TMI Tax Updates - e-Newsletter
April 23, 2014

Case Laws in this Newsletter:

Income Tax Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Issue & Possible Resolution - Negative List

   By: Madhukar N Hiregange

2. SERVING THE ORDER ON THE EMPLOYEE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. RBI Reference Rate for US $ and Euro

2. Regulating Capital Account: Some Thoughts (Inaugural address delivered by Shri Harun R Khan, Deputy Governor, Reserve Bank of India delivered at the 9th Annual Conference of FEDAI in Cape Town on April 12, 2014)

Highlights / Catch Notes

Income Tax

• Reopening Assessments Requires Evidence of Income Escape, Not Just Expense Verification - Avoid Fishing Inquiries.

  Case-Laws - HC : An assessment cannot be reopened merely to verify the genuineness of the expenses as that would amount to an impermissible fishing or rowing enquiry without any tangible material to show escapement of income - HC
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• Objective Unrelated to Education Doesn't Deny Tax Exemption u/s 10(23C)(iiiad) of Income Tax Act.

  Case-Laws - HC : Merely, because there exists object, which is not related to educational activities, is not sufficient to deny the exemption/benefit of Section 10(23C)(iiiad) - HC
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• Taxpayer's Charity Donation Error Not Penalized u/s 271(1)(c) Due to Lack of Intentional Omission.

  Case-Laws - AT : Neither actual payment nor genuineness of the charity and donation was in dispute, mere failure of assessee to add back the same while computing the total income and make a separate claim u/s 80G, is not sufficient for levy of penalty u/s 271(1)(c) - AT
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• Court Rules NRI Status Intact Without Legal Violations; No Unjust Alteration or Movement Restrictions Allowed Under Tax Law.

  Case-Laws - AT : Determination of Residential status – legislature cannot have enacted the provision with an intention to forfeit the NRI status by unlawfully compelling the assessee not to leave India even if he has found not to have violated the alleged law - AT
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• Customized SAP Software Qualifies as 'Produced' u/s 10A for Tax Deductions After Extensive Customization Process.

  Case-Laws - AT : Deduction u/s 10A - the customised SAP software after passing through cumbersome process of customization is different product; i.e. software, then the original standard software and would certainly fall under the term 'produce' - AT
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• Telecasting via transponder is a "Process" under Income Tax Act Sec 9(1)(vi) for royalty definition.

  Case-Laws - AT : Royalty or not – The use of transponder by the assessee for telecasting/broadcasting the programme involves the transmission by the satellite including uplinking, amplification, conversion for downlinking of signals which falls in the expression “Process“ as per Explanation 6 of section 9(1)(vi) - AT
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• Section 44C Deduction: No Need for Head Office to Issue Debit Note or Voucher for Branch Claims.

  Case-Laws - AT : Allowability of deduction u/s 44C - there is no requirement for raising debit note or voucher by the head office on the branch for claiming deduction u/s 44C of the Act - AT
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Corporate Law

• High Court: Winding Up Petition Must Be Dismissed Despite Creditor's Pending Debt Recovery Application.

  Case-Laws - HC : Winding up petition must fail - it makes no difference that the petitioning-creditor has a pending application before the Debt Recovery Tribunal - HC
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Central Excise

• Court Rejects Request to Modify Stay Order After Appellant Fails to Make Rs. 3.5 Crore Pre-Deposit on Unsecured Loan.

  Case-Laws - AT : Modification of Stay Order - appellant has given un-secured loan and considered to be good to others to the tune of Rs.32.52 crores, which definitely if recovered, can help them to deposit an amount of Rs.3.5 crores, which is ordered to be pre-deposited - application rejected - AT
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VAT

• Tribunal Confirms Dealer's Exemption Status for Canvas Cloth Transactions; Reinstates Previous Order.

  Case-Laws - SC : Scope of textiles - Tribunal, which is the last fact-finding Authority has positively come to the conclusion that the appellant is a dealer who purchases canvass cloth and effects sale of the canvass cloth and therefore exigible for exemption - order of tribunal restored - SC
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• Transformer Qualifies for Concessional Tax Rate as Manufacturing Accessory Under "Goods Required for Use in Manufacture" Category.

  Case-Laws - SC : Purpose of transformer - Whether it is an accessory to the manufacture of the goods so as to claim concessional rate of tax - assessee would certainly fall within the meaning of the expression “goods required for use in the manufacture“ - exemption allowed - SC
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• Sales Tax Exemption Policy: Broad Definition of 'Manufacture' Includes Production, Altering, and Processing Raw Materials for Tax Relief.

  Case-Laws - SC : Sales Tax Exemption Policy – The definition of 'Manufacture' that finds a place in the Act is wide enough to cover production, making, extracting, altering, ornamenting, finishing or otherwise processing of the raw material - SC
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Case Laws:

• Income Tax

• 2014 (4) TMI 752
  Disallowance u/s 14A of the Act – Applicability of Rule 8D of the Rules - Dividend income earned – Held that:- The assessee has specifically raised a point before the AO that 97.82% of the investment is in the subsidiary companies and joint venture companies and, therefore, no expenditure was incurred for maintaining the portfolio on these investments or for holding the same – the investments are long term investment and no decision is required in making the investment or disinvestment on regular basis because these investments are strategic in nature in the subsidiary companies on long term basis and, therefore, no direct or indirect expenditure is incurred. The department has not disputed the fact that out of the total investment about 98% of the investment are in subsidiary companies of the assessee and, therefore, the purpose of investment is not for earning the dividend income but having control and business purpose and consideration – Prima facie the assessee has made out a case to show that no expenditure has been incurred for maintaining these long term investment in subsidiary companies – Relying upon GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - The assessee has brought out a case to show that no expenditure has been incurred for maintaining the 98% of the investment made in the subsidiary companies – thus, in the absence of any finding that any expenditure has been incurred for earning the exempt income, the disallowance made by the AO is not justified and is liable to be set aside – Decided in favour of Assessee.

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• 2014 (4) TMI 751
  Addition u/s 68 of the Act – Unexplained cash credits and expenses – Onus to prove the genuineness - Held that:- The onus is upon the assessee to prove the identity and creditworthiness of the lenders as well as the genuineness of loans - the assessee has not been able to prove the proper identity and creditworthiness of the lenders except in the case of Ms. Jalpa K. Shah - CIT(A) rightly observed that the assessee has shown loans to the extent of Rs.57 lakhs out of which only the loan of Jalpa K. Shah was proved with the help of confirmation letter and the for balance amount provisions of section 68 are attracted - the assessee has not raised any specific ground with regard to the validity of enhancement of income except merely contesting on merits that the CIT(A) is not justified in holding that the balance amount is assessable to tax u/s 68 of the Act - no material was placed to contradict the findings of the CIT(A) and also no material was filed to prove the genuineness and creditworthiness of the creditors – thus, there is no infirmity in the order of the CIT(A) – Decided against Assessee.

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• 2014 (4) TMI 750
  Validity of power u/s 147/148 of the Act – Reopening of assessment – Reason to believe – Held that:- The “reasons to believe” nowhere reveal as to what tangible material which the AO came to obtain to justify the reassessment notice - the reassessment notice was based on the assumption that a much larger income had accrued to the assessee whereas only a fraction of its was offered in the P & L account - a somewhat similar ground has been made out i.e. that of expenses incurred abroad have not been revealed - This was an aspect which was known to the AO at the time of the original assessment – Relying upon CIT V. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - the explanations by the assessee appear to have been taken into account - A virtual assertion of the same reasons in different words does not clothe the reassessment notice with any more sanctity, nor does it take away the vice of lack of jurisdiction - an assessment cannot be reopened merely to verify the genuineness of the expenses as that would amount to an impermissible fishing or rowing enquiry without any tangible material to show escapement of income – the notice is no justified and is beyond the authority of law – Decided in favour of Assessee.

