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TMI Tax Updates - e-Newsletter
April 18, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Purchase of Technical know-how - Covered under section 9(l)(vi) of Income Tax Act, 1961 and treated as royalty - The Seller had sold, assigned, conveyed and transferred to assessee its entire right, title, interest and ownership in the asset - not taxable in view of DTAA - AT
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Validity of the assessment orders u/s 153A, r.w.s. 143(3) - period of limitation - if no seizure is made on that date and nothing is done except lifting the prohibitory orders then the last punchnama drawn on that date would not be relevant to compute the limitation period for framing the assessment. - AT
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Disallowance of depreciation on Foreign exchange (forex) loss on the payment of model fees, which was capitalized - not considering the adjusted cost as the cost of acquisition of capital asset for allowing depreciation, results into distortion of the provisions of section 43A, which is impermissible - AT
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Merely because she happens to be the daughter of the Managing Director and the Chief Executive, it cannot be said that the money is spent by her parents out of love and affection for higher education of their daughter - HC
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Validity of statement - Once a certain claim has been accepted adverse to the interest of assessee, same can be retracted by way of deposition in affidavit and Assessing Officer ought to have made further inquiries in respect of same - AT
Customs
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Import of Nylon Filament Yarn - Denial of Exemption form CVD on the ground that cenvat credit was availed - when the credit under the CENVAT Rules is not admissible to the appellant, question of fulfilling the aforesaid condition does not arise - SC
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As regards goods which are less than 100 years old, they do not qualify as antiques because of the age factor and therefore, they would more appropriately fall under heading 97.05. As regards goods of age more than 100 years, only goods which are not covered under CTH 97.01 to 97.05 merit classification under CTH 97.06 as is clear from the HSN Explanatory Notes. - AT
Service Tax
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Clearing and forwarding (C&F) Agent service - 'freight rebate' and 'primary freight rebate' - Merely because the amount is routed or received through ACC Ltd. or its customers, it cannot be linked with clearing and forwarding agent's service. Manner of routing the consideration cannot decide taxability of the transaction - AT
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Revenue neutrality - As appellant is only an exporter of services and availing Cenvat Credit the same would have been admissible as refund under Rule 5 of the Cenvat Credit Rules 2004. It is Revenue neutral situation, therefore, demands are not sustainable - AT
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Cenvat Credit - reversal of credit on exempted servcies - erstwhile Rule 6(3) only restricted availment of credit upto 20%. - If did not make the credit lapse. - Demand set aside - AT
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Appellant is entitled to interest after three months from the date of filing of refund claims to the date of payment of refund amounts, as the date of calculating interest does not get postponed by the favourable decision given by the higher appellate authority - AT
Central Excise
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Cenvat Credit - Capital goods - railway track material used for handling raw materials, processed goods - appellant has rightfully claimed for MODVAT credit in respect of this item which credit is wrongly reversed by the authorities below - SC
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Manufacture - on coating uncoated paper, an article with different name commercially may have emerged but it is not a distinct article with different character or use and therefore no manufacturing process was involved when uncoated printing and writing paper is coated. - SC
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Classification of motor vehicle - It is not merely the weight of the passenger but also that of the cargo permitted to be carried that is relevant in determination of the gross vehicular weight. - AT
VAT
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Where an assessee, whether a public sector undertaking or otherwise, defaults in payment of tax without a bona fide explanation or there is no dispute pending as to the levy of tax, a necessary consequence of such default shall in levy of interest under Section 25(5) of the Act - HC
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Levy of value added tax (VAT) from main contractor where as works contract was executed by the Sub contractor - demand of tax on the amount retained as profit by the main contractor - since there was no sale of material, tax cannot be levied - HC
Case Laws:
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Income Tax
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2015 (4) TMI 580
Rejection of books of accounts - Failure to produce the books of account and the supporting documents for verification - Estimation of profits on adhoc basis - Held that:- The learned CIT/DR appearing for the department did not have any serious objection to the contention of the assessee for affording another opportunity for production of the books of accounts and submitted that the matter can be remitted back to the file of Assessing Officer for denovo assessment. Considering the submissions of the parties and keeping in view the interest of justice, we allow one more opportunity to the assessee for production of its books of accounts and other documents before the Assessing Officer to substantiate its claim and accordingly, set aside the Order of the CIT(A) and remit the matter to the file of the Assessing Officer for denovo assessment after examining the books of accounts and other documents. We also direct the assessee to produce all its books of accounts, documents, bills, invoices and any other information called for by the Assessing Officer and cooperate in finalisation of the proceeding. In the event, the assessee does not co-operate by producing the books of accounts and other information called for by the Assessing Officer or if the Assessing Officer on examination of the books of accounts and other documents finds that there are discrepancies which the assessee is not able to explain, the Assessing Officer would be at liberty to take an independent decision in the matter in accordance with law. The Assessing Officer shall afford a reasonable opportunity of being heard to the assessee. - Matter remanded back.
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2015 (4) TMI 579
Purchase of Technical know-how - Covered under section 9(l)(vi) of Income Tax Act, 1961 and treated as royalty - Liable for TDS u/s 195 of the Income Tax Act,1961 - Seller transferred entire right, title,interest and ownership of the asset - Held that:- After going through rival submissions and material on record, we find that it is undisputed that payment made to M/s. Colour Limited was not taxable in India because of DTAA. Its case is that the transactions are not for royalty as defined in section 9(l)(vi) of the Act. Complete reading of the agreements and clauses there under reveal that assessee had purchased goodwill, trademark and technical knowhow from Colour Ltd, outright. M/s. Colour Limited ("seller") was the owner of manufacturing processes, formulae, trade secrets, technology, analytical techniques, testing procedures, processes and all documents and literature pertaining to the manufacturing. The knowhow relating to the business was purchased by assessee vide agreement dated 31-3-2007. The Seller had sold, assigned, conveyed and transferred to assessee its entire right, title, interest and ownership in the asset. It was accordingly agreed that pursuant to effective date, the seller shall cease to have right, title, interest and ownership in the asset. Similarly assessee would have right title, interest and ownership in the asset. In the case of Asia Satellite Telecommunications Co LTd. [2011 (1) TMI 47 - DELHI HIGH COURT], it was held that In case of royalty, the ownership on the property or right remains with owner and the transferee is permitted to use the right in respect of such property. A payment for the absolute assignment and ownership of rights transferred is not a payment for the use of something belonging to another party and, therefore, no royalty. In an outright transfer to be treated as sale of property as opposed to licence, alienation of all rights in the property is necessary. Same views were held in Davy Ashmore India [1990 (12) TMI 51 - CALCUTTA High Court]. Also same views were held in Deepak Fertilizers and Petrochemicals Corporation Limited [2014 (2) TMI 933 - ITAT PUNE]. So,we hold that CIT(A) was not justified in holding that an amount of € 2,10,000 remitted to GPN Engineering and Process, France as part of total lump sum price of € 3,00,000 on net of tax basis for acquisition of process, design, documentation called Basic Engineering Package on outright purchase basis for Ammonium Nitrate Prill production pursuant to agreement entered into with GPN France was fee for technical service, therefore, liable to withhold tax in India. In view of above, we hold that assessee is not liable to make such payment on such deduction of tax on said amount of remittance. - Decided against the revenue.
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2015 (4) TMI 578
Disallowance u/s. 40(a)(i) of share of Technical expenses of head office - whether the same was reimbursement of actual expenses incurred by the head office - CIT(A) considering the reimbursement of actual expenses as fees for technical services without considering the definition of “Fees for included services” as per Article 12(4) of India-USA France Tax Treaty - Held that:- Assessee was not required to deduct tax at source from the impugned payment, consequently no disallowance could be made of the said amount of fee for technical services paid by the assessee to its Head Office, therefore, disallowance under section 40(a)(ia) of the Act was not called for. The connotations of fees for technical services under the Indo-French tax treaty were confined to payment for such services ‘as make available’ technical knowledge, skill, experience, etc. or consisted of development and transfer of technical plan or design. Generally speaking, technical services are treated as having been ‘made available’ when recipient of such technical services is enabled to perform such services without recourse to the service provider. In the instant case, the payment for technical services, which was sought to be brought to tax in the hands of the assessee was in the nature of reimbursement of technical expenses to the head office. The Assessing Officer had observed that ‘the head office expenditure allocated to the Indian division was in the nature of technical and administrative expenses’. Thus, this amount was not on account of any specific technical services having been ‘made available’, in the sense in which this expression was employed in the tax treaties, the amount could not be brought to tax in the hands of the assessee under article 13 of the Indo- French tax treaty. This amount could not also be taxed in the hands of the assessee under article 7 as it was not an income ‘attributable to PE’. Hence, the taxability of the impugned sum in the assessee’s hand was indeed incorrect. The Tribunal in assessee’s own case in respect of very same year, i.e. for A.Y 2002-03, it has to be held that the aforementioned amount could not even be assessed in the hands of the assessee on account of applicability of Article -13 and 7 of DTAA. - Decided in favour of assessee
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2015 (4) TMI 557
Fees for technical services - Assessment under section 144C/143(3) - income arising from services rendered by the appellant in connection with exploration/prospecting/extraction of mineral oil - CIT(A) Held that the provision of well testing equipments and services was not in the nature of Fee for Technical Services (FTS) squarely covered under section 9(1 )(vii) and holding that the income of the assessee was taxable under the provisions of sec 44BB - Held that:- The word 'services' in section 44BB include both technical and non-technical services. It was held that the proviso to section 44BB (1) will be pressed into service in case of the assessee whose receipts being of the nature of FTS and the income is required to be computed in accordance with section 44D or 44DA or section 115A or section 293. It is not out of place to mention that had these not being technical services, the proviso will not be pressed for the exclusion. FTS effectively connected with the permanent establishment is taxable under the Section 44DA and not under section 44BB, however, this would be applicable from assessment year 2011-12 and for the assessment years 2004-05 to 2010-11 the FTS also would be taxable under section 44BB (1). See Baker Hughes Asia Pacific Ltd., C/o Nangia & Co., and others Versus Addl. Director of Income-tax, International Taxation, Dehradun [2014 (7) TMI 601 - ITAT DELHI]. We uphold the order of the Ld. CIT(A) for the assessment year 2010-11 dated 05.03.2013. Hence we dismiss the appeal of the Revenue for assessment year 2010-11. - decided against revenue.
