Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 15, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Reopening of assessment - the basis for reopening ought not be such survey actions and the report. Something more was required in law for the Assessing Officer to exercise his powers - HC
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Payments made for sharing of utilities - whether do not attract section 194C - The payment made to Weizmann group of is not in the nature of income but was expenditure reimbursed which cannot be regarded as a revenue receipt - No TDS u/s 194C - HC
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Return of investment cannot be construed to mean "expenditure" and if it is construed to mean "expenditure" in the sense of physical spending still the expenditure was not such as could be claimed as an "allowance" against the profits of the relevant accounting year under Sections 30 to 37 of the Act and, therefore, Section 14A cannot be invoked. - HC
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Revision u/s 263 - when assessee company made a bogus claim of expenditure then the assessee cannot avail immunity from tax liability by stating that the impugned amount of expenditure claim has been taxed in the hands of respective payee companies. - AT
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JDA - Non-refundable deposit would par take the character of sale consideration only upon the ownership of the undivided interest in land being transferred by a sale deed and not before and then only to the extent of the amount proportionately applicable to the extent of the land so transferred - AT
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Revision u/s 263 - unaccounted interest payments - the Commissioner of Income Tax cannot find fault and he cannot impose his view on the Assessing Officer - AT
Customs
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Exemption denied on the ground that the goods imported were not connectors - appellants contended that the goods were actually connectors imported in CKD condition and that by simple pliers can be assembled into connectors - exemption allowed - AT
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Denial of refund claim - SAD - The date of final Out-of-Charge only reflects the date when the complete consignment has been cleared by Customs. It does not mean that the part clearances were not made physically before the date of final Out-of-Charge recorded on the Bill of Entry. - Refund is admissible - AT
Wealth-tax
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Rectification under section 35(1)(e) of the Wealth Tax Act, 1957 - Tribunal could not have exercised jurisdiction to rectify the order dated 28.05.2008, as it seeks to refer, and rely upon the sanction granted by the local authority, which was clearly not a part of the record. - HC
Service Tax
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Waiver of pre deposit - option to pay 7.5% or 10% of demand under the new substituted provisions of Section 35F - the amended provisions, thus, will apply to even those orders, which have been passed before the amendment was made effective - HC
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Waiver of pre deposit - jurisdictional commissioner, who passed the impugned order is having the jurisdiction only for the office registered in Delhi. For the other locations, Faridabad, Noida and Alwar, the adjudicating authority has no jurisdiction - stay granted - AT
Central Excise
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Excisability of lean gas - Natural gas or not - Lean Gas is in fact natural gas and therefore would attract nil duty - SC
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Classification of blended marble vinyl flooring - use of limestone to the extent of 84.10% and use of plastic only as a binder clearly indicated that characteristic of lime stone that confers upon the material its use - SC
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Supply of circuit breakers, control panels and relays along with mandatory spares under International Competitive Bidding (ICB) - Benefit of exemption Notification No. 6/2006 allowed - AT
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Refund of unutilized accumulated CENVAT Credit - Duty drawback claim - When there is no provision to disallow refund of the cenvat credit pertaining to service tax remaining unutilized and carried forward, refund allowed - AT
VAT
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Dealer or not - Charitable trust - Whether Tribunal was justified in holding that the appellant's activity of manufacture and sale of sweetmeats and farsan is integral and incidental to his main charitable activity, and that therefore the appellant is not a 'dealer' and does not carry on 'business' - Held No - trust is liable for tax - HC
Case Laws:
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Income Tax
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2015 (4) TMI 466
Reduction of amount of profits eligible for deduction u/s. 80HHC from the book profits u/s. 115JA - MAT computation - Held that:- As decided in case of Ajanta Pharma Ltd [2010 (9) TMI 8 - SUPREME COURT ] if the dichotomy between "eligibility" of profit and "deductibility" of profit is not kept in mind then s. 115JB will cease to be a selfcontained code. In s. 115JB, as in s. 115JA, it has been clearly stated that the relief will be computed under s. 80HHC(3)/(3A), subject to the conditions under sub-cls. (4) and (4A) of that section. The conditions are only that the relief should be certified by the chartered accountant. Such condition is not a qualifying condition but it is a compliance condition. Therefore, one cannot rely upon the last sentence in cl. (iv) of Explanation to s. 115JB [subject to the conditions specified in sub-cls. (4) and (4A) of that section] to obliterate the difference between "eligibility" and "deductibility" of profits as contended on behalf of the Department. Therefore, respectfully following the above precedents, we hereby hold that the AO is required to re-compute the taxable profit for the purpose of computation of book profit u/s.115JA of the Act in the light of the guide lines laid down by the Hon Courts as cited above. - Decided in favour of assessee. Reduction of amount of profits derived by eligible industrial undertaking referred in s. 80IA from the book profits u/s. 115JA - Held that:- This issue has already been decided in Assessment Year 1999-2000 wherein held that as per the Appellant the deduction U/s 80IA on Silvasa Unit, however the A.O. had allocated certain expenses and reduced the Profit to compute the deduction U/s 80IA. But it was pleaded that this issue was not decided by Ld. CIT(A). Also in the past for A.Y. 1998-99 this very issue was restored back to the file of Ld. CIT (A) in assessee's own case - Thus for this year as well, this ground may be treated as allowed but for statistical purposes only. - Decided in favour of assessee for statistical purpose only. Inclusion of Exchange Rate Fluctuation/Difference in respect of balances under the Exchange Earners Foreign Currency Account (EEFC Account) in total turnover for the purpose of deduction u/s. 80HHC - Held that:- This issue is directly covered in favour of the assessee by an order of Honble Gujarat High Court in the case of CIT vs, Alps Chemicals Pvt Ltd [2014 (10) TMI 251 - GUJARAT HIGH COURT] wherein held held that an exporter had an option to keep certain percentage of export receipts in EEFC a/c. The assessee received higher amount in Indian rupees on such amount due to fluctuation in the foreign exchange rate. Conscious of the fact that the assessee had received the proceeds of the export transaction and gained due to fluctuation the court held that such gain cannot only be said to have been 'derived' from export business but the fluctuation gain arose subsequent to receiving the sale consideration hence part of the export sales . The gain was not due to delayed realization of export proceeds. - Decided in favour of the assessee Inclusion of Sale of scrap in total turnover for the purpose of deduction u/s. 80HHC - Held that:- For the purpose of availing deduction u/s.80HHC, income from sale proceeds of sale scrap was not included in the "total turnover" but it was shown separately as relying on Punjab Stainless Ltd. case [2014 (5) TMI 238 - SUPREME COURT] - Respectfully, following the above decision, we hereby direct to re- compute the turnover after excluding the sale amount of scarp. - Decided in favour of assessee. Disallowance u/s. 14A - Held that:- the basic information about the availability of the interest free funds can only be furnished by the assessee. Reply before the A.O. only suggested that the profit was ploughed back but the amount, stated to be ₹ 16.25 Crores invested in the firm, actually invested out of the said interest free fund is to be established. Certain basic information such as fund flow statement is not available before us. Side by side, A.O. has simply applied a formula which was only giving the figures of the total income verses exempted income, however, before applying the said formula it is also a requirement to establish that the interest bearing borrowed funds have actually been applied to earn the exempted income and then if such expenditure is not separately identifiable then on prorate basis disallowance can be calculated. Moreover this is A.Y 1999-2000, which is before the introduction of Rule 8D. We therefore direct that if the assessee is placing reliance on the above cited decisions then the connected information should be placed before the A.O. and to accomplish it, we hereby restore this ground back to AO to decide as per law accordingly. - Decided in favour of assessee for statistical purposes. Addition of expenses attributable to earning exempt income for the purpose of computation of book profits u/s. 115JA - Held that:- There is a latest decision CIT vs. Gujarat State Fertilizers and Chemicals (2013 (7) TMI 701 - GUJARAT HIGH COURT) wherein it was held that the A.O. had added the amount of estimated expenditure on earning of dividend income u/s 14A. So by referring sec. 115JB(2) it was held by the A.O. that it was required to be added in the profit shown in the P&L A/c. Commissioner of Appeals had deleted the addition in the normal computation, consequently deleted such addition under sec 115JB on the ground that this would not serve any purpose. The Tribunal affirmed this . In the High Court it was held that when the said sum was added as an expenditure estimated on earning of dividend income U/s 14A had been deleted , the said deletion for the purpose of Sec. 115JB required to be confirmed . For that reason we hereby restore this issue back to the file of A.O. - Decided in favour of assessee for statistical purposes. Disallowance of expenses for increase in share capital - Held that:- There