Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 21, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
Highlights / Catch Notes
Income Tax
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Penalty u/s 271(1)(c) – Concealment of income – assessee agreed to be assessed at 11% of the gross receipts only “to buy peace” and “avoid litigation” cannot be accepted - penalty confirmed - HC
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Disallowance u/s 40A(3)(a) of the Act – Payment made otherwise than by account payee cheque - endorsement of crossed cheque - disallowance confirmed - HC
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Income from air conditioning and other charges has to be assessed as income from other sources - while computing the income from other sources the assessee will be entitled for deduction of expenses u/s 57 - AT
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No law of the land can justify the action in taxing the assessee for the income which in fact has not been received by the assessee but due to some error in writing the figure to which the Revenue Authorities have also not disputed - AT
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Nature of Receipts - AO directed to treat the Proceeds realized from sale of Certified Emission Reduction (CERs) generated out of Capital Projects registered with UNFCCC as capital receipt - AT
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The fact that an expenditure gives enduring benefit is by itself not conclusive as regards the nature of the expenditure - the disallowance on account of entrance fee paid by the assessee for Corporate membership of Cricket Club of India set aside - AT
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Allowability of gross loss incurred in financing activity – No basis or justification for the payment at interest rates, charged ostensibly at prevailing rates by the assessee, in excess of that charged, stands furnished - disallowance confirmed - AT
Customs
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Exclusion from assessable value u/s 14 - No substance in the plea of the Appellant that FOB price be treated as cum-duty price and not the transaction value, as prescribed under Section 14 of the Customs Act, 1962 - AT
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CHA - irregularity regarding employees, who was issued a photo ID Card in Form- H - once there is negligence on the part of department also, it is not fair to impose any penalty on the appellant - AT
Service Tax
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Denial of refund claim - Bar of limitation - in the case of export of service during the impugned period the relevant date is the date of receipt of the payment towards the service exported. - AT
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Commercial and industrial construction service - construction work undertaken for educational institutions - stay granted being prima facie not commercial concerns - AT
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Prima facie, the project theatre was let out for screening of films, which would be included in the definition of ‘Renting of Immovable Property’ - AT
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Business of marketing telecom services - Incentive for work done - Applicants claim that these incentives were to be paid to the staff of the applicant, hence not liable to service tax - prima facie case is against the assessee - AT
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Demand of interest - appellant submitted that they have erroneously paid the tax on reimbursement of administrative charges which is not warranted - stay granted - AT
Central Excise
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Duty demand -Since, the department's case is based on the documents received from the railways and also recovered from the transport company, all these documents have to be supplied and non-supply of these documents would result in denial of natural justice. - AT
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Valuation of goods - Inclusion of testing charges - Cylinder testing charges are not includible in the assessable value of the liquid chlorine and there is no infirmity in the impugned order - AT
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Duty demand - CENVAT Credit - transportation provided for school children would also get covered in the definition of "input services". - AT
VAT
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Requirement of Notice of change in the constitution of the firm - the order rejecting the application of the petitioner for amending the registration certificate u/s 75 read with Rule 33 of the Rules is liable to be quashed - HC
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Business transaction after filing of application for cancellation VAT registration but in the absence of any order from the VAT authorities assuming that registration was not cancelled - all the questions raised in this Appeal answered in favour of the appellant - HC
Case Laws:
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Income Tax
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2014 (4) TMI 683
Power u/s 263 of the Act – Withdrawal of additional depreciation – Reference made for revision of sales - Whether the CIT fell into error in invoking his power u/s 263 of the Act modifying the assessment order by withdrawing the additional depreciation and further directing the AO to examine the allowance on account of revision of sales afresh – Held that:- NTPC could not be accused of withholding information or material information, or providing incomplete facts - there was some tentativeness in the CERC Regulations about the tariff rates and conditions that were to be applied for the period 01-04-2004 onwards - The previous Tariff Regulations – framed in 2001 – were to end on 31.03.2004; yet by the latter date, even though the conditions for tariff applicability had been more or less finalized, the final tariff order, notifying the rates and some final principles, had not been brought into force - the CERC directed that the existing conditions were to be applied till 30.9.2004. NTPC had no choice in the matter but to carry on billing in terms of the previous notification on a provisional basis up to 31.03.2005 or till the approval of tariffs; such billing figures were to be subject to adjustment after final tariff determination - inherently there was a degree of uncertainty and incompleteness in the process - This was reflected in the return when the adjustment of the billing became necessary on account of the application of the CERC notification. NTPC’s argument that the tariff for power plants from 2004-09 was lower than the tariff norms for 2000-04 has not been disputed by the Revenue - Even a bare look at the later Tariff Regulations shows that the rate of return was revised downwards - NTPC submits that it accounted sales for electricity for Rs.2212.8 crores based upon the previous experience in tariff fixation orders of CERC - This was even though the billed amount was Rs. 2306.6 crores - The estimate was bona fide and made on a realistic assessment of sales estimation that could be realized in terms of accepted tariff notifications - There was nothing erroneous or prejudicial to Revenue’s interest in such estimate. Power generation companies owned or controlled by the Central Government are a sub-species of business entities for which a separate provision has been enacted by the Act - the income of utilities, especially ones subject to stringent public control, are tightly regulated in terms of what are the accounting methods to be adopted, how depreciation is to be claimed, allowances rate of return on capital, etc. -All the aspects are subject to CERC Regulations - the transition between the old (2001) CERC Regulations, and the later ones (2004-2009), had not been fully worked out by the CERC as to what had to be recovered by NTPC and other entities – it is directed that the previous regime be followed - for a portion of previous accounting periods, provisional figures were being indicated as income estimates, and depending on how the final figures were worked out at times, higher figures would be offered as amounts received in excess of the sum estimated and reported during other periods - Relying upon Shree Sajjan Mills Ltd v. CIT [1985 (10) TMI 2 - SUPREME Court] - A provision made on a reasonable basis, it would be in the nature of an ascertained liability and that in a mercantile system of accounting, provision for liability ascertained during the course of the relevant accounting period, which is payable at a future is permissible. The court is satisfied that the AO’s order was made after appropriate inquiry; the absence of discussion regarding downward revision of sales figures in this case did not make it any less vulnerable to correction u/s 263 - The view taken by him is one which is endorsed by law, as the CERC Regulations left the NTPC with little choice to make such revision awaiting a final determination in regard to the whole period after the expiry of the assessment in that instance - The Commissioner acted erroneously in exercising revisional power u/s 263 – Decided in favour of Assessee.
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2014 (4) TMI 682
Nature of income – STCG or business income - What factors are to be given weight while examining whether a taxpayer is a dealer in shares or having regard to the nature of investment, it is to be construed that the income bears the character of sale of a capital asset so as to attract capital gains tax – either STCG or LTCG – Held that:- Tribunal rightly held that the substantial nature of transactions has been laid bare by the assessee before the Department right from the word “go”, as deliberated upon - The holding of shares was by way of investment - The activity was in accordance with the main objective of the assessee company - It was duly authorized by the Memorandum and Articles of Association of the assessee company - The shares were purchased out of the assessees own funds and not borrowed funds - The decision of investment of the assessee’s shareholder’s funds in share/units and Mutual Funds was taken by the management of the assessee company from time to time with the objective of capital appreciation in the long term and in case the target price was achieved in the short run, the shares were to be sold in the market - It was depending on the funds available, that the management of the assessee company decided which shares were to be acquired - The investment was shown as such in the balance sheet of the assessee company, under Schedule Ill of the audited accounts. Relying upon Commissioner of Income Tax, U.P v. Madan Gopal Radhey Lal [1968 (9) TMI 14 - SUPREME Court] - For 2006-07 the total share consideration was ₹ 3.4 crores, as against ₹ 4.58 for the previous year - the assessee had its own funds to the tune of ₹ 7.31 crores, in the form of shareholder’s funds - Further, dividend income to the extent of ₹ 1.12 crore was also earned - The Commissioner found that during the year, there was no transfer from stock in trade to investment account and that the transfers had been accepted during the year 2005-06 - the income derived from sale of shares was, for 2006-07, not business income but capital gains - For AY 2007-08, the Appellate Commissioner’s evaluation of facts was based on an overall consideration of all the circumstances – Relying upon Commissioner Of Income-Tax, Bombay Versus H. Holck Larsen [1986 (5) TMI 30 - SUPREME Court] - no single factor or criteria ought to be given undue weight, ordinarily – there was no error in the order of the Tribunal – Decided against Revenue.