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2015 (4) TMI 556
Validity of the assessment orders u/s 153A, r.w.s. 143(3) - period of limitation - Held that:- The language of provisions of Sections 158BE and 153B of the Act, so as it relate to computation of limitation, is same. The search is conducted on the basis of authorizations issued to the officers of the departments. In all these cases, the Courts have considered the authorizations issued by the departments to its officers and conclusions of such authorizations by way of punchnama in which the seizures made during the course of search are considered along with the requisitions made under Section 132A. A unanimous view has been taken by the Courts that the authorizations referred to in the provisions relating to computation of limitation is to be considered as a conclusion of search on the dates when seizures are made and practically the search is concluded. If the authorization is extended by way of passing prohibitory order then it would be relevant to look into the action of the department taken on subsequent dates till the prohibitory order passed are revoked or vacated. In various cases such prohibitory orders are being passed by the Revenue and according to unanimous view taken by the Courts more particularly Hon’ble Jurisdictional High Court, that if on the date when such prohibitory orders are vacated, it would be relevant to see the action of the department and if no seizure is made on that date and nothing is done except lifting the prohibitory orders then the last punchnama drawn on that date would not be relevant to compute the limitation period for framing the assessment. We are of the opinion that the learned CIT(A) has committed an error in not accepting the submission of the assessee that the computation of the period of limitation should commence on 1st March, 2007 when for all practical purposes the authorization issued by the department for search in the case of the assessee was executed and subsequent punchnama drawn on 28th April, 2007 could not be considered as relevant for computing the period of limitation for framing the assessment. Therefore, we reverse the order of learned CIT(A) on this issue and it is held that the assessments framed by the Assessing Officer on 29th December, 2009 in respect of all the impugned assessment years are beyond the period of 21 months, therefore, barred by limitation and thus are invalid assessments. The impugned assessments are quashed. - Decided in favour of assessee.
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2015 (4) TMI 555
Forfeiture of bid amount - extension of period to make the payment of bid amount - Held that:- As at the time of inviting the bids as well as even at the time of confirmation of sale in favour of the petitioner, the petitioner was informed that the petitioner has to make the payment of bid amount within a period of 90 days from the date of confirmation of the sale, failing which the amount already deposited shall be forfeited. It is required to be noted that as such on the aforesaid terms and conditions the sale came to be confirmed in favour of the petitioner. Despite the above, the petitioner has failed to make the payment of bid amount within 90 days from the date of confirmation of sale. It is required to be noted that the sale came to be confirmed in favour of the petitioner on the aforesaid terms and conditions vide communication dated 14.02.2014 which came to be communicated to the petitioner vide communication dated 27.02.2014. Thus, within a period of 90 days from 14/27.02.2014, the petitioner was required to make the payment of entire bid amount, which admittedly the petitioner has failed to make. Under the circumstances, as such the consequences on breach of the terms and conditions on which the sale came to be confirmed must follow. At the time of making bid the petitioner was required to make the provision for deposit of the bid amount. Now, so far as the request on behalf of the petitioner to grant extension to the petitioner to deposit the balance bid amount is concerned, the same cannot be accepted now. It is required to be noted that as such the petitioner was required to deposit / pay the entire bid amount within a period of 90 days from 14/27.02.2014 i.e. on or before 14/27.05.2014. Therefore, time to make the payment of entire bid amount had expired as far as back in the month of May, 2014. Granting of further time and/or extension of time further would tantamount to varying the terms and conditions on which the bids were invited and even the terms and conditions on which the sale came to be confirmed in favour of the petitioner.In any case this Court in exercise of powers under Article 226 of the Constitution of India cannot extend the period to make the payment of bid amount which would tantamount to varying the terms and conditions of inviting the bids and/or terms and conditions on which the sale is confirmed in favour of the petitioner. As observed herein above, on nonfulfillment of the terms and conditions and/or in breach of the terms and conditions on which the sale is confirmed, the necessary consequences as provided under the terms and conditions of the tender agreement / the sale confirmation must follow. Thus he impugned communication/decision of the CCIT forfeiting the amount on failure of the petitioner to make the payment of entire bid amount within stipulated time is illegal and/or arbitrary and/or in breach of the terms and conditions on which the sale came to be confirmed in favour of the petitioner.
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2015 (4) TMI 554
Determination of nature of business - where loss resulting out of dealing in shares is more than the income arising out of loans and advances it can be said that the principal business of the assessee is not of granting loans and advances in the light of explanation appended to Section 73 of the Income Tax Act - Held that:- Income and business activity, according to the legislative mandate, are distinguishing factors. Therefore income alone cannot be taken into account in deciding whether the assessee is entitled to make a departure from the mandate appearing in Sub-section (1). In the case before us the activity of granting loans and advances is on a larger scale than the business of buying and selling shares. Both profit and loss are matters of chance in both the activities. Therefore profit alone was not made the distinguishing factor. Since business activity is also a distinct factor, we are inclined to think that the principal business of the company/assessee is granting loans and advances as would appear from the volume indicated in the chart above for a number of years. Therefore, the view taken by the learned Tribunal appears to be the correct view of the matter. - Decided in favour of assessee.
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2015 (4) TMI 553
Unaccounted gifts - whether the two donors had the financial capacity to make the gift(s) in favour of the assessees herein? - ITAT deleted the addition - Held that:- In the light of the decision of the Supreme Court in the case of P.R.Ganapathy (2012 (9) TMI 482 - SUPREME COURT), wherein held that the burden is on the assessees to show that the amount received by purported gift(s) from the two donors was a "gift" in the legal sense. Assessees have not led evidence to show whether the alleged donors had adequate funds in their respective accounts to make these purported gift(s) in Singapore Dollars, which is almost running into more than five lakhs, we have no hesitation to set aside the order of the Tribunal. Accordingly, the order of the Tribunal stands set aside and the matter is remanded back to the Tribunal to decide the issue along with the case of P.R.Ganapathy on this issue. - Decided in favour of revenue for statistical purposes.
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2015 (4) TMI 552
Reopening of assessment - Bogus purchases - Held that:- The audited accounts coupled with the records submitted by the assessee go to establish that the purchase account was debited by an excess sum of ₹ 1,51,09,660/-. In seeking to explain, the assessee came out with a disclosure that it had purchased from J.J. Gold House 83 Kgs. of Gold and not 58 Kgs. of Gold. The total cost of gold purchased by the assessee furnished at the initial stage has remained unchanged. If the case of assessee is that he purchased 25 Kgs of gold in addition than what was shown originally from J. J. Gold House, then the total quantity purchased in the year has to be increased by 25 Kgs of Gold and that 25 Kgs of Gold should consequently be in the closing stock. Since the closing stock is nil a view could certainly be taken that the assessee had suppressed sale of 25 Kgs of Gold. But that does not change the original position. The original position remains the same. It transpired from the fact that the purchase account was inflated by a sum of ₹ 1,51,09,660/-. It is only on the basis of the case run by the assessee during the hearing of the appeal that the Commissioner of Income Tax held that if the case of the assessee in the appeal is true, then there should have been 25 Kgs of gold in the closing balance. Since the closing balance is nil there is suppression of sale of 25 Kgs Gold. Since the learned Tribunal was agreeing with the views of the CIT (Appeal), it was not incumbent upon them to write out an elaborate judgment or to reiterate what had already been indicated in the judgment of CIT (Appeal).The issue was whether the purchase was overstated. The assessee was given opportunities repeatedly to adduce evidence to rebut the proof adduced by the revenue in support of the aforesaid issue. The assessee failed to discharge its burden. It has not been shown to us that any question of fact essential to the right decision was left undetermined. The case sought to be built upon on the basis of the letter dated 7th June 2010 is a new case which the authorities below had no occasion to consider. The case run by the assessee before them has been falsified. We do not think for ends of justice a remand is permissible in the facts of the case. - Decided against assessee.
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2015 (4) TMI 551
Deemed dividend under Section 2(22)(e) - ITAT deleted addition on the ground that this amount represented share application money - Held that:- The learned Tribunal on due consideration of the reasonings assigned by the Appellate Authority, so also the record found that the assessee has filed copy of the relevant share application money, account of share application money, copy of the Board's resolution for allotment of shares, copy of form no.2 with ROC for allotment of shares and held that the documentary evidence clearly establishes that the money so received was on account of share application money and dismissed the appeal. On due consideration of the reasonings assigned by the learned Income Tax Appellate Tribunal, we are of the view that the finding recorded by the learned Tribunal is based on appreciation of material on record. No substantial question of law arises in this appeal. - Decided against revenue.
