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TMI Tax Updates - e-Newsletter
March 28, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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GST Bills - PDF files + Clause by Clause
Income Tax
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The penalty u/s 271(1)(c) was imposed because the assessee did not offer any explanation to the assessing officer in the first instance and then the penalty was sustained because his explanation furnished before the CIT (Appeals) was rejected. - Levy of penalty confirmed - HC
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Where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit - HC
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Charitable activity u/s 2(15) - Exemption u/s 11 - asylum to old, maimed, sick and disabled cows - an incidental activity of selling milk which may result in receipt of money, by itself would not make it trade, commerce or business nor an activity in the nature of trade, commerce or business to be hit by the proviso to Section 2(15) - HC
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Section 145 (1) permits two process of accounting and it is not the case of appellant that double entry system of account is not a recognized mercantile system of accounting provided under Section 145(1) and in absence of anything shown otherwise, we find nothing wrong in the method of accounting adopted by Assessee and, therefore, this question is also answered against Revenue - HC
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Admission of additional evidence - no doubt the assessee did not cooperate with the Assessing Officer in completion of the assessment proceedings and that the books of account etc were not produced inspite of opportunity but the said evidence might have been relevant for the calculation of the real income of the assessee - CIT(A) directed to admit and consider additional evidences - HC
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Reassessment u/s 147/148 - the mandatory procedure of disposal of the objection by AO before proceeding with the assessment has not been followed and exercise of power can be said as not only vitiated, but the order of assessment cannot be sustained - HC
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Addition u/s 14A - If even after the decrease the assessee has interest free funds sufficient to make the investment in assets yielding the exempt income, the presumption that it was such funds that were utilized for the said investment remains. There is no reason for it not to. - No addition - HC
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Unexplained cash deposit - In many cases, small amounts were withdrawn two or three times on a single day by different persons. Further, the deposits in Bank were made after a gap of two-three instances of withdrawals - assessee was not able to link the cash withdrawn from the bank with the cash deposit - additions confirmed - HC
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Disallowance of deduction - AO should have made disallowance only while framing regular assessment or reassessment, which was made prior to resorting to this rectification. This disallowance cannot be made while acting u/s.154 of the Act reason being this is not a prima facie mistake it is a highly debatable issue - HC
Customs
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Levy of ADE - the goods which were imported by the appellant were diverted to the domestic market - the justification provided for levy of ADE at the rate of 8% under Section 3(5) of CTA, cannot be sustained. - HC
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Classification of imported goods - Thermacool Thermage Radio Frequency Therapeutic device and its accessories - beauty care equipment or medical device? - the device is nothing but a medical device which helps in treatment - goods are properly classified under Chapter 9018 - AT
Service Tax
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Nature of activity - levy of service tax - When the assessee-Appellants had no relationship with the imported goods, then the services provided by them were nothing else but marketing services - AT
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Security agency service provided by the society of ex-serviceman - commercial concern or not - tax entry section 65(105)(w) - demand of service tax confirmed for the full period - AT
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Exemption under notification no. 12/2013 dated 01.07.2003 - The material where the VAT has already been paid cannot be brought to the service tax levy; otherwise it would amount to double taxation. However, where the VAT is not paid the value of the goods as well as the service is subject to the service tax - AT
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De-husking of the paddy is covered in relation to the agricultural activity hence, the service tax is not applicable on such activity - AT
Central Excise
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When once duty is paid by the assessee treating the activity as manufacturing activity by the Department, CENVAT credit is available and there is no question of reversal of CENVAT credit - HC
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Penalty u/s 11AC - Whether the appellant was entitled to the benefit of payment of only 25% of the penalty? - The first Proviso not having been complied with, the appellant is not entitled to the benefit of the second Proviso - since demand was not deposited within 30 days, no relief from penalty - HC
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CENVAT credit - Whether the appellant is eligible to avail cenvat credit on the items which are used in the transmission line which has been erected as dedicated transmission line only for the appellant’s use? - Held Yes - AT
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Classification of goods - rate of duty - wheat puffs - goods have been cleared to Integrated Child Development Scheme (ICDS) for free supply and not for sale - the classification of the product Wheat Puff will be most appropriate under CETH 1904.90 and not under 1904 10 - AT
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SSI exemption - use of brand name of others - packing material - brand name used on packaging material supplied to the person owning the brand name, would not be the basis for denial of SSI exemption to the manufacturer of said final products - AT
Case Laws:
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Income Tax
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2017 (3) TMI 1297
Eligible for deduction u/s 80IB(11A) - income of kasar (discount) treated as not not derived from the eligible industrial undertaking - Held that:- There is no quarrel about the fact that the assessee received the impugned purchase discount from raw materials/consumables suppliers to the tune of ₹ 2,99,1537- as utilized in its eligible business of manufacturing of specialty chemicals whose profits are already eligible for section 80IB deduction. Both the Id. lower authorities do not rebut assessee's books specifically stating the crucial live nexus between the discounted raw materials and its manufactured specialty chemicals. Net effect thereof is that assessee's eligible profits derived from its manufacturing activities have seen increased since raw material costs have come down due to the impugned discount forming integral part of the manufacturing process. We conclude in these peculiar facts that the authorities below have wrongly equated these facts with those involved in hon'ble apex court decision in Liberty India vs. CIT (2009 (8) TMI 63 - SUPREME COURT ) involving DEPB sales figures. We accept assessee's contentions on merits and reject those raised at Revenue's behest supporting the impugned disallowance. Thus assessee is eligible to claim deduction u/s 80IB on the income from discount (kasar) - Decided against revenue Non treating, interest of received from PGVCL, interest subsidy received from Government of Gujarat through district industrial center and interest from FDR eligible for deduction u/s 80IB(llA) - Held that:- As regards interest received from Government of Gujarat issue is squarely covered in favour of assessee in the case of Commissioner of Income Tax vs. Meghalaya Steels [2016 (3) TMI 375 - SUPREME COURT ] as held the subsidies were only in order to reimburse, wholly or partially, costs actually incurred by the assessee in the manufacturing and selling of its products. Examining the facts of the case in the light of above judgment we are of the considered view that assessee has also received interest subsidy from Govt. of Gujarat for the project undertaken by the assessee eligible for deduction u/s 80IB(11A) of the Act and, therefore, since subsidy received is also a part of profit and loss account of the industrial undertaking it is eligible for deduction u/s 80IB(11A) of the Act. We, therefore, allow assessee's claim of deduction u/s 80IB As regards interest received from PGVCL and interest on FDRs certainly this income does not have direct nexus with the profit and loss of the undertaking but it is also a fact that the deposits with PGVCL and deposit with the bank FDRs have been indirectly carried out in the process of business only with regard to statutory deposits to be made or surplus funds deposited with Bank. Ld..As AR requested for netting of the interest income against interest paid we find substance in the argument of ld. Authorised Representative and are of the view that benefitting of netting of interest should be allowed to the assessee against the interest expenditure claimed by the assessee and resultantly there will be nil effect to the eligible profit for the purpose of claiming deduction u/s 80IB (11A) of the Act and accordingly, this ground of the assessee is allowed. See ACG Associated Capsules Pvt. Ltd. [ 2012 (2) TMI 101 - SUPREME COURT OF INDIA ] Notionally reducing amount on account of remuneration and interest payable to the partners as per the partnership deed from the eligible profit to claim deduction u/s 80IB(11A) - Held that:- As the assessee was having discretion of providing interest and remuneration to partners, and in the year under appeal it decided to not to book any such expenditure ld. Assessing Officer's was not justified in notionally calculating the interest and remuneration at ₹ 10,92,653/- and ₹ 251634/- and reducing deduction u/s 80IB(11A) of the Act by ₹ 13,44,287/-. Accordingly, we set aside the order of ld. Commissioner of Income Tax(A) and allow this ground of assessee. Disallowance on account of late payment of PF u/s 36(l)(va) - Held that:- During the course of assessment proceedings ld. Assessing Officer disallowed a sum of ₹ 31,421/- being employees contribution to PF Asst. Year 2010-11 deposited after the due date as statutorily provided under the Act. Ld. Commissioner of Income Tax(A) confirmed the disallowance. We observe that Hon. Jurisdictional High Court in the case of Commissioner of Income Tax vs. Gujarat State Road Transport Corporation (2014 (1) TMI 502 - GUJARAT HIGH COURT ) held that if the employees contribution to PF is deposited beyond the due date as provided in the statute then such expenses cannot be claimed as deduction against the gross revenue. Respectfully following the judgment of Hon. Jurisdictional High Court in the above case, we find no reason to interfere with the order of ld. Commissioner of Income Tax(A) confirming the disallowance with respect to late payment of employees PF. - Decided against assessee.