are few examples such as payment of stamp duty for issue of public subscription of debentures which was held as revenue expenditure U/s 37(1); even though after the insertion of Sec. 35D. Likewise other expenditure pertaining to issue of debenture is entitled U/s 37(1) and the provision of Sec. 35D are not going to effect such deduction. So the outcome of the above discussion is that the provision of amortisation is not intended to supersede any other provision of the income tax act under which such expenditure is otherwise admissible as a deduction . Under the fitness of circumstances it is therefore required to restore this issue back to A.O. to examine both the aspects i.e. Revenue Expenditure or Capital Expenditure and then decide the question of disallowance. Resultantly this ground is restored back for denovo adjudication - Decided in favour of assessee for statistical purposes. Addition on account of payment made to Synergy Research Centre Pvt. Ltd. - CIT(A) deleted the addition - Held that:- CIT(A) has held that the AO’s conclusion that the payment of ₹ 40 lacs was made against the sale proceeds of shares and not against research was merely on presumption. There was no material on record to justify such presumption. Side by side, the assessee had brought on record the evidence about the payment of ₹ 40 lacs against scientific research were carried out by SRCL. The ld.CIT(A) has, therefore, placed reliance on the facts as already considered by his predecessor and the view taken by the AO was reversed. No judicial requirement to interfere with the findings of ld.CIT(A) - Decided against revenue. Discount paid to M/s. Antrish and M/s. Dukan allowed by CIT(A) - Held that:- appointment of M/s.Antariksh Pharma and M/s.Dukan have provided certain facilities to the assessee related to administrative as well as business services. Dadhas had a very good network of committed dealers, who have managed the business. Both those entities were otherwise registered with Sales Tax Department as Registered Dealers. Even during the course of search, certain correspondences relating to installation of various systems at M/s.Dukan was seized and since the activities was not merely on paper, therefore it was held that the payment was reasonable and the addition was directed to be deleted. We hereby endorse the view taken by the First Appellate Authority primarily on the ground that in a situation when a search was conducted and no material was found, then according to us, the amount was rightly directed to be deleted. - Decided against revenue. Disallowance of interest payment - CIT(A) deleted addition - Held that:- Since in the past a consistent view had been taken that once the Revenue had accepted the business decision of appointment of the said firms then in the same breath could not question the assessee’s other decision taken in the ordinary course of business. We therefore follow the view already taken by the respected coordinate benches and affirm the decision of CIT(A) - Decided against revenue. Unaccounted sale of spent solvent - CIT(A) deleted the addition - Held that:- It was merely presumed by the A.O. that even for the post search period the Solvent might have been sold on the same rates. But the basic question is that when even for search period the impugned addition did not survive on account of lack of evidence then how such presumption could be approved for the post search period. The reasoning appears to be convincing especially when no contrary material is available on record form the side of the Revenue. - Decided against revenue. Addition made on account of DEPB sale for 80IA deduction - CIT(A) deleted the addition - Held that:- This issue is well settled by in the case of Liberty India [2009 (8) TMI 63 - SUPREME COURT ] wherein it was held that Duty Drawback receipts and DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purpose of deduction U/s 80I / 80IA / 80IB. It was commented by S.C. that Sec. 80IB provides for the allowing of deduction in respect of profits and gains derived from the eligible business. The connotation of the words 'derived from' is narrower as compared to that of the words ' attributable to.' By using the expression ' derived from' Parliament intended to cover sources not beyond the first degree. - Decided in favour of revenue. Addition to depreciation allowance - - CIT(A) deleted the addition - Held that:- Depreciation not claimed by the assessee could be deducted despite the introduction of the block-assets concept.For the year under consideration, which is before the amendment took place, the depreciation cannot be foisted upon the assessee. Therefore, this ground of the Revenue is hereby dismissed.- Decided against revenue. Inclusion of sales-tax & excise duty as part of total turnover for 80HHC purpose - CIT(A) deleted the addition - Held that:- As decided in Laxmi Machine Works [2007 (4) TMI 202 - SUPREME Court] for the legal proposition that Excise Duty & Sales Tax are indirect taxes so do not involve any element of 'Turnover'. Respectfully following this precedent we hereby affirm the findings of CIT(A) - Decided against revenue. Gross interest,Gross lease rent & Operational charges for computing 'Profit of the Business' for 80HHC purpose - CIT(A) deleted the addition - Held that:- As relying on ACG Associated Capsules Pvt. Ltd.,[2012 (2) TMI 101 - SUPREME COURT OF INDIA] and Topman Exports, reported [2012 (2) TMI 100 - SUPREME COURT OF INDIA] arriving at the conclusion that 90% of the net interest which had been included in the profits of the business was required to be deducted as per Explanation (baa) of section 80HHC. On the same line, we hereby direct to compute the 80HHC deduction. - Decided against revenue. Adjustment to trading export profit on account of export promotion expenses - Held that:- CIT(A) has given certain findings on facts which were not confronted to the AO. The ld.CIT(A) has noted that the assessee had maintained the details about export promotional expenses which were stated to be identifiable. It was also noted by him that those expenditure were attributable to different products. Further, he has noted that the assessee has furnished accurate details of the direct expenses attributable to turnover of the products including the overseas sales promotional expenses. Since those were new evidences, which were entertained by the ld.CIT(A), therefore it is demanded by the ld.CIT-DR to give an opportunity to examine those evidences which were entertained by the ld.CIT(A) at the back of the AO. Considering the said preliminary technical objection of the assessee, we hereby restore this ground to the file of ld.CIT(A) with the direction to give opportunity to both the sides and then decide as per law. - Decided in favour of revenue for statistical purposes. Reducing deduction under section 80-IA - Assessing Officer has disallowed depreciation and the profit on sale of DEPB - Held that:- while dealing ground No.6 of the Revenue’s appeal and held that the depreciation could not be foisted upon the assessee compulsorily. Therefore, the relief given by the ld.CIT(A) upto this extent is affirmed. Next is the question of DEPB sale which has already been held against the assessee, therefore in consequence thereof, we hereby hold that the relief was wrongly granted by the ld.CIT(A). - Decided partly in favour of revenue.
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2015 (4) TMI 465
Reopening of assessment - validity of initiation of proceedings u/s. 147 - AO has come to the conclusion that by virtue of JDA dated 5.2.2005, there was a transfer of the capital asset giving rise to capital gains u/s. 45(2) - Held that:- t. As we have already seen the Assessee held the Whitefield property as investment and converted the same as stock-in-trade of business. This fact has also been recorded by the AO in the order of assessment passed u/s.143(3) of the Act. Sec.45(2) of the Act provides that the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him. The taxable event for application of Sec.45(2) is conversion of capital asset into stock-in-trade of business. The point of time at which tax is levied is the year in which the stock-intrade is sold. When the original assessment was completed u/s.143(3) of the Act, the AO did not think it fit to invoke provisions of Sec.45(2) of the Act either because he overlooked the applicability of those provisions or because he thought that the point of time at which tax is to be levied u/s.45(2) of the Act, viz., sale of the stock-in-trade had not occurred during the previous year. AO has relied on two important factors viz., (i) assessee has executed POA in favour of developer and the fact that assessee received refundable and nonrefundable deposits under the JDA, and (ii) the fact that several courts have held that capital gains is liable to tax on account of JDA entered into by the land owners with the builder on handing over of the possession of the property for joint development. In coming to the aforesaid conclusion, the AO has placed reliance on the decision of the Hon’ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT, (2003 (2) TMI 62 - BOMBAY High Court) which was much before when the AO concluded the original assessment proceedings u/s. 143(3) of the Act on 31.12.2007. The other decision referred to by the AO in the reasons recorded is CIT v. T.K. Dayalu [2012 (6) TMI 405 - Karnataka High Court]. This decision was rendered on 20.6.2011, after the conclusion of the original assessment proceedings. The decision rendered subsequent to the original assessment proceedings will not mean that assessee did not fully and truly disclose material facts. If reassessment proceedings are initiated on the basis of a subsequent judicial decision, then that would also be a case of change of opinion, as was held by the Hon’ble Bombay High Court in the case of Sesa Goa Ltd. v. JCIT,(2004 (5) TMI 54 - BOMBAY High Court) on which reliance was placed by ld. counsel for the assessee. In the present case, the facts on record and reasons recorded clearly show that all facts were available before the AO when he completed the original assessment proceedings u/s. 143(3) of the Act. There is no tangible material which has come to the possession of the AO justifying initiation of reassessment proceedings. On the facts and circumstances of the present case, we are of the view that initiation of reassessment proceedings has been merely on the basis of change of opinion and in view of the law laid down by the Hon’ble Supreme Court in the case of Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA) initiation of reassessment proceedings has to be held as not proper.We are, therefore, of the view that in the given facts and circumstances of the case, initiation of reassessment proceedings u/s 147 of the Act is held to be illegal and consequently, order passed u/s. 147 of the Act is cancelled on this ground. - Decided in favour of assessee.