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• 2014 (4) TMI 749
  Violation of section 11(4) and 11(4A) of the Act – Entitlement for exemption – Held that:- There is no reason to interfere with the findings of the Tribunal in the order so far as the question of entitlement to the benefit of exemption u/s 11 is concerned – also, there is no error in the findings with respect to violation of Section 11 (4) and 11 (4A) of the Act. Deduction for legitimate expenses and depreciation – Held that:- No findings were recorded by the CIT(A) with respect to the permissible heads of expenditure including depreciation - The Tribunal merely set aside the order of the CIT (A) having regard to the findings of the Court in the previous years – thus, the matter is required to be remitted back to the AO for examination of the aspect of granting allowability of expenditure and depreciation – Decided partly in favour of Assessee.

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• 2014 (4) TMI 748
  Notional Interest - Accrual of interest – Held that:- the amount has been accepted by the assessee as its own income, there is no justification in assuming that the assessee has paid interest on such amount - No addition is required on the basis of assuming interest on the amount which has already been accepted by the assessee as his own income - The reasonable approach has been adopted by the Tribunal – thus, no error of law is committed and no substantial question of law is arise for consideration – Decided against Revenue.

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• 2014 (4) TMI 747
  Eligibility to claim deduction u/s 10(23C)(iiiad) of the Act – Purpose not solely Educational – Interpretation of the term “other than education” – Held that:- Any income received by any person on behalf of the educational institution “existing” solely for educational purpose and not for purposes of profit and if its aggregate annual receipts do not exceed the amount of annual receipts as may be prescribed, it is entitled for exemption under this provision – The society has been conducting the primary and secondary school in the State of Karnataka since 2002 - Nor is there any dispute that save and except for conducting school, the society has carried on any other activities since then - Without expressing any opinion whether the object, as reflected in Clause 3(b) and 3(h) of the Memorandum of Association, are related to education, it is clear that save and except educational activity the assessee did not/do not carry on any other activity is the fact, which is not in dispute - though the activities as reflected in Clause 3(b) and 3(h), may constitute the purpose, other than the educational purpose, but, during the relevant assessment year, it is not the case of the revenue nor is there any material to show, that the society was running any activities other than the educational activity. There are adequate safeguards that if the activities other than educational activities are undertaken by the society, exemption granted can be withdrawn - Merely, because there exists object, which is not related to educational activities, is not sufficient to deny the exemption/benefit of Section 10(23C)(iiiad) of the Act - in the absence of any allegation or material against the society showing that they are involved in any other activities than the educational activities, it cannot be denied exemption u/s 10(23C)(iiiad) – Decided in favour of Assessee.

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• 2014 (4) TMI 746
  Penalty u/s 271(1)(c) of the Act – Genuineness of the transaction - Held that:- Even though assessee has filed the PAN Number, but the confirmation of the respective creditors could not be filed - By not filing the loan confirmation, the assessee was unable to discharge his primary onus to prove the identity, genuineness and creditworthiness of the loan creditors – thus, there was no infirmity in the order of the AO for levy of penalty for addition of such loan creditors – Decided against Assessee. Disallowance of charity and donation – Held that:- Neither actual payment nor genuineness of the charity and donation was in dispute, mere failure of assessee to add back the same while computing the total income and make a separate claim u/s 80G, is not sufficient for levy of penalty u/s 271(1)(c) - the assessee has made full disclosure of amount given for charity and donation in the P&L account, there is no failure on the part of the assessee to disclose fully the particulars of income - the AO was not justified in levying penalty with respect to the disallowance of charity and donations – Decided in favour of Assessee.

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• 2014 (4) TMI 745
  Condonation of delay – Delay of 67 days - Restoration of appeal - Held that:- CIT(A) did not condone the delay and dismissed the appeal without giving any verdict in regard to merits of the addition - filing of appeal is a right granted under the statute to the assessee and is not an automatic privilege, therefore, the assessee is expected to be vigilant in adhering to the manner and mode in which the appeals are to be filed in terms of the relevant provisions of the Act. Relying upon Collector, Land Acquisition vs. Mst. Katiji & Ors. [1987 (2) TMI 61 - SUPREME Court] - The expression "sufficient cause" is adequately elastic to enable the courts to apply the law in meaningful manner which sub serves the end of justice – that being the life purpose of the existence of the institution of courts - When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred - Without going into merits of addition and keeping in view the interest of substantial justice, the delay is condoned and the appeal is restored to the CIT(A) for deciding on merits – Decided in favour of Assessee.

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• 2014 (4) TMI 744
  Determination of profits in the business of wines – Rejection of books of accounts – Held that:- There was no reason to interfere with the order of the CIT(A), following Income-tax Officer, Ward 1, Warangal Versus Shri P. Ramaiah, Warangal and others [2013 (12) TMI 1001 - ITAT HYDERABAD] - consistent directions has been made to adopt the rate of 5% of the purchase value or stock put to use whichever is more – thus, the order of the CIT(A) upheld – Decided against Revenue.

