Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 20, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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TDS on amount paid through agent - Short deduction of TDS on the payment to agent - Once the payment is made through the agent to the third party against the services provided by the third party, the assessee is liable to deduct tax on such payment or to ensure the TDS through the agent - AT
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Penalty u/s 271(1)(c) - there was no doubt on the issue that even when there is increase in the capital for the business of the company then also the expenditure would be capital in nature - penalty confirmed for wrong claim as revenue expenditure - AT
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Addition made u/s.68 - assessment u/s.153A - The initial burden is upon the Revenue under section 153A to prove that there is an incriminating material which shows that the claim made by the assessee in its original return was not correct. - AT
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Disallowance on account of loss due to flood - It is not in dispute that loss has occurred during the year under consideration, however the dispute is that the loss and quantification thereof are not ascertainable in the year under consideration. - claim of loss allowed - AT
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Income from house property - Deduction of Interest paid on security deposit received from the tenants - these interest bearing deposits has been utilized for repayment of borrowed capital - deduction allowed - AT
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Loss of Advance given to procure land for future projects - the amount in question was advanced by the assessee for purchase of land which would be going to form part of stock in trade of the assessee being in the business of construction and development - allowed as revenue expenditure u/s 37(1) - AT
Customs
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Imposition of redemption fine - goods were received in excess of the quantity specified in the documents, without the knowledge of the appellant - redemption fine and penalty are imposable - AT
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Misuse of advance licences - appellant has no manufacturing facilities for that part of the period. - goods manufactured through their job worker - matter needs to be verified again - AT
Service Tax
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Denial of CENVAT Credit - Appellant will not be entitled for Cenvat credit of service tax paid on Marine Insurance Policies taken in respect of the tugs and barges or materials brought in a ship or in respect of life or health or medi-claim insurance of the employees/families. - AT
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Penalty u/s 77 for non appearance to summons - penalty of ₹ 200 per day is not in the nature of mandatory. Therefore it is discretion of the officer to reduce the penalty depending upon the nature of the case. - AT
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Construction Services - It is difficult to imagine a hydro power project without a dam. Once again, this is also arguable and prima facie view is in favour of appellant since appellant is not treating the contract as a composite contract. - AT
Central Excise
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Classification - manufacture of Milk N Nut - Classification under Chapter Heading 2001.10 or Chapter Heading 1704.90 - product in question is vegetable preparation and is not sugar confectionery - SC
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Extended period of limitation - suppression of facts - when the fact of the issue came to the notice of the Department in January, 2001, subsequent to that it cannot be said that there was suppression on the part of the appellant - but demand prior to January 2001 confirmed - AT
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Valuation of goods - sale of goods through depot - in terms of Rule 7, in case goods not sold from the factory but transferred to the depot the price prevailing at depot at the time of removal of the goods from the factory shall apply as transaction value. - AT
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Denial of remission of duty - Goods lost in fire - appellant has taken Cenvat Credit correctly and there is also no provision in the Cenvat Credit Rules to reverse proportionately Cenvat Credit on capital goods which was lost in fire or were not used - AT
VAT
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Refund - retrospective exemption - though it states that any amount deposited will not be refundable but, when no amount was legally payable on the basis of retrospective amendment than no amount was “payable” and if amount paid than in terms of the aforesaid notification the amount cannot be retained and thus has to be refunded- HC
Case Laws:
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Income Tax
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2015 (4) TMI 617
Penalty u/s 158BFA - Search conducted u/s 132 - unexplained cash receipts - Held that:- mere fact that an addition has been confirmed in the Tribunal per se cannot be a ground for imposing or sustaining penalty u/s 158BFA. Since the assessment and penalty proceedings are different and independent of each other, it is open to the assessee to make out a case that even if addition has been confirmed in quantum proceedings, but it cannot be a good reason to impose penalty. - Admittedly Awin Exim Co. offered ₹ 15 lakh, which did not co-relate to any incriminating material and that assessee owed page no.2 of Annexure-A4 by claiming to be pertaiing to it. It is a strong reason to conclude that no penalty should be imposed in the hands of the assessee because the amount has already been offered and assessed in the hands of the sister concern. - CIT(A) was fully justified in ordering the deletion of penalty u/s 158BFA(2). - Decided against Revenue.
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2015 (4) TMI 616
Disallowance u/s 40(a)(ia) - Non deduction of TDS - amount was not payable at the end of year - Held that:- orders of the Calcutta High Court [2013 (5) TMI 510 - CALCUTTA HIGH COURT] and the Gujarat High Court [2013 (5) TMI 457 - GUJARAT HIGH COURT] are against the assessee. In such circumstances, the rule of Judicial Precedence demands that the view favourable to the assessee must be adopted, as held by the Hon’ble Supreme Court in the case of CIT vs. Vegeta ble Products Ltd., [1973 (1) TMI 1 - SUPREME Court]. Following the fundamental rule declared by the Hon’ble Supreme Court, we have to follow the judgment of the Hon’ble Allahabad High Court, which is in favour of the assessee. Accordingly, we hold that the disallowance under section 40(a)(ia) applies only to those amounts ‘payable’ and not to those amounts ‘paid’. Accordingly, we uphold the order of the Commissioner of Income- tax(Appeals) in the present case. The appeal filed by the Revenue is liable to be dismissed. - Decided against Revenue.
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2015 (4) TMI 597
Non deduction of TDS on the payment for supply of batteries - Held that:- In the instant case, the first and foremost thing is that the appellant has entered into a contract / agreement with vendors for purchase of Kodak batteries. It has not entered into a works contract at 'all. Further, the appellant has not supplied any raw material to the manufacturer. The manufacturing activities has been carried out by the manufacturer in its factory Only the printing name Kodak on batteries and also manufacturing with certain specifications does not convert the sale contract into works contract. The manufacturer also pay sales tax / VAT on such sales. The property in the goods and the delivery of the possession is given to the appellant at the ultimate point of sale. In view of the facts, and the CBDT's circulars as well as judicial decisions on this issue, I am of the view that the action of the Assessing Officer was not justified entreating the purchase / sales contract as contract for works u/s.194-C Therefore, the transaction between the appellant and vendors is being treated as 'sales transaction’ or a ‘contract for sale’., which will not fall under the provisions of sec. 194C of the IT Act, and therefore, the demand raised by the Assessing Officer is deleted. From the facts as recorded by the CIT(A), it is clear that the agreement between the assessee and Powercell Batteries India Ltd is not job work agreement but it was simply an agreement of purchase for specific battery with the name of the assessee printed on the cell. An identical issue was considered by the Hon'ble Jurisdictional High Court in case of CIT Vs. Glenmark Pharmaceuticals Ltd [2010 (3) TMI 289 - BOMBAY HIGH COURT] - Decided in favour of assessee. Non deduction of tax in respect of payment made on supply of Cameras manufactured by Hical Magnetic Pvt. Ltd. - Held that:- activity of Hical Magnetic Pvt. Ltd. do not have financial risk and working capital risk as it was all provided by the assessee. Even the procurement of the raw material is also arranged by the assessee as per the tripartite agreement. Thus it is nothing but a job work contract under these two agreements. Further the assessee is paying the entire cost in advance being working capital and compensation with the margin on cost of raw material and labor at the rate of ₹ 8.04 per Camera to Hical which is nothing but the job work charges. The price arrangement as agreed between the parties clearly shows that it is a job work of assembling of cameras by Hical Magnetic Pvt. Ltd. The Hical Magnetic Pvt. Ltd. in fact, receiving only the labor charges and mark up of ₹ 8.04 per camera which is subjected to TDS being job work charges paid by assessee. Therefore, it is not the entire payment to the Hical Magnetic Pvt. Ltd. but only the labor charges of ₹ 20.84 and margin of ₹ 8.04 total amounting to ₹ 28.88 per camera towards the assembling job is subjected to TDS. Accordingly, we set aside the impugned order of CIT(A) on this issue and restore the order of Assessing Officer to the extent of applicability of section 194C only on the payment of ₹ 28.88 per camera. The decision relied upon by the CIT(A) in the case of CIT Vs. Glenmark Pharmaceuticals (supra) is not relevant on the facts of this issue when the arrangement is found to be work contract. - Decided against assessee. Short deduction of TDS on the payment to agent - Held that:- Once the payment is made through the agent to the third party against the services provided by the third party, the assessee is liable to deduct tax on such payment or to ensure the TDS through the agent. There is no denial of the fact that these payments were not subjected to TDS either by the assessee or by the agent. Failure to deduct tax for such payment at any stage either by the agent or by the assessee would attract the provisions of section 201(1) and 201(1A). If this modus operandi is allowed then in each and every payment which otherwise attracts the TDS can be given a colour of reimbursement of making the payment through intermediatory and consequently circumvent the provisions of TDS. The real fact is that the payment is made for and on behalf of the assessee by the agent and, therefore, the same would be considered as payment made by the assessee to the third party for the purpose of TDS provisions under chapter XVII of the Act. Thus we set aside the order of CIT(A) and restore the order of Assessing Officer on this issue. - Decided against assessee.