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2015 (4) TMI 445
Reopening of assessment - assessee resorting to hoarding of potatoes and making huge profits by fluctuating the day to day price of potatoes in the market - Held that:- During the course of survey, the Assessee's manual books of accounts, cash balance, stock etc. were physically verified and inventory was prepared. The backup of the books of accounts maintained on computer has been taken and impounded for further verification. The details of the group's bank accounts have been obtained and kept on record. The further contents of this report would reveal that there were some discrepancies and which are very minor in nature. Therefore, the cash physically found was short of ₹ 5020/- for which it is explained that the same pertains to day to day and misc. expenses incurred on the day of survey. Secondly, the physical stock of 672 bags of potato was found. The explanation for the same is recorded. Thus, neither the survey report nor any other material indicates that any income chargeable to tax for the relevant assessment year has escaped assessment. The Assessing Officer, therefore, had nothing before him which would enable him to record his belief that any such escapement has taken place. In the circumstances, the reasons recorded and which pertain to all the assessment years prior and subsequent to the survey can hardly satisfy requirement in law. This is not how the power under section 147 should be exercised.That is to be exercised and in exceptional cases. It should not be exercised as a manner of routine and merely because some survey of this nature had taken place. At any point of time and when there was shortage of potato in the market, that such powers of survey were invoked. If nothing has been found therein which would indicate escapement of income and chargeable to tax, then, the basis for reopening ought not be such survey actions and the report. Something more was required in law for the Assessing Officer to exercise his powers.When there is absolutely no material to institute the proceedings or issue the notice proposing reassessment of income, then, it is the duty of the Court to interfere and quash the proceedings at the threshold. In these circumstances, this Writ Petition is allowed. - Decided in favour of assessee.
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2015 (4) TMI 444
Excess lease rentals on the basis of inflated cost of windmills allowed - Tribunal allowing depreciation on the inflated cost of windmills purchased by the assessee - Held that:- The order of the Appellate Tribunal cannot be faulted as the Tribunal considered the previous findings of certain group companies of Weizmann being involved and on inquiry, it was found that the commission / fees paid by NEG Micon was not received by the assessee Accordingly, the Tribunal considered the statement of comparable cases made by the assessee and concluded that the payment made by the assessee was certainly not inflated. The Tribunal considered the fact that setting up of windmills was a specialized task and came to the conclusion that the Assessing Officer had no evidence on record to establish that the price of windmills paid by the assessee was not the actual price or that the price was inflated. The Tribunal found that the Assessing Officer had proceeded on the basis of a presumption that the cost of each windmill is inflated by ₹ 1 crore and it had not been proved by documentary evidence that such money came back to the assessee from the concern to whom commission was paid, namely M/s.Suhani Traders. The Tribunal found that the Commissioner of Income Tax (Appeals) was justified in holding that there is nothing on record to prove the excessive amount of lease rent was paid. The said issue is identical in all appeals and the appeals came to be rejected while upholding the orders of the Commissioner of Income Tax (Appeals). The appeals filed for the year 2002-03 and 2005-06 were also dismissed. The cross objections filed by the assessee for the year 2002-03 were also rejected. Payments made for sharing of utilities - whether do not attract section 194C and, therefore, disallowance made by the Assessing Officer under section 40(a)(ia) is to be deleted as held by Tribunal - Held that:- The payment made to Weizmann group of is not in the nature of income but was expenditure reimbursed which cannot be regarded as a revenue receipt and therefore, the Tribunal considering the provisions of Section 194C of the Act has upheld the order of the Commissioner of Income Tax (Appeals) rejecting the contention of the department. Appeal dismissed.
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2015 (4) TMI 443
Special investment subsidy - subsidy received from the state govt. for employing persons belonging to scheduled caste and scheduled tribe categories of M.P. State at its industrial unit, established in the selected backward districts of Madhya Pradesh - whether was not in the nature of capital receipt in view of the judgment of Sahney Steels and Press Works Ltd. vs. CIT [1997 (9) TMI 3 - SUPREME Court] as held by Tribunal - Held that:- No hesitation in holding that the subsidy in the hands of the assessee in the present case M/s Veener & Plywood P. Ltd. are of revenue in nature and would be liable to tax accordingly. The Apex Court decision was passed in the year 1997 still holds the field and there is no valid reason urged to deviate from the ratio laid down by the Apex Court. - Decided in favour of assessee.
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2015 (4) TMI 442
Business loss incurred in the course of purchase and sale of mutual fund units - whether is an expenditure incurred for earning exempt dividend income and hence not allowable under Section 14-A ? - whether the Tribunal was right in holding that the transaction of purchase and sale of units had not taken place without appreciating the evidence produced and after holding that loss on sale of shares is an expenditure for earning dividend income? - whether Section 14-A of the Act is invokable by the Department in the transaction in issue? Held that:- In decision of Commissioner of Income Tax - Vs - Walfort Share & Stock Brokers P. Ltd. [2010 (7) TMI 15 - SUPREME COURT] wherein identical issue fell for consideration and the Supreme Court while negativing the stand of the Department that the transaction in the said case would fall under Section 14-A, distinguished the stand of the Department, in bringing the case under Section 14-A holding that the loss in the sale of units could be disallowed on the ground that the impugned transaction was a transaction of dividend stripping and, therefore, it was alleged to be a colourable device. Return of investment cannot be construed to mean "expenditure" and if it is construed to mean "expenditure" in the sense of physical spending still the expenditure was not such as could be claimed as an "allowance" against the profits of the relevant accounting year under Sections 30 to 37 of the Act and, therefore, Section 14A cannot be invoked. The Supreme Court, in the above decision, further fortified this issue by stating that such a transaction was curbed by the introduction of Section 94 (7) in Finance Act, 2001 with effect from 1.4.02 relevant to the assessment year 2002-2003. In view of the abovesaid decision of the Supreme Court, the plea of the Department that the transaction would attract Section 14-A of the Act fails and, this Court holds that the assessee is entitled to claim the amount as business loss during the assessment year in question. - Appeals are allowed setting aside the order of the Tribunal - Decided in favour of assessee.
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2015 (4) TMI 441
Rebate under section 88E - Tribunal allowing the rebate of ₹ 1.01 crores under section 88E against the rebate of ₹ 75.07 lacs allowed by the Assessing Officer - Held that:- When the income from the securities transactions is taxable and offered to tax, the deduction insofar as that sum is concerned or quantum has been granted. We do not think that the Tribunal's order can be interfered with. The Tribunal's view is imminently possible in the backdrop of the facts and circumstances peculiar to the Assessee. In any event by sub-section (3) of section 88E it has been clarified that no deduction under section 88E shall be allowable in, or after, the assessment year beginning on the 1st day of April, 2009 i.e. because a deduction which is contemplated by this provision has been now made admissible elsewhere. In these circumstances, the Appeal raises no substantial question of law. It is dismissed. More so when the Tribunal's order has been given effect to by the Assessing Officer. He has followed his view taken in the assessment year 2006-07, which is also following the Tribunal's order. - Decided against revenue.
