphasised that even while seeing the cumulative effect of the tests, in the given facts of a case, one test might be determinative or conclusive. At the same time, no single test having regard to the facts of a case and a cumulative effect thereof, need be determinative or conclusive. In the present instance what is apparent is that the assessee, an individual, did not borrow any funds; the share scripts traded were only from amongst what were held by him. Significantly, dividend income amounting to about 4% of the value of the investment was earned by the assessee. What appears to have weighed almost conclusively with the tax authorities in the first and second instance is the value and frequency of the transactions. As underlined by us, that factor alone cannot be conclusive and would have to be weighed along with the totality of facts. An important detail which cannot be overlooked by the Court is that in all past periods and even subsequent periods, similar income reported by the assessee was accepted by the Revenue as short term capital gain. In fact for AY 2005-06, the scrutiny assessment under Section 143 (3) accepted the sum of ₹ 1.02 crores as short term capital gain. In the circumstances, it was all the more necessary for the Revenue to point to some unique feature or distinctive material to differentiate the assessee's activities for the subject assessment year, since they fundamentally remained the same and unchanged. Thus ITAT's findings and view cannot be faulted in the circumstances of the case - Decided in favour of assessee.
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2015 (3) TMI 719
Non deduction of tds - payments made by the assessee to the non-residents - whether the relationship between the appellant and the agents is contractual and entire service is provided outside India and duly compensated by way of commission payment which is also paid outside India, thus no TDS is to be deducted? - Held that:- The facts of the present case are akin to the facts of the decision in Toshoku Ltd.'s case [1980 (8) TMI 2 - SUPREME Court] wherein held that the non-resident assessees did not carry on any business operations in the taxable territories. They acted as selling agents outside India. The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the assessees in India as contemplated by clause (a) of the Explanation to section 9(1)(i) of the Act. The commission amounts which were earned by the non-resident assessees for services rendered outside India cannot, therefore, be deemed to be incomes which have either accrued or arisen in India.In the instant case the assessee engaged the services of non-resident agent to procure export orders and paid commission. That apart, the Commissioner of Income-tax (Appeals) as well as the Tribunal have correctly applied the principle laid down in GE India Technology Centre (P.) Ltd.'s case, [2010 (9) TMI 7 - SUPREME COURT OF INDIA] to hold that the assessee is not liable to deduct tax at source when the non-resident agent provides services outside India on payment of commission. - Thus the services rendered by the non-resident agent can at best be called as a service for completion of the export commitment and would not fall within the definition of fees for technical services, we are the firm view that section 9 of the Act is not applicable to the case on hand and, consequently, section 195 of the Act does not come into play. Also see Faizen Shoes case [2014 (8) TMI 170 - MADRAS HIGH COURT]- Decided in favour of assessee.
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2015 (3) TMI 718
Entitlement to exemption under Section 11 - anonymous donations amounting to ₹ 84,36,407/- received in violation of the provisions of Section 115BBC - Tribunal allowed the claim - Held that:- The Trust was declared by Sir Jamsetjee Jeejeebhoy, Knight by a Trust Deed dated October 18, 1834 for the keep of stray cattle and other animals with a view to protect their lives. This shows that the Trust was created / established for charitable purposes. Thereafter, the Commissioner of Income Tax (Appeals) as well as the Tribunal have decided the appeal before them by placing reliance upon the binding decision of this Court in the case "Vallabhdas Karsondas Natha" (1946 (9) TMI 1 - BOMBAY HIGH COURT) wherein the Court inter alia considered the issue whether supply of fodder to animals and cattle would amount to a charitable and / or religious purpose. In the above context, the Court observed that "that to a Hindu nothing can be of greater religious merit than to relieve suffering of dumb cattle and animals by giving them fodder. It is hardly necessary to emphasize that, according to Hindu religion and philosophy, animals have the same soul as human beings have and the spark of divinity is as much present in them as in human beings." Thereafter, concluded by holding that "supply of fodder to cattle and animals is not only a good religious trust but it is also a good charitable trust." Therefore, the submissions of the Revenue is in the face of the decision of this Court in "Vallabhdas Karsondas Natha" (supra) wherein taking care of animals is considered to be a charitable as well as religious activity. We may also refer to the decision of Gujarat High Court in the case of "C.I.T. Gujarat Vs. Swastik Textile Trading Co.Pvt.Ltd."(1977 (7) TMI 30 - GUJARAT High Court) wherein the issue for consideration was whether establishing, maintaining, running and helping gaushalas, panjarapoles and other similar institutions for animals, would be considered to be a charitable and religious purpose. - Decided against revenue.
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2015 (3) TMI 717
Transfer to the General Reserve on amalgamation - whether is not in the nature of any benefit or perquisite and thus not taxable under Section 28(iv) - Held that:- A plain reading of the provision of Section 28(iv) makes it clear that the amount reflected in the balance sheet of the assessee under the head 'reserves and surplus' cannot be treated as a benefit or perquisite arising from business or exercise of profession. The difference amount post amalgamation was the amalgamation reserve and it could not be said that it is out of normal transaction of the business. The present transaction is capital in nature arose on account of amalgamation of four companies. Hence, we have no hesitation to hold that the manner in which the Revenue wants to treat this amount is not in consonance with Section 28(iv) of the Income Tax Act. Tribunal was right in holding that the amounts transferred by the assessee company to the General Reserve on amalgamation is not in the nature of any benefit or perquisite and thus not taxable under Section 28(iv) of the Income Tax Act, 1961 - Decided against revenue.
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2015 (3) TMI 716
Exemption under Section 11 denied - Assessee is running separate business activity as by way of renting out its properties to Vodaphone, Reliance Communication Ltd., Jyoti Publicity etc. for advertisements and cell phone towers and also renting out the hall for marriages, party etc. as incidental to its main activity and not maintain separate books of account in contravention of Section 11(4A) as per revenue - grievance of the Revenue is that letting out of property would not amount to income from house property but is essentially in the nature of business income, and therefore, the respondent - assessee is not entitled to benefit of Section 11 of the Act - ITAT allowed exemption - Held that:- The Commissioner of Income Tax (Appeals) as well as the Tribunal on examination of the record have determined that the income derived from its property by the respondent-assessee should be treated as income from house property and not as business income. This finding of the Commissioner of Income Tax (Appeals) is upheld by the impugned order. We find that as two Authorities under the Act have concurrently come to a finding of fact that the amounts received by the respondent-assessee on account of letting out of its property is income taxable under the head "income from house property". Thus, no occasion to apply Section 11A (4) of the Act as canvassed by the Revenue would not arise. In view of the concurrent findings of the fact arrived at by the Authorities which is not shown to be perverse, no substantial question of law arises for our consideration. - Decided against revenue.
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2015 (3) TMI 715
Deduction u/s 80HHC on counter sales - whether ITAT as well as the CIT(A) was justified in allowing the deduction u/s 80 HHC when there is no finding to the effect that the goods were cleared at any of the custom station? - Held that:- Apex Court in CIT vs. Silver & Arts Palace [2002 (12) TMI 12 - SUPREME Court] has held that the counter sale to the foreign tourists against convertible foreign exchange in India, is eligible for deduction under section 80HHC of the Income Tax Act. The Apex Court has also approved the decision of the Allahabad High Court in the case of Ram Babu & sons vs. Union of India [1996 (5) TMI 61 - ALLAHABAD High Court]. In the present case the assessee had produced the Sale To Foreign Tourists Voucher, which not only recorded the name and address of the customer (tourist), but also his/her passport number and the declaration given by him that the goods will not be gifted or sold in India. The goods sold at counter at the shop/emporium were sold to be taken out of the country, which necessarily involved clearance of baggage, by the customs authorites. There was no further proof, nor any document in proof of clearance of the goods at the Customs Station by the assessee is required. The declaration in the form of Sale To Foreign Tourist Voucher, for sale made against the convertible foreign exchange with the undertaking that the goods will not be gifted or sold in India, was sufficient proof for export out of India. Unless anything contrary was alleged and proved by the department, it was not necessary for the assessee to have produced the documents of clearance of goods sold by him to the foreign tourists at any Customs Station. The Explanation (aa) is not a rule of evidence, nor raises any presumption. It also does not require any proof of clearance at any Customs Station. The explanation is couched in double negative. It is a rule of exclusion and excludes only those transactions, which do not involve clearance at any Customs Station. It cannot be read in a manner, as suggested by learned counsel appearing for the department that a proof of customs clearance of baggage must be provided to establish the export of goods out of India for the purpose of deduction of profits on such sales under section 80HHC of the Income Tax Act. - Decided in favour of assessee.