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2017 (3) TMI 1268
TDS u/s 194C - disallowance under Section 40(a)(ia) - Held that:- We find that the High Court has referred to the provisions of Sub-Section(3) of Section 194C of Act as well as Rule 29D of Income Tax Rules. Sub-Rule (3) of Rule 29D stipulates that the particulars under the third proviso to clause(i) of sub-section (3) of Section 194C to be furnished by a contractor responsible for paying any sum to such sub-contractor shall be in Form No. 15J. The High Court has treated the filling of the said Form as a prerequisite and on that basis held that provisions of Section 40(a)(ia) of the Act could not be invoked. In the process the High Court has failed to notice that even that aspect of not filling Form No. 15J is kept aside, in the present case, the income of the assessee on the total contract receipts of ₹ 74,81,106/- had been reached at by applying the net rate of profit after reduction and, thus, no further addition could be made under Section 40(a)(ia) of the Act. This is the reason which is rightly ascribed by the Commissioner of Income Tax (Appeals)to the order.
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2017 (3) TMI 1267
Valid authorization for search - block assessment validity - Held that:- In the instant case, the Deputy Director of Income Tax (Investigation), New Delhi authorized the search in the case of the assessee on 14.10.1998 that is well after the amendment. We are, therefore, of the opinion that the Deputy Director of Income Tax (Investigation), New Delhi was competent to authorize the search on 14.10.1998 in view of the amendment made on 01.10.1998 by Finance No.(2) Act of 2009 with retrospective effect. In view of the above, the finding of the Tribunal is clearly based on misreading of the amendment and it cannot be sustained, it is set aside. Accordingly, the substantial questions of law raised in the memo of appeal are answered in favour of the revenue and against the assessee. Assessee, however, points out that the Tribunal has not adjudicated the issue on merits in the appeal filed by the assessee.The matter is remitted to the Tribunal to adjudicate the assessee's appeal on merits and in accordance with law as expeditiously, as possible.
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2017 (3) TMI 1266
Words "the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner" in Section 260A (2) (a) interpretation - whether mean only the 'jurisdictional' Principal or Chief Commissioner of Income-tax (CIT) or could it include any CIT including the CIT (Judicial)? - period of limitation - Held that:- The word ‘received’ occurring in Section 260A (2) (a) would mean received by any of the named officers of the Department, including CIT (Judicial). The provision at present names four particular officers i.e. the Principal Commissioner, Commissioner, Principal Chief Commissioner, and the Chief Commissioner of Income Tax. These are the only designations of the officers who could receive a copy of the order. In the absence of a qualifying prefix ‘concerned’, the receipt of a copy of the order of the ITAT by any of those officers in the Department including the CIT (Judicial) will trigger the period of limitation. In Section 260A (2) of the Act, the words CIT, Pr CIT or Chief CIT are not prefixed or qualified by the word 'concerned'. There is no warrant for the Court to read into the provision such a qualifying word. The Court rejects the contention of the Revenue that limitation for the purposes of Section 260A (2) (a) begins to run only when a certified copy of the order of the ITAT is received by the 'concerned' CIT within whose jurisdiction the case of the Assessee falls notwithstanding that it may have been received by any other CIT, including the CIT (Judicial) prior thereto. As far as the obligation of the ITAT under Section 254 (3) of the Act is concerned, the said obligation is satisfied once the ITAT sends a copy of an order passed by it to the Assessee as well as to the Pr CIT or the CIT or even the CIT (Judicial). The ITAT has to be simply go by the details as provided to it in the memo of parties. If there is a change concerning the jurisdiction of the CIT and it is some other CIT who has jurisdiction, it will not have the effect of postponing the commencement of the period of limitation in terms of Section 260A (2) (a) of the Act. The statute is not concerned with the internal arrangements that the Department may make by changing the jurisdiction of its officers. It is for the officer of the Department who first receives a copy of the ITAT’s order to reach it in time to the officer who has to take a decision regarding the filing of an appeal. While there is no requirement for the DR or CIT (Judicial) to apply for a certified copy of the ITAT, in any event under the extant ITAT Rules, a copy of the order is sent to the CIT (Judicial). In the context of Section 260A(2)(a) of the Act, once an order is listed for pronouncement in the ITAT, the DR or the CIT (Judicial) should be taken to be aware of the order. From that point, it is a purely an internal administrative arrangement as to how the DR or CIT (Judicial) obtains and further communicates the order to the officer who has to take a decision on filing the appeal. It is possible that immediately after pronouncement, the AR or the DR or both may apply for a certified copy of the order of the ITAT. In that case, the time taken for the certified copy to be readied for collection by the applicant will be excluded while computing limitation. But here again, if earlier to such date, a copy is received by a party from the ITAT, then such earlier date will be the starting point for limitation. Period of limitation - Held that:- The receipt of a certified copy of the order of the ITAT by CIT (Judicial) would trigger the commencement of the limitation period under Section 260 A (2) (a) of the Act. Where there, is a common order of the ITAT covering the several appeals, limitation would begin to run when a certified copy is received first by either the CIT (Judicial) or one of the officers of the Department and not only when the CIT ‘concerned’ receives it. When the same CIT has jurisdiction for more than one Assessee, the limitation begin to run for all from the earliest of the dates when the DR of CIT (Judicial) or any CIT first receives the order in any of the cases forming part of the batch disposed of by the common order. If there are four separate orders passed, then the limitation begins to run when such separate orders are received first by any officer of the Department. Instructions issued by the Department for its administrative convenience cannot alter the time when limitation would begin to run under Section 260A (2) (a) of the Act. To reiterate these administrative instructions are for the administrative convenience of the Department and will not override the statute, in particular, Section 260A (2) (a) of the Act.
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2017 (3) TMI 1265
Penalty proceedings under Section 271(1)(c) - unexplained cash credit standing in the assessee's books in the names of minor sons of the partners of the assessee firm - Held that:- We cannot loose sight of the fact that the minors in question were children of the partners in the firm and therefore, it had to be the partners who would have both arranged the gifts and also made the decisions to introduce money into the firm in name of the minors. It was therefore for them to have established the genuineness of the transaction as otherwise, in such circumstances, it would be to allow assessee's to place the minors in between themselves and the firm to escape the consequences in law by citing the rule - revenue cannot look into the source of the source. Further, in the facts of the instant case, the question of examining the source of the source may have been an issue in the quantum proceedings in which as has been candidly stated by Shri. Bansal, the findings recorded against the assessee have attained finality. In the instant proceedings, the penalty was imposed because the assessee did not offer any explanation to the assessing officer in the first instance and then the penalty was sustained because his explanation furnished before the CIT(Appeals) was rejected. The provision of Explanation 1 to section 271 (1) (c) having been thus invoked, no further enquiry was required in the facts of this case. - Decided against assessee.