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2015 (4) TMI 596
Penalty u/s 271 (1)(c) - Expenditure incurred on filing fee - ROC which was with respect to increase in authorized share capital of the assessee company disallowed - Held that:- To claim that such expenditure is allowable, assessee is relying upon the commentary of Iyengar’s Law of Income Tax 11th Edition, but a clear reading of the aforementioned commentary will reveal that no specific view has been formed by the Apex Court in the case of Brooke Bond Indian Ltd Vs. CIT (1997 (2) TMI 11 - SUPREME Court) regarding allowability of such claim that if there is increase in working funds then such expenditure could be allowed. However, in the case of Punjab State Industrial Development Corporation Ltd. Vs. CIT (1996 (12) TMI 6 - SUPREME Court), this issue has been considered and it has been observed that the fee paid to Registrar for expansion of capital base of the company was directly related to the capital expenditure incurred by company and although incidentally that would certainly help in business of company and may also help in profit making, it still retains the character of capital expenditure, since the expenditure was directly related to the expansion of capital base of the company. Thus, there was no doubt on the issue that even when there is increase in the capital for the business of the company then also the expenditure would be capital in nature and cannot be claimed as revenue expenditure. Therefore, clear-cut law has been laid down by Hon’ble Apex Court that such expenditure cannot be claimed as revenue expenditure. Thus when prima facie, a wrong claim is made, which is not only against two decisions of Apex Court i.e. in the cases of Brooke Bond India Ltd. (supra) and Punjab State Industrial Corporation Ltd. (supra), but also against the decision of Hon’ble Delhi High Court in the case of CIT Vs. Hindustan Insecticides (2001 (2) TMI 75 - DELHI High Court) then it will be a case of claiming expenditure, which is not permissible in law and assessee’s explanation cannot be considered to be bona fide or substantiated. CIT(A) did not commit any error in sustaining the concealment penalty. - Decided against assessee.
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2015 (4) TMI 595
Addition made u/s.68 - assessment u/s.153A - Held that:- A perusal of the impugned order reveals that the additions have been made pursuance to assessment proceedings under section 153A of the Act merely on the basis of assumptions and presumptions holding that the assessee had failed to discharge the burden relating to genuineness of gifts. We may point out here that the present proceedings were not the original assessment proceedings under section 143(3) of the Act where the initial burden was upon the assessee to prove the genuineness of the transaction. In the proceedings under section 153A, there must be some incriminating material indicating that the income of the assessee in the original assessment proceedings had escaped assessment. On the basis of that incriminating material, the assessment proceedings can be initiated under section 153A. The initial burden is upon the Revenue under section 153A to prove that there is an incriminating material which shows that the claim made by the assessee in its original return was not correct. Once there does not exist any such incriminating evidence, the additions on the basis of mere suspicion about the genuineness of the transactions cannot be held to be justifiable. Thus the assessment proceedings made under section 153A in this case are held to be bad in law and the same are set aside and the consequential additions made are also accordingly ordered to be deleted.
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2015 (4) TMI 594
Reopening of assessment - additions / disallowances to the returned incomes and also in assessing the income from lease rental receipts as income from house property’ as against ‘business income’ - Validity of Assumption of Jurisdiction - Held that:- As rightly pointed out by the learned Departmental Representative, the sanction and approval for assumption of jurisdiction was obtained by the Assessing Officer from the Addl. CIT and not from the CIT as contended by the assessee. This fact is very clear from the order sheet noting dt.13.3.2008 and also from the Assessing Officer’s letter dt.13.3.2008 addressed to the Addl. CIT for obtaining the approval for initiating proceedings under Section 147 of the Act. It is also clear from the order sheet noting dt.19.3.2008 that the Assessing Officer has obtained the approval of the Addl.CIT for initiation of reassessment proceedings, as is envisaged in the provisions of section 151(2) of the Act. We find that it is only after this approval, that the Assessing Officer issued notices under Section 148 of the Act on 20.3.2008. On an appreciation of the records of assessment placed before us for our perusal, we are of the considered opinion that proper sanction has been obtained by the Assessing Officer from the Addl. CIT as per the requirements of section 151(2) of the Act and that the correct procedure has been followed by the Assessing Officer in initiating and invoking proceedings under Section 147 of the Act. Decided against assessee. Orders of assessment passed under Section 144 r.w.s. 147 are not tenable in law as the assessee has given all the details called for - Held that:- As in the interest of equity and justice, the matter / issues with respect to whether the lease rental receipts received by the assessee from its tenants is to be treated and assessed as ‘business income’ as claimed by the assessee or as ‘income from house property’ as held by revenue, requires fresh consideration in the light of the observations in para 6 of the decision of the coordinate bench of this Tribunal in the assessee's own case for Assessment Year 2002-03. We, therefore, remit this matter to the file of the Assessing Officer for fresh consideration of this issue after affording the assessee adequate opportunity of being heard - Decided partly in favour of assessee for statistical purposes.
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2015 (4) TMI 593
Prescribed monetary limits for filing of appeal before ITAT - Whether, this appeal of revenue, which is below the prescribed limit of tax effect in view of the Board’s Instruction No.5/2014 issued on 10.07.2014 revising the monetary limits for filing of appeals by the Department before ITAT is maintainable or not? - Held that:- On query from the Bench, the Ld. DR could not point out any of the exceptions as provided in the Circular as that this is a loss case having tax effect more than the prescribed limit, which should be taken into account,or that this is a composite order for many assessment years where tax effect will be more than the prescribed limit as per para 5 of above instructions, or that this is a case, where, in the case of revenue, where constitutional validity of the provision of the Act or I.T. Rules 1962 are under challenge,or that Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or that Revenue Audit Objection in the case has been accepted by the Department and the same is under challenge. The Ld. DR could not point out any of the exceptions as provided above. Accordingly, this being a low tax effect case, the appeal of the revenue dismissed in limine without going into merits. - Decided against revenue.