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2015 (4) TMI 550
Reopening of assessment - Tribunal directing the AO to re-consider the issue of exemption, if any, available to the assessee, under Section 10A - Held that:- The order of remit made by the Appellate Tribunal has been rendered also noticing that the matter stands restored on the file of the Commissioner of Income Tax (Appeals) and the appeal has to be disposed of after giving opportunity of hearing to the assessee. The re-opening order having thus been affirmed, all issues as to exemptions, if any, available to the assessee, including in terms of Section 10A of the Income Tax Act, will remain open for adjudication before the Tribunal. The argument on behalf of the appellant that what has led to the impugned reopening order was merely a change of opinion of the Original Assessing Officer as contained in the Original Assessment Order does not stand. If the Assessing Officer, at the first instance, has ignored the very particular binding statutory provision, that by itself, would be sufficient ground on which the assessment order could be re-opened. The plea in that regard therefore fails. Noground arises for decision as a question of law for consideration in this appeal in favour of the assessee. - Decided against assessee.
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2015 (4) TMI 549
Condonation of delay - Held that:- Cause shown by the appellant is not at all sufficient to condone the delay. Even there are material contradictions in both the affidavits, which have been filed in support of the application for condonation of delay. The Director of the appellant - company has not given true and correct facts about service of order dated 30.4.2011 and also about the fact that judgment was pronounced in the open court. No affidavit of chartered accountant has been filed that order has been served to him or judgment was not pronounced in the open court. It is well settled that sufficient cause should be construed liberally on facts without any hard and fast rule. No doubt, substantive rights of parties should not be ignored because of delay, but a distinction must be made between delay of few days and inordinate delay causing prejudice to the other side. No premium can be given for utter negligence of the appellant and giving incorrect explanation, in support of the prayer for condonation of delay, the explanation given by the appellant is not at all sufficient to condone the delay. Issue involved in this appeal has already been settled by the Apex Court in the case of CIT v/s. Ghanshyam (HUF) [2009 (7) TMI 12 - SUPREME COURT ] - Decided against assessee.
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2015 (4) TMI 548
Transfer pricing adjustment - Payment of export commission and Payment of royalty for export to the Associated Enterprises - Held that:- Similar issues were raised in appeals by the assessee determination of ALP in respect of Export commission has been restored to the file of AO/TPO with certain directions and the payment of royalty for exports to AE has been accepted at arm’s length price. No distinguishing feature has been brought to our notice in the facts of the instant year vis-à-vis those of the above referred earlier two years. We adopt the same reasons for the year under consideration as well and, accordingly, remit the international transaction of `Payment of export commission’ to the file of AO/TPO for a fresh determination as per the guidelines given in our above referred order and delete the addition on account of `Payment of royalty’ in respect of exports made to the AEs. - Decided in favour of assessee for statistical purposes. Disallowance of depreciation on Foreign exchange (forex) loss on the payment of model fees, which was capitalized by the assessee as part of the cost of Intangible assets - AO invoked the provisions of section 40(a)(i) to disallow the proportionate amount of depreciation on Intangible asset towards the additional cost paid by the assessee due to change in the foreign currency rate - Held that:- Whether there is a forex loss or gain, deduction of tax at source u/s 195 is contemplated only at the first stage of the credit of income to the account of the payee. The higher or lower liability due to foreign exchange loss or foreign exchange gain is inconsequential in so far as deduction of tax at source u/s 195 is concerned. Once there is no default on the part of the assessee in making deduction of tax at source on the additional amount paid due to foreign exchange loss, there can be no question of making any disallowance u/s 40(a)(i) of the Act. Section 32 of the Act provides for depreciation, inter alia, on intangible assets acquired on or after the 1st day of April, 1998, which are owned, wholly or partly, by the assessee and used for the purposes of the business or profession. It provides that depreciation shall be allowed in the case of any block of assets, at such percentage on the written down value thereof as may be prescribed. Section 43A of the Act is a special provision consequential to changes in rate of exchange of currency. The interpretation as suggested by the Revenue in not considering the adjusted cost as the cost of acquisition of capital asset for allowing depreciation, results into distortion of the provisions of section 43A, which is impermissible. It, therefore, follows that there can be no question of adopting unadjusted cost of acquisition of asset for allowing depreciation by invoking the provisions of section 40(a)(i) of the Act inasmuch as the depreciation is allowable with reference to the adjusted cost of acquisition of the asset in terms of section 43A. - Decided in favour of assessee.
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2015 (4) TMI 547
Disallowance of expenditure spent for the education of Dr.Gauri Sriram - daughter of the Managing Director - whether disallowance is justified as the said amount spent on her did not accrue any benefit to the assessee company? - Held that:- In the instant case, before expenditure was incurred, the daughter had acquired a degree in medicine. She was employed. Apart from the fact that she is the daughter of the Managing Director and the Chief Executive, she was an employee of the assessee. She was sent outside the country for acquiring higher educational qualification, which would improve the services, which the assessee is giving to its patients. It is in this context, the sum of ₹ 5,00,000/- is spent. That is not in dispute. After acquiring the degree, she has come back and she is working with the assessee. She was paid ₹ 20,000/- per month as salary, before she was sent to higher education and after returning she is being paid ₹ 30,000/- per month. Merely because she happens to be the daughter of the Managing Director and the Chief Executive, it cannot be said that the money is spent by her parents out of love and affection for higher education of their daughter. She was an employee of the assessee, in the field, in which, she has acquired degree. They wanted her to specialize in Radiological Investigations and therefore, she was sent abroad for acquiring the knowledge. After acquiring the additional knowledge, she has come back and she is working with the assessee. Therefore, there is a direct nexus between the expenses incurred towards her education, with the business, which the assessee is carrying on. See CIT Versus Ras Information Technologies (P.) Ltd. [2010 (7) TMI 670 - KARNATAKA HIGH COURT ]- Decided in favour of the assessee
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2015 (4) TMI 546
Penalty u/s. 271(1)(c) - ITAT deleted penalty levy - Held that:- The answer to the question is in the affirmative, i.e. the Appellate Tribunal was right in deleting the penalties imposed by the Assessing Officer under Section 271(1)(C) as the facts emerge, it is clear that assessee furnished relevant details i.e. names, addresses, confirmations etc. and offered AO to call some of them for examination. It appears that these details were not inquired into further, however, assessee offered about amount for addition purpose. We find merit in the argument of learned counsel that assessment proceedings and penalty proceedings are separate and distinct and merely because additions has been made, same will not lead to automatic levy of penalty. See ACIT, Udaipur Versus M/s. Gebilal Kanhaialal HUF, Through Karta, Udaipur [2012 (9) TMI 297 - SUPREME COURT] and Northland Development and Hotel Corporation v. CIT [2012 (9) TMI 629 - SUPREME COURT] - Decided in favour of assessee.
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2015 (4) TMI 545
Validity of proceedings u/s 153 - Held that:- After considering the satisfaction note and the assessment order of the AO for AY 2009-10, it is evident that the seized document belonged to AY 2009-10 and not to AY 2005-06 & 2006-07. Therefore, in our opinion, there is no necessity of sending the matter back to the file of AO for verification of the year to which the seized document belonged. In view of above, we respectfully following the decisions of Hon’ble Jurisdictional High Court in the case of SSP Aviation Ltd. (2012 (4) TMI 335 - DELHI HIGH COURT ) and Devi Dayal Petro Chemical Pvt. Ltd. (2014 (10) TMI 216 - ITAT DELHI), hold that the proceedings u/s 153C was not validly initiated for AY 2005-06 and 2006-07 because the seized document did not belong to these assessment years. We, therefore, quash the proceedings initiated u/s 153C and consequently assessment orders passed in pursuance thereof. - Decided in favour of assessee.
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2015 (4) TMI 544
Deemed dividend - whether source and nature of credit found adequate in the context of section 2(22)(e) cannot be treated as inadequate for purposes of section 68? - Held that:- After rejecting the technical objections raised by the assessee questioning CIT(A)'s power to invoke the provisions of the impugned order by discovery of a new source of income under Section 68 of the Act in place of deemed dividend u/s.2(22)(e) of the Act, the learned CIT (Appeals) on the merits of the issue, held that the addition of ₹ 1.25 Crores is to be made as unexplained cash credit u/s.68 of the Act instead of the addition as deemed dividend under Section 2(22)(e). On a careful and considered perusal of the findings of the learned CIT(A) extracted above (supra)and specifically sub-paras (iii), (iv) and (v) thereof, we find that these issues have never been before the Assessing Officer either in the course of assessment proceedings or were raised or considered or addressed by him in remand proceedings. We also find that not all the issues raised by the assessee in the grounds raised in this appeal (supra) appear to have been raised before the learned CIT(A) or considered or addressed by the learned CIT(A) in the impugned order. In this factual and legal matrix of the matter, we are of the view that in the interest of equity and justice, the issue of the unsecured loan of ₹ 1.25 Crores taken by the assessee from M/s. Deccan Alloys Pvt. Ltd. requires to be examined and adjudicated afresh in respect of the application and invocation of the provisions of section 68 of the Act after affording the assessee adequate opportunity of being heard and to file details / submissions required. - Decided in favour of assessee for statistical purposes.