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2017 (3) TMI 1264
Reopening of assessment - apllying provisions of Section 55-A and 142-A-(i) - Held that:- Reassessment proceedings initiated against the assessee upon information of undisclosed investment in immovable property relying on the report of the Income Tax Inspector and the report of the District Valuation Officer is valid in view of the distinguishing features of this case that admittedly investments were made in such property and further nature of investment made is from undisclosed income, the assessee having not filed its returns of income for the years in which such investment was made. The Tribunal was not in error in so far as it has upheld the initiation of re-assessment proceedings. Accordingly, question nos. 'A' and 'B' raised in the memo of appeal are decided against the assessee and in favour of the revenue. Unexplained investment in the building - Held that:- We find essentially the issue raised in question no. 'C' is a question of fact on which the Tribunal has recorded its finding after due appraisal of the evidence and material existing on record. In view of the above, the finding of the Tribunal sustaining the part of ₹ 6,76,441/- does not suffer from any infirmity. The question is answered accordingly. Addition in part claimed as deduction made by the wife of assessee - Held that:- Tribunal has recorded its finding upholding disallowance of certain cash credit entries in the books of account of the assessee, the Tribunal has considered the material and evidence at length and has thereafter sustained part disallowance. While the identity of the creditors may have been established by the assessee, the other essential ingredients of their credit worthiness and genuineness of the transaction were not found established by the Tribunal. These findings of fact are again based on appraisal of evidence. Again, we do not find any infirmity in these finding of fact recorded by the Tribunal. Question no. 'D' is also answered accordingly.
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2017 (3) TMI 1263
Unexplained cash credit - addition u/s 68 - ITAT deleted addition - Held that:- three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. - Decided in favour of assessee Disallowance under Section 14A - whether the Tribunal was justified in restricting the disallowance under Section 14A of the Act only to the amount of expenditure claimed by the assessee in the absence of any such restriction under Section 14A and/or Rule 8D? - Held that:- Admit the substantial question of law no (II) The issue arising in question no. (ii) is essentially whether application of Rule 8D(2)(iii) of the Income Tax Act Rules would permit the Revenue to disallow expenditure not claimed i.e. much larger than the expenditure / debited in earning its total income. The Counsel inform us that there is no decision on this issue of any Court available and it would affect a large number of cases where similar issues arise. Therefore, this issue would require an early determination. In the above view, at the request of the Counsel, the appeal is kept for hearing on 17th April, 2017 at 3.00 p.m., subject to overnight part heard.
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2017 (3) TMI 1262
Charitable activity u/s 2(15) - Entitlement for continued registration u/s 12A - activities carried by the assessee were commercial in nature - Held that:- Tribunal has recorded a finding of fact that the dominant function of the respondent Trust is to provide an asylum to old, maimed, sick and stray cows. Further, only 25% of the cows being looked after yield milk and if the milk is not procured, it would be detrimental to the health of the cows. Therefore, the milk which is obtained and sold by the respondent assessee is an activity incidental to its primary / principal activity of providing asylum to old, maimed, sick and disabled cows. In the present facts, the activity of milking the cows and selling the milk is almost compelled upon the Trust, in the process of giving asylum to the cows. In our view, the activity to be considered in the nature of trade, commerce or business would in most cases have to be carried out on a regular basis with a view to earn the profit. The presence of the profit intent (even if it does not fructify) would normally be a sine qua non for the activity to be considered as trade, commerce or business. Therefore, in the present facts, it is not as though the keeping of the cows and milking them was with a view to carry out activity in the nature of trade, commerce or business to earn profits. The Revenue has not shown how even in the absence of profit motive, the activity of obtaining milk and selling the same would still be an activity of trade, commerce or business. In the alternative, Mr. Malhotra submitted that the proviso to Section 2(15) of the Act would apply even if it is not trade, commerce or business but only in its nature. However, how and why the activity of selling milk obtained incidentally while taking care of the cows, is in the nature of trade, business or commerce is not shown. Admittedly, in the present facts, the dominant activity carried out by the respondent assessee's Trust for over 130 years is to take care of old, sick and disabled cows. In these circumstances, an incidental activity of selling milk which may result in receipt of money, by itself would not make it trade, commerce or business nor an activity in the nature of trade, commerce or business to be hit by the proviso to Section 2(15) of the Act. - Decided in favour of assessee
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2017 (3) TMI 1261
Reopening of assessment - wrong deduction claimed by Assessee under Section 35(2AB) - Held that:- from the orders passed by Commissioner of Income Tax (Appeals) and Tribunal, it is evident that entire facts relating to aforesaid deduction were disclosed by Assessee in the return filed by him and deduction was allowed initially when the order of assessment was passed on 22.12.2006. Thereafter a notice was issued under Section 154 of Act, 1961 to assess three amounts including relating to deduction under Section 35(2AB). Assessee filed letter dated 28.07.2007 explaining reasons for which additions could not be made and said that deduction under Section 35(2AB) was correctly claimed. Matter, thereafter, went in appeal. In these facts and circumstances Tribunal has found that there was a complete disclosure of all relevant facts by Assessee with regard to the amount claimed as deduction under Section 35(2AB) and that being so, question of escape assessment giving rise to re-assessment under Section 147/148 of Act, 1961 does not arise as it amounts to change of opinion. - Decided in favour of assessee Adoption of correct method of accounting - Held that:- Section 145 (1) permits two process of accounting and it is not the case of appellant that double entry system of account is not a recognized mercantile system of accounting provided under Section 145(1) and in absence of anything shown otherwise, we find nothing wrong in the method of accounting adopted by Assessee and, therefore, this question is also answered against Revenue.
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2017 (3) TMI 1260
Penalty levied u/s 271(1)(c) - revised computation filed during proceedings under Section 153A - Held that:- At the time the return of income in response to notices under Section 153A of the Act was filed, the respondent assessee continued to declare its estimated income for the subject assessment years at the same rate / quantum as shown in the return of income filed during the regular assessment proceedings in Assessment Years 2002-03 and 2003-04. It was only on the order dated 30th July, 2009 of the Tribunal, the respondent assessee filed revised computation of income during the assessment proceedings. Moreover, all concerned were aware that at all times the income offered for tax was only on estimated basis. In the above view, the view taken by the impugned order of the Tribunal in the facts of this case is a reasonable view. The respondent assessee could not forecast the result of its appeal before the Tribunal and filed its return of income on the basis of determination of income by the Tribunal in the future. Both the CIT(A) and the Tribunal have came to a concurrent finding of fact that there was no furnishing of inaccurate particulars and / or concealment of income on the part of the respondent assessee. - Decided in favour of assessee
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2017 (3) TMI 1259
Stay of demand - directing the petitioner to deposit/pay 15% of the disputed demand so as to stay the demand till final disposal of its appeal before CIT (A)- Held that:- Having accepted 15% of deposit in respect of a stay under Section 220(6) of the Act for an earlier appeal cannot estop the petitioner from contending that they should be granted an unconditional stay. This is more particularly so as the issue now seems to be covered by the order of the Appellate Authority for the earlier assessment year in its favour. In the above view the issue arising in the appeal for the assessment year 2014-15 which is pending before the CIT (A) stands concluded as of now in favour of the petitioner – assessee by the order of the Appellate Authorities for earlier assessment year. It would therefore be appropriate in these facts to pass the following order : (i) The demand of ₹ 29.13 crores be stayed till such time as CIT (A) decides the petitioner's appeal for the assessment year 2014-15 and the communication of same to the petitioner; (ii) Petition disposed of in above terms.
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2017 (3) TMI 1258
Admission of additional evidence - Held that:- Tribunal that the assessment was completed under Section 144 of the Act as the assessee did not cooperate in assessment proceedings. On account of sickness of the assessee, he wanted to file additional evidence under Rule 46A of the Rules before the CIT(A). In his affidavit dated 04.03.2010, the assessee had even stated that he had undergone heart surgery. In the first week of December, 2009, he got himself examined from the hospital at Mohali where the doctors advised him bed rest. In view of this factual position books of account, bills/vouchers etc could not be produced by the assessee. It has been recorded by the Tribunal that no doubt the assessee did not cooperate with the Assessing Officer in completion of the assessment proceedings and that the books of account etc were not produced inspite of opportunity but the said evidence might have been relevant for the calculation of the real income of the assessee. The Tribunal keeping in view the overall facts and circumstances of the case rightly directed the CIT(A) to admit additional evidence and decide the case afresh after affording reasonable opportunity to the assessee of being heard.