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2015 (4) TMI 592
Disallowance on account of loss due to flood - CIT(A) allowed the claim - Held that:- The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. We find that the ld.CIT(A) has observed that the assessee followed the principle and signed in the notified accounting standards. Therefore, the assessee claimed loss due to flood, on mercantile basis in the year in which the said loss (liability) had arisen. We also find that the AO has disallowed the claim on the basis that the extent of damages due to flood was not ascertainable in the assessment year under consideration. It is not in dispute that loss has occurred during the year under consideration, however the dispute is that the loss and quantification thereof are not ascertainable in the year under consideration. We do not agree with this reasoning of AO in rejecting the claim in view of the principle laid down by the Hon'ble Apex Court in the case of Bharat Earth Movers vs. CIT [2000 (8) TMI 4 - SUPREME Court] - Decided against revenue. Disallowance u/s 14A - CIT(A) restricting the disallowance - Held that:- CIT(A) has given a finding that the assessee has been able to establish this fact from its account that no portion of interest bearing-funds were utilized by the applicant in making the aforesaid investments and, therefore, the applicant has not really incurred any direct expenditure for earning the exempt income. This finding of ld.CIT(A) has not been controverted by the Revenue by placing any material contrary. Therefore, we no reason to interfere with the order of the ld.CIT(A) on this issue, same is hereby upheld. In respect of disallowance to 0.5% of value of investments amounting to ₹ 42,423/-, the ld.CIT-DR submitted that the order of the ld.CIT(A) is justified on this ground. We find that the assessee has not challenged the finding of the ld.CIT(A) by filing a cross-objection, therefore this finding of ld.CIT(A) is not interfered - Decided partly in favour of revenue. Late delivery charges debited by the assessee disallowed - CIT(A) allowed the claim - Held that:- in this case, no remand report was sought for from the AO by the ld.CIT(A) before deleting the disallowance on the basis of evidence adduced by the assessee-company. The AO has categorically given a finding that no evidence was produced to prove that such late delivery charges have been crystallized during the year under consideration. We find that the ld.CIT(A) has also not given any finding as to what were the terms of agreement between the assessee and the customers. Thus we cannot approve the finding of the ld.CIT(A), therefore the order of the ld.CIT(A) on this issue is set aside and the issue is restored back to the file of ld.CIT(A) for decision afresh since the order passed by the ld.CIT(A) is not a speaking order - Decided in favour of revenue for statistical purposes. Disallowance u/s.40A(2)(a) - CIT(A) allowed the claim - Held that:- The GP Margin of the firm for FY 04-05 was 18.71% and also during the period from April-July, 2006 it was 18.80%. On a matching basis the GP Margins earned by the appellant company have also shown increasing trend, as they improved from 15.69% in FY 2003-04 to 18.95% in FY 2005-06. Further, the GP Margin earned by the firm in case of third party sales (unrelated parties) in the period from April-July 2006 is 18.65% - i.e. within comparable range vis-à-vis the overall GP Margin earned by the firm in the same period. By inference, it can be concluded that for related party sales also, the firm would have earned similar margin. The appellant has also explained by way of written submissions to the AO the commercial expediency for which it was incumbent on part of the firm to transfer large position of the semi-finished goods to the appellant company prior to the takeover date. Thus the addition made by the AO u/s.40(A)(2)(b) is correctly deleted. - Decided against revenue.
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2015 (4) TMI 591
Validity of reopening of assessment - significant change in the accounting policy regarding depreciation - Held that:- Following the decision of Hon'ble Jurisdictional High Court in Export Credit Guarantee Corporation of India Ltd Vs, Additional CIT [2013 (1) TMI 517 - BOMBAY HIGH COURT ] we hold that the reopening in this case is proper as the Assessing Officer has exercised the power conferred u/s 147 of fulfillment of requirements in the said section. On merits the assessee has not produced the requisite records and evidence to show the basis on which such a change in accounting policy was taken by the board of Directors. Even the resolution of board of Directors was not produced by the assessee either before the Assessing Officer or before us. Thus, the issue requires a proper verification and examination of the relevant facts and records. Accordingly, we set aside the issue on merits to the record of Assessing Officer for deciding afresh after verification and examination of relevant record. The assessee is directed to produce the evaluation report, board’s resolution as well as the approval of the board’s decision in the general body meeting in support of its claim that the change of method of depreciation as well as rate of depreciation is in conformity with the requirement of provisions of Companies Act as well as Accounting Standard. - Decided partly in favour of assessee for statistical purposes.
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2015 (4) TMI 590
Transfer pricing adjustment - assessment order passed u/s.143(3) r.w.s 144C(13) the AO made an adjustment in Arm’s length price in pursuance of order u/s 92CA(3) - selection of comparable - Held that:- The business of Cross Domain ranges from high end KPO services, development of product suits and routine low end ITES service as compared to the advisory and support services provided by assessee. Thus, we found it functionally different. Accordingly, we direct the AO/TPO to exclude M/s Cross Domain Solutions Limited from the list of comparables. Genesys International Corporation Ltd. company is not functionally comparable and it has a different employee skill set and also performs R&D services and also owns intangibles. Accordingly, we direct the TPO to exclude Genesys International Corporation Ltd. from the list of comparables. E-Clerx Services Private Limited be also directed to be excluded as this company is engaged in providing data analytics and data process solution to the largest brands in the world. They are recognized experts in financial services, retails and manufacturing. Accentia Technologies Ltd the TPO after collecting information u/s.133(6) of the Act had included it as a comparable. The plea of the ld. AR is that it has software development activity also, therefore, non comparable with the functional activity of the assessee. In the interest of justice, we restore this matter back to the file of the TPO for examining afresh. The information collected by him u/s.133(5) is to be supplied to assessee. Mold Tek Technologies Ltd. be rejected on the plea that the Financial Year 2007-028 relevant Assessment Year 2008-09 was a unique year for Mold Tek Technologies Ltd. as the scheme of arrangement involving amalgamation between Tekmen Tool Pvt. Ltd. and Mold. Tek Technologies Ltd. and de-merger between Mold-Tek Technologies Ltd. simultaneously was sanctioned by the Hon’ble AP High Court by 15th July, 2008 with the appointed date for amalgamation and de-merger being 1st October, 2007 and 1st April, 2007, respectively. Infosys BPO Ltd., being a subsidiary of Infosys, has an element of brand value associated with it. This is also clear from the presence of brand related expenses incurred by this company. Presence of a brand commands premium price and the customers would be willing to pay, for the services/products of the company.Infosys BPO is an established player who is not only a market leader but also a company employing sheer breadth in terms of economies of scale and diversity and geographical dispersion of customers. The presence of the aforesaid factors will take this company out of the list of comparables. Wipro Limited cannot be treated as comparable as it is a giant company having turnover of ₹ 11,57.20 crores and it owns tangibles. Maple e-Solution Ltd., Acropetal Technologies Ltd. & Cosmic Global Ltd. cannot be treated as comparable as found having low employee’s cost to sales as against assessee’s ratio of 48.85% Datamatics Financial Services Ltd. TPO has collected segmental information by issuing notice u/s.133(6). The contention of ld. AR was that the same are not audited. In the interest of justice, we restore this issue back to the file of AO/TPO with a direction to provide the information collected by the TPO u/s.133(6) of the Act to assessee and after calling assessee’s objection decide afresh the inclusion/exclusion of M/s Datamatics Financial Services Ltd. from the list of comparables. - Decided partly in favour of assesse.