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2015 (4) TMI 440
Addition made applying percentage of completion method - Held that:- No infirmity in the order of the CIT(Appeals) on the fact that the assessee has consistently followed the same method of accounting of income in all the earlier years as well as the succeeding years, has not been disputed by the Revenue. Thus the facts remains that the assessee has always been accounting for the sale proceeds of the portions sold by it as income in the year when the possession is given and the registered sale deeds are executed. This method of accounting of income stands accepted in the hands of the assessee u/s 143(3) in the earlier as well as succeeding years. On these facts the A.O. is not justified in adopting the percentage completion method for one year (the year under appeal) only on selective basis. Infact this will distort computation of the true profits and gains of the business. Further same income will be assessed again in the hands of the assessee in the year when sales have been declared in the subsequent years and assessments have been framed u/s 143(3) of the Act which is not tenable in law. - Decided against revenue. Unaccounted sales proceeds received in cash - CIT(A) deleted the addition holding neither the A.O. was justified in adopting the sales consideration on the basis of circle rate prescribed for charging of stamp duty nor was he justified in considering the taxability of transactions relating to office / residential flats against which only advances had been received during the year and actual sale had not been made - Held that:- CIT(Appeals) has given a finding that the value adopted for the purpose of charging the stamp duty cannot be taken into consideration for assessing the business income in relation to the area sold by the assessee and therefore the A.O. was not justified in adopting the circle rate for the purpose of estimating the income. Even before us, the Revenue has not been able to bring any such material on record on the basis of which it could be said that the assessee has actually received any amount of sales proceeds over and above the amount declared by it in the registered sale deeds and its books of accounts and therefore we do not find any infirmity in the order of the learned CIT(Appeals) in deleting the addition of ₹ 1,46,25,071/-. - Decided against revenue.
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2015 (4) TMI 439
Revision u/s 263 - Bogus expenditure - earlier assessment order passed u/s 143(3) r/w Section 153A quashed - Expenses claimed by the assessee company and offered to tax by the recipient company become revenue neutral and, therefore, it cannot be said that the order of the AO was prejudicial to the interest of revenue as submitted by assessee - Held that:- It is well-settled principle that the Revenue authorities are duty bound to tax right person and right person alone. By "right person" is meant the person who is liable to be taxed, according to law, with respect to a particular income. The meaning of "wrong person" is obviously used as the opposite of the expression "right person". Ratio of decision ITO vs Ch. Atchaiah [1995 (12) TMI 1 - SUPREME Court] clarifies that merely because of a wrong person is taxed with respect to a particular income, the AO is not precluded from taxing the right person with respect to that income. Same is the case here when assessee company made a bogus claim of expenditure then the assessee cannot avail immunity from tax liability by stating that the impugned amount of expenditure claim has been taxed in the hands of respective payee companies. The present case is squarely covered in favour of the revenue by the decisions of Gee Vee Enterprises vs ACIT (1974 (10) TMI 29 - DELHI High Court) and CIT vs Nagesh Knitwears P. Ltd. (2012 (6) TMI 65 - DELHI HIGH COURT ) as in the present case, the AO did not raise any query or make any inquiry pertaining to the claim of expenses submitted by the assessee in its books and statements of accounts submitted along with return and this is a clear case of "lack of inquiry". We may also point out that if the AO fails to conduct the said investigation, he commits the error and the word "erroneous" includes failure to make inquiry. In such cases, the order becomes erroneous because necessary inquiry or verification has not been made and not because a wrong order has been passed on merits. We further hold that if from the detailed investigation conducted by the Investigation Wing of the department, it is revealed that the bogus expenses have been claimed by the assessee with the intention to reduce its tax liability, then the order is also prejudicial to the interest of revenue. The argument of the ld. Counsel of the assessee about revenue neutrality is not applicable to the facts and circumstances of the present case. Hence, we are of the view that the CIT(A) invoked provisions of section 263 of the Act in a judicious and proper manner and we are unable to see any ambiguity, perversity or any other valid reason to interfere with the same - Decided against assessee.
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2015 (4) TMI 438
Disallowance u/s.14A - Held that:- The Hon'ble Delhi High Court in the case of Maxopp Investments Ltd. V CIT [2011 (11) TMI 267 - Delhi High Court] has held that by virtue of the provisions of sub-section (2) and (3) of Section 14A of the Act, if the Assessing Officer is not satisfied by the correctness of the claim of the assessee in respect of such expenditure or no expenditure, as the case may be, cannot embark upon the determination of the amount of expenditure in accordance with Rule 8D. While rejecting the claim of the assessee, the Assessing Officer has to render cogent reasons for the same. In a case where the assessee states that no expenditure has been incurred by it to earn exempt income, the Assessing Officer has to verify the correctness of the assessee's claim having regard to the accounts of the assessee. In the case on hand, we find that the Assessing Officer has not given any cogent reason in the order of assessment for disbelieving the contention of the assessee that it has incurred no expenditure to earn the exempt income of ₹ 18,400 but has proceeded to apply the provisions of Rule 8D to arrive at the disallowance of ₹ 1,93,730 as the expenditure deemed to be incurred for earning exempt income. Further, as contended by the learned Authorised Representative, the judicial pronouncements relied on by the assessee i.e. J.M. Financial Ltd (2014 (4) TMI 752 - ITAT MUMBAI), apply to the factual matrix of the case on hand and in this view of the matter, it cannot be said that the assessee was incurring expenditure to maintain and / or monitor its long term investments of ₹ 3,87,00,000 in its sister / associate concern M/s. Trichy Steel Rolling Mills P. Ltd. and ₹ 46,000 invested in the shares of Andhra Bank. Thus we delete the disallowance of ₹ 1,93,730 made by the Assessing Officer under Section 14A r.w. Rule 8D. - Decided in favour of assessee. Addition u/s.41(1) - difference in liability towards Karnataka Breweries & Distilleries Ltd. ('KBDL') - Held that:- It has been submitted by the assessee that the impugned addition of ₹ 5,87,817 can be made only if the liability claimed by the assessee is higher than the dues shown by the creditor viz. KBDL. In the case on hand, the undisputed facts as per record show that the liability claimed by the assessee is ₹ 3,65,92,256, whereas on examination of the books of KBDL by the Assessing Officer, it was found that the assessee was shown to be liable to pay KBDL ₹ 3,71,80,073. We find that it is in these factual circumstances the finding of the authorities below is erroneous as the basic requirement that a liability no longer exists is not present in the case on hand to warrant the application of the provision of section 41(1) of the Act - Decided in favour of assessee. Interest under Section 234B - Held that:- The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld in the case of Anjum H Ghaswala (2001 (10) TMI 4 - SUPREME Court) and we, therefore, uphold the action of the Assessing Officer in charging the said interest. - Decided against assessee. Income from 'Prestige Shantiniketan' Project - CIT (Appeals) deleted the addition and upheld the basic contention of the assessee that the property, which is the subject matter of JDA between the assessee and PEPL, is held as stock-in-trade by the assessee and not as a capital asset, therefore income arising under Section 45(2) in respect of the conversion of the capital asset to stock-in-trade, as well as business income arising on the sale of such stock-in-trade will accrue and arise only in the year in which the stock-in-trade is actually sold - Held that:- The lands which are subject matter of the JDA dt.5.2.2005, between the assessee and PEPL, are stock-in-trade of the assessee at the time of JDA was entered into. There is a finding to this effect, rendered by a co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2005-06 [2015 (4) TMI 465 - ITAT BANGALORE]. No sale of such stock-in-trade has been reported to have taken place during the year under consideration i.e. Assessment Year 2009-10. The assessee has reportedly been consistently following the completed contract method of accounting and the same appears to have accepted by revenue. AO has not brought on record any material evidence to demonstrate that the system of accounting followed by the assessee does not show a true and correct picture of income, which in turn would warrant rejection of the books of account. The Assessing Officer has not rejected the books of account maintained by the assessee in the year under consideration. The assessee is basically a landlord simpliciter as far as the JDA between the assessee and PEPL is concerned thus there is no requirement in law that the assessee ought to adopt the percentage completion method of accounting merely because PEPL, the developer in the JDA, in following the said method.In the light of the above facts, it would be incorrect to conclude that the assessee has earned any income out of the JDA in the period relevant to the impugned assessment year 2009-10. As decided in case of R.Gopinath (HUF) V CIT [2009 (7) TMI 1209 - ITAT CHENNAI] when an immovable property is held as stock-in- trade, the same is to be considered as sold only when the sale is conveyed by means of a registered sale deed and not before that. The learned CIT(A) has also expressed the same view in the impugned order in the case on hand and the said view, in our considered opinion, is in order Non-refundable deposit would par take the character of sale consideration only upon the ownership of the undivided interest in land being transferred by a sale deed and not before and then only to the extent of the amount proportionately applicable to the extent of the land so transferred. 11.6.4 In the light of the facts and circumstances of the case as discussed above and the observations made and findings rendered by us, we see no reason for interfering with the findings rendered by the learned CIT(A) in the impugned order deleting the addition as income from the Shantiniketan Project in the year under consideration - Decided against revenue.
