Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 12, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Process of compression of natural gas is a manufacture for claiming additional depreciation u/s.32(iia) - AT
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Central excise duty refund due to the assessee is part of the profit derived from the industrial undertaking and therefore the assessee was eligible for deduction under section 80-IB on the said refund. - AT
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Refundable amount utilized by the Department hence interest was payable under Section 244(1A) - SC
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Short term capital loss - Just because a transaction results in a tax benefit, unless it is a sham transaction, it cannot be ignored - No justification in declining the short term capital loss claimed - AT
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Advances taken against the supply are not covered by the provisions of Deemed dividend u/s 2(22)(e) - AT
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Reopening of assessment on the basis of Volckar committee report to be annulled - AT
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MAT - Provision for bad and doubtful debts are required to be added to book profit as per clause (i) of explanation [1] to subsection [2] of section 115JB - AT
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Interest income of the assessee from fixed deposit is not “business income” but “income from other sources”- AT
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Interest paid to third parties falls under the head “business expenditure” which is liable to be deducted while computing the net profit - AT
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Agricultural land which is beyond 8 Kms from municipal limits is not a capital asset - AT
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Expenses incurred for obtaining feasibility report, on the possibility of setting up projects, etc. is revenue in nature - AT
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Stay of demand - Delay in deciding the appeal cannot be attributed to the assessee - There is nothing on record to show when the order was communicated to the assessee - AT
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Benefit of indexation - NRI assessee who had purchased shares in Indian currency would be entitled to benefit of second proviso to Sec. 48 on sale of equity shares in question. - AT
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UP Sahakari Chini Mill Sangh Limited and Sakkar Vikash Nikdhi are not covered by the definition of Public Financial Institutions / State Finance Institutions/ State Industrial Finance Institutions as defined u/s. 4A(2) of the Companies Act, 1956 and therefore provisions of section 43B(d) of the I.T. Act are not attracted - Disallowance of accrued interest not paid in respect of secured / unsecured loans taken from various institutions of UP Government allowed - AT
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Selection of most appropriate method - as cost components of the assessee are in variations with that of the comparables thus CPM cannot be regarded as MAM in the case of the assessee but TNMM - AT
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Depreciation to be carried forward allowed - carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever allowed - AT
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Penalty u/s 271D - cash transactions of the assessee with the directors and share holders of the company due to business expediency. Nobody has doubted the genuineness of the transactions. - No Penalty - AT
Customs
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Imposition of penalty - Penalty cannot be imposed if there is no malafide on part of importer, no tests have been carried out and no expert opinion has been obtained - AT
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Enhancement of value - Enhanced only on the basis of NIDB data - Adoption of NIDB Data, without any other evidence on record to establish the transaction value is incorrect, is not proper and justified - Value cannot be enhanced - AT
Service Tax
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Date for deposit of Service tax by cheque - VCES Scheme, 2013 - With the cheque having been realized, the date on which the service tax should be taken to have been paid, is deemed to be the date of presentation of the said cheque in terms of Rule 6(2A) of the ST Rules - HC
Central Excise
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Reversal of Cenvat credit - Inputs found short in factory premises were written off - Shortages written off should be available in the factory prenises for Cenvat credit to be reversed - AT
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Restoration of appeal - Dismissed by way of remand - Revenue's argument that the appeals are not dismissed and have been remanded with all issues open accepted and appeal cannot be restored - AT
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Availment of Cenvat credit before 01.04.2011 - Outdoor catering and rent a cab service provided to employees/officers of the company - the cost of input services that forms part of, the Cenvat credit availed in respect of outdoor catering service and rent a cab service is eligible as input services, hence Cenvat credit is available - AT
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Cenvat credit - Health Insurance Services for the coverage of employees, spouse, dependent children and parents etc. - Medical insurance in relation to the employees of the company are within the broad definition of input service as per Rule 2(l) - Credit allowed - AT
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Cenvat credit - Non-possession of capital goods at the time of availment of Cenvat credit and goods were not used in or in relation to the manufacture of the final products - If two conditions i.e. receipt of capital goods in the factory and credit has not taken earlier are satisfied, the Cenvat credit has to be allowed - AT
Case Laws:
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Income Tax
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2016 (4) TMI 390
Interest on refund - Held that:- The amount in question, though found refundable to the assessee, was utilized by the Department and, therefore, interest was payable under Section 244(1A) of the Income Tax Act.
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2016 (4) TMI 389
Non-booking of excise duty refund as revenue in its profit and loss account - Held that:- Assessee collected Central Excise Duty in respect of the unit eligible for deduction under section 80IB of the Act, in the sale bills issued to the customers and subsequently paid to the Central Government, however, same payment was not claimed in the profit and loss account as expenses as the assessee was eligible for refund of the said duty from the Central Excise Department, after verification of the payments in accordance to the notification issued. Since the assessee was to be refunded the central excise duty collected from the customers, which has already been credited by the assessee in the sales and therefore the assessee was not required to again credit the refund due from the Central Excise Department. In our considered opinion, the accounting entries made by the assessee in respect of excise duty refund are in order and there is no infirmity in the finding of the ld. Commissioner of Income-tax(Appeals) on the issue in dispute - Decided against revenue Deduction under section 80IB in respect of central excise duty refund - Held that:- Excise duty was part of the sale receipt and thus derived from the business of manufacturing activity. Deduction under section 80IB in respect of central excise duty refund allowed. See CIT versus Dharmpal Premchand Ltd [2008 (11) TMI 231 - DELHI HIGH COURT ] - Decided against revenue Higher deduction claimed by the assessee under section 80-IB of the Act in respect of the sales made to its sister concern - CIT(A) allowed the claim - Held that:- The sale price per unit paid to the assessee by the sister concern M/s MAPL is lower than the sale price per unit paid to the other suppliers. This fact has not been controverted by the Ld. DR. In such circumstances it cannot be said that profits have been diverted to the assessee from its sister concern . We find that order of the learned Commissioner of Income-tax(Appeals) on the issue in dispute is well reasoned and no interference on our part is required - Decided against revenue
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2016 (4) TMI 388
Preparatory expense - revenue v/s capital expenditure - Held that:- The preparatory expenses are necessity in a construction work and cannot be bifurcated from the actual construction work. Thus, the Ld. DR’s contention fails and the said receipt has to be treated as revenue receipts only. The reliance of the Assessing Officer on Section 35D of the Act is not relevant in the present case. Section 35D provides for amortization of certain preliminary expenses incurred by an assessee before commencement of his business or after the commencement of his business but in connection with the extension of the undertaking or setting up a new unit. The assessee herein neither commenced its business during the assessment year in question nor did it incur the expenses in question for setting up any new unit or for extension of its undertaking. The expenses incurred for obtaining feasibility report, on the possibility of setting up projects, etc. is revenue in nature. - Decided in favour of assessee
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2016 (4) TMI 387
Stay of demand - Held that:- Delay in deciding the appeal cannot be attributed to the assessee. The stay is extended for a period of six months or disposal of appeal whichever is earlier. It goes without saying that no adjournment on any unreasonable ground shall be sought by the assessee on the next date of hearing
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2016 (4) TMI 386
Entitlement for benefit of indexation - capital gain computation - Held that:- The assessee company being a non-resident is not covered by the first proviso to Sec. 48, however, it is entitled for benefit of indexation since the shares were purchased in Indian currency. The first proviso to Sec. 48 ensures that a non-resident, who utilizes his foreign currency, is taxed after taking into consideration the fluctuation in the exchange rate. The Indian rupee, which has in the past appreciated against various currency, long term capital gains payable can increase. Therefore, the NRI assessee who had purchased shares in Indian currency would be entitled to benefit of second proviso to Sec. 48 on sale of equity shares in question. No merit in the action of the lower authorities declining the benefit of second proviso to Sec. 48. AO is accordingly directed to re-compute the capital gains.
