Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 21, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Entitled to the benefit under Section 10-B - department submits that most of the activities are "outsourced" and very small part of the manufacture was undertaken by the assessee - even on the basis of such an outsourcing the assessee has to be held to be the 'manufacturer' of the products for which it had been approved as 100% EOU. - HC
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Reopening of assessment - the successor Assessing Officer has simply sat over the decision of the earlier Assessing Officer passed u/s.143(3) with respect to the issues sought to be covered u/s.147 - CIT(A) was completely justified in anulling the order of the successor AO - HC
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Capital gains v/s business income - The assessee did not hold the capital asset. He did not transfer the capital asset, he only facilitated the transfer of capital asset from the owner to the purchaser. He took the risk. He identified the purchaser. Any amount paid in excess of ₹ 5.5 crores which the owner was expecting from the transaction was his margin of profit. - HC
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Recording of satisfaction under section 158BD - revenue having taken three and a half months to record his satisfaction cannot be held to be unreasonable. - HC
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Revision u/s 263 - assessee engaged in the business of manufacture and processing of pharmaceuticals, entitled to benefit of deduction, though the activity was being done through machinery belonging to other company on hire, under direct supervision of own staff and under own quality control of assessee - HC
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TDS u/s 194C - nature of contract - works contract or sale purchase contract - purchase of footwear with logo from the job worker - transaction in the nature of sell and purchase is on principal to principal basis - No TDS liability - HC
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Rental income earned from terrace floor/roof area - exploitation of the licensed space - terrace floor cannot exist in the air. It is part of the building which has been constructed on the land beneath the super-structure - taxable as income from house property - HC
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The amount transferred to the reserve fund account as per provisions of Section 67 of the Gujarat Cooperative Societies Act, 1961 was not diversion of income at source by overriding title nor can such transfer be treated as a business expenditure - HC
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Entitlement to benefit conferred under Section 54F - . It is open for the assessee to put up a residential construction or to purchase a residential house. It is not the requirement of law that he should purchase a residential site and then putup construction. - HC
Customs
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Valuation - inclusion of 1% of the F.O.B. value of goods on account of loading, unloading and handling charges - Rule 9(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - this clause would apply only when actual charges referred to in Clause (b) are not ascertainable. - SC
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Actual user condition - Re-export of defective components after being issued for manufacturing would be treated as used for intended purpose - However, demand of duty for re-export of surplus inventory which was re-exported and components written-off confirmed - AT
Corporate Law
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Rejection to Registration / Transfer of Preference shares - The alleged inadequacy of monetary consideration with respect to the transfer of shares, as alleged by the Respondents, cannot be taken as a ground for rejection for registration/transfer of shares by the Company, if, the Transferor has no objection in this regard - CLB
Service Tax
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Renting of immovable property - the lease of open land for use for construction for business/commercial purposes during the terms of the lease is taxable - not to be excluded on the ground of an act of sovereign /public duties /functions- HC
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Benefit of Notification no. 15/04-ST and Notification 1/06-ST would be available even if value of the goods and materials supplied by the service recipient are not included for the purpose of computation of the abatement provided under these Notifications - AT
Central Excise
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Denial of CENVAT Credit - the expenditure on training, printing and stationery could not satisfy as to relevancy thereof to the manufacture activity. Therefore, no CENVAT credit on these two items shall be allowed - AT
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Job work - manufacture of fastners required bright wire rods out of bright bars - manufacturing activity or taxable services - Job worker is paying service tax - Prima facie case is in favor of assessee - AT
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Denial of CENVAT Credit - Goods have been loaded to some other vehicle. Therefore, there is a difference in vehicle number - credit allowed - AT
Case Laws:
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Income Tax
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2015 (4) TMI 664
Penalty for income admitted during search - Income was disclosed in return and tax paid with interest - Held that:- It is an undisputed fact that during the course of search and seizure action a disclosure of ₹ 5,01000/- was made by the Assessee and the same was also included by the assessee in the return of income filed in response to notice under section 153A of the Act. The return filed by the assessee has also been accepted by the AO and no addition has been made by AO. The AO in the present case had levied penalty on the amount surrendered by the assessee during the course of search and seizure operation and the aforesaid penalty was confirmed by Ld. CIT(A) by following the decision in the case of Kirit Dayabhai Patel. We find that the decision in the case of Kirit Dayabhai Patel was challenged by the assessee and the Hon’ble Gujarat High Court vide order dated 03-12-2014 [2015 (1) TMI 201 - GUJARAT HIGH COURT]has reversed the order of Hon’ble Tribunal. Revenue has not brought any binding contrary decision in its support. We therefore respectfully following the decision of Hon’ble Gujarat High Court in the case of Kirit Dayabhai Patel [2015 (1) TMI 201 - GUJARAT HIGH COURT], hold that no penalty is leviable in the present case and thus direct its deletion. - Decided in favour of assessee.
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2015 (4) TMI 662
Dis-allowance of amortisation of premium paid on HTM securities - Treatment of Investment fluctuation fund as contingent liability - Held that:- Cooperative bank unlike other commercial banks are subjected to dual control from both RBI as well as from state cooperative department. The accounting treatment for a cooperative bank is therefore a result of guidelines from both the controlling authorities. Ordinarily a deduction is not available to an assessee unless specifically provided under the Act. This is irrespective of accounting treatment provided by the assessee in its books of accounts. But at the same time it was well settled that deduction expressly mentioned under the Act are not exhaustive and profit is to be derived according to ordinary commercial principles. As per the extant RBI guidelines dated 01-07-2009 the investment portfolio of the banks is required to be classified under 3 categories viz., Held the maturity HTM), Held for Trading (HFT) and Available for Sale (AFS). The ITAT, Mumbai Bench, in the case of The Bank of Rajasthan Ltd.[2010 (12) TMI 894 - ITAT, Mumbai], has held that in case of banks, the premium paid in excess of face value of investments classified under HTM category which has been amortised over the period till maturity is allowable as revenue expenditure since the claim is as per RBI Guidelines and CBDT also has directed to allow such premium. It has also been held in the case of Catholic Syrian Bank Ltd.[2013 (1) TMI 129 - ITAT COCHIN] that amortization on purchase of Government securities was made as per prudential norms of the RBI and same was allowable deduction. In view of above, assessee was justified in contending for amortization of premium paid in excess of face value of securities held to maturity (HTM) category or period remaining till maturity was found reasonable by the CIT(A). Accordingly addition of ₹ 17,91,659/- made by the Assessing Officer by disallowing amount towards amortization of Government Securities (HMT) was deleted. This reasoned factual and legal finding of the CIT(A) needs no interference from our side. Accordingly, the disallowance of ₹ 2,20,68,302/- made by the Assessing Officer claimed as amortization of premium expenditure for HTM securities by payment of premium over and above the face value of such securities is directed to be allowed. - Decided partly in favour of assessee.