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2017 (3) TMI 1257
Obligatory on the part of the Assessing Officer to dispose of the objection before invoking the re-assessment proceedings - Held that:- The reasons for re-opening of the assessment by issuing of the notice under Section 148 of the Act were supplied to the appellant assessee. It is also admitted position that the appellant assessee after receipt of such reasons raised objections. It is also undisputed position that the Assessing Officer did not dispose of the objections prior to proceeding with the assessment further and proceeded to pass the order for assessment. Under the circumstances, it can be said that the mandatory procedure of disposal of the objection by Assessing Officer before proceeding with the assessment has not been followed and exercise of power can be said as not only vitiated, but the order of assessment cannot be sustained. If the decision of the Assessing Officer is illegal on the face of it, in our view, it would fall in the exceptional category of making departure from the normal principles of self-impose limitation of not to interfere in a matter where there is existence of alternative statutory remedy.In view of the aforesaid, the impugned order passed by the learned Single Judge is set aside. The impugned order of assessment is also set aside.
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2017 (3) TMI 1256
Valuation of depleted/unusable/unsalable/rat bitten stock - Held that:- After examining the entire material on record, it has been categorically recorded by the Tribunal that nothing was brought on record by the assessee to prove that the stock was very old. The assessee was not able to produce the last purchase invoice to prove how old the stock was which could be written off/rejected. Thus, the Tribunal rightly upheld the finding recorded by the CIT(A) disallowing the claim made by the assessee. Disallowance of claim under Section 24(1) against rental income derived - Held that:- Tribunal concurred with the findings recorded by the Assessing Officer as well as the CIT(A) that since the income was to be assessed under the head “income from other sources”, deduction under Section 24(1) of the Act was not allowable.
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2017 (3) TMI 1255
Revision u/s 263 - entitled to claim additional depreciation - we allow the instant appeal, making it clear that since the assessee has not assailed the impugned judgment of the Tribunal in this appeal with respect to the issues other than that which deals with the assessee's right to carry forward the balance additional depreciation to the subsequent year, the other parts of the impugned judgment will remain intact and will not be affected by the order passed by us today. The appeal, to our minds, will have to be allowed, even, vis-a-vis Questions (i) and (ii) as well, in so far as they relate to Question no.(iii), as it cannot be said, at this juncture, that the order of the Assessing Officer was erroneous in law.
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2017 (3) TMI 1254
Disallowance of interest expenditure under section 36(1)(iii) - Held that:- Admittedly, the assessee company had given interest free loans and advances amounting to ₹ 2297.83 lacs upto the end of the relevant year including ₹ 704 lacs during the relevant year to its three subsidiary companies. The Assessing officer did not make any disallowance in respect of expenditure incurred on borrowed funds under section 36(1)(iii) of the Act in relation to interest free loans and advances given to the said three subsidiary companies in the earlier years. After perusing the cash flow statement of the assessee company for the assessment year in question, the Tribunal observed that the assessee company had received substantial proceeds from preferential issue of shares capital amounting to ₹ 99999.98 lacs. It had also received dividend income of ₹ 166.13 crores from various investments. After giving interest free loans of ₹ 7.04 crores to its subsidiary companies, the assessee was left with surplus interest free funds of ₹ 53.86 crores which were utilized for giving interest free advances. Thus, there was no nexus of interest expenditure incurred during the year with the aforesaid loans/advances given to the subsidiary companies, warranting disallowance under section 36(1)(iii) of the Act. After considering the relevant provisions and the case law on the point, the Tribunal correctly deleted the disallowance of interest expenditure made under section 36(1)(iii) of the Act. - Decided in favour of assessee Addition u/s 14A - Expenditure related to exempt income - Held that:- The issue is covered by the decision in the case of the assessee in Commissioner of Income Tax, Jalandhar I, Jalandhar vs. M/s Max India Limited [2016 (11) TMI 1012 - PUNJAB AND HARYANA HIGH COURT] as held Merely because the interest free funds with the assessee have decreased during any period, it does not follow that the funds borrowed on interest were utilized for the purpose of investing in assets yielding exempt income. If even after the decrease the assessee has interest free funds sufficient to make the investment in assets yielding the exempt income, the presumption that it was such funds that were utilized for the said investment remains. There is no reason for it not to. The basis of the presumption as we will elaborate later is that an assessee would invest its funds to its advantage. It gains nothing by investing interest free funds towards other assets merely on account of the interest free funds having decreased. In that event so long as even after the decrease thereof there are sufficient interest free funds the presumption that they would be first used to invest in assets yielding exempt income applies with equal force.- Decided in favour of assessee
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2017 (3) TMI 1253
Unexplained cash deposit - Held that:- Tribunal has upheld the finding recorded by CIT(A) with regard to cash deposit to the tune of ₹ 14,20,212/- as unexplained. It has been categorically recorded by the Tribunal that out of the 33 withdrawals, only two withdrawals of ₹ 2 lacs each from Bank of Rajasthan and ICICI Bank were made in cash. The rest were all withdrawals by cheque – small amounts made mostly by an employee of the assessee. Similarly, in many cases, small amounts were withdrawn two or three times on a single day by different persons. Further, the deposits in Bank were made after a gap of two-three instances of withdrawals. Taking the totality of facts and circumstances of the case, the Tribunal concurred with the findings recorded by the CIT(A) that the withdrawals were for the purpose of business and not available for redeposit. Further, the withdrawals were re-deposited after a gap of two or three months which was not probable. Thus, the assessee was not able to link the cash withdrawn from the bank with the cash deposit. Consequently, the finding of the CIT(A) with regard to treating the cash deposit of ₹ 14,20,212/- as unexplained income of the assessee was correctly upheld by the Tribunal. Thus, the appeal of the assessee dismissed.
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2017 (3) TMI 1252
Disallowance of deduction under Section 36(1)(viia) made under Section 154 - Rectification of mistake - Held that:- In case of assessee, if interest is debited to borrowed account but for any reason interest has not actually realized, account is to be treated as NPA as per the guidelines issued by RBI. In that eventuality, the amount is unrealized, the unrealized interest so taken to income should be reversed by debiting to the P & L Account and crediting to overdue interest reserve account. It was the claim of the assessee that during the year unrealized interest taken to income has been reversed by debiting the P & L Account and crediting to provision for overdue interest account following the guidelines issued by RBI. We find that this issue is highly debatable and it cannot be adjudicated while acting u/s.154 of the Act. The AO should have made disallowance only while framing regular assessment or reassessment, which was made prior to resorting to this rectification. This disallowance cannot be made while acting u/s.154 of the Act reason being this is not a prima facie mistake it is a highly debatable issue. In term of the above, we allow this issue of assessee’s appeal
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2017 (3) TMI 1251
Allowable business expenditure - non commencement of business - Held that:- As seen from the Director’s report placed in the paper book, the assessee had acquired the land and had paid the compensation to the displaced land owners and has also initially awarded contract to one company, but later on due to certain circumstances cancelled the contract and had called for tenders from various international bidders and finally awarded the contract to L&T Ltd. Therefore, it is clear that the assessee has taken all the necessary steps to facilitate the building of Metro Rail System. Since the assessee has taken steps in furtherance of its main objects, it cannot be stated that the assessee has not commenced its business. Even from the perusal of the expenditure debited to the P&L A/c which has been disallowed by the AO, it is seen that most of it relates to the administrative office of the assessee and not for manufacturing or making the system operational. As the Revenue has not disallowed the business expenditure claimed by the assessee in the earlier two years, we are of the opinion that the assessee has commenced its business and the expenditure has to be allowed as business expenditure. - Decided in favour of assessee Interest income - Nature of the income earned by the assessee - Held that:- The govt. has released the grant for carrying out the objects of the assessee and therefore, the govt. grant has to be considered as the business receipts of the assessee. The interest on deposits is the interest earned by the assessee on deposits made by the assessee of the unutilized funds as short term deposits. It is thus clear that the funds are for business purposes of the assessee and when they are not immediately needed, instead of keeping them idle, the assessee is parking them in short term deposits. The funds received by the assessee are for the purpose of the business of the assessee but it is for commercial exploitation of the unused funds, that they are parked as short term deposits. Therefore, we hold that interest income is business income. The Hon'ble Supreme Court in the case of SA Builders [2006 (12) TMI 82 - SUPREME COURT] has held that where the interest bearing funds are advanced without interest for commercial expediency, then the interest paid on such borrowings is to be allowed. Applying the said principle of commercial expediency in a counter situation, where the assessee earns interest on its business receipts which are temporarily not required for business, and are parked in banks for earning of interest in order to reduce the cost, then the same attains the nature of business income. As regards the other income we find that the details of the other incomes are given in Schedule VIII which and on perusal of the same, we find that the income is derived from sale of RSQ and RSB documents. The RSQ & RSB documents are the tender documents and are, therefore, inexplicably linked with the business of the assessee and therefore, the receipt on sale of such documents also has to be treated as business income. The details of the other miscellaneous income is not given before us, therefore, we are inclined to treat the miscellaneous income as “income from other sources”. The AO is therefore, directed to compute the business income in accordance with the directions given above and allow the intra head set off in accordance with the law. The assessee’s grounds of appeal as well as additional ground of appeal are treated as partly allowed.