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2015 (4) TMI 543
Unexplained cash credit u/s.68 - CIT(A) deleted the addition - Held that:- Amount of ₹ 1,00,000/- received from Nanak Sadi Centre and ₹ 2,50,000/- received from Nilkanth Industries was not found cash credits but repayment received from them towards advances made to them on earlier dates. In this background, CIT(A) was convinced from the explanation given by assessee that amounts represent advance repayments from Nanak Sadi Centre and Nilkanth Industries and fully explained and held that in these circumstances, provisions of Section 68 of the Act are not attracted and accordingly, he rightly directed the Assessing Officer to delete the addition in question. This reasoned finding of CIT(A), needs no interference from our side. - Decided against revenue. Disallowance u/s 40(a)(ia) r.w.s 194J - non deduction of TDS while making payment - Held that:- Held that:- As regards to payment of ₹ 3,62,440/- made to MohMangal Carting Contractor, assessee has hired Hydraulic Trucks for carting boulders from explosion sites to the crushers sites for making metals etc. Payments were made on regular basis. In case of Associated Cement Ltd. (1993 (3) TMI 1 - SUPREME Court) was in connection with ‘any work’ and ‘on income comprised therein’ in Section 194C(1) of the Act. CIT(A) distinguishing the case law has rightly confirmed the addition made by Assessing Officer invoking the provisions of Section 40(a)(ia) of the Act. - Decided against assessee. In respect of payment to MohMangal Carting Contractor of ₹ 3,63,440 towards moving matter from mine to crusher-machine and crushed metal from crusher to storage place. In facts and circumstances, Assessing Officer was justified in invoking provision of Section 194C for making disallowance under the provisions of Section 40(a)(ia). Same is upheld because assessee hired Hydraulic Trucks for carting boulders from explosion sites to the crushers sites for making metals etc. - Decided against assessee. Payment made to Ramaiya Compressorwala and Ladubhai Compressorwala, payments were for hire or rent charge for equipment like compressor only. CIT(A) having considered the submission of assessee observed that assessee has been hiring equipment from year to year and the payments are made on regular basis even if no written agreement exists between the contractor and contractee. The equipment is specialized one hired for the drilling work. Hiring of such equipment and payment on such hiring squarely falls within the scope of Section 194C. In view of above, CIT(A) confirmed the order with regard to above payments, disallowed by Assessing Officer by invoking provision of Section 40(a)(ia). This factual and reasoned finding of CIT(A) needs no interference. - Decided against assessee. Disallowance of payment made for accounting work, Audit fees and Income Tax fees payable, provision made during the year is nothing but amount credited is exigible to TDS. Therefore, only amount of ₹ 15,000/- provision made on 31.03.2006 for fees to be paid for the year concerned i.e. A.Y.2006-07 may attract TDS liability and amount paid ₹ 15,000/- fees accrued for earlier year and paid in the year 2006-07 was not exigible to TDS. Provision made of ₹ 15,000/- fees payable to Income Tax Consultant on 31.3.2006 for the A.Y. 2006-07 which was understood as credited in any other name, is exigible to TDS but being below ₹ 20,000/, no TDS was required to be made. Regarding Accounting fees, amount of ₹ 20,000/- was shown payable on 01.4.2005 was the expenditure of earlier year and paid during the year is not expenditure but a discharging of liability which is not exigible to TDS Provision made of ₹ 20,000/- of Accounting fees for A.Y.2006-07 was as good as amount of fees payable for A.Y.2006-07. Amount of provision does not exceed ₹ 20,000/-, so, it was held not deductible to TDS and therefore non-deduction of Tax does not attract the provision of Section 40(a)(ia). In view of the above, CIT(A) agreed with the contention of assessee that payment made on this account is not subject provision of Section 40(a)(ia) of the Act. Accordingly, CIT(A) rightly directed the Assessing Officer to delete the additions made on this account. This reasoned finding of CIT(A) needs no interference - Decided against revenue. Addition u/s 40(A)(3) - payment exceeding ₹ 20,000/- at one time in a single day - CIT(A) deleted the addition - Held that:- All the aforesaid Compressorwalas shown in para (6) of Assessment Order have not been paid amount exceeding ₹ 20,000/- per bill and therefore, provisions of Section 4oA(3) was not applicable. Further stand of assessee has been that payments were made to these persons also covered in Explanation clause of Rule 6DD of sub-rule(g) because payment is made in a village- Alipore, Degam, which on the date of such payment was not served by any bank to any person who ordinarily reside or carrying on any profession, business or vocation in any of village. Payees had no bank account at Alipore-Degam, therefore assessee was required to make payment in cash. In this background, CIT(A) was justified in directing the Assessing Officer to delete addition because application was within eligible limits. This reasoned finding of CIT(A) needs no interference - Decided against revenue. Disallowance of 10% and 5% out of various expenses - Held that:- Assessing Officer made addition of ₹ 35,963/- being 10% out of above i to iv aggregate expenses of ₹ 3,59,633/- and made addition of ₹ 1,14,672/- being 5% out of above v & vi aggregate expenses of ₹ 22,93,423/-. In appeal, CIT(A) estimated lump sum 5% disallowance on Telephone expenses (Rs.70,825/-), petrol expenses (Rs.48,610/-) and diesel expenses (Rs.21,93,423/-) and directed the Assessing Officer to restrict the disallowance to 5% of ₹ 23,12,858/- [(Rs.70,825/- ) + (Rs.48,610/-) + (Rs.21,93,423/-) = 23,12,858/-]. This reasoned finding of CIT(A) need no interference from our side - Decided against revenue. Disallowance of agricultural income - AO after making inquiry from land records and from APMC gave the finding that assessee had inflated income from vegetables - Held that:- After considering the facts and circumstances of the case, CIT(A) found that Assessing Officer was too conservative to adopt income from sale vegetables at ₹ 24,200/-. Vegetables are grown from 0.59 Hector. Accordingly, he estimated the income from vegetable at ₹ 3,50,000/-. Under the facts and circumstances, CIT(A) directed the Assessing Officer to give relief of ₹ 3,50,000/-. This reasoned finding of CIT(A) needs no interference from our side - Decided against revenue.
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2015 (4) TMI 542
Addition on account of alleged advances to Shri Niranjan Shah out of undisclosed sources - whether CIT(A) erred in relying upon statement of assessee recorded by FEMA for drawing adverse inference without considering the fact that said statement in such transactions other than FEMA already stood reflected in his statement recorded by Income Tax Authorities - Held that:- In this particular case there are irrefutable evidences that not only the two parties were connected but admittedly entered into out of book transaction which even infringed against stringent laws like FERA. The transactions recorded in this account are held to be genuine and the appellant has failed to explain the same. The additions made by the AO on this issue, which are basically those confirmed by the then CIT(A) in the year 2000 on the issue. I agree and confirm the decisions made by him on the issue of the date and the sequence of the transactions and the working of required additions. The additions are therefore, confirmed in all the appeals. The evidence discussed i.e. the entries appearing in the seized documents coupled with the statements of the noticees, as well as other persons whose names are figuring in the documents seized, from Sh. Niranjan Shah as well as the admissions made by the notices, (other than Sh. Niranjan Shah) it is satisfying that the charges levelled against S/ Sh. Niranjan Shah, J.K. Doshi, Parag Kumar Pal, Nikhil R. Parikh and Sh, Nirish Babulat Shah as alleged in the SCN are proved and find them guilty of the said contraventions. S/Sh. j.k. Doshi, Parag Kumar Pal, Bhavnagari, Nikhil R. Parikh and Nirish Babulal Shah have submitted that they had entered into the transactions alleged in the SCN due to the circumstances beyond their control. While imposing penalties on these noticees, considering the fact that they had no deliberate intention to defy the law, but had undertaken the aforesaid transactions without any malafides, due to the exigency of the circumstance, the penalty of ₹ 4,50,000/- (Rs. Four Lacs and fifty thousand only) Imposed on Sh. Niranjan Shah, ₹ 90,000/- (Rs, Ninety thousand only) imposed on Sh. J.K. Doshi, ₹ 8,500/- (Rs. Eight thousand five hundred only) imposed on Sh. Parag Kumar Pal B, ₹ 1,500/- (Rs. One thousand five hundred only) imposed on Sh. Nikhil R. Parikh and ₹ 10.000/-(Rs.Ten Thousand only) imposed on Sh. Nirish Babulal Shah should be deposited in the office of the Enforcement Directorate at Mittal Chambers, 2nd Floor, Nariman Point, Mumbai 21 either by Demand Draft or Pay Order drawn in favour of the Drawing & Disbursing Officer within forty five days from the date of receipt of this order. According to us, FEMA proceeding has a bearing on the issue and latest position of same should be known. So, in view of submission of both parties and in the interest of justice, we restore whole issue to Assessing Officer with direction to decide the issue at hand as per fact and law and in light of subsequent development as discussed above, of course, after providing due opportunity of being heard to the assessee. Since we are restoring the issue on preliminary ground and on for the reasons discussed above, we are refraining to comment on merit at hand. - Decided in favour of assessee for statistical purposes.