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2015 (4) TMI 638
Entitled to the benefit under Section 10-B - department submits that most of the activities are "outsourced" and very small part of the manufacture was undertaken by the assessee - Held that:- The assessee is a manufacturer of the 'Ballistic Helmets' and 'Bullet Proof (bullet resistant) Jackets'. Only a part of the manufacturing activities was got done by the assessee from outside agency and that to under the direct control and supervision of the managerial and technical staff available with the assessee. Therefore, even on the basis of such an outsourcing the assessee has to be held to be the 'manufacturer' of the products for which it had been approved as 100% EOU. Accordingly it cannot be denied the benefit of exemption under section 10B of the Act. In the instant case, a new product has come out at final stage. It is not the case of changing the label or the cover of the product. When totally new product came into existence after the entire process then we are of the view that the assessee is entitled to the benefit of Section 10B of the Act. We set aside the impugned order passed by the Tribunal and restore the order passed by the first appellate authority pertaining to the benefit of exemption under Section 10B of the Income Act. In the case of CIT vs. Heartland Delhi Transcription Services Pvt. Ltd. reported in (2014 (7) TMI 810 - DELHI HIGH COURT) the Hon'ble Delhi High Court has ruled that after removal of sub sections (9) and (9A) from the statute book w.e.f. 1.4.2004 and simultaneous insertion of sub-section (7A) w.e.f. the same date, benefit under section 10B is applicable even where the ownership of the industrial undertaking, in continuity. In arriving at the said conclusion the Hon'ble Delhi Court has referred to and relied upon various case laws as has been referred to in the preceding paragraphs and finally held that sub section (7A) is an 'enabling provision', meant for "continuity" of benefit under section 10 B, even after change in ownership of the 'industrial undertaking'. - Decided in favour of the assessee
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2015 (4) TMI 637
Deemed dividend under Section 2(22)(e) - money received by a company, on account of the share premium - Held that:- In the case before us the provisions contained in Section 78 of the Companies Act, 1956 are applicable. It is interesting to note that it was not also the case of the revenue that from out of the moneys received on account of share premium dividend was declared as was done in the case of Bharat Fire And General Insurance (1964 (4) TMI 44 - SUPREME COURT OF INDIA). Income Tax Appellate Tribunal was justified in law in deleting the addition made by the Assessing Officer under Section 2(22)(e) of the Income Tax Act, 1961. For the aforesaid reasons the question formulated at the time of admission of the appeal is answered in the affirmative and against the revenue.
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2015 (4) TMI 636
Unaccounted sales - ITAT hold that the addition made of ₹ 1,35,00,000/- representing sale consideration and sustained by the Commissioner of Income Tax (Appeals) was sustainable in law or on facts? - Held that:- Tribunal took note of each of the adverse findings recorded against the appellant. In fact paragraphs 35-37 deal with other amounts and held that the sum of ₹ 15,15,000/- which was sustained by the CIT (Appeals) was unwarranted. Likewise, relief was granted in respect of addition of ₹ 20,00,000/- by the AO. Having regard to this conspectus of facts, the submissions of the assessee in this Court’s opinion amount to re-appreciation of circumstances at the third appellate level. Although, the interpretation of a document made in certain circumstances require interpretation of law, we are clear that in the overall circumstances of the case, given the concurrent nature of findings by the three authorities as far as the three amounts in question are concerned, at least no such question of law arises. As to whether the interpretation placed upon the document is such as to amount to patent error or not, in any case the interpretation given to the two documents in question and the inference drawn on the basis of the statements made are not such as to attract the jurisdiction of the Court which is confined to framing and answering substantial question of law. Since no such substantial question of law arises for consideration, the appeal is devoid of merit and is accordingly dismissed.
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2015 (4) TMI 635
Reopening of assessment - whether Tribunal was justified in upholding the legality of reassessment u/s.147 which sought to reopen a completed scrutiny assessment u/s.143(3) on the basis of audit objection and mere change of opinion on the same set of evidence and record - Held that:- If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. The aforesaid provisions are clear and unambiguous. We find that by invoking the provision of Section 147 of the Act, the successor Assessing Officer has simply sat over the decision of the earlier Assessing Officer passed u/s.143(3) with respect to the issues sought to be covered u/s.147 of the Act. Hence, the CIT(A) was completely justified in anulling the order of the successor Assessing Officer. Decided in favour of the assessee.
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2015 (4) TMI 634
Transfer of capital asset - capital gains v/s business income - whether appellate authorities were correct in holding that a sum of ₹ 6,37,00,726 received by the assessee for the purpose of finding a purchaser of the property of Mrs. Rubab Mohamed Ali Kazerani, at No. 1, Cubbon Road, Bangalore-01, which was sold for ₹ 11.87 crores and the owner paid ₹ 5.5 crores cannot be brought to tax under the head 'Business income' but should be brought to tax under the head 'Capital gains' ? - Held that:- The memorandum of understanding entered into between the owner and the assessee is not an agreement of sale for transfer of a capital asset and it is not stamped or registered, any transaction which has the effect of transferring or enabling the enjoyment of any immovable property in the nature of a capital asset would fall within the definition of transfer and, therefore, the consideration they seek for such transfer constitutes capital gains. In the hands of the owner, the property, it is a capital asset. Then the amount of ₹ 5.5 crores received under the document by the owner would be liable to tax as capital gains. Now, the question before the court is not whether the ₹ 5.5 crores constitutes capital gains or not. The question is whether over and above ₹ 5.5 crores paid by the purchaser to the assessee would constitute capital gains. In that context, in the instant case, it is clear that the assessee had no intention to acquire a capital asset in lieu of transfer. His intention was only to identify a buyer for the property to bring about a sale transaction and any amount paid in excess of ₹ 5.5 crores is his profit minus the expenditure which he has incurred. It is clear from the recitals in the memorandum of understanding that even if the assessee is not able to get the purchaser who is willing to pay ₹ 5.5 crores 50,000 and pays less, the loss is to the account of the assessee. Only in the event of the purchaser is willing to pay more than ₹ 5.5 crores, that profit is his. Therefore, the transaction was entered into with a sole intention of making profits and gains from the aforesaid transaction and as such do not fall within the definition of capital gains. The assessee did not hold the capital asset. He did not transfer the capital asset, he only facilitated the transfer of capital asset from the owner to the purchaser. He took the risk. He identified the purchaser. Any amount paid in excess of ₹ 5.5 crores which the owner was expecting from the transaction was his margin of profit. - Decided in favour of the Revenue
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2015 (4) TMI 633
Penalty under Section 271(1)(c) - deduction under Section 80-IB(7A) denied - Held that:- By making legal claim for deduction under Section 80-IB(7A) assessee is not guilty to concealment of income. In the earlier years, the A.O. himself has cancel the levy of the penalty for the similar reasons. When it is so, then the principal of consistency will have to be followed as per ratio laid down in the case of Radhasoami Satsang, [1991 (11) TMI 2 - SUPREME Court]. From the record, it also appears that the A.O. has not given any finding that the claim of the deduction was bogus. The A.O. has only stated that such claim was not leviable as the conditions envisaged under Section 80-IB(7A) were not fulfilled. Thus, the claim was found to be legally unacceptable, but it does not amount to furnish the inaccurate particulars/concealment of the income. It is a simple case of non-allowance of the legal claim for which the penalty is not desireable. Hence, we set aside the impugned order of the Tribunal and restore the order passed by the first appellate authority, who has rightly cancelled the levy of the penalty. - Decided in favour of the assessee
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2015 (4) TMI 632
Recording of satisfaction under section 158BD - whether person searched and consequent issuance of notice under section 158BD on 02.09.2005 was belated and beyond the period prescribed by law when the section 158BD read with section 158BE does not specify that satisfaction has to be recorded by the Assessing Officer before completion of assessment under section 158BC? - Held that:- In the present case, the notices were issued to about 70 persons on the documents seized from the Bhatia Group. The Assessing Officer, therefore, had to take action against the 70 persons on account of the same search operation under Section 132 of the Act. He could not possibly do so the same day or even by the next day. The paperwork in such cases is itself enormous. Moreover, this presumably was not the only work that the Assessing Officer had. A period of three and a half months in the facts of this case was entirely reasonable. The respondent is in any event not prejudiced on account of the satisfaction having been prepared thereafter. In these circumstances, the appellant having taken three and a half months to record his satisfaction cannot be held to be unreasonable. The appellant contended that the satisfaction was recorded on 15.07.2005. If that is established, as held earlier, it is sufficient compliance with the provisions of Section 158-BD of the Act. The respondents, however, contended that there was never any satisfaction recorded at all. The orders of the Assessment Officer and of C.I.T. (Appeals) refer to the satisfaction note of 15.07.2005. The issue as to whether the same is genuine as contended by the appellant or fabricated and false as contended by the respondents may be considered by the Tribunal. All the appeals are accordingly allowed. The question of law is answered in favour of the appellant. The appeals are restored to the file of the ITAT and shall be decided on-merits by the Tribunal. - Decided in favour of revenue
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2015 (4) TMI 631
Stay of demand - by-products also have some value and therefore, TDS ought to have been deducted in respect thereof as per AO - Held that:- As mentioned earlier, the petitioner is operating in the whole of the State of Punjab engaged essentially in public utility services of a very important nature, namely, the procurement and distribution of foodgrains throughout the State of Punjab. They are funded by the Reserve Bank of India/Union of India. Although the turnover is around ₹ 12,000 crores, their profits is only about ₹ 1 crore. If the amounts lying in their bank accounts are frozen, at this stage, it would cause enormous inconvenience, harm and prejudice, not only to the petitioner but to the public in general. This important fact persuades us to grant stay in favour of the petitioner. We do not grant the stay, at this stage, merely because the petitioner has a arguable case. That is but one factor. The impugned order merely stated that the factors mentioned in the circular of the CBDT dated 02.12.1993 are absent. The CBDT circular only contains illustrative situations, as noted in the impugned order dated 09.07.2014 itself. It is certainly not exhaustive of the grounds on which a stay can be granted and the grounds which ought to be taken into consideration in an application for grant of stay. The impugned order dated 25.09.2014 merely records that the petitioner has not given a schedule of payment. The last order impugned in these petitions, namely, the order dated 12.03.2015 merely observes that despite various opportunities, the petitioner had failed to submit any proposal/schedule to pay the demand and that the petitioner has not furnished any reasonable cause for not paying the demand. An assessee not paying the demand or not agreeing to do so in instalment, would not be a ground for rejecting the grant of stay, if the assessee is entitled to the same. Thus the petitioner is entitled to a stay of the demand, pending the hearing and of the final disposal of the appeal. - Decided in favour of assessee.