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2016 (4) TMI 385
Disallowance of manufacturing expenses under the head “Manufacturing material and chemicals” - Held that:- AO has doubted the genuineness of the transactions recorded in the books of accounts in support of expenditure claimed under the head Manufacturing Material and Chemical Expenses nor any adverse or incriminating materials have been placed on record by the A.O. so as to show that the purchases are bogus. The AO has also not doubted the authenticity of the books of accounts which was produced before him during the assessment proceedings. In fact the AO., has not doubted the genuineness of the books of accounts and the authenticity of the transactions recorded therein. Moreover, AO has also not recorded any justification for arriving at a figure of ₹ 25 lacs for ad-hoc disallowance under this head. Thus, the AO has also failed to specify any specific items of expenditure comprising total ad-hoc disallowance of ₹ 25 Lacs as above. It was also found that that as per record that the AO did not issue any show cause notice in this regard while making this addition and to that extent agree that it amounts to breach of principles of natural justice. In view of above discussions, we find that there was no no justification for adhoc disallowance of ₹ 25 lacs under the head “Manufacturing Material and Chemical Expenses”, hence, the same was rightly deleted by the Ld. CIT(A). - Decided in favour of assessee Disallowance of accrued interest not paid in respect of secured / unsecured loans taken from various institutions of UP Government - CIT(A) allowed the claim - Held that:- CIT(A) has rightly held that the UP State Government itself and also its institutions namely UP Sahakari Chini Mill Sangh Limited and Sakkar Vikash Nikdhi are not covered by the definition of Public Financial Institutions / State Finance Institutions/ State Industrial Finance Institutions as defined u/s. 4A(2) of the Companies Act, 1956 and therefore provisions of section 43B(d) of the I.T. Act are not attracted in this case. Accordingly, disallowance made on this account was rightly deleted by the Ld. CIT(A). - Decided in favour of assessee
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2016 (4) TMI 384
Disallowance of short term capital loss - Held that:- Right to recover the money from the Indian entity, in the light of the financial difficulties that the Indian entity was traversing through, was valued at Euro 7,31,000. There is no dispute about bonafides of this valuation. As for the vague allegations about the tax evasion motive, nothing cogent has been brought on record at all. The authorities below were in error in fighting shy of the tax corollaries of a legally valid commercial transaction, without bringing on record any material to disprove its bonafides or to show that it s a sham transaction, just because of their apprehensions about tax motives of the transaction. Just because a transaction results in a tax benefit, unless it is a sham transaction, it cannot be ignored. The fact remains that the recoverable from the Indian entity is transferred by the assessee and that it was transferred for an amount lesser than the cost at which it is acquired. There is also no dispute that if the capital loss is to be allowed, the loss has to be short term capital loss. In these circumstances, in our considered view, there is no justification in declining the short term capital loss claimed by the assessee.- Decided in favour of assessee
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2016 (4) TMI 383
Interest paid to third parties - Held that:- What has been estimated is not the gross profit but net profit. When computing the net profit, the expenditure incurred by the assessee in respect of earning of income under the head “business” is rightly to be allowed. Here, the books of account of the assessee has been rejected, the interest paid to third parties falls under the head “business expenditure” which is liable to be deducted while computing the net profit. In the present case, as the net profit itself has been estimated no further addition to the same by picking and choosing items from expenditure account can be made. Consequently, we are of the view that the interest paid to third parties are liable to be allowed and further addition made by the Assessing Officer on account of the interest paid to third parties stands deleted. Interest received from the bank on FDs - Held that:- As noticed that the interest income of the assessee from fixed deposit is not “business income” of the assessee. It is liable to be assessed under the head “income from other sources”. The business of the assessee is not making any Fixed Deposit and deriving interest there from. Further, the assessee has also not been able to show as to how the bank interest was in any way intrinsically connected to the business activity of the assessee for the purpose of claiming that the interest received on the FDRs are business income. In the circumstances, the findings of the learned CIT (A) in confirming the addition ₹ 70,709/- on account of bank interest especially under the head “income from other sources” stands confirmed.