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2015 (3) TMI 714
Reopening of assessment - Whether, the order of the Appellate Tribunal in arriving at the finding that there was sufficient reasons and material to re-open the assessment? - Held that:- Insofar as the extracts made in the order of the Tribunal is concerned, it discloses that the assessing authority, before issuing notice under Section 148 of the Act was satisfied that the assessee, while computing indexed cost of acquisition has taken the value as on 01.04.1981 as ₹ 280/- per sq.ft., but as per the Government notification, the value is at ₹ 45 per sq. ft. Therefore, he came to the conclusion that the assessee has taken higher value while working out indexation and therefore, he recorded an opinion that the income chargeable to tax has escaped assessment under Section 147 of the Act. Merely because, he addressed a letter to the Sub-Registrar asking him to furnish the particulars would not lead to the conclusion that on the day he issued notice, he had no material to show that the assessee has over valued the asset. Rightly, the authorities have rejected the said contention and the proceedings initiated is valid and legal and do not suffer from any legal infirmity. Therefore, the first substantial question of law is answered in favour of the revenue and against the assessee. Computation of benefit u/s 54F - Tribunal holding that only the expenses incurred to make the residential house habitable is entitled to benefit under Section 54F but not any additions made to the newly acquired building - Held that:- It is not in dispute that the property purchased by the assessee was habitable but had lacked certain amenities. The assessee has spent nearly about ₹ 18 lakhs towards removal of mosaic flooring and laying of marble flooring, alteration of the kitchen, putting up compound wall, protecting the property with grill work and attending to other repairs. Section 54F of the Act provides that if the cost of the new asset, which is to be taken into consideration while determining the capital gain, the words used is "cost of new asset" and not "the consideration for acquisition of the new asset". In law, it is permissible for an assessee to acquire a vacant site and put up a construction thereon and the cost of the new asset would be cost of land plus (+) cost of construction. On the same analogy, even though he purchased a new asset, which is habitable but which requires additions, alterations, modifications and improvements and if money is spent on those aspects, it becomes the cost of the new asset and therefore, he would be entitled to the benefit of deduction in determining the capital gains. The approach of the authorities that once a habitable asset is acquired, any additions or improvements made on that habitable asset is not eligible for deduction, is contrary to the statutory provisions. The said reasoning is unsustainable. To that extent, the impugned order passed by the Tribunal as well as the Lower authorities require to be set-aside and it is to be held that in arriving at cost of the new asset, ₹ 18 lakhs spent by the assessee for modification, alterations and improvements of the asset acquired is to be taken note of. - Decided in favour of the assessee
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2015 (3) TMI 713
Penalty u/s 271(1)(c) - no explanation as to how the shares were purchased for over ₹ 23 lakhs in AY 2004-05 - ITAT deleted penalty levy based on reasoning that the AO did not make any effort to discharge the burden placed upon him to investigate and to bring on record some material to dispute the assessees contentions with regard to the actual sale being at ₹ 6000/- - Held that:- It is now well established that Section 271(1)(c) of the Act does not compel the Revenue to initiate proceedings imposing penalty in all cases where findings were adverse against the assessee at a given point of time, leading to addition of amounts or disallowance. Possibly, an explanation may have been required from assessee in the given facts of this case as to why it acquired the shares even when the company was facing winding up proceedings but the fact remains that the efforts to rehabilitate the company were undertaken. The lack of proper explanation undoubtedly might have justified the addition. The disallowance was ultimately directed and upheld by the ITAT, however, the reasoning of the ITAT in holding that the penalty proceedings required satisfaction of a higher threshold of proof, which confirmed the basis for it, ultimately cannot be faulted. - Decided against revenue.
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2015 (3) TMI 712
Fee paid to the Securities & Exchange Board of India (SEBI) - ITAT allowed it as revenue expenditure - Held that:- There is no merit or substance in this appeal. If the Revenue had been treating the amount deposited by the similarly situated assessees with SEBI as revenue expenditure, then there is no reason why a different treatment should be meted out to the present assessee. See Commissioner of Income- Tax and Another v. Vysya Bank Ltd. [2008 (1) TMI 385 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2015 (3) TMI 711
Disallowance of exemption u/s.11 - ITAT confirming the order passed by the CIT(A) directing the Assessing Officer to restrict the disallowance of exemption u/s.11 of the Act in respect of deposits in contravention of section 11(5) read with section 13(1)(d) of the Income Tax Act, as against denial of exemption on the entire income by the Assessing Officer - Held that:- Tribunal was justified in upholding the order passed by CIT(A)who has very clearly observed that the provisions of Section 11(1)(a) are very clear and provide that the income derived from the property held under trust shall not be included in the income to the extent it is applied for the charitable or religious purposes (expenses incurred during the year) or accumulated/set apart to be applied for that purpose in future out of 75% to which the restriction u/s 11(5) applies. In the case of Fr. Mullers Charitable Institutions (2014 (2) TMI 1033 - KARNATAKA HIGH COURT) it was held that a perusal of section 13(1)(d) of the Income-tax Act, 1961 makes it clear that it is only the income from such investment or deposit which has been made in violation of section 11(5) of the Act that is liable to be taxed and violation under section 13(1)(d) does not result in denial of exemption under section 11 to the total income of the assessee and that where the whole or part of the relevant income is not exempted under section 11 by virtue of violation of section 13(1) (d) of the Act, tax shall be levied on the relevant income or part of the relevant income at the maximum marginal rate - Decided in favour of assessee.
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2015 (3) TMI 710
Depreciation on non performing assets disallowed - Tribunal upholding the order of the CIT(A) in deleting the disallowance of depreciation - Held that:- The impugned ITAT's order has followed its own decision in the respondent-assessee's case for the Assessment Year 2001-02, 2002-03, 2003-04, 2004-05 and 2006-07. In all these years the Tribunal has allowed the depreciation in respect of nonperforming assets i.e. not linked to the recognizing of lease income in respect of the leased assets. The revenue does not point out any reasons as to why the order of the Tribunal for earlier years should not be followed in this Assessment Year.Thus no substantial question of law arises. - Decided against revenue. Set off of profit on sale of depreciable assets against long term capital gain - ITAT dismissed the revenue's appeal holding that the respondent-assessee is entitled to set off its profit on sale of depreciable asset against long term capital losses on sale of investment - revenue contends that in terms of Section 50 of the Act the profit on sale of depreciable assets shall be deemed to be short term capital gains - Held that:- The impugned order followed its decision in Manali Investment Vs. ACIT reported in [2011 (4) TMI 116 - ITAT MUMBAI ] on an identical issue following the decision of this Court in CIT Vs. Ace Builders (P) Ltd. reported [2005 (3) TMI 36 - BOMBAY High Court] wherein allowing the benefit of exemption under section 54E to the assessee in respect of the capital gains arising on the transfer of a capital asset on which depreciation has been allowed. Tribunal was right in upholding the decision of the CIT(A) on the issue of set off of profit on sale of depreciable assets of ₹ 1.13 crores against long term capital gain which arose to the assessee on indexation method and also allowing brought forward long term capital gain against the said profit on sale of depreciable assets - Decided against revenue.
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2015 (3) TMI 709
Income from Ware Houses/godowns - income from business or house property - Held that:- Tribunal, by going into the individual aspects of the business correctly to come to the conclusion that it is a case of warehousing business and, therefore, would fall only under the head 'Business Income'. See The Commissioner of Income Tax, Tamil Nadu-III, Madras Versus M/s. SSM. Estates Ltd. [2015 (3) TMI 320 - MADRAS HIGH COURT] - Decided against revenue.
