Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 8, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Highlights / Catch Notes
Income Tax
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MAT computation - Book adjustments - Liability of interest on turnover tax - whether an allowable expenditure for computing book profit? - the provisions for interest on turnover tax is determined as an ascertained liability and once it is so, the same cannot be added to the book profit u/s. 115J - AT
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Provision of section 40(a)(ia) of the Act are applicable not only to the amounts which is shown as payable on the date of balance sheet but it is applicable to such expenditure which becomes payable at any time during the relevant previous year and was actually paid within the previous year - AT
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Addition u/s. 69B - unexplained investment in land - AO was not justified in making addition under Section 69B of the Act solely relying upon the statements of those two farmers - HC
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The stock of levy sugar could not have been valued at free sale sugar price in view of the fact that there was a legal obligation on the assessee to supply the such stock of sugar at the controlled levy price through the Public Distribution System - HC
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Block assessment - Receipt of two gifts received by the assessee and the gift to the Assessee’s wife - Where an income and assets are disclosed in the books of account and no incriminating material is found during search and seizure, addition in the block assessment is not valid. - HC
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Reopening of assessment - capital gain addition - transfer of land - the capital gain u/s 45 arises in the year of execution of deed and not when the same was registered with the office of the Sub-Registrar - HC
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Addition u/s 41 - creditor was in dispute - When the matter is in dispute and sub-judice assessee cannot be expected to get a confirmation from the creditor - No addition - AT
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Assessee offered capital gain from Sale of land and not from building - joint property - assessee submitted that he is the owner of the land and not of the building. The entire investment in the construction of the building was made only by other person - matter to be examined afresh - AT
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The interest income earned on deposits made with other co-operative banks/society are fully deductible u/s. 80P(2)(a)(i) from the income liable to tax though the assessee has claimed the same as exempt u/ s. 80P(2)(d) and the same is also exempt u/s. 80P(2)(d) - AT
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Sec. 292BB can cure only were a notice is claimed by a assessee not to have been served on him or served on him out of time or served in an improper manner. It cannot cure a situation were there was no issue of notices u/s.148 or u/s.143(2) of the Act. - AT
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Penalty levied u/s 271C - transaction between the assessee and M/s. MMTC is on principal to principal basis and hence the assessee is not liable to deduct TDS u/s 194H/194J - No penalty - AT
Customs
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Valuation - import of crude oil - Quantity actually received into shore tank in port in India should be the basis for payment of Customs duty. Quantity shown in bill of lading cannot be used for this purpose as it does not reflect quantity of goods at the time and place of importation - AT
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Valuation - polyester PVC coated fabrics - either transaction value of the goods have been rejected under Section 14 of the Customs Act, 1962 and there is no contravention import of such goods was found - value cannot be enhanced - AT
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Remission of demurrage charges - Board of Trustee of Port could not bring anything on record to our notice which demonstrates the reasons for declining remission as claimed by the appellant nor any clear policy of the respondent which regulates the discretion - SC
Service Tax
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Refund of unutilised CENVAT credit - rejection on the ground that the assessee was not registered with the service tax department at the time of providing / export of Business Auxiliary Services and the registration was taken subsequently - refund allowed - AT
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CENVAT credit - book adjustments - When the service tax has been paid by the Associated Enterprises within time the demand of interest cannot sustain, in terms of provisions laid in Section 67(4)(c) - AT
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Imposition of penalty u/s 76 of FA - works contract service - doubts regarding the interpretation of relevant provisions - benefit of section 80 extended to appellant - AT
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Challenge to the issuance Show Cause Notice (SCN) - Levy of tax - Societies registered under the Co-operative Societies Act - there is no reason for this Court to interfere in the matter at this stage of the proceedings - HC
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Refund claim - rejection on the ground of limitation - duty becomes refundable “as a consequence of” judgment, decree etc. - the judgment, decree etc. need not be directly refunded and can be in relation to any precursor of refund - AT
Central Excise
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CENVAT credit - input services used in relation to setting up, modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal - AT
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Availing cenvat credit while availing benefit of exemption - The reversal of Cenvat Credit on inputs used attributable to manufacture of said goods or reversal of amount equivalent to 5%/6% of the value of said goods shall amount to not taken the credit on inputs of the said goods - AT
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Cash refund - CENVAT credit lying unutilised - closure of factory - Section 11B of the CEA, 1944 - refund allowed - AT
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Valuation - the installation, erection & commissioning charges are not added/included in the assessable value for determination of Central Excise duty - AT
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Refund claim - excess payment of duty due to post removal discount - the appellant paid duty on the value including the discount that is to be allowed and therefore opting for provisional assessment is not required. - AT
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Clandestine Removal - Fake invoices - the job workers are the manufacturer of the goods cleared on the strength of parallel/fake invoices. In that case if any duty is to be demanded, the same was required to be demanded from the job worker - AT
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CENVAT credit - registered dealer from whom the goods have been procured by the appellants found to be non-existent - CENVAT Credit cannot be denied to the appellants on the basis of deficient investigation - AT
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Captive consumption - intermediate producut - Benefit of N/N. 67/95 dated 16.03.1995 - While trimming untrimmed sheets and circles scrap was generated, whether untrimmed circles and sheets of brass were eligible to enjoy benefits of Notification? - Held Yes - AT
VAT
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Interpretation of statute - proviso to Section 19(2)(v) of the TNVAT Act, 2006 - reversal of input tax credit (ITC) - the proviso, on account of erroneous interpretation by the Revenue, was causing difficulties for the manufacturers, is exemplified by the Statement of Objects and Reasons which was set forth, at the time of introduction of Act 5 of 2015 - HC
Case Laws:
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Income Tax
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2017 (3) TMI 276
AO jurisdiction to pass the order under section 158BC - Held that:- Addition in respect of professional receipts revenue in the course of the present proceedings was unable to pinpoint any material, which had been found during the course of the search vis-a-vis the point at issue, thereby, the aforesaid figures arrived at cannot be brought to tax as “undisclosed income” in the block assessment, within the meaning of section 158BB(1). Therefore, in the absence of any material found during the course of search, the post search enquiries made by the AO would become futile since this would only be relevant for a regular assessment u/s 143(3) and not in respect of a block assessment. Addition towards suppressed rent - Held that:- When all material relating to the so called “suppressed rent” was available with the AO, in the first instance when the assessment for the relevant year was completed and no addition was made, the exercise by the AO, in deducing that the assessee must have earned some income (based on the expenditure estimated for his foreign travel and the estimate of his professional income) which was the suppressed rent, and determined, is twice removed from reality. The error in this kind of assessment was compounded, given that no material relating to such “suppressed rent” was discerned during the search or from the seized materials. Thus, this assessment falls outside the jurisdiction of the AO, since the block assessment conducted is not based on relatable evidence as required under section 158BB(1), but on presumptions made by the AO, as was highlighted in R.M.L. Mehrotra (supra), how an assessment based on search alone that does not attribute material evidence found therein or other information available with the AO relating to such materials cannot constitute block assessment. Receipt of two gifts received by the assessee and the gift to the Assessee’s wife - Held that:- Where an income and assets are disclosed in the books of account and no incriminating material is found during search and seizure, addition in the block assessment is not valid. Therefore, the gifts received by the assessees from Jhanwar Lal Kothari, as well as the gift from Shri R. K. Jatia fell outside the purview of block assessment, and the AO has no jurisdiction to bring to tax the said sums. See CIT v. Jupiter Builders P. Ltd. [2006 (9) TMI 127 - DELHI High Court ] Appeal decided in favour of assessee
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2017 (3) TMI 275
Addition u/s 40A - Held that:- We find that in this case the appellate authorities have gone into the facts of the case and, thereafter, reached the conclusion of existence of commercial expediency. The findings recorded by both the authorities are correct and no infirmity has been shown. Therefore, the questions of law raised in the memo of appeal are answered in favour of the assessee
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2017 (3) TMI 274
Set off of brought forward business loss against deemed short term capital gains arising from sale of building and plant and machinery - Held that:- Tribunal correctly allowed the appeal of the assessee following the decision in Digital Electronics Ltd. v/s. Additional Commissioner of Income Tax [2010 (10) TMI 722 - ITAT, Mumbai] wherein held that under Section 72 of the Act, the loss under the head 'profits and gains of business or profession' can be carried forward and the same can be set off against profits of any business or profession. It is not the requirement of Section 72 of the Act that such gain or profit must be taxable under the head 'profit and gains of business or profession'. Thus carry forward business loss was set off against short term capital gains on sale of building. Set of brought forward unabsorbed depreciation - depreciation available to the assessee on the first day of April 2002 for the Assessment Year 2002-03 without the restriction of 8 years carry forward which was during the Assessment Years 1997-98 to 2001-02 allowed by ITAT - Held that:- Restriction of eight years as existing between Assessment Year 1997-98 upto 2001-02 to carry forward and set off the unabsorbed depreciation has been dispensed with effect from Assessment Year 2002-03. Consequently the unabsorbed depreciation as available on 1st April, 2001 will be allowable from the Assessment Year 200203 onwards. In the above view, as the issue stands concluded in favour of the respondent assessee by the decision of this Court in Hindustan Unilever Ltd. (2016 (7) TMI 1245 - BOMBAY HIGH COURT).