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2015 (4) TMI 589
Disallowance of claim of deduction u/s.10A in respect of Unit No.2 & 3 - Held that:- From the record we found that assessee is engaged in the business of IT Enabled services. In its computation of total income for the Asst. Year 2005-06, the it had claimed the exemption under section 10A of ₹ 124,179,095 for Unit II and of ₹ 383,205,319 for Unit III. No exemption has been claimed in respect of Unit 1. Unit-2 is engaged in non-voice BPO business (Insurance claim processing) whereas Unit-3 is engaged in voice BPO (Call Center). Units 2 and 3 were set-up in June 2000 and November 2001 respectively and accordingly the assessee started claiming exemption under section 10A in respect of each of these units from AYs 2001-02 and 2002-03 respectively. We also found that during the appellate proceedings, the CIT(A) has called a remand report from the AO, wherein the AO has categorically observed that assessee was engaged in its business activity in respect of its Units No.2 & 3 during previous year relevant to assessment year commencing on or after 1st April, 1994, therefore, the condition was fulfilled. The AO also observed that the Unit No.II & III have not been formed by splitting up or reconstruction of an existing business and are not formed by the transfer to a new business of machinery or plant previously used for any purpose. It is crystal clear from the remand report of AO that the units II and III fulfilled all the conditions prescribed under the relevant provisions of section 10A of the Act. Accordingly, we direct the AO to allow assessee's claim for deduction u/s.10A(2) of the Act in respect of Unit II and III.- Decided in favour of assessee. Disallowance made u/s.14A - Held that:- We direct the AO to compute the disallowance u/s.14A, in terms of directions issued by the Tribunal in assessee's own case [2013 (9) TMI 116 - ITAT MUMBAI], wherein the tribunal has directed the AO to consider all the materials placed by the assessee before it while computing disallowance u/s.14A of the Act. We direct accordingly. - Decided in favour of assessee for statistical purposes.
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2015 (4) TMI 588
Computation of capital gain - AO taxing the amount of ₹ 4,89,89,000/- as long term capital gains on transfer of leasehold rights in respect of MIDC land by applying provisions of section 50C as against long term capital gain of ₹ 1,90,11,120/- declared and admitted by the appellant under this head - Held that:- Section 50C of the Act does not come into operation in the present facts where what is transferred by the assessee is only the leasehold rights in land which were acquired by it from Maharashtra Industrial Development Corporation (i.e. MIDC) on a 99 years lease basis. As a consequence, we setaside the order of the CIT(A) and direct the Assessing Officer to compute the long term capital gain on transfer of leasehold land by adopting the full value of consideration of ₹ 2,35,04,000/- declared by the assessee in the computation of income and allow the appropriate relief to the assessee - Decided in favour of assessee. Loss on sale/transfer of Dies belonging to others disallowed - Held that:- claim of the assessee has been rejected by the lower authorities on mere surmises and conjectures. The CIT(A) has reproduced in his order the written submissions put-forth by the assessee in this regard which clearly point out that assessee had given a detailed computation of manner in which the long term capital loss of ₹ 10,15,149/- in question has been worked out. There is no repudiation to the details furnished by the assessee before the CIT(A). Nevertheless, since the matter involves a factual appreciation, we deem it fit and proper to restore it back to the file of the Assessing Officer who shall verify the claim put-forth by the assessee and allow appropriate relief in accordance with law. - Decided in favour of assessee for statistical purposes. Computation of short term capital gain on sale of other depreciable assets - Held that:- Explaining the mistake committed by the lower authorities, it is pointed out that the Assessing Officer has missed out the exclusion of gain on Motor Cars of ₹ 75,536/- and has wrongly included the consideration of ₹ 10,00,000/- pertaining to Dies and moulds. The Ld. Representative pointed out that the aforesaid was a clear error on the part of the lower authorities and that there was no justification for enhancing the short term capital gain on depreciation asset to ₹ 82,93,137/- from ₹ 73,66,673/- as above. The order of the CIT(A) is accordingly set-aside and the Assessing Officer is directed to delete the addition of ₹ 9,26,464/- made by the Assessing Officer towards the amount of short term capital gain on sale of other depreciation assets. - Decided in favour of assessee.
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2015 (4) TMI 587
Revision u/s 263 - disallowance under section 40A(2)(b) and section 40A(3) - Held that:- A perusal of the correspondence relied upon by the Ld. Counsel reveals that the AO has not applied his mind on this aspect of the matter. A perusal of letter dated 13.10.11 placed on the paper book at Sl. No.G reveals that the AO had sought details of retiring partners Shri Ramnivas Ramratan Gupta and Shri Nikhil Ramnivas Gupta along with return of income, capital account and balance sheet of last three years. However, the said details had not been submitted by the assessee while replying to the said letter vide letter dated 18.10.11, copy of which has been placed at Sl. No. I of the paper book. Moreover, as observed above, we find that the issue relating to the applicability of section 40A has not been examined by the AO. There was sufficient material available on the file which was enough for the Ld. CIT to form the opinion that the AO had not applied his mind on this aspect of the matter. Hence, we do not find any infirmity in the order of the Ld. CIT while invoking provisions of section 263 on the issue of the application of provisions of section 40A(1) and (2). So far as the contention of the assessee regarding the application of provisions of section 40A(3) is concerned, we find that the said issue has also not been examined by the AO. The Ld. CIT has not made any addition but has only set aside the order of the AO on the above said two issues for examination afresh after giving opportunity of hearing to the assessee. Hence, the assessee will be at liberty to present its case before the AO.- Decided against assessee.
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2015 (4) TMI 586
Transfer pricing adjustment - selection of comparable - exclusion of one time ESOP cost - Held that:- Do not agree with the action of the authorities below in not excluding the one time ESOP cost and accordingly direct the Assessing Officer to exclude the one time ESOP cost while computing margin in the case of the assessee. The margin after excluding ESOP cost is stated to be 16.6 per cent. which may be verified by the Assessing Officer. Selection of comparable - Held that:- New comparables selected at the level of the Dispute Resolution Panel should have been considered. The Dispute Resolution Panel has not considered the new comparables without giving any reason. In our view, it would be appropriate to take as many comparables as possible so that the mean margin is closer to the correct margin because no two companies can be said to be exactly identical and small differences, if any, could be eliminated by increasing number of comparables. These new comparables, therefore, in our view have to be considered. We, however, note that one of the comparables, i.e., SIP Tech has only revenue of ₹ 3.6 crores. Obviously, the company has some problems as it is not able to procure enough orders and cannot be considered as established player in the field. It is, in our view, has to be excluded outright. The new comparables also include L&T Infotech and as has been pointed out by learned senior counsel this is a subsidiary of L & T, which is against the filter applied by the assessee that the comparable should not be a subsidiary of another company. We find that, on this ground, we have already excluded Datamatics Ltd. Therefore, this company has to be excluded outright. We are thus left with only two new comparables submitted at the level of the Dispute Resolution Panel, i.e., Goldstone which has turnover of ₹ 41.03 crores and Lanco Infotech, which has turnover of ₹ 45.56 crores. As we have held earlier, the comparables must have certain minimum size as these have to be compared with well established players in the field. In our view on the facts of the case, minimum turnover of ₹ 100 crores has to be fixed and considering this, these two comparables have also to be rejected. Infosys, Wipro, Mindtree and Persistent which are the comparables selected by the assessee and which have been accepted by the Transfer Pricing Officer/Assessing Officer. We, therefore, uphold the selection of comparables by the Transfer Pricing Officer/Assessing Officer. Working capital adjustment are required to be made because these do impact the profitability of the company. Rule 10B(2)(d) also provides that the comparability has to be judged with respect to various factors including the market conditions, geographical conditions, cost of labour and capital in the market. Accounts receivable/payable effect the cost of working capital. A company which has a substantial amount blocked with the debtors for a long period cannot be fully comparable to the case which is able to recover the debt promptly. In our view, the average of opening and closing balance in the account receivable/payable for the relevant year may be adopted which may broadly give the representative level of working capital over the year. Even if there is some difference with respect to the representative level, it will not effect the comparability as the same method will be applied to all cases. Working capital adjustment cannot be denied to the assessee only on the ground that the assessee had not made any claim in the transfer pricing study if it is possible to make such adjustment. In our view, working capital adjustment will improve the comparability. We, therefore, direct the Assessing Officer/Transfer Pricing Officer to make the working capital adjustment after necessary examination in the light of the observations made above and after allowing opportunity of hearing to the assessee. Whether there is no transfer of profit to low tax jurisdiction, no adjustment should be made? - Held that:- 24/7 Customer.com P. Ltd. [2013 (1) TMI 45 - ITAT BANGALORE ] in which the Tribunal held that the arm's length price of international transaction has to be calculated with respect to similar transaction with an unrelated party as per the method prescribed and the Revenue is not required to prove tax avoidance due to transfer of profit to lower tax jurisdiction. The Tribunal therefore held that the argument that parent company was incurring loss or had shown lower margin was not relevant. These arguments had also been earlier considered by the Special Bench in the case of Aztec Software Technology Services Ltd. v. Asst. CIT [2007 (7) TMI 50 - ITAT BANGALORE] and not accepted. - Decided partly in favour of assessee.