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2015 (3) TMI 708
Legality and validity of the assessment made under Section 153A - Held that:- On the ground of absence of any incriminating material relating to the assessee found at the time of search, relying on the order of the jurisdiction High Court of Andhra Pradesh in the case of Gopal Lal Bhadruka [2012 (6) TMI 657 - ANDHRA PRADESH HIGH COURT] wherein it has been held that the AO can take into consideration material other than that discovered during search. We do not find any merit in the same, and the said ground is accordingly rejected. Disallowance under Section 40A(3) - assessee showed purchase of land related to real estate business amounting to ₹ 23,76,020 during the year, which comprised of cost of land of ₹ 21,60,180 and registration charges paid to government of ₹ 2,16,020 - Held that:- It is the case of the assessee that the payments in question were made in villages where banking facilities are not available and as such, the same are covered by the exceptional circumstances envisaged in Rule 6DD(g) of the Income -tax Rules. In support of this plea, assessee has submitted details with respect to the names of the villages where the lands were purchased and also the list of major banks in Chittoor District. The Revenue authorities have rejected the plea of the assessee in this behalf by general observations. Since the assessee has furnished details of the villages and the details of the branches of major banks in Chittoor District, we deem it just and proper to set aside the impugned orders of the Revenue authorities on this aspect, and remit the matter to the file of the Assessing Officer for proper examination of the claim of the assessee that banking facilities were not available where lands have been purchased and payments have been made and consequently, these payments are covered by the exceptional circumstance envisaged in Rule 6DD(g) of the I.T. Rules - Decided in favour of assessee for statistical purposes. Disallowance of expenditure on adhoc basis - Held that:- CIT(A), after considering all the facts and circumstances of the case and corresponding expenditure claimed and allowed in the earlier years, has restricted the disallowance made by the Assessing Officer at 10%. We find that the disallowance sustained by the CIT(A) is fair and reasonable and there is no justification for interference with the order of the CIT(A) on this issue. - Decided against assessee. Addition made by treating part of the agricultural income claimed by the assessee as income from other sources - Held that:- Assessee inviting our attention to the details of the land holding of the assessee, submitted that the assessee was having land-holding around Tirupati region and agricultural operations were indeed carried on, and the agricultural income derived from such lands was duly certified by the MRO, as such, he pleaded that there was no justification for any disallowance to be made out of the agricultural income claimed by the assessee. Considering the extent of land holding and the claim of the assessee as to the agricultural operations carried thereon during the relevant period, we find it just and proper to set aside the impugned orders of the Revenue authorities and restore this issue to the file of the Assessing Officer for fresh examination this issue. The Assessing Officer is directed to verify the records of the agricultural land owned by the assessee and Adangal Patti and other records to ascertain the crops grown and the income derived by the assessee, and thereafter arrives at any reasonable amount of disallowance, if any, warranted out of the agricultural income claimed by the assessee - Decided in favour of assessee for statistical purposes. Unexplained cash credit - CIT(A) accepting the explanation of the assessee with regard to availability of agricultural income of ₹ 4,32,500 of the year 2001-02, restricted the addition made by the Assessing Officer to ₹ 2,63,000. As for the balance amount of ₹ 2,63,500 sustained by the CIT(A) as well, we find that the assessee claimed before the CIT(A) rental income and agricultural income of his mother as constituting the sources for the capital introduced on 1.4.2002 - Held that:- Mere possession of agricultural land by the assessees mother or her deriving substantial agricultural income there from does not establish the sources for the cash credit introduced by the assessee, unless it is established by the assessee that the said income of his mother constituted source for the capital introduced by him by way of cash. At the same time, the learned counsel for the assessee has also furnished before us, a cash flow statement, for explaining the sources of the capital introduced. These aspects of the matter have not been examined by the CIT(A) and the same have to be verified by the Assessing Officer. Considering totality of facts and circumstances of the case, we find it just and proper to remit this issue to the file of the Assessing Officer for re-deciding the same, after verifying the cash-flow statement furnished by the assessee and in the light of the explanation of the assessee with regard to the sources for the capital introduced by the assessee. He shall of course, re-decide this issue after giving reasonable opportunity of hearing to the assessee to substantiate his claim with regard to the sources, other than the agricultural income of ₹ 4,32,500 which has been accepted by the CIT(A).- Decided in favour of assessee for statistical purposes. Unexplained investment in purchase of land - Held that:- We are in confirmity with the order of the CIT (A) as the claim of the assessee that it received back this amount of ₹ 3,50,00 on 1.11.2003 is not relevant. The assessee has not explained the source of this money and the AO has clearly pointed out that the cash book does not indicate either payment of ₹ 3.50 lakhs or subsequent receipt. Hence, the CIT (A) was right in holding that the payment of ₹ 3.50 lakhs is unexplained in the absence of satisfactory explanation. As regard the 2nd property, there is no evidence of subsequent payment or registration of this land in favour of assessee or his family members. The assessee has no offered explanation for the source of ₹ 50,000, hence we confirm the order of the CIT (A), in sustaining the addition of ₹ 50,000. Hence the sum of ₹ 4.00 lakhs is being held as unexplained investment. - Decided against assessee. Unexplained cash credit appearing in the books of the assessee - Held that:- Since no evidence has been brought to our record that Smt. S. Basamma, mother of the assessee was having agricultural income and carrying out agricultural operations, for the past several years and had given the same to the assessee, we set aside this issue to the file of the AO to verify this fact and decide accordingly. - Decided against assessee. Addition as unexplained cash credit - Held that:- The assessee has not furnished any details and the CIT (A) has rightly disallowed the claim as regarding the compensation for destruction of residential house and for being a political leader, we agree with the view of the CIT (A) that generally the amounts received from the Govt. in the form of cheque and not cash. The cash deposits of ₹ 2,00,523/- are also not explained by the assessee satisfactorily. Hence we confirm the order of the CIT (A) on this issue. - Decided against assessee. Unexplained investment in land ₹ 33,34,733 - Held that:- We find that the ld counsel for the assessee has relied on the consolidated cash flow statement submitted in the paper book before us. The ld Counsel has pointed out to exact row and page of the cash flow statement from which the amounts paid as advances are made out of explained income. The assessee has also stated that in the case of Chinnagaritappa Naidu and Gopal Choudhary, E. Ramachandra Naidu, Thalluri Muniratnam Naidu, Balarami Reddy, A Muni Reddy and Others, the transactions are duly reflected in the books of accounts and income arising out of it was offered to tax in the return of income of the assessee for the year under consideration. Hence we are of the opinion that the advances made by the assessee are out of explained income of the assessee - Decided in favour of assessee. Contribution to chit fund - Held that:- The AO held that the payment of the amount of ₹ 21,700/- and ₹ 25,000/- to Shri Chamundi Group of companies has not been explained and added the amount. During the appellate proceedings, the assessee stated that these amounts were installments towards purchase of residential plots and were subsequently refunded since permission for developing the plot were not received by them. The CIT (A) held that this does not explain the source of initial investment of ₹ 46,700 as unexplained investment and sustained the addition. It was submitted that in the consolidated cash flow statement at Row No.23 of page No.3, the amount is reflected. Hence we set aside this issue to the file of the AO to verify the same - Decided in favour of assessee for statistical purposes. Addition towards political expenditure - Held that:- It was submitted that during the years under consideration, the assessee has made certain political expenditures amounting to ₹ 33,840 for AY 2008-09 and the same is reflected in the books of accounts of the assessee and is made out of the explained source of income. It was submitted that the AO made the addition based on the invoices found during the search which does not belong the assessee and contained names of some other parties not belong the assessee group. Since it was submitted by the ld Counsel that the same is reflected in the cash flow statement filed before us, we set aside the issue to the file of the AO to verify the cash flow statement - Decided in favour of assessee for statistical purposes. Unexplained expenditure towards sons education - Held that:- The source for the amount of ₹ 17,10,000 (Rs.1.10 + 4.00 + 3.50 +7.00 + 1.50) has been properly explained out of the total amount of ₹ 40,10,000. The balance of ₹ 23.00 lakhs (i.e. 40,10,000 - 17,10,000) which according to the assessee is a loan to be returned back in due course. Dr.Deepthi has submitted sworn affidavit in this regard. Therefore, we are convinced of the source of funds towards sons education expenditure. - Decided in favour of assessee. Addition towards silver and gold ornaments - Held that:- It is a fact that the estimates found by the AO is for the original purchase of silver articles. Also during the search AO has not found physically any of these items. Hence, AO added the estimate as well as the purchase invoice for the same items which was not correct, not justified and bad in law. It was further submitted that the expenditure made by the assessee are out of the explained income of the assessee and his family and are duly reflected in the cash flow statements submitted before the CIT (A) and are again provided in the paper book. Therefore, we set aside this issue to the file of the AO to verify whether the amount of ₹ 12,30,743/- is shown before purchase of jewellery in the cash flow statement under application of funds. - Decided in favour of assessee for statistical purposes. Income from the sale of agricultural commodities - Held that:- CIT (A) observed that the land documents with Pattadar Passbooks submitted by the assessee sum up to only 14 acres as supposed to 20.9 acres claimed in the agricultural income certificate. Hence the CIT (A) restricted the agricultural income to ₹ 15,000 per acre which worked to ₹ 2,10,000 and considered the balance of ₹ 1,50,000 as income from other sources. Since the assessee has not produced evidence for the ownership of the remaining (20.9 - 14 acres = 5.1), we set aside the issue to the file of the AO to give one more opportunity to produce the land holdings and the proof for the income from the sale of agricultural commodities as well as the expenses incurred in the course of cultivating the land. - Decided in favour of assessee for statistical purposes. Advance for purchase of plywood and laminates - CIT (A) held that The appellant has reflected ₹ 35.89 lakhs towards house construction as on 31.03.2008 and hence the contention is accepted and the addition is deleted - Held that:- We find that the construction account has shown an expenditure of ₹ 35.89 lakhs as on 31.03.2008. Hence payment of ₹ 1,95,000 being part of construction accounts is only a small portion of the entire amount spent towards construction. We find that the amount of ₹ 35.89 lakhs towards house construction has been reflected in the accounts of the assessee. Whether the amount has been paid towards granites or plywood and laminates, is not relevant as the payment is part of the construction account. Therefore, we confirm the deletion made by CIT (A) for an amount of ₹ 1,95,000/-. - Decided against revenue