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2014 (4) TMI 681
Nature of income – Sale of shares - Whether the income is business income or STCG - The shares were shown as investments by the assessee, and not as stock in trade - This is an important (though not conclusive) factor - The frequency of transactions speaks greatly to whether the shares were traded - the shares were traded irregularly is a strong pointer that they were held as investment, lest there be a new category of static trading or business - there was a limited dividend drawn from the shares - the fluctuation in the number of shares held, and also the companies in which shares are held, is minimal. Just as aggressive and constant behavior as regards the portfolio suggests business activity, its absence suggests that the shareholding was as an investment - to hold that the portfolio is to be treated as business would deny the possibility of selling an investment based on a market factors, or dealing in them it at all - the assessee has transacted in shares does not necessarily mean that it is a trading activity - shares held as investment may also be sold and purchased, the crucial factor being the frequency and volume of the trades to determine the true intention for which they are held - Considering the limited activity surrounding the shareholding of the assessee in relation to the 13 scrips, the order of the CIT(A) and the ITAT is upheld - the amount reported by the assesse is to be treated as STCG – Decided against Revenue.
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2014 (4) TMI 680
Disallowance u/s 36(1)(iii) of the Act – Interest free advances - Whether the Tribunal fell into error in setting aside the disallowance u/s 36(1)(iii) of the Act - Held that:- The Tribunal was of the view that the advancing of interest-free monies to the subsidiary companies was driven by business considerations since the subsidiaries were also engaged in the same business in which the assessee was engaged – Relying upon SA BUILDERS LTD. Versus COMMISSIONER OF INCOME-TAX (SC) [2006 (12) TMI 82 - SUPREME COURT] - it would be in the interest of business of the assessee and certainly would be commercially expedient for the assessee to advance interest-free monies to the subsidiaries as part of the corporate business strategy to expand its business operations through its subsidiaries – thus, the order of the Tribunal is upheld – Decided against Revenue.
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2014 (4) TMI 679
Cancellation of penalty u/s 271(1)(c) of the Act – Concealment of income – Acceptance of profits @ 11% - Projects on turn-key basis taken by the assessee contractor – Held that:- The decision in MAK Data P. Ltd. Versus Commissioner of Income Tax-II [2013 (11) TMI 14 - SUPREME COURT] followed - The number of discrepancies and irregularities listed by the special auditor in his report which are reproduced in the assessment order bear testimony to the fact that the books of accounts maintained by the assessee were wholly unreliable - there can be no sanctity attached to the figure of gross contract receipts on which the assessee estimated 3% as its income - the AO did not enhance the figure of gross receipts but that is not because he gave a clean chit to the books of accounts maintained by the assessee. He could not have given a clean chit in the face of the defects, discrepancies and irregularities reported by the special auditor - the mere fact that the estimate was reduced by the Tribunal to 8% would in no way take away the guilt of the assessee or explain its failure to prove that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on its part - the assessee was taking a chance - sitting on the fence - despite the fact that there was a search towards the close of the relevant accounting year in the course of which incriminating documents were found - the intention of the assessee was to take a risk and disclose a lesser income than what it actually earned and rely upon the minor variations in the rate of profits adopted by the taxing authorities and the Tribunal as a defence in the penalty proceedings - The plea - accepted by the Tribunal - that the assessee agreed to be assessed at 11% of the gross receipts only “to buy peace” and “avoid litigation” cannot be accepted - the Tribunal was in error in upholding the order of the CIT (Appeals) cancelling the penalty – Decided in favour of Revenue.
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2014 (4) TMI 678
Interpretation of section 80HHC(3) of the Act - Scope of the Business of assessee - Whether the word 'business' u/s 80HHC(3) of the Act means all businesses of an assessee or only that business, which is partly or fully doing export business – Held that:- There is no dispute that the formula is, Profit of the business is Export turnover Total turnover of the business - the word 'business' has the same meaning as in the word 'profits of the business' as well as the 'total turnover of the business' provided , 'Profit of the business' means the profits of the business of that unit only, which is fully or partly doing export business namely the SE-Unit , then the 'total turnover of the business' will also mean the total turnover of the SE-Unit only; and 'Profits of the business' means total profits namely profits from the SE-Unit and F-Unit, then the 'Total turnover of the business' will include turnover of both of them. The meaning of the word 'business' used in section 80HHC(3) of the Act is confined only to export oriented unit namely the SE-Unit or to all the businesses carried out by the Assessee namely the SE-Unit as well as the F-Unit is to be determined - use of the word 'total' in section 80HHC(3) of the Act signifies that it is not limited to a particular unit but refers to all the businesses carried on by the Assessee - The decision in GJ. Fernandez Versus ACIT [2010 (10) TMI 843 - Karnataka High Court] followed - the word 'export turnover' is also defined in explanation (ba) - It excludes certain amounts mentioned - it does not exclude the turnover of the business other than the one doing export business - the word 'business' means the all businesses carried on by the Assessee and it is not limited to the export oriented unit namely the SE-Unit - decided in favour of Revenue.
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2014 (4) TMI 677
Disallowance u/s 40A(3)(a) of the Act – Payment made otherwise than by account payee cheque - endorsement of crossed cheques - Held that:- It is indisputable that the term “an account payee cheque” is well understood and signifies cheque which carries a mandate to have the amount mentioned in the cheque to be paid to the drawee of the cheque. In common parlance and as per RBI directives, it would, thereafter, not be open to the drawee of the cheque to endorse the cheque in favour of another person. RBI directions in no uncertain terms mandate the banks to credit the amount of an account payee cheque only in the account of the payee and no other person and conversely not to accept any cheque from any source other than the person named in the account payee cheque except after requiring the drawer of the cheque to withdraw the mandate in this respect. When RBI directives command the banks not to deposit the cheque amount in favour of any person other than the drawee of the cheque and correspondingly prohibit the banks from accepting any cheque, which is account payee cheque from a source other than the drawee, lack of any distinction between a crossed cheque and an account payee cheque without a further endorsement “ not negotiable” would be of no further relevance. Genuineness of the payments and receipts of the amounts by the payee was one of the factors, however by no means a sole factor - Several other peculiar facts went into the Court taking a decision that it had taken - no such additional facts emerge - CIT(Appeals) noted a futile attempt on part of the assessee to show that the cheques were A/c payee - Assessee relied on documents which were not genuine - there was no other additional ground, compelling reason or commercial expediency, which would have left no choice, would have compelled the assessee to make payment other than by account payee cheques - It was this overwhelming consideration of impossibility of making the payments through the mode other than by account payee cheque - the Tribunal has correctly interpreted the provisions of section 40A(3) of the Act – Decided against Assessee.
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2014 (4) TMI 676
Interpretation of section 80IA(9) of the Act – Claim of deduction u/s 80HHC of the Act - Whether the Tribunal is right in holding that the assessee can claim deduction both u/s 80HHC as also u/s 80IA despite the provisions of section 80IA(9) – Held that:- Sub-section (9) of section 80IA was aimed at restricting the successive claims of deduction of the same profit or gain under different provisions contained in sub-chapter C of Chapter VI of the Act - The provision necessarily impacts other deduction provisions including section 80HHC of the Act - Nothing contained in section 80HHC suggests that the deduction provided was immune from any outside influence or that the provision was impregnable by any other statute or enactment - Accepting any such theory would lead to incongruous results - Even the assessee concedes that sub-section (9) of section 80IA would operate as to limiting the combined deductions to a maximum of the profits and gains from an eligible business of the undertaking or enterprise - If section 80HHC contained a protective shell making it immune from any outside influence, even this effect of sub-section (9) of section 80IA could not be applied - This would completely render the provisions of subsection (9) of section 80IA redundant and meaningless. Sub-section (9) of section 80IA was enacted to have universal application to all deductions under sub-chapter C of Chapter VI - It was neither possible nor expected of the Legislature to make individual matching provisions in large number of statutory provisions recognizing deductions under various situations - Such provisions are often times made for a limited period, new deductions are introduced from time to time and old deductions withdrawn - different formulae have been provided for manufacturing exporter and trader and in case of an assessee whose exports comprise of both the sources - at the stage of sub-section (3) of section 80HHC effect of sub-section (9) of section 80IA would apply - clause (baa) to explanation to section 80HHC defines a term 'profits of the business' - While working out the business profits as specified therein, in terms of sub-section (9) of section 80IA the profit or gain which had already been allowed deduction to the extent mentioned therein would have to be ignored. In IPCA Laboratory Ltd. v. Deputy Commissioner of Income-Tax reported in [2004 (3) TMI 9 - SUPREME Court] it has been held that Section 80AB is also in Chapter VI-A - It starts with the words "where any deduction is required to be made or allowed under any Section of this Chapter" - This would include Section 80HHC - Section 80AB further provides that "notwithstanding anything contained in that Section" - Thus Section 80AB has been given an overriding effect over all other Sections in Chapter VIA -Section 80HHC does not provide that its provisions are to prevail over Section 80AB or over any other provision of the Act. Section 80HHC would thus be governed by Section 80AB - Section 80AB makes it clear that the computation of income has to be in accordance with the provisions of the Act - If the income has to be computed in accordance with the provisions of the Act, and then not only profits but also losses have to be taken into consideration – Decided in favour of Revenue.