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2016 (4) TMI 382
Deemed dividend u/s 2(22) - whether the advances received by the assessee after 11.8.2008 were towards purchases of plant and machinery or could be treated as deemed dividend? - Held that:- During the year the assessee received amounts on various dates aggregating to ₹ 1,09,75,000/- and supplies could not be made as the purchase orders were changed and replaced with fresh proposal of 200 TPH feeding Mobile Crushing and Screening machineries. The fact is also corroborated that during the year under consideration as the sale and supplies came down drastically as stated elsewhere in this para. The assessee had duly provided interest on money borrowed and also treated the trade advance against the sale of machinery accordingly however the AO as well as the CIT(A) held the trading advances to be covered under the deeming provisions of section 2(22)(e) of the Act. In view of the foregoing facts, we are of the considered opinion that money received by the assessee which was engaged in the manufacturing and sale of machinery and more particularly when in the earlier and subsequent years the sale of machineries were made to the said concern by the assessee from whom the money towards the supply of machinery were taken could not fall within the meaning of section 2(22)(e) of the Act. In the catena of decisions relied on by the assessee the ratio laid down is that the advances taken against the supply are not covered by the provisions of section 2(22)(e) of the Act. We, therefore, hold that order of CIT(A) confirming the order of AO is wrong and cannot be sustained and accordingly delete the addition - Decided in favour of assessee.
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2016 (4) TMI 381
Reopening of assessment - CBDT on the basis of Volckar committee report sent a memorandum to the AO intimating the list of companies involved in the paying kickbacks to Iraqi Government during supplies made under ”Oil for Food Programme and the AO recorded reasons u/s 148(2) Held that:- We note that the AO had mechanically recorded the reasons on the basis of CBDT information without even verifying the fact whether the assessee charged such expenses in the profit and loss account as stated in the memorandum . The ld AR argued that no ASFF was incurred and charged to the profit and loss account and also no inland transportation of 84100US$ were incurred and charged to the profit and loss account but ₹ 14,29,604/- were incurred and charged to the profit and loss account as transportation charges overseas paid to ALIA Jordan in Jordan for which proper bills, vouchers and bank advice are available. We are of the considered view that in the light of the facts as stated above the re-opening of assessment cannot be justified by the AO by just mechanically recording the reasons without any application of mind. We therefore annul and quash the re-assessment proceedings and also the consequent order of assessment passed u/s 143(3) /147 of the Act by allowing the appeal of the assessee on technical ground in favour of assessee
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2016 (4) TMI 380
Adjustment of book profit by increasing it by provision for bad and doubtful debts - Held that:- Clause (i) covers the amount debited to the profit and loss account which are set aside as provision for diminution in the value of any assets. Provision of bad and doubtful debts also results diminution in the value of its assets i.e. debt. Therefore in our view the provision for bad and doubtful debts are required to be added to book profit as per clause (i) of explanation [1] to subsection [2] of section 115JB of the Act. In view of this we confirm the decision of CIT (A) on this count. Taxing the amount of interest - as business income OR income from other sources - Held that:- Details of such interest income was not furnished by AR of the assessee and same was no such details have been furnished before us. In the assessment order also, AD has not mentioned the reason for changing the head of bank interest income from +-Business Income -offered by assessee to =income from other sources '. Therefore in the interest of justice we set aside this ground of appeal of the assessee back to the file of AD to decide the same on merit after affording reasonable opportunity of hearing to assessee.
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2016 (4) TMI 379
Addition made on account of initial connection charges Held that:- CIT(A) after having considered the submissions of the assessee, has given a finding that ₹ 4.76 crores was initial connection charges collected on behalf of the BPCL for the equipments and was rightly shown as current liability by the assessee and could not be treated as income of the assessee and with respect to the balance amount of ₹ 52,50,830/- he has given a finding that since the amount was received towards the installation of pipelines, meters and equipments which are assets of the assessee, the said amount was a capital receipt as it was for bringing in plant and machinery and assessee has claimed depreciation after reducing the aforesaid amount from the aggregate cost of assets. Before us, Revenue has not placed any material on record to controvert the finding of ld. CIT(A) - Decided against revenue Estimation of value of closing stock of natural gas - Held that:- We find that ld. CIT(A) while deleting the addition has given a finding that assessee purchased gas from GSPC which is transmitted through pipelines and that gas is purchased by it at the “delivery point” or “tap off” point and it is same as the point at which it is sold to the customers and it is a back to back arrangement for purchase by the assessee and sale to its customers and the quantity purchased by assessee is same that is sold by assessee. Before us, Revenue has not placed any material on record to controvert the above findings of ld. CIT(A)- Decided against revenue Addition on account of depreciation on meters and instruments - Held that:- CIT(A) while deleting the addition has given a finding that assessee is the owner of meters and instruments that has been shown as plant and machinery in the book of accounts and that assessee has claimed depreciation after reducing the amount of initial connection charges which has been collected from customers. He, therefore, held that assessee was eligible for depreciation. Before us, Revenue has not placed any material on record to controvert the above findings of ld. CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) - Decided against revenue Non treating the process of compression of natural gas as manufacture - whether the activity of compression of Gas to CNG amounts to manufacture for claiming additional depreciation u/s.32(iia)? - Held that:- In case of GSPC Gas Company Ltd.(2014 (4) TMI 740 - ITAT AHMEDABAD) on identical facts has decided the issue in favour of assessee to held that the authorities below were not justified in rejecting the claim of the assessee for additional depreciation. - Decided against revenue Addition of liquidated damages - revenue receipt or capital receipt - Held that:- The facts of the present case are identical to that of GSPC Gas (supra). We, therefore, following the decision of Coordinate Bench in the case of GSPC (supra) direct that the addition made therein on account of liquidated damages received by the assessee from the suppliers of the equipments be deleted. Since, the addition itself is deleted, the question of granting depreciation on the amount as directed by ld. CIT(A) does not arise. We, therefore, direct the A.O. to delete the addition of liquidated damages and reverse the depreciation (as directed by ld. CIT(A)) if allowed to the assessee.- Decided against revenue
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2016 (4) TMI 378
Penalty u/s 271D - whether there was a reasonable cause in accepting the deposits in contravention of provisions of section 269SS of the Act? - Held that:- The cash transactions of the assessee were with the directors and share holders of the company due to business expediency. Nobody has doubted the genuineness of the transactions. In my opinion, the assessee has proved throughout without any shadow of doubt that the transactions are genuine and there is a reasonable cause within the meaning of section 273B of the Act, which provides that no penalty shall be imposed on person or assessee as the case may be for any failure referred to in section 269SS of the Act, if he proves that there was reasonable cause for failure to take a 'loan' or 'deposit' otherwise than by account payee cheque or account payee bank draft, then the penalty should not be levied. Accordingly, do not see any reason to sustain the penalty levied u/s 271D of the Act. Consequently, the impugned penalty levied u/s 271D of the Act is cancelled. - Decided in favour of assessee
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2016 (4) TMI 377