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2015 (3) TMI 707
Revision u/s 263 - set aside for fresh consideration the issue of exemption under section 10B - Held that:- the product, i.e., finished honey in the case of the assessee is at variance with the raw honey collected from the bee hives. The process carried out by the assessee changes both the physical and chemical characteristics of raw honey to convert it into finished product and the said product is different in form, i.e., raw honey and has a better shelf life than raw honey. Further finished honey is prepared on the specific requirements of the buyers or the respective country and the product has a different market than raw honey. We are of the view that the activities carried on by the assessee bring into form the product which has a different market and thus fulfils the test of marketability as laid down by the hon'ble Supreme Court in the case of India Cine Agencies v. CIT [2008 (11) TMI 15 - SUPREME COURT ]. In view thereof, we hold that the assessee was engaged in the production of finished honey and the profits and gains arising from such activity were eligible for deduction under section 10B of the Act as the assessee fulfils the condition of being 100 per cent. export oriented unit and total sale proceeds were received in foreign exchange by the assessee. In the totality of the facts and circumstances, we are in conformity with the finding of the Assessing Officer that the assessee was eligible for the claim of deduction under section 10B of the Act. - Thus where the order of the Assessing Officer in coming to the conclusion that the assessee is entitled to claim of deduction under section 10B of the Act, was erroneous, there was no merit in exercise of revisionary jurisdiction by the Commissioner of Income-tax under section 263 of the Act. Accordingly, we cancel the directions issued by the Commissioner of Income-tax under section 263 of the Act in setting aside the assessment made by the Assessing Officer in this regard and hold that there was no error in the order of the Assessing Officer in granting exemption under section 10B of the Act. - Decided in favour of assessee. Set aside the issue of claim of allowance of additional depreciation - CIT(A) in view of holding that the assessee was not engaged in the manufacture or production of any article or thing, held that the assessee was not entitled to the claim of additional depreciation - Held that:- The said issue is linked to the first issue raised by the Commissioner of Income-tax, i.e., the issue of exemption allowable under section 10B of the Act. Where the assessee is engaged in the business of manufacture of things then the claim of additional depreciation is allowable as prescribed under the Act. However, in the facts of the case before us, the learned authorised representative for the assessee had pointed out that during the assessment proceedings itself, the assessee had pointed out to the Assessing Officer that no additional depreciation had been claimed during the year under consideration. Our attention was drawn to the questionnaire raised by the Assessing Officer placed at page 58 of the paper book and the reply of the assessee as placed at page 65 of the paper book. In view of there being no claim of additional depreciation during the year under consideration, the order of the Commissioner of Income-tax on this ground in holding the order of the Assessing Officer to be erroneous and prejudicial to the interests of the Revenue is invalid and the same is set aside. - Decided in favour of assessee. Profits on sale of incentives received from the Ministry of Commerce, Government of India - whether the same were eligible for deduction under section 10B of the Act? - Held that:- In the present case before us the copy of the scheme of "Vishesh Krishi Upaj Yojna" is placed. The objective of the said scheme was to promote the exports of agricultural produce and their value added products, minor forest produce, gram udyog products, forest based products and other products which may be notified from time to time. Further benefits are also given under the scheme, but the relevant benefits of the scheme vis-a-vis assessee are as referred to by us in the above paragraph. In view of the scheme under which the assessee is entitled to the incentives which in turn are to compensate high transport cost and to offset other advantages to the exporters, and also in view of the fact that the incentives are to be allowed at reduced rates where the assessee is in receipt of duty drawback, DEPB, we are of the view that the incentives received by the assessee under the "Vishesh Krishi Upaj Yojna" as an export incentive were given to the assessee to neutralise the incidence of high transport cost and also to offset other disadvantages. The said neutralisation as in the case of the hon'ble Supreme Court in the case Liberty India v. CIT [2009 (8) TMI 63 - SUPREME COURT ] is linked to the FOB value of exports by way of duty credit scrip. The said benefits are provided by DGFT in the case of the assessee and the said scheme being similar to the scheme of grant of Duty Drawback/DEPB and in turn applying the ratio laid down by the hon'ble Supreme Court in the case of Liberty India v. CIT [supra] we hold that the assessee is not entitled to the claim of deduction under section 10B of the Act on the said incentives. In view thereof, we uphold the order of enhancement passed by the Commissioner of Income-tax in exercise of its jurisdiction under section 263 of the Act - Decided against assessee. Claim of expenditure of commission paid to Shri Parminder Thapar - CIT(A)had set aside the issue observing that the Assessing Officer had accepted the expenses without making any verification and without application of mind - Held that:- It is an admitted position that the Assessing Officer had raised queries with regard to the said expenditure and the assessee had furnished complete details in respect of the amount paid to Shri Parminder Thapar against exports made to the U. S. A. All these aspects are mentioned by the Commissioner of Income-tax in paragraph 7 of the order passed under section 263 of the Act. Where the queries have been raised and in response the Assessing Officer had accepted the claim of the assessee merely because elaborate references were not made, while allowing the said expenditure to the assessee in the assessment order, it cannot be said that the Assessing Officer has not applied his mind because writing of the said order is not in the control of the assessee and in view thereof the order of the Assessing Officer being cryptic and non-descriptive, cannot be said to be erroneous and prejudicial to the interests of the Revenue. We find no merit in exercise of jurisdiction under section 263 of the Act by the Commissioner of Income-tax in this regard - Decided in favour of assessee. Allowing 100 per cent. of the deduction instead of 90 per cent. under section 10B by CIT(A) - Held that:- Under the provisions of section 10B of the Act the assessee is entitled to the claim of deduction of such profits and gains as are derived from 100 per cent. export oriented unit. The second proviso under section 10B of the Act provides that for the assessment year beginning on the first day of April, 2003, the deduction shall be 90 per cent. of the profits and gains derived by an undertaking from the export of such articles or things or computer software. In view of the provisions of the Act wherein it has been provided that for the assessment year beginning on the first day of April, 2003, the deduction would be restricted to 90 per cent. of the profits of the export oriented unit, we find no merit in the claim of the assessee and the same is rejected. - Decided against assessee.
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2015 (3) TMI 706
Deduction under section 80-IB(8A) - Assessing Officer held that the assessee does not meet prescribed conditions in rule 18DA of the Income-tax Rules, 1962 to claim deduction under section 80-IB(8A) - Held that:- In the present case, it is not disputed that the entire receipts of the assessee are from contract research and not own research. It is also pertinent to mention that in the appendix to the form for approval to the renewal there is a specific column, namely, column Nos. 2 and 3 dealing with contract research. The said column seeks details of sponsorship fee (if any) name of the sponsors, if any. It is, thus clear that the forms contemplates a sponsor research (contract research) also as falling within the ambit of section 80-IB(8A) of the Income-tax Act, 1961. t is also relevant to note that the prescribed authority after being fully conscious of the fact that the assessee is only a contract research organisation has still though it fit to grant section 80-IB(8A) of the Income-tax Act, 1961. It thus clear that on a overall reading of the relevant provisions and Rules that the deduction under section 80-IB(8A) of the Income-tax Act, would be allowed to a contract research organisation. The decision of Income-tax Appellate Tribunal in the case of Fortis Clinical Research Ltd. [2012 (11) TMI 498 - ITAT DELHI ] also supports the aforesaid view. In the aforesaid case, though the issue as to whether the contract research organisation are also covered under section 80-IB(8A) of the Act was not directly in issue, yet, it is an authority for the proposition that any violation of the conditions of rule 18DA(8A) can be looked into only by the prescribed authorities and not by the Assessing Officer, while completing the assessment. In that view of the matter, we are of the view that the Revenue authorities fell in error in denying the claim of the assessee. We therefore, hold that the assessee would be entitled to claim for deduction under section 80-IB(8A) of the Income-tax Act, 1961. The Assessing Officer is directed to allow the claim for deduction. - Decided in favour of assessee. Transfer pricing adjustment determination of the arm's length price (ALP) - payment of management fee by the assessee to its associated enterprise (AE) - addition made by the Assessing Officer and confirmed by the Dispute Resolution Panel - Held that:- In the present case, as already seen, voluminous evidence was filed by the assessee before the Transfer Pricing Officer. The Transfer Pricing Officer as well as the Dispute Resolution Panel proceeded on wrong facts regarding the nature of services rendered and also made reference to entities which are not in any way connected with the assessee or the payment of management fee. Clearly there has been lack of proper application of mind by the Transfer Pricing Officer as well as the Dispute Resolution Panel. However, for this reason, we are not inclined to accept the submission of learned counsel for the assessee that the addition made should be deleted on this ground alone. We find that evidence on record exists regarding allocation of cost and the basis of such allocation. The invoices regarding nature of services rendered, however, are in the form of invoices supported by e-mails exchanged between the assessee and the associated enterprise. These invoices per se, in our opinion, do not demonstrate the nature of services rendered. The invoices have to be linked to the e-mails in support of the invoices. We also find that the assessee has not made any attempts to demonstrate the arm's length price of the transaction with the associated enterprise. As we have already stated, the evidence in the present case has to be linked with the invoices to show the nature of services rendered. The assessee has to choose a method in accordance with the Act and the Rules. On production of such evidence, the Transfer Pricing Officer will have to give the basis of his price, if he disputes the assessee's claim with comparable cases. We feel that the evidence on record need to be presented in a proper form so that the nature of services rendered can be discerned with reasonable accuracy. The assessee can demonstrate on a sample basis item expenditure comprised in the management fee. We are therefore of the view that it would be just and proper to set aside the order of the Assessing Officer and remand the question of determination of the arm's length price to the Transfer Pricing Officer for fresh consideration. - Decided in favour of assessee for statistical purposes.