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2015 (4) TMI 437
Disallowance of weight shortage expenses - Held that:- We find that the AO as well as the Id.CIT(A) has disallowed the expenditure on the basis that in earlier year the assessee has not claimed such kind of expenditure. In our considered view, since the assessee has placed on record the debit notes raised by various parties to whom the material was supplied, therefore the authorities below were not justified in disallowing the expenses claimed by the assessee. We therefore direct the AO to delete this addition. Before us, Revenue has not brought on record any material to demonstrate as to how the decision of Hon’ble Tribunal for A.Y. 07-08 in Assessee’s own case would not be applicable to the facts of the case for the year under appeal more so when ld. CIT(A) himself has noted that identical issue arose in A.Y. 07-08 and had followed the order of his predecessor. - Decided in favour of assessee. Disallowance u/s 14A r.w. rule 8D - Held that:- Considering the totality of the facts and in view of the fact that the provisions of Rule 8D are applicable for the year under consideration and in the light of the decision of Joint Investments Pvt Ltd Versus CIT [2015 (3) TMI 155 - DELHI HIGH COURT] and in view of the fact that the disallowance worked out by A.O u/s. 14A is more than the exempt income and considering the alternate submission of ld. A.R. to make a reasonable disallowance u/s. 14A as deemed fit, we are of the view that disallowance of ₹ 5,000/- if made in the present case will meet the ends of justice. - Decided partly in favour of assessee.
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2015 (4) TMI 436
Revision u/s 263 - unaccounted interest payments - Held that:- In this present case, the Assessing Officer completed assessment u/s.143(3) on 30.11.2011 which means that the Assessing Officer applied his mind and came to the conclusion that the assessee had properly accounted interest payments in his books of accounts. After he came to the conclusion that the whole expenditure incurred by the assessee towards interest payment of D48,39,309/-, he allowed the same as business expenditure. For this conclusion reached by the Assessing Officer, the Commissioner of Income Tax cannot find fault and he cannot impose his view on the Assessing Officer. The Assessing Officer has taken one possible view. The view taken by the Assessing Officer cannot be considered as erroneous if the income from interest on ‘fixed deposit’ is considered as income from other sources, than the interest incurred by the assessee on borrowings used for making deposits is to be allowed as expenditure. Further, if there is any loss under the head “Income from other sources” it is to be set off against income from any other head of Income as per provisions of section 71 of the Act. Then also, there is no revenue loss to the department. From this point of view, the order passed by the Assessing Officer cannot be prejudice to the interests of Revenue. Thus Commissioner of Income Tax is not justified in exercising his jurisdiction u/s. 263 of the Act and the order of the Commissioner of Income Tax passed u/s. 263 is quashed. - Decided in favour of assessee.
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2015 (4) TMI 435
G.P. addition on insulated scrap - CIT(A) restricted the addition - Held that:- Finding of the ld.CIT(A), it is evident that the same is based on sound reasoning and material placed before him. As per the FIFO method, the G. P. rate in respect of insulated scrap for A. Y. 2005-06 was 7.65% whereas for A. Y. 2006-07, it was 1.11%, However, by LOT to LOT method, the G. P. rate for last year was 3.26% as against 1.66% for the present year. After considering all the facts, and circumstances, it would meet the ends of justice if G, P. rate for the current year is taken @ 5%. The appellant has already shown a G. P. rate of 1.66%. Accordingly, the addition @ 3.34% of the G. P. which works out to ₹ 12,81,410/- is sustained in respect of insulated scrap.The other major items of scrap which can be compared with the figures of previous year is cables and wires mtrs. There is a decline of about 2% in the present year. Considering all the facts and circumstances, it would be judicious to make an addition on account of decline of G. P. rate by increasing the G. P. by 1%. After applying this rate to the sale of the present year, the addition on this account comes to ₹ 1,97,134/-. The ld.Sr.DR could not controvert the finding by placing any contrary material on record. Moreover, the Assessing Officer has not given any basis for estimating the profit on lump sum basis. Therefore, we do not see any reason to interfere into the finding of the ld.CIT(A), same is hereby upheld. - Decided against revenue. Disallowance of commission expenses - CIT(A) allowed the claim - Held that:-The A. O. had made an addition of ₹ 2,08,802/- as the appellant could not furnish complete name and address of the persons to whom above commission was paid. It has been submitted by the appellant that the TDS has been made u/s. 194H and copies of Form 60A was also filed by him before the A. O. He has given complete details mentioning the Address, PAN and the amount of commission paid to 3 persons. The A. O. in his remand report has not given any comments on the information submitted by the appellant. Since, the appellant has given necessary details for verification of commission expenses such as name and address of the person, PAN, confirmation of the person as well as Form 16A which was issued to the person to whom the commission was paid, the A. O. was not justified in disallowing the commission. No reason to interfere into the finding of the ld.CIT(A), same is hereby upheld. - Decided against revenue.
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2015 (4) TMI 434
Penalty u/s 271(1)(c) - application filed in the case of M/s. Suvistas Software Pvt. Ltd. (company) seeking rectification of the appellate order dismissed - maintainability as per the provisions of section 253 of the I.T. Act, 1961 - Held that:- The term ‘assessee aggrieved’ used in S.253(1), being a person competent to file an appeal before the Tribunal, is only the person who is an aggrieved party liable to pay tax in terms of the order against which the appeal is to be preferred. As already discussed by us, there is no tax payable by the appellant in the present case as a result of the impugned order passed by the learned CIT(A), and consequently, he cannot treated as an ‘aggrieved party’. We, therefore, hold that the appellant is not entitled to file the present appeal against the impugned order passed by the learned CIT(A) confirming the penalty imposed by the Assessing Officer under S.271(1)(c) on the company and consequently the present appeal, being not maintainable, is liable to be dismissed in limine. We accordingly dismiss this appeal holding the same to be not maintainable. - Decided in favour of assessee.
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2015 (4) TMI 433
Computation of capital gain - actual cost incurred by the assessee for the acquisition of the property has to be taken for computing capital gain and part of it cannot be disallowed on the basis that construction is demolished before sale as held by CIT(A) - Held that:- Considerable cogency in the finding of the CIT(A) wherein held that the demolition of building was a part of the process of land transaction and, hence, the cost of property was the actual cost incurred by the assessee for purchasing the land along with the building. Therefore, he held that the assessee has claimed cost of acquisition correctly which is to be allowed in full. Ld. CIT(A) also noted that there is no authentic evidence that sale of Malwa was only for ₹ 1,30,000/- and noted that in this behalf assessee’s own affidavit is self serving and therefore, observed that in the absence of any authentic evidence, he held that sale consideration for Malwa requires to be estimated and accordingly, estimated the said consideration at ₹ 2.75 lacs which should be added to the consideration disclosed ₹ 24 lacs. We find force in the Ld. CIT(A)’s computation which read Total sale consideration [As per registered deed dated 3.2.07 + sale consideration of ‘Malwa’ (Rs. 24,00,000 + ₹ 2,75,000/-) ₹ 26,75,000/- LESS Cost of acquisition as per registered deed dated 17.5.06 ₹ 23,70,020/- = SHORT TERM CAPITAL GAIN ₹ 3,04,980/- - Decided against revenue.
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2015 (4) TMI 432
Disallowance of payment made to third partly by cheque - addition u/s 68 for payment made before incorporation of company - Held that:- There is a confusion about the date of payment and incorporation of the assessee company. As per facts undisputed and admitted by both the parties it is held that the assessee company was incorporated on 5.12.2006 and the legal existence of assessee company can only be considered from the date of incorporation i.e. 5.12.2006. - assessee as well as Ld. DR is also agreed that the impugned payment of ₹ 10,00,000/- was made on 23.10.2006 to the third entity by cheque. The controversy remains that whether the payment was made by assessee company out of books of accounts or the same was made by M/s B.L.Kashyap & Sons Ltd. or any other entity to the third party. - query need further verification - Matter remanded back - Decided in favour of assessee.