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• 2014 (4) TMI 743
  Error in determination of annual rateable value of the property let out – Computation of income from house property – Held that:- As decided in assesee’s own case, it has been held that gross annual ratable value of the property at the annual value determined for the purposes of computation of house property income is to be determined at the annual value determined by Municipal Corporation - the AO is directed to determine ALV at the value determined by Municipal Corporation for the year – Decided in favour of Assessee. Addition u/s 92 of the Act - Purchases of Cefotaxime Sodium & Roxythromycin – Held that:- As decided in assesee’s own case, it has been held that the transaction between the assessee and the non-resident company was not an “arranged transaction” - The certificates produced by the assessee from various parties establish that the assessee did not buy the product cefoaxime sodium at a price higher than the price at which the same product was sold to others - the AO failed to establish a case where provisions of section 92 could be applied to disown the loss incurred by the assessee - the order of the CIT(A) is upheld – Decided against Revenue. Disallowance of estimated depreciation on obsolete assets – Held that:- The decision in CIT Vs. GR Shipping Ltd. [2009 (7) TMI 1169 - BOMBAY HIGH COURT] followed – depreciation was allowable on obsolete assets to the assessee – there was no merit in the action of the AO for declining assessee’s claim of depreciation on obsolete assets – Decided in favour of Assessee. Disallowance of full revenue deduction – VRS and Early retirement incentives – Held that:- Mulund factory was working and the AO was not justified in observing that expenditure was incurred for closing that unit - various manufacturing unit of assessee at Mulund, Ankleshwar and Goa and under loan licence agreement part of the corporate business and many of the projects which were being maintained at Mulund were continued to be produced under loan licence agreement - the expenditure incurred on VRS was wholly and exclusively for the purpose of business, even if it is consider the same under the provision of Section 37(1), it cannot be disallowed – Relying upon K Ravindranathan Nair Versus Commissioner of Income-Tax [2000 (11) TMI 3 - SUPREME Court] – there was no merit in the action of the lower authorities for declining the assessee’s claim for deduction of VRS and early retirement incentives paid to the workers – Decided in favour of Assessee. Sales tax set off and refund – Inclusion in taxable turn over – Computation of deduction u/s 80HHC of the Act - Held that:- The issue with regard to allowing claim of deduction in respect of sales tax set off and refund, the assessee is not eligible in view of Explanation (baa) to Section 80HHC – the AO is directed to reduce the amount of sales tax refund from the eligible profit for computing claim of deduction u/s 80HHC – Decided against Assessee. Claim of deduction u/s.80HHC in respect of processing charges – Held that:- As decided in assessee’s own case, it has been held that the AO is directed that only net receipts after deducting expenditure incurred for earning such income will be considered for reduction from eligible business profit as per Explanation (baa). Disallowance of bad debts – Held that:- The amount so written off by the assessee is eligible for deduction as bad debts or business loss - Merely because the AO was not convinced with the efforts made by the assessee for recovery of the bad debts, no disallowance can be made – Relying upon TRF. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] - the CIT(A) that he has already considered amended provisions of law and allowed assessee’s claim for deduction u/s 36(1)(vii) except amount of Rs.4,64,239 - no evidence with regard to export debt outstanding was produced before the CIT(A), he has partly confirmed the disallowance – thus, the matter is remitted back to the AO to the extent of Rs.4,64,239/- for fresh adjudication. Taxing of STCG on sale of brands – Held that:- The claim of the assessee was however not accepted by the AO who after analyzing the basis on which the right over trade marks got acquired, came to the conclusion that certain portion of the expenditure incurred by the assessee company over a period of time and claimed as deduction under various heads can be related to the cost of acquisition of these trademarks – the ground was not taken before the CIT(A) - Therefore, he has not decided the issue – thus, the matter is required to be remitted back to the CIT(A) for adjudication – Decided in favour of Assessee. Disallowance of interest – Tax free investment income – Held that:- As decided in assessee’s own case for the previous year, it has been held that the CIT(A) accepted the claim of sale proceeds but confirmed disallowance of interest for 20 days as there was time gap of 20 days between date of investment and date of receipt - No material is placed on record to controvert the claim of the assessee regarding availability of sale proceeds – Decided against Revenue. Exclusion of excise duty from turnover – Computation of deduction u/s 80HHC of the Act – Held that:- The decision in CIT Vs. Laxmi Machine Works [2007 (4) TMI 202 - SUPREME Court] followed - excise duty has no element of profit, therefore, not includible in total turnover for computing deduction u/s.80HHC – thus, there was no infirmity in the order of CIT(A) directing for exclusion of excise duty from the total turnover for computing deduction u/s.80HHC – Decided against Revenue. Exclusion of processing charges and bad debts – Computation of deduction u/s 80HHC of the Act – Held that:- The decision in CIT Vs. Ravindranathan Nair [2007 (11) TMI 10 - Supreme Court of India] followed - the AO is directed to recompute the deduction u/s 80HHC after excluding the net income from processing charges - bad debts recovered is neither part of total turnover nor export turnover for the purpose of Section 80HHC – thus, it is required to be excluded from eligible profit for the purpose of clause (baa) – Decided against Revenue. Re-computation of indirect cost attributable to export of trading goods – Held that:- As decided in assessee’s own case, it has been held that it is clear from the working of the AO that for determining the indirect cost, the AO has reduced from the total cost of business, cost of goods as well as the other items – thus, there was no error as far as the formula adopted by the Assessing Officer for computation of indirect cost allocated to the export of trading goods – Decided in favour of Revenue. Direction to the AO for calculating deduction u/s 80HHC of the Act – 90% of DEPB license license not reduced – Held that:- The decision in Topman Exports Vs. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] followed - a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Explanation (baa) to section 80HHC read with the words used in clauses (iiid) and (iiie) of section 28, the assessee was entitled to a deduction under section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee – thus, the AO is directed to compute deduction on DEPB since license sold – Decided in favour of Assessee. Restriction of penalty u/s 271(1)(c) of the Act – Held that:- As the addition made u/s.92 is already set aside, disallowance of VRS as well as claim of depreciation on obsolete assets - the quantum itself has been deleted, there is no legs for levy of penalty for such disallowance/addition - the action of the CIT(A) is confirmed for deleting the penalty imposed with respect to these above three items - In respect of penalty imposed for addition on account of short term capital gain, the matter has been remitted back to the CIT(A) for fresh adjudication – thus, penalty for such addition is also restored to the file of CIT(A) – Decided against Revenue.

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• 2014 (4) TMI 742
  Validity of re-opening of assessment u/s 148 of the Act - Consideration in part received for construction of additional built up area - Held that:- The observation of the Tribunal for the purpose of deleting the addition in respect of the assessment year 2002-03 cannot be treated to be a ‘finding’ for reopening the AY 2001-02 as the appeal for assessment year has not been before the Tribunal for adjudication - the observation of the Tribunal that ‘the case of the assessee is to be brought to tax for assessment year 2000-01 and not assessment 2002-03 as done by the AO is incidental for holding the addition made in the year 2002-03 is not justifiable and the same cannot be the basis for having recourse to section 150 of the Act by holding it as ‘finding or direction’. The observation of the Tribunal does not require compliance by the authorities so far as the assessment year 2000-01 is concerned, taking recourse to section 150 of the Act by holding the same as ‘finding’ of the Tribunal is not legally tenable – Relying upon Rakesh N. Dutt Vs. ACIT [2007 (10) TMI 285 - BOMBAY HIGH COURT] - once section 150 of the Act is not applicable to the case of the assessee, the reopening of the assessment beyond the period of six years from the end of the relevant assessment year would be time barred - thus, CIT(A) is not justified in confirming the validity of the notice issued u/s 148(1) – the proceedings for re-opening of the assessment is set aside – Decided in favour of Assessee.

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• 2014 (4) TMI 741
  Stay application – Claim for deduction u/s 10B of the Act – Out of turn hearing - Held that:- It is necessary to evaluate the balance of convenience in order to dispose of the stay application - Be that as it may, on the aspect of the outstanding demand, the adjustment of MAT credit in terms of section 115JAA of the Act sought by the assessee is still not determinate, the same is before the Assessing Officer – thus, the AO is directed to consider the assessee’s plea for grant of MAT credit claimed to be available for assessment years 2008-09 and 2009-10 and only thereafter determine the net demand outstanding for the year under consideration – no specific order has been passed on the application seeking stay on the recovery of outstanding demand - also, the Registry is directed to post the appeal of the assessee for hearing on an out-of-turn basis before the regular Bench - Decided partly in favour of Assessee.