Transfer pricing adjustment - selection of most appropriate method - Held that:- There is no contract between the assessee and its AEs regarding the remuneration and mark up in respect of the value added by the assessee in the manufacturing process and further when the assessee is using the raw material of its own and not supplied by the AE for job work or contract manufacturing. Further, we find that there are variations of cost components in respect of the manufacturing activity of the assessee as well as the other comparables selected either by the assessee or by the TPO. The assessee is also seeking adjustment on account of variation of depreciation method applied by the assessee in comparison to the comparables which itself shows that the cost components of the assessee are in variations with that of the comparables and therefore in our considered opinion CPM cannot be regarded as MAM in the case of the assessee. Accordingly, we uphold the orders of the authorities below on this issue in rejecting the CPM as MAM and adopting the TNMM as MAM for determination of ALP. - Decided against assessee Rejection of the Multi Year Data adopted by the assessee while computing the margins of the comparables and considering the current year data by the TPO for the purpose of determining the ALP - Held that:- 3 Rule 10D(4) further states that the information and documents specified under sub-rules (1) and (2), should, as far as possible, be contemporaneous and should exist latest by the specified date. Therefore, it is revealed by the provisions of transfer pricing that unless and until the current year data does not gives a true and correct picture of the uncontrolled comparable price more than one year data are not required to be considered. Only in the case when the current year data does not give a true and correct picture and more than one year data not being more than two years prior to the financial year can be considered if such data reveals the fact which have an influence on the determination of transfer pricing. In the case on hand, the assessee has not brought on record any fact to show that the current year data are not reflecting the correct uncontrolled comparable price. Therefore, this ground of the assessee's appeal is dismissed. Adjustment for difference in accounting policies, depreciation adjustment, etc.- Held that:- In order to provide any adjustment on account of differential depreciation cost, the figure of depreciation cost alone are not enough but the composite expenditure relating to the use of the fixed assets has to be taken into account like depreciation, maintenance, lease rentals if any, etc. We further note that the cost of depreciation depends on the level of automation of the manufacture process of a particular entity which in turn reduce the other direct expenses like cost of salary/wages. Therefore the comparison of the cost of depreciation has to be worked out in the ratio of turnover to the cost of depreciation and other expenditure for use of the asset/machinery. Accordingly, in the facts and circumstances of the case when this issue has not been decided either by the TPO or by the CIT (Appeals), we set aside the same to the record of the TPO/A.O for working out the comparative analysis of the cost of depreciation/use of machinery in the ratio of turnover of the assessee as well as the comparable companies and then grant an appropriate adjustment on account of differential ratio of the cost of depreciation including other incidental expenses of use of machinery/fixed assets in the margins of the comparable companies and then determine the ALP. No error or illegality in the order of the CIT (Appeals) in directing the A.O/TPO to grant working capital adjustment. Application of uniform PLI - Held that:- When there is no facts or circumstances to indicate that the change in PLI in respect of reference segments is applied to avoid distorted results then the TPO is not permitted to apply different PLI an international transactions which are similar except that in mass segment manufacturing of optical plastic lenses are on standard basis without a specific personal requirements and in the case of reference lenses are prepared as per the specific personal requirements. Therefore, the material as well as process in both the segments is not significantly different except the powering of the lenses which is as per the specific requirements under the referral segments as against the standard power of various levels in the mass production. This itself will not justify the adoption of different PLI. Therefore, the TPO was not justified in not maintaining the consistency of applying the PLI while computing the ALP in respect of the international transactions. In view of the above facts and circumstances of the case, we set aside this issue to the record of the TPO for applying the uniform PLI as applied in the case of mass production segment as well as in the Assessment Year 2008-09.
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2016 (4) TMI 376
Disallowance of depreciation to be carried forward - revision u/s 263 as the issue of unabsorbed depreciation has not been examined by AO as wrongly allowed to be carried forward by the order of AO - Held that:- As decided in the case of General Motors India (P) Ltd. vs. DCIT [2012 (8) TMI 714 - GUJARAT HIGH COURT ] any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001, thus once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever In this view of the matter, we find that the order passed by Assessing Officer is not erroneous and prejudicial to the interest of revenue. In this view of the matter, we reverse the order of Ld. CIT passed u/s. 263 - Decided in favour of assessee
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2016 (4) TMI 375
Agricultural land - CIT(A) held that the agricultural land which is within 8 Kms from municipal limits is not a capital asset - Held that:- CIT(Appeals) has grossly erred in ignoring all those facts and adopted a contrary view, that too by taking a ‘turtle turn’ simply on the pretext that the case laws of higher forum were binding upon him. It is a well established law that an appeal is to be decided on it’s own facts as available on record. In this appeal it is evident from the paragraphs, reproduced above, that although the facts of this case were found to be not matching with the facts of certain precedents cited, but still Ld CIT(A) had decided not only to follow but to apply the view taken in those cited cases so as to give relief on the pretext that those case-laws being pronounced by the higher forum hence binding upon him. It is an incorrect way of following or applying a precedent. Law does not permit to blindly follow a Precedent. On one hand learned CIT(Appeals) has given a finding on certain facts that there were number of real estate projects in that area and that there was International Cricket Stadium located very near to the said land , therefore, in the absence of any agricultural activity it was a ‘capital asset’ for the purpose of levying tax as per the provisions of Income-tax Act, it is very strange that even after recording of those facts of the case, the learned CIT(Appeals) has taken a view that because few decisions of the Tribunal and the High Courts have taken a view that distance is to be measured through approach road and not by straight line distance, therefore, the land in question was exempt from the tax. Such an order of an Appellate Authority cannot be approved.Therefore, we deem it proper to restore the issue back to him with a direction to provide a reasonable opportunity of hearing to both the sides - Decided in favour of revenue for statistical purposes
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2016 (4) TMI 357
Reopening of assessment - Disallowance u/s 28 and 80HHC - Held that:- In the case in hand , the proceedings under section 147 of the Act were initiated by the Assessing Officer in view of the retrospective amendment to the provisions of sections 28 and 80HHC of the Act w.e.f. AY 98-99, by Taxation Laws Amendment Act, 2005, however, we find that the Jurisdictional High Court in the case of Pawan Kumar Jain Vs. Union of India, [2014 (8) TMI 32 - DELHI HIGH COURT] following the judgment in the case of Avani Exports vs. CIT [2012 (7) TMI 190 - GUJARAT HIGH COURT] has held the said amendment is prospective in nature and not retrospective. Thus there was no failure on the part of the assessee to disclose fully and truly all material facts in respect of the assessment and the case has been reopened beyond the period of 4 years from the end of the relevant assessment year, the proceedings of reopening under section 147 of the Act are without jurisdiction and not sustainable - Decided in favour of assessee
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2016 (4) TMI 356
Transfer pricing adjustment - exclusion of Mold-Tek Technologies Ltd as comparable by the CIT(A) - Held that:- The company grew with a compounded annual growth rate (CAGR) of 147% for 3 years which is evident from the chart given in the impugned order of the Ld.CIT(A) and on the basis of the said chart, CIT(A) has rightly rejected Mold-Tek as comparable company due to the consistently abnormal profits earned by the company. The CIT(A) by deciding this issue has studied annual report of the company and found that there were several irregularities in the financial statements. When we look into all these aspect, we find that the CIT(A) was correct in excluding Mold-Tek Technologies Ltd. as comparable and hence the Revenue is not proper in harping that Mold-Tek has to be taken into account as a comparable in TP study.