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2014 (4) TMI 675
Maintainability of petition - Correctness and sustainability of order – Denial of exemption – Alternate remedy available – Held that:- The assessee is having an effective alternative remedy by way of appeal before the appellate authority and in the that circumstance, interfere is not liable to be made – relying upon Income Tax and Others v. Chhabil Dass Agarwal [2013 (8) TMI 458 - SUPREME COURT] - the denial of exemption is not a blanket denial - the correctness of the figures will have to be examined by the competent authority with reference to the relevant records - This cannot be pursued in a proceeding under Article 226 of the Constitution of India, more so when the assessee is having an effective alternative remedy by way of appeal – Decided against assessee.
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2014 (4) TMI 674
Waiver of Pre-deposits - Liability to deduct surcharge and turnover tax from the income u/s 37 of the Act - Computation of income tax – Held that:- The matter is required to be considered and decided by the competent authority, before whom the statutory appeals are pending - This being the position, the Court finds it not fit and proper to express anything on merits – 40% of the outstanding liability is required to be submitted as interim stay till the disposal of appeal – Partial stay granted.
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2014 (4) TMI 673
Genuineness of the will – Burden to prove – Deletion of unexplained jewelry – Unexplained income – Held that:- All the facts cumulatively led both the authorities to concurrently hold that the Will was not questionable - Both have rightly held that it was a presumptive action on the part of the AO to dismiss the contents of the Will - the details from the certificate of the registered valuer in respect of jewelry bequeathed to the assessee by her father and also considering the supporting documents indicating clearly the transfer of amount from USA to India - the maximum sum that could have been transferred by the father if considered by each trip from USA was Rs.10 lakhs and accordingly, the Tribunal sustained a sum of Rs.10 lakhs out of Rs.18 lakhs – thus, there is no reason to interfere in the findings of the Tribunal – Decided against Revenue.
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2014 (4) TMI 672
Nature of Income received – income from house property or income from other sources - Air-conditioning and other charges - Disallowance of property maintenance expenses – Held that:- Following SULAKSHANA SECURITIES LTD Versus INCOME TAX OFFICER [2014 (1) TMI 705 - ITAT MUMBAI] Income from air conditioning and other charges has to be assessed as income from other sources - while computing the income from other sources the assessee will be entitled for deduction of expenses u/s 57 - CIT (A), did not analyses the nature of expenditure incurred by the assessee in relation to Mafatlal Centre building, and has simply directed the AO to allow electricity charges only - Such a direction is wholly misconceived as all the necessary expenditures which are attributable to the earning of the receipts which are shown under the head “income from other sources” has to be considered under section 57(iii) – thus, the order of the CIT(A) set aside and the matter is remitted back to the AO for adjudication – Decided in favour of Assessee.
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2014 (4) TMI 671
Confirmation of penalty u/s 271(1)(c) of the Act – Additions made u/s 68 of the Act – Held that:- The findings given in the assessment proceedings are quite relevant and have probative value but such a finding alone may not justify the levy of penalty in a given case, because the considerations that arise in the penalty proceedings are different from the assessment proceedings - In the penalty proceedings, the matter has to be examined from the angle that whether the assessee is guilty of furnishing inaccurate particulars of income or concealment of income - the issue has to be examined afresh and the assessee may adduce fresh evidence in the penalty proceedings to establish by way of material, relevant facts which may come into effect as liability of penalty. The assessee even though may not file any fresh evidence but still may rely upon the existing material to prove that presumption raised by the Explanation would stand rebutted and he is not guilty of concealment of furnishing of inaccurate particulars of income or for concealment - the sole material which has been relied upon is the statement of Mr. D.A. Sawant – the piece of material alone cast a serious doubt against the genuineness of the loan - this may not be conclusive for the penalty proceedings - Once the assessee furnished the explanation based on the material on record, he has to give a conclusive finding on such explanation whether it is a bonafide or has been substantiated or not – thus, the matter is remitted back to the AO to decide afresh about the penalty – Decided in favour of Assessee.
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2014 (4) TMI 670
Typographical error – Error committed at the time of filing e-return – Non-exercise of power u/s 154 of the Act - Held that:- Due to some clerical error the decimal separator was not put in the total income declared by the assessee and as such the total income was treated at Rs.3,62,16,725/- instead of Rs.3,62,167.25 – it is an admitted fact that of the AO that there was a clerical error in writing the total income of the assessee - it was the duty of the AO to correct the figure exercising his powers u/s 154 of the Income Tax Act - On the failure of the AO to correct the figure, it was the duty of the CIT(A) to rectify the defect - the powers of the CIT(A) are coextensive with that of AO - No law of the land can justify the action of the lower authorities in taxing the assessee for the income which in fact has not been received by the assessee but due to some error in writing the figure to which the Revenue Authorities have also not disputed – thus, the AO is directed to assess the income of the assessee treating the total income at Rs.3,62,167.25 – Decided partly in favour of Assessee.
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2014 (4) TMI 669
Addition made u/s 68 of the Act – Deposits in the bank account – Opportunity to file submissions not provided - Held that:- The FAA has proceeded to decide the issues after considering the submissions made by the assessee - It is not known as to whether the first appellate authority did call for the details relating to the loan transactions of earlier years or not - Similarly it is not known as to whether the assessing officer also did call for such kind of details – there was merit in the claim of the assessees that they did not get sufficient opportunities to substantiate their submissions. The CIT(A) has proceeded to adjudicate the issue by making certain observations about the failure of the assessee to furnish the details and the observations are seriously disputed by the assessee - the assessees have filed copies of returns of income filed for earlier years as additional evidences would show that they were not furnished before the AO during the course of assessment proceedings – the CIT(A) has made certain presumptions before proceeding to adjudicate the issues and the said presumption entertained by CIT(A) is being questioned by the assessees – thus, the matter is required to be remitted back to the AO for fresh adjudication –Decided in favour of Assessee.
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2014 (4) TMI 668
Addition of commission - Deletion of compensation charges – Held that:- CIT(A) was of the view that the expenditure of commission payment was incurred by the assessee wholly and exclusively for the purpose of its business and therefore was allowable as an expenditure and accordingly deleted the addition - CIT(A) agreed with the assessee that office/infrastructure and other facilities of holding company were used for the purpose of its business - The CIT(A) was convinced that the payment of compensation charges to the holding company was wholly and exclusively for the purpose of business - the total income computed by the holding company for the year under consideration is at Rs. 84,09,900 - The returned income of the assessee is at Rs. 11,99,832 - Both the assessee and its holding company come within the same tax brackets - there is no benefit to the assessee by inflating its expenditure and diverting it towards its holding company as both parties are subject to same rate of tax and both parties are showing positive income - The entire exercise is tax neutral – thus, there is no reason to interfere with the findings of the CIT(A) – Decided against Revenue.
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2014 (4) TMI 667
Fee treated as capital expenses - Disallowance of Non-compete fee – Fee paid to Executive Director – Held that:- The payee is precluded from making a claim, for the reason that the intellectual property is developed etc. during the course of his employment with the company – the CIT(A) and AO were not right in taking the view that the assessee company has paid the compensation to acquire the intellectual property from the payee permanently - The territorial restriction prescribed in Article 5 does not lead to a conclusion that Mr. Prasrampuria was carrying on any business in those area - he was only prohibited from exercising the activities prescribed in Article 5 in those four countries. All the three reasons cited by the CIT(A) to confirm the addition has failed - the period of prohibition / restriction is for a period of one year only - the period of one year cannot be considered as a long period which would give an enduring benefit to the assessee – relying upon Commissioner of Income Tax Versus M/s Eicher Limited [2008 (3) TMI 15 - HIGH COURT OF DELHI] - the assessee could not be said to have derived any enduring benefit out of the payment of non-compete fee - it is in the nature of restricting only one of the employees of the Company that was taken over by the assessee company – thus, it cannot be considered as a Capital expenditure - the tax authorities were not justified in disallowing the claim of ₹ 80.88 lakhs treating the same as Capital expenditure - thus, the order of the CIT(A) set aside – Decided in favour of Assessee.
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2014 (4) TMI 666
Disallowance of interest expenses – Addition of estimated interest - Outstanding bank balance – Held that:- The excess balance shall automatically be transferred to a Fixed Deposit account, which will earn interest for the assessee - the assessee has effectively utilised the surplus funds - Since the Flexi Current account is a running account, the daily balances would change every day depending upon the deposits and collections - in order to put the bank balances for better use, the assessee seems to have opted for Flexi Current account and in that process, it has earned a sum of about Rs.5.00 lakhs as interest also - the AO’s view that the assessee has kept the funds idle is not based on any material but only on surmises and conjectures - the AO has computed notional interest on the outstanding bank balance as at the year end, which is not permissible under the Act – thus, the order of the CIT(A) set aside and the AO is directed to delete the addition – Decided in favour of Assessee. Disallowance made u/s 14A of the Act – Held that:- The AO has applied Rule 8D, which is not applicable to the year - the assessee has earned exempted income - some amount of disallowance is called for in terms of sec. 14A - Assesseee as well as revenue agreed that a sum of Rs.15,000/- may be disallowed – thus, the order fo the CIT(A) and the AO is directed to restrict the addition – Decided partly in favour of Assessee.