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2015 (4) TMI 630
Revision u/s 263 - whether Assessee is entitled to a deduction under Section 80I? - Held that:- When two opinions or views are available and one of the possible view is reached by the Assessing Officer, recourse to Section 263 of the Income Tax Act is not open. In order to decide whether two view on Section 80I are possible, in so far as present facts are concerned, we have to look into the express language of Section 80I which is on the subject of deduction in respect of profit and gains derived from an industrial undertaking, after certain date etc. It's subsection [1] is about profits derived from an industrial undertaking. If the gross total income of assessee includes such profits, deduction therefrom of an amount equal to 20% thereof is permitted. The proviso in subsection [2] stipulate that Section 80I applies to any industrial undertaking which fulfills conditions which are stipulated in subsections (i) to (iv), subsection [i] does not permit benefit of deduction to be taken if the industrial undertaking is formed by splitting up or reconstruction of a business, already in existence. Clause (ii) does not allow benefit to be taken if such undertaking is formed by transfer to a new business, machinery or plant previously used for any purpose. Clause (iii) again creates a bar if the industrial undertaking manufactures any article or thing, which is not specified in the 11th Schedule. By Clause (iv), the ceiling on number of workers has been provided. Thus, none of these clauses prohibit the assessee from taking other industrial undertaking on hire and use it for the purpose of his manufacturing activity. Division Bench of this Court in a case reported at CIT .vrs. Penwalt India Ltd. (1991 (4) TMI 33 - BOMBAY High Court) has considered a finding by the Tribunal of absence of factory for manufacturing facility of its own, where assessee company utilizes facilities of others on payment, and found assessee entitled to relief as contemplated under Section 80I of the Income Tax Act, upholding those findings. Other judgment of this Court reported at Cit .vrs. Anglo French Drug Co. (Eastern) Ltd) [1991 (2) TMI 63 - BOMBAY High Court] again shows a finding that the manufacturing company need not manufacture the goods by its own plant and machinery, at its own factory. There while recording these findings in paragraph no.2, the Division Bench has also noted that CBDT had accepted the correctness of the judgment of Calcutta High Court in a case Addl. CIT .vrs. A. Mukherjee & Co. (P) Ltd. (1977 (9) TMI 26 - CALCUTTA High Court), in its Circular No. 347 dated 07.07.1982. Third judgment of this Court reported in CIT .vrs. Neo Pharma Pvt Ltd. (1982 (3) TMI 56 - BOMBAY High Court), finds the assessee engaged in the business of manufacture and processing of pharmaceuticals, entitled to benefit of deduction, though the activity was being done through machinery belonging to other company on hire, under direct supervision of own staff and under own quality control of assessee. - Decided in favour of assessee.
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2015 (4) TMI 629
TDS u/s 194C - nature of contract - works contract or sale purchase contract - purchase of footwear with logo from the job worker - Tribunal disagreeing with the findings of the First Adjudicating authority that the transaction between the assessee and its supplier was in the nature of work done by the supplier on behalf of the assessee i.e. ‘outsourcing’ and holding that the said transaction was a sale - Held that:- As regards the purchase of footwear without any specified logo i.e. ₹ 38.39 crores (Rs.46.29-Rs.7.90), it is observed that the same was purchase simplicitor i.e. without any logo, label or identity mark. In view of this purchase of footwear worth ₹ 38.29 crore cannot be equated to “any work” so as to fall within the purview of Section 194C. For the balance purchase for a sum of ₹ 7.90 crores the reasoning advanced by the CIT for the purpose of holding that the purchase amounted to awarding a specific job work to the vendors is neither supported by law nor is factually a correct finding. Goods can be sold either by sample or by description or manufactured as per requirement of the buyer. The assessee has purchased the goods and has admittedly paid sales tax, central excise duty and has in its turn availed the benefit of cenvat credit which is inconsistent with a job contract contemplated by section 194C of the Income Tax Act. Section 194C contemplates payment to a contractor for carrying out any work including supply of labour or carrying out any work. It was not the case of the revenue that the vendor of the assessee carried out any work of or for the assessee. The CIT could not dispute the fact that it was “purchase of shoes from 10 manufacturers only which were labeled and marked with the logo ‘khadim’.” Section 194C contemplates a transaction between a principal and an agent. Whereas a transaction in the nature of sell and purchase is on principal to principal basis. The fact that goods for ₹ 7.90 crores were purchased by the assessee has been accepted by the CIT (A). In spite thereof insistence upon bringing the case within Section 194C was an improper exercise of power. - Decied in favour of assessee.
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2015 (4) TMI 628
Addition u/s 36(I)(iii) - whether introduction of provision of sec. 14A with retrospective effect, ITAT was justified in law and on the facts to delete addition coming under sec. 36(I)(iii) - Held that:- How does the interest paid or incurred by the assessee for earning exempt income become an expenditure allowable under section 36 of the Income Tax Act has not been explained by the learned Tribunal nor has Mr. Bagaria, learned Advocate for the assessee tried to make any improvement thereupon. Therefore, the finding given by the learned Tribunal is palpably wrong. Admittedly, money was paid from the cash credit account. The position would have been different if the money had been paid from a current account or a savings account. Money was admittedly paid from the cash credit account and admittedly interest was also paid. Therefore, it was the obligation of the assessee to offer one to one explanation to establish that the money borrowed from United Bank of India was not spent for the purpose of purchasing the shares. Since the assessee did not discharge his obligation, the Assessing Officer had refused to allow the deduction. Without applying mind, the learned Tribunal upheld the contention of the assessee. We, therefore, propose to remand the matter to the Assessing Officer. - Decided in favour of the revenue.