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2017 (3) TMI 1250
Additions u/s 40(a)(ia) - Delay in deposit of tds - Held that:- TDS pertaining to the financial year should have been deducted & paid within the time allowed under section 139(1) of the Act. The amendment to section 40(a)(ia) of the Act i.e. vide Finance Act, 2010 w.e.f. 01.04.2010, whereby the deposit of tax deducted at source, deposited with the central government by the due date of the filing the return for the relevant year, i.e., where the tax was deductible at any time during the relevant previous year, has been interpreted by the Hon'ble courts of law as retrospective in nature, so that it would apply for the current year as well. The decisions by the higher courts of law, as in the case of CIT v. Rajinder Kumar [2013 (7) TMI 454 - DELHI HIGH COURT] and CIT v. Naresh Kumar [2013 (9) TMI 275 - DELHI HIGH COURT ] have read down the said amendment, holding it as retrospective on the ground of it being only clarificatory and toward mitigating the hardship being caused and, further, of the payment by due date qua the deductions effected for the first eleven months of the relevant previous year as sufficient compliance of the provision. - Decided against the revenue.
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2017 (3) TMI 1249
Revision u/s 263 - receipt of share capital and share premium - Held that:- In the case of Subhlakshmi Vanijya Pvt. Ltd. Subhlakshmi Vanijya Pvt. Ltd. Vs CIT [2015 (8) TMI 174 - ITAT KOLKATA] CIT ought to have set aside the order of AO and direct the AO to make fresh enquiry with regard to the receipt of share capital and share premium by the assessee during the previous year. As rightly pointed out by the ld. Counsel for the assessee, since the proceedings u/s 263 of the Act were concluded ex-parte, the Assessee had no occasion to place material to satisfactorily explain the receipt of share capital and share premium by the Assessee. There was however no material on the basis of which the CIT could have come to the conclusion that the receipt of share capital and share premium was not satisfactorily explained by the assessee. As rightly contended by the assessee, the CIT ought to have set aside the order of the AO and directed the AO to conduct fresh enquiry on the lines indicated in the order of this Tribunal in the case of Subhlakshmi Vanijya Pvt. Ltd. (supra). We therefore modify the order of CIT and direct the AO to make fresh enquiry with regard to the receipt of share capital and share premium during the previous year after affording Assessee opportunity of being heard. With these observations the appeal of the assessee is treated as partly allowed.
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Customs
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2017 (3) TMI 1278
Natural justice - the decisions taken by the Inter-Ministerial Committee were not preceded by proper verification of the credentials of the foreign companies - Held that: - one Rajat Kapoor has formed some bogus companies and has been trying to obtain licence of scrap verification and stating that grant of licence to such bogus companies would be a threat to security of India. Thus, the DGFT was called upon not to grant any licence to the said companies - the petition are absolutely vague and unsubstantiated - petition dismissed.
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2017 (3) TMI 1277
100% EOU - CENVAT credit - input service - deemed export - Whether CENVAT credit is available in respect of input service used in the manufacturing of exported goods when such goods are exported to another 100% EOU even if there is no any physical export? - Held that: - the clearances made by one 100% EOU to another 100% EOU which are deemed exports are to be treated as physical exports for the purpose of entitling refund of unutilized Cenvat credit contemplated under the provisions of Rule 5 of the CCR, 2004 - credit allowed - appeal dismissed - decided against Revenue.
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2017 (3) TMI 1276
Levy of ADE - Apparel Export Promotion Council - export performance certificate - the goods which were imported by the appellant were diverted to the domestic market and thereby, ended up violating the conditions of import - appellant's case is that the Settlement Commission could not have imposed ADE upon it - N/N. 21/2002, dated 01.03.2002 - Held that: - the said notification which is issued u/s 25 of the Act, exempts, so much of additional duty which is leviable under sub-section (1) of Section 3 of the CTA, which is in excess of the rate specified in the corresponding entry in column 5 of the table appended to the said notification. Section 3 (1) of the CTA speaks about excise duty. The entry 410 in Column 5 of the table appended to Notification No.21/2002, dated 01.03.2002, restricts the duty to 16% - ADE, which is in the nature of excise duty is the additional duty, which, if imposed will take it beyond the consolidated rate of 16% in terms of N/N. 21/2002, dated 01.03.2002, as CVD, at the rate of 16% is already imposed. Which of the two duties is to be levied, i.e., ADE or SAD? - Held that: - Since, ADE is exempted, quite clearly, the respondents were entitled to levy SAD, as was indicated, initially. ADE could be sourced to Section 3(5) of CTA, in our view, is also erroneous for the following reasons : First, ADE is in the nature of excise duty leviable under the 1957 of the Act. Its an imposition in the form of additional duty on articles imported into India and is traceable to Section 3(1) of CTA, and not, to Section 3(5) of CTA. A plain reading of Section 3(5) of CTA would show that additional duty on the imported articles, is levied to counter-balance Sales Tax, Value Added Tax, Local Tax, or other charges for the time being levied on a like article upon on its sale, purchase, or transportation in India which cannot be imposed at the rate exceeding 4%. Clearly, therefore, the justification provided for levy of ADE at the rate of 8% under Section 3(5) of CTA, cannot be sustained. Appeal allowed - decided in favor of appellant-assessee.
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2017 (3) TMI 1275
Classification of imported goods - Thermacool Thermage Radio Frequency Therapeutic device and its accessories - beauty care equipment or medical device? - classified under CTH 8543.7093 or CTH 9018 9099? - benefit of N/N. 12/2012-Cus - Held that: - the goods imported by the appellant are to be used for dermatological and general surgical procedures for electro coagulation and hemostasis; and non invasive treatment of periorbital wrinkles and rhytids including upper and lower eyelids - The said equipment is used only by the qualified Doctors - impugned items cause the remodeling and re-generation of collagen (protein: connective tissue) in dermal and sub-cutaneous layers of skin. Because of physiological changes or changes in anatomy, skin gets tightened. On a perusal of above uses, it is apparently clear that the device is nothing but a medical device which helps in treatment - it stand clearly marked on the said technical literature that the goods are for use by Registered Medical Practitioner, Hospital or a laboratory only - also, certificate of TUV Rheinland (applicable authority) has certified the goods as medical device - goods are properly classified under Chapter 9018 - appeal dismissed - decided against Revenue.