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2015 (3) TMI 705
Profit on sale of shares - short term and long term capital gain v/s business income - Held that:- The assessee made investment in shares with intention to earn dividend income on appreciation of price of shares. Therefore, it cannot be said that the assessee was doing business. Since in earlier assessment years the claim of the assessee was consistently accepted as short term capital gain, it was held that the rule of consistency as propounded by Hon'ble Bombay High Court in the case of Gopal Purohit (2010 (1) TMI 7 - BOMBAY HIGH COURT), it is fairly applicable and the income has to be treated as short term capital gain. Identically in the case of Nagindas P Seth (2011 (4) TMI 3 - ITAT MUMBAI ) it was held that despite large number of transactions in shares, the profit can be assessed as capital gains under the facts of the case. The case of the assessee is further fortified by these decisions more specifically when the assessee was hold the shares in his books as investor, as well as stock-intrade separately. The decision in the case of Janak S Ranawala,(2006 (12) TMI 261 - ITAT MUMBAI ) further supports the case of he assessee. Likewise, the decision from Hon'ble Madras High Court in CIT vs N.S.S. Investment Pvt Ltd. (2005 (4) TMI 45 - MADRAS High Court ), CIT vs. Associated Industrial Development Company, (1971 (9) TMI 3 - SUPREME Court) supports the case of the assessee. Accordingly, we uphold the order of CIT(A) and dismiss the appeal of the revenue. - Decided in favour of assesee.
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2015 (3) TMI 704
Penalty under section 271(1)(c) - bona fide or mala fide with an intention to evade taxes - addition of ₹ 225 crores on account of expenditure incurred on the development of infrastructure in the form of setting up of international airport at Mohali - Held that:- The assessee in present case having paid for the establishment of an International Airport at Mohali was under the bona fide belief that the expenditure is duly allowable as revenue expenditure and same was so claimed in the profit and loss account. The said expenditure has been held by the Tribunal not to have been incurred for the purpose of business. It has also been held by the Tribunal that the expenditure is in nature of capital expenditure and therefore, the same is not allowable. Mere disallowance of expenditure in the hands of the assessee does not establish the charge of concealment in the hands of the assessee. Various courts have time and again laid down the principle that where the assessee has bona fide explanation of non-exclusion of receipts as its income or for claiming particular item of expenditure as deduction, even where claim of the assessee is rejected, no penalty for concealment of income or furnishing of inaccurate particulars of income could be levied under section 271(1)(c) of the Act. The assessee having declared complete facts with regard to expenditure of ₹ 225 crores and the claim of the assessee being bona fide, though not allowed as expenditure in the hands of the assessee, does not justify levy of penalty under section 271(1)(c) of the Act, much less penalty at the rate of 150 per cent. of the tax sought to be evaded. We thus hold that the assessee, in the present set of facts and circumstances, is not exigible to levy of penalty under section 271(1)(c) of the Act where the claim of the assessee vis-a-vis expenditure incurred on establishment of an international airport had been rejected. Accordingly, we delete the penalty levied under section 271(1)(c) of the Act and the Assessing Officer is directed to delete the same. - Decided in favour of assessee. Penalty u/s 271(1)(c) - addition made on account of instalments received during the year on account of for sale of houses/flats - Held that:- The present issue of addition on account of instalments received on sale of houses/flats has been remitted back to the file of the Assessing Officer with directions to recompute the income in the hands of the assessee arising on account of the instalments received on sale of houses/flats after holding that the same are includible in the hands of the assessee in view of the mercantile system of accounting followed by the assessee. The Assessing Officer was directed to recompute the income after considering the receipts and expenditure incurred by the assessee on this account. Consequently, the addition on this issue has been cancelled and the issue sent back to the Assessing Officer with directions to decide the same de novo. In view thereof, we hold that the issue of levy of penalty under section 271(1)(c) of the Act in relation to the aforesaid addition on account of instalments received on sale of flats/houses does not stand as the said addition has not been upheld by the Tribunal and the matter has been sent back to the file of the Assessing Officer. However, in the interest of justice, we hold that the Assessing Officer shall be at liberty to initiate and complete the penalty proceedings under section 271(1)(c) of the Act after deciding the issue of addition on account of instalments received on sale of houses/flats and the proportionate expenditure allowable against the same, under the regularly employed method of accounting followed by the assessee. we delete the penalty levied under section 271(1)(c) of the Act on the addition made on account of sale/purchase of houses/flats with the liberty to reinitiate the said proceedings after giving appeal effect to the order of the Tribunal. - Decided in favour of assessee.
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Customs
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2015 (3) TMI 731
Exemption from customs duty for goods imported to India for the purpose of carrying out job work in India and for export of the job worked (finished) product - respondent had found that in certain cases, the petitioner had exported the finished goods after six months and thereby, it is liable to pay interest for the delayed period as stipulated in the Notification - non-submission of documents relating to imports made under the notification - Held that:- Though the petitioner contended that almost all the documents were already furnished to the authorities, but it was denied by the respondents and created alert and therefore, this is a disputed question of fact, which this Court is refrained to deal with the same and it is for the petitioner prove the same before the authorities. However, having regard to the facts and circumstances narrated above, this Court is not inclined to go into the merits of the case since the petitioner has been directed to submit the documents, which were admittedly pertaining to the period more than a decade ago, the difficulty expressed by the petitioner in retrieving the documents, appears reasonable and considering the same, this Court is of the view that the impugned order shall be set aside for the present and the petitioner is directed to produce all the relevant documents which were sought for by the respondents, within a period of one month from the date of receipt of a copy of this order. - Matter remanded back - Decided in favour of assessee.
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2015 (3) TMI 730
Condonation of delay - Held that:- Clause (a) thereof denotes as to how the order/decision passed or any summons or notice issued under the above section shall be served. It shall be by tendering it personally or sending it by registered post to the person for whom it is intended or to his agent. Now, the words inserted with effect from 28 May 2012 are "registered post or by such courier as may be approved by the Commissioner of Customs". We do not find as to how reliance could be placed on clause (b) by the Tribunal in this case. It is only when the service is not possible in the manner provided in clause (a) that affixation of the order, decision, summons or notice on the notice board of the customs house is permitted. In such circumstances, if the packet containing copy of the adjudication order dated 10 March 2008 was not sent by registered post at the address to which the petitioner has shifted as informed way back in 1999, then, there is no question of placing reliance on clause (b) - Tribunal's order is vitiated by total non application of mind. - Tribunal is in error in dismissing the application for condonation of delay and therefore, this writ petition is allowed by setting aside the Tribunal's order. We allow the petitioner's application for condonation of delay and direct the Tribunal to hear the petitioner's appeal in accordance with law - Decided in favour of assessee.
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2015 (3) TMI 729
Levy of anti dumping duty - dumping of Pentaerythritol - only point urged on the part of the petitioner was that the petitioner, being an interested party, was not given an opportunity of oral hearing prior to the issuance of the final findings by the designated authority - Held that:- it is clear that the definition of interested party, being an inclusive one, cannot be regarded as an exhaustive or as a hard and fast definition. The expression interested party as defined would therefore refer to its natural, ordinary and popular meaning as also to the particular entities which are stated to be included, namely, an exporter or a foreign producer or the importer of an article subject to investigation for being dumped in India, or a trader or business association a majority of the members of which are producers, exporters or importers of such an article; the government of the exporting country; and a producer of the like article in India or a trade and business association a majority of the members of which produce the like article in India. In its natural and ordinary sense interested party would have reference to a party who is interested in the investigation and the ultimate outcome of it. The petitioner was an importer of Penta from other countries such as Sweden and Germany during the period of investigation. But, in the post POI period, the petitioner had imports of Penta from Russia. In any event, the petitioner was a prospective importer of Penta from Russia. It was therefore vitally interested in the outcome of the investigation into the complaint regarding dumping of Penta from Russia. The result of the investigation would affect the petitioner, one way or the other. - it is evident that the petitioner would be an interested party. In fact, as pointed out by Mr Balbir Singh, even the DA considered the petitioner to be an interested party and treated it as such in the impugned Final Findings. We are also in agreement with the views of CESTAT in the Lubrizol case with regard to the meaning to be ascribed to the expression interested party. The CESTAT decisions cited by Mr Sethi are clearly distinguishable as in those cases the concerned party had not participated in the investigation conducted by the DA. - petitioner falls within the expression interested party as defined in Rule 2(c) of the said Rules. DA functions as a quasijudicial authority and decides a lis between persons supporting the levy of duty and those opposing the levy. Furthermore, the DA is bound to follow the principles of natural justice and to give an opportunity of hearing to all interested parties, in fact, to all the parties, who have filed objections and adduced evidence. The petitioner, being an interested party and at least a party who had filed objections and adduced evidence was required to be heard, particularly, when it repeatedly asked for a hearing. It is also clear from the Supreme Court decision that written arguments / submissions / comments are no substitute for an oral hearing. In the backdrop of the clear enunciation of law by the Supreme Court [2011 (1) TMI 7 - SUPREME COURT OF INDIA], it has to be held that it is mandatory for the DA to give an opportunity of oral hearing to an interested party. DA has violated the principles of natural justice in not giving an opportunity of hearing to the petitioner. And, that is fatal. Consequently, the Final Findings, having been rendered in violation of the principles of natural justice, stand vitiated and cannot be sustained. As a result, the impugned Final Findings are quashed - Decided in favour of appellant.