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2015 (4) TMI 627
Entitlement to deduction u/s 80I - Whether relationship of master and servant is necessary to claim deduction under 80I - Held that:- There is nothing in Section 80I(2)(iv) to say that the relationship in order to qualify for the term “employment” must be one of master and servant and cannot extend to contractual employment. That the concept of permanent or direct workmen is the precondition envisioned in Section 80I(2) when it was the term “employs” does not appear to be reflected in the statute as is imputed by the lower authorities. This Court also notices that there are situations where it has been held that services provided by outside agencies would also qualify for benefits of Section 80I. In Krishak Bharti Cooperative Limited V. Deputy Commissioner of Income Tax [2013 (7) TMI 632 - DELHI HIGH COURT], a Division Bench of this Court held that service charges received from the owner of the unit, could in fact be considered as profit derived from an industrial undertaking and thus be entitled for deduction under Section 80I. In other words, even though the ownership of unit, from which the profit was derived by the industrial undertaking claiming deduction under Section 80I, did not vest with it, the Court held that it was entitled to the said benefit - Decided in favour of the assessee
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2015 (4) TMI 626
Regulation of Proceedings - notice of appeal not served - Held that:- The omission to serve notice of appeal as required by rules coupled with failure on the part of the appellant to serve notice of appeal inspite opportunity granted after time prescribed by rules to serve had expired leaves no other option to the Court except to dismiss the appeal.
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2015 (4) TMI 625
Rental income earned from terrace floor/roof area - assessable under the head "Income from other sources" OR "Income from house property" - Held that:- In the case at hand, the building the top terrace of which is the subject of focal attention here has been developed for its various portions to be sold or let out with no possibility of the terrace floor being subjected to such utilization. The assessee continues to be the owner of the terrace floor. It has conceivably no other purpose to be served by such property as is held on the terrace floor, except the exploitation of the licensed space for gaining the income that cannot be treated as either income from business or income from other sources. The income was thus rightly returned as income from house property. We do not approve of the logic employed by ITAT in rejecting the claim of it being income from house property. The terrace floor cannot exist in the air. It is part of the building which has been constructed on the land beneath the super-structure. It is, therefore, not correct to hold that the terrace does not have any appurtenant land. We, therefore, reject the conclusion of ITAT that the agreement of renting and hiring terrace is in essence for hiring space and not hiring building or land appurtenant thereto. - Decided in favour of the assessee.
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2015 (4) TMI 624
Transfer to reserve fund - whether the amount transferred to reserve fund account as per provisions of Sec. 67 of the Gujarat State Cooperative Societies Act, 1957 was not a diversion of income at source by overriding title? - transfer to reserve fund cannot be treated as business expenditure and allowed deduction u/s 28/37 as held by Tribunal - Held that:- The two questions, at the instance of the assessee, stands concluded by the decision of the Apex Court in the case of Associated Power Co. Ltd. Vs. Commissioner of Income tax (1995 (11) TMI 5 - SUPREME Court). Furthermore, as can be seen from provisions of Section 67(2) of the Cooperative Societies Act the question of control of the State Government by specifying the mode of investment or the mode of use of the reserve fund can arise only in the eventuality when the society does not use the reserve fund in the business of the society. It is only in the event the society does not choose to use the reserve fund for the business of the society that the question about investing the reserve fund in the specified category of investments and thereafter utilizing the same for the objects specified by the State Government can arise. Hence, not only is there no diversion of income by overriding title but in fact there is no outgoing of funds from the domain of the assessee society. In fact, the profits at the specified percentage are set apart so as to be available to the society for use in the business of the society at a later point of time. Once the society is in a position to use the funds lying in the reserve fund for the business of the society as and when the society so chooses, there can be no question of keeping out such profits from the purview of taxation. Accordingly, the amount transferred to the reserve fund account as per provisions of Section 67 of the Gujarat Cooperative Societies Act, 1961 was not diversion of income at source by overriding title nor can such transfer be treated as a business expenditure deductible either under Section 28 or Section 37 of the Act. See Gujarat CO-OP. Milk Marketing Federation Ltd Versus DY. Commissioner Of Income-Tax [2015 (4) TMI 621 - GUJARAT HIGH COURT] - Decided in favour of the Revenue.
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2015 (4) TMI 623
Payment made to PF & ESI - Whether the Appellate Tribunal was right in law and on facts in not appreciating the deduction of PF & ESI collected from employees can be allowed under Section 36(1)(va) if the payment was made within due date prescribed under the relevant Acts and the provisions of Section 43B are not applicable? - Held that:- Order passed by the learned tribunal is hereby quashed and set aside and the mater is remitted back to the file of the Assessing Officer with respect to the directions under Section 36(1)(va) of the Act and with a direction to the Assessing Officer to pass an appropriate order in accordance with law and on its own merits and in light of the observations / decisions of this Court in the case of Gujarat State Road Transport Corporation (2014 (1) TMI 502 - GUJARAT HIGH COURT) and Amoli Organics (P) Ltd (2013 (11) TMI 971 - GUJARAT HIGH COURT ) as still the Assessing Officer is required to bifurcate the amount towards the employers contribution and employees contribution and is also required to consider factually, whether the employees contribution was made within the grace period or not? - Decided in favour of revenue for statistical purposes.
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2015 (4) TMI 622
Addition on Mobilization Advance - Difference / discrepancies between receipts as per TDS certificates and the receipts shown as income by the assessee in its return of income - ITAT deleted the addition - Appellate Tribunal and the CIT (A) admitting fresh evidence - Held that:- it has come on record that the assessee was following the system regularly showing the mobilization account and the amount of advance were always stated in the subsequent AY against bills in that year and the revenue had not raised any objection for that treatment. Considering the aforesaid facts and circumstances, when the learned CIT (Appeals) as well as the learned Tribunal have deleted the additions made by the Assessing Officer on account of “Mobilization Advance” in the year under consideration, it cannot be said that the learned CIT (Appeals) as well as the learned Tribunal have committed any error. Tribunal has committed no error in confirming the order passed by the learned CIT (Appeals) in deleting the additions made on account of the “Mobilization Advance” account. In so far as the contention on behalf of the revenue that the appellate Tribunal and the learned CIT (Appeals) have erred in admitting fresh evidence without following due procedure under the Income Tax Rules is concerned, it is required to be noted that as such, no elaborate submissions have been made on the aforesaid by learned advocate appearing on behalf of the revenue. Even otherwise, from the impugned judgment and order, it appears that the learned CIT (Appeals) as well as learned Tribunal have observed and considered that the documentary evidences were furnished before the Assessing Officer. No substantial questions of law in the present tax appeal would arise - Decided against revenue.
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2015 (4) TMI 621
Diversion of income at source by overriding title - Transfer to reserve fund - ITAT holding that the amount transferred to reserve fund account as per the provisions of Sec.67 of Gujarat State Cooperative Societies Act was not a diversion of income at source by overriding title - ITAT holding that the transfer to reserve fund cannot be treated as a business expenditure and allowed deduction u/s 28/37 - Held that:- The two questions, at the instance of the assessee, stands concluded by the decision of the Apex Court in the case of Associated Power Co. Ltd. Vs. Commissioner of Income tax (1995 (11) TMI 5 - SUPREME Court). Furthermore, as can be seen from provisions of Section 67(2) of the Cooperative Societies Act the question of control of the State Government by specifying the mode of investment or the mode of use of the reserve fund can arise only in the eventuality when the society does not use the reserve fund in the business of the society. It is only in the event the society does not choose to use the reserve fund for the business of the society that the question about investing the reserve fund in the specified category of investments and thereafter utilizing the same for the objects specified by the State Government can arise. Hence, not only is there no diversion of income by overriding title but in fact there is no outgoing of funds from the domain of the assessee society. In fact, the profits at the specified percentage are set apart so as to be available to the society for use in the business of the society at a later point of time. Once the society is in a position to use the funds lying in the reserve fund for the business of the society as and when the society so chooses, there can be no question of keeping out such profits from the purview of taxation. Accordingly, the amount transferred to the reserve fund account as per provisions of Section 67 of the Gujarat Cooperative Societies Act, 1961 was not diversion of income at source by overriding title nor can such transfer be treated as a business expenditure deductible either under Section 28 or Section 37 of the Act. Decided in favour of the Revenue.