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2016 (4) TMI 355
Rectification of mistake - offering for tax the capital gain on sale of land in the current year which related the subsequent year i.e AY 2009-10 - Held that:- The income offered by the assessee in the current year i.e AY 2008-09 under the head capital gain be rectified as the said income accrued and was assessed in the AY 2009-10. The both the authorities below had failed to appreciate that if the same income was assessed to tax in two assessment years it would be bad in law and also would be a mistake apparent liable for rectification u/s 154 of the Act regardless of the fact that it might had happened be due to assessee’s mistake. Accordingly we delete LTCG of ₹ 3,02,93,202/- from the current year ₹ 3,02,93,202/- as apparent mistake from records and direct the AO accordingly. Addition under the head “income from other sources” - Held that:- We find that the assessee during the course of assessment proceedings could not file the sale deed in respect of plot at survey no.132 on Mumbai-Pune Highway which was duly shown by assessee in the revised return of income filed u/s 139(5) of the Act. The details of sale considerations from both the plots at survey no.68 and 132 were shown while calculating the capital loss in the revised return of income. The ld. CIT(A) allowed the appeal of the assessee subject to quantification by holding that the same would be considered under the head capital gains and accordingly deleted the addition of ₹ 1,20,00,000/-. However, we find merit in the ground as raised by the revenue to set aside the proceedings to the file of the AO in view of the violation of Rule 46A of the Rules. In our view, the ld.CIT(A) has rightly deleted the addition under the head “income from others sources” and therefore the order of ld. CIT(A) does not require any interference at our end. However, in order to meet principle of natural justice we are of the opinion that the matter be restored to the file of the AO for a limited purpose of examining the sale deed and delete the addition accordingly. Addition under the head income from house property by estimating the rent of property - Held that;- We find that the rent from the rental properties located in Khar area have been shown at ₹ 15,808/- and water charges ₹ 4,94,282/- and property tax ₹ 54,532/- were claimed in respect of the said property. The AO further observed that the five flats were occupied by the partner and their family members. The AO estimated the rent in respect of rented property at ₹ 30 to 50 sq. ft. and thus arrived at notional income of ₹ 28,23,840/- which was increased by water charges of ₹ 4,94,982/- and from the total rental charges allowed standard deduction of 30% u/s 24 of the Act and worked out the total income from house property at ₹ 23.,21,775/- which was confirmed by the ld.CIT(A) on the ground that low rent was charged by the assessee from the partners and his family members. As it is clear from the above the AO has failed to prove/bring on record by any cogent evidence that the rent of comparable properties in the vicinity where the assessee’s property was located and we find that the estimation of rent by AO is a purely guess work and based on estimation, conjecture and surmises, which in our opinion, cannot be sustained. We, therefore, delete the addition Estimation of LTCG - Held that:- AO and CIT(A) had taken different method of valuation to in order to ascertain the FMV on 1.4.1981. It was also pointed out that there was a building in the plots sold. Under the present circumstances and facts, we are of the view that the ends of justice would be met if the assessee is supplied the copy of final valuation report by the valuation officer and after allowing the opportunity to the assessee the matter is decided afresh and de nova as per law. We therefore set aside the matter to the file of AO with the direction to supply a copy of the valuation report to the assessee and after allowing reasonable opportunity decide the matter afresh as per law.