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2017 (3) TMI 273
Cancelling the block assessment framed u/s. 158BC r.w.s 158BD - satisfaction note in the case of assessee (other than searched person) was belated and after the assessment was completed - Held that:- As observed by the Hon'ble Supreme Court in the case of Calcutta Knitwears (2014 (4) TMI 33 - SUPREME COURT ) satisfaction note can be after the assessment is completed in the case of searched person. Under the circumstances, the impugned judgment and order passed by the learned Tribunal quashing and setting aside the block assessment on the ground that satisfaction note in the case of assessee (other than searched person) was subsequent to the assessment framed in the case of searched person and therefore belated, cannot be sustained. - Decided against the assessee.
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2017 (3) TMI 272
Deduction u/s 80HHC computation - inclusion of income arising from the sale of DEPB licence - Held that:- It is the case on behalf of the assessee that the assessee never transferred / sold DEPB Licenses, for which deduction under section 80HHC was claimed and in fact the same were used for house consumption. Therefore, when the issue has been remanded to the A.O., the A.O. is required to consider whether, in fact, DEPB Licenses, for which deduction claimed under section 80HHC, has been transferred by the assessee or not and appropriate decision is required to be taken by the A.O. considering the decision in the case of Topman Exports (2012 (2) TMI 100 - SUPREME COURT OF INDIA ) wherein held if the assessee has not transferred and/or sold the DEPB Licenses, in that case, the assessee is entitled to deduction under section 80HHC. Thus it cannot be said that the learned tribunal has committed any error in confirming the order passed by the learned CIT(A) remanding the matter to the A.O. However, it is observed that on remand the A.O. is required to consider the case on behalf of the assessee whether DEPB Licenses for which deduction under section 80HHC has been claimed, were, in fact, transferred / sold by the assessee or not - Decided in favour of assessee for statistical purposes.
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2017 (3) TMI 271
Addition u/s. 69B - unexplained investment in land - Held that:- Assessing Officer made additions under Section 69B of the Act, relying upon the statements of two farmers [ie., two sellers of the land] in which, according to the Department, they admitted of having received on-money in cash. However, it is required to be noted and it is an admitted position that the statements of those two farmers upon which reliance was placed by the Department were not furnished/given to the assessee to controvert the same. Not only that when a specific request was made before the Assessing Officer to permit them to cross examine the aforesaid two farmers, the same was rejected by the Assessing Officer. Thus as rightly observed by the learned Tribunal, the Assessing Officer was not justified in making addition under Section 69B of the Act solely relying upon the statements of those two farmers. - Decided against revenue Addition made in the case of partnership firm - individual partners taxed - Double taxation - Held that:- Again to make an addition in the case of individual partners would be double taxation, as observed by the learned Tribunal. Under the circumstances, the learned Tribunal has rightly deleted the additions made in the case of the partners when a similar addition was made in the case of partnership firm also.- Decided in favour of assessee.
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2017 (3) TMI 270
MAT computation - disallowing the deduction of accumulated unabsorbed depreciation of earlier years while computing the book profit u/s 115JB - Held that:- As for A.Y 2009-2010, the Assessing Officer allowed deduction of alleged accumulated unabsorbed depreciation of earlier years and computed the book profit for the purpose of Section 115JB of the Act accordingly. It is required to be noted that assessment for A.Y 2009-2010 was a scrutiny assessment under Section 143 (3) of the Act. A similar treatment was given by the Assessing Officer for Assessment Year 2011-2012. It is not in dispute that the aforesaid assessments for Assessment Years 2009-2010 and 2011-2012 have attained finality. Despite the above, in the subsequent Assessment Year 2012-2013, the Assessing Officer has taken a contrary view which has been confirmed by the learned CIT [A] by observing that each assessment year is a distinct year and therefore, the principle of res judicata shall not be applicable. It is required to be noted that the question in the earlier years was also with respect to the similar/same deduction of alleged accumulated unabsorbed depreciation of earlier years, which came to be allowed by AO while computing the book profit for the purpose of Section 115JB of the I.T Act. It was not the case on behalf of the Assessing Officer and even before this Court, it is not the case of the Revenue, that there are change in circumstances with respect to the year under consideration and with respect to A.Y 2009-2010 and/or A.Y 2011-2012. Thus in absence of any change in the circumstances, it was not open for the Assessing Officer to take a different view in the subsequent assessment years. SEE M/s. Dalmia [2015 (9) TMI 1247 - SUPREME COURT] wherein dismissed/disposed of the appeal preferred by the Revenue on the ground that consistency does demand that there being no change in the circumstances, the income for the year under consideration will have to be treated business income, as per the previous years. - Decided in favour of assessee
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2017 (3) TMI 269
Penalty u/s 271(1)(c) - Held that:- Tribunal in Nayan Builders and Developers Pvt. Ltd [2011 (3) TMI 46 - ITAT MUMBAI] had deleted the penalty only on the ground that as substantial question of law had been admitted by this Court in quantum proceedings the issue is debatable. - Decided in favour of assessee.
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2017 (3) TMI 268
Reopening of assessment - capital gain addition - transfer of land - Held that:- The sale deed has been executed by the petitioners on 27.03.2008. The sale consideration has been received by the petitioner on 27.03.2008 and the possession has also been handed over on 27.03.2008. Thus, the transfer of land has been taken place on 27.03.2008 when the sale deed has been executed. Therefore, it can be said that income has arisen in the AY 2008-09 and therefore, if at all any income has escaped assessment, the same can be said to be in AY 2008-09. By impugned notice, assessment for AY 2009-10 is sought to be reopened on the ground that income chargeable to tax has escaped assessment in 2009-10. When, it was pointed out to AO that the transfer had taken place on 27.03.2008 and therefore, it can be said that the income has arisen in the year 2008-09 and therefore, there cannot be any escapement of income in the year 2009-10, while disposing of the objection raised by the assessee against the reasons recorded, the AO has overruled the said objection by observing that as the document was registered with the SubRegistrar on 25.07.2008 and the payment of ₹ 5,23,000/- with regard to said transfer was received by assessee vide cheque no. 193533 on 3.4.2008, the transfer of land as well as sale consideration has been received by the assessee in AY 2009-10 and therefore, impugned notice is valid. However, from the sale deed dated 27.03.2008, it appears that entire sale consideration has been paid vide cheque dated 27.03.208.. Even otherwise, as per the decision of the Full Bench of this Court in the case of Hormasji Mancharji Vaid (2001 (6) TMI 58 - GUJARAT High Court ), the capital gain under Section 45 of the Act arises in the year of execution of deed and not when the same was registered with the office of the Sub-Registrar. Under the circumstances also, the AO has materially erred in forming the opinion that any income chargeable to tax has escaped assessment for the year 2009-10.Thus impugned proceedings for reopening of the assessment for AY 2009-10 and the impugned notices cannot be sustained and same deserve to be quashed and set aside. - Decided in favour of assessee.