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2015 (4) TMI 620
Entitlement to benefit conferred under Section 54F - sale consideration is utilized for construction of a residential house on a site which is owned by him within one year from the date of transfer - amount not deposited in a capital gains account scheme before the due date prescribed under Section 139(1) - Held that:- Eligible for the benefit under Section 54F(1) the assessee should not be owning more than one residential house other than the new asset acquired or he should not purchase any residential house other than the new asset within a period of one year after the date of transfer of residential asset or constructs any residential house other than the new asset within a period of three years after the date of transfer of the residential asset. In the entire scheme there is no prohibition for the assessee putting up construction out of sale construction received by such transfer of a site which is owned by him as is clear from the language used. It is open for the assessee to put up a residential construction or to purchase a residential house. It is not the requirement of law that he should purchase a residential site and then putup construction. Therefore, in the instant case admittedly the assessee has purchased a vacant site pri-31.3.2001. He sold the original asset on 27.8.2003 on which date he was already owning a site. In fact even before sale of the original asset he had started construction on such site by availing loan from the Bank. In terms of Section 54F(1) all investments made in the construction of the residential house of the said site within a period of one year prior to 27.8.2003 would be eligible for exemption under Section 54F(1). Similarly all investments in the said construction after 27.8.2003 within a period of three years therefrom is also eligible for exemption. Therefore, the argument that such investment in putting up a residential construction cannot be made on a site owned by him to be eligible for exemption is without any substance. Both the Appellate Authorities have rightly extended the benefit to the assessee and there is no error committed by them which calls for interference. - Decided in favour of assessee. Assessee invests the entire sale consideration construction of a residential house within three years from the date of transfer - whether assessee can be denied exemption under Section 54F on the ground that he did not deposit the said amount in capital gains account scheme before the due date prescribed under Section 139(1) - Held that:- It is clear from Sub-section (4) in the event of the assessee not investing the capital gains either in purchasing the residential house or in constructing a residential house within the period stipulated in Section 54F(1), if the assessee wants the benefit of Section 54F, then he should deposit the said capital gains in an account which is duly notified by the Central Government. In other words if he want of claim exemption from payment of income tax by retaining the cash, then the said amount is to be invested in the said account. If the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated therein, then Section 54F(4) is not at all attracted and therefore the contention that the assessee has not deposited the amount in the Bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct. - Decided in favour of assessee.
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Customs
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2015 (4) TMI 643
Valuation - inclusion of 1% of the F.O.B. value of goods on account of loading, unloading and handling charges - Constitutional validity of proviso (II-i) of Rule 9(2) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - Violation of Section 14(1) and Section 14(1-A) of the Customs Act, 1962 - Violation of Article 14 and Article 19(1)(g) of the Constitution of India - Held that:- It contains the provisions from Section 12 to Section 28BA. Section 12 which talks of “dutiable goods”, provides that duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975, or any other law for the time being in force, on goods imported into, or exported from, India. Thus, the rates at which the customs duties is to be imposed are specified in the Customs Tariff Act, 1975. That rate is on the value of goods imported or exported, as the case may be. Therefore, there is a need to determine the value of the goods imported and exported. The yardsticks for arriving at this value are contained in Section 14 of the Act. - It introduced a deeming/fictional provision by stipulating that the value of the goods would be the price at which such or like goods are “ordinarily sold, or offered for sale”. Under the new provision, however, the valuation is based on the transaction price namely, the price “actually paid or payable for the goods”. Even when the old provision provided the formula of the price at which the goods are ordinarily sold or offered for sale, at that time also if the goods in question were sold for a particular price, that could be taken into consideration for arriving at the valuation of goods. The underlying principle contained in amended sub-section (1) of Section 14 is to consider transaction value of the goods imported or exported for the purpose of customs duty. Transaction value is stated to be a price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation. Therefore, it is the price which is actually paid or payable for delivery at the time and place of importation, which is to be treated as transaction value. However, this sub-section (1) further makes it clear that the price actually paid or payable for the goods will not be treated as transaction value where the buyer and the seller are related with each other. In such cases, there can be a presumption that the actual price which is paid or payable for such goods is not the true reflection of the value of the goods. This Section also provides that normal price would be the sole consideration for the sale. However, this may be subject to such other conditions which can be specified in the form of Rules made in this behalf. Rule 9 which is incorporated in the Valuation Rules and pertains to costs and services also contains the underlying principle which runs though in the length and breadth of the scheme so eloquently. It categorically mentions the exact nature of those costs and services which have to be included like commission and brokerage, costs of containers, cost of packing for labour or material etc. Significantly, Clause (a) of sub-rule (1) of Rule 9 which specifies the aforesaid heads, cost whereof is to be added to the price, again mandates that it is to be “to the extent they are incurred by the buyer”. That would clearly mean the actual cost incurred. Likewise, Clause (e) of sub-rule (1) of Rule 9 which deals with other payments again uses the expression “all other payments actually made or to be made as the condition of the sale of imported goods” - The provision of sub-rule (2) of Rule 9, as originally stood, made it clear that wherever loading, unloading and handling charges are ascertainable i.e. actually paid or payable, it is those charges that would be added. Proviso to the said Rule contained the provision that only in the event the same are not ascertainable, it shall be 25% of the free on board value of such goods. In fact, sub-rule (3) of Rule 9 leave no manner of doubt when it mentions that additions are to be made on the basis of objective and quantifiable data. Only justification for stipulating 1% of the F.O.B. value as the cost of loading, unloading and handling charges is that it would help customs authorities to apply the aforesaid rate uniformly. This can be a justification only if the loading, unloading and handling charges are not ascertainable. Where such charges are known and determinable, there is no reason to have such a yardstick. We, therefore, are not impressed with the reason given by the authorities to have such a provision and are of the opinion that the authorities have not been able to satisfy as to how such a provision helps in achieving the object of Section 14 of the Act. It cannot be ignored that this provision as well as Valuation Rules are enacted on the lines of GATT guidelines and the golden thread which runs through is the actual cost principle. Further, the loading, unloading and handling charges are fixed by International Airport Authority. Impugned amendment, namely, proviso (ii) to sub-rule (2) of Rule 9 introduced vide Notification dated 05.07.1990 is unsustainable and bad in law as it exists in the present form and it has to be read down to mean that this clause would apply only when actual charges referred to in Clause (b) are not ascertainable. - Decided in favour of assessee.
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2015 (4) TMI 642
Import of sandalwood - Import made without obtaining proper license - Confiscation of goods - Goods released on bank guarantee - Bank guarantee encashed - Imposition of redemption fine - Whether a concluded contract had been arrived at between the respondent and the foreign supplier prior to 07.04.2006 - Held that:- Prior to 07.04.2006, sandalwood could be imported against an open general licence (OGL). The Tribunal relied upon two vital facts for coming to the conclusion that the respondent had entered into a valid and binding contract for the purchase of sandalwood from their foreign supplier on 30.03.2006 i.e. before the notification dated 07.04.2006. Firstly, an invoice dated 30.03.2006 was issued. Although the document states that it was a proforma invoice, it would make no difference in the facts and circumstances of the case. Admittedly, on 30.03.2006, the appellant paid the supplier a sum of US$38,000 in respect of the goods. In fact, due to a short supply, the supplier had refunded an amount of $4921. The Tribunal's conclusion that the facts establish the formation of a contract between the parties on or before 30.03.2006 is justified and in any event cannot be said to be absurd or perverse. In fact, the finding appears to be correct - No substantial question of law arises - Decided against Revenue.