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2014 (4) TMI 665
Depreciation on BSE card – Held that:- The decision in Sino Securities P. Ltd. Versus Income-tax Officer [2011 (11) TMI 535 - ITAT MUMBAI] and Sunidhi Consultancy Services Ltd. Versus Deputy Commissioner of Income-tax 4(2), Mumbai [2012 (4) TMI 392 - ITAT MUMBAI] followed - assessee received the shares in lieu of BSE Membership card then whatever written down value was standing in the books of account of the assessee has been received by the assessee by way of shares and therefore, no shortfall arises to be claimed as depreciation – Decided in favour of Revenue. Disallowance of loss of open positions in the future and options segment – Held that:- The decision in CIT Versus M/s Woodward Governor India P. Ltd. & M/s Honda Siel Power Products Ltd. 2009 (4) TMI 4 - SUPREME COURT] followed - loss suffered as on the date of balance sheet is an item of expenditure u/s 37(1) of the Act - No adverse findings have been given by the AO so far as the method of accounting employed by the assessee is concerned - There is also no finding of the AO that the assessee is not following the method of accounting employed during the year under consideration consistently - the AO is directed to allow the loss – Decided in favour of Assessee.
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2014 (4) TMI 664
Addition u/s 68 of the Act – Unexplained cash credit – Held that:- CIT(A) rightly held that the assessee has shown an amount of Rs. 37,06,000/- in cash - there was cash payment of Rs. 15,57,000 - CIT(A) was convinced that the assessee has failed to discharge the onus cast upon it by virtue of Sec. 68 and confirmed the addition of Rs. 21,49,000/- in the name of Shri Raouff Ansari - the assessee has never discharged the initial onus cast upon it by Section 68 of the Act – CIT(A) has confirmed the addition of Rs. 2640 for want of verifiable details – thus, there was no reason to interfere with the findings of the CIT(A) - Decided against Assessee. Disallowance of prior paid expenses – Held that:- The assessee could not prove before the CIT(A) that the liability have crystallized during the year under consideration – thus, there was no reason to interfere with the findings of the CIT(A) – Decided against Assessee. Disallowance of 5% of expenses on adhoc basis – Held that:- Considering the nature of expenses and the non co-operation by the assessee in not filing the details – as the CIT(A) has already reduced the disallowances by 50% - thus, there is no no need for any interference in the order of the CIT(A) – Decided against Assessee. Deletion of addition u/s 68 of the Act - Unexplained cash credit – Held that:- CIT(A) rightly held that the confirmations were furnished by the party and also furnished its PAN to AO - the loan was returned in subsequent year and the sum of Rs. 2,93,138/- represents provision for interest on the opening balance plus the money introduced during the year - the assessee has successfully discharged the initial onus cast upon it by virtue of Sec. 68 of the Act – this, there is no need for interference in the order of the CIT(A) – Decided against Revenue. Addition u/s 68 of the Act – Onus to prove - Amount received from MD of the company as cash credit – Held that:- CIT(A) has rightly held that the assessee has shown the amount from Directors under the head ‘unsecured loans’ from the Directors – the provisions of Sec. 68 clearly apply on the facts of the case - the primary onus is on the assessee and this onus stands undischarged - the addition for the reasons that the assessee has not discharged the primary onus cast on it u/s 68 of the Act – thus, there is no reason to interfere with the findings of the CIT(A) – Decided against Assessee. Disallowance of prior paid expenses – Held that:- CIT(A) was convinced that the liability for octroi charges did crystallized during the year and allowed the relief to the extent of Rs. 1,57,189 - In so far as advertisement expenditure is concerned, CIT(A) observed that the liability was crystallized in the earlier year therefore cannot be allowed as expenditure during the year under consideration – the CIT(A) has given a clear finding regarding the crystallization of liability in respect of advertisement expenditure – thus, there is no need for interference in the order of the CIT(A) – Decided against Assessee. Deletion made u/s 41(1) of the Act – Held that:- The AO has made the addition u/s 41(1) of the Act only because he found that the liabilities were outstanding for more than one year - CIT(A) has rightly observed that this cannot be any ground for making the addition u/s 41(1) of the Act – thus, there is no reason for any interference in the order of the CIT(A) – Decided against Revenue. Disallowance of professional /legal charges – Held that:- CIT(A) rightly held that the assessee and its associated concerns are different entities carrying on business separately - CIT(A) was convinced that the expenses are not incidental to the business of the assessee – as the assessee has failed to substantiate its claim of expenses, there is no reason for any interference in the order of the CIT(A) – Decided against Assessee. Penalty u/s 271(1)(c) of the Act – Unexplained cash credit u/s 68 of the Act – Held that:- As decided in assessee’s own case for the previous assessment year, the assessee has grossly failed to explain the genuineness of the transaction – thus, the levy of penalty is justified and since a minimum penalty has been levied at the rate of 100% of the tax sought to be evaded, no interference is called for – Decided against Assessee.
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2014 (4) TMI 663
Allowability of deduction u/s. 80IA of the Act - Captive power generating DG sets Rail systems - Nature of benefit Capital OR not - Sales tax exemption benefit - Held that:- As decided in assessee s own case for the previous assessment years, it has been held that the claim u/s 80IA in respect of captive power generating DG sets and rail systems is allowed also it has been held that sales tax exemption benefit is on account of capital receipt not liable to tax Decided against Revenue. Deletion made u/s. 14A of the Act r.w. Rule 8D of the Rules Held that:- The decision in Godrej Boyce Manufacturing Co. Ltd. Vs DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] followed - Rule 8D cannot be applied during the assessment year - the assessee has purchased units out of its own funds thus, the matter is remitted back to the AO for fresh adjudication to verify the cash flow statement to see whether the assessee has purchased units from its own funds - the disallowance appears to be reasonable considering the nature of disallowance as computed by the assessee - the interest part shall be considered by the AO after verification and the addition of other expenses set aside Decided partly in favour of Revenue. Exclusion of taxable investment in unit of growth fund Held that:- The AO himself has excluded the investment in units of growth fund while calculating the disallowance u/s. 14A of the Act - The CIT(A) seems to have given this direction without appreciating the fact of the case - general observations made by the CIT(A) need not be interfered Decided against Revenue. Disallowance in respect of Employee stock option expenses Held that:- Relying upon Biocon Ltd. VS DCIT [2013 (8) TMI 629 - ITAT BANGALORE] - the expenditure in respect of ESOP is allowed after considering the SEBI guidelines - the allowability of the claim of the assessee has to be considered afresh thus, the matter is remitted back to the AO to consider the claim of the assessee Decided in favour of Assessee. Nature of Receipts Capital or not - Proceeds from certified emission reduction Receipts generated out of capital projects Held that:- The assessee has shown the sale consideration out of sale proceeds of Carbon Credit under the head other income as revenue receipts which now it wants to claim as capital receipts - no new facts have to be verified so far as the claim is concerned realization of Carbon Credit are already shown under the head other income the decision in My Home Power Ltd. Vs DCIT [2012 (11) TMI 288 - ITAT HYDERABAD] followed - the AO is directed to treat the Proceeds realized from sale of Certified Emission Reduction (CERs) generated out of Capital Projects registered with UNFCCC as capital receipts Decided in favour of Assessee. Deduction u/s 80IA(2) of the Act Held that:- The decision in National Thermal Power Company Limited Versus Commissioner of Income-Tax [1996 (12) TMI 7 - SUPREME Court] followed - the facts on record mean the record for the year under consideration - It is a legal claim which involves question of law but at the same time facts relating to the claim have not at all been considered at the assessment stage except that the assessee is having a jetty, nothing more is considered at the assessment stage - the claim u/s. 80IA has to be tested on many factors - Having an infrastructure facility is only one of them - other factors have not been considered and need to be verified by bringing cogent evidences on record the additional ground cannot be admitted Decided against Assessee.