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2015 (4) TMI 541
Net profit estimation - CIT(A) reducing the estimated profit of ₹ 28,84,038/- at 12.5% on a turnover of ₹ 2,30,72,304/- to 5% on turnover of ₹ 2,14,74,304/- to ₹ 10,63,715/- and to take working capital at ₹ 2,50,000/- and addition reduced to ₹ 19,95,196/- which includes unexplained expenditure of ₹ 7,21,233/- being profit from business - rejection of books of accounts - Held that:- Assessee was carrying on business of sweet and namkeen. During the year under consideration there was survey at the business premises of the assessee in which it was found that assessee was not maintaining proper books of account. It was found that assessee was having bank account which were not disclosed in the return of income. It was also found that the assessee has taken some loan which was repaid, however, the amount repaid was not disclosed in the books of account in the return filed with the department. Accordingly, by rejecting books of account, the AO computed the income by applying estimated net profit rate as well as made addition in respect of amount deposited in bank as well as repayment of loan effected during the year. The CIT(A) appreciated each observation of the AO and after giving detailed finding confirmed the action of the AO for rejection of the account. On the basis of observation made by the AO in its order vis-à-vis details of account submitted along with the return of income the CIT(A) found that total sale of the assessee was ₹ 2,12,72,304/-. After applying net profit rate on total sales, the net profit was worked out at ₹ 10,63,615/-. The CIT(A) also worked out working capital requirement at Thane Shop at ₹ 2,50,000/- on the basis of 15 days cycle in procurement of raw material and sale of products. The CIT(A) also made separate addition of ₹ 4,75,616/- in respect of payment made to India Bulls from whom assessee has taken loan. The addition was also confirmed on account of payment made towards the credit card. Thus, the total addition of ₹ 7,21,233/- was made u/s.69C. In sum and substance, out of total addition of ₹ 36,06,744/- made by the AO, the CIT(A) upheld the addition of ₹ 19,95,196/-. Detailed findings recorded by CIT(A) have not been controverted by department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the finding recorded by CIT(A) resulting into part deletion of addition made by AO. Under Rule 27 of ITAT Rules, ld. AR raised a ground to the effect that amount paid to India Bulls loan amounting to ₹ 4,75,616/- was out of sale proceeds on which profit has already been estimated and addition has been made, therefore, the CIT(A) was not justified for making separate addition of ₹ 4,75,616/- on account of unexplained payments. We found that neither the assessee filed any appeal nor any cross objection and under Rule 27, assessee can raise a plea which is in support of CIT(A)’s action. The ground taken by the assessee is not in support of CIT(A)’s action but amounts to separate ground for which neither assessee has filed any appeal nor any cross objection. Accordingly, we refrain from entertaining this ground and confirm the action of CIT(A) for making addition of ₹ 4,75,616/- on account of unexplained expenditure/payment. - Decided against revenue.
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2015 (4) TMI 540
Disallowance of processing charges paid to Shri Shivcharan Sharma - genuineness of expenditure - CIT(A) deleted the addition - Held that:- Assessee's products can not be manufactured without preparation of gum. Assessing Officer has brought nothing on record to suggest that any other person was paid for preparation of gum so as to negate the version of assessee to establish that Shri Shivcharan Sharma was not paid for preparation of gum. Moreover, assessee also filed affidavit of Shri Shivcharan Sharma, wherein it has been deposed that total amount of ₹ 11,73,477/- was paid to him and he has filed corresponding return of income accordingly. The contents of affidavit filed on behalf of Shri Shivcharan Sharma could not be rejected without confronting the contents of deposition to the deponent. Moreover, stand of assessee has been that payments were made by cheques and TDS was deducted thereon and payments were made subsequent to raising of bills by Shri Shivcharan Sharma. Under these facts and circumstances, AO was not justified in negating the claim of assessee. Once a certain claim has been accepted adverse to the interest of assessee, same can be retracted by way of deposition in affidavit and Assessing Officer ought to have made further inquiries in respect of same. Without making further inquiries, contents of affidavit should not be rejected. In case before us, once statement was retracted by Shri Shivcharan Sharma by filing an affidavit, burden was upon revenue to establish that statement given earlier was correct. The evidence has been submitted by way of bills for purchase of gum, process of preparation of gum, bills for preparation of gum paid to Shri Shivcharan Sharma. Payment being made by cheque and making deduction thereon and finally, filing the return of income by Shri Shivcharan Sharma. All these evidences lead to conclude that above expenses were debited by assessee. Accordingly, CIT(A) was justified in deleting the addition - Decided in favour of assessee. Disallowance of production incentives - CIT(A) deleted the addition - Held that:- It is evident from the assessment order that only one of the workers i.e. Jat Rampratap Chokaram has stated that he has not received production incentives, while other two have stated regarding themselves that they have not received more than stated above. So, it cannot be presumed that this one worker Jat Rampratap Chokaram was speaking on behalf of all other workers. There is no denial of the Fact that production incentives have been allowed in earlier year even when the papers were scrutinized as is evident from assessment order for Assessment Year 2003- 04. In view of above facts, it is a case where production incentives in case of above three workers who have denied to receive production incentives was liable to be disallowed and not for other workers. Assessee himself has staled that production incentives were not paid to three of them and also not claimed. Accordingly, Assessing Officer was not justified in making addition on account of rejecting production incentives to all and same was rightly directed to be deleted by CIT(A). This reasoned factual finding of CIT(A) needs no interference from our side.- Decided in favour of assessee.
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2015 (4) TMI 539
Suppression of profit - client code modification by the brokers in a large number of commodity transactions - CIT(A) deleted the addition - Held that:- All transactions at the Commodities Exchanges have been duly accounted in the books of account maintained by the concerned parties. Such profits/loss has been duly accounted whenever the transactions have been closed. Thus, whatever profits have been generated or accounting of actual trade, have been offered and brought to the charge of tax in the cases of concerned assessees." These findings of fact recorded by the ld. CIT(A) has not been controverted by the Revenue at the time of hearing before us. When the transaction has been duly accounted for and the profit/loss has accrued to the concerned parties in whose names transactions have been closed, there cannot be any basis or justification for considering those profit/loss in the case of the assessee on the basis of mere presumption or suspicion. It is not the case of the Revenue that such alleged profit has actually been received by the assessee. In view of the totality of the above facts, we do not find any justification to interfere with the order of the CIT(A) in this regard and the same is sustained - Decided against revenue. Addition in respect of the income disclosed by the assessee at the time of search - Held that:- In the case of Kailashben Manharlal Chokshi (2008 (9) TMI 525 - GUJARAT HIGH COURT), it was noticed that when during the course of assessment proceedings the assessee has given the proper explanation for investment in various properties, the addition cannot be made on the basis of statement made at odd hours. Similarly, in the case of Ratan Corporation (2005 (3) TMI 748 - GUJARAT HIGH COURT), reiterated that when the statement made during the course of search has been retracted, then it is duty of the Assessing Officer to make further inquiries. Similar view is expressed by their Lordships of Hon'ble Jurisdictional High Court in the case of Radhe Associates (2013 (8) TMI 247 - GUJARAT HIGH COURT), wherein the Assessing Officer has made the addition by mentioning that there were clinching documentary evidences with respect to receipt of on-money. However, these clinching documentary evidences were not specified. In the case under appeal before us also, we find that the officer recording the statement of Shri Nayan Thakkar has mentioned that various defects and discrepancies have been observed from the papers and documents seized from the assessee's premises. However, any defects or discrepancies were not specified. - Decided against revenue.
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2015 (4) TMI 538
Disallowance of finance charges by invoking the provisions of section 40a(ia) - no outstanding balance as on the last day of the FY - Held that:- if the relevant expenditure is found to have been paid within the relevant previous year, no disallowance under section 40a(ia) can be made on the ground that tax at source has not been deducted by the assessee from the payment of the said expenditure. In the present case, the expenditure in question on account of finance charges was fully paid by the assessee in the year under consideration as clearly noted by the A.O. in his order and we, therefore, hold following the decision of Coordinate Bench of this Tribunal in the case of S.S. Net Works (2015 (2) TMI 532 - ITAT HYDERABAD), that no disallowance under section 40a(ia) can be made, on account of such finance charges as the same were fully paid. - Decided in favour of assessee. Disallowance on account of unverifiable purchases of Chennai branch of the assessee company - CIT(A) estimating the income of the assessee from the business of trading in sale of products by applying the net profit rate of 0.7% of sales - assesee contended that the relevant invoices and other details could not be furnished by the assessee during the course of assessment proceedings as proper and sufficient time was not allowed by the A.O. to do so - Held that:- all these details and documentary evidence in the form of invoices are duly maintained by the assessee. Keeping in view of this submission made by the Ld. Counsel for the assessee, we are of the view that it would be fair and proper and in the interest of justice, to restore this matter to the file of the A.O. for giving one more opportunity to the assessee to produce the relevant invoices and other details in order to support its claim of purchases made by Chennai branch and even the learned D.R. has not raised any objection in this regard. - Decided in favour of assessee for statistical purposes. Disallowance made on account of expenditure claimed by assessee towards salary, wages and bonus, we find that the said disallowance made by the A.O. on adhoc basis is not sustainable. The nature of this expenditure claimed by the assessee is such that the same is not likely to vary with the turnover and merely because there was drastic reduction in the turnover of the assessee in the year under consideration, it cannot follow that there has to be a proportionate reduction in the expenditure claimed on account of salary, wages and bonus. This expenditure is substantially in the nature of fixed expenditure and the disallowance made by the A.O. on adhoc basis without pointing out any other specific instance of unverifiable element involved in the expenditure claimed by the assessee, in our opinion, is not well founded. We, therefore, direct the A.O. to delete the same. - Decided in favour of assessee. Adition made on account of non- disclosure of opening stock to the A.O. - Held that:- submissions made by the assessee clearly shows that the decrease in stock was duly shown by the assessee in the expenditure side of the P & L account. It appears that this method of presentation adopted by the assessee was not appreciated by the A.O. in proper perspective. When the difference in opening and closing stock was duly reflected in the P & L account of the assessee as increase or decrease in stock, the value of opening and closing stock was duly taken into account while determining the profit and loss of the relevant period and this aspect was very much clarified by the assessee in the written submissions filed before the Ld. CIT(A). The value of closing stock as on 31st March, 2008 thus was duly brought forward by the assessee as opening stock for the year under consideration and there was no case of making any addition on this issue as done by the A.O. presuming that the opening stock was sold by the assessee outside the books of accounts - Decided against revenue.