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2015 (4) TMI 641
Actual user condition - various components were imported free of basic custom duty under Notification No.24/2005-Cus for use in manufacture of telecommunication equipment - re-export of defective components - re-export of surplus inventory - some components written-off - Held that:- Re-export of defective components after being issued for manufacturing would be treated as used for intended purpose - Following decision of Asahi India Safety Glass Limited vs. Union of India reported in [2004 (9) TMI 118 - HIGH COURT OF DELHI] - such components have to be treated as having been used and hence the assessee cannot be asked to reverse the cenvat credit. Following the judgments of the Tribunal, these components have to be treated as having been used for the intended purpose and hence the duty demand of ₹ 1,71,07,253/- would not be sustainable and has to be set aside. As regards the duty demand of ₹ 94,29,117/- in respect of the surplus inventory which was re-exported and the duty demand of ₹ 23,15,901/- in respect of the components written-off admittedly these components have not been used for the manufacture of the finished products and, therefore, in our view the Department is justified in invoking Rule 8 of the 1996 Rules for recovery of duty. Since the components in respect of which the duty demand of ₹ 94,29,117/- has been confirmed have been re-exported, in our view, the customs authorities have to consider the appellants claim for duty drawback. While customs duty demand of ₹ 1,71,07,253/- and also the order of penalty of ₹ 20,23,000/- is set aside, the customs duty demands of ₹ 23,15,901/- and ₹ 94,29,117/- are upheld. As regards the appellants claim for draw-back in respect of the components re-exported, the same may be considered by the concerned customs authority - Decided partly in favour of assessee.
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Corporate Laws
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2015 (4) TMI 640
Rejection to Registration / Transfer of Preference shares - Rectification in member's shares register - Period of limitation - Not sufficient cause for rejection - Held that:- It is a settled law that, if no limitation period is prescribed, in that case Article 137 of the Limitation Act shall be applicable. Therefore, in terms of Article 137 of the Limitation Act, 3 years period with effect from the date of cause of action would be available for an aggrieved party to approach the CLB for relief under Section 111/111A of the Act. In light of the above law, I have examined the pleadings as contained in the petition. On perusal of the pleadings, it is noted that the cause of action to file the instant Company Petition had arisen lastly on 3/10/2012 and the petition came to be filed in the year 2013 which is within the prescribed period of 3 years. I, therefore, hold that this petition is not barred by law of limitation and the preliminary objection is devoid of substance. It is rejected accordingly. I have considered the rival submissions. In my opinion, the aforesaid ground taken by the Answering Respondents for rejection of transfer of shares-in-question is hardly acceptable. There is no challenge that the Respondent No.2 Bank has transferred the shares in favour of the Petitioner for a monetary consideration in accordance with the law. Therefore, the Petitioner as a Transferee has stepped in the shoes of the Transferor i.e. ICICI Bank, As is seen from the scheme of amalgamation sanctioned by the Hon'ble High Court, no restriction was imposed with respect to the transfer of shares in question. In such a situation, there was no need to seek any approval from the Hon'ble High Court, who sanctioned the scheme of Amalgamation. It is a fundamental law that the transferability of shares is subject to the provisions of the Companies Act and no restriction, save and except as provided in law, can be imposed, I do not find any restriction in the transfer of shares, as sought to be contended by the Answering Respondents. Therefore, the ground taken by the Answering Respondents is frivolous, malafide, arbitrary and against the basic principles of law and, hence, liable to be rejected. On a careful perusal of the Board Resolution authorizing to sign the Transfer Deeds with respect to transfer of the shares, I do not find any illegality therein. The transfer of the shares are absolutely valid. There is no forgery, fraud, manipulation and misrepresentation. The Respondent Company cannot challenge the transfer on behalf of the Transferor ICICI Bank. No restrictions can be imposed regarding the marketability of the shares, save and except provided in law. I do not find force in the contention of the Answering Respondents' Counsel that the Bank was not entitled to transfer the shares. The alleged inadequacy of monetary consideration with respect to the transfer of shares, as alleged by the Respondents, cannot be taken as a ground for rejection for registration/transfer of shares by the Company, if, the Transferor has no objection in this regard. I therefore, reject this contention too. Based on the above discussion I have come to the conclusion that the grounds stated by the Ld. Sr. Counsel for the Answering Respondents for rejection of registration/transfer of shares-in-question are unsustainable. It has been established that the Company has rejected the prayer for transfer of shares without any sufficient cause. - Decided in favour of appellant.
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FEMA
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2015 (4) TMI 639
Imposition of penalty - prohibition of any payment into a credit of a resident outside India except with general or special permission of the Reserve Bank of India - Held that:- Admittedly, the payment was made in India towards customs duty payable by the non-resident Indian while importing the car. The adjudicatory authority with reference to notification No.16/2000, dated 03/05/2000 held that only certain payments are allowed to be made in favour of a resident outside India during his stay in India and not one that was paid by the petitioner to the importer of the car, who is a Non-resident Indian. - The payment now effected is not one referable as permitted under notification No.16/2000, dated 03/05/2000. The notification No.FEMA/17/RB-2000, dated 03/05/2000 relied by the learned counsel for the petitioner has no application in this matter, as the same deals with the payment in Indian rupees to residents of Nepal and Bhutan. The adjudicatory authority passed the order after adverting to the relevant provisions. I do not find any infirmity with the order passed by the adjudicatory authority in regard to the decision making process - Decided against the appellant.
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Service Tax
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2015 (4) TMI 661
Demand of service tax - rent which had been received in the matter of allotment of plots by the assessee to use for construction for business/commercial purposes during the terms of the lease - an act of sovereign/public duties/functions or not - Held that:- In view of the definition of expression of "renting of immovable property" read with Explanation, in our opinion, will include the lease of various plots allotted by the assessee for business/ commercial purposes and rent charged/ collected in respect of the lease so executed would necessarily be subjected to service tax. - The Tribunal appears to be justified in recording that the letting of vacant land by way of lease or license irrespective of the duration or tenure for construction of building or temporary construction for use in the course or furtherance of business or commerce is taxable w.e.f. `st July, 2010 in view of Clause (v) of Explanation 1 to Section 65 (105) (zzzz) of the Finance Act, 1994. So far as the term lease is concerned, it may be recorded that it has not been defined under the Finance Act, 1994. The term "lease" would cover a lease for any period including a lease in perpetuity, as will follow from simple reading of Section 65 (90a). The Finance Act, 1994 does not carve out any distinction in the mater of long term lease/lease in perpetuity or lease for short duration, so far as the charging section is concerned. - No illegality in the conclusions drawn by the Tribunal that the lease of immovable property under Section 65 (105) (zzzz) would be covered for service tax, irrespective of the fact that the lease is short term or long term or lease in perpetuity. - Letting of immovable property for consideration, which is determined on the basis of offers received from public at large by the assessee Greater Noida Industrial Development Authority is a service provided for consideration and not on payment of statutory fees, neither it is a statutory service performed by the assessee. It may be that the statute permits such activities of letting out of immovable property for augmenting its finances but the same cannot be termed as the service in public interest nor it is a mandatory or statutory functions of the Development Authority. Accordingly such activity of leasing, do constitute a taxable service, in our opinion. If the Tribunal has held that only rent charged be considered for computation of service tax, it will not mean that the Tribunal has held that a part of the same transaction was taxable and part of it as not taxable. In our opinion, the Tribunal has rightly held that the lease of open land for use as commercial/business purpose, as an taxable event, but what amount is to be taken into consideration for computation of service tax has been confined to the periodical rent only. The plea raised to the contrary by the learned counsel for the appellant has therefore, to be rejected. - questions as raised by means of the present excise appeal are answered against the assessee and in favour of the department - No error in the order of the Tribunal - Decided against assessee.