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2014 (4) TMI 662
Disallowance of claim for depreciation on BSE and NSE Membership Card – Held that:- The decision in JM FINANCIAL SERVICES PVT LTD Versus ADDL COMMISSIONER OF INCOME TAX. MUMBAI [2013 (8) TMI 821 - ITAT MUMBAI] followed - the right of membership (including the right of nomination) vests in the Exchange only when a member commits default - Otherwise, he continues to participate in the trading session on the floor of the Exchange - by virtue of Explanation 3 to Section 32(1)(ii) the commercial or business right which is similar to a "licence" or "franchise" is declared to be an intangible asset - the right of membership, which includes right of nomination, is a "licence" or "akin to a licence" which is one of the items which falls in Section 32(1)(ii) of the Act - The right to participate in the market has an economic and money value - It is an expense incurred by the assessee which satisfies the test of being a "licence" or "any other business or commercial right of similar nature" in terms of Section 32(1)(ii) of the Act – Decided in favour of Assessee. Disallowance u/s 14A r.w Rule 8D of the Rules – Held that:- A specific dissatisfaction was recorded by the AO in the assessment order regarding the correctness of the disallowance offered by the assessee u/s 14A of the Act and even the reasons for the same were given by the AO - Rule 8-D was not applicable in A.Y. 2007- 08 when the additional disallowance made u/s 14A of the Act - As per Rule 8D, if the AO is not satisfied with the disallowance computed by the assessee u/s 14A of the Act, he can compute the disallowance to be made u/s 14A of the Act by applying the Rule and there is nothing to suggest that either the AO or the CIT(A) is required to point out any specific expenditure incurred for earning the dividend income in order to make a disallowance u/s 14A read with Rule 8-D of the Income tax Rules, 1962 – thus, there was no merit in the ground raised by the assessee – Decided against Assessee. Disallowance of expenses on lease rent paid for vehicles – Claim for depreciation on vehicles and finance charges paid on lease finance assets - Held that:- The decision in JM FINANCIAL SERVICES PVT LTD Versus ADDL COMMISSIONER OF INCOME TAX. MUMBAI [2013 (8) TMI 821 - ITAT MUMBAI] followed - The facts has not been discussed or dealt with by the AO - an appreciation of facts by the CIT(A) has also been disputed - the entire issue is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Disallowance of entrance fees paid to the club for corporate membership – Held that:- The decision in CIT vs. Samtel Color Ltd 2009 (1) TMI 26 - DELHI HIGH COURT] followed - the Corporate Membership fee paid to the club was held to be deductible as revenue expenditure u/s 37 of the Act holding that the fact that an expenditure gives enduring benefit is by itself not conclusive as regards the nature of the expenditure - the disallowance on account of entrance fee paid by the assessee for Corporate membership of Cricket Club of India is set aside – Decided in favour of Assessee. Computation of rebate u/s 88E of the Act – Allocation of indirect expenses – Held that:- Assessee was unable to explain any basis on which the indirect expenditure to the extent of Rs. 22,10,259/- was allocated by the assessee to the trading activity - the allocation of indirect expenses towards trading activity as made by the assessee was without any basis and keeping in view of the same as well as other facts of the case, allocation of indirect expenses made by the CIT(A) on estimated basis cannot be disturbed being fair and reasonable – thus, there is no need to interfere in the order of the CIT(A) – Decided against Assessee.
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2014 (4) TMI 661
Penalty u/s 271(1)(c) of the Act – Deduction claim for fee paid to portfolio manager - No satisfactory explanation provided – Held that:- The assessee has furnished an explanation to the effect that he had claimed the deduction of Portfolio Management fee against the Short term capital gain on the basis of decisions rendered by the Tribunal - the decision in ITO Vs. Radha Birju Patel [2010 (11) TMI 145 - ITAT MUMBAI] followed - the Portfolio Management charges are deductible as expenses - the addition or disallowances made in the assessment proceedings would not automatically give rise to penalty and hence in the penalty proceedings, the entire matter has to be looked into afresh, though the finding given in the assessment proceedings can be taken help of - the AO was not justified in levying penalty u/s 271(1)(c) of the Act on the disallowance of Portfolio Management Charges – the order of the CIT(A) set aside the AO is directed to delete the penalty u/s 271(1)(c) of the Act – Decided in favour of Assessee.
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2014 (4) TMI 660
Restriction of disallowance of interest expenses u/s 14A of the Act – Held that:- CIT(A) has given relief to the assessee in view of the undisputed fact that assessee was having interest free funds against the investment in shares - there was no finding of AO that interest bearing funds were utilized by the assessee in making investments in shares resulting in tax free income – relying upon CIT vs. Jayesh Budhalal Mehta [2010 (2) TMI 1056 - GUJARAT HIGH COURT] - if assessee has sufficient interest free funds and AO having have not brought any material on record to prove that interest bearing funds were utilized in making investments in assets resulting in tax free income then no disallowance could be made - disallowance to the extent of Rs. 89,550/- has been retained by the Ld. CIT(A) in view of the fact that assessee himself had estimated the administrative costs attributable to dividend income at Rs. 89,550 – thus, there is no need to interfere in the order of the CIT(A) – Decided against Revenue. Addition of STCG as business profit – Held that:- Assessee as well as revenue both are in appeal - At the time of hearing counsel of the assessee reiterated the submissions made before lower authorities and also highlighted certain portion of those submissions and relied upon case laws - it would not be proper to accept the submissions without getting them verified – thus, the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of Revenue.
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2014 (4) TMI 659
Allowability of gross loss incurred in financing activity – Held that:- The activity of borrowing and lending is not representing the assessee’s business, being in fact barred from being so - rather than the activity being income driven (which would require necessary approvals, of which there is no reference at any stage), so that the assessee incurs the necessary expenditure toward the same, i.e., earning income, the assessee has availed of loans for financing working capital of its non-existing business - in fact, even not deciding on it, and which (funds), being surplus for the time being, are lent to sister concerns, with a view to therefore park the same - Would the assessee have done so, if it did not have a whole range of sister concerns, or is it a part of a scheme to act as a conduit for funds for them - Though the borrowings are on secured loan basis, which, bearing a lower risk, attract a lower rate of interest, it yet receives a lower rate of interest on its lending, which is on unsecured basis - No basis or justification for the payment at interest rates, charged ostensibly at prevailing rates by the assessee, in excess of that charged, stands furnished – there is a deficit in the amount of borrowing relent as well – thus, the order of the CIT(A) upheld – Decided against Assessee. Disallowance of stamp duty – Loan from Bank – No business activity carried on during the year - Held that:- The loan advanced by the Bank of America is for funding working capital in the main, while no trading or manufacturing activity stands undertaken, for and toward which the said capital could be said to have been availed of – there was no reason as to why it has been considered as secured, which perhaps is also the reason for it being classified as an unsecured loan by the assessee in its audited balance-sheet, while at the same time claiming expenses on stamp duty, which is only toward the registration of the hypothecation agreement - the assesse to have not carried out any business - No part of the borrowed capital could be said to be availed of for business purposes, so as to validate the assessee’s claim u/s. 37(1) of the Act. The assessee has abysmally failed to show that the same stood incurred toward making or earning any income - the activity to be not income driven at all - No basis or algorithm or model of its operations stood furnished, so that even the direct expenses by way of interest incurred on the corresponding borrowed capital, stood confirmed for disallowance in part, i.e., to the extent of the short fall in the interest realized, in the absence of the requisite details/facts – thus, the disallowance is upheld – Decided against Assessee. Disallowance of 50% of staff expenses – Held that:- The assessee has during the year disposed of almost its entire machinery, besides other fixed assets, save immoveable property - it did not generate any business by way of processing, which would presumably require plant and machinery, nor any explanation toward the same stands furnished at any stage - the expenditure incurred at almost the same level appear to be independent – thus, the disallowance is effected at 50%, and not for the total expense claimed – Decided against Assessee.
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Customs
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2014 (4) TMI 658
Exclusion from assessable value u/s 14 of the Customs Act - Consideration of FOB price as cum-duty price as it includes the export duty - Held that:- It is not in dispute that the time and place of export referred to u/s 14 are, respectively, the time and place of shipment of the goods - The price of the goods at the time and place of shipment is its FOB price, whether paid or payable - The law declares that this shall be the transaction value for the purpose of levy of export duty - It does not make provision for abatement of duty element from the FOB price so as to arrive at the assessable value for the purpose of levy of export duty - The provisions of Section 14 are clear and free from any ambiguity. Necessity of incidence of duty to be passed on – Held that:- Judgment in Chhotabhai Jethabhai Patel & Co. vs. UOI & Anr.,[1961 (12) TMI 1 - SUPREME COURT OF INDIA] followed - To qualify as Customs (Export) Duty, it is not necessary that the incidence of duty should always be passed on, so as to satisfy the economists principle of Indirect Tax - On the contrary, the present export duty on Iron Ore could have been levied by the legislature to discourage export of Iron Ore from the Country, with an objective to make it unviable for exporters, who ultimately have been intended to be saddled with the levy, instead of passing on the burden to the purchaser – No substance in the plea of the Appellant that FOB price be treated as cum-duty price and not the transaction value, as prescribed under Section 14 of the Customs Act, 1962 - Appeals are rejected – Decided against appellants.