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2015 (4) TMI 585
Addition on account of inventory mis-match w.r.t stock statement submitted to bank - Dis-allowance of Interest u/s 40A(2)(a) - Interest paid on unsecured loans in excess of fair market rate i.e. bank rate - Held that:- In a given case, an assessee may satisfactorily explain the difference in the stock figure/s furnished to the bank and that disclosed by its final accounts, in which case no case for addition would arise. Why, in the instant case the assessee has even failed to show that the same, i.e., the stock as disclosed, actually matches with that reflected by its books. Reliance on case law would thus be of little moment; our decision being based on firm findings of fact, based on the material on record, as it ought to be. It would, therefore, all depend on the facts of the case - the question to be decided is whether the excess stock is inferable in the facts and circumstances of the case and, two, if the assessee has been able to satisfactorily explain the same, i.e., in case of a difference, the answers to which in the present case are ‘yes’ and ‘no’ respectively. We decide accordingly, and the assessee fails. The bank rate is not strictly comparable, and some leverage would have to be allowed between the interest rate to the bank and that to the private parties, which is on an unsecured basis, even though in the instant case the same stands given by related parties to their own concerns, so that it serves a common purpose or mutual interest. That is, the said rate yet cannot form a suitable basis to arrive at the fair market value of the interest rate for unsecured loans. In our view, on the balance, a premium of 25% (on the bank rate) would be more than adequate. Accordingly, the excess interest rate be worked out by applying a factor of 1.25 to the average bank interest rate, i.e., for term finance, as obtaining for the relevant years. A bank rate of 12% p.a. (say) would accordingly yield an excess interest rate of 6% p.a. (21 - 12 x 1.25). We decide accordingly, and the assessee gets part relief. - Decided partly in favour of assessee.
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2015 (4) TMI 584
Income from house property - Deduction of Interest paid on security deposit received from the tenants - Interest bearing deposits - Held that:- Generally under a lease agreement, the security deposits are taken as an advance of rent of a certain period which are generally not interest bearing. Here in this case the deposits received from various tenants are more than 100 times of the arrival rent amount. These deposits have been taken/accepted on a payment of interest @ 6% per annum and deposit is to be refunded back by the assessee. Now, whether such a deposit can be reckoned as "borrowed capital" within the meaning of section 24(b). The word "borrow" as defined in Law lexicon (2nd edition) means to take or receiving from another person as a loan or on trust money or other article of value with the intention of returning or giving an equivalent for. A person can borrow on a negotiated interest with or without security. If the deposits are interest bearing and is to be refunded back, then debt is created on the assessee which it is liable to be discharged in future. Here the concepts of debt has to be understood as per the terms of the parties. If the deposits had been security deposit simplicitor to cover the damage of the property or lapses on part of the tenant either for non-payment of rent or other charges, then such a deposit cannot be equated with the borrowed money, because then there is no debt on the assessee. A moment a deposit is accepted on interest, then it part takes the character of borrowed money. It is an undisputed fact here that, these interest bearing deposits has been utilized for repayment of borrowed capital. Accordingly, finding of the Ld. CIT(A) in this regard is affirmed. Ground raised by the Revenue are dismissed. - Decided against the revenue.
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2015 (4) TMI 583
Depreciation on securities held as stock in trade - Deduction of broken period of interest - Dis-allowance of deduction claimed u/s. 36(1)(viia) of Income Tax Act - Held that:- We find that the issue on Depreciation on securities (premium on govt. securities) for ₹ 9,76,74,332/- is squarely covered by the order of the ITAT Hyderabad in the case of AP Grameena Vikas Bank [2014 (3) TMI 724 - ITAT HYDERABAD] for the relevant A.Y 2009-10, Vijaya Bank [1990 (9) TMI 5 - SUPREME Court] and Nedungadi Bank Ltd. [2002 (11) TMI 29 - KERALA High Court]. Hence, respectfully following the order of the Coordinate Benches, we dismiss part of the Revenue’s appeal. With regard to the issue of broken period of interest for an amount of ₹ 3,73,12,444/- the issue is covered by the orders cited above and also in the case of United Commercial Bank [1999 (9) TMI 4 - SUPREME Court] and South Indian Bank Ltd. [1999 (3) TMI 43 - KERALA High Court] and Board’s circular No.665 dated 5.10.1993 issued by the CBDT. Hence, respectfully following the order of the Coordinate Benches, we dismiss Ground No.3 of Revenue’s appeal. - Decided against the revenue.
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2015 (4) TMI 582
Addition due to difference in turnover reported in books of accounts and in VAT returns - Non taxable purchases reported in the taxable category of purchases in books of account - Held that:- We have heard the ld Counsel for the assessee wherein he has submitted that there was a mistake committed by the CTO which has been proved by the production of monthly statements filed before the said authorities. The ld Counsel for the assessee further pointed out in the statement relied on by the AO, the tax shall be taken at ₹ 40,14,746. Such tax is worked out at 4% of the turnover. At the rate of 4% the tax of ₹ 40,14,746 would be correct, if the output is taken at ₹ 10,03,68,648, whereas if the figures shown is ₹ 10,19,71,512 were to be true, the tax payable would work out to ₹ 40,78,860. Hence, it was brought to the notice of the AO that there is an error in the VAT ledger a/c. Hence we confirm the order of the CIT (A) wherein he has held that the fact of the miss-match and the turnover in the certificate dated 23.11.2011 support the view that the figure reflected in the certificate dated 16.6.2011 is the correct figure. Further, we find that the total purchases as reflected in the VAT return and as reflected in the schedule to the P&L a/c is the same and hence we confirm the order of the CI ,T (A) and dismiss the grounds raised by the Department on this issue.- Decided against the revenue.
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2015 (4) TMI 581
Loss of Advance given to procure land for future projects - Failure to recover the advance amount - Loss of capital or a revenue expenditure - Held that:- We note that there is no dispute that the amount in question was advanced by the assessee for purchase of land which would be going to form part of stock in trade of the assessee being in the business of construction and development. Accordingly, the said advance becoming irrecoverable and consequently, writing off by the assessee is a revenue loss and an allowable claim being business loss of the assessee as held by Hon'ble Delhi High Court in the case of New Delhi Hotels Ltd. [2012 (3) TMI 325 - DELHI HIGH COURT] Following the Judgment of Hon'ble Delhi High Court in the case of New Delhi Hotels Ltd. [2012 (3) TMI 325 - DELHI HIGH COURT], we do not find any error or illegality in the order of CIT(A) in allowing the claim of the assessee. - Decided against the revenue.