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Insolvency & Bankruptcy
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2017 (3) TMI 1272
Revival of the Company in provisional liquidation - Winding up petition - Held that:- Nothing that has been brought to the notice of this Court that requires proceedings in relation to a company that has been admitted to be wound up, and revival applications in relation thereto, to be transferred to the National Company Law Tribunal. In my view, it could not have been the intention of the Legislature in its infinite wisdom, to create a situation where, the scheme relating to the revival of company in provisional liquidation, pending consideration before the Company Court would be required to be transferred to and dealt with by the National Company Law Tribunal; leading to multiplicity of proceedings with the real possibility of conflicting decisions on the dissolution/winding up and/or revival of the respondent company. In view of the foregoing, the issue that arose for consideration before this Court, is answered in the affirmative. The Company Court would exercise exclusive jurisdiction for adjudicating applications, in relation to the revival of the Company in provisional liquidation.
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PMLA
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2017 (3) TMI 1269
Offences punishable under Sections 3 and 4 of the PML Act alleging that the applicant has committed parity of scheduled offences i.e. under Sections 467, 471 read with Section 120-B of Indian Penal Code as well as for the offences punishable under Sections 7 and 13 of the Prevention of Corruption Act, 1988 - Held that:- Considering there is no pronouncement by Hon'ble the Supreme Court or of any High Courts that the provisions of Section 45 of the PML Act are ultravires or the inclusion of the offences of Part B into Part 1 of the Schedule of PML Act is declared ultra-vires to the provisions of the Constitution of India, the Court is required to read the provisions of law which are applicable on the day. When the Court is dealing with an application of an accused under Section 439 read with Section 45 of the PML Act, the provisions of the PML Act are required to be scrupulously followed. The applicant is facing charges for several offences punishable under the provisions of Indian Penal Code and also under the provisions of Prevention of Corruption Act, which are of Part A to the Schedule of PML Act and, therefore, rigor of Section 45 would be applicable. Therefore, the Court cannot presume that certain offences which were in part B in past shall be treated in the same Part even though they have been amended in the year 2013. Hence, hereby hold that the rigors of Section 45 would be applicable in the present case. If the definition of proceeds of crime is read and compared with the material collected by the Investigating Agency, it appears that Crores of rupees have been transferred in the bank accounts of the wife and children of the applicant in USA by different modes. The said aspect is supported by the information supplied by the United States of America, pursuant to the request made by the Special Judge under Section 57 of the PML Act. When the Investigating Agency could gather such material against the applicant, the burden to prove not guilty of having committed the schedule offence lie on accused as per Section 24 of the PML Act, which in my opinion, the applicant has failed to establish that. However, at this stage, I would not like to deal with the same in detail since the present case is being dealt with for the purpose of releasing a person on bail. It is also alleged that through Havala entries via Dubai (UAE), Crores of rupees have been credited in the account of his wife and his children in USA. The wife of the applicant who was made a Partner in a firm to the extent of 30% and that too, by investing only ₹ 1 Lac, and getting Crores of rupees from India as well as UAE, the Court cannot believe that the applicant is not guilty of offences for which he has been charged. The burden is upon the accused to prove that the amount which has been transferred in the account of his family member in foreign country is not proceeds of crime as per Section 24 of the PML Act. In the present case, except his own statements, the applicant is unable to prove himself that the amount received by his family members are not proceeds of crime. The statements recorded of the witnesses who would be governed under Section 50 of the PML Act and there are number of judgments of validity of such statements recorded under the provisions of Section 50. Have also gone through several statements of witnesses referred and relied upon by the Investigating Agency and have also gone through the material which prima facie suggests that huge amount has been credited in the account of the wife of the applicant and his children though they might have settled in USA. Therefore, the present application fails on both the grounds and hence, the same is accordingly dismissed.
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Service Tax
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2017 (3) TMI 1295
Marketing Services - the assessee-Appellants had multi facet business activities. When the imported crude oil was sold in the high sea, then there was a transaction of buyer and seller. When the assessee-Appellants got cleared the goods at the port, then they acted as C&F agent. So whatever charges were there, they were collected from the importer and paid tax thereupon - The Department is of the view that the assessee-Appellants had collected the charges for “marketing services” by raising debit notes and were not paying the Service Tax thereupon - Held that: - In addition to clearing and forwarding charges, the assessee-Appellants had further collected the payment from various clients to promote their products, this amount is nothing but is the receipt from various clients to promote their products. When the assessee-Appellants had no relationship with the imported goods, then the services provided by them were nothing else but marketing services. When it is so, then we find no reason to interfere with the impugned order - appeal dismissed - decided against appellant-assessee.
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2017 (3) TMI 1294
Club or association services to employees - Held that: - the identical issue has come up before the Hon’ble High Court of Jharkhand in the case of Madras Race Club Versus Commissioner of Service Tax, Chennai [2008 (9) TMI 199 - CESTAT, CHENNAI], where it was held that another part of the demand is on the amount collected by the club from its members for use of amenities provided by the club - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1293
Security agency service provided by the society of ex-serviceman - commercial concern or not - tax entry section 65(105)(w) - Held that: - the services rendered are squarely covered by the tax entry and we see no merits in the pleas of the appellant in this regard. The lower authority examined the issue in detail and we find no ground in the present appeal to interfere with the findings. Similarly, the appellants are covered for tax liability for the whole period of demand is clear from their legal status and financial accounts to the effect that they are, infact, involved in profitable commercial activity. It is clear from the bylaws of the society which clearly stipulates about net profit - there is no justification to hold the appellant as anything other than commercial entity. It is clear that the appellants did not provide the required details and come forward with full facts during the course of audit during subsequent inquiry conducted by the department. Even at the time of filing regular ST 3 return, the appellant did not show the full gross amount received from the clients for providing taxable service. Considering these facts as recorded in the impugned order, the demand is sustainable for the full period. Penalties - Held that: - there is reasonable cause for non payment of Service tax during the material time. Considering the background of operation of assessee and also circumstances pleaded by the appellant in appeal, we find it fit and proper to waive the penalties imposed on the appellant, invoking the provisions of section 80 as available during material time. Appeal allowed - decided partly in favor of appellant.
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2017 (3) TMI 1292
Transfer of the right to the use of the trade mark - intellectual property service - whether penalty is imposable, where the short levied duty is already deposited by the assessee before issue of SCN? - Held that: - In the case of Union of India Vs. TPL Industries Ltd. [2007 (3) TMI 71 - HIGH COURT, RAJASTHAN], the Hon’ble Rajasthan High Court has held that no penalty amount charged from assessee for non payment of duty - no penalty will be leviable on the appellant - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1291
Exemption under notification no. 12/2013 dated 01.07.2003 - bullet proofing services - the vehicles in issue are supplied by the customer and on such vehicles, bullet proofing is done by the appellant. This activity is amounting to production. On the material portion used VAT is paid - whether benefit of notification is to be extended to appellant or not? - Held that: - the material where the VAT has already been paid cannot be brought to the service tax levy; otherwise it would amount to double taxation. However, where the VAT is not paid the value of the goods as well as the service is subject to the service tax - the adjudicating authority is to ascertain where VAT has been paid and in those cases value of the component will be excluded and wherever the VAT is not paid that can be brought under the clutch of the service tax including the value of the goods as well as the service - appeal allowed by way of remand.
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2017 (3) TMI 1290
Levy of tax - lease agreement - lease of services falling under man power recruitment or supply agency services - time limitation - Held that: - the fact of leasing of the factory was very much in the knowledge of the Revenue and in fact based upon the same earlier show cause notices were issued to them raising demands though under different categories and different situation. However, the said fact establishes that there was no suppression or malafide on the part of the appellant with any malafide intention. As such, the longer period of limitation is not available to the Revenue - entire demand is barred by limitation - appeal allowed by way of remand.