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2014 (4) TMI 657
Exemption of Duty - Export of goods not permitted by LOP - NEPZ, Noida – Duty on manufacture and export of syringes - Whether the case was covered under Rule 8 of the Customs (Import of Goods at concessional rate of duty for manufacturing of excisable goods) Rules, 1996 or covered by Notification No. 53/97 and the Board circular No. 21/1995, as amended by Notification No. 122/95-Cus – Held that:- In the case of same assessee while disposing appeal No. C/580/2008 this court noticed that when the assessee had shown wastage and scrap of the imported material meant for use in the manufacture of syringes with or without needle, unless the waste and scrap aspect is reconciled for the period November, 96 to April, 2003 it is difficult to reach to any conclusion prematurely about the export or no export of 2,35,54,000 pieces of cannulae - Unless cannulae is properly accounted for it is difficult to hold the manufactured quantity of specific goods were exported - Therefore, it is required to be ensured that the claim of waste and scrap as that is in appeal No. C/580/2008 should not grant undue advantage to the plea of export in the present appeal - Present Appeal is also remanded to the Adjudicating Authority for common disposal along with the controversy in C/580/2008 – Decided in favour of Revenue.
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2014 (4) TMI 656
CHA - One of their employees, who was issued a photo ID Card in Form- H as per Regulation 19 (6) of Custom House Agents Licensing Regulations, 2004, was found to be not possessing the minimum educational qualification as prescribed under Regulation 19. - concerned employee was having a certificate of having completed 12th class from the Board of Secondary Sanskrit Education, Lucknow. - the Board was not recognized by University Grants Commission. - Imposition of penalty u/s 158 (2) of the Customs Act, 1962 - Held that:- The The appellant as well as approving AC or DC of Customs have missed to ascertain whether the Board in question was recognized by UGC - Thus, once there is negligence on the part of department also, it is not fair to impose any penalty on the appellant - No other facts leading to revenue leakage or any loss to the State has been pointed out - Thus, it is felt that penalty imposed is not warranted - The impugned order set aside and appeal allowed – Decided in favour of appellant.
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Corporate Laws
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2014 (4) TMI 655
Winding up petition - Violation of contract - Non payment of dues - Respondents claim that statutory notice was not sent to the registered office address of the company - Held that:- Appellant filed a further affidavit dated 18th February 2014. In paragraph 2 of this affidavit, its deponent states that an examination of the records with the Registrar of Companies shows that Sundeep Plastics Pvt Ltd had its registered office at Udyog Bhavan, and that there is only one form no.18 showing this, dated 15th December 1980. After the change of name, the registered office address is at 52, Mamta “A”, New Prabhadevi Road. This is the address shown on Sundeep Polymer’s annual return for 28th September 1998, and the Directors’ Report and Balance Sheet as on 31st March 2000. The Company/LLP Master Data record, too, shows only this address. To this affidavit, at Exhibit “D”, is another print out of the Company/LLP Master Data, and this also shows the 52, Mamta “A” address. The CIN no of the company (both when it was known as Sundeep Plastics Pvt Ltd and later when its name was changed to Sundeep Polymers Pvt Ltd) is the same - Respondent's reply, dated 27th March 2001, shows only one address: 52, Mamta “A”, New Prabhadevi Road, Mumbai 400 025. This is the very address to which the statutory notice was sent. Whether transaction is hit by the Bombay Money-Lenders’ Act 1946 and the agreement is not a hire-purchase agreement but a loan, thus making the petition not maintainable - Held that:- Under the present hire-purchase agreement, Tata Motors is the owner of the Mercedes Benz. Sundeep Polymers is the hirer. On Sundeep Polymers paying all the agreed instalments to Tata Motors, it had the option of taking the car as its property. Till that time, the car remained the property of the Tata Motors. This is no moneylending transaction. It is an agreement of hire-purchase, a bailment of the car with a provision for sale added. Bar of limitation - Held that:- The hire-purchase agreement is dated 14th July 1998. The petition was filed on 20th June 2001. Even if the date of the agreement is reckoned as the starting point of limitation (which it cannot), the petition is in time. Sundeep Polymers was in default of payment of instalments between 14th August 2000 and 14th February 2001. Taking either of those two dates as the starting point of limitation, the petition is well within time. Whether appellant has an arbitral award in its favour and therefore cannot maintain this petition - Held that:- A petitioning-creditor with a decree need not put it into execution before bringing a winding up petition. He can proceed either under Section 434(1)(b) or, having served a notice, move against the debtor-company under Section 434(1)(a) - Decided partly in favour of applicant.
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Service Tax
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2014 (4) TMI 688
Denial of refund claim - Bar of limitation - Held that:- in the case of export of service during the impugned period the relevant date is the date of receipt of the payment towards the service exported. As the appellant has filed the refund claim in this matter within one year of the date of receipt of the payment, therefore, I hold that the refund claim is in time - Following decision of CCE Pune I vs. Eaton Industries P. Ltd. [2010 (12) TMI 71 - CESTAT, MUMBAI] - Decided in favour of assessee.
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2014 (4) TMI 687
Commercial and industrial construction service - construction work undertaken for educational institutions - Revenue submitted that the institution for which construction activity was being undertaken was collecting substantial fees for providing education. Therefore, the activity has to be considered as commercial activity only - Held that:- The explanation relied upon by Ld. AR applies only to cover training or coaching centre which has to be taxed under section 65 (105) (zzzc). The activity of commercial or industrial construction is made taxable under section 65 (105) (zzzq). These days hardly any education is provided without collecting any fees and for that reason alone, the educational institutions cannot be prima facie considered a commercial institution. If such criterion is adopted even IITs has to be considered as undertaking business or commerce. The activities taxable under commercial training or coaching is on different type of activity where coaching for entrance examination etc. is sought to be taxed. Since in this matter the Bench has already granted waiver of pre-deposit of dues for assessees similarly placed, we grant waiver of pre-deposit of dues arising from the impugned order for admission of appeal in this case also - stay granted.
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2014 (4) TMI 686
Waiver of pre-deposit of tax - Projection theatre under the category of Renting of Immovable Property - Held that:- Section 65(90a) of Finance Act, 1994 renting of immovable property includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course of furtherance of business and commerce. Explanation 1 of the said definition provides that for the purpose of this clause for use in the course or furtherance of business or commerce includes use of immovable property as factories, office building, warehouse, theatres, exhibition halls and marriage halls and multiple use building. In the present case, prima facie, we find that the project theatre was let out for screening of films, which would be included in the definition of ‘Renting of Immovable Property’ - Conditional stay granted.
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2014 (4) TMI 685
Waiver of pre deposit - business of marketing telecom services - Incentive for work done - Applicant claim that these incentives were to be paid to the staff of the applicant, hence not liable to service tax - Held that:- Prima facie, we feel that there is nothing in the contract which shows that the payment of incentives was to the employees of the applicant and not to the applicant themselves. Further, the legal question whether employees can be considered to be distinct from the applicant in this transaction with the M/s. Bharti Telenet also is a debatable issue - Conditional stay granted.
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2014 (4) TMI 684
Waiver of predeposit of interest - demand of interest - appellant submitted that they have erroneously paid the tax on reimbursement of administrative charges which is not warranted - man power recruitment or supply agency services - Held that:- applicant has taken a definite stand before the adjudicating authority that payment of tax is not warranted in this case. It is noted that the adjudicating authority has not given any observation on this issue. Prima facie , we find that Hon'ble Delhi High Court [2012 (12) TMI 150 - DELHI HIGH COURT] has struck down Rule 5 (1) of Service Tax (Determination of Value) Rules 2006. In view of that, we waive the predeposit of interest and penalty and stay its recovery during pendency of the appeal - Stay granted.
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Central Excise
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2014 (4) TMI 654
Refund of duty paid on removal of goods after including transportation charges (FOR) - area based exemption - notification no.56/2002-CE - Held that:- The invoices issued by the appellant mention only one consolidated FOR price and also mention that the sales are on FOR destination basis. This fact is not disputed by the department. When the invoices themselves mention the sales as on FOR sales, risk of loss of goods or damage to the goods during transit would be of the appellant and the ownership of the goods during transit would be treated as of the appellant and if the Department alleges that the sales are not as FOR basis, the burden of proof in this regard would be on the Department. Just because there are no purchase orders placed by the customers or there are no agreements between the appellant and their customers regarding sale of the goods and the terms of sale, it cannot be concluded that the sales are not on FOR destination basis. We find neither any inquiry in this regard has been conducted by the Department nor any evidence has been produced. In view of this, the impugned orders are not correct. The same are set aside - Decided in favour of assessee.