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Customs
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2015 (4) TMI 600
Seizure of goods - Goods imported without proper NOC - Held that:- on 17.1.2014, after the seizure was made, the officer who had seized the controlled substance in question submitted a report to his superior officer, as required under Section 57 of the NDPS Act. On 18.1.2014, after receipt of the report of the seizing officer, the Assistant Narcotics Commissioner (Prevention) Gwalior appended on the said report a note to the effect that Crime Case No.1/2014 is registered in the Headquarter Office, Gwalior and the Seizing Officer was authorized to investigate the matter and file a complaint before the Competent Court, after completion of investigation, if required. Thereafter it appears, an investigation was carried out and on 14.8.2014 a complaint under Section 36A(1)(d) of the NDPS Act was filed before the Special Judge (NDPS Act cases), Ali Baug, District Raigad, Maharashtra for alleged violation of Sections 25A and 38 of the NDPS Act by one Basant Kalra, Managing Director of the First petitioner Company for importing the controlled substance in question without obtaining the NOC required under the Regulations in force. - it would be appropriate for us to refrain from addressing any of the issues raised by and on behalf of the rival parties and instead leave the petitioners with the remedy of taking such appropriate steps in the criminal proceeding, including release of the goods pending trial, as it may be advised
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2015 (4) TMI 599
Imposition of redemption fine - Whether redemption fine and penalties are impossible when quantity of 2 Ethyl Hixyl Acrylate, imported by appellant under Bill of Entry No. 245685 dated 20.06.2013, was received in excess of the quantity specified in the documents, without the knowledge of the appellant - Held that:- Adjudicating authority demanded duty/ interest and imposed redemption fine of ₹ 1,15,000/- upon the appellant under Section 125(l) of the Customs Act, 1962. He also imposed a penalty of ₹ 35,000/- upon the appellant vide Section 112(a) of the Customs Act, 1962. Under the impugned OIA, first appellate authority set-aside the levy of duty but upheld imposition of redemption fine and penalty but reduced the same to ₹ 60,000/- and ₹ 15,000/- respectively. - Following decision of Commissioner of Customs (Export), Chennai vs. Bansal Industries [2006 (9) TMI 58 - HIGH COURT, MADRAS] - In view of the settled proposition of law, redemption fine and penalty are imposable. No other contrary case law of higher judicial forum has been brought to the notice of the Bench by the appellant. Further, first appellate authority has already extended substantial benefit to the appellant by setting aside the duty liability and by reducing the redemption fine and penalty - Decided against Assessee.
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2015 (4) TMI 598
Misuse of advance licences - appellant has no manufacturing facilities for that part of the period. - goods manufactured through their job worker - Benefit of duty exemption under Customs Notification Nos.30/97, dated 01.04.1997 and 48/99, dated 29.04.1999 - Manufacture and export of S.S.Utensils - Held that:- It was observed by the Adjudicating authority that if the appellant had declared the job workers to the DGFT and got the licences amended to incorporate the job workers and took steps to fulfill the obligation under the Customs notification, he would be eligible to avail the benefit of exemption notification. It is stated that the Licensing authority may have the power to condone the non-fulfilment of condition relating to declaration of job workers not declared in the application. We find that the Licensing authority certified the fulfillment of export obligation and in this context, the submission of the learned Advocate that the Policy permitted job work is required for examination. In our considered view, the stand taken by the appellant that they manufactured the goods through their job worker and permitted by Policy is required to be verified and, thereafter, it should be decided as to whether they are eligible to get benefit under the notification - matter remanded back - Decided in favour of assessee.
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Service Tax
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2015 (4) TMI 615
Denial of CENVAT Credit - various insurance policies in respect of capital assets - Held that:- various insurance policies taken by the appellant falls into the category of Marine Hull Policy, Public Liability Insurance Policy, Standard Fire and Special Perils Policy, Burglary Standard Insurance Policy, Marine Cargo Open Policy, Industrial all Risks Insurance Policy, Marine War Insurance Policy, Money Insurance Policy and Contractors Plant and Machinery Insurance Policy. While Marine Hull Policy, Marine Cargo Open Policy and Marine War Insurance Policy pertain to tugs and barges used by the appellant in transportation of materials from the mother vessels to the jetty, the other insurance policies pertain to the insurance of the capital assets used within the factory except in the case of Contractors Plant and Machinery Insurance Policy. The nexus between the assets utilised within the factory is clearly discernible, the same cannot be said in respect of goods used outside the factory. As regards the tugs and barges in respect of which marine policies have been taken, this issue has been considered in the Vikram Ispat (cited supra) wherein it was held that there was no nexus between the impugned services with manufacture/clearance of goods; therefore, they are not input service on which the assessee could get benefit of credit of service tax. - Therefore, the eligibility to Cenvat credit on marine insurance policies taken in respect of tugs and barges is clearly not admissible. Appellant will not be entitled for Cenvat credit of service tax paid on Marine Insurance Policies taken in respect of the tugs and barges or materials brought in a ship or in respect of life or health or medi-claim insurance of the employees/families. Similarly, the appellant would not be entitled for the service tax paid on the contractors equipments. In respect of other assets, which are used by the appellant within its factory for the manufacturing activity, the appellant would be eligible for the credit of service tax paid on various insurance policies in respect of such assets. Therefore, the matter is remanded back to the adjudicating authority for ascertaining the entitlement of service tax paid in respect of items as discussed above and allow the same to the appellant - Decided against assessee.
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2015 (4) TMI 614
Penalty u/s 77 for non appearance to summons - Commissioner reduced penalty - Held that:- Under Section 70, the provision of the penalty are built in. But under section 77, the provision of imposition of penalty is flexible. Considering the nature of the service provided and the situation through which the service provider is passing, leniency is required to be shown. Moreover, I find that the appellants had already deposited an amount of ₹ 20,000/- towards penalty vide Challan dated 31.03.2010. In view of the above, I order reduction of penalty to ₹ 5000/- each against non appearance to summons dated 19.08.2008, 30.09.2008, 4.12.2008 and 18.1.2009 totally amounting to ₹ 20,000 - penalty of ₹ 200 per day is not in the nature of mandatory. Therefore it is discretion of the officer to reduce the penalty depending upon the nature of the case. I therefore did not find any infirmity in the findings of the Ld. Commissioner (Appeals) given in the impugned order - Decided against Revenue.
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2015 (4) TMI 613
Waiver of pre deposit - 'Commercial or Industrial Construction Services - Held that- Work undertaken by the Appellants related to Hydro Power Project consisting of various activities.The definition of 'Commercial or Industrial Construction Service' excluded services provided in respect of Dams, Roads, Tunnels. In such a situation, the provisions of section 65A of Finance Act, 1994 requires identification of the services which gives the essential character when different services are provided. What comes out is the fact that all items of work are related to a Dam and a Power Project, Roads, Tunnel etc. and the Dam constitutes the main activity and the Power Project can be entirely different or may not be different. It is difficult to imagine a hydro power project without a dam. Once again, this is also arguable and prima facie view is in favour of appellant since appellant is not treating the contract as a composite contract. - requirement of predeposit has to be waived and stay has to be granted against the recovery of the dues during the pendency of appeal. Accordingly the requirement of predeposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.
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2015 (4) TMI 612
CENVAT Credit - GTA Services - Whether a person who is not a actual service provider but discharges the Service Tax liability on the Taxable Services under Section 68(2) of the Finance Act, 1994, as a deemed service provider, is entitled by virtue of legal fiction to utilize the Cenvat credit inputs/input services/capital goods for payment of Goods Transport Agency Service Tax, even if he is not using such inputs/input services/capital goods for providing taxable services by virtue of deeming legal fiction - Held that:- Following decision of Panchmahal Steel Ltd. Vs. Commissioner of Central Excise, Vadodara [2014 (4) TMI 490 - CESTAT AHMEDABAD] - Impugned order is set aside - Decided in favour of assessee.