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2017 (3) TMI 267
TPA - determining the net profit margin - whether all operating expenses should be taken into account and once any item is appearing as an operating cost which is taken into determining the PLI, then there cannot be any reason to exclude any part of the cost subsequently in the garb of making comparability adjustment? - Held that:- We are unable to fully subscribe to such proposition above because, even if an item is taken as an operating cost, however the rule as enshrined under 10B (1)(e)(iii) and 10B(3) clearly contemplates that any difference or abnormality or any extraordinary item which materially affects the cost base or profit, the same needs to be adjusted so as to eliminate the material effect of such difference. Because, the whole spirit of the transfer pricing exercise is to determine the appropriate arms length price. Such an adjustment definitely warrants at times the tinkering of PLI in the exercise of determination of arms length price. If any peculiar abnormality or extraordinary event which has arisen specific in the case of the ‘tested party’ then same needs to be analysed, firstly, by comparing it with uncontrolled transactions with independent entity; and secondly, if such peculiarity is not found in the case of the uncontrolled comparable transactions then the rule envisages that reasonable accurate adjustment should be made which materially affects the cost or profit. Hence, the contention put forth by Ld. CIT DR in our humble opinion is not acceptable. Whether Forex loss is to be reckoned as operating cost or not? - Held that:- As in this case as stated earlier it has not been brought on record that such kind of an exposure of hedging loss on cancellation of forward contracts is there in every comparable uncontrolled transaction, that is, in the case of the other comparables. Risk assumed by the assessee as well as by the comparable entity may be similar but quantum and scale of a risk factor if undermines the computation of PLI of the assessee vis-à-vis the comparables, then our rules under the Indian Transfer Pricing provisions also enshrines that any material difference affecting the cost or profitability between the international transaction and comparable uncontrolled transaction needs to be eliminated by making suitable adjustments. Here in this case, a material difference has arisen in the case of the assessee due to abnormal feature which is qua the assessee in this particular year, (which is abnormal loss on cancellation of forward contract) which admittedly is absent in the cases of comparables with whom the assessee’s transaction is being bench marked, therefore, a suitable adjustment has to be made to factor in the material difference in the PLI. Thus, in our opinion, the loss amounting to ₹ 2,22,52,786/- on account of cancellation of forward contracts out of total forex loss of ₹ 3,41,44,774/- needs to be eliminated from the operating cost and this adjustment is proposed to be made in the case of the assessee which is the tested party. We accordingly direct the TPO/AO to make the adjustment of this amount in the operating cost and rework the PLI. Selection of comparables - Held that:- Assessee company cannot be regarded as low end ITES service provider because engagement of qualified and professional lawyers for providing legal outsourcing services is definitely high end services
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2017 (3) TMI 266
Disallowance u/s 14A - as per assessee as in preceding years, accepted the suo-moto disallowance therefore, in the present Assessment Year also, the same has to be followed - Held that:- We find that the Tribunal for Assessment Year 2009-10, followed the decision of the Tribunal in the case of assessee itself for Assessment Year 2008-09 with respect to disallowance made by the Assessing Officer under rule-8D(2)(ii) and 8D(2)(iii) of the Rules along with the disallowance of the administrative expenses. In that case, the Ld. Commissioner of Income Tax (Appeal) restricted the disallowance to ₹ 10 lakh against the suomoto disallowance made to the tune of ₹ 1 lakh. The disallowance to the tune of ₹ 10 lakh was upheld by the Tribunal against the claim of ₹ 1 lakh by the assessee. So far as, the contention of the ld. counsel for the assessee that the disallowance may be restricted to ₹ 1 lakh only, is concerned, we are not satisfied with such reasoning because the rule of consistency applies to both sides and since, the Tribunal for Assessment Year 2008-09, 2009-10, being on identical facts, directed the Assessing Officer to restrict the disallowance as contained in the order of the Tribunal dated 27/03/2015 (for Assessment Year 2009-10), for the present Assessment Year also, the disallowance is directed to be restricted to ₹ 10 lakh under section 14A of the Act r.w.r. 8D(2)(iii), against the claim of the assessee at ₹ 1 lakh, consequently, the Ld. Assessing Officer is directed to follow the ratio laid down in order dated 27/03/2015 (Assessment Year 2009-10). Disallowance of interest on the alleged basis that borrowed funds were utilized for non-business purposes - Held that:- As mentioned earlier, the Department in earlier and subsequent Assessment Year, accepted the stand of the assessee, therefore, no U-turn is permissible at this stage, when the facts are identical. Even otherwise, the issue of consistency has already been discussed by us in preceding paras of this order. Thus, the Ld. Assessing Officer is directed to follow the ratio laid down in theorder of the Tribunal in assessee's own case and hold that the funds were utilized for business purposes as the same were advanced by the assessee for the business exigencies of the assessee.
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2017 (3) TMI 265
Adding notional interest on the interest free deposit received from the tenant in order to determine annual value of the property for the purposes of section 23 - Held that:- Section 23(1)(a) of the Act relates to the manner of determination of annual value of the property for the purpose of section 22 of the Act. Section 23(1)(a) relates to the determination of the annual letting value of such property and speaks of the sum for which the property might reasonably be expected to let out from year to year. Quite clearly what is envisaged in section 23(1)(a) of the Act is the probable rent which the property is expected to earn but certainly it does not envisage consideration of any notional interest on any security deposit that may be placed by tenant with the landlord as a part of the terms and conditions of letting out of such a property. In the facts of the present case before us, it is clear that the deposit received from the tenant has been kept in fixed deposit by the assessee which has yielded interest income of ₹ 10,28,644/- and such sum is lying credited to the Profit and loss account of the assessee, therefore, the benefit derived from the deposit received from the tenant is very much part of the total income declared by the assessee. Hence, there is no scope for making any addition on account of so called notional interest on the deposit while determining the annual value of the property for the purpose of section 23 of the Act. Delete the impugned addition and accept the income as declared by the assessee under the head “income from house property” on account of rent earned on the property leased to Deutsche Bank. - Decided in favour of assessee Nature of interest income earned by the assessee - Held that:- The orders of the authorities below do not require any interference in as much as factually it has been made out by the AO that no activity of giving loans and advances has indeed been carried out and, therefore, the impugned interest income has been correctly taxed as “income from other sources”. Notably interest has been earned on the fixed deposit kept with the bank and the source of such deposit is the security deposit received from the tenant. Under these circumstances, we confirm the stand of the AO that interest income is liable to be taxed as “income from other sources”. - Decided against assessee Expenses local travel and conveyance and commission expenses - Held that:- The expenses in question are necessary to sustain the corporate entity and, therefore, the same deserve to be allowed while computing the total income. Accordingly, we direct the AO to allow the aforesaid expenses while computing the total income. - Decided in favour of assessee
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2017 (3) TMI 264
MAT computation - provisions for gratuity not added to book profit - Held that:- Here the liability had been calculated on the basis of actuarial valuation towards future payment to the employees. The assessee had submitted a copy of the actuarial valuation certificate issued by the Advocate and registered valuer which is on record. We further observe that when the provisions for gratuity is made on the basis of actuarial valuation for future payments to employees such a liability cannot be held as contingent liability as held by the Hon’ble Apex Court in the case of Bharat Earth Movers Ltd.[2000 (8) TMI 4 - SUPREME Court]. We also observe that the ground of the AO for rejecting the claim of the assessee that there was a change in the method of accounting in respect of gratuity liability is not correct because the change made by the assessee was not proved to be mala fide as it is on record and the change was made on the basis of accepted accounting principles. On that basis of this finding, we do not find any infirmity in the order of Ld. CIT(A) on this issue, and, therefore, the relief granted to the assessee by the Ld. CIT(A) is sustained . - Decided against revenue. Liability of interest on turnover tax - whether an allowable expenditure for computing book profit? - Held that:- CIT(A) in his detailed order provided the reasons carefully as to why the claim of assessee is justified herein. At the same time we also observe the decision of the West Bengal Tribunal in the case of Kingsway & Co. [1989 (7) TMI 326 - WEST BENGAL TAXATION TRIBUNAL ] wherein the provisions for interest on turnover tax is determined as an ascertained liability and once it is so, the same cannot be added to the book profit u/s. 115J of the Act. We agree with the findings of the Ld. CIT(A) and the relief given to the assessee on this issue is, therefore, sustained. - Decided against revenue. Provision of doubtful debt - whether an allowable expenditure for computing book profit? - Held that:- Issue is decided in favour of the assessee company by the jurisdictional High Court of Kolkata in the case of ICI (India) Ltd. Vs. CIT (2011 (9) TMI 136 - CALCUTTA HIGH COURT ) in which the decision in the case of CIT Vs. Comnet Systems & Services Ltd.(2008 (9) TMI 18 - SUPREME COURT ) was followed by the Hon’ble Calcutta High Court. The Ld. CIT(A) held on the basis of the judicial principles and decisions that the AO is directed to delete the addition of ₹ 8,70,932/- from the computation u/s. 115J of the Act on account of provision for doubtful debts.- Decided against revenue. Disallowance on account of unabsorbed loss is being lower than brought forward business loss computing adjusted book profit for the purpose of section 115J - Held that:- Once loss is held to be arrived at after taking into account depreciation, there is no scope of disputing the contention of the assessee that the amount of depreciation of ₹ 13,85,66,473/- is to be set off in terms of clause (iv) of the Explanation to section 115J of the Act. Thus, it was a duty of the AO to set off the said amount as the said duty falls within the purview of the limited power of making increases and deductions provided for in the explanation to the said section. See M/s. Pieco Electronics & Electricals Ltd. (now known as Philips India Ltd.) Vs. CIT, WB-4 & Anr. [2011 (8) TMI 352 - CALCUTTA HIGH COURT]- Decided against revenue.