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2014 (4) TMI 653
Duty demand - Estimation of unaccounted production of sponge iron - Receipt of unaccounted iron ore - The transportation of iron ore up to the Uslapur by Railways was under the documents called Railway Receipts (RRs) issued by the Railways - Held that:- The allegation of receipt of unaccounted iron ore is based on the difference between the iron ore accounted for by the appellant company in their records and the receipt of iron ore on the basis of the RRs in the name of the appellant company or endorsed by others to them. The appellant s plea is that in respect of a number of RRs which are in their name for the reason that the iron ore had been transported in the rates assigned to them, the iron has not been received by them but has been received by others against the endorsements on the RRs by them and these facts can be clarified only when the RRs are made available to them but the same have not been made available by the department in spite of their request. Since, the department's case is based on the documents received from the railways and also recovered from the transport company, all these documents have to be supplied and non-supply of these documents would result in denial of natural justice. Similarly, when in respect of the RRs endorsed to M/s Jai Ambey Mineral it is being alleged on the basis of statement of Shri Dilip Kumar Markam that the consignments of iron ore have been transported to the factory premises of the appellant and when the request for cross examination of Shri Dilip Kumar Markam had been made, his cross examination has to be allowed - Matter remanded back - Decided in favour of assessee.
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2014 (4) TMI 652
Duty demand - Clandestine removal of goods - Documents recovered and seized from the residential premises - Held that:- Inasmuch the alleged clandestinely manufactured and cleared ingots were converted into flats by M/s. D P Processors and the finding of clandestine manufacture and clearance of flats of M/s. DC Processors stand already set aside in the above referred decision, we find that the present confirmation of demand on the clandestine clearance of ingots, based upon the same set of documents recovered from the residential premises of Shri Hem Chand Jain and same set of statements recorded during the investigation, is required to be set aside. As such, by following the decision of D P Industries [2007 (7) TMI 115 - CESTAT, NEW DELHI] - Decided in favour of assessee.
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2014 (4) TMI 651
Duty demand - Penalty - quantity shown in the Out-Turn Statement(OTS) on the basis of which the duty has been paid is less than the quantity as per the invoices - Held that:- The differential duty demand had arisen because the investigating officer and the Department did not take into account the quantity of duty paid petroleum products received in the tanks - When the matter came up last time before this Tribunal, we had required the Department to do a sample study and get a report. The report shows that the statements prepared by the appellants are acceptable. During the course of hearing, we verified one statement relating to furnace oil for the quarter of April to June 1994 and after going through the report, we find that the appellants have maintained the accounts and the statement clearly shows that the quantity received in the tank as per OTS has suffered duty. Since the entire quantity received in the tank as per OTS which is non-duty paid petroleum product has suffered duty, we find that the submission of the appellant that the Department has ignored the quantity of duty paid petroleum product receipts have not been taken into account for calculation of differential duty is correct - Decided in favour of assessee.
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2014 (4) TMI 650
Valuation of goods - Inclusion of testing charges - whether the testing charges for the customer s tonners which according to the Respondent are optioned, are part of the transaction value of the goods - Held that:- During the period w.e.f. 01.07.2000, under Section 4(1)(a), the assessable value of the goods, on each removal, shall, in a case where the goods are sold by the assessee, for delivery at the time and place of removal to unrelated buyers and price is the sole consideration for sale, is the Transaction value - any amount that the buyer is liable to pay to or on behalf of assessee for the reason of or in connection with sale would cover the amount paid or payable by the buyer for the goods, only for the expenses which contributed to the value of the goods or are necessary to make the goods marketable and this expression would not include the amounts paid by the buyers for something which has no nexus with the emergence of marketable goods or does not contribute to the value of the goods up to the point of sale from the place of removal. Thus if some goods become marketable and can be sold only when packed in certain type of containers and testing of those containers is mandated by law, the testing charges of those containers would be includible in the value along with the cost of such containers if the containers are of durable and returnable nature, the amortized cost of the container including testing charges during the period of use would be includible in the assessable value - Cylinder testing charges are not includible in the assessable value of the liquid chlorine and there is no infirmity in the impugned order - Decided against Revenue.
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2014 (4) TMI 649
Duty demand - Held that:- prima facie iron ore in question was transported to the appellants factory. Inasmuch as there is no entry in the statutory records, it leads to the reasonable conclusion that the same has been utilized in the factory for manufacture of final products which stands cleared without payment of duty. As such, at this stage, we are of the view that the appellant needs to be put to some terms of deposit. We also find that the no plea of financial difficulty has been raised in their stay application and they have not produced any evidence to reflect upon poor financial condition of the appellant - Conditional stay granted.
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2014 (4) TMI 648
Waiver of pre deposit - Denial of CENVAT Credit - Invocation of extended period of limitation - Held that:- We really fail to understand the late issuance of the show cause notice, by invoking the extended period based upon the same set of investigation, when the first show cause notice itself was issued in December 2008. The period covered in the present appeal could have been covered in the earlier show cause notice inasmuch as that show cause notice was also issued after a period of two years from June 2006. As such we are of the view that the appellant had a good case on limitation. Apart from that we also note that the appellant had already deposited Rs. 2.5 lakhs approximately. By treating the same as sufficient for the purpose of Section 35F of the Act, we dispense with the balance amount of duty and entire amount of penalty and stay the recovery of penalties upon both the appellants during the pendency of the appeals - Stay granted.
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2014 (4) TMI 647
Cenvat Credit - Denial of benefit of transportation charges - Revenue contends that service tax credit in respect of such GTA service is not available as sales were not on FOR basis - Held that:- definition of input service was amended with effect from 1.4.2008, replacing expression clearances of final products from the place of removal to clearances of final products, upto the place of removal. The appellant has taken a stand before the lower authorities that their sales were on FOR basis but we find that they have been able to produce purchase order in respect of one buyer i.e. M/s.Mitsun Steels Pvt.Ltd. showing delivery on FOR basis. In the case of Bharat Trading Co., there is a certificate issued by said buyer subsequent to the initiation of proceedings. There is no documentary evidence to establish that the sale to the said buyers was on FOR basis. As such, we are of the view that the appellant has not been able to make out a case for unconditional stay - Conditional stay granted.
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2014 (4) TMI 646
Reversal of CENVAT Credit - Whether, a manufacturer of final product, who procured inputs and availed MODVAT credit thereon, was entitled to remove the inputs as such, without reversal of the credit or payment of equivalent amount of duty, to a 100% EOU under CT-3 certificate in terms of Notification No. 1/95 – Held that:- removal of inputs by the recipient without reversal of credit to 100% EOU does not satisfy the condition of the notification which requires direct procurement from the factory of manufacture. The Bench observed that the said condition is not a procedural condition but a substantive and needs to be fulfilled before the benefit of the notification can be extended. Ld. Advocate submits that the notification considered by the Larger Bench was 1/95-C.E. whereas the notification involved in the present proceeding is 22/2003-C.E. However, he fairly agrees that the condition involved in the past notification as also in the present notification is identical - no prima facie case in favour of the appellant and as no financial hardship stands pleaded - Following decision of LAKSHMI AUTOMATIC LOOM WORKS LTD. Versus COMMR. OF C. EX., TRICHY [2008 (10) TMI 57 - CESTAT CHENNAI] - Conditional stay granted.
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2014 (4) TMI 645
Denial of CENVAT Credit - Depreciation on the CENVAT credit of duty paid on capital goods - Held that:- Commissioner (Appeals) has discussed in the impugned order that the appellant has filed returns for the year 2008-09 and 2009-10 but they have not filed the return for the year 2007-08. In fact, the Commissioner (Appeals) does not have any knowledge of the assessment year for the income tax purpose which clearly says that for the period 01.04.2007 to 31.03.2008, the assessment year is 2008-09. As the appellant has filed revised return and did not claim depreciation on those capital goods by producing the IT Return, therefore, they are entitled for CENVAT credit for the capital goods as per the judgement of the Hon'ble High Court of Bombay in the case of Maharashtra Electrosmelt Ltd. (2007 (6) TMI 224 - HIGH COURT OF JUDICATURE OF BOMBAY AT NAGPUR) - Decided in favour of assessee.