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2015 (4) TMI 431
Disallowance of expenses - Whether CIT(A) has erred in deleting the addition made by the A.O. on account of expenses claimed, but no details in support of its contention had been filed during the course of assessment proceedings - Held that:- Assessing Officer completed assessment proceedings ex partie u/s 144 of the Act and the assessee was prevented by this reason in filing necessary and relevant explanation, details and evidence before the AO. Hence, we further, hold that in this situation the assessee was having right to submit additional evidence during First Appellate proceedings under Rule 46A of the Rules. At the same time, we note that the CIT(A) called remand report of the AO on the admissibility of additional evidence and the Assessing Officer objected to the admission of additional evidence without verifying, examining and commenting upon the merits of the additional evidence. From the vigilant reading of the impugned order we note that the CIT(A) rejected the objection of the AO and admitted the additional evidence but the remand report of the AO was not called and AO was not allowed to comment upon the merits of the additional evidence. In this situation, it can safely be presumed that the CIT(A) considered additional evidence in violation of Rule 46A of the Rules and granted relief for the assessee. - Matter remanded back - Decided in favour of Revenue.
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Customs
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2015 (4) TMI 451
Benefit of Notification No. 21/2002-Cus dated 1.3.2002 (Sr. No. 244) - denial on the ground that the goods imported were not connectors - contention of the appellants that the goods were actually connectors imported in CKD condition and that by simple pliers can be assembled into connectors. - Held that:- As is evident from the re-examination report, the contention of the appellants that what they imported was connectors in CKD condition and that the imported goods were assemblable into connectors by simple pliers is not negated thereby. The appellants contention is also in conformity with the finding recorded by the original adjudicating authority in the order dated 16.12.2009. The Commissioner (Appeals) has agreed that by virtue of Rule 2(a) of the General Rules of Interpretation in such a situation the goods will be treated as connectors. - Benefit of exemption allowed - Decided in favour of assessee.
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2015 (4) TMI 450
Denial of refund claim - SAD - Signature not verified - Held that:- only ground for rejecting the refund is that the agreement between the importer and the consignment agent does not contain the signature of the witnesses - As per the copy of the Agreement, it bears signatures of both the importer, being the first party, and the consignment agent being the second party. There is no requirement in the statutory provisions that the Agreement should bear the signatures of the witnesses. In fact, the notification providing for refund does not require that the appellant should submit a copy of the agreement. The finding of Commissioner (Appeals) is indeed very strange and totally unwarranted. In the circumstances, the appellant have submitted all required documents for processing and sanctioning of the refund claim. - Decided in favour of assessee.
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2015 (4) TMI 449
Denial of refund claim - SAD - refund was rejected on the ground that the appellant could not have sold the goods before the Out of Charge was given - Held that:- it is clear from the Public Notice that part clearances have been permitted in respect of the bulk cargo. The examination reports in respect of such par clearances are also recorded on the bills of entry. The purpose of allowing part clearances is obviously to give part delivery to the appellant. The finding of Commissioner (Appeals) that goods do not come in the possession of the importer before the Out-of-Charge is given is totally fallacious and contradictory to the Public Notice issued by the Commissioner himself. The Commissioner (Appeals) has gone on a tangent and held that the appellant could not have sold the goods which were not in his possession. It is clear from the Public Notice that the goods will be in the possession of the appellant once the part clearance is allowed. The appellant have produced copies of invoices showing the sale of the goods to the buyers. Revenue has not shown that these goods are not the same in respect of which part clearance was given. Therefore, it would be wrong and totally unjust to state that the goods could not have been sold before the date of final Out-of-Charge. The date of final Out-of-Charge only reflects the date when the complete consignment has been cleared by Customs. It does not mean that the part clearances were not made physically before the date of final Out-of-Charge recorded on the Bill of Entry. - Refund is admissible - Decided in favour of assessee.
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Corporate Laws
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2015 (4) TMI 448
Application for approval of scheme of amalgamation and arrangement - Creditors objection regarding not complying provision of section 391 and 394 of the Companies act, Unsecured creditors meeting not held - Application for winding up - Objection by minor shareholders - Report of Regional Director & Liquidator - Held that:- I feel the failure to call a meeting of the unsecured creditors even assuming for a moment that the debts are genuine is not fatal and is no ground to refuse the scheme of amalgamation. The court has to now consider as to whether the objections are valid. On this aspect, it is to be noted that the creditors are not opposing the scheme of amalgamation as being against the public interest but they are only canvassing for repayment of their amounts from the available money before amalgamation. It is a case where they are pleading for a clearance of the debts before amalgamation and whereas the petitioner disputes the binding nature of the debts. Therefore, even if the meeting is not called for, the genuineness of the debts is a matter for consideration and the court has to answer as to whether their interest is protected or defeated or they have been prejudiced by not calling the meeting or by scheme. Any right for the objecting creditors can be considered only if in the particular circumstances of this case, the genuineness of the debt is proved beyond pale of doubt as binding on petitioner. To draw such an inference, there should be a counter evidence on behalf of the creditors. In this case, except relying upon the admitted lending, there is no other material to show that by virtue of such lending, the Company is benefited and the opinion formed by the Company Law Board or the Central Bureau of Investigation is erroneous. There is positive evidence throwing doubt about the genuineness as against the prima facie claim of truthfulness of the objecting creditors. The opposition of the claim by the creditors is definitely not in public interest and it is for their personal interest. The defence of the petitioner for non-consideration of those debts and dispensing with the unsecured creditors' meeting is bona fide. In view of the above factual situation, the several decisions touching on the law of winding up and the rights of the creditors is not referred to. The fixing of the swap ratio is based on the report of the auditors, which is accepted by the majority of the shareholders, and, therefore, it cannot be said that the scheme is disadvantageous to the shareholders. Therefore, I find that the objections raised by the minority shareholders are also not tenable and there is no violation of any of the mandates under Section 391 or 394 of the Act while dealing with the meeting of the shareholders. The report of the Official Liquidator or the Regional Director cannot be taken advantage by objecting creditors and on the other hand they do certify the beneficial interest of amalgamation. I, therefore, find that there is also no violation of the requirement from calling information from the Official Liquidator or the Regional Director. It has been already observed that the reports of the Official Liquidator or the Regional Director are not final and it is ultimately for the Court to consider the effectiveness of those reports. In this case, the court was inclined to accept the conditions that are to be imposed for amalgamation as suggested by the Regional Director. On a comprehensive assessment of the claims, this court feels that the scheme of amalgamation is in the interest of the public and the shareholders and the interest of the workmen is also protected. There is no attempt to defeat any provision of law with regard to pending of future prosecutions or liabilities. There is also no escaping of the liability with regard to disputed creditors in case they are found to be true. I, therefore, feel that this court by applying the provisions under Section 391 and 394 of the Act satisfactorily finds that the scheme of amalgamation is bona fide and has to be allowed by imposing certain conditions. - Scheme conditionally approved.
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Service Tax
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2015 (4) TMI 464
Renting of Immovable Property Services - Invocation of extended period of limitation - Suppression of facts - Held that:- Any finding by the Court at this stage is likely to be prejudicial, either the petitioner-BDA or the Service Tax Authority. At a stage where demand-cum-show cause notice has been issued to the BDA, various grounds have been indicated in the show cause notice as to why the Service Tax Authority are seeking to apply the extended period of limitation to the facts and circumstances of the case. Further, in view of the fact that although it appears that an agreement was signed between the BDA and M/s. Unitech Ltd. on 14.3.2008, the same was admittedly registered only on 30.9.2010 and the consequences thereof are the matters to be determined in the light of the submissions that may be advanced by the petitioner in course of such determination. In view of the judgment of Collector of Central Excise, Hyderabad (1989 (2) TMI 116 - SUPREME COURT OF INDIA), the issue itself, i.e. as to whether the extended period of limitation would apply, is yet to be determined by the adjudicating authority itself at the first instance. Consequently, without expressing any finding on the issues raised in course of the argument, we dismiss the writ application but allow the petitioner a further period of 30 days to file show cause reply and also to participate in such proceeding. The petitioner is at liberty to raise all such contentions and the Commissioner shall deal with the matter strictly in accordance with law without in any manner being influenced by any observation made hereinabove and reach in an independent conclusion both on fact and legal issues raised. - Decided in favour of assessee.