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Central Excise
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2015 (4) TMI 619
Waiver of pre deposit - zinc dross and ash - lower authorities have held that after the amendment to the provisions of section 2(d) of the Central Excise Act, the goods in question are marketable and as such, have to be held as having been manufactured by the appellant - Held that:- Tribunal in the case of KEC International Ltd. [2012 (12) TMI 426 - CESTAT, NEW DELHI], while upholding the dutiability of the zinc dross and ash has set aside the penalty on the ground that such clearances were effected with the knowledge of the Revenue. By applying the ratio of the above decision, we set aside the penalty, while confirming the duty and interest. - Decided partly in favour of assessee.
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2015 (4) TMI 607
Denial of Concessional rate of duty - Notification No.8 /95 dated 9.2.95 - Denial on the ground that product is combination of streptomycin and penicillin - Held that:- On reading the definition of 'formulations' , we find that the plea taken by the respondent/assessee that even if one of the bulk drugs mentioned at serial no.1 is included in the formulation that would satisfy the definition of 'formulations' contained at serial no.2 is correct and has to be accepted, and is rightly accepted by the Tribunal. As per the definition, even if the formulation is processed out of or containing one bulk product the condition of Notification stands satisfied. We, therefore, do not find any error in the order passed by the Tribunal. - Decided against Revenue.
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2015 (4) TMI 606
Classification of goods - manufacture of Milk N Nut - Classification under Chapter Heading 2001.10 or Chapter Heading 1704.90 - Held that:- Assistant Commissioner came to the conclusion that the product was preparation of vegetables, fruits, nuts and parts of plants and therefore rightly classified under Chapter Heading 2001.10 and cannot be treated as sugar confectionery. He thus, dropped the proceedings by passing the final order dated 18.12.2001. The Department went in appeal. The Commissioner (Appeal) also upheld the orders. Same is the view taken by the Tribunal as well. Thus all the three authorities below have arrived at finding of fact that the product in question is vegetable preparation and is not sugar confectionery - no reason to interfere with this appeal - Decided against Revenue.
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2015 (4) TMI 605
Manufacture - levy of duty on Zinc-Dross/Zinc-Ash generated in the Factory - Validity of Tribunal's order - Section 2(f) of the Central Excise Act, 1944 - whether a bare Provisions of Section 2(d) of the Central Excise Act, 1944 is enough to raise & confirm the Demand of Duty on such products - Held that:- The appellant contended that in view of its having deposited the entire demand, it was entitled to a stay. The matter appeared on the Board on the first day itself for considering the application for stay regarding penalty. It was not necessary to consider any application for stay regarding the demand as the amount demanded had already been deposited. However, the CESTAT, by the impugned order dated 15.02.2013, disposed of the appeal itself. The CESTAT could not have disposed of the appeal without the consent of the appellant. - The appeal restored to the file of the Tribunal, who shall decide the matter afresh .
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2015 (4) TMI 604
Condonation of delay - Held that:- Provision for pre-deposit under section 35F of the Central Excise Act came into force with effect from 6th August, 2014 whereas the original order sought to be challenged in this appeal is dated 22nd March, 2011 - we are inclined to allow the prayer for condonation of delay subject to deposit as per section 35F of the Central Excise Act within two weeks. In default of such deposit, the appeal shall stand dismissed. In the event such deposit is made, the Commissioner of Central Excise (Appeals)-III shall hear out the appeal on merits. - Delay condoned conditionally.
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2015 (4) TMI 603
Valuation of goods - sale of goods through depot - Demand of differential duty - extended period of limitation - Penalty u/s 11AC - Bar of limitation - Held that:- motor vehicle in question is first cleared from the factory to a depot of the appellant and subsequently it is transferred to another depot from where the motor vehicle is sold. - valuation in case of goods sold at depot, shall be governed by the provision of above Rule 7. On careful reading of the said rule we are of the view that price prevailing at that depot from where the goods is sold shall apply. Contention of the appellant is not acceptable that at the time of initial clearance of motor vehicle to first depot, goods are intended to be sold from the first depot irrespective whether the motor vehicle first cleared to particular depot and subsequent transferred to another depot. The fact remains that the goods are sold from the subsequent depot, and not from first depot therefore in terms of Rule 7 a depot from where the goods is actually sold, the price prevailing at that depot at the time of clearance of the goods from factory shall be the correct transaction value for charging the excise duty. - Accordingly, in terms of Rule 7, in case goods not sold from the factory but transferred to the depot the price prevailing at depot at the time of removal of the goods from the factory shall apply as transaction value. - Decided against the assessee. Extended period of limitation - Held that:- the demand for the period prior to audit observation raised on January 2001 can be raised up to 5 years as there was clear suppression during that period. Hence, the demand of duty for the period up to January 2001 is correct and legal. In the show cause notice dated 19.7.2005, the demand was raised for the period from 1.7.2000 to 30.9.2004. In this regard, we observe that when the fact of the issue came to the notice of the Department in January, 2001, subsequent to that it cannot be said that there was suppression on the part of the appellant - though demand of duty for period involved in these appeals (except for the period February, 2001 to June 2004) is sustainable on merit, however demand of duty pertaining to the period February 2001 to June 2004 is hereby dropped being time bar. - Decided partly in favour of assessee.
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2015 (4) TMI 602
Denial of remission of duty - Goods lost in fire - Held that:- For claim of remission of duty on unfinished / semi-finished goods destroyed in fire I do agree with the contention of the Ld. Commissioner (A) relying on the decision of Deepak Tandon (supra) that these goods are not marketable. Therefore, remission of duty cannot be claimed. But at the same time relying on the decision of Grasim Industries (Supra) when the input have gone in manufacturing process, therefore they are not required to reverse Cenvat Credit on input contained in unfinished goods / semi-finished goods lost in fire as there is no provision of reversal of Cenvat Credit in respect of inputs used in manufacturing of such goods. - appellant has taken Cenvat Credit correctly and there is also no provision in the Cenvat Credit Rules to reverse proportionately Cenvat Credit on capital goods which was lost in fire or were not used. Therefore, I hold that the appellant is not required to reverse Cenvat Credit on capital goods. - appellant is not required to pay duty on finished goods and not required to reverse the Cenvat Credit on inputs contained in unfinished goods and semi-finished goods and not required to reverse the Cenvat Credit of capital goods - Decided in favour of assessee.
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2015 (4) TMI 601
Restoration of appeals - Appeal dismissed for non prosecution - Ex-parte order passed - Held that:- on earlier occasions, the adjournment was not sought by the counsel for the respondent but on account of non-availability of the Bench, the matter was adjourned, it cannot be said that the respondent was not keen to pursue the remedy against Revenue's appeal. Moreover, from the letter dated 25.03.2014 from the Registry to the CPIO, CESTAT, New Delhi, which was sent to the respondent in response to their application under RTI Act, shows that there is no acknowledgement of the service of the appeal available with the Registry and also there is no acknowledgement of the service of the notice fixing the date of hearing on 02.01.2014 - Assessee had neither received the copy of the Revenue's appeal nor they had received the notice of hearing of the appeal on 2.1.2014. In view of these facts, we hold that non-appearance of the respondent at the time of hearing of the matter on 2.1.2014 was due to non-receipt of the notice of hearing and not only this, they had not received the copy of the Revenue's appeal. - Order recalled and appeal restored.