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2016 (4) TMI 354
Addition made u/s. 68 - as per AO depositors were not financially capable to give loans/deposits, most of the depositors had interest income that too received from the Assessee and they did not have any other source of income or their income was very small and thus according to the A.O mere receipt of loans by account payee cheques did not make the loans as genuine - Held that:- CIT(A) while granting the relief has given a finding that most of the creditors had current account with the Assessee wherein deposits and withdrawals were made on regular basis, majority of the depositors were maintaining the current account with the Assessee for more than 2 years and in the assessment order passed u/s. 143(3) for A.Y. 2007-08, the same depositors have been treated as genuine. Ld. CIT(A) has further given a finding that Assessee had furnished the copy of ledger account with confirmation, full address, copy of PAN number, income tax acknowledgement receipt etc. before the A.O but A.O did not made any further inquiry of the concerned creditor nor had issued summons u/s. 131 of the Act, nor made any spot inquiries on the addresses of the creditors. He thus held that Assessee had discharged the initial onus cast upon it and the evidences and explanations furnished by the Assessee have not been found to be untrue and while deleting the addition he also placed reliance on the various decisions cited in the order. Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A) nor has pointed any fallacy in his findings - Decided in favour of assessee
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Customs
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2016 (4) TMI 368
Enhancement of value - Enhanced only on the basis of NIDB data without rejecting the transaction value - Import of goods describing as Stainless Steel Coils Grade 201 “Ex Stock” but found of prime quality and weight was also found in excess - Held that:- there is neither any allegation nor any evidence on record to show that the value agreed upon between the importer and the exporter does not reflect the correct position. As the similar issues are considered in number of earlier decisions it is held that adoption of NIDB Data, without any other evidence on record to establish the transaction value is incorrect, and not proper and justified. Also revenue has not made any efforts to reject the transaction value. There is virtually no evidence on record to indicate that the value agreed upon between the importer and the exporter is not correct or any consideration of the goods has flown back to the exporter from the appellant. If that be so, the transaction value would reflect the correct assessable value of the imported items. Otherwise also, there is catena of decisions holding so. Therefore, the value cannot be enhanced. Imposition of penalty - Held that:- imposition of penalty of ₹ 25,000/- on the importing firm is not justified in as much as the Appellate Authority has himself arrived at a finding in favour of the assessee. Having held that there was no malafide on the part of the importer, it was not proper for the Appellate Authority to impose penalty on the firm. No tests have been carried out, no experts opinion obtained and as such it is difficult to accept the Revenue's proposal that the goods were not of the Grade declared by the assessee and were of higher Grade. However, apart from observing that there was no willful mis-declaration by the importer so as to avoid incidence of a higher duty, department has also observed that even a small percentage of the excess goods covered by one of bills of entries was also not at the instance of the importer. However, in spite of that department has imposed penalty on the importer. Therefore, the said part of the impugned order of Commissioner (Appeals) is self-contradictory, thus not calling for imposition of any penalty on the importer. - Decidde in favour of appellant with consequential relief
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2016 (4) TMI 363
Whether the Tribunal erred in relying upon the statement of one Sundaram when the said statement was not made available to the appellants either through the show cause notice or during the proceedings before the learned Collector (Appeals) - Seizure conducted on 16.6.1992 in the business premises of the assessee by name T.R.Nanniar (who is now no more) and seized 6 silver ingots weighing 19.165 kilograms, on a reasonable believe that the same was smuggled. A statement was recorded from T.R.Nanniar on 16.6.1992 under section 108 of the Customs Act, 1962. Held that:- Before proceeding with the questions of law referred to us by the Tribunal for our consideration, it is necessary to take into two important developments. The first is that the appellant is no more. The second is that the party, whom the appellant wanted to cross-examine, viz., Sundaram is also no more. The appellant did not ask for cross-examination of Sundaram. The seizure took place about 24 years ago. The reference itself was of the year 2000. Today, even if the contention that Sundaram ought to have been produced for cross-examination is upheld, the matter has to be remitted back, but, it is impossible to produce Sundaram for cross-examination. Therefore, taking into account the developments and also taking into account the admission made by Nanniar, the Tribunal did not commit any mistake in relying upon the statement. - Decided against the appellant
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2016 (4) TMI 362
Imposition of fine and penalty - Export of marble articles such as table tops - Declared value on higher side and there is variation in import prices, so the goods are taken back to town - as goods are liable for confiscation, redeem them on payment of fine and penalty of ₹ 1,00,000/- and ₹ 10,000/- respectively but after department being gone into appeal, the fine and penalty increased to ₹ 4,00,000/- and ₹ 7,50,000/- respectively - Held that:- the earlier adjudicating Commissioner vide his order-in-original has found the market value of the goods around $ 30/- to $ 70/- per sq.m. and the realistic value could not be more than ₹ 8 to 10 lakhs in each case and the exporter had accepted this adjudication order. It is pertinent to mention that the declared value of the marble i.e. US$ 650/- per sq.m. is extremely high, considering the fact that import prices of the goods during the relevant period varied from $ 30/- to $ 70/- per sq.m. In the impugned order, the learned Commissioner has also observed that by overvaluation, the appellant would have got the benefits of customs duty to the tune of ₹ 11,17,402.73 (approx.) by showing the export towards fulfilment of export obligation under the EPCG licence dated 21.3.1996. As per the remand order of the Tribunal, the learned Commissioner redetermined the redemption fine and revised it to ₹ 4,00,000/- which, according to our opinion, is not excessive and therefore, upheld. However, the learned Commissioner has revised the penalty from ₹ 20,000/- to ₹ 7,50,000/- which, is on the higher side and, therefore, reduced to ₹ 5,00,000/- and there is no change in in value of redemption fine. - Decided partly in favour of appellant
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Corporate Laws
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2016 (4) TMI 359
Scheme of Amalgamation - Held that:- The Official Liquidator has opined that the affairs of the Petitioner Transferor Company have not been conducted in a manner prejudicial to the interest of its members or to the public interest. In the view of this Court, there does not appear to be any impediment to the grant of sanction to the Scheme of Amalgamation. From the material on record and upon perusal of the Scheme, it appears to be fair, and reasonable and does not appear to contain any clause that is contrary to public policy. The Amalgamation under the proposed Scheme appears to be in the interest of the companies and their members and creditors and, therefore, deserves to be sanctioned. Accordingly, the Scheme as proposed by the Petitioner Company is hereby sanctioned.
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2016 (4) TMI 358
Scheme of Amalgamation - Held that:- The amalgamation under the proposed Scheme appears to be in the interest of the companies and their members and creditors, this Court is of the view that the Scheme deserves to be sanctioned. The Arrangement otherwise seems to be appropriate and hence, it is required to be sanctioned with a specific observation that the sanctioning of the Scheme would not absolve anyone who is otherwise liable for any responsibility or liability, only on account of this sanctioning. In view of the above, the Scheme of Amalgamation is sanctioned. It is, however, directed that the petitioner shall preserve its books of accounts, papers and records and shall not dispose of the records without the prior permission of the Central Government under Section 396A of the Companies Act,1956.