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2015 (4) TMI 463
Waiver of pre deposit - option to pay 7.5% or 10% of demand under the new substituted provisions of Section 35F - since orders were passed before the amendment was made effective - levy of service tax on the lease rent and development charges - renting of immovable property service - Held that:- In Paramount Security through its Proprietor Vs. Union of India & Ors., a Division Bench of this Court, considering the effect of new substituted provisions of Section 35F with effect from 06.08.2014, recorded an opinion that the effect of the amendment cannot be restricted only for those appeals which are filed after 06.08.2014. Such a restriction will be violative of Article 14 of the Constitution of India. The amended provisions, thus, will apply to even those orders, which have been passed before the amendment was made effective. While issuing notices of the writ and the stay petition, the Division Bench had directed that, in the meantime, the appeal shall not be dismissed by the Tribunal, provided the petitioner complies with the condition of pre-deposit in terms of amending Section 35F, introduced with effect from 06.08.2014, within a period of four weeks. - No good ground to take a different view, at the stage of passing of an interim order. - Decided conditionally in favour of assessee.
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2015 (4) TMI 462
Denial of refund claim - Scientific and Technical Consultancy Service - Bar of limitation - Whether the relevant date for deciding the limiting period of one year under Clause 6 of Appendix to Notification 5/2006-CE(NT) dt. 14.3.2006 for sanction of refund of Cenvat Credit under Rule 5 of Cenvat Credit Rules read with Notification No. 5/2006-CE(NT) dt. 14.3.2006 - Held that:- Relevant date for determining the period of limitation will be the date of export of services from the date when the invoices are raised and the date on which consideration is received whether it is in part or full or advanced while in the case of Bechtel India Pvt. Ltd. - [2013 (7) TMI 490 - CESTAT NEW DELHI] it was held that the relevant date for refund is the date of receipt of foreign exchange. It is also to be noted that the decision of this Tribunal in the case of Affinity Express India Ltd. (2014 (6) TMI 593 - CESTAT MUMBAI) and Business Process Outsourcing (I) Pvt. Ltd. (2014 (9) TMI 747 - CESTAT BANGALORE) were rendered by a Single Member Bench while the judgement in the case of Bechtel India Ltd. (2013 (7) TMI 490 - CESTAT NEW DELHI) has been rendered by a Division Bench. - decision of this Tribunal in the case of Affinity Express India Ltd. (2014 (6) TMI 593 - CESTAT MUMBAI) and Business Process Outsourcing (I) Pvt. Ltd. (2014 (9) TMI 747 - CESTAT BANGALORE) were rendered by a Single Member Bench while the judgement in the case of Bechtel India Ltd. (2013 (7) TMI 490 - CESTAT NEW DELHI) has been rendered by a Division Bench. It is a settled law that reference to the Larger Bench is made only in a situation when there is a contrary view expressed by two different Benches on a given issue. - in the absence of any contrary view expressed by any other Division Bench no reference lies to the Larger Bench. In our considered view, as no reference lies to the Larger Bench hence, the reference needs to be returned and is returned.
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2015 (4) TMI 461
Waiver of pre deposit - Erection, Commissioning or Installation Service - Abatement of 67% - Jurisdiction of authority - Held that:- jurisdictional commissioner, who passed the impugned order is having the jurisdiction only for the office registered in Delhi. For the other locations, Faridabad, Noida and Alwar, the adjudicating authority has no jurisdiction. Therefore, the demands pertain to those jurisdiction are not sustainable as held by this Tribunal in the case of Tina Sales Agecy Vs. CCE (Prev.), Mumbai [2015 (1) TMI 207 - CESTAT MUMBAI] and in the case of Vihar Aahar Pvt Ltd. Vs. CST, Ahmedabad [2012 (11) TMI 370 - CESTAT AHMEDABAD]. Therefore, the demand pertains to the contract receipts of ₹ 4,43,70,778/- for which service tax works out to ₹ 51,31,929/-.. Prima facie, the demand is not sustainable. For the rest of the demands, the applicant, prima facie, entitled for 67% abatement. In these circumstances, the demand pertains to Delhi jurisdiction is worked out to ₹ 5,62,18,873/-. The applicant is entitled for 67% abatement on the amount. - Partial stay granted.
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Central Excise
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2015 (4) TMI 457
Eligibility to pay 25% of the total penalty amount imposed under section 11AC of Central Excise Act, 1944 - Held that:- in view of judgement of the Hon ble Gujarat High Court in the case Commr. Of Central Excise & Customs, Surat-I vs. Harish Silk Mills (2010 (2) TMI 494 - GUJARAT HIGH COURT). Therefore, while examining the issue of excess payment of duty, the adjudicating authority should also extend the option to the Appellant for payment of 25% of the penalty as prescribed under section 11AC of Central Excise Act, 1944 on fulfillment of conditions prescribed thereunder. The Ld.Commissioner(Appeals) s order to this extent is modified and the matter remanded to the adjudicating authority for deciding the case in the light of above observations - Decided in favour of assessee.
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2015 (4) TMI 456
Excisability of lean gas - Natural gas or not - Held that:- Following decision of OIL INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, SHILLONG [2002 (6) TMI 402 - CEGAT, NEW DELHI] appellant is right in contending that Lean Gas is in fact natural gas and therefore would attract nil duty. - Decided against Revenue.
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2015 (4) TMI 455
Classification of blended marble vinyl flooring - Classification under heading 3918.10 or sub-heading 6807 - Held that:- From the order of the CEGAT [2003 (6) TMI 46 - CESTAT, MUMBAI] it becomes clear that the CEGAT also accepted that the test in Bhor Industries [1980 (10) TMI 60 - HIGH COURT OF GUJARAT AT AHMEDABAD] was not be applicable any longer. Therefore, the CEGAT resorted to note 3(b) of General Interpretation Rules which is applied to the facts of the present case. Even Mr.A.K. Sanghi, learned senior counsel for the Department, does not dispute this position and emphasizes that it is General Interpretation Rules which are applicable. We find that as per Note 3(b) of the General Interpretation Rules, the test is essential character of the product and in the facts of the present case it is to be examined as to whether the said essential character is that of plastic or the limestone. - Though no technical material was placed by either side before the Courts below, the CEGAT noted that use of limestone to the extent of 84.10% and use of plastic only as a binder clearly indicated that characteristic of lime stone that confers upon the material its use, in the present case. We may also remark that the Department could not produce any evidence in support of its contention that the goods are known as plastic tiles in the market and therefore this ground was rightly rejected. It may be reiterated that the onus lies on the Department to show that the goods were to be classified under sub-heading 3918.10, which onus the Department has failed to discharge. - Decided against Revenue.
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2015 (4) TMI 454
Supply of circuit breakers, control panels and relays along with mandatory spares under International Competitive Bidding (ICB) - whether the appellants are eligible for exemption Notification No. 6/2006 dated 1.3.2006 - Held that:- issue stands settled by the decision of this Tribunal in the appellant's own previous case and the Revenue has accepted the said order - Respectfully following the decision of the Tribunal in the appellant s own case, I set aside the order passed by learned Commissioner (Appeals) - Decided in favour of assesee.
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2015 (4) TMI 453
Refund of unutilized accumulated CENVAT Credit - Duty drawback claim - Held that:- So far as the claim of drawback is concerned, there is no material evidence on record to appreciate that export of the appellant were supported by drawback claim. There was no enquiry done with the customs authority. Learned counsel in all fairness states that if any enquiry is done no material showing the export under drawback claim can be discovered by Revenue. Therefore, as an abundant caution, the Authority for his satisfaction may cause verification from the Customs authorities as to whether export was made by the appellant under drawback scheme. If there was claim of drawback of service tax and such drawback has been paid, refund of cenvat credit of service tax shall not be allowed. It may be stated that when the drawback on service tax was not extended before 13.7.2006, claim thereof cannot be presumed. When there is no provision to disallow refund of the cenvat credit pertaining to service tax remaining unutilized and carried forward, the Hon'ble High Court of Bombay has held in the [2011 (2) TMI 503 - BOMBAY HIGH COURT] that in the absence of any distinction in Rule 5 prior to 13.2.2006, appellant cannot be disentitled to claim of refund thereof. Therefore entire carried forward credit remaining unutilized should be refunded. - Matter remanded back - Decided in favour of assessee.