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2017 (3) TMI 263
TDS u/s 194C - TDS liability - expenses reimbursed by the assessee - nature of expenses - Held that:- There existed a royalty-cum-reimbursement agreement between the assessee and CECO and as per the said agreement certain service charges for contract job work were to be reimbursed by the assessee to CECO e.g. (i) royalty for use of the name of CECO, (ii) reimburse of direct expenses made exclusively by CECO for the business of the assessee and (iii) payment for services and reimbursement will be based on practical aspect and requirement of funds. Therefore, this clause is clear about the fact that all direct expenses made by CECO have to be reimbursed by the assessee. At the same time, we observe from the order of the Ld. CIT(A) itself wherein there is a chart of statement of expenses where for all expenses paid TDS was deducted and i.e. evident from the chart. Therefore, there is no loss to the revenue in the entire transaction. Further in the judgment of the Delhi ITAT in case of Dr. Willmar Schwabe India (P) Ltd. [2005 (3) TMI 398 - ITAT DELHI-D ] it is crystal clear proposition of law that when there is no element of income and there is mere reimbursement made there is no question of deduction of TDS. In the instant case, we arrive at our considered view that assessee made payment to CECO by way of reimbursement only. Therefore, we find no infirmity with the findings of the Ld. CIT(A) and the relief granted to the assessee is sustained. This ground of appeal of revenue is dismissed. 9. Ground Nos. 1 and 3 are general in nature and hence, need no adjudication.
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2017 (3) TMI 262
Payment of Standby Letter of Credit charges (SBLC) charges - Allowable business expenses or not - Held that:- There is a commercial expediency in payment of SLBC charges by the assessee to M/s. Shalini P.Ltd and hence payment is an allowable expenditure. Therefore the deletion of disallowance made by the ld. CIT(A) is sustained. - Decided in favour of assessee TDS u/s 194C and 194J - consultancy and professional charges - disallowance made u/s 40(a)(ia) - mounts which is shown as payable on the date of balance sheet - Held that:- The majority ruling in the case of Merilyn Shipping and Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) was that if all amounts have been paid then no disallowance can be made u/s 40(1)(ia) of the Act if the amounts are found to be payable as on the year end then no disallowance can be made u/s 40(10(ia) of the Act. That in effect the Tribunal analyzing the section 40(a)(ia) of the Act had held that in the case of omission to deduct tax even the genuine and admissible expenses are to be disallowed. But it sought to remove the rigour of law by holding that the disallowance shall be restricted to the money which is yet to be paid. However, we have observed that in the case of Crescent Export Syndicate (2013 (5) TMI 510 - CALCUTTA HIGH COURT) observed that there can be no denial that the provision in question is harsh. But there is no ground which was not intended by the Legislature. The law was deliberately made harsh to secure compliance of the provisions requiring deduction of tax at source. It is not the case of an inadvertent error and accordingly the Hon’ble High Court held that the provision of section 40(a)(ia) of the Act are applicable not only to the amounts which is shown as payable on the date of balance sheet but it is applicable to such expenditure which becomes payable at any time during the relevant previous year and was actually paid within the previous year. In the result the question is decided in favour of the revenue and against the assessee. TDS u/s 194I and 194C - failure to deposit within 31st March, 2009 - disallowance u/s 40(a)(ia) - Held that:- The appellant has deducted the tax at source on these payments in the month of Feb. 2009 but has deposited the tax after the end of the accounting year.That the provision of section 40(a)(ia) has been amended by Finance Act 2010. As per the amended provision if the TDS amount is deposited before due date of filing of return then no disallowance can be made under section 40(a)(ia). It has been held by Supreme Court in the case of CIT v Alom Extrusions Ltd.(2009 (11) TMI 27 - SUPREME COURT) that the amendment made in the section 43B is not prospective but is explanatory and will accordingly apply retrospectively. Similarly view has been taken in the case CIT v Virgin Creations [2011 (11) TMI 348 - CALCUTTA HIGH COURT ]. In view of above discussed legal and factual position the further addition of ₹ 9,38,408/- made by applying the provision of section 40(a)(ia) is delete and thus the appellant gets relief of ₹ 9,38,408/- (11.32.925-194517) on this ground. CIT(A) had rightly sustained the disallowance of ₹ 73556/- u/s 194J of the Act and ₹ 120961/- u/s 194C of the Act in the facts and circumstances of the case. - Decided partly in favour of assessee
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2017 (3) TMI 261
Addition u/s 14A - whether the provisions of section 14A can be invoked to make a disallowance on account of expenditure incurred in relation to the exempt income in the form of dividend received by the assessee on the shares held as stock-in-trade? - Held that:- Disallowance is to be made under section 14A of the Act in relation to those shares which are held as stock in trade has been settled in the case of Dhanuka & Sons Vs. CIT [2011 (4) TMI 861 - CALCUTTA HIGH COURT] as held that the provisions of section 14A of the Act are very much attracted on those investments which are held as stock in trade. The provisions of section 14A of the Act are very much attracted on those investments which are held as stock in trade. However before us, the ld. counsel for the assessee has raised an alternative contention that even if section 14A read with Rule 8D is held to be applicable in the case of the assessee, the Assessing Officer may be directed to compute the disallowance as per Rule 8D by taking into consideration only those shares which have yielded dividend income in the year under consideration. Since this issue raised by the ld. counsel for the assessee as an alternative contention is squarely covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the case of REI Agro Ltd. (2013 (9) TMI 156 - ITAT KOLKATA), we direct the Assessing Officer to compute the disallowance as per Rule 8D by taking into consideration only those shares, which have yielded dividend income in the year under consideration. The alternative contention of the ld. counsel for the assessee is accordingly accepted.
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2017 (3) TMI 260
Additions made u/s. 80P(2)(a)(i) - Held that:- As per sec. 2(19) of the Act, a co-operative society means a co-operative society registered under the co-operative societies Act 1912 or under any law for the time being in force in any state for the registration of co-operative societies. The provisions of the IT Act 1961 either in sec. 2(19) or u/ s. 80P do not make any discrimination between the co-operative societies carrying on banking business and other co-operative societies. Co-operative banks are primarily co-operative societies by constitution and "banks" by the nature of business. In the case of Menasi Seemeya Group Gramagala Seva Sahakari Sangha Niyamita [2015 (2) TMI 1094 - ITAT BANGALORE ] it was held that the restrictive interpretation given to co-operative society u/ s. 80P(2) (d) was ·not warranted. The ITAT B'lore Bench in this case through a detailed reasoning came to conclusion that the interest and dividend earned by the appellant from co-operative bank was eligible for deduction u/ s. 80P(2) (d) of the Act. Thus held that the interest income earned on deposits made with other co-operative banks/society are fully deductible u/s. 80P(2)(a)(i) from the income liable to tax though the assessee has claimed the same as exempt u/ s. 80P(2) (d) and the same is also exempt u/ s. 80P(2)(d) as stated above. - Decided in favour of assessee
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2017 (3) TMI 259
Reopening of assessment - assessment completed in the status of individual though return originally filed in the status of HUF - Held that:- Once AO reached a opinion that assessment was to be done only in the status of individual and not in the status of HUF , he was bound to issue a notice to the assessee in his individual status. An individual and an HUF are different persons under the Income Tax Act, and notice to one cannot be deemed as notice to the other. Section 2(31) clearly brings out this differentiation. In the case before us, there was a clear failure to issue notice to the assessee in his individual status. Sec. 292BB of the Act can cure only were a notice is claimed by a assessee not to have been served on him or served on him out of time or served in an improper manner. It cannot cure a situation were there was no issue of notices u/s.148 or u/s.143(2) of the Act. As for the contention of the ld. Departmental Representative that such a ground was not raised by the assessee before ld. Assessing Officer, it being a pure question of low with all relevant facts on record, it is of the opinion that Tribunal can consider it, though raised first time before it. Therefore have no hesitation to set aside the assessment done on assessee on impugned assessment year. - Decided in favour of assessee
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2017 (3) TMI 258
Penalty levied u/s 271C - failure to deduct tax at source u/s 194H/194J of the Act, towards commission payment - Held that:- The coordinate bench of ITAT, Visakhapatnam in assessee’s own case for the assessment years 2003-04 to 2005-06 as considered the issue in detail and held that transaction between the assessee and MMTC is not on principal to principal basis and hence the assessee is not liable to deduct TDS u/s 194H of the Act. Thus we are of the view that transaction between the assessee and M/s. MMTC is on principal to principal basis and hence the assessee is not liable to deduct TDS u/s 194H/194J of the Act. Since, we have already deleted the additions made by the A.O. u/s 201(1) & 201(1A) of the Act, consequent penalty levied u/s 271C of the Act for failure to deduct TDS cannot sustain in the eyes of law. Therefore, we direct the A.O. to delete penalty levied u/s 271C of the Act. - Decided in favour of assessee
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2017 (3) TMI 257