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• 2014 (4) TMI 740
  Addition on account of closing stock – Held that:- CIT(A) ought not to have rejected the book results as the books of the assessee are subjected to audit by various departments - the action of the CIT(A) rejecting the book of accounts is set aside, but there was no infirmity in the order of the CIT(A) in rejecting the alternate claim of the assessee that the closing stock for the AY 2007-08 be treated as opening stock of the AY 2008-09 - the CIT(A) has given liberty to the assessee to approach to the AO – Decided partly in favour of Assessee. Disallowance of depreciation on fixed assets – Intangible right of way and permissions – Held that:- The assessee has placed documents, such as proof of payment made to various authorities, nd letter of Secon Private Ltd. dated 10/04/2007 along with land compensation award No.01/Nadiad - CNG PL/2007 in support of its contention on the issue – the record of certain documents were not before the AO – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of Revenue. Disallowance of additional depreciation @ 20% on plant and machinery – Held that:- The decision in Income Tax Officer vs. Arihant Tiles & Marbles (P) Ltd. [2009 (12) TMI 1 - SUPREME COURT] followed - the authorities below were not justified in rejecting the claim of the assessee for additional depreciation – Decided in favour of Assessee. Disallowance of prior paid expenses – Held that:- The assessee has not placed anything on record suggesting that the bills and vouchers were received during the year under consideration except a statement is made that these expenses were crystallized and incurred during the year - It is not demonstrated that as to how these expenditure were crystallized during the year – Relying upon CIT vs. Jagatjit Industries Ltd. [2010 (9) TMI 58 - DELHI HIGH COURT] – the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Disallowance of interest on share application money – Held that:- The share application money which was used in purchases of asset - The interest was capitalized by adding the sum to the cost of the asset on which depreciation was claimed - The lower authorities were not justified in disallowing the claim of depreciation as the interest expenses incurred became the cost of the asset acquired – thus, the assessee is entitled for depreciation - the balance interest was not claimed as deduction by the assessee as submitted by the assessee – thus, the order of the lower authorities and the addition is set aside – Decided in favour of Assessee. Addition on account of liquidated damages – Held that:- The assessee has received liquidated damages on account of delay in supply of machinery. the decision in CIT vs. Sauarashtra Cement Ltd. 2010 (7) TMI 11 - SUPREME COURT] followed - Compensation paid for the delay in procurement of capital asset amounted to sterilization of the capital asset of the assessee as supplier had failed to supply the plant – the amount received by the assessee towards compensation for sterilization of the profit earning source, not in the ordinary course of their business, was a capital receipt in the hands of the assessee – Decided in favour of Assessee.

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• 2014 (4) TMI 739
  Determination of the Status of the Assessee – Residential or not – Whether the strict and literal construction of sec 6 and other provisions leads to absurd results which cannot be intended by legislature - Held that:- The proceedings clearly reveal that the repeated impounding of assessee s passport and lodging of criminal case was found to be untenable by courts - This entangled the assessee into spat of litigation, forcing him to stay in India and unwillingly loose his NRI status on strict and literal interpretation of relevant provision - the assessee was restrained by govt. from traveling abroad, compelled to stay in India for more than 180 days - The circumstances were beyond assessee s control and no fault can be attributed to assessee in this behalf – the facts and circumstances create a peculiar situation. No fault can be attributed to assessee who has shown active diligence in defending his legal rights - legislature cannot have enacted the provision with an intention to forfeit the NRI status by unlawfully compelling the assessee not to leave India even if he has found not to have violated the alleged law - assessee was forced to stay in India for a period of more than 182 days by which he lost his NRI status and became liable to enhanced income tax on his global - assessee s case becomes fit where doctrine of forced meajure may be applicable as it was impossible for the assessee to move out of country and therefore doctrine of impossibility of performance is also applicable - This is a fit case where strict legal reading of the provisions regarding residence in India should not be applied - An interpretation or construction should be applied which results in harmonious meaning, equity rather than injustice. For calculation of stay in India for these years the same should be calculated after exclusion of days of wrongful impounding of passport which constitutes forced stay in India - Thus period for which assessee could not travel outside India in above facts and circumstances i.e. from 10.10.2006 to 21-9-2011 i.e. till the passport was finally handed over to assessee and allowed to travel outside India should be excluded - the assessee s residential status is held to be as non-resident for the years – Decided in favour of Assessee. Validity of reference made to Govt. of Mauritius, Jersey and British Islands – Held that:- The direction given to AO does not amount to set aside of the AOs order - CIT(A) has tried to caution the AO to keep the interest of revenue in mind - the appellate authorities should restrict their conclusions to the subject matter and should avoid generalized directions - Such directions are susceptible to be taken to be orders of a higher authority - CIT(A) has deleted the entire addition without any pre condition, therefore, general instructions given to Assessing Officer do not amount to binding order and at best amount to obiter dicta – the observations of CIT(A) are general – Decided against Assessee. Addition made on protective basis – Held that:- As decided in assessee’s own cse for the previous assessment years, it has been held that the CIT(A) has made the addition on protective basis without justification – thus, the alternate retention of addition on protective basis is set aside – Decided in favour of Assessee. Addition on account of excess cash found during search – Held that:- Assessee contended that without considering opening balance and arbitrarily estimating household expenses, the CIT(A) s action in confirming the action of AO is not justified – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Addition on account of investment in renovation of farms – Held that:- The assessee is held to be a non-resident consequently any amount is not taxable in India unless it is deemed to have been received or accrues or arises or deemed to have arisen to assessee in India – As decided in assessee’s own case for the previous years, the order is set aside and the AO id directed to verify as to whether the total amount spent on Sonali Farms exceeded the amount as estimated by the valuer and if any addition is possible under section 69C – Decided in favour of Assessee.

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• 2014 (4) TMI 738
  Entitlement of deduction u/s 10A of the Act - Production and development of computer software solutions – Held that:- As per the agreement, the assessee has to provide services at the place assigned by the Seavus Group and that the payment is to be made as per man-hours spent by the professionals - it is not possible to hold that the assessee has not exported any article or thing or computer software - the meaning of computer programme has been expanded as "computer program" "process" or "management of electronic data" - the product and service as notified by the Board for the purpose of clause (i) of Explanation 2 includes the contents development, data process, human resources services etc. as part of computer software eligible for exemption, if other conditions are satisfied - the human resource service in the field of development of software programme as notified falls under the definition of computer programme as stipulated in the Explanation as well as the definition u/s 10A - raising of bill on the basis of man-hour further supports the case of the assessee that the assessee is carryout the customization work of software and development of programme as per the specific requirement of clients - the method of invoice cannot be the basis of rejection of the claim of the assessee. When the assessee has been collected the customised data, stored and transmitted the same through electronic media, then this activity of the assessee falls under the definition of computer programme as provided under sec. 10A as well as under Explanation 2 of sub sec. 10A thereby the definition of software has been expended as customised electronic data or any product or service of similar nature as may be notified by the Board - The assessee definitely engaged in the export of customised electronic data as recorded by the Assessing Officer in his order. The AO has not disputed the fact that the assessee was engaged in customising the software as per the needs of the clients - the definition of “produce” is wider than the term "manufacture" and does not require to produce or manufacture altogether a new product - but if the outcome of the process is a different product than the input it would fall under the definition of ‘produce’ – thus, the customised SAP software after passing through cumbersome process of customization is different product; i.e. software, then the original standard software and would certainly fall under the term ‘produce’ – thus, the claim of the assessee u/s. 10A is to be allowed as the deduction claimed by the assessee falls under the provisions of Explanation 2 after section 10A(9A) of the Act – Decided in favour of Assessee.