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2015 (4) TMI 452
Confication of goods - Imposition of redemption fine and penalty - detection of excess stock of branded chewing tobacco - Incomplete books of accounts - Held that:- When the accounts were not updated and excess quantity of goods were found during inventory, preponderance of probability was in favour of Revenue to hold possible circumstance of clandestine removal. In absence of any reconciliation statement of the excess goods found, it was not open to the appellant to challenge that mere absence of the partner or the staff shall not bring the appellant to the ambit of adjudication. Therefore, excess branded chewing tobacco found by investigation can be inferred to be unaccounted stock with the object of removal thereof without payment of duty. Appellant s only plea all along was that mere unaccountal of the stock found does not make the appellant liable to duty or penal consequence. Adjudicating authority had every reason to believe that the appellant s goods were liable to confiscation and redeemable on payment of redemption fine. Therefore, both seizure and imposition of redemption fine is confirmed. Present case being the case of tobacco product which has higher margin in the market, there shall be no interference to the adjudicated fine since the appellant did not come out to show the extent of margin earned in dealing with Tobacco products. Therefore, there is no necessity to intervene to the decision of learned adjudicating authority. - When there was prejudice caused to Revenue, there cannot be exoneration from penalty which otherwise shall be sanction to illegality. Therefore, there shall be no interference to the penalty imposed also. - Decided against assessee.
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2015 (4) TMI 447
Chargesheet against Central Excise Commissioner - CAT declines to interfere - Held that:- Such issues at the first instance are to be thrashed out in the departmental proceedings where evidence is to be led, witnesses are to be produced, examined and cross-examined. We are confident that this Tribunal should not usurp the power of the departmental authorities. We at this stage cannot go into the merits of the case as this would amount to creating prejudice in relation to the disciplinary enquiry which is yet to be held. We, therefore, desist from giving any finding regarding the legality/illegality of the order dated 28.02.2014 passed by the respondent dismissing the representation of applicant dated 01.02.2014 in compliance of the Tribunal's order dated 28.01.2014. We are also to observe that dismissal of the representation is a reasoned and speaking one and that prima facie no malice appears to be getting established. We have to take note of the fact that since no person has been impleaded in his personal capacity, the allegations regarding malice are also vague. Likewise, all the allegations raised regarding the violation of statute have been dealt with comprehensively by the respondents in their order dated 28.02.2014. Therefore, we see no point at present to interfere with the chargesheet and leave all the issues open to be adjudicated before the departmental proceedings or any future proceedings that may follow. - no merit in the OA and the same is dismissed leaving the parties to bear their own costs. - Decided against appellant.
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CST, VAT & Sales Tax
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2015 (4) TMI 460
Reversal of input tax credit - Imposition of penalty - Opportunity of hearing not granted - Held that:- in terms of Section 27(3) of the Act, penalty can be imposed for wilful suppression and there is no finding to that effect as far as the petitioner is concerned. - no opportunity was given to the petitioner has not been disputed by the learned Additional Government Pleader - Impugned order is set aside - Decided in favour of assessee.
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2015 (4) TMI 459
Denial of refund claim - Bar of limitation - Held that:- having taken note of Section 49(2) of the Act, clearly, the order of the Tribunal having been passed on 2.5.2009 in terms of the extended period of limitation granted under the said provision, the period of limitation expired on 1.5.2013. Consequently, any notice for assessment under Section 43 of the Act made thereafter cannot save the power or authority for assessment, once, it becomes barred by the law of limitation. We are, therefore, of the considered view that the writ application ought to be allowed and the notice under Annexure-4 having been issued beyond the period of limitation and that too, not in statutory Form 307, is non-est in the eyes of law. We order accordingly and direct refund of any amount that may be due to the petitioner along with the statutory interest as may be applicable in terms of Section 59 of the Act within a period of three months - Decided in favour of assessee.
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2015 (4) TMI 458
Dealer or not - Charitable trust - Whether Tribunal was justified in holding that the appellant's activity of manufacture and sale of sweetmeats and farsan is integral and incidental to his main charitable activity, and that therefore the appellant is not a 'dealer' and does not carry on 'business' qua its activity of manufacture and sale of sweetmeats and farsan - Held that:- trust was formed with an object of providing pure drinking water to the needy, to provide food; either free of charge or at concessional rate to the needy and deserving and as such according to the assessee, the activity of manufacturing of farsan and sweetmeats is taken up. Though it is claimed by the assessee that the sweetmeats and farsan are made available to the devotees at concessional rate, no material is brought on record to demonstrate that the said activities of sale of sweetmeats and farsan, etc. are restricted to the persons interested, whereas it is part of the orders passed by the Revenue, from time to time, that the sweetmeats and farsan are sold to the general public. - From the conduct of the assessee, it appears that the very activity of manufacture and sale of farsan and sweetmeats, is also not ancillary to the main object of the trust, but the same activity is carried out as purely business activity and that too on large basis continuously and having sizable volume. It is nowhere provided in the object of the trust to manufacture farsan and sweetmeats and to sell the same in open market, that too on large scale, in sizable volume with a continuous and regular activity. The profit earned out of the said activity is said to have been used for the purpose of achieving the object of the trust, however, the said activity of preparation of sweetmeats and farsan and selling the same, in no way could be termed as an activity ancillary to the main object of the trust, i.e. providing medical aid, education, manage Pyaus, to manage and run Ganesh Bhandar and to provide food, sweetmeats and other delicious food free of charge or at concessional rate. This is not a sale of literature or other material having any bearing on the teaching and message of somebody as revered as Saibaba. It is a proper commercial activity and aimed at garnering revenue. It is now established and is in place under the distinctive name and style. The sale of sweetmeats, farsan to general public cannot be equalled with a activity noticed by the Hon'ble Supreme Court [2002 (3) TMI 45 - SUPREME Court] and associated with Saibaba and his followers. It is also required to be noted that even if the main object of the trust in the present case is not a business, the connected incidental or ancillary activity of manufacture of farsan and sweetmeats, could not normally be termed as 'business', unless the very conduct of the assessee if analyzed independently, the intention that could be gathered is to conduct the business in carrying out the incidental or ancillary activity. In our opinion, the Revenue has rightly discharged its burden by bringing on record from the observations made herein above, that the activity of the assessee trust is not incidental or ancillary to the main object of the trust, hence termed as 'business' having regard to its nature, viz. continuity, voluminous, etc. - Court is alive to the fact that the profit motive will have hardly any bearing over declaring the said activity as 'business' activity, however, it is required to be noted that the regularity of the transaction of manufacture and sale in the said class of goods, that too with a motive of carrying on business and making available the same not only to restricted persons or beneficiaries of the trust, but to public at large, has to be termed as the 'business' activity covered under the Bombay Act and assessee trust is liable for tax under the Bombay Act. - Decided in favour of Revenue.
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Wealth tax
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2015 (4) TMI 446
Rectification under section 35(1)(e) of the Wealth Tax Act, 1957 - Enhancement in value of property - Classification of office premises - Held that:- Power of the Tribunal to rectify mistakes is only to correct an error apparent on record and not to correct an error which is to be established by a long drawn out process of reasoning or where there could be two possible views. Although one of the grounds in the appeal before the Tribunal did relate to application of sub-clause (3) of section 2(ea)(i) of the Act, the same was not urged before the Tribunal during the hearing. This is evident from the fact that the Rectification Application also does not state that the above issue was urged at the hearing. Therefore, the decision was taken by the Tribunal in its order dated 28.05.2008 on the basis of the submissions made before it on merits. This application as allowed by impugned order is in fact review the order dated 28.01.2008. Moreover the impugned order has while allowing the application held whether the office premises is in a commercial building or not would have to be determined by the sanction granted by the local authority. - Tribunal could not have exercised jurisdiction to rectify the order dated 28.05.2008, as it seeks to refer, and rely upon the sanction granted by the local authority, which was clearly not a part of the record. - Decided in favour of assessee.
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