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2017 (3) TMI 1289
Benefit of N/N. 14/2004-ST dated 10.09.2004 and 13/2003-ST dated 20.06.2003 - The department is of the view that, process of de-husking is not an agricultural activity so, no exemption can be granted - Held that: - Board has issued a Circular, No. 143/12/2011-ST dated 26.05.2011, where the benefit was provided to raw cashew, tobacco leaves etc. and the same were considered in relation to agriculture. Needless to mention that in the cashew, kernel is removed and in the instant case, the husk is removed. So both the cases are on the same footing. By considering the Notifications, Circulars and clarifications, we are of the view that de-husking of the paddy is covered in relation to the agricultural activity hence, the service tax is not applicable on such activity - demand set aside. Levy of tax - brokerage and commission - payment to the agents in foreign currency - Held that: - as per Board Circular No. 143/12/2011-ST dated 26.05.2011, it is clarified that the commission agents stationed abroad provide business auxiliary service to promote the export of rice, said business auxiliary service is covered by Notification 13/2003-ST (as amended) because, the word ‘rice’ is mentioned under the explanation to the term ‘agricultural produce’, in the inclusive portion along with other items like cereals, pulses, etc - demand set aside. Clearing and Forwarding services in relation to export of rice - Held that: - the said payment was made under the head of ‘Clearing and Forwarding services’ which includes the ‘freight charges’ - demand upheld. Appeal allowed - decided partly in favor of appellant.
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Central Excise
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2017 (3) TMI 1288
Jurisdiction of Tribunal - non-compliance of earlier directions issued by this Court - Held that: - Once the specific directions had been issued by this Court, which direction has not been shown to have stayed or set aside by the Supreme Court, it was no longer open to the Tribunal to not comply with the same - At any rate, it cannot be accepted that in the matter of statutory appeal the Tribunal vested the jurisdiction to adjudicate the matter finally may, while dealing with an appeal duly maintainable before instead of deciding it on merits, wash its hands of it by making observation such as made in instant case- granting liberty to the parties to approach again when the cause of action had clearly arisen in the present and appeal had matured for adjudication - matter remitted for decision afresh - appeal allowed by way of remand.
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2017 (3) TMI 1287
CENVAT credit - inputs stand utilized for payment of duty on the final product, whether credit is required to be reversed? - Held that: - the final product is treated as dutiable and duty is paid by the assessee. When once duty is paid by the assessee treating the activity as manufacturing activity by the Department, CENVAT credit is available and there is no question of reversal of CENVAT credit - appeal dismissed - decided against Revenue.
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2017 (3) TMI 1286
Scrap - levy of duty - whether the scrap which has been cleared without payment of duty was liable for duty? - Held that: - the scrap if has resulted in manufacturing process, the duty is leviable - here scrap not resulted from manufacturing activity, no duty leviable - appeal dismissed - decided against Revenue.
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2017 (3) TMI 1285
Penalty - section 11AC - Whether the appellant was entitled to the benefit of payment of only 25% of the penalty? - Held that: - The judgment comes to the appellant’s assistance only in respect of the second proviso but not the first proviso in view of the appellant not having complied with the conditions precedent of the first proviso, namely, the payment of the duty and interest determined under section 11A(2) and Section 11AB, respectively, within 30 days of the communication of the order of the adjudicating authority. The first Proviso not having been complied with, the appellant is not entitled to the benefit of the second Proviso. Thus, the appellant is not entitled to the benefit of the reduced duty - decided against appellant. Whether an assessee is liable to pay penalty only to the extent of the balance unpaid amount of the duty determined under section 11A(2) of the Act? - Held that: - the Legislature has dealt with cases of fraud, etc. differently from cases which do not involve fraud, collusion, etc. It is important, therefore, to bear in mind that the concession granted under the first proviso to section 11AC is to a person who has been guilty of fraud, collusion, etc - we are not inclined to take the view in favour of the assessee in a case under section 11AC for it involves an assessee who has been found guilty of fraud, collusion, etc - decided against assessee. Appeal dismissed - decided against assessee.
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2017 (3) TMI 1284
Natural justice - Sections 35 G and 35 L of the Act - whether the impugned order made by the Hon’ble Tribunal can be said to be an order made in accordance with Law, when the Tribunal has set aside the order to the extent of clandestine removal without giving any reasoning and ignoring the submissions of the Department with regard to facts and evidences on record? - Held that: - The decision of the Tribunal in respect of the respondent itself related to questions that fall within the ambit of Section 32 G as well as in respect of questions that fall outside the ambit of Section 32 G - The position, therefore, is that even as regards the respondent alone the Tribunal by the impugned order decided questions that fall within the ambit of Section 35 G as well as with questions that fall outside the ambit of Section 35 G and within the ambit of Section 35 L of the Act. Whether an appeal lies to the High Court under Section 35 G or to the Supreme Court under Section 35 L cannot possibly depend upon the nature or scope of the appeal that the party intends filing. A party may seek to challenge only that part of the order of the Tribunal which relates to questions other than those relating to the rate of duty of excise or the value of the goods for the purposes of assessment. Such an appeal would, absent any other questions, lie to the High Court. Once it is held that an appeal against the order of the Tribunal which deals with questions that fall within the ambit of Section 35 L as well as other questions lies to the Supreme Court under Section 35 L the mere fact that the party chooses to challenge only that part of the order that falls within the ambit of Section 32 G would make no difference. It is not the order-in-original i.e. the order of the adjudicating authority but the order of the Tribunal that would determine the issue as to whether the appeal lies to the High Court under Section 35 G or to the Supreme Court under Section 35 L. Section 35 G provides for an appeal to the High Court from every order passed in appeal by the appellate Tribunal. It is, therefore, the order of the Appellate Tribunal that must determine the issue. The determination of the question as to whether Section 32 G applies or whether Section 32 L applies requires the consideration of the order of the Tribunal - Appeal dismissed as not maintainable u/s 32 G of the CEA, 1944.
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2017 (3) TMI 1283
CENVAT credit - Whether the appellant is eligible to avail cenvat credit on the items which are used in the transmission line which has been erected as dedicated transmission line only for the appellant’s use? - Held that: - Cenvat Credit is not eligible only on the ground that these goods are immovable is against the law as settled by the Hon’ble High Court of Gujarat in the case of Mundra Ports and Special Economic Zone Ltd. [2015 (5) TMI 663 - GUJARAT HIGH COURT]. In that case, the Tribunal had denied the Cenvat Credit on the steel and cement used in the construction of jetty which is used for providing port services/cargo holding services - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1282
Classification of goods - rate of duty - wheat puffs - the assessee wanted classification under CETA 2107 for the period up to 1994-95 and from 16.03.1995 onwards under 2108, whereas the department classified it under CETA 1904 10 - Soya nuts - The assessee sought their classification of Soya Nuts under CETH 2107 99 however, the department classified the same under CETH 2107 91 - The claim of the assessee is that 98.5% of the goods manufactured by them have been cleared to Integrated Child Development Scheme (ICDS), which is an organization of the State Governments of Haryana and Delhi with the objective to improve the nutrition level among young children as well as expecting and lactating mothers. Held that: - as regards soya nuts, the wording “put up in unit containers and ordinarily intended for sale”, in trade parlance refers to goods cleared for sale in convenient sizes of 100 gms., 200 gms. etc. for retail sale. The unit container cannot be used to refer to bulk packing of 10 Kgs./15 Kgs. which are mostly used in clearance for wholesale. It is also not in dispute that the goods have been cleared to ICDS for free supply and not for sale. Hence, the most appropriate classification for these goods is 2107.99. We note that the goods of 2107.99 were chargeable to ‘nil’ rate of duty as per tariff rate up to 28.02.1994 and with effect from 01.03.1994 the goods enjoyed ‘nil’ rate of duty under various N/N. 6/92-CE dated 01.03.1992 and 2/94 dated 01.03.1994. As regards wheat puffs, clearances made to ICDS in jumbo packs cannot be considered as clearance in unit containers. Consequently, the classification of the product Wheat Puff will be most appropriate under CETH 1904.90 and not under 1904 10. It is necessary for the issue to go back to the adjudicating authority for re-quantification of such demand of excise duty in respect of clearances of both the products made in unit containers to the agencies other than government (ICDS) - appeal allowed by way of remand.