Validity of re-assessment proceedings - failure on the part of the A.O. to provide the reasons recorded for re-opening - Held that:- In the present case on hand, on perusal of the facts available on record, we find that the A.O. has formed an opinion merely based on the return of income and CBDT instructions, but not based on any tangible material which came to his knowledge subsequent to the completion of original assessment completed u/s 143(1) & 143(3) of the Act. Though there is no question of change of opinion in the cases where the assessment has been completed u/s 143(1) of the Act, but the facts remains that the A.O. should form reasons to believe which should be based on a new material which is came to his knowledge after completion of original assessment, but not based on same set of facts or return of income, which is already available with the A.O. at the time of completion of original assessment. Therefore, we are of the view that there is no sound basis for formation of reason to believe for re-opening of the assessment and hence, re-opening of assessment for the assessment year 2007-08, 2008-09 & 2009-10 is bad in law Question of non-furnishing the reasons for re-opening on already concluded assessment goes to very route of the matter and that the assessee is entitled to be furnished reasons for such re-opening and that if reasons are not furnished to the assessee, then the proceedings for the re-assessment cannot be taken any further, and re-opening of the assessment would be bad in law. A.O. had issued notice u/s 148 of the Act, on 30.6.2011 calling upon the assessee to furnish return of income. In response, the assessee has filed a letter on 18.7.2011 requesting for time of atleast 30 days for submitting the required details. Thereafter, the A.O. has issued a letter dated 25.7.2011 to furnish returns in response to notice issued u/s 148 of the Act. In response to letter, the assessee has filed a letter on 8.8.2011 and requested the A.O. to furnish reasons recorded for re-opening of the assessment for all the assessment years. Thereafter, the assessee has filed one more letter on 26.8.2011 and requested the A.O. to treat the return filed earlier u/s 139(1) of the Act, as the return filed in response to notice issued u/s 148 of the Act, for the assessment year 2007-08, but the assessee has filed returns in response to notice u/s 148 for the assessment year 2008-09 and 2009-10. Therefore, it is abundantly clear that the assessee has followed the procedure laid down by the Hon’ble Supreme Court, in the case of G.K.N. Drive Shaft’s India Ltd. (2002 (11) TMI 7 - SUPREME Court ). It is only the A.O. has not followed the procedure laid down by the Hon’ble Supreme Court. Therefore the re-opening of the assessment for the assessment years 2007-08, 2008-09 & 2009-10 is invalid - Decided in favour of assessee.
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2017 (3) TMI 256
Addition on account of valuation of stock of levy sugar at the rates applied for valuation of levy free sugar - Held that:- This stock of levy sugar could then not have been valued at free sale sugar price in view of the fact that there was a legal obligation on the assessee to supply the such stock of sugar at the controlled levy price through the Public Distribution System. For the purpose of valuation of the stock it was relevant to examine whether the assessee was under an obligation to provide for levy sugar. This fact has been duly established by the assessee through evidence led both before the CIT appeals as also tribunal that has specifically referred to such evidence. In view of the above, the questions of law raised in the memo of appeal are answered, against the revenue and in favour of the assessee i.e. in absence of any dispute as to the total stock of sugar and the closing stock of sugar the tribunal was not in error in accepting the value of closing stock of levy sugar in view of the assessee being under an obligation to supply levy sugar.
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2017 (3) TMI 255
Deduction under Section 80IB(10) - Held that:- HC order [2016 (9) TMI 295 - DELHI HIGH COURT] confirmed. No reason to entertain this Special Leave Petition, which is, accordingly, dismissed. The income from the housing schemes in respect of which deductions are claimed are by themselves standalone complete housing projects. - Decided in favour of assessee
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2017 (3) TMI 254
Constitutional validity of the third proviso to Section 254(2A) challenged - grant extension of stay beyond 365 days - Held that:- In view of the intervening developments whereby the main matters have been disposed of, this Special Leave Petition has been rendered infructuous. As delay in disposing of the appeal is not attributable to the assessee, the Tribunal has the power to grant extension of stay beyond 365 days in deserving cases. - Decided in favour of assesse. HC ref case - 2015 (5) TMI 655 - DELHI HIGH COURT
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2017 (3) TMI 253
Addition u/s 41 - creditor was in dispute - Held that:- Up on careful consideration we find that the assessing officer has disallowed the outstanding liability under section 41(1) only after issuing a notice under section 133(6). In this regard assessee had submitted that the matter with the creditor was in dispute and sub judice. In these circumstances in our considered opinion the assessing officer has not brought on record any cogent material to prove that the liability has ceased to exist When the matter is in dispute and sub judice assessee cannot be expected to get a confirmation from the creditor. In these circumstances in our considered opinion assessing officer was wrong in adding the credit under section 41(1). Accordingly, "we' hold that the addition is not sustainable. - Decided in favour of assessee
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2017 (3) TMI 252
Assessee offered capital gain from Sale of land and not from building - joint property - assessee submitted that he is the owner of the land and not of the building. The entire investment in the construction of the building was made only by other person - Held that:- On examination of the order of lower authorities we find that the argument of the assessee that he has no connection with the building either directly or indirectly has not been adjudicated in the absence of documentary evidence. However in our view the lower authorities before reaching to the conclusion should have cross verified the contention of the assessee from Mr. Samar Roy Chowdhury which they failed to do so. Therefore in the interest of Justice and fair play we’re inclined to give one more opportunity to the assessee to submit his arguments with documentary evidence to justify his claim. Hence we restore this ground of appeal of the assessee to the AO for fresh adjudication in accordance with the law and in the light of above is stated discussion. - Decided n favor of assessee for statistical purposes.
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Customs
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2017 (3) TMI 286
Container Freight Station - violation of provisions of Handling of Cargo & Customs Area Regulations, 2009 - one of the export consignment the goods were substituted after the same were examined by the Customs - penalty - Held that: - certain steel material, which brought in the CFS for export was later substituted with Sandalwood. The said cargo was examined when it was in CFS and thereafter it was the responsibility of the CFS to transfer the same safely to the port. However, during transfer from the CFS to Port, the said cargo was substituted with prohibited cargo. The act and omission of CFS need to be examined in this background of specific violation on their part to do their duties. Just because examination was done without de-stuffing, it cannot be said that the appellant had compromised to the cargo in its custody. It is pointed out that the same was examined by the customs officer and it if was violation of any regulation then the customs officer, who examined the goods is equally responsible for the same. It is apparent that the responsibility of safe transit of the goods from CFS to Port is that of the appellant and callousness in ensuring the safety and security is the violation on their part. Penalty under various regulations is reduced from ₹ 2 lakhs to ₹ 1.5 lakhs - the penalty u/s 117 cannot be upheld - appeal allowed - decided partly in favor of appellant.
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2017 (3) TMI 285
Issuance of Duty credit scrips - duty credit scrips were held up on account of a letter received from the DRI Ahmadabad - Held that: - on scrutiny, 11 of the applications have been found to be defective and deficiency letter has been issued to the petitioner and on petitioner’s complying with the deficiency letters and curing the defects, the applications shall be processed - the petition is disposed of directing the petitioner to remove the deficiency as pointed out by the respondents. Some of the applications are still under consideration at the pre deficiency notification stage. The respondents are directed to process all the remaining applications within a period of 10 days and point out deficiencies. In case any deficiency is pointed out, the petitioner shall cure the same expeditiously Petition allowed - decided in favor of petitioner.
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2017 (3) TMI 284
Valuation - import of crude oil - whether the crude oil imported by the appellant was liable to be assessed on the transaction value u/s 14 on the basis of Bill of Lading quantities or whether the duty is required to be assessed on the basis of crude oil pumped into the shore tank? - Held that: - the issue is squarely covered in favor of the appellant by the decision of the Supreme Court in appellant's own case Mangalore Refinery And Petrochemicals Ltd. Versus Commissioner of Customs, Mangalore [2015 (9) TMI 245 - SUPREME COURT], where it was held that Quantity actually received into shore tank in port in India should be the basis for payment of Customs duty. Quantity shown in bill of lading cannot be used for this purpose as it does not reflect quantity of goods at the time and place of importation - the adjudicating authority are directed to re-determine the customs duty by adopting the shore tank quantity as opposed to the bill of lading quantity - appeal allowed by way of remand.