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CST, VAT & Sales Tax
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2015 (4) TMI 618
Reassessment of proceedings - Section 9 - Held that:- Pursuant to search at the business premises of the Opponent, a show cause notice was issued for reassessment of the assessment of earlier years under section 9 (2) of the Central Act read with section 44 of the State Act - advocate appearing for the opponent was inquired about 20% of the pre-deposit of the total demand raised by the Deputy Commissioner of Commercial Tax, a request was made in writing to waive the amount of pre-deposit and it was insisted that the issue concerns branch transfer of the transactions. The Joint Commissioner of Commercial Tax also, in the impugned order, noted that the appellant is not desirous to make payment of pre-deposit and the request of waiver since was not acceptable - nothing has been stated on merits by the Joint Commissioner of Commercial Tax. What all he did is the rejection of the request made for waiver of pre-deposit by the opponent herein without touching anywhere the merits of the case. That being the case, when such order came to be challenged before the Tribunal, the Tribunal instead of addressing the issue of pre-deposit, has chosen to decide the matter on merits. - It is not the case of either side that an identical question of law was pending before the Tribunal in some other appeals concerning the very assessee, or identical question of law in respect of very assessee for different assessment year was before the Tribunal, and in such circumstances, with the consent of the parties it chose to conclude on merit. - Matter remanded back - Decided in favour of Revenue.
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2015 (4) TMI 610
Reversal of Input tax credit - variation with references to purchases made - supplier has not paid the tax collected by them - Held that:- the selling dealer had not paid the collected tax. The liability had to be fastened on the selling dealer and not on the petitioner-dealer which had shown proof of payment of tax on purchases made. The orders were liable to be set aside. That sub-section (16) of section 19 states that the input-tax credit availed is provisional. It however, does not empower the authority to revoke the input-tax credit availed of on a plea that the selling dealer has nor paid the tax. Additional Government Pleader (Taxes) appearing for the respondent is unable to refute the factual legal submissions. Hence, I have no other option except to set aside the impugned orders and remit the matters back to the authority concerned to consider the case of the petitioner afresh on merits. - Matter remanded back - Decided in favour of assessee.
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2015 (4) TMI 609
Refund claim of pre deposit - retrospective exemption - Whether the amount having been deposited by the assessee as pre-condition of filing appeals before the appellate authority under Section 84(3) of the Rajasthan Sales Tax Act, 1994 can be refunded or not - Held that:- Analogy can be drawn is that in the present case though the assessment order was made, liability was created but when by a retrospective amendment, the entire liability was held to be bad in the light of deletion of section 4(e)(i) with retrospective effect from 23.5.1987, therefore, in my view, it would relate back to 23.5.1987 when the amendment was made retrospectively and on that particular date in view of the amendment, no tax was payable and though the assessment has been made it was not recoverable. - After considering the amendment and on reading of clause (f) quoted, though it states that any amount deposited will not be refundable but in my view, when no amount was legally payable on the basis of retrospective amendment than no amount was “payable” and if amount paid than in terms of the aforesaid notification the amount cannot be retained and thus has to be refunded. In my view when condition (i) of sub clause (e) in clause 4 was deleted w.e.f. 23/5/1987 that date is relevant and is required to be seen and on that particular date nothing was payable by the assessee, therefore, in my view Tax Board was unjustified in coming to the conclusion that section (f) comes into the way of non-refunding of the said amount. - order passed by the Rajasthan Tax Board is set aside. Assessee is liable to refund of the said amount deposited by them as pre-condition to file appeal before DC(A). - Decided in favour of assessee.
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2015 (4) TMI 608
Levy of entertainment tax - penalty levied under Section 6-A(4) - Levy of tickets sold for DLF/IPL/2010 - Held that:- Section 3(1-A) provides for payment for admission excluding the amount of tax to such entertainment, entertainments tax at the rate of ten per cent, if such payment for admission, excluding the amount of tax is less than ₹ 50/-, no tax is leviable under Section 3. However, sub-Section (2) of Section 3 makes it clear that every complimentary ticket issued by the Proprietor of an entertainment, even if no amount is received by the holder of such ticket, the Proprietor of an entertainment is deemed to have received the amount mentioned for admission to the entertainment according to the class of seat or accommodation which the holder of such ticket is entitled to occupy or use. - if the assessee arranges his affairs in such a manner so as to attract no tax, no fault would be found with the assessee. In fact, after this order, it is submitted that in order to avoid such consequences in future, the assessee has given up giving complimentary tickets to the members and VVIPs printing at the rate of ₹ 25/- and ₹ 49/- and they are printed at actual prices and paying taxes for the subsequent years. Therefore, it cannot be said that there is any intention much less the malafide intention for avoiding payment of tax. The assessee would be entitled to this benefit only for the period 2010. That is precisely what the Tribunal has held. Hence, for the assessment year 2010, we do not find any error committed by the Tribunal in passing the impugned order. - Decided against Revenue.
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Indian Laws
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2015 (4) TMI 611
Validity of Molasses Policy 2011-12 - Maintenance of ratio of the stocks of reserved and unreserved quantities of molasses - Held that:- observation made by the Division Bench in the judgment in M/s Triveni Engineering & Industries Ltd and another vs. State of UP & another (2011 (3) TMI 1526 - ALLAHABAD HIGH COURT) relating to maintenance of ratio and reserving the percentage of molasses in favour of distilleries and for maintenance of the ratio, were out of context and were totally out of place, inasmuch as the petitioners had neither prayed, nor argued on the validity of Section 8 (1) and (2) as well as Molasses Policy in which such reservations and ratio have been prescribed. There was no prayer in the writ petition nor there is any discussion on the question of percentage of reservation and the ratio. The Court did not give any relief with regard to Section 8 (1) and (2) of the Act and Rules providing for reservation and maintenance of ratio of the reserved and unreserved stocks of molasses. - petitioner as a member of the U.P. Sugar Mill Association, having participated through its association in the deliberations of the Advisory Committee of which the unanimous resolution and recommendations were accepted by the State Government to reserve 22% of the Molasses, are estopped from challenging the reservation and the consequential maintenance of the ratio of the stocks of the reserved and unreserved molasses. Maintenance of stocks of the reserved and unreserved molasses in clause-3 of the Molasses Control Order dated 20.12.2011 is in consonance with the reservation of 22% of molasses and is provided to carry out the objects of reservation to provide for sufficient and safe quantities for manufacture of country liquor in distilleries and at the same time reserving the revenue for the State. The maintenance of ratio throughout the year with the condition to review the percentage of reservation as well as the power to relax the reservation, which has in fact has been exercised in the case of the petitioner and other sugar mills by order dated 21.6.2012, which also refers to many such orders of the relaxation in the same year, makes the exercise of power, reasonable and non-arbitrary. After the order of relaxation, the petitioner has not established any hardships to challenge the policy as arbitrary and unreasonable. Clause-5 of the policy clearly refers to an extraordinary condition created in the year 2009-10, in which on account of over-shooting the storage capacities, a situation of over-flow and auto-combustion was created and in order to avoid the recurrence of any such condition, the State Government reserved the powers for relaxations, which have been exercised in the current year from time to time. No such extraordinary condition has been pleaded or established by the petitioners. - State Government has been issuing allotments to the distilleries regularly for release, sale and transportation of the reserved quantities of molasses. One such order dated 15.6.2012 has been placed before us along with request of the distilleries for further allotments and for transportation of the reserved quantities of molasses. These allotments demonstrate that the State Government is regularly monitoring the stock position of molasses and is issuing orders of sale of the reserved quantities of molasses to avoid the accumulation and over-shooting of the stocks. - Decided against the petitioner.
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