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• 2014 (4) TMI 737
  Fee payable to be treated as Royalty or not – Scope of section 9(1)(vi) of the Act – Article 12 of Indo-US DTAA - Whether the fee payable by the assessee to Intelsat Corporation, a tax resident of USA is in the nature of "Royalty" in the light of amended provisions of section 9(1)(vi) as well as under Article 12 of Indo-US DTAA – Held that:- The payments were made to the Intelsat is for user of transponder capacity by the assessee for telecasting/broadcasting of its various programmes on television channels including marketing and advertising airtime etc. Relying upon Asia Satellite Telecommunications Co. Ltd. Versus Director of Income-tax [2011 (1) TMI 47 - DELHI HIGH COURT] - the application of the term 'royalty' to the transaction on the premise of territorial jurisdiction in-as-much as the said 'process' was not being used in India - Without doubt, the rights in or for the use of the process vesting in the assessee are located in India, where at the signals are downlinked as also uplinked from – it has to be read in conjunction with Explanation below section 9(2), inserted on the statute by Finance Act, 2007 w.r.e.f 01.06.1976 - The use of transponder by the assessee for telecasting/broadcasting the programme involves the transmission by the satellite including uplinking, amplification, conversion for downlinking of signals which falls in the expression "Process" as per Explanation 6 of section 9(1)(vi) - the payments made for use/ right to use of process falls in the ambit of expression "royalty" as per DTAA as well as provisions of Income Tax Act – there was no reason to interfere in the decision of CIT(A) – Decided against Assessee.

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• 2014 (4) TMI 736
  Deletion of unexplained investment – Purchase of plots – Held that:- CIT(A) was of the view that there is no contrary information related to the issue to disprove the submissions made by the appellant - the addition could not be made on the basis of a seized material presumed to be coded figures or the actual figures, without bringing any corroborative material evidence, in support thereof, and no addition can be made, if primary burden is discharged by the appellant - the information in seized material was not put to further tests or examinations and the explanation of the assessee has been rejected by the AO summarily - Nothing was brought on record to counter the findings of the CIT(A) - the amounts are already assessed in the hands of individual and as there is no business in the hands of the firm – Decided against Revenue. Income from sale of plots – Held that:- CIT(A) was of the view that the AO has gone by the mere indication of the details inscribed at the referred pages of the annexure without getting into the details related to the nature of the transactions and their relevance either in the books of the appellant or any other entity of the group - in the absence of any specific information or the evidence gathered against the submissions of the appellant, the AO is not justified in treating the entire amount by estimation and presumption in the hands of the appellant firm - the additions made merely based on the information in seized material without a corroborative evidence is not sustainable - there was no reason to interfere with the well-reasoned order of the CIT(A) – AO was not correct in making the addition in the hands of the firm - firm has not done any real estate business and entire business was done by the individual in his individual capacity – the order of the CIT(A) upheld – Decided against Revenue. Validity of admission of additional evidence – Violation of Rule 46A of the Rules - Held that:- The assessee has not furnished any additional evidence which was not filed before the AO and only an affidavit was filed before the CIT(A), which cannot be considered as additional evidence – Decided against Revenue. Income from plots – Held that:- CIT(A) was of the view that the basis for making the addition by treating the amounts inscribed in the seized material referred above is the mere indications of figures of amounts made in the seized material - the AO has not made any enquiries or investigations to disprove the claim of the appellant that amounts do not belong to the firm - there is no adverse information to dispute the claim of the appellant - there is no further basis for making the addition in the hands of the appellant firm under the head 'income from plots' – there was no reason to differ from the findings of the CIT(A) – the AO seems to have not applied his mind to any of the submissions and has in fact made addition again - the additions were made purely on presumptions and surmises - Decided against Revenue. Deletion towards commission from chits and investment in loans – Unexplained income – Held that:- There is no reason to interfere with the orders of the CIT(A) - As far as the transactions pertaining to the individual Shri K.C. Reddappa Naidu, the same cannot be brought to tax in the hands of the firm - deletion by the CIT(A) is correct - As far as the verification to be done with reference to transactions of others as directed by the CIT(A), this verification is required as the AO did not make any enquiries - there is no discussion also about the quantification of the amounts, details of the entries made in the seized material and very cursorily the Assessing Officer made the addition – the CIT(A) directed correctly to make the verification of the same to bring it to tax in the respective hands - Since assessee is not having any business on its own in real estate, nothing can be brought to tax in the hands of the assessee as such - To that extent, the deletion by the CIT(A), of the amount which was contended by the Revenue in its ground, is confirmed - assessee’s ground is also upheld as the same need to be assessed in the respective persons hands and not in the hands of the assessee – Decided against Revenue. Deletion of amount expended for gift items – Deletion made on amounts borrowed – Deletion of unaccounted receipts - Held that:- CIT(A) was of the view that the expenses were meant for the gifts for the new business of chit fund, which was not started yet - incurring of such expenses do not arise as per the appellant, which was not refuted by the Assessing Officer, with a concrete and correct evidence - the addition could not be made on the basis of a seized material presumed to be coded figures or the actual figures, without bringing any corroborative material evidence, in support thereof, and no addition can be made, if primary burden is discharged by the appellant – the addition based on loose sheets and presumptions of the AO based could not be sustained in absence of any corroborative material or evidence brought on record - the facts are that the information in seized material was not put to further tests or examinations and the explanation of the assessee has been rejected by the AO - the Revenue is contesting the factual aspects decided by the CIT(A) - The AO did not consider the assessee’s partner submissions that most of the amounts were accounted for in the hands of individual and entries are not belonging to the firm - Since the firm did not do any business either in real estate or in chit business, question of making additions in the hands of the firm does not arise – thus, the order of the CIT(A) on all the grounds is confirmed as he has examined the issues factually – Decided against Revenue. Deletion of receipts from real estate business – Held that:- CIT(A) was of the view that the proceeds were shown to be precisely related to 'Ganesh Gardens' venture, whose receipts are accounted for in the assessment years 2006-07 to 2008-09 - The appellant also explained the corrections in the figure on account of the duplication of certain sale values thereby arriving at the correct figure related to the transactions - the amounts are explained to be related to Sri K.C.Reddappa Naidu in his individual status, the addition of the same amounts in the hands of the appellant firm are not justified - there is no reason to differ from the findings of the CIT(A) - Revenue has not made out any case to make the addition in the firm’s hand when it is already a fact on record that firm has not done any real estate business – Decided against Revenue. Addition on account of unaccounted advances – Held that:- The CIT(A) was of the view that there is no reason to interfere with the order of the CIT(A) as it is very clear that the figures 98,99,100 does not reflect any money but numbers of plots under sale - the addition per se of the plot numbers cannot be made as advance received – non-application of mind by the AO while making the addition - the fact is that the assessee firm has not involved itself in any real estate business and the transactions pertaining to individual Shri K.C. Reddappa Naidu or other persons – Decided against Revenue.

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• 2014 (4) TMI 735
  Deduction u/s 80-IA - non claim of Depreciation – Held that:- As decided in M/s. Time Technoplast Limited Versus Addl. Commissioner of Income Tax [2014 (1) TMI 297 - ITAT MUMBAI], the decision in Plastiblends India Limited Versus Additional Commissioner of Income-Tax [2009 (10) TMI 39 - BOMBAY HIGH COURT] followed – The quantum of deduction under section 80-IA is not dependent upon the assessee claiming or not claiming depreciation, because, under section 80-IA the quantum of deduction has to be determined by computing total income from business after deducting all deductions allowable under sections 30 to 43D of the Act - Decided against Assessee. Admission of additional ground – Applicability of section 14A while computing the book profits u/s 14A of the Act – Held that:- The CIT(A) is directed to hear the assessee and adjudicate the same after granting a reasonable opportunity of being heard to the assessee - The CIT(A) shall follow the binding judgments relevant to this matters of giving set off of the interest expenses against the interest income for the purpose of computing deduction u/s 80IB of the Act – Decided in favour of Assessee.