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2017 (3) TMI 283
Valuation - polyester PVC coated fabrics - value of goods has been enhanced on the basis of assessed bill of entry of the imported goods and on the basis of DRI alert - Held that: - neither transaction value of the goods have been rejected under Section 14 of the Customs Act, 1962 and there is no contravention import of such goods was found - the assessed bills of entry cannot be relied in the absence of the value of contemporaneous imports - reliance placed in the case of M/s. Sedna Impex India Pvt. Ltd. Garg Impex Versus CC, Faridabad [2016 (10) TMI 517 - CESTAT CHANDIGARH], where it was held that declared value cannot be enhanced on the basis of DRI alert - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 282
Permission for filing an appeal - redemption fine - penalty - Held that: - During the relevant period, it was mandatory for the department to seek permission from the Committee on Disputes to file an appeal before the higher judicial forum - The COD very clearly recorded that there are no legal issues involved in the dispute in the case of the impugned order and the Committee held that it was not desirable for the Revenue authorities as well as Mazagon Docks Ltd. to litigate the matter in a court of law and gave direction to the department not to impose any further penalty on MDL or insist on confiscation of the goods - appeal rejected - decided against Revenue.
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2017 (3) TMI 281
Natural justice - non-availing of the statutory right to prefer an appeal from two orders - Held that: - The petitioner was well aware of both the proceedings at the adjudication stage. It chose to arrange its affairs in a particular way. The order dated August 31, 2005 passed by DGFT has attained finality. The petitioner did not prefer any appeal thereform despite having complete knowledge of such proceeding. In fact the petitioner has contemporaneous knowledge of such order - The petitioner became aware that a demand was raised by DGFT consequent upon an adjudication in the proceeding. The petitioner not to take any steps even in spite of such knowledge - petition dismissed.
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2017 (3) TMI 280
Remission of demurrage charges - consignment shipped on CAD Basis - non-clearance of the goods - the question regarding the liability of the appellant to pay the demurrage was never raised before the High Court nor did the High Court consider that question - Held that: - though the question was not raised before the High Court, the appellant need not be barred from raising this question before us because it is a pure and substantial question of law. No enquiry into any fact is really necessary to decide the said question of law. The only fact which is not clearly established on record is the point of time at which the title in the goods passed to the appellant. But, in our opinion (for the reasons to be given later), that fact is wholly irrelevant for determining the authority of the 1st respondent to collect demurrage from the appellant. Whether the Madras Port Trust was acting as an agent of the consignee or the steamer agent when it took charge of goods discharged from the vessel? - Held that: - High Court held that the steamer agent’s responsibility ceases “once the goods are handed over to the Port Trust” and the bill of lading is endorsed. The High Court further held that upon the endorsement of the Bill of lading, “the property in the goods vests” in the consignee and therefore the steamer agent’s responsibility for the custody of the goods ceases - High Court, concluded that only the consignee was liable. The fact that the appellant was not permitted to clear the goods because of the pendency of some proceedings initiated by the customs authorities by itself does not create a right of remission in favour of the appellant. Though it may constitute a relevant circumstance for considering granting remission if the 1st respondent so chooses as a matter of policy. As a matter of fact, remission of a part of the demurrage was granted by the 1st respondent. The authority of the 1st respondent to grant or decline remission of any amount due towards any rate payable under THE ACT must be based on rational consideration and a sound policy. Such a requirement is inherent in the fact that 1st respondent is a statutory body discharging important statutory obligations. 1st respondent could not bring anything on record to our notice which demonstrates the reasons for declining remission as claimed by the appellant nor any clear policy of the respondent which regulates the discretion - we deem it appropriate to set aside the decision of 1st respondent dated 16.09.1995 in declining the remission and leave it open to the respondent to take appropriate decision on the application duly recording the reasons for such decision. Appeal disposed off - decided partly in favor of appellant.
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Corporate Laws
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2017 (3) TMI 277
Public auction - properties free from any encumbrance - Held that:- We permit the contemnor to sell the properties mentioned in Part 'A' barring the property at Item No.15, and any other properties mentioned in Part 'B' and other properties which are not encumbered and deposit ₹ 5092.64 crores on or before 13th April, 2017. The amount shall be deposited in SEBI Sahara Refund Account. In case, the substantial amount is deposited, this Court may think of extending the time, otherwise appropriate direction shall be issued. As is evident from Part 'A', item No.15, the land at Ghaziabad admeasures 91.65 acres. We have been apprised at the Bar that the same has been acquired by the Ghaziabad Development Authority and the price, as stated in the Annexure, is ₹ 1112.70 crores. It is submitted by the learned senior counsel for the contemnor that the same is payable to him along with interest. To appreciate the said submission, it is obligatory on the part of the Court to offer an opportunity of hearing to the Ghaziabad Development Authority. Let notice be issued to the said authority within a week hence. The requisites in that regard be filed by the petitioner, S.E.B.I., within three days from today. The competent authority of the Ghaziabad Development Authority shall bring the computation in regard to the compensation awarded and remain personally present on 17th April, 2017 before this Court. The Registry is directed to send a copy of this order to the competent authority of the Ghaziabad Development Authority. In a case of this nature, surprises are bound to spring up. Mr. Sriram P., learned counsel has submitted that he has instructions from an International Real Estate Company, namely, MG Capital Holdings LLC, which is prepared to purchase the Plaza Hotel at New York, U.S.A. The company intends to offer 550 million US dollars for the stake of “Sahara” in that hotel. However, he wanted that he may be permitted to do due diligence and that should be granted by the contemnor. Though the submission advanced by Mr. Sriram appears quite innocuous, it cannot be so perceived. Once he intends to get into the fray, a fiscal one, he must be financially prepared. The permission can only be granted if he deposits a sum of ₹ 750 crores before the Registry of this Court on or before 17th April, 2017. In addition, he may supply the details of the company to Mr. Narendra Hooda, learned senior counsel assisting Mr. Kapil Sibal so that the credentials of the company can be verified.
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Service Tax
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2017 (3) TMI 315
Refund of unutilised CENVAT credit - rejection on the ground that the assessee was not registered with the service tax department at the time of providing / export of Business Auxiliary Services and the registration was taken subsequently on 08.04.2008 - Held that: - the issue is squarely covered by judgment of the Hon’ble Karnataka High Court in the case of Portal India Wireless Solutions P. Ltd. [2011 (9) TMI 450 - KARNATAKA HIGH COURT], where it was held that Registration not compulsory for refund - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 314
CENVAT credit - whether input service credit of Terminal Handling Charges received and used in connection with export of goods for the period prior to 07.07.2009 is admissible to the appellants? - Held that: - the Terminal Handling Charges would fall under port services prior to 07.07.2009 has been decided by this Tribunal in the case of Nahar Fibers vs. C.C.E., Chandigarh [2013 (12) TMI 330 - CESTAT NEW DELHI] - appeal allowed - decided in favor of appellants.
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2017 (3) TMI 313
CENVAT credit - inputs namely LPG cylinders used in forklifts - input services including works contract services - Held that: - appellant is eligible for input credit on LPG cylinders - reliance placed in the appellant's own case M/s Sri Sarvaraya Sugars Ltd. Versus CCE, C & ST, Visakhapatnam [2016 (11) TMI 860 - CESTAT HYDERABAD], where it was held that the LPG cylinders were used to function the forklifts in order to facilitate movement of goods within the factory - credit allowed. The works contract services of setting up of a factory alone has been deleted by the amendment broughtforth with effect from 01.04.2011. It is clear that appellant has availed the services prior to 31.03.2011 and only the invoice happened to be issued after 01.04.2011 and that too, immediately after the amendment - the imposition of penalty is highly harsh upon the appellant and is not warranted. Appeal disposed off - decided in favor of assessee.
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2017 (3) TMI 312
Condonation of delay of 111 days - the appeal could not be filed within the stipulated period of three months owing to internal procedures that had to be complied with before filing the appeal - Held that: - It is seen that between 23rd May 2016 and 18th July 2016, the Export Inspection Council, the empowered body, was without a Chairman and that without the approval of Chairman funds for pre-deposit, a mandatory requirement for filing of appeals, could not be released - the rigour of procedure for entering into dispute with the tax authorities stood in the way of prompt filing of appeal - the reasons ascribed for failure to file the appeal in time appears to be acceptable - delay condoned - appeal allowed.