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Customs
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2015 (4) TMI 562
Denial of exemption claim - import of hot mix plant or only parts notification dated 1.3.2001 - exemption from payment of customs duty and additional duty leviable under the Customs Tariff Act - imports to be made by a Joint Venture Company and not by one of the partners of the said company - Held that:- both authorities have relied upon statements made by none other than the Vice President of the Appellant who after retracting a statement made on 3.1.2002 has made a subsequent statement on 21.2.2002 admitting that the imported goods were only components and had not attained the essential characteristics of a plant. The subsequent statement has not been retracted - statements made to an Officer of Customs are admissible in evidence under Section 108 of the Customs Act, 1962 - unretracted statements made by none other than the Vice President of the appellant company, representatives of Marshalls, and a representative of National Highways Authority of India, having never been retracted later, were made voluntarily. Reliance on the said statements, therefore, by the authorities below cannot be said to be unwarranted in law. It is clear that on a holistic reading of the letter what has been imported is "the basic character" of the hot mix plant and not a complete plant as it is clear that what is manufactured indigenously would alone ultimately complete the plant. - Equally the letter dated 20.1.2002 being a letter by the National Highways Authority of India does not take us much further. In fact, as has been pointed out above, Shri M.V.N. Rao of the said authority candidly admitted that a complete plant had not been imported and that the imported components did not have the essential characteristics of the hot mix plant in question. In the present case, both the oral evidence and the documentary evidence ultimately lead to the same conclusion: namely, that what was imported was not a hot mix plant that was complete in itself. - CESTAT has already given the appellant considerable relief. The redemption fine of ₹ 5,00,000/- imposed by the Commissioner was reduced to a fine of ₹ 1,00,000/- and a penalty of ₹ 1,00,000/- imposed by the appellant has also been set aside. In the circumstances, the appeal is dismissed with costs of ₹ 1,00,000 - Decided against assessee.
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2015 (4) TMI 561
Import of Nylon Filament Yarn - Denial of Exemption form CVD under Notification No. 6/2002-CE dated 01.03.2002 - denial on the ground that cenvat credit was availed - whereas it was not possible to avail the credit - Held that:- the CEGAT has come to the conclusion that when the credit under the CENVAT Rules is not admissible to the appellant, question of fulfilling the aforesaid condition does not arise. In holding so, it followed the judgment of the Bombay High Court in the case of Ashok Traders v. Union of India [1987 (10) TMI 53 - HIGH COURT OF JUDICATURE AT BOMBAY], wherein the Bombay High Court had held that "it is impossible to imagine a case where in respect of raw nephtha used in HDPE in the foreign country, Central Excise duty leviable under the Indian Law can be levied or paid." Thus, the CEGAT found that only those conditions could be satisfied which were possible of satisfaction and the condition which was not possible of satisfaction had to be treated as not satisfied. - Following decision of Thermax Private Limited v. Collector of Customs (Bombay), New Customs House [1992 (8) TMI 156 - SUPREME COURT OF INDIA] and Hyderabad Industries Limited v. Union of India [1999 (5) TMI 29 - SUPREME COURT OF INDIA] and AIDEK Tourism Services Private Limited v. Commissioner of Customs, New Delhi [2015 (3) TMI 690 - SUPREME COURT] appellants were entitled to exemption from payment of CVD in terms of Notification No. 6/02 - Decided in favour of assessee.
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2015 (4) TMI 560
Confiscation of goods - Redemption fine - Classification of goods - Provisional assessment - antique goods - Held that:- When the goods were examined in the presence of the importer, the appellant-importer provided the information and the goods were segregated as "more than 100 years old" and "less than 100 years old". - appellant Sri. Farokh S. Todywala has clearly admitted that he is in the business of procuring the old coins and medals from collectors and these are put to auctions - From these evidences available on record, it is difficult to accept the plea that the goods merit classification under Chapter 71 or 74. Goods falling under these chapter are traded by dealers in these goods and are for use as such. They are not sold by numismatists of through auctions and they also do not have any historic or numismatic interests. Therefore, the classification of these goods under Chapter 71 or 74 based on the metal content is clearly ruled out. In any case, Chapter Note 3(p) to Chapter 71 and Chapter note to 74 clearly exclude these items from the scope and coverage of the articles falling under the said chapters. As regards goods which are less than 100 years old, they do not qualify as antiques because of the age factor and therefore, they would more appropriately fall under heading 97.05. As regards goods of age more than 100 years, only goods which are not covered under CTH 97.01 to 97.05 merit classification under CTH 97.06 as is clear from the HSN Explanatory Notes. - As per the statement of the appellant importer, the goods imported by him are old and used items and would be sold through auction to collectors who have numismatic or historic interest in collections. From these evidences available on record and the coverage of CTH 97.05 as given in the HSN explanatory notes, we are of the considered view that the goods imported by the appellant merit classification under CTH 97.05. - Since the goods falling under CTH 97.05 are restricted items, they need a licence for importation. In the present case, it is a fact on record that the appellant did not have the requisite licence and the goods are liable to confiscation under section 111(d) of the Customs Act. In view of this legal position, the confiscation and the option to redeem the goods on payment of fine ordered by the adjudicating authority cannot be faulted at all. The last issue is regarding the direction given in the impugned order to keep the assessments provisional since the value declared is notional and not the real transaction value. However, in the show cause notice issued to the appellant, there is no such proposal and the show cause notice specifically proposes to levy the goods to duty on a value of ₹ 9,62,713/- at the rate applicable to goods falling under CTH 9705. Thus, the direction to keep the assessment provisional is contrary to the proposal in the show cause notice and therefore, cannot be sustained and accordingly, we set aside the same. - Thus while we uphold the classification of the goods under CTH 9705 and the consequent confiscation with option for redemption and imposition of penalty, we set aside the direction to keep the assessment provisional on account of valuation - Decided partly in favour of assessee.
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2015 (4) TMI 559
Interest u/s 75A - delayed payment of duty drawback claim - Maintainability of appeal - Held that:- No appeal shall lie to the Appellate Tribunal and the Appellate Tribunal shall no jurisdiction to decide any appeal in respect of any order passed by the Commissioner (Appeals), under Section 128 of the Customs Act, if such order relates to payment of draw-back as provided under Chapter X and the Rules made thereunder. It is noted that the appeal against the order of the Commissioner in respect of payment of drawback is appealable before the Appellate Tribunal - claim of interest against the payment of drawback was rejected by the Assistant Commissioner of Customs, which was upheld by the Commissioner (Appeals) and the appeal is filed before the Tribunal. On a plain reading of Section 75A of the said Act, it is clear that the payment of interest is arising from the drawback payable to a claimant under Section 74 or Section 75, which was not paid within the stipulated period. - Under Secretary (Drawback) had not fixed the brand rate of draw back. By Order of the Hon'ble Bombay High Court and the Hon'ble Supreme Court, the Commissioner fixed the value of brand rate of drawback and the payment of drawback was made to the appellants. Hence, the claim of interest is arising out of payment of drawback under Section 75 of the Act. In our considered view, in the present case, the payment of interest is related to the order of the Commissioner (Appeals), which was arising out of the drawback claim and therefore, the appeal is not maintainable before the Tribunal - Following decision of Mercury Exports & Manufacturing (P) Ltd. (2009 (4) TMI 629 - CESTAT, KOLKATA). - Appeal not maintainable - Decided against assessee.
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Corporate Laws
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2015 (4) TMI 558
Penalty for violation of regulation 29(1),29(2) & 29(3) of the SEBI SAST (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 - Violation of regulation 13(1),13(3) read with regulation 13(5) of the SEBI PIT (Prevention of Insider Trading) Regulations, 1992 - Delay in disclosures - Held that:- In the present case, appellant holding 4.71% shares of SRS received additional shares of SRS on account of amalgamation and it is not in dispute that on receiving those shares, the holding of appellant SRS exceeded the limit prescribed under SAST Regulations, 2011 and PIT Regulations, 1992. Admittedly, disclosures made to the Stock Exchange under regulation 29(1) and regulation 29(2) of SAST Regulations, 2011 were delayed by 120 and 128 days respectively. As noted earlier, penalty for violating regulation 29(1) at the rate of ₹ 1 lac per day would be more than ₹ 1 crore. Similarly, penalty for violating regulation 29(2) at the rate of ₹ 1 lac per day would be more than ₹ 1 crore. As against the above, after considering all mitigating factors, AO has imposed composite penalty of ₹ 4.5 lac which cannot be said to be excessive or unreasonable. Argument of appellant that the delay was unintentional and that the appellant has not gained from such delay and therefore penalty ought not to have been imposed is without any merit, because, firstly, penal liability arises as soon as provisions under the regulations are violated and that penal liability is neither dependent upon intention of parties nor gains accrued from such delay. Secondly, taking above factors as mitigating factors, AO has imposed penalty of ₹ 4.5 lac as against the liability of ₹ 1 crore each imposable for violations committed under regulation 29(1) and 29(2) of SAST Regulations 2011. Similarly, fact that additional shares were not received on account of any positive act on part of appellant is also untenable, because, liability to make disclosure arises once the shareholding of a person exceeds the limits prescribed under SAST Regulations, 2011 and PIT Regulations, 1992, irrespective of the mode and the manner of acquiring those shares. - Decided against the appellant.