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2014 (4) TMI 644
Duty demand - CENVAT Credit - Credit reversed before issuance of SCN - Whether the service availed for transportation of the staff from the residence to the factory and back can be treated as covered by the definition of 'input service', as given in Rule 2 (1) of Cenvat Credit Rules, 2004 - Held that:- transportation of the employees of the companies has been held to be admissible Modvatable services by the Tribunal in the case of Stanzen Tototetsu India Pvt. Ltd. and said decision stand upheld by the Hon'ble Karnataka High Court decision as reported in [2011 (4) TMI 201 - KARNATAKA HIGH COURT] . On going through the said judgment of Hon'ble High Court, I find that it stand observed by them that definition of input service is wide enough and takes into its ambit the services connected of furtherance of business. Test is whether service utilized is for manufacture of final product directly or indirectly or used in relation to activities relating to business. If any of these two tests are satisfied, service is well within the definition of input service and the manufacturer would be entitle to avail the credit. As such, by referring to CAS-4 standards relating to cost of the final product, it stand held by the Hon'ble High Court that transportation of the employees service is an admissible modvatable service - even services used for maintenance and repair of the colony are cenvatable input services. If that be so, transportation provided for school children would also get covered in the definition of "input services". - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (4) TMI 693
Requirement of Notice of change in the constitution of the firm - Certificate of registration – Held that:- Section 17 deals with registration of dealers and sub-section (14)(a) read with Explanation (II) would clearly show that where there is a change in the constitution of the firm without dissolution thereof, then it shall not be necessary for the dealer or the firm (the constitution whereof is changed) to apply for a fresh certificate of registration and then on information being furnished in the manner required by section 75, the certificate of registration shall be amended – It is not the case of the respondents that the change in the constitution of the firm was not informed to the Department in the proper format or within the prescribed period - As such, this Court is proceeding on the basis that the information was supplied by the petitioner on the requisite format and within the specified period - On information as required u/s 75 with regard to change of business, (which includes the change in the ownership or constitution of business or entering into partnership or other association in regard to his business [sub-sections (c) and (f)] having been given within the prescribed period of 30 days, Rule 33 of the Rules of 2008 would become applicable - Then as per Rule 33(3), when information Rule 33(1) is received by the competent authority, the correctness of the information has merely to be verified and since the respondents do not dispute the correctness of the information furnished by the petitioner, necessary amendment in the relevant records, including registration certificate, ought to have been made, as far as possible, within a period of 30 days. The present is not a case of transfer and is only a case relating to change in constitution of the firm hence in the absence of a registered dealer having been succeeded by another dealer by transfer, the provisions of Rule 35 of the Rules of 2008 would not be attracted - As such the order passed by respondent no.2 rejecting the application of the petitioner for amending the registration certificate u/s 75 read with Rule 33 of the Rules is liable to be quashed - Accordingly, this writ petition stands allowed - The impugned order dated 9.1.2014 passed by respondent no.2 is quashed - The respondents are directed to pass fresh order in the light of the observations made hereinabove – Decided in Favour of assessee.
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2014 (4) TMI 692
Entertainment of writ petition – Available Alternate remedy of an appeal u/s 62 – Invocation of Extraordinary Jurisdiction of High Court – Article 226 of Constitution of India - Held that:- For the reason that petitioner has an alternate and efficacious remedy available under law, this Court is not inclined to entertain this writ petition – Time and again Apex Court as well as this Court has held that when there is a remedy available under the Act, exercise of extraordinary jurisdiction would be limited - Relying upon Titaghur Paper Mills Co. Ltd., and another vs. State of Orissa and another [1983 (4) TMI 49 - SUPREME Court] - The remedy available to petitioner to invoke extraordinary jurisdiction and to exercise the discretion by this Court would be in extraordinary circumstances – Relying upon K.S. Rashid and Son vs. Income Tax Investigation Commission and others [1954 (1) TMI 1 - SUPREME Court] - Remedy provided under Article 226 is a discretionary remedy and if this Court is satisfied that the aggrieved party can have an adequate and suitable relief elsewhere, it should refrain from exercising extraordinary jurisdiction - Relying upon Assistant Collector of Central Excise, Chandan Nagar, West Bengal vs. Dunlop India Ltd., and others [1984 (11) TMI 63 - SUPREME Court] - Article 226 of the Constitution is not meant to short circuit or circumvent or statutory procedure. It is no doubt true that extraordinary power of this Court cannot be taken away and the exercise of jurisdiction under Article 226 is essentially discretionary, all though founded on legal injury, still it is open for this Court to refrain from exercising said jurisdiction, if it is shown that alternate remedy available to the party is not only efficacious, but also it is a statutory alternate remedy available under the Act - When the facts on hand are examined, it would clearly indicate that an order of assessment has been passed by Assessing Authority on 02.03.2014, Annexure - E. Said order is an appellable order under Section 62 - Assessee is at liberty to file an appeal before the Appellate Authority – Petition is dismissed – Decided against Assessee.
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2014 (4) TMI 691
Condition of Pre-deposit – Interim stay during the pendency of the appeal – Held That:- This Court finds that, Assessee had not submitted any objection, on serving the pre- assessment notice as clearly discernible from Exts. P1 to P3 - What the reason was, is not forthcoming and it is not stated anywhere in the appeal memorandum filed before the second respondent as well - This Court finds that the condition imposed by the appellate authority while granting interim stay, is not liable to be treated as arbitrary or illegal in any manner - However, it is made clear that, if any amount has been satisfied by the petitioner, pursuant to Ext.P3, i.e., after passing the assessment order, the same shall be given credit to and only 30% of the balance liability needs to be cleared, furnishing security for the balance amount in compliance of the interim order passed by the appellate authority vide Exts. P12 to P14 - Interference is declined and the writ petition is dismissed – Decided against assessee.
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2014 (4) TMI 690
Whether the Tribunal ought to be directed to raise the questions proposed - Whether Tribunal was justified to come to conclusion that software is developed by the Applicant and transferred to HDFC, Based on records in the form of invoice and work order, although the Applicant was acting for and on behalf of and under supervision of HDFC - Worthiness of questions to be raised - Development of software and its transfer while acting for and on behalf of and under supervision of HDFC - Held that:- It is not necessary to entertain this application - The Tribunal has held that the provisions of the Copyrights Act were not brought to the notice of the Tribunal and that the appeal was argued on the basis of the provisions of the contract - This court find however that the questions sought to be raised at sr. nos. i, ii, iv and v are covered by the questions which have been raised especially at sr.no. vi - The question whether the appellant is entitled to raise the contentions u/s 17(1)(dd) of the Copy Rights Act, 1957 would arise for consideration of this court while dealing with question (vi) itself - Mere failure to mention a provision of law would not prevent the applicant from relying upon it in support of its contentions in the reference - Similarly, while deciding the reference in relation to question nos.(vi),(vii), (viii), it would be necessary for this court to construe the agreement between the applicant and the HDFC including clause (iii) thereof - It is therefore not necessary to direct the Tribunal to raise the questions other than those which have already raised - This Court do not read the order as holding that a transfer of any rights was effected even if the same did not vest in the applicant - The application is, accordingly, disposed of - Decided against assessee.
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2014 (4) TMI 689
Business transaction after filing of application for cancellation VAT registration but in the absence of any order from the VAT authorities assuming that registration was not cancelled - What would be the effect of withdrawal of application seeking cancellation of registration before the order of conciliation passed on an application u/s 27(1) of Gujarat VAT Act is communicated - Effect of withdrawal of application seeking cancellation of registration – Undated order - No evidence - Held that:- It is noticed that in the interregnum period, no order of cancellation was passed on his application dated 30/10/2007 - Neither from the material on the record nor from the affidavit in reply, the respondent could satisfy of passing of such order before the application for withdrawal of the earlier application for cancellation of registration reached to the authority - Admittedly, there has been no communication of such undated order of cancellation and the said order is communicated on 27th February 2009 where the cancellation had been made effective from 30th September 2007, a month prior to the date of the application which is the date of discontinuation of business of appellant. Whether undated order was passed prior to 17/2/2009 - No evidence - Held that:- It is also apparent from the pleadings and from the submissions that the official website of the respondent continued to reflect the status of the appellant as a registered dealer - Assuming that such reflection on the website may not have a bearing on the case of the appellant for such registration as the appellant as a dealer himself had applied for cancellation of the registration due to discontinuance of business and such information on the website of the Department is for the safeguarding the interest of the third parties - In absence of any material on record to indicate that pursuant to the first application u/s.27(1) any cancellation order in fact had been made by the concerned authority, this Court is of the firm opinion that before such order of cancellation had been passed when due communication of subsequent withdrawal of his earlier application has been effected, such subsequent cancellation by way of an order impugned dated 17th February 2009 deserves indulgence from this Court and the Tribunal certainly erred in holding that even in absence of communication of undated order, such order was valid - Whether in fact undated order was passed prior to 17/2/2009 itself is a serious question mark and therefore, Tribunal also erred in upholding validity of order of cancellation passed under subsection (1) of Section 27 of VAT Act when withdrawal was much prior to 17/2/2009. Absence of explicit provision for opportunity of hearing and communication – Held that:- It is noticed that in the event of the dealer himself applying for cancellation of registration u/s 27(2), there is no explicit provision for availing an opportunity of hearing to the dealer as he himself is the applicant volunteering for such cancellation, nor is there any express provision for communicating such order - The reflection of the status of the present dealer as a registered dealer on 26th January 2008 was on account of the official website not being updated - Such updation if not regularly done, confusion and disputes are found to consequently follow - To avert these factual disputes the communication of the order of cancellation of certificate of registration must be done, even if such cancellation is made pursuant to the application made by the dealer himself - Section 27(1) makes it incumbent upon the Commissioner to publish in the manner prescribed, status of the dealer when certificate of registration has been cancelled under the provisions of this Act - Resultantly, all the questions raised in this Appeal are answered in favour of the appellant - The Order of the Tribunal dated 1st May 2013 is set aside so also consequential order dated 17th February 2009 cancelling the registration of the petitioner – Decided in favour of assessee.
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