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2017 (3) TMI 311
CENVAT credit - book adjustments - On such book adjustments the appellant has taken credit and the demand of interest is made on the pretext that there is delay in paying service tax and that appellant has taken credit of the service tax even before the payment of the said amount to the Associated Enterprises - Held that: - When the service tax has been paid by the Associated Enterprises within time the demand of interest cannot sustain, in terms of provisions laid in Section 67(4)(c) - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 310
Imposition of penalty u/s 76 of FA - works contract service - doubts regarding the interpretation of relevant provisions - invocation of section 80 - bonafide belief - Held that: - It has to stated that even though the appellants have been issued a SCN for the earlier period, the same was being litigated by the appellant and the appellants has accepted the liability to discharge service tax on the subject services only after the order passed by the Commissioner (Appeals) dated 29.03.2013. The subsequent SCN in respect of the present appeal was issued on 04.09.2012 which is much before the order of Commissioner (Appeals). Therefore the issue was under litigation so far as the appellant is concerned - benefit of section 80 extended to appellant - penalty set aside - appeal allowed - decided in favor of appellants.
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2017 (3) TMI 309
Jurisdiction of Tribunal - Disallowance of abatement under N/N. 1/2006-ST dated 1st March 2006 - short-payment of tax - Held that: - Unlike Commissioners of Central Excise or the appropriate review committees, the Tribunal is not empowered to call for and scrutinise an order-in-original or order-in-appeal to ascertain its conformity to legality and propriety; that jurisdiction to review is vested in Commissioners and Chief Commissioners of specified collegial strength - the Tribunal is debarred from rendering a finding or recording an order on a matter in which the appellant has not placed itself within the appellate jurisdiction of the Tribunal. A legacy of times past when the recovery provisions of Central Excise Act, 1944 were an extension of the assessment provisions under which duty was payable only to the extent assessed by the ‘proper officer’ - which, in our opinion, should not be resorted to. And, therefore, we did not do so. Application dismissed.
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2017 (3) TMI 308
CENVAT credit - input services or not? - maintenance and repair services - civil work services - Held that: - On perusal of the invoices it is clear that the said services do not fall in the exclusion part of the definition of input services. The works though mentioned is only minor repair works and rennovation works. The definition of input service mostly includes the words 'modernization', 'rennovation' or 'repairs' of the premises of the provider of output service - the services qualify as input service and are eligible for credit - appeal allowed - decided in favor of appellants.
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2017 (3) TMI 307
Challenge to the issuance Show Cause Notice (SCN) - Levy of tax - Societies registered under the Co-operative Societies Act - petitioner claim that they do not come under the purview of Service Tax Rules and is classified as "Primary Agricultural Credit Society" registered as per Section 2(oaa) of the Kerala Co-operative Societies Act, 1969, and they do not belong to any of the organization mentioned in Section 65 (105)(zm) of the Finance Act, 1994 so as to attract service tax - Held that: - if the issue that the activity carried on by the society attracts provisions of Finance Act, 1994 to fasten the liability of service tax is decided against the Society, objection will be considered, is clearly complied with, while issuing the SCN - Even otherwise, when the respondents have in the SCN clearly indicated that they are proceeding after hearing the petitioner or their representative and after coming to a finding that the service rendered is taxable under the Service Tax Act, there is no reason for this Court to interfere in the matter at this stage of the proceedings - petition dismissed - decided against petitioner.
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2017 (3) TMI 306
Refund claim - refund denied without even serving a notice - natural justice - Held that: - The absence of such notice precludes me from examining the aspects that have been elaborated in the impugned order - The interests of justice can be served only by restoring the claim for refund and placing the appellant on notice for the proposed reasons to reject a part of the claim - appeal allowed by way of refund.
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2017 (3) TMI 305
100% EOU - refund claim - various input services - denial on account of nexus - Held that: - The input services other than club / association services have been analysed by this Tribunal in various judgments and the Tribunal has held that the appellant is eligible for refund - refund allowed for all services except club / association services - appeal allowed - decided partly in favor of appellant.
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2017 (3) TMI 304
Refund claim - rejection on the ground of limitation as this Service Tax/penalty/interest was paid during 29.3.2010 to 26.4.2010 whereas the refund claim was filed on 30.5.2011 - Explanation (ec) to Section 11B defining 'relevant date' - Held that: - Revenue has sought to limit this explanation to the judgment, decree, order or direction only in case where refund is under dispute - there is no such reference in the explanation. In fact, the explanation clearly says that it applies to case where the duty becomes refundable “as a consequence of” judgment, decree etc. This clearly implies that the judgment, decree etc. need not be directly refunded and can be in relation to any precursor of refund - appeal rejected - decided against Revenue.
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Central Excise
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2017 (3) TMI 303
Time limitation - is SCN issued to assessee by Department time-barred? - Held that: - the relevant date in this case is 20.07.2005 and not the date mentioned in the return i.e., 18.07.2005 or the date of taking credit or the date of internal audit, as claimed by the appellant and therefore the appellant's plea that the SCN is hit by the limitation of period of one year is not acceptable - the SCN was issued well within the period of limitation and as such, the demand is not time barred - appeal dismissed - decided against appellant.
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2017 (3) TMI 302
Classification of goods - Anhydrous Dextrose I.P. - classified under CH No.17.02 of Central Excise Tariff or under CH No.29.42.00? - Held that: - The CESTAT Ahmedabad in the case of Maize Products [2009 (6) TMI 300 - CESTAT, AHMEDABAD] decided that the product viz. Anhydrous Dextrose deserves classification under CH No.17.02 of Central Excise Tariff and not under CH No.29.42.00 - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 301
CENVAT credit - HR beams, sheets, channels, plates, falling under Chapter 72 of the Schedule to the CETA - Held that: - this case needs to be remanded back to the original authority to verify the actual use of the items alleged to have been stated by the appellant to have been used in the fabrication which is used for production of the paper - appeal allowed by way of remand.
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2017 (3) TMI 300
CENVAT credit - service tax paid on Civil Construction Work - denial on the ground that the use of input services had no nexus with the manufacture of final product - Held that: - the issue is no longer res integra - reliance placed in the case of Commissioner Central Excise Commissionerate, Delhi-III Versus M/s Bellsonica Auto Components India P. Ltd. [2015 (7) TMI 930 - PUNJAB & HARYANA HIGH COURT], where it was held that input services used in relation to setting up, modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 299
Availing cenvat credit while availing benefit of exemption N/N. 30/2004-CE dt. 09.07.2004 - denial on the ground that the appellant has taken credit on the inputs - Held that: - it is an admitted fact that before clearances of the said goods availing benefit under N/N. 30/2004-CE dt. 09.07.2004, the appellant either reverses the Cenvat Credit attributable to the inputs used in manufacture of said goods or reverse the amount equivalent to 5%/6% of the value of the said goods. The reversal of Cenvat Credit on inputs used attributable to manufacture of said goods or reversal of amount equivalent to 5%/6% of the value of said goods shall amount to not taken the credit on inputs of the said goods - the appellant has complied with the condition of N/N. 30/2004-CE dt. 09.07.2004 - appellant has correctly availed the benefit of said Notification - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 298
CENVAT credit - whether the respondent/assessee is liable to pay 8% /10% of value of exempted goods when they have already reversed the credit taken in respect of inputs used in manufacture of exempted products? - Held that: - the respondent having reversed the proportionate credit cannot be compelled to pay 8%/10% of the value of the clearances of exempted goods - appeal dismissed - decided against Revenue.
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2017 (3) TMI 297
CENVAT credit - outward service i.e. CHA Agency, DEPB Registration, Port Shipping, Customs Clearing Services, inland Haulage Services, Technical Handling Charges, Courier Services and Insurance Charges etc - denial on the ground that the services rendered were beyond the place of removal i.e. factory gate - Held that: - without examining the relevant documents, Commissioner (Appeals) could not have come to a conclusion as to the place of removal. Admittedly, these documents which have been produced before the Tribunal were not before the Commissioner (Appeals). It will, therefore, be in interest of justice that the documents, which the appellants have now produced to substantiate their plea, are submitted before and examined by the Commissioner (Appeals) to record proper findings giving the basis for arriving at the same - appeal allowed by way of remand.
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2017 (3) TMI 296
CENVAT credit - MS items used for fabrication of canteen sheds - Held that: - For the present period appellant has not used the MS items for canteen sheds. On perusal of the Chartered Engineer's certificate as well as the various Installations Certificates furnished by the appellant I am convinced that the appellant has not used MS items for canteen sheds in the present period - disallowance of credit is unjustified - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 295
With a view to enable the appellants/assessee to move the Tribunal, the Revenue should not initiate any steps to recover the taxes by coercive means - it is well-settled that it is not for this Court to guess as to how the assessee proceeded, what points the assessee's representative pressed and what was given up and whether at all the Tribunal failed to take any of them into consideration or omitted to make a reference to them.