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• 2014 (4) TMI 734
  Disallowance of interest expenses – Proper fact findings not done - Held that:- Neither the assessee nor the Revenue could point out as to what happened in the immediately preceding year in assessee’s own case - the Tribunal is a fact finding body and it is the duty of the parties appearing from both sides to assist the court properly by placing all the facts relevant for disposal of the appeal - When the FAA referred to the earlier orders passed by his predecessor in assessee’s own case and per chance further appeals filed by the assessee were dismissed but on account of laxity on the part of the parties in brining that information to the notice of the Bench - if the matter is set aside, then it would lead to inconsistency which could have been avoided if the parties are vigilant to obtain the information so as to assist the court properly – Relying upon Topaz Holdings Pvt. Ltd. vs. DCIT [2014 (2) TMI 1115 - ITAT MUMBAI] - even in the third round of litigation, if the facts need to be properly examined, the maater could be remitted back – thus, the matter is remitted back to the CIT(A) for fresh adjudication – Decided in favour of Assessee. Admission of additional ground – Assessability of income - Held that:- As decided in Topaz Holdings Pvt. Ltd. vs. DCIT [2014 (2) TMI 1115 - ITAT MUMBAI] - it is not a pure legal issue which goes to the root of the matter as otherwise it could not have been dismissed as academic - the facts were not on record before the tax authorities – thus, the additional ground cannot be admitted – Decided against Assessee.

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• 2014 (4) TMI 733
  Allowability of deduction u/s 44C of the Act Head office expenses Held that:- The expatriates are paying full tax on their global salary in India - The expenses incurred by the Head Office is an expenses of the branch as the expatriates working in India are rendering services to the branch in India Relying upon Kedarnath Jute Manufacturing Company Limited Versus Commissioner of Income-Tax (Central), Calcutta [1971 (8) TMI 10 - SUPREME Court] - there is no requirement for raising debit note or voucher by the head office on the branch for claiming deduction u/s 44C of the Act thus, there was no infirmity in the order of CIT(A) deleting the disallowance of expatriate salary Decided against Revenue. Deletion of disallowance u/s 40(a)(ia) of the Act Held that:- The decision in Abn Amro Bank NV. Versus Assistant Director Of Income-tax, International Taxation-i. [2005 (8) TMI 294 - ITAT CALCUTTA-E ] followed - interest paid by the Indian Branch of the assessee bank to its overseas head office is not chargeable to tax in India - the provisions of Section 195 consequently would not be attracted in case of such payment of interest by the Indian Branch to overseas Head Office and the question of disallowance of the said interest by invoking the provisions of Section 40(a)(ia) does not arise thus, the order of the CIT(A) upheld Decided against Revenue. Condonation of delay - Whether the delay in filing of appeal by the assessee was on account of sufficient reasons or not Held that:- In matters concerning the filing of appeals, in exercise of the statutory right, a refusal to condone delay can result in a meritorious matter being thrown out at the very threshold which would lead to miscarriage of justice - The judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so Relying upon Collector, Land Acquisition vs. Mst. Katiji Ors. [1987 (2) TMI 61 - SUPREME Court] and Vedabai Alia Vaijayanatabai Baburao Patil vs. Shantaram Baburao Patil [2001 (7) TMI 117 - SUPREME Court] - the court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression sufficient cause , the principle of advancing substantial justice is of prime importance - the expression sufficient cause should receive liberal construction thus, the delay is condoned in the interest of substantial justice. Interest income earned by head office added in branch office Held that:- The decision in Deputy Director of Income-tax (International Taxation) -4(1) Versus Mizuho Corporate Bank Ltd. [2012 (9) TMI 193 - ITAT MUMBAI] followed - interest paid by Indian branch of the assessee bank to its overseas head office is not chargeable to tax in India - the provisions of sec.195 consequently would not be attracted in case of such payment of interest by the Indian Branch to overseas Head office thus, the order of the CIT(A) upheld Decided against Revenue.

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• Corporate Laws

• 2014 (4) TMI 766
  Winding up of company - Breach of contract - non payment of dues under derivative transaction - Held that:- The matter must either be documented if the assertions are said to be affirmed on the basis of available records, or, being undocumented, must be to the personal knowledge of the person who affirmed the petition. That affirmation is by one Atulya Sharma, and, as Mr. DeVitre points out, he categorically says that he affirmed the petition on the basis of “information derived from the petitioner’s records”. That must necessarily mean some contemporaneous record of these critical assertions. There is none. What is more puzzling is this reference to 4:30 pm as the transaction time. This is the time after which, according to Deutsche Bank, the Japanese Yen reached the entry level of 118.55 allegedly specified by Finolex. But this time of 4:30 pm IST is inexplicable. Throughout, the reference is only to 3:00 pm Tokyo time, about 11:30 am IST. At the time the Tokyo exchange opened and when, according to Deutsche Bank, the Japanese Yen crossed the barrier event mark, it would have been very early in the morning in India, well before 10:00 or 11:00 am. When, exactly, therefore the Japanese Yen hit the so-called entry-level is unknown. If it reached that level at the specified Tokyo time, 3:00 pm, that was 11:30 am IST, and the contract execution time of 4:30 pm mentioned by Deutsche Bank is meaningless and without cogent explanation. If the Japanese Yen had indeed crossed the entry-level mark, descending from its barrier-event mark at the start of the day’s trading, and if that was at or before 3:00 pm Tokyo time, 11:30 am IST, then there was not only no reason to wait till 4:30 pm, but there is also no explanation for this, nor an explanation as to how the Yen could have crossed the entry-level mark at 4:30 pm IST (about 8:00 pm Tokyo time), given that the transaction is linked to a Tokyobased reporting index and the spot rate for every Fixing Date is pegged to 3:00 pm Tokyo time. There are several crucial, yet careful, elisions in this Company Petition, apparent when it is set beside Deutsche Bank’s Original Application No.160 of 2009 filed before the Debt Recovery Tribunal. Before the latter, Deutsche Bank said there were telephone discussions between Finolex and Deutsche Bank’s Treasury Department in Mumbai. This is not to be found in the Company Petition - There are other such assertions in the Original Application as well - This creates another conflict between Deutsche Bank’s position in two parallel, factually similar but distinct proceedings. If, as Deutsche Bank says in the Original Application before the Debt Recovery Tribunal, there is evidentiary material of this telephone conversations and emails and, in particular, of Finolex specifying an entry point, and if the Term Sheet or Confirmation Sheet are supposed to affirm or confirm these, then one might reasonably expect to see these specifics properly reflected in the signed documentation: an endorsement, perhaps, of the specified entry level, or a confirmation that the document was not to be executed till a certain event happened. There is simply no such evidence. There is no equivalence between a proceeding in the Debt Recovery Tribunal under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 and a winding up petition under Sections 433 and 434 of the Companies Act, 1956. This does not and cannot mean that a company court, in exercise of its equitable jurisdiction, must, only because of the pendency of a proceeding in the other forum, proceed on the a priori assumption that the debt claimed is undisputed - Decided against Petitioner.