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FEMA
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2016 (4) TMI 366
Violation of provisions of FERA by the SBI officials - Validity of summons - making full advance payment to the tune of US$ 38 million without either obtaining any prior permission of the Reserve Bank of India (‘RBI’) or any guarantee from an International Bank of repute situated outside India to safeguard their money - Held that:- petitioners are not covered under Sub-section (ii) of Section 49 of FERA for abetting or not complying with all or any such conditions. Summoning order dated 30.05.2002 was issued just two days prior to the repealing of the FERA Act as on that day hundreds of such complaints were filed and process was to be issued in all those complaints before 01.06.2002 when new Act in the shape of Foreign Exchange Amendment Act, 1999 (FEMA) was to come into force in place of FERA, 1973. The said summoning order itself shows that the Trial Court has not considered the aspect of criminal liability of the petitioners under Section 68 of FERA having position of subordinate officers other than Managing Directors, Directors and Executive Directors as per the provisions of Section 68 of FERA. The respondents deliberately and willfully ignored the investigation conducted by CBI whereby, chargesheet at Para 2 confirmed that C.K. Ramakrishnan and D.S. Kanwar who were functioning as Managing Director and Executive Director respectively in the petitioners company were responsible having domain over the funds of the company during the year 1995-96 and they dishonestly in connivance with officials of M/s. Karsan Limited, a Turkish Company and other accused persons, directed the bank officers to remit US$ 38 million to the account of M/s. Karsan Limited. Moreover, the facts of the investigation have been concealed by the respondent before the Trial Court and since the sunset period was expired, therefore, hurriedly without going through the material on record, the Trial Court had issued the summons against the petitioners. Complains and Summons quashed - Decided in favor of petitioner.
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Service Tax
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2016 (4) TMI 374
Date for deposit of Service tax by cheque - period between April and December, 2012 - VCES Scheme, 2013 - Manpower services - Assessee deposited service tax by cheque on 31.12.2013 but the bank realised the same on 8.1.2014 - Held that:- if the cheque is deposited by cheque then the date of presentation of cheque to the bank designated by the Central Board of Excise and Customs for this purpose shall be deemed to be the date on which service tax has been paid subject to realization of that cheque. It is not in dispute that the assessee deposited the cheque constituting 50% of the service tax dues in terms of the VCES Scheme 2013 on 31.12.2013 and it was realised on 8.1.2014. With the cheque having been realized, the date on which the service tax should be taken to have been paid, is deemed to be the date of presentation of the said cheque in terms of Rule 6(2A) of the ST Rules. - Decided in favour of assessee
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2016 (4) TMI 365
Demand of Service tax - Cable Operator Service - Service tax not paid on amounts received from distributor - Held that:- it is admitted that the appellant have filed details of amount received from M/s Chanakya Communication Network Pvt. Ltd., Rohtak alongwith the ST-3 returns filed by their Chandigarh office with challans. Due verification could have been made regarding the party's claim instead of rejecting the same as unsubstantiated without specific reason. Also there is an error in the total as submitted by the appellant. The Original Authority had not examined the records submitted by the appellant in support of their claim of discharge of service tax on the gross amount received from the distributor during the impugned period by their Chandigarh office. This can be verified from the documents already submitted by the appellant or calling for additional documents, if required to arrive at the correct conclusion. - Matter remanded back
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2016 (4) TMI 364
Demand of Service tax - Invokation of longer period of limitation - Providing hoarding space to the advertising agencies - Suppression of value of services, as reflected in their account books and as reflected in their ST-3 returns - Held that:- the sale of space service having been introduced w.e.f. 01/5/2006 would not be covered by any other category prior to 01/5/2006. The nature and character of the services being provided by the assessee to the other advertising agencies has not been spelt anywhere, either by the Revenue or by the assessee. As such, it becomes necessary to find out what type of services were being provided by the assessee to the other advertising agencies. In as much as the said legal plea was not taken by the appellant before the lower Authorities and in as much as the same does not stand examined by them by referring to the type of services provided by the assessee, we deem it fit to set aside the impugned order and remand the matter to original Adjudicating Authority for examining the said plea of the assessee vis-`-vis the type of services being provided by them. The appellant is at liberty to produce documentary evidences to show and to establish that the service being provided by them was relatable to “sale of space for advertisement”. It is further clear that we have not expressed any opinion on the factual position of the advertising agency having paid the entire tax on the full consideration and such a plea would be open to the appellant to be taken in denovo proceedings. - Matter remanded back
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Central Excise
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2016 (4) TMI 373
Reversal of Cenvat credit - Inputs found short in the factory premises of the appellant - Appellant contended that shortages found in the factory premises were written off as per Cost Accounting System so demand of duty cannot be made because the period of demand is 2002-03 to 2005-06 and the provisions for reversal of CENVAT Credit with respect to shortages in inputs and capital goods on writing off was introduced as per Notification No.26/2007-CE(NT) dated 11.05.2007 hence no CENVAT Credit is required to be reversed Held that:- the shortages written off by the appellant were never found available in the factory premises of the appellant. It is observed that writing off amount and the shortages were detected by the departmental officers during audit and scrutiny of the Cost Audit Reports, accordingly extended period is applicable. Also, it is observed that option of payment of 25% reduced penalty under Section 11AC of the Central Excise Act, 1944 is not extended to the appellant. The same is extended to the appellant subject to the condition that the entire demand along with interest and 25% reduced penalty is paid within 1(one) month from the date of receipt of this Order. - Decided partly in favour of appellant
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2016 (4) TMI 372
Restoration of appeal - Dismissed the appeal for non-prosecution by way of remand - Revenue argues that Tribunal has not dismissed the appeal but had ordered “all the appeals are allowed by way of remand” - Held that:- the Tribunal has gone into merits of the case of the appeals and observed that the demand was proposed on the ground of clandestine removal of the goods and the contention of the Revenue is that the adjudicating authority had not considered the evidences in proper manner. In view of the said facts and circumstances, the Tribunal held that it is difficult to proceed in the matter and therefore, remanded the matter to the adjudicating authority to decide afresh on the grounds of appeals raised by the Revenue, after giving proper opportunity of hearing to the applicants. The Tribunal ordered that the appeals are allowed by way of remand. It is found that the Tribunal had gone into the issue and applied mind and had come to a decision. Therefore, the recalling of the order and restoring the appeals would amount to review of the earlier order of the Tribunal which would not be legal and proper. Also in the arguments of Revenue that the appeals are not dismissed and have been remanded with all issues open, and therefore, the same cannot be restored. - Decided against the appellant