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2017 (3) TMI 294
Cash refund - CENVAT credit lying unutilised - closure of factory - Section 11B of the CEA, 1944 - Held that: - the decision in the case of Slovak India Trading Co. Pvt. Ltd. Versus Commissioner of Central Excise, Bangalore [2005 (8) TMI 273 - CESTAT, BANGALORE], is applicable in the present case as the issue is similar, where it was held that this Tribunal was justified is ordering refund of unutilized Cenvat credit lying in balance when the manufacture in the unit was closed - appeal dismissed - decided against Revenue.
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2017 (3) TMI 293
Valuation - whether the erection & commissioning charges of said Sugar Plant & Machinery at the site of customer should be included in the assessable value or not? - Held that: - similar issue decided in the case of Commissioner of Central Excise, Mumbai Versus Official Liquidator for Brimco Plastic Machinery (P) Ltd. [2015 (10) TMI 2281 - SUPREME COURT] wherein it was held that the installation, erection & commissioning charges are not added/included in the assessable value for determination of Central Excise duty - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 292
Refund claim - excise duty paid on discounts passed on to the dealers and stockists, subsequent to clearances - denial on the ground that the appellant has not resorted to provisional assessment and also for the reason that the refund amount has not passed the test of unjust enrichment - Held that: - The said point was considered by the Tribunal in the appellant's own case [2016 (8) TMI 493 - CESTAT HYDERABAD], where it was held that the appellant paid duty on the value including the discount that is to be allowed and therefore opting for provisional assessment is not required. Unjust enrichment - Held that: - The appellant has produced documents such as Chartered Accountant Certificate, Ledger account as well as the Balance Sheet. The appellant has therefore established that the burden of duty has been borne by the appellant. In view thereof, following the decisions laid in the appellant's own case [2016 (8) TMI 493 - CESTAT HYDERABAD], the appellant is eligible for refund. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 291
Manufacture - whether the activity of cutting, drilling, punching hole bending/welding amount to manufacture in terms of section 2 (f) of CEA, 1944 or not? - Held that: - in the case of Mahindra & Mahindra Ltd. [2005 (11) TMI 103 - CESTAT, NEW DELHI] it has been held that the activity of cutting,drilling, punching hole bending/welding amount to manufacture and liable to pay duty under heading 73.08 - the photographs of certain items which show that they have undertaken the activity of cutting, drilling, punching hole but in some cases, welding has also taken place. In that circumstance, the correct quantification of demand is not ascertainable, therefore, the matter needs examination at the end of the adjudicating authority - appeal allowed by way of remand.
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2017 (3) TMI 290
Clandestine Removal - Fake invoices - Held that: - As it is admitted fact that the goods have been manufactured by the job workers which has been cleared by the appellants on the strength of fake/parallel invoices, therefore, the job workers are the manufacturer of the goods cleared on the strength of parallel/fake invoices. In that case if any duty is to be demanded, the same was required to be demanded from the job worker being manufacturer which is not the case. No other evidence has been brought on record by the revenue. In that circumstances, the charge of clandestinely removal of goods is not sustainable against the appellants - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 289
Interest u/s 11BB - denial on the ground that refund claim has been sanctioned within 3 months from the date of CESTAT order dated 9.9.2009 as well as within 3 months from the date of filing of refund claim dated 9.11.2009 - Held that: - The refund application was filed by the appellants on 9.11.2009. Since the refund was sanctioned within 3 months from the date of CESTAT order dated 9.9.2009 as well as within 3 months from the date of filing of refund claim dated 9.11.2009, both the adjudicating authority and appellate authority have rightly held that the appellant is not eligible for interest u/s 11BB - appeal dismissed - decided against appellant.
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2017 (3) TMI 288
CENVAT credit - registered dealer from whom the goods have been procured by the appellants found to be non-existent - Held that: - no investigation has been conducted at the end of the appellants to ascertain they have received the goods or not - No cross examination of the registered dealer was granted to the appellants to reveal the truth - CENVAT Credit cannot be denied to the appellants on the basis of deficient investigation - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 287
Captive consumption - intermediate producut - Benefit of N/N. 67/95 dated 16.03.1995 - While trimming untrimmed sheets and circles scrap was generated, whether untrimmed circles and sheets of brass were eligible to enjoy benefits of Notification? - Held that: - merely because in the process of trimming, certain wastes have arisen, untrimmed sheets captively consumed, the benefit of exemption under N/N. 67/95 cannot be denied. Prima facie, the applicants shall be eligible for the benefit of N/N. 67/95 - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2017 (3) TMI 279
Interpretation of statute - proviso to Section 19(2)(v) of the TNVAT Act, 2006 - reversal of input tax credit - petitioner claims that all along, in consonance with the provisions of the 2006 Act, in particular, Section 19(2)(ii) of the 2006 Act, it was claiming Input Tax Credit (ITC) in respect of inputs, which had suffered tax, as they were being used in manufacturing the final product, i.e., Asbestos cement sheets/Hi-tech cement sheets. Held that: - A plain reading of the provisions of sub-section (1) and sub-section (2) of Section 19 of the 2006 Act would show that, as long as specified goods, which suffer tax are used for any of the purposes set out in clauses (i) to (vi) of sub-section (2) of Section 19, the assessee should be able to claim the ITC, with a caveat in so far as clause (v) is concerned. The caveat being, the limitation, which is encapsulated in the proviso to Section 19(2) of the 2006 Act. Therefore, the limitation provided in the proviso would apply only vis-a-vis the purpose specified in clause (v) and not qua other purposes set out in clause (i) to (iv) and (vi) of Section 19(2) of the 2006 Act - The fact that, the proviso, on account of erroneous interpretation by the Revenue, was causing difficulties for the manufacturers, is exemplified by the Statement of Objects and Reasons which was set forth, at the time of introduction of Act 5 of 2015. Petition allowed - decided in favor of petitioner.
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2017 (3) TMI 278
Natural justice - none of the documents filed by the petitioner have been taken into account - while the demand notice dated 14.11.2016, bears the signature of the respondent, the Assessment Order has not been signed by the said Officer - Held that: - It appears that the respondent/Assessing Officer has passed the impugned Assessment Order dated 14.11.2016, in haste, and consequently, not even appended his signature on the Order - The respondent/Assessing Officer, after affording an opportunity to the authorised representative of the petitioner, will pass a fresh order - appeal allowed by way of remand.
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Indian Laws
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2017 (3) TMI 251
Public auction sale - Mandate of secured creditor to put the borrower Separate individual notice prior to deciding on the mode of sale of the secured asset - Rule 8 (6) read with Rule 9 of the Security Interest (Enforcement) Rules, 2002 - High Court has quoted or relied upon sub-rule 6 of Rule 8 as dealing with “movable” secured assets - Held that:- There is nothing in the Rules, either express or implied, to take the view that a public notice under sub-rule 6 of Rule 8 must be issued only after the expiry of 30 days from issuance of individual notice by the authorized officer to the borrower about the intention to sell the immovable secured asset. It is permissible to simultaneously issue notice to the borrower about the intention to sell the secured assets and also to issue a public notice for sale of such secured asset by inviting tenders from the public or by holding public auction. The only restriction is to give thirty days’ time gap between such notice and the date of sale of the immovable secured asset. High Court has committed a manifest error in assuming that the notice of intention of sale to be given to the borrower and a public notice for sale cannot be simultaneously issued. The High Court was also not right in observing that after a notice regarding intention to sell the secured asset under sub-rule 6 of Rule 8 is given by the authorized officer to the borrower, only on expiry of 30 days therefrom can the secured creditor take a decision about the mode of sale referred to in sub-rule 5 of Rule 8 after giving notice to the borrower and then issue a public notice after expiry of further thirty days. By this interpretation, the High Court has virtually re-written the provisions and inevitably extended the time frame of 30 days specified in sub-rule 6 of Rule 8 (atleast in relation to the sale of secured asset by inviting tenders from the public or by holding public auction). There is no need to wait for the expiry of 30 days from issuance of notice of intention to sell the secured asset given to the borrower, for publication of a public notice for sale of such asset. Nor is there any requirement to give a separate individual notice prior to deciding on the mode of sale of the secured asset. To the above extent, the opinion of the High Court in the impugned judgment will have to be overturned. Thus the public auction sale held on 21.11.2015 has not materialized, the appellant may have to resort to a fresh public notice for sale of the secured asset of the respondent no.1, if the outstanding liability is still unpaid and the sale is to be effected either by inviting tenders from the public or by holding public auction.
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