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• Service Tax

• 2014 (4) TMI 769
  Waiver of pre-deposit - Consulting Engineer; Maintenance or Repair Service; Commercial or Industrial Construction Service; Erection, Transport of Goods by Road; Construction of Complex, Works Contract - Receipt of advance taxes - Held that:- where Service Tax is chargeable on any taxable service with reference to its value, then such value shall in a case where the provision of the service is for consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him - Section 67 clause (3) further elucidates the principle by stating that the gross amount charged shall include any amount received towards the taxable service, before, during or after provision of such service - Stay denied.

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• 2014 (4) TMI 768
  Waiver of pre-deposit - Technical Testing and Analysis Service - Held that:- Prima facie, the appellant was exporting service and hence not liable to pay service tax by virtue of exemption available under Rule 3(1)(ii) of the Export of Services Rules, 2005. We further note that, on similar sets of facts, this Bench granted waiver of pre-deposit and stay of recovery in the case of M/s Lotus Lab Pvt. Ltd. vs. Commissioner of Service Tax, Bangalore (2013 (12) TMI 149 - CESTAT BANGALORE). The appellant's case is also supported squarely by Commissioner of Service Tax, Ahmedabad vs. B.A. Research India Ltd. [2009 (11) TMI 213 - CESTAT, AHMEDABAD] wherein a similar service was found to have been exported by the assessee and, accordingly, held to be exempted from payment of service tax - Stay granted.

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• 2014 (4) TMI 767
  Refund claim for service tax paid wrongly - Foreign commission agent - appellant paid the service tax and took the cenvat credit of the same as a receiver of the service - realising that there was no need to pay service tax as a receiver, appellant filed a refund claim which was allowed - Before receiving the refund, appellant had reversed the cenvat credit taken by them - Held that:- The legal principle laid down cannot be said to be not applicable just because the service receiver and the provider happen to be one and the same. Further, I also find considerable force in the argument advanced by the ld. counsel that at the time when credit was taken it cannot be said that there was a wrongful availment. In any case, there is a question of interpretation of law involved and it would require consideration of statutory provisions and precedent judicial decisions to come to a final conclusion. However, prima-facie the ld. counsel has been able show that the time when tax was paid by the appellant as a receiver, it cannot be said that it was paid wrongly especially when it was paid on the advice of the department. Under these circumstances, it cannot be said that the credit was availed wrongly and therefore interest is liable to be paid when the credit is reversed. Since appellant has made a prima-facie case for waiver of pre-deposit, the pre-deposit is waived and stay against recovery of the dues is granted during the pendency of appeal - Stay granted.

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• Central Excise

• 2014 (4) TMI 765
  CENVAT Credit - GTA Service - Held that:- demand within the limitation period, learned advocate submits that he is entitled to take the credit of the same. However, I find that appellants final product are assessable to duty under Section 4A of Central Excise Act, in which case, they will not be entitled to credit of service tax paid on outward transportation of the goods in terms of law declared by the Tribunal in the case of Ultratech Cement [2012 (12) TMI 941 - CESTAT NEW DELHI]. As it is not clear as to whether the said disputed services were inward or outward transportation, I direct the lower authorities to adjudge on the appellants liability to the credit of Service Tax so paid after verifying the above factual fact. If the appellants are entitled to the Cenvat credit of duty on inward transportation, demand to that extent can be neutralized - Decided in favour of assessee.

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• 2014 (4) TMI 764
  Waiver of pre deposit - Denial of MODVAT Credit - Revenue neutrality - Held that:- There is no dispute about the fact that the appellant have paid countervailing duty at the time of import of the goods on MRP declared by M/s DMS Corporation. The Revenue has confirmed excise duty by adopting the same MRP. Even if the Revenue s contention is accepted at this prima facie stage, the appellant would be entitled to Modvat credit of CVD paid at the time of import thus, neutralizing the entire duty confirmed - Stay granted.

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• 2014 (4) TMI 763
  Remission of the duty on the finished goods - Goods destroyed in fire - Held that:- On perusal of the conditions as mentioned in trade notice No.16/2005 indicates eight conditions. The letter from the office of the Commissioner of Central Excise & Customs, Daman (as reproduced hereinabove) does not indicate which of the condition is not met by the appellant. We are also of the view that the ld. Commissioner should have issued a speaking order after following the principles of natural justice while considering remission application, instead of issuing a letter - Matter remitted back - Decided in favour of assessee.

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• 2014 (4) TMI 762
  CENVAT Credit - Penalty u/s 11AC - discharge of 25% of the amount confirmed as duty liability - Held that:- appellant needs to pay interest as the provisions of Section 11AB will apply in this case even if cenvat credit is reversed before the issuance of show cause notice. Accordingly, we hold that the appellant is also liable to pay interest on the amount of duty liability which has been confirmed. Adjudicating authority will quantify and convey the amount of interest payable by the appellant as early as possible and on such communication, appellant will pay the interest within thirty days and report compliance to the adjudicating authority - if the lower authorities have not extended the benefit of discharge of 25% of the amount of the duty liability as penalty as provided under Section 11AC of the Central Excise Act, 1944, Tribunal is at liberty to extend these benefits to assessee-appellant. From the records we find both the lower authorities have not extended this benefit to the appellant. Accordingly, respectfully following the ratio of the Honble High Court of Gujarat [2009 (1) TMI 113 - GUJARAT HIGH COURT] we extend the benefit of payment of 25% of the amount of the duty liability as penalty within thirty days from the date of receipt of this order - Decided partly in favour of assessee.

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• 2014 (4) TMI 761
  Waiver of pre deposit - valuation of final product manufactured and cleared - Held that:- There is no reason to deviate from the view already taken by this Bench in the appellant’s own case while granting the waiver of pre-deposit of balance amounts involved in the Stay Order as mentioned hereinabove - Accordingly, we consider the amount of Rs.8 lakhs deposited by the appellant in these 3 cases as enough deposit to hear and dispose the appeals. The applications for waiver of pre-deposit of balance amounts involved are allowed and recovery thereof stayed till the disposal of appeal - Stay granted.

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• 2014 (4) TMI 760
  Modification of Stay Order - Assessee contends that Bench has passed a non-speaking order and has not considered the submissions made by the applicant in the memo of appeal as well as during the course of personal hearing - Held that:- while coming to a conclusion of directing the appellant to pre-deposit an amount of Rs.3.5 crores, prima facie, we found that there was note book and other documents which indicated movement of semi-finished goods without payment of duty and statement of transporters, director and employee. On a specific query from the Bench, Shri Kanti Mohan Mishra submitted that the statement given by the Director and employee are not retracted. He also submits that they are not disputing the recovery of notebook but the entries made in the note book are being disputed - After going through the balance sheet annexed with the application for modification of our Stay Order, we find that the balance sheet, though shows a loss, it also indicate that the appellant has given un-secured loan and considered to be good to others to the tune of Rs.32.52 crores, which definitely if recovered, can help them to deposit an amount of Rs.3.5 crores, which is ordered to be pre-deposited - appellant has not made out a case for any modification of our Stay Order which directed them to deposit an amount of Rs.3.5 crores - Modification denied.