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2017 (3) TMI 1281
SSI exemption - use of brand name of others - The Department was of the view that since the appellant was clearing those goods with brand name of M/s Dabur India Ltd. they were not entitled to the benefit of SSI exemption under N/N. 8/2003-CE dated 1.3.2003 - N/N. 47/2008-CE, dated 01.9.2008 - Held that: - N/N. 24/2009-CE (N.T.) dated 21.10.2009 clarified that brand name used on packaging material supplied to the person owning the brand name, would not be the basis for denial of SSI exemption to the manufacturer of said final products - absolutely there is no justification in upholding the demand on the goods manufactured by the appellant i.e. PP Caps with brand name ‘Dabur’ and will be clearly eligible for the benefit of SSI Notification, subject to fulfillment of other conditions specified therein - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1280
Valuation - sanitary wares - Whereas the appellant has adopted the value in terms of the provisions of Section 4 of the CEA; Revenue is of the view that the goods are liable to be assessed on MRP basis, in terms of Section 4 A of the CEA - Held that: - the opinion relied upon by Revenue along with query raised to the Metrology Department, has not been placed on record and not procured to the appellant; that the facts of packaging condition of ultimate clearance of the goods to the consumer are not available on record; that the other contra opinions placed on record have not been considered by the lower authorities - we deem it fit to set aside the impugned order and remand the matter to the Original Adjudicating Authority for re-consideration of all the above issues - appeal allowed by way of remand.
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2017 (3) TMI 1279
Clandestine removal - Revenue says that the demand based upon some weighment slips of the Dharma kanta - Held that: - the demand confirmed by the adjudicating authority is not solely based upon weighment slips or weighment register of the dharma kanta. All the weighment slips have been taken as a corroborative evidence by the adjudicating authority, the loose chits/ papers which stand recovered from the appellants premises and wherein all the details have been given. As such, he has not confirmed the demand exclusively based on weighment slips - weighment slips have been found to be not sufficient evidence to confirm the balance demand inasmuch as there is no corroboration to the same - also, there is nothing on record to show that the trucks were loaded with the iron and steel items, which is the appellants final product - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2017 (3) TMI 1296
Waiver of pre-deposit - bank guarantee to be made for the purpose of consideration of the appeal - Counsel for the petitioner says that uptill now 50% of the disputed tax has already been paid. The counsel further says that the petitioner is willing to furnish a personal bond for the balance disputed tax and penalty as against a bank guarantee sought for by the respondents - Held that: - the impugned order is modified to the extent that instead of a bank guarantee, the petitioner would furnish a personal bond for the balance amount of disputed tax and the entire penalty amount, within two (2) weeks from the date of receipt of a copy of the order. Upon such personal bond being furnished, there shall be a stay qua the Order-in-Original dated 30.05.2016, pending consideration of the appeal preferred before the first respondent - petition allowed - decided in favor of petitioner.
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2017 (3) TMI 1274
Maintainability of petition - Article 226 of the Constitution of India - alternate remedy of preferring appeal - Held that: - if the appeal is resorted to, any observation in the impugned order by the Single Judge on the merits of the matter may influence the Appellate Authority to decide the appeal in accordance with law. Therefore observations made by the learned Single Judge insofar as merits of the case is concerned, the same should not operate in the way of appellant in pursuing the appeal. Suffice it to say that contentions of both parties are to be considered by the Appellate Authority independently and in accordance with law - if appeal is preferred and the direction is given to the Appellate Authority to decide the appeal within reasonable time, the same would meet the ends of justice, more particularly, when on behalf of the respondents it was declared for no objection to decide the appeal within particular time limit - appeal allowed - decided partly in favor of appellant.
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2017 (3) TMI 1273
Validity of assessment order - natural justice - Assessing Officer relied on the Web Report and passed the impugned order without furnishing all the details and conducting thorough enquiry with the dealers - Held that: - this Court, in the batch of cases, has dealt with the matter in respect of the assessments made based on Web Report and found that the centralised mechanism has to be evolved for passing such order of assessment - as regards the contention raised by the petitioner that the assessee was not given personal hearing before imposing penalty u/s 22(4) of TNVAT Act is concerned, a perusal of the order of assessment does not indicate that the petitioner was given any opportunity of personal hearing before passing the same - matter needs to be remitted back to the Assessing Authority for re-doing the exercise after following the procedures/directions stipulated in the order - petition allowed - appeal allowed by way of remand.
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Indian Laws
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2017 (3) TMI 1271
Suit for recovery - Held that:- Respondents have filed certified copies of the entire proceedings of the complaint case filed by them against the Company, the appellant/plaintiff and the other Directors under Section 138 of NI Act. The said documents have been referred to and dealt with at some length in para 27 of the impugned judgment wherein the learned trial court has observed that the complaint case was settled between the parties after the accused persons including the appellant herein had paid a sum of ₹ 21 lakhs to the respondents. Nowhere in the said proceedings did the appellant take a plea that he had extended a personal loan to the respondent/company and that they had admitted the said liability and agreed to pay back the alleged loan amount to him. All the aforesaid facts and circumstances lends credence to the version of the respondents that the appellant had issued a cheque for ₹ 10 lakh from his personal account in favour of the respondent No.1/Company, but the said payment was in part discharge of the amounts due and payable by his Company towards the price of the goods purchased from the respondents and the said cheque was issued by him because the Company was in financial distress at that time. On a conspectus of the pleadings of the parties and the evidence brought on record, it has to be held that the version of the appellant that he had advanced a personal loan of ₹ 10 lakhs to the respondent No.1/Company, remains unsubstantiated. The said version has been conclusively demolished by the respondents/defendants and rightly rejected by the learned trial court as improbable and unbelievable. As a result, the present appeal fails and is accordingly dismissed in limine along with the pending applications.
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2017 (3) TMI 1270
Challenge to the VRS scheme - Package having been received by the workmen as compensation pursuant to the decision taken by the Central Government to offer special protection to the employees of HPF - exempted from deduction to income tax - VRS scheme - Held that:- The declaratory relief sought for to declare the proceedings dated 20.03.2014, and the circular dated 21.03.2014, as illegal, is rejected and the relief sought for to pay 72 months, salary stands rejected. It is held that the receipts in the hands of the employees of the HPF, pursuant to the severance package announced by the Central Government and intimated vide proceedings/circular is held to be a special privilege/protection granted to the employees of the HPF Ltd and therefore, the provisions of the Section 10(10B) of the Income Tax Act, 1961 are attracted and accordingly, the same shall not fall within the definition of income, while computing the total income of concerned employee and income tax cannot be deducted from the severance package paid to the employees of HPF. Pursuant to interim orders dated 22.12.2015, the amounts deducted towards income tax was directed to be kept in deposit to the credit of the Writ Petition in Indian Bank, High Court Branch. In the light of the finding rendered supra holding that no income tax is recoverable from the severance package, the amount deducted as income tax shall be disbursed to the respective employees by the respondents. It is reiterated that in these writ petitions, the Court has considered the VRS package and the consequential circular issued by the HBF relief sought for, for payment of 72 months salary instead of 60 months salary as proposed in the VRS Scheme and not to deduct income tax on the amount payable to them as in respect of recovery which were sought to be made pursuant to the circular dated 10.07.2013 and 01.07.2013 were already been quashed by this Court in W.P.Nos.24460, 24355 and 25491 of 2013 dated 29.11.2016. The respondents shall comply with the above directions within a period of one month from the date of receipt of a copy of this order as during the pendency of these writ petitions, all the employees have exercised their right to accept the severance package though without prejudice to their rights in the writ petition. Now the writ petition has been finally disposed of, it is only the implementation of the severance package which shall be done within one month from the date of receipt of a copy of this order. As agreed to by the employees of the HBF, all the employees on receipt of the severance packages in terms of the above direction shall vacate and hand over vacant possession of the quarters within a period of one month from the date on which they received the monetary benefits.
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