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2015 (4) TMI 660
Demand of service tax - Franchise Service - Held that:- During the relevant period, to satisfy the definition of "franchise" all the four limbs of the definition of franchise had to be satisfied. In the present case, neither in the show cause notice nor in the Primary Order or the impugned order, it has been brought out as to whether there was any grant of representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol as the case may be. Thus this limb of the definition is clearly not satisfied. There is also nothing on record to show that the last limb of the definition is satisfied in the present case. - though the franchisor provided know-how, expertise and quality control and granted representational right, no enquiry was made by the revenue for ascertaining whether as per the agreement appellants were under obligation not to engage in providing similar service with other persons and therefore the demand under franchise service was not sustainable. - Impugned order is not sustainable - Decided in favour of assessee.
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2015 (4) TMI 659
Denial of benefit of Notification no. 15/04-ST dated 10.09.2004 and 1/2006-ST dated 01.03.2006 - Non inclusion of value of the goods received free of cost from the service recipient while claiming the benefit of abatement - Held that:- Value of the goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged, within the meaning of later expression in Section 67 of the Finance Act, 1994; and the value of free supplies by service recipient do not comprise the gross amount charged under Notification no. 15/04-ST, including the explanation thereto as introduced by Notification no. 4/05-ST. Accordingly, the Larger Bench held that the benefit of Notification no. 15/04-ST and Notification 1/06-ST would be available even if value of the goods and materials supplied by the service recipient are not included for the purpose of computation of the abatement provided under these Notifications. The issue involved in the present case is also identical and therefore, the appellant would be eligible for the benefit of the aforesaid Notifications. - Decided in favour of assessee.
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2015 (4) TMI 658
Waiver of penalty imposed u/s 78 - service tax liability and interest were paid on having pointed out by the departmental authorities after visiting their premises - Event Management Services - Held that:- the discharge of service tax on being pointed out, by appellant, gets covered under the provisions to provide that no show-cause notice is required to be issued if the assessee discharges the service tax and interest liability on his own ascertainment or on being pointed out by the Central Excise Officers. We hold that the said Section will be applicable to this case. We also find that the appellant could have entertained a bonafide belief that the services rendered by them is of Event Management of the marriage may not be covered under the tax net. In our considered view, this is a fit case for invoking provisions of Section 80 of the Finance Act, 1994. By invoking the said provisions of Section 80 of the Finance Act, 1994, we set aside the penalties imposed by the lower authorities. We would also like to record the argument taken by the appellant before the lower authorities that the 'Extra Ordinary tax Payers Friendly Scheme' is correct and applicable in this case; as has been settled by the Union of Indian Union of India v. Amit Kumar Maheshwari - [2008 (12) TMI 43 - HIGH COURT RAJASTHAN] - Penalty is set aside - Decided in favour of assessee.
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Central Excise
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2015 (4) TMI 652
Extension of stay order - Power of tribunal to extend stay beyond period of 365 days - Held that:- Tribunal has noted that a waiver of pre-deposit and unconditional stay on the realisation of the adjudicated liability was granted by the Tribunal since a prima facie case was found in favour of the assessee. The Tribunal has also observed that the appeal has not been disposed of only on account of the pendency of several older appeals and not on account of any delay on the part of the assessee - Ends of justice would be met if the Tribunal is requested to dispose of the appeal expeditiously and preferably within a period of six months - Stay extended.
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2015 (4) TMI 651
Denial of CENVAT Credit - credit taken on capital goods and inputs contained in semi-finished goods/ work in progress, destroyed in a fire accident - Held that:- It is observed from the facts of the case available on record that certain capital goods, which were used for considerable period and inputs contained in the semi-finished goods/ work in progress were destroyed in a fire accident that happened on 03.02.2012 - In view of the settle legal proposition, demand of CENVAT credit taken with respect to capital goods in use and inputs contained in semi-finished goods/ work in progress are required to be set-aside. Following the ratio [2010 (7) TMI 433 - GUJARAT HIGH COURT], no demand of credit taken services used in installation of capital goods destroyed in fire, can sustain. - Decided in favour of assessee.
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2015 (4) TMI 650
Denial of CENVAT Credit - courier service and transportation services - Held that:- Reason stated by the Chartered Accountant and supported by substantial evidence on record demonstrate relevancy of services to manufacture and business of the appellant. When the authority below did not find any contrary evidence of use of services elsewhere but were utilized for business as well as manufacture, denial of CENVAT credit is unjustified. But the expenditure on training, printing and stationery could not satisfy as to relevancy thereof to the manufacture activity. Therefore, no CENVAT credit on these two items shall be allowed. But credit on the rest of the items clamed shall be allowed. - Decided partly in favor of assessee
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2015 (4) TMI 649
Demand of duty - Issue of bogus invoices - Denial of CENVAT Credit - Held that:- In the case of Juhi Alloys Ltd. (2014 (1) TMI 1475 - ALLAHABAD HIGH COURT), the Hon'ble Apex Court has held that when the invoices have been issued by registered dealer, invoices of manufacturer issued in the name of Registered dealer found fake, and manufacturer of the inputs is not in existence. It was held by Hon'ble High Court that it would be impractical to require the assessee to go behind the records maintained by the first stage dealer. The assessee has duly acted with all reasonable diligence in its dealing with the first stage dealer within the meaning of Rule 9(3) of Cenvat Credit Rules, 2004. Admittedly in this case the allegation has been made against the appellant on the basis of statement given by the manufacturer, dealer / supplier of the goods, but no investigation has been conducted at the end of the appellant. Moreover, there is no discrepancy in the invoices issued to the appellant and all the payments were made through account payee cheque. In these circumstances, I hold that Revenue has failed to prove their case with supporting evidence. In these circumstances, impugned order is set aside. - Decided in favour of assessee.
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2015 (4) TMI 648
Condonation of delay - Rectification of mistake - Held that:- First order of the Tribunal very clear covers both the show cause notices and covered by the single adjudication order. The second order of the Tribunal again covers both the show cause notices and gives an impression that the Tribunal thought that the two cases though are similar but are different. It is well settled legal position if a matter is decided by any adjudicating authority or any appellate authority, the said authority cannot decide it again. The second judgment or order has to be ignored or is non est in the eyes of law. We accordingly hold so. - Petition disposed of.
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2015 (4) TMI 647
Enhancement in rate of duty - Effective date for enhancement - Government introduced an amendment to clause 141 of the Finance Bill 2012 by which the Ad valorem rate introduced with effect from 17.03.2012 was converted into specific rate and this had effect increasing the rate of duty on the Cigarette. However, this amendment was not accompanied by a declaration under section 3 of the PCT Act. The Finance Bill as amended, received the President's assent on 28.05,2012 - whether enhanced rates of duty as per the amendment introduced on 08.05.2012 would be applicable w.e.f. 17.03.2012 - Held that:- Since, both the sides agree that the issue involved in this case is covered in favour of the appellant by the Board's Circular No. 981/05 dated 11.02.2014, which has been followed by Tribunal in its judgment in the case of ATC ltd, vs CCE Chennai-III, (2015 (2) TMI 1008 - CESTAT CHENNAI) the impugned order is not sustainable. The same is set aside - Decided in favour of assessee.