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Service Tax
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2015 (4) TMI 577
Clearing and forwarding (C&F) Agent service - 'freight rebate' and 'primary freight rebate' - Held that:- With respect to 'freight rebate' and 'primary freight rebate' received by the Respondent we find that the same is received due to Respondent's investment in 125 wagons and is clearly arising out of their arrangement with Indian Railways. In fact, Indian Railways has issued a circular to this effect entitling Respondent to receive 22.5% of the freight amount as rebate to the Respondent. This amount has not become payable to the Respondent for having provided any service to ACC Ltd or its customers and certainly not for providing any clearing and forwarding agent's service - when the amount became due to the Respondent due to their arrangement with Indian Railways, it cannot be said that it is towards clearing and forwarding agent for Indian Railways. Merely because the amount is routed or received through ACC Ltd. or its customers, it cannot be linked with clearing and forwarding agent's service. Manner of routing the consideration cannot decide taxability of the transaction. Respondent has paid service tax on consideration received for providing clearing and forwarding agent's service under a separate contract with ACC Ltd or its client for this purpose. - Commissioner has rightly dropped the service tax demand on 'freight rebate' and 'primary freight rebate'. Amount received as facility charges is towards making available certain facilities such as special wagons, specialist equipment for the use of ACC Ltd. The appellant-assessee has not provided any service to receive facility charges but has only made available certain facilities or infrastructure for the use of ACC Ltd. The record of the proceedings before us do not show any material to the effect that the appellant-assessee was engaged in providing any service to entitle them to receive facility charges other than merely making available the specified facilities or equipment to ACC Ltd. We have perused the scope of clearing and forwarding agent's services as clarified in the CBEC Circular and it clearly does not suggest that the tax is to be levied as C&F service for making available any facility but is to be levied only on providing of specified C&F services in which clearing and handling of goods are involved. - consideration received for facility charges is not liable to service tax as clearing and forwarding agent's service - Decided against Revenue.
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2015 (4) TMI 576
Demand of service tax on import of services - Revenue neutrality - eligibility to avail Cenvat Credit - Business Support Services - Held that:- Appellant is covered as an exporter of services under the Export of Services Rules, 2005 and no services are provided by the appellant in India. It is observed from the case records that appellant has been getting refund claim from July 2006 onwards under Rule 5 of the Cenvat Credit Rules 2004. Any service tax payable by the appellant on reverse charge basis under Section 66 A of the Finance Act 1994 was also admissible as Cenvat Credit. As no services are provided by the appellant in India, therefore, the entire service tax so paid would have been admissible as Cenvat Credit and refundable to the appellant as per the provisions of Rule, 5 of the Cenvat Credit Rules, 2004. In the case of Commissioner of Central Excise Chandigarh Vs. Dharampal Satyapal [2008 (11) TMI 581 - CESTAT NEW DELHI] was relied upon the appellant. In this case appeal filed by the Revenue was rejected by holding that on the grounds that in a case of Revenue neutrality demand does not survive - service tax payable under Section 66A of the Finance Act 1994 was also admissible to the appellant as Cenvat Credit. As appellant is only an exporter of services and availing Cenvat Credit the same would have been admissible as refund under Rule 5 of the Cenvat Credit Rules 2004. It is Revenue neutral situation, therefore, demands are not sustainable on merits in view of the settled proposition of law. - Decided in favour of assessee.
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2015 (4) TMI 575
Cenvat Credit - Practicing Chartered Accountant service - Assessee provided taxable as well as non taxable service - Non maintenance of separate accounts - whether the appellant are required to pay 6% /8% of the value of exempted services under rule 6(3)(i) or they may be allowed to make the payment under Rule 6(3)(ii) - Held that:- No assessee would intentionally evade payment of ₹ 927/-. The appellant have pleaded ignorance about the new provisions and continued to restrict utilisation of CENVAT credit to the tune of 20% as per previous provisions of law. In any case Rule 6(3) only restricted availment of credit upto 20%. If did not make the credit lapse. Further, the restriction of 20% was removed from 01.04.2008. Therefore, I set aside the demand of ₹ 26,487/-. Levy of penalty - Held that:- the mens rea with definite intent to evade duty is not established - No penalty. Admissibility of CENVAT Credit on insurance, repair and maintenance of motor vehicles. - Commissioner appears to contradict his own statement. On the one hand he says the expenditure has been incurred from the firm's budget whereas on the other hand he comes to a conclusion that no documentary evidence showing use of vehicles for output services, has been produced. - it was never the allegation in the show-cause notice that the vehicles are not use for providing output services. The allegation in the show-cause notice is vague as is states that the insurance & maintenance of motor vehicle on which the Service Tax credit is availed appears to be not input services and therefore credit of the same is inadmissible as per provision of CENVAT credit Rules, 2004. The allegation in the show-cause notice is not definitive nor substantiated in any manner - CENVAT credit is admissible - Decided in favour of assessee.
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2015 (4) TMI 574
Interest claim on refund claim - Assessee demand interest after three months from the date of filing of refund claims till the date of refund claimed were paid to the appellant under Section 11B and Section 11BB of the Central Excise Act, 1944 which has been denied by the lower authorities - Held that:- Following decision of Ranbaxy Laboratories Limited vs. UOI [2011 (10) TMI 16 - Supreme Court of India] - appellant is entitled to interest after three months from the date of filing of refund claims to the date of payment of refund amounts, as the date of calculating interest does not get postponed by the favourable decision given by the higher appellate authority - Decided in favour of assessee.
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Central Excise
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2015 (4) TMI 569
MODVAT / Cenvat Credit - Capital goods - railway track material used for handling raw materials, processed goods - goods "in connection with" manufacture of or "in relation to" manufacture - Held that:- It follows from the bare reading of the Rule 57Q that for the purpose of allowing credit on specified duty paid on the capital goods, such capital goods are to be used by the manufacturer in his factory and are to be utilised for the purpose of manufacturing of final product. The explanation gives the meaning of 'capital goods'. As per clause (a) thereof, machines, machinery, plants, equipment, apparatus, tools or appliances which are used for producing or processing goods or in bringing about any change in any substance for the manufacture of final product are to be treated as "capital goods" - It is clear from the reading of the definition of capital goods that when machines, machinery, plants, equipment, etc., are used for producing or processing any good or bringing about any change in any substance for the manufacture of final product, it would qualify as 'capital goods' and MODVAT credit thereon would be permissible. In the process, the court also explained that there is no warrant for limiting the meaning of the expression "in the manufacture of goods" to the process of production of goods only. In the opinion of the court, the expression "in the manufacture" takes within its compass, all processes which are directly related to the actual production. It noted that goods intended as equipment for use in the manufacture of goods for sale are expressly made admissible for specification. The court further marked that drawing and photographic materials falling within the description of goods intended for use as "equipment" in the process of designing which is directly related to the actual production of goods and without which commercial production would be inexpedient must be regarded as goods intended for use "in the manufacture of goods". Order of the Commissioner that in spite of taking note of the aforesaid use of the railway tracks and accepting the same as correct, the Commissioner denied the relief to the appellant on an extraneous ground, i.e., railway tracks were used for other purposes as well, namely, apart from conveying hot metal and hot pigs, it was used for carrying raw materials and finished goods as well. This can hardly be a ground to deny the relief inasmuch as by incidental use of the railway tracks for some other innocuous purpose, it does not lose the character of being an integral part of the manufacturing process. The Commissioner has further observed in his order that the railway track is not utilised directly or indirectly for producing or processing of goods or bringing about any change for manufacture of final product. This conclusion, obviously, is completely erroneous and amounts to misreading of the process. Test laid down by this court in M/s. J. K. Cotton Spinning & Weaving Mills Co. Ltd.'s [1964 (10) TMI 2 - SUPREME COURT OF INDIA]. It is clear that the railway tracks are installed not only within the plant, but the main objective and purpose for which the capital expenditure on laying these railway tracks is incurred by the appellant is for transporting hot metal in ladle placed on ladle car from blast furnace to pig casting machine through ladle car where hot metal is poured into pig casting machine for manufacture of pig iron. It is clear from the above that the use of railway tracks inside the plant not only form the process of manufacturing, but it is inseparable and integral part of the said process inasmuch as without the activity for which railway tracks are used, there cannot be manufacturing of pig iron. - CEGAT has not even adverted to and examined the issue from the aforesaid angle, which was the only method for arriving at a finding as to whether the railway tracks installed within the plant would come within the definition of capital goods under Rule 57Q of the Rules or not. The order of the CEGAT is stoically silent. It has affirmed the order of the Commissioner by simply observing that the Commissioner has arrived at the conclusion that these goods are not being used directly or indirectly for producing or processing the goods or for bringing about any change for the manufacture of the final product. - we set aside the order of the Commissioner as well as of CEGAT insofar as it pertains to item "railway track material used for handling raw materials, process goods" and hold that the appellant has rightfully claimed for MODVAT credit in respect of this item which credit is wrongly reversed by the authorities below - Decided in favour of assessee.
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2015 (4) TMI 568
Benefit of exemption from payment of central excise duty to factories in North Eastern States vide Notifications viz. Notification No.32/99-CE and Notification No.33/99-CE both dated 8.7.1999 - Held that:- No ambiguity in the language of the Notifications. The Notifications as well as C.B.E.C.'s clarifications relied upon by the appellants are very clear that in the case of existing manufacturing units, the date on which the capacity of the unit is enhanced, should be the relevant date in terms of Clause 3(b) of the Notifications. The date of commencement of commercial production is mentioned in Clause 3(a) of the Notification, is applicable to the new industrial units only. We also agree with the Commissioner (Appeals) that Clause (4) of the Notifications regarding commercial production applies only to new units. The appellants' unit is existing unit and the expansion was completed prior to 24.12.97 - Decided against assessee.