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2015 (3) TMI 728
Maintainability of appeal - Section 35G - whether the benefit of concessional rate of duty in terms of Notification No.20/99 - Cus. dated 28.2.1999 as amended by Notification No.139/99- Cus. dated 30.12.1999 is available to the assessee on import of crude sunflower oil and what will be the rate of duty that is payable by the respondent, but for the notification in question - Held that:- it is apparent that the question as to the applicability of a notification or a circular which has a bearing on the determination of the rate of duty is a question which has a direct and proximate relationship to the rate of duty and to the value of goods for purposes of assessment. In the circumstances, the present appeal which relates to the applicability of the above referred circular, relates directly to the determination of rate of duty for the purpose of assessment and as such, in the light of the provisions of Section 35G read with Section 35L of the Act, this Court has no jurisdiction to entertain the appeal. - appeal is not maintainable - Following decision of Commissioner of Central Excise v. JBF Industries Ltd. [2010 (12) TMI 437 - GUJARAT HIGH COURT] - Decided against Revenue.
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Corporate Laws
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2015 (3) TMI 727
Application for sanction of Scheme of Amalgamation - Held that:- In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies; representation/reports filed by the Regional Director, Northern Region and the Official Liquidator, attached with this Court to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under sections 391 and 394 of the Companies Act, 1956. The Petitioner Companies will comply with the statutory requirements in accordance with law. - Petition of Scheme of amalgamation approved.
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2015 (3) TMI 726
Winding up application - Liability of Corporate guarantors in case of default by borrower - Director was not authorised by board of directors to execute the guarantee - Held that:- The respondent Companies in these petitions are not the Borrower company in so far as the financial assistance provided by the petitioner. The petitioner contends that the respondents have offered corporate guarantee for repayment of the loan by the Borrower company. Though the respondents contend that the liability of the borrower itself has not been adjudicated as yet, the petitioner has contended that a winding up petition has already been instituted, the respondent therein i.e., the borrower has not chosen to defend the same. It has been admitted and is pending before this Court. It is contended, even otherwise the documents relied on indicates that the Borrower company has not disputed the liability.Be that as it may, the legal position that the creditor can choose to proceed against the guarantor on establishing the debt cannot be in doubt. Therefore, the question herein is as to whether the defense raised by the respondent to the effect that the corporate guarantee claimed not being genuine is substantial which would require adjudication in an appropriate proceedings. To consider this aspect, the reference in that regard is made to the material relied on in the lead case as the consideration is similar in the other cases. In the instant case, in any event the parties are already before the appropriate forum raising the same issues and the adjudication therein will settle these issues, which if held against the respondent company and at that stage if it is shown that they are unable to repay their debts, certainly the petition can be entertained at that stage, but as of now, the substantial issues raised will weigh in favour of the respondent to secure adjudication of the same in the forum where it is pending and that aspect cannot be decided at this stage based on the averments made in the petition and the objection statement. - Petition disposed of.
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Service Tax
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2015 (3) TMI 748
Works contract service - taxability of service component before 1.6.2007 - Larger Bench decision - whether components of a composite transaction amounting to supply of labour/rendition of service(s), under a works contract ought to be classified only under Section 65(105)(zzzza) of the Finance Act, 1994 (the Act) - inserted by the Finance Act, 2007, w.e.f 01-06-2007; or are also comprehended within the ambit of existing (as on 01-06-2007) taxable services such as Commercial or Industrial Construction Service (CICS);Construction of Complex Service (COCS); or Erection, Commissioning or Installation Service (ECIS). Service elements in a composite (works) contract (involving transfer of property in goods and rendition of services), where such services are classifiable under "Commercial or Industrial Construction"; "Construction of Complex" or "Erection, Commissioning or Installation" (as defined), are subject to levy of service tax even prior to (01.06.2007) insertion of sub-clause (zzzza) in Section 65(105) of the Finance Act, 1994.
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2015 (3) TMI 745
Waiver of pre deposit - Opportunity of hearing not granted - Held that:- When Annexure-D order was passed, admittedly, the counsel for the appellant was absent. Therefore, the said order was passed without hearing the appellant. Insofar as this Annexure-F order is concerned, reading of the order itself show that the Tribunal was more influenced by the limits of its jurisdiction in an application for review. Evidently therefore, both these orders are passed without appreciating the merits canvassed by the appellant. - Matter remanded back - Decided in favour of assessee.
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2015 (3) TMI 744
Clearing and forwarding agent service - Whether in the facts and circumstances of the case, the finding of the Tribunal that the appellant/corporation is engaged in purchase/sale of liquor is a perverse finding and the Corporation is C & F agent as defined in Section 65(25) of the Finance Act, 1994 - Held that:- It is not disputed that if the corporation was engaged in sale and purchase of liquor for the State, then no service tax was payable. - The Tribunal has recorded a finding of fact that the Corporation was engaged in purchase and sale of liquor and could not be considered as clearing and forwarding agent for the State Government. It is finding of fact. No illegality in the finding has been pointed out. - No merit in appeal - Decided against Revenue.
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2015 (3) TMI 743
Availment of CENVAT Credit - Utilization of credit of the service tax on the insurance premium in respect of a Transit Insurance of induction furnace and transformer, Group Personal Accidental Policy and. Group Health Guard Policy of Company staff - Held that:- The Rule 2(l)(ii) is further defined by the description of certain services which are only inclusive. The transit insurance paid by the. Assessee on the aforesaid item is indirectly in relation to the manufacture of the final products and is included in service. - Tribunal committed no illegality in dismissing the appeal of the Department. - Decided against Revenue.
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2015 (3) TMI 742
Denial of refund claim - refund claims were rejected by the lower authorities on the ground that the appellant had claimed excess refund of the service tax paid by commission agent - Held that:- On a perusal of Notification no. 33/2008-ST we find that the said notification does not indicate that the words ten percent' shall be effective in the Notification 41/2007-ST from the date when it was issued. Secondly, we find that the benefit which has been sought to be given to the appellant is in respect of the exports which were made prior to the Notification came into existence, which in the case in hand, were eligible as per notification 41/2007-ST. In our considered view, the benefit of Notification no. 33/2008 can be claimed by the appellant from 07/12/2008 which is not in dispute as the Revenue has granted the said benefit to the appellant.- benefit of Notification no. 41/2007-ST was already in existence and was granted to the appellant and benefit of Notification 33/2008 was also granted to the appellant as on the date when it was enacted. - impugned order of the first appellate authority is correct and legal and does not require interference - Decided against assessee.
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2015 (3) TMI 736
Availment of CENVAT Credit - Outdoor Catering Service - Whether the assessee can utilise the cenvat credit facilities in respect of outdoor catering services, provided in the factory for its employees, as input service - Held that:- definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. In the facts of the present case, use of the outdoor catering services is integrally connected with the business of manufacturing cement and therefore, credit of service tax paid on outdoor catering services would be allowable. - Cost of any input service that forms part of value of final products would be eligible for CENVAT credit. That observation of the Division Bench is made in the context of a service which is held to be integrally connected with the business of manufacturing the final product. Therefore, the observation of the Division Bench in the case of Coca Cola India (P.) Ltd. (2009 (8) TMI 50 - BOMBAY HIGH COURT) has to be construed to mean that where the input service used is integrally connected with the business of manufacturing the final product and the cost of that input service forms part of the cost of the final product, then credit of service tax paid on such input service would be allowable. - Cenvat Credit has been properly availed in respect of outdoor catering services - Decided against Revenue.
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Central Excise
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2015 (3) TMI 746
Deemed credit denied to the re-rollers availing SSI Exemption - Benefit of Notification No.1/93-CE - Whether the re-rollers whose aggregate value of clearances in the current financial year had exceeded ₹ 75,00,000/- and who were paying full rate of central excise duty as applicable to re-rollers in respect of clearances exceeding ₹ 75,00,000/- in the current financial year, could still avail of the benefit of the Government of India Order - Held that:- From the heading of the notification it is clear that the benefit thereunder is available to S.S.I. units provided they have not exceeded clearances of rupees two crores in the preceding financial year. What is stated in the heading is provided under clause (3) of the notification which limits the entitlement to the benefit of the notification to S.S.I. units, the aggregate value of whose clearances have not exceeded rupees two hundred lakhs. In effect and substance, clause (3) of the notification provides for the eligibility criteria for getting the benefit of the said notification and accordingly provides that such S.S.I. units whose aggregate clearances in the preceding financial year have not exceeded two hundred lakhs shall be eligible to get the benefit of the said notification. Assigning a plain meaning to the language used in the Government Order dated 1st March, 1994, the rerollers who are eligible to get the benefit of the Notification No.1/93 and are availing exemption thereunder are eligible to get the benefit of deemed credit thereunder. Provision whereby the benefit of notification No.1/93 is limited to the aggregate value of clearances of specified goods to the extent of rupees seventy five lakhs relates to the extent of benefit that can be claimed under the said notification. However, the same is not an eligibility criteria for availing of the benefit of the said notification. A reroller who avails of the benefit of Notification No.1/93 is by dint of such fact eligible for the benefit of deemed credit under the Order dated 1st March, 1994 and the benefit under the said order is not qualified by the limit provided for availment of the benefit of Notification No.1/93. The decision of the Tribunal in the case of Digambar Foundary v. Commissioner of Central Excise (supra), whereby it is held that the eligibility to avail of the benefit under the order would be only to the extent the clearances do not exceed ₹ 75,00,000/-, is, therefore, an incorrect interpretation of the Order dated 1st March, 1994 as well as the Notification No.1/93. - Tribunal was not justified in holding that the benefit of deemed credit available under Order TS/36/94--TRU dated 1st March, 1994 passed by the Central Government in exercise of powers conferred under rule 57G(2) of the erstwhile Central Excise Rules, 1994 could be denied to the re-rollers whose value of clearances have crossed ₹ 75,00,000/- in a particular financial year for the purposes of exemption Notification No.1/93 on the ground that such re-rollers could not be said to be availing of exemption under the Notification No.1/93 dated 28-2-1993. Respondent M/s Sonthalia Steel Re-Rolling Mills had availed the benefit of deemed modvat credit of ₹ 5,74,098/- on 24th December, 1995 for input lying in stock, after the Notification:TS/36/94-TRU dated 1st March, 1994 came to be rescinded vide Notification:TS/8/95-Tru.-CE (NT) dated 16th March, 1995 whereby the Central Government in exercise of powers under the second proviso to sub-rule (2) of rule 57G of the rules rescinded the order dated 1st March, 1994 with effect from 1st April, 1995. Thus, to the extent M/s Sonthalia Steel Re-Rolling Mills had availed the benefit of the order dated 1st March, 1994 after it came to be rescinded with effect from 1st April, 1995, it was not entitled to such benefit. - Decided partly in favour of assessee.