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2015 (4) TMI 646
Job work - manufacture of fastners required bright wire rods out of bright bars - manufacturing activity or taxable services - Business Auxiliary Services - Rods used for manufacture of their finished products - Manufacturing activity or not - Held that:- M/s Juneja Bright Steels Pvt. Ltd. (Job worker) had obtained service tax registration treating their activity as Business Auxiliary Services, that is production of goods not amounting to manufacture and were paying service tax on the job charges and were also filing ST-3 return. Thus, it cannot be denied that the activity of M/s Juneja Bright Steels Pvt. Ltd. was known to the Department and the Department at that time was accepting the service tax from them. In view of this, just because subsequently the Department takes the view that the activity of M/s Juneja Bright Steels Pvt. Ltd amounts to manufacture and the bright wire rods manufactured by them would attract Central Excise duty, M/s Sundram Fasteners Ltd. cannot be accused of receiving the wire rods with knowledge that the same were non-duty paid and liable for confiscation. - prima facie view that the imposition of penalty on M/s Sundram Fasteners Ltd. under Rule 26 (1) is not sustainable and as such they have strong prima facie case in their favour. The requirement of pre-deposit of penalty by M/s Sundram Fasteners Ltd. for hearing of their appeal is, therefore, waived and recovery thereof is stayed. - Stay granted.
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2015 (4) TMI 645
Denial of Cenvat credit - security services availed for the factory and sales commission paid against Business Auxiliary Service availed - Held that:- Nexus of the expenditure on security services used for the factory and manufacture facility there at being not possible to be isolated, Rule 2(l) of the Cenvat Credit Rules, 2004 allows Cenvat credit on service tax paid to avail such service and sales promotion expenses being attributable to the service availed, input credit of service tax paid cannot be denied on the commission paid. Further, the service tax paid on the security service availed for protection of factory is admissible for existence of inextricable link between the services and the manufacturing facility for which that was used - Decided in favour of assessee.
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2015 (4) TMI 644
Denial of CENVAT Credit - quantity corresponding to invoices and challan does not match - date of challan and invoices differs and in six cases vehicle numbers also differs - Invocation of extended period of limitation - Held that:- during the course of the audit between challan and invoices. There are three types of discrepancies: a) Quantity, b) Difference in dates of invoice and challan, c) Vehicle Number does not match. The appellant has explained all the discrepancies in detail and tried to justify the clarifications regarding quantity it is explained that on the same date two invoices has been issued and quantity of one invoice has been taken into consideration, if quantity of both the invoices is taken into consideration then there will be no difference in quantity. Goods have been loaded to some other vehicle. Therefore, there is a difference in vehicle number. It is a fact that goods have been received by the appellant in their factory as goods have been manufactured from the inputs of same has been cleared on payment of duty. Moreover, no statement of the supplier of goods and the transporter have been recorded to corroborate the allegations against the appellant. Further, I find that appellant has produced a certificate from the supplier of goods that they have supplied the goods and received the payment through account payee cheque. These facts have not been controverted by the revenue at any stage. - goods have been received by the appellant and duty has been paid there on. Therefore appellant are entitled to take Cenvat Credit. - Decided ain favour of assessee.
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CST, VAT & Sales Tax
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2015 (4) TMI 657
Revision of assessment - Bare of limitation - Revised order passed after period of 5 years - Held that:- Following decision of Universal Abrasives v. Commercial Tax Officer, Manali Asessment Circle, Chennai reported in [2013 (10) TMI 440 - MADRAS HIGH COURT] - Court has no other option except to set aside the impugned order and this Court is not inclined to remit the matter back to the authority concerned as contended by the respondent - Decided in favour of assessee.
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2015 (4) TMI 656
Delayed payment of interest on the pre-deposit - Held that:- DVAT had required the appellant to make a payment of ₹ 2.61 crores as pre-condition to the hearing of his appeal. The appellant could not, however, comply with the direction but did so about three years later. In these circumstances, by the impugned order Tribunal directed it to pay 15% interest for the intervening period. Section 76(4) primarily empowers the Tribunal to make appropriate orders for waiver of either the full or part pre-deposit. Although this power includes the power to make other directions, the present direction to pay interest 15% per annum on belated payment of deposit has acted as a further barrier and caused hardship. - ribunal’s order is hereby modified. Instead of direction to pay 15% interest for belated payment, the appellant is hereby directed to deposit ₹ 10 lacs - Decided partly in favour of assessee.
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2015 (4) TMI 655
Levy of penalty and interest - adjustment of carried forward input tax credit - Held that:- respective assessees had surplus balance of input credit, which have been adjusted against the demand of tax upon reassessment. Under these circumstances, the element of avoidance of tax could be said as lacking. Consequently, the deletion of interest and penalty by the learned Tribunal could not be said as unjustifiable and/or it cannot be said that the learned Tribunal has committed any error in deleting the interest and penalty. Following decision of STATE OF GUJARAT Versus JAY STEEL AND TUBES TRADERS [2015 (2) TMI 372 - GUJARAT HIGH COURT] - Decided against Revenue.
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2015 (4) TMI 654
Demand of tax - Stock difference - for the earlier notice petitioner has not stated about the godown for the first time it is stated and it is created for the purpose to avoid tax payable under The Puducherry Value Added Tax Act, 2007 - Held that:- On verification of the registration records by the authorities on 19.11.2014 there is no such proof of existence of such a godown has been substantiated in the official registration records or the petitioner has been able to sustain the same. Therefore the presence of a godown and stock in the godown cannot be possibly be authenticated at a later point of time by the petitioner to the department only on 27.01.2015. Till date petitioner has not come to register godown and has created the same only to avoid the payment of tax - One more opportunity is given to the petitioner to appear before the authority and make his submissions. It is open to the respondent to verify the place of business before 30.04.2015. Petitioner shall deposit 35% of the tax amount less the amount already deposited if any - Decided partly in favour of assessee.
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2015 (4) TMI 653
Validity of impugned order passed - Violation of principle of natural justice - Opportunity of hearing not granted. - Held that:- No due opportunity has been given to the Petitioner and non consideration of the documents produced by the Petitioner as rightly pointed out by the learned counsel for the Petitioner the respondent has omitted to take into consideration the relevant documents and has also failed to provide opportunity of hearing before passing the impugned order which is in violation of principles of natural justice. - Matter remanded back - Decided in favour of assessee.
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Indian Laws
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2015 (4) TMI 663
Charges of misconduct - Dismissal from service - Misbehaviour with female employee of the bank - Held that:- decision of the Tribunal cannot be faulted. In Jai Krishna Mandal (2010 (8) TMI 889 - SUPREME COURT), it was an admitted position that there was "deep enmity" between the family of prosecutrix and the appellants therein on account of a dispute over a piece of land. The prosecutrix had alleged that she had been raped by the appellants and one other person. The medical report and the evidence of the doctor did not support the prosecution and the doctor had deposed that there was no evidence of rape or injury on the prosecutrix. In those circumstances, the Supreme Court set aside the appellant's conviction. - Tribunal noted that Ms Sunita Jain could not recollect the exact dates of the incidents and held that she was not expected to do so after a long time gap. In my view, although there is inconsistency in the testimony of Ms Sunita Jain and her complaint, the same is not sufficient for her testimony to be rejected in toto. The admitted facts are that the petitioner had tendered a written apology for his behavior. Although, the petitioner had immediately filed a complaint that his apology was forcibly extracted from him, the same must be discounted. There is no explanation as to why Ms Sunita Jain's husband would come to the branch office to extract an apology from the petitioner. The Tribunal had also taken note of the fact that it takes a certain amount of courage for a lady to come and depose regarding the harassment meted out to her and such testimony should be given due weightage. - Tribunal has appreciated the evidence and arrived at a conclusion. It is well established that this court, while exercising its powers under Article 226 of the Constitution of India, would not interfere with the findings of fact unless the same are perverse or based on no evidence at all. - No infirmity in impugned award - Decided against Petitioner.
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