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2015 (4) TMI 567
Manufacture - Denial of exemption under Notification No.67/95-CE dated 16.3.1995 - assessee had cleared final product i.e. coated paper at nil rate of duty under Notification No.3/2001-CE dated 1.3.2001 - whether coating on uncoated paper, would amount to 'manufacture' - Held that:- Tribunal found that on coating uncoated paper, an article with different name commercially may have emerged but it is not a distinct article with different character or use and therefore no manufacturing process was involved when uncoated printing and writing paper is coated. - conclusion of Tribunal is legally sustainable and there is no error in the view taken by the Tribunal - Decided against Revenue.
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2015 (4) TMI 566
Clandestine removal of goods - documents particularly certain GRs became the basis of the issuance of the show cause notice - High Court remanded the case back to the CEGAT with the directions to hold the enquiry as to whether those GRs could be the basis of the demand - Held that:- High Court, no doubt, has remarked that the CEGAT did not look into the various documents which were produced by the respondent and did not record the statement of the consignors and consignees who had given the affidavit, etc. To this extent, the High Court may be justified. However, if the matter was not dealt with by the CEGAT affirmatively, without scrutiny of the relevant documents, the only option for the High Court was to remit the case back to the authorities below for fresh consideration in the light of documents filed by the respondent. On the contrary, the High Court proceeded to decide the issue on the premise that documents filed by the respondent are authentic and treating the case put forth by the respondent as gospel truth. That cannot be countenanced. - Matter remanded to Commissioner for fresh consideration - Decided in favour of Revenue.
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2015 (4) TMI 565
Penalty u/s 11AC - Violation of principle of natural justice - Opportunity of hearing not granted - Application of Section 33A - Held that:- Section 33A of the Act, 1944 and particularly the proviso to sub- Section(2) does not come into operation. Clearly, the petitioner had been denied his right under law to make his defence prior to the adjudication of the proceeding. We have no hesitation in coming to hold that rules of the natural justice have not been complied with and Section 33A (2) proviso of the Act, 1944 has been brought into play, without the necessary circumstances available in the present case to reach the said conclusion. It is clear that Section 33A of the Act, 1944 and particularly the proviso to sub- Section(2) does not come into operation. Clearly, the petitioner had been denied his right under law to make his defence prior to the adjudication of the proceeding. We have no hesitation in coming to hold that rules of the natural justice have not been complied with and Section 33A (2) proviso of the Act, 1944 has been brought into play, without the necessary circumstances available in the present case to reach the said conclusion. - Impugned order is set aside - Decided in favour of assessee.
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2015 (4) TMI 564
Waiver of pre deposit - Section 35F - assessee is a proprietary concern. After the death of the father, son is running the said concern - held that:- Though the substituted Section appears to be prospective in nature certainly the intention behind it cannot be ignored. The original proprietor is dead. His son is levied with these taxes. He is not carrying on any business. Under these circumstances justice of the case would be met by depositing 50% instead of the entire amount as directed by the Tribunal. - Decided partly in favour of assessee.
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2015 (4) TMI 563
Classification of goods - Classification of motor vehicle model Nos. Commander 750 DP (10 Seater), Commander 650 DI (10 Seater) and Commander 750 DP (ST) - Classification under tariff heading 87.03 or under tariff heading 87.02 - whether the classification sought to be made under Tariff Heading 87.03 in Order-in-original No. 50 to 87/Commr (AH)/05 dated 30-3-2005 passed by the commissioner of Central Excise (Adjudication), Mumbai, can be sustained or not - Held that:- there were specifications stipulated in the Statute as to the dimensions of the seating space as also the gross vehicle weight and gross axle weight. These specifications have been provided in the statute not only for the sake of passenger comfort but also for the safety of the passengers travelling in the vehicle. Therefore, when the classification of vehicle is made based on the seating capacity of passengers, the statutorily stipulated specifications and norms have to be complied with. Viewed from this perspective, there is merit in the argument that these specifications should be tested/examined by the competent authorities before a vehicle can be categorised as a 10 seater or 11 seater, etc. From the documents available on record, it is seen that the various certificates given by the road transport authorities or by ARAI, are merely based on the declarations made by the appellant and not on the basis of any objective data specified in any industry standards or statutory provisions governing motor vehicles and therefore, these certificates do not inspire any confidence as regards their acceptance and not much reliance can be placed on them. From the various statements recorded from the officials of the appellant firm, it prima facie appears that attempts have been made by the appellant to project their vehicle as belonging to a particular type so that their excise duty liability can be minimized. - once classification list has been approved, the excise authorities can take a different view. It is not merely the weight of the passenger but also that of the cargo permitted to be carried that is relevant in determination of the gross vehicular weight. Hence, the argument that only the weight of the persons needs to be taken into account for determining payload and not that of the personal belonging/cargo, is not prima facie convincing. As per the technical literature published in various web-sites, another important feature in vehicle design is the wheel base (the difference between the front and rear wheels) as it impacts weight distribution and aerodynamics of the vehicle. The components that decide the wheelbase are also the major masses in the car (driver, engine, gearbox, etc.) and by placing these strategically along the wheelbase, a more forward or rearward weight bias can be achieved. Thus the dimensions of the wheel base directly impacts the axle weight. - Matter reamanded back - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (4) TMI 573
Compounding of offence - Clubbing of proceedings for same assessment period - Sales made through credit card - Held that:- From a plain reading of the Section 82, it would be clear that finality is to be given only to such proceedings which relate to compounding of offences. The reassessment proceedings, which may be for the same assessment periods, would be independent proceedings and could not be clubbed with the proceedings for compounding of offences. In the present case, the proceedings for compounding were concluded on the basis of the inspection carried out on 31.01.2008. The same had become final and could not be subjected to any appeal. Once the Department had thereafter initiated reassessment proceedings, the same being independent of the proceedings for compounding of offences, the appellant-assessee would always have a right to challenge such reassessment order on merits. - conclusion of the revisional proceedings by holding that the appeal against reassessment order was not maintainable by virtue of Section 82(3)(c) of the KVAT Act, cannot be justified in law. We are of the clear opinion that the respondent-revisional authority ought to have decided the matter on merits and in accordance with law, after considering the reply of the appellant and giving opportunity of hearing to the appellant. - Matter remanded back - Decided in favour of assessee.
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2015 (4) TMI 572
Violation of section 76(6) of VAT Act - penalty @ 30% of the value - Declaration found to be blank - Held that:- Admittedly VAT-47 was found absolutely blank except seal of the petitioner's firm, therefore, the judgment of the Hon'ble Apex Court in the case of M/s Guljag Industries (2007 (8) TMI 344 - SUPREME Court) is squarely applicable to the facts of the present case wherein the Hon'ble Apex Court has come to conclusion that if the material particulars in Form ST-18A, are found unfilled or left blank then for all practical purposes, there is no declaration form and the revenue was justified in imposing penalty, despite of the fact that vehicle was having other documents like bills, vouchers & builty etc.- Admittedly, in the present case the VAT-47 has been found totally blank except the seal of the petitioner, therefore, in my view, the Tax Board was well justified in holding the penalty leviable by the assessing officer. Declaration Form VAT-47 and declaration form ST-18A are at par. - goods of the assessee can be said to be still in transit though reached destination as only part of goods were unloaded, if the goods have reached destination it does not mean that movement of goods had come to an end. - goods of the assessee can be said to be still in transit though reached destination as only part of goods were unloaded, if the goods have reached destination it does not mean that movement of goods had come to an end. - The goods were still in the vehicle though may be partly unloaded that does not mean that goods had been delivered to consignee - No infirmity in impugned order - Decided in favour of assessee.
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2015 (4) TMI 571
Levy of tax on public sector undertaking - scope and ambit of Section 25(5) - whether a public sector undertaking which does not deposit tax at the requisite rate can escape levy of interest by alleging a bona fide error - Held that:- A perusal of Section 25(5) of the Act reveals that where an assessee defaults in payment of the requisite tax, payment of interest is a necessary consequence of such a default. Section 25(5) of the Act does not admit to any exception much less on a plea that the assessee is a public sector undertaking or that it committed a bona fide error. Even otherwise the assessee does not deny the default. We cannot but reject the plea based upon a bona fide error as there is no ambiguity in the notification. The failure to deposit tax was the result of gross negligence that cannot be condoned. - Where an assessee, whether a public sector undertaking or otherwise, defaults in payment of tax without a bona fide explanation or there is no dispute pending as to the levy of tax, a necessary consequence of such default shall in levy of interest under Section 25(5) of the Act. - Decided against assessee.
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2015 (4) TMI 570
Levy of value added tax (VAT) from main contractor where as works contract was executed by the Sub contractor - demand of tax on the amount retained as profit by the main contractor - Refund claim of tax already paid - Held that:- When the petitioner had sub contracted the entire work and also obtained the Form 20H certificate from the sub contractor who undertook to discharge the tax liability in respect of the entire work that was sub contracted, the amounts retained by the petitioner, from out of payments made by the awarder of the contract, represented only the profit element that accrued to the petitioner in his capacity as the main contractor. - In fact the very demand against the petitioner is only on the amount of ₹ 45,92,762.90 that was retained by him towards profit under the transaction with the awarder of the contract. In that view of the matter, there was no liability on the petitioner in terms of the Kerala Value Added Tax Act since there was no sale of material in the course of execution of works contract that emanated from the petitioner to the awarder of the contract. In the absence of any taxable event under the Kerala Value Added Tax Act, the respondent could not have demanded tax on the amounts retained by the petitioner as profits arising out of the transaction in question - Decided in favour of assessee.
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