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2015 (3) TMI 737
Evasion of duty - Ignorance of law - Imposition of penalty u/s 11AC - Held that:- There is a specific finding by the Commissioner that only due to ignorance of law, the assessee has not paid the duty. It is trite law that ignorance of law cannot be a ground to avoid tax liability and to allow the appeal. There is yet another factor involved in the present case, viz., IOC being a public sector undertaking, as has been admitted by the Tribunal, is under excise control for generations. IOC has supplied goods in bulk and, therefore, show cause notice has also been issued on them. Therefore, IOC should have been well aware of the change in circumstances. In such circumstances, it should be expected that the assessee was aware of the position through IOC. Further, the assessee having an unit at Bombay, would have been aware of the changes in the law and, therefore, it cannot come before this Court and seek indulgence on the ground of ignorance of law. IOC, which is a public sector undertaking and admittedly coming under the Excise Control for generations, as observed by the Tribunal, should have, at the time of supply of bulk goods, informed the assessee that on repacking, duty liability has to be discharged. In this case, correct information was not disclosed to escape payment of duty. - The statement recorded from the persons and the finding of the Commissioner in the earlier and later orders clearly show that it is a case where proviso to Section 11A could be invoked. Taking note of the specific provision of Section 11AC where there is a specific mandate that the assessee shall be liable to pay penalty, the mere payment of duty even after the show cause notice is not a ground to waive penalty. Hence, the Tribunal is not justified in deleting the penalty imposed under Section 11AC of the Central Excise Act. Such a mandate under the Statute cannot be given a go-by by the Tribunal. - penalty imposed under Section 11AC is justified. Since this Court has held that the duty demand and the penalty are justified due to suppression of materials by the assessee, the consequential payment of interest on delayed payment of duty stands attracted automatically and the Revenue is justified in invoking Section 11AB directing payment of interest. - Decided in favour of Revenue.
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2015 (3) TMI 735
Denial of refund claim - Unjust enrichment - Held that:- as is evident from the records, it is not a case of refund of duty. It is a pre-deposit made under protest at the time of investigation, as has been recorded in the original proceedings itself. In this regard, it has to be noticed it has been the consistent view taken by the Courts that any amount, that is deposited during the pendency of adjudication proceedings or investigation is in the nature of deposit made under protest and, therefore, the principles of unjust enrichment does not apply. - Refund allowed - Decided against the revenue. Whether the Tribunal was justified in holding that without a show cause notice issued under Section 11-A, there could be no recovery consequent to proceedings initiated under Section 35-E of the Act - Held that:- In the impugned order passed by the Tribunal, however, the judgment in Asian Paints (supra) was distinguished by the Tribunal on the ground that the said decision did not deal with the issue as to whether a notice under Section 11A of the Central Excise Act is mandatory for the purpose of proceeding for recovery and, thereby, on the facts of the present case, it was held to be not applicable. On a perusal of the above decision, as also the impugned order of the Tribunal, this Court is of the considered view that the distinction as drawn by the Tribunal distinguishing the said judgment with the facts of the present case is fully justified and does not warrant any interference, since the issue that arise in the case on hand is whether issuance of show cause notice is mandatory under Section 11A of the Act. On a careful reading of Section 11-A, it is clear that the said section mandates the issuance of a show cause notice, prior to passing an order, asking the person to show cause as to why duty, which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, shall not be paid. From a perusal of the documents available on record, as also the order of the Tribunal, it is clear that no such notice, as mandated under Section 11A, was issued for recovery of the duty on the ground of erroneous refund. This view is further fortified by the decision of the Supreme Court in the case of Collector Vs Re-rolling Mills (1997 (7) TMI 124 - SUPREME COURT OF INDIA). Further, the Board's Circular No.423/56/98-CX dated 22.9.1998 also stresses the need for the concerned Departments to issue timely demands through show cause notices within six months period as contemplated under Section 11A of the Act. This in itself shows that the show cause notice, as provided under Section 11A of the Act is mandatory in nature and the same has to be adhered to before proceeding further in the matter. Further, as has been observed by the Tribunal, circulars issued by the Board are binding on the Departmental authorities. Therefore, In the absence of any such show cause notice, which is mandatory, the Department cannot seek recovery of the amount. - Decided against Revenue.
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2015 (3) TMI 734
Invocation of extended period of limitation - Suppression of facts - Whether or not period of five years provided under proviso to Section 11A(i) can bar the demand of Central Excise duty when the clearance are affected by reason of willful mis-statement and suppression of facts and in contravention of the provisions of the Act and Rules - Held that:- Inspection was carried out by the Officers of the appellants on 16.91996. The first show-cause notice was issued on 14.3.1997 and the second showcause notice was issued on 20.4.1998 and the third show-cause notice was issued on 27.3.2001. It is true that the show-cause notices were issued with regard to part of the transactions for different periods, but on the basis of the same inspection made on 16.9.1996. Once the earlier show-cause notices were issued with regard to the same inspection, then the averment of the department cannot be accepted that they have discovered suppression, fraud etc. subsequently. Everything was within the knowledge of the department from the date of inspection and from the Panchnama made by them on 16.9.1996. Therefore, in view of the peculiar facts and circumstances of the case, the extended period of five years was not available to the department. - Decided against Revenue.
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2015 (3) TMI 733
Excisability of the respondent's product custom pack - Whether in the facts and circumstances of the case, the process carried out by the assessee will amount to manufacture or not - Held that:- The appellant has placed reliance on the decision of the Apex Court in the case of FEDDERS LLLOYD CORPORATION LTD. VS. COMMISIONER OF CENTRAL EXCISE, MUMBAI reported in [2007 (12) TMI 8 - SUPREME COURT OF INDIA] wherein the definition of the word `manufacture' as laid down in Section 2(f) of the Central Excise Act has been considered and the law laid down by the Apex Court is clear that process will result in alteration or change in the fact leading to production of a commercially new article as a manufacture. In the instant case, the Tribunal has recorded its finding of fact that the product is only `pack' and no new product is manufactured by the respondent assessee and therefore no excise duty could be levied. Therefore, the decision of the Apex Court is no help to the appellant as only packaging of product is being done of the goods which are manufactured by the assessee. - No merit in appeal - Decided against Revenue.
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2015 (3) TMI 732
Availment of deemed credit - deemed credit on Iron and Steel Re-rollable materials @ ₹ 920 PMT - Whether the Tribunal is correct in extending the deemed credit benefit to a unit availing Notification No.1/93-CE dated 28.2.1993, even after crossing the value of clearances of their goods of ₹ 75 lakhs and when they are paying full rate of duty after crossing the exemption limit - Held that:- this court has affirmed the view taken by the Tribunal at Madras [1996 (3) TMI 262 - CEGAT, MADRAS] - The result is that the respondent assessee was entitled to the benefit of deemed credit benefit in pursuance of the notification dated 28.2.1993. - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (3) TMI 747
Levy of tax on the purchase turnover of goods under Section 3 (4) of the Tamil Nadu General Sales Tax Act - Held that:- since they had effected only export sales of finished goods by using the goods purchased against Form XVII declarations and have not transferred the goods to other state agent or to their own branch in other state in order to attract levy u/s 3 (4) of the Act. - Following decision of Tube Investment of India Limited Vs State of Tamil Nadu (2010 (10) TMI 938 - MADRAS HIGH COURT) - No substantial question of law arises for consideration in these revisions - Decided against Revenue.