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2016 (4) TMI 371
Availment of Cenvat credit - Service tax paid on outdoor catering and rent a cab service - Appellant claimed that period of dispute is prior to 01.04.2011 and hence, they are eligible for credit though they have taken credit of the said services in their cenvat account during June, 2011 - Held that:- the appellant has availed Cenvat credit facility on outdoor catering service provided in the factory premises to its employees and also provided rent a cab service to its employees/officers of the Company for commuting to and from the factory premises to attend to their business activities of the company. But the Revenue is of the view that outdoor catering service and rent a cab service were neither used in or in relation to the manufacture and clearance of the final products or it could be said to be an activity relating to the business. By following the ratio of decision of Hon'ble Bombay High Court in the case of CCE, Nagpur Vs. Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] and decision of Hon'ble Madras High Court in the case of CCE & ST, LTU, Chennai Vs. M/s. Turbo Energy Ltd. [2015 (3) TMI 632 - MADRAS HIGH COURT], the cost of input services that forms part of, the Cenvat credit availed in respect of outdoor catering service and rent a cab service is eligible as input services. - Decided in favour of appellant
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2016 (4) TMI 370
Eligibility of Cenvat credit - Service tax paid on Health Insurance Services for the coverage of employees, spouse, dependent children and parents etc. - Department contended that the impugned service is not covered under the definition of the input service vide Rule 2(l) of Cenvat Credit Rules, 2004, Held that:- it is found that when employees are at work in the factory, if an accident happens, the employer is liable to pay compensation and a prudent businessman will be interested in taking an accident insurance policy for his workers to cover the business risk and it cannot be considered that such insurance is not relation to the manufacturing activity. Even in the case of health insurance of the workmen, when employees fall sick, it is necessary that they are provided proper treatment so that they are brought back to work without loss of man hours and disruption of manufacturing lines and the employer may take insurance for arranging proper medical attendance for sick workman or other employees of the company. In the case of premium attributable to the families of employees it cannot have any direct nexus and will not qualify as input services. By following the judgment of Hon’ble High Court of Karnataka in the case of CCE, Bangalore-III Vs. Stanzen Toyotetsu India (P) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT], the medical insurance in relation to the employees of the company are within the broad definition of input service as per Rule 2(l)ibid. Hence, the impugned order is set aside. - Matter remanded back
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2016 (4) TMI 369
Disallowance of Cenvat credit - Availed credit on 22.08.2009, whereas, the capital goods have been cleared from the factory on 18.05.2009 itself - Revenue contended that cenvat credit is not to be allowed as the appellants were not in possession of the said capital goods on that date- Held that:- On going through the provisions of Rule 4(2) of Cenvat Credit Rules, the proviso clearly mentions, “that cenvat credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if such capital goods are cleared as such in the same financial year”. The facts conforms to the provisions laid down by the proviso to Rule 4 (2) of CCR, 2004, and there is no ambiguity in the proviso as discussed above. By following the ratio laid down by the Co-ordinate Bench of the Tribunal in the case of Hindalco Industries Ltd. Vs. CCE, Cochin [2008 (1) TMI 292 - CESTAT, BANGALORE], wherein it was decided that the appellant assessee could not be debarred from taking credit so long as the fact of receipt of capital goods in the factory is not disputed and the fact of not having taken credit earlier were proved. In the instant case, both the conditions stand satisfied. Accordingly, the impugned order is set aside. - Decided in favour of appellant
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CST, VAT & Sales Tax
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2016 (4) TMI 367
Invokation of powers under Section 60(2)(f) - in continuation of invocation of power under Section 59 of the Act to search the premises for information and documents - Sealing of the premises of petitioner - Avoidance or evasion of tax demand - Sufficient opportunity not afforded to petitioner to explain why the premises should not be sealed - Held that:- the respondents are directed to de-sealed forthwith the business premises of the Petitioner in the presence of the authorized representative of the Petitioner. The documents/records seized at the time of the sealing will be returned to the Petitioner. The proceedings drawn up for the de-sealing will be signed by both the VATO concerned and the authorized representative of the Petitioner. - Petition disposed of
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2016 (4) TMI 361
Claim of benefit - Whole-sale dealer in cements, hence, various types of incentives/discount are offered by the Companies - Appellant contended that when the Companies similarly placed have been granted benefits of exemption from the tax on discounts, the appellant alone cannot be singled out without any basis and not even affording an opportunity of personal hearing - Held that:- It is not in dispute that personal hearing was not given to the appellant. Principles of natural justice require that the appellant should have been offered personal hearing. Therefore, the order of the respondent is hereby set aside. The matter is remitted back to the respondent. The respondent shall offer personal hearing to the appellant. While the personal hearing is offered, it is open to the appellant to produce the order copy passed in respect of M/s. Sree Laxmi Traders, and to claim the benefit. It is for the respondent to consider on the applicability of the order passed in respect of M/s. Sree Laxmi Traders. - Appeal disposed of
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2016 (4) TMI 360
Seeking direction to move the goods to its agent - Goods detained for non-production of transit pass as well as copies of invoices at the time of inspection - Manufacturer of liquor known as 'BARCADI' - Goods transported from the State of Goa to the Union Territory of Pondy disclosing the seller and buyer and sufferance of Central Sales Tax at 2% - Held that:- as per the submission of Department that if the petitioner produces relevant papers by which, the authority would be able to co-relate the entries available in the outer check post. Also if the petitioner is able to prove that they are taking away the goods outside the state and there is no tax liability in Tamilnadu, then the authority can only levy a sum of ₹ 2000/- for lapses. Therefore, taking in to consideration the same, the petitioner is directed to pay a sum of ₹ 2000/- (Rupees two thousand only) towards fine for the purpose of release of goods and on such payment along with necessary copies of documents, the goods shall be released forthwith. - Petition disposed of
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