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2015 (3) TMI 741
Detention of goods and truck - Held that:- Although there are four modes provided in Rule 77 of the RVAT Rules, but there is no reason for the respondent to insist upon the petitioner for furnishing bank guarantee, who according to its own showing is a driver and the respondent in the case of other identical parties has adopted last mode of furnishing of security i.e., executing a bond in Form RVAT-64, with necessary modifications where necessary, with two sureties acceptable to the officer or authority concerned. - Ends of justice therefore would meet if the respondent is directed to release the goods along with truck of the petitioner on furnishing of security for a sum of ₹ 13,55,303/- by way of submitting a bond in RVAT Form 64 along with two sureties, as per his offer, of local parties, acceptable to the authorised officer, as per provisions of Rule 77 of the RVAT Rules within ten days. - Petition disposed of.
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2015 (3) TMI 740
Arrears of commercial tax - Proceedings for recovery of same initiated - Court granted option to pay a sum of ₹ 5 crores within a period of six weeks and the remaining amount in eight equal monthly installments - whether the learned Single Judge was correct in permitting the assessee to pay the amount in installments - Held that:- Section 42 of the Act gives a clear indication that it is open to the assessing authority to permit the assessee to pay the amount in instalments. The section provides that the amount due under the Act shall be paid in such manner, meaning thereby, tax amount should be paid within the time indicated in the order or in such instalments permitted by the assessing authority. Sub-clause 3 of Section 42 of the Act mandates payment of statutory interest at the rate of 2% per month for the entire period of default. The Act, therefore, gives the authorities, power to permit the assessee to pay the amount in instalments. The appellants are given discretion to fix the period of payment and instalments. It was only on the strength of the said provision, the learned Single Judge passed a discretionary order permitting the assessee to pay the tax amount in instalments. When there is a provision permitting payment of tax amount in instalments, subject to payment of statutory interest, the appellants cannot be heard to say that the learned Single Judge erred in quashing the coercive action taken by the fourth appellant and permitting the assessee to pay the amount in installments. - The order passed by the learned Single Judge should be read in the light of sub-clause (1) and sub-clause (3) of Section 42 of the Act, meaning thereby unless extension is given, the entire amount in arrears shall become due immediately, in case of default. We are of the view that no interference is necessary in the order passed by the learned Single Judge, in the light of Section 42 of the Act. - Decided against Revenue.
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2015 (3) TMI 739
Government amensty scheme - Payment of excess duty - Claim of refund - Refund barred as per Para 13 of scheme - Held that:- The Scheme requires a sealer to pay the principal tax itself and seek amnesty from further proceedings of interest, penalties, recoveries, etc. The requirement was for agreeing to pay such amount, and not to seek refund in any condition. The Scheme clearly envisaged that there would be no further burden of interest and penalty. Under the circumstances, what the Government would collect from an intending dealer was the past tax dues minus the penalty and interest. If for some reason, purely by mistake any amount larger than the principal tax due is collected, the same would not be hit by paragraph 13. Paragraph 13 only prevents a dealer from claiming and Government from refunding any excess refundable under the Scheme. Any amount which is mistakenly paid over and above what was required to be paid by the dealer and collected by the Government cannot be categorized as an amount paid under the Scheme. The conclusions, however, are based on our ad hoc presumption that the petitioner did deposit a sum larger than what was required under the Scheme, and that this has happened because of apparent error of arithmetic calculation on the part of the Government. If either of these two premises are proved to be wrong, the ultimate benefit would not flow to the petitioner. We make it clear that there would be no case of refund, if it is found that the entire amount of ₹ 6,56,713/was towards the principal tax due or that this question itself is a disputable and arguable issue. We must recall that the Scheme desired to put an end to all disputes. We cannot permit the petitioner to raise a fresh dispute and pursue legal proceedings, particularly when the petitioner applied for the benefit of the Scheme and deposited such sum as was told to him by the authority. - impugned communication dated 31.12.2012 is quashed. The authorities are directed to verify the petitioner's claim that under the Amnesty Scheme what was actually payable by the petitioner by way of principal tax due, ignoring interest and penalty, was not ₹ 6,56,713/, but ₹ 4,33,128/. To the extent it is found that there was overpayment, the same shall be returned without interest. - Decided in favour of assessee.
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2015 (3) TMI 738
Maintainability of appeal - Application for condonation of delay - Bombay Sales Tax Act, 1959 - whether return of kerosene without N-parafin by the Petitioner No. 2 to the Petitioner No.1 amounts to return of goods. - Held that:- it is not necessary to interfere with the impugned order in our discretionary and equitable powers under Article 226 of the Constitution of India at this preliminary stage. The matter is still at large and on merits. It may be that an application for stay is pending, however, considering the checkered history of the litigation and the time spent in prosecution of the same, we are of the opinion that this Writ Petition can be disposed of by appropriate clarifications. In the event the final orders in the Appeal are in any way adverse to the Petitioners, then, while challenging the same, the Petitioners can raise all contentions and grounds including as set out in the present Writ Petition to impugn the findings rendered at the preliminary stage on the point of power or the authority of the officer to present the Appeal and on the point of limitation. The Petitioners can, by way of appropriate proceedings, including requesting the Tribunal to forward certain questions of law for opinion and answer by this Court, request that the findings on the above two questions also raise questions of law and they may be referred for opinion and answer of this Court. - Petition disposed of.
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Indian Laws
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2015 (3) TMI 725
Abuse of dominant position in supply and distribution of natural gas - Contravention of the provisions of section 4 of the Competition Act - Report of the DG - Unilaterally terms and conditions in Gas Sales Agreement - Held that:- In the result, the Commission is of opinion that the relevant market in the present case is the market of supply and distribution of natural gas to industrial consumers in the district Faridabad. In the present case, the Commission observes that the opposite party has 100% market share in the relevant market being the only entity authorized by Government of Haryana to set up and operate CGD network in Faridabad. Further, it appears that distribution of natural gas is regulated by the Petroleum and Natural Gas Regulatory Board (PNGRB) established under the Petroleum and Natural Gas Regulatory Board Act, 2006 (PNGRB Act). As per the provisions of the PNGRB Act and the regulations framed thereunder, PNGRB is empowered to register and authorize downstream market activities such as laying, building and operating natural gas distribution networks, ensure access to customers on a common carrier basis, register entities to market natural gas subject etc. It may also be noticed that the regulations contain provisions to grant 25 years infrastructure exclusivity to lay, expand or operate a CGD network. Moreover, the Authorization Regulations provide up to three years marketing exclusivity from the date of authorization to an existing CGD networks and five years from the date of authorization to a new CGD network from the purview of common or contract carrier, after which there is a provision for "open access", which allows competition and choice to the consumer. In the aforesaid circumstances and after further taking into account the absence of any countervailing buying power, market structure and size thereof as also the entry barriers, the Commission holds the opposite party to be in dominant position in the defined relevant market. It may be noted that though clause 11.2.4 absolves the opposite party from consequential damages in the event of disruption of supply, clause 21.5 (Exclusion of Consequential Loss) of GSA executed between the opposite party and its industrial consumers provides that neither party shall be liable for any indirect, incidental or consequential loss or damage or loss of opportunity or profits. Moreover, this clause is a reflection of the upstream agreement of the opposite party with its supplier i.e. GAIL. In these circumstances, it may be observed that the impugned clause, in light of conspectus of various clauses as discussed, appears to be evenly balanced and no contravention of the Act can be found on this count. The Commission is of the opinion that the clause regarding likely termination of contract by the opposite party on account of failure to off-take 50% or more of the cumulative DCQ by the buyer during a period of 45 consecutive days as against the longer period available to the opposite party from GAIL, amounts to imposition of unfair conditions in contravention of section 4(2)(a)(i) of the Act. As the opposite party had uniformly stipulated the said condition in the GSAs executed with all its industrial consumers, the allegations of the informant regarding discriminatory conduct of the opposite party in terms of section 4(2)(a)(i) of the Act is not made out. In view of the above discussion, the Commission is of opinion that the opposite party has contravened the provisions of section 4(2)(a)(i) of the Act by imposing unfair conditions upon the buyers under GSA. Order issued to opposite party to cease and desist from indulging in conduct which is in contravention of the provisions of the Act and to modify in gas supply agreement accordingly.
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2015 (3) TMI 724
Abuse of dominant position - Arbitrary clauses in Buyer Builder Agreement - Contravention of the provisions of section 4 of the Competition Act - Held that:- The Informant alleged that OPs were dominant in the relevant market. However, having regard to the factors stated under section 19(4) of the Act, it does not appear so. Apparently, there are several other real estate developers such as DLF, Ramprastha Group, Anantraj Group, Earth Infrastructure Group etc. which are operating in the relevant market. As per informants own submissions, the land bank of OPs in the relevant market in Gurgaon is around 778 acres. As per the information available in public domain the land bank of other players e.g. DLF (over 3000 acres), Ramprastha Group (over 1000 acres), Anantraj Group (around 100 acres) is also enormous. Accordingly, it seems unlikely that with such land bank, the OPs had huge size or resources or any other advantage that could have capacitated them to work independently of their competitors. Since the case under section 4 of the Act depends primarily on the position of the Opposite Parties i.e. whether they held a dominant position or not, in the absence of OPs holding a dominant position the Commission need not go into the question of abuse. Based on the foregoing, no prima facie case of contravention of the provisions of section 4 of the Act is made out against the opposite parties. It is a fit case for closure under section 26(2) of the Act and the same is hereby closed.
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