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• CST, VAT & Sales Tax

• 2014 (4) TMI 759
  Rate of Sales Tax - Eligibility for Exemption – Notification – Classification – ‘Canvas Cloth’ - Entry 53 – Held that:- No need to notice the Notification issued by the State Government, dated 31.01.1985 - Entry 53 specifically excludes durries, carpets, druggets, hosiery goods, readymade garments, hessian or jute cloth etc., but includes goods specified in annexure to the said Entry - The goods which are included within the meaning of textiles are cotton fabrics of all varieties, rayon or artificial silk fabrics including staple fibre fabrics of all varieties, woolen fabrics of all varieties, fabrics made of a mixture of any two or more of the above fibres, viz. cotton, rayon artificial silk staple fibre or wool and lastly canvas cloth, tarpaulins and water proof cloth - Tribunal, which is the last fact-finding Authority has positively come to the conclusion that the appellant is a dealer who purchases canvass cloth and effects sale of the canvass cloth and therefore exigible for exemption in view of the notification issued by the State Government - High Court was not justified in setting aside the order so passed by the Tribunal - Thus, this court allows these appeals, set aside the judgment and order passed by the High Court and restore the order passed by the Tribunal – Decided in favour of Assessee.

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• 2014 (4) TMI 758
  Recalling of the SLP order – Availability of alternative remedy - Held That:- After going through the application and prayer made in SLP (C) No 12415 of 2010, this Court is of the opinion that the request of the applicants/petitioners appears to be reasonable and needs to be accepted - The High Court without relegating Assessee to first exhaust the alternative remedy available to them under the provisions of the Punjab General Sales Tax Act, 1948 has dismissed the writ petitions - Assessees should first approach the First Appellate Authority - Accordingly, SLPs are allowed and impugned judgment and order are set aside – Matter remitted back to First Appellate Authority – Decided in favour of Assessee. Availability of alternative remedy - Brief Facts:- Withdrawal of appeal before Supreme Court - In the light of Gobind Mills Ltd vs. State of Bihar [1999 (8) TMI 761 - SUPREME COURT OF INDIA] the Tribunal remanded the matter back to the Appellate Authority to hear and decide - However, the Appellate Authority dismissed the applications filed by assessee - Assessee thereafter challenged the order of AO directly before High Court without filing appropriate petitions before the Tribunal – Held That:- Since the applicants/petitioners have directly approached the High Court without taking recourse to appeal before the Tribunal, Assessees should first approach the Tribunal by filing appropriate petitions - Accordingly, Special Leave Petitions are allowed and impugned judgment and order are set aside – Decided in favour of Assessee.

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• 2014 (4) TMI 757
  Pre-deposit - Stay of Judgment & Order - A.P. Tax on Entry of Goods into Local Areas Act, 2001 - Correctness of the common judgment and order passed by the High Court - Constitutional validity of the A.P. Tax on Entry of Goods into Local Areas Act, 2001 - Interim relief - Held That:- The operation of the impugned judgment and order is stayed subject to the appellants depositing 50% of the accrued tax liability/arrears and furnish bank guarantee for the balance amount – The deposit shall be made after adjusting the amount(s) paid or deposited during the pendency of the Writ Petition before the High Court – Decided in Favour of assessee.

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• 2014 (4) TMI 756
  Rate of Tax – Exemption Notification - Transformers – Classification - Whether the transformer purchased by the assessee at the concessional rate of tax falls under the category of "accessories and component parts" required for use in the manufacture of notified goods under the U.P. Act - Held that:- Judgment in Annapurna Carbon Industries Co. vs. State of Andhra Pradesh [1976 (3) TMI 156 - SUPREME COURT OF INDIA] followed - Accessories are an object or device that is not essential per se but that is supplementary or secondary to another object of greater or primary importance which assists in operating or controlling or may serve as aid - The meaning ascribed to the term "accessory" was followed in Mehra Brothers vs. Joint Commercial Officer, Madras [1990 (11) TMI 144 - SUPREME COURT OF INDIA] - Car seat covers are accessories as "an addition; an adjunct; an accompaniment for comfortable use of the motor vehicles or for adding elegance to the seat. Purpose of transformer in the manufacturing unit - Whether it is an accessory to the manufacture of the goods so as to claim concessional rate of tax – Held that:- In the manufacturing process transformer serves the purpose of modifying or controlling the voltage supplied by the utility to the manufacturing unit according to its specific requirements - The transformer installed in the unit would ensure that the electricity is supplied to the unit so as to ensure its optimal performance - The transformers that are purchased by the respondent/assessee would act to the effective functioning of the machinery installed in the unit used for the purpose of manufacture of urea and fertilizers and hence are accessories to the manufacture of urea and fertilizers - Therefore, assessee would certainly fall within the meaning of the expression "goods required for use in the manufacture" appended as explanation to Section 4-B(2) – Therefore, impugned judgment and order does not suffer from any error whatsoever and therefore, no need to interfere with the findings and conclusion reached by the High Court - The appeals are dismissed – Decided in Favour of Assessee.

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• 2014 (4) TMI 755
  Pre-deposit - Rajasthan Sales Tax Act, 1994 - Held That:- Assessee has complied with the interim orders passed by this Court on 20.05.2004 - By virtue of Section 84(3), assessee is required to deposit 10% of the disputed tax for appeal to be entertained by the appellate authority - Since the Assessee has already deposited 5% of the demand, he has to deposit another 5% of the disputed tax - If such deposit is made by assessee, appellate authority before whom the appeal is pending is directed to dispose of the appeal within two months' time thereafter, since the matter is pending before the first appellate authority for the last one decade – Decided in favor of assessee.

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• 2014 (4) TMI 754
  Sales Tax Exemption Policy – Nature of Work - Purchase of raw materials for iron and steel based industry for manufacturing activity - Annexure V(2) – Bihar Finance Act, 1981 – Manufacturing Activity – Classification – Interpretation of Statute - Held that:- The definition of 'Manufacture' that finds a place in the Act is wide enough to cover production, making, extracting, altering, ornamenting, finishing or otherwise processing of the raw material – This Court has noticed that the raw material that is purchased by assessee is a steel scrap and what is produced with the steel scrap are agricultural implements and the household articles - The activity of assessee would certainly fit into the definition of 'Manufacture' to qualify for the grant of exemption under the notification – Relied upon Ashirwad Ispat Udyog and others Versus State Level Committee and others [1998 (11) TMI 527 - SUPREME COURT OF INDIA] - Raw material with the help of a shearing machine is cut as per requirement - After some time it become hard - This hard sheet is then put in a furnace so that it becomes soft and thereafter agricultural and household articles are prepared. Relying upon Sonebhadra Fuels vs. Comm. Trade Tax [2006 (8) TMI 304 - SUPREME COURT OF INDIA] - Referred B.P. Mills Ltd vs. Sales Tax Tribunal [1998 (9) TMI 507 - SUPREME COURT OF INDIA] - Definition of 'manufacture' in Uttar Pradesh Trade Tax Act, 1948 is very wide to include processing, treating or adapting any goods and therefore it held that even if the processing of coal to make coal briquettes, did not amount to a different commercial commodity, eventhough it did, it would still amount to "manufacture" as it is processing, treating or adapting coal to make coal briquettes which are altogether different in shape, size, moisture and characteristics. Therefore, revisional authority and High Court was not justified in rejecting the request of the appellant for grant of exemption under Notification dated 04.04.1994 - Impugned judgment and order is set aside – Decided in favour of assessee.

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• 2014 (4) TMI 753
  Extension of time to make pre-deposit – Held that:- No prejudice would be caused, if some time is granted to the appellant to comply with the orders and directions passed by the First Appellate Court for hearing the appeal on merits - Assessee herein is directed to comply with the orders and directions so passed by the First Appellate Court in Appeal No. ST/1374/2006-07 - If the deposit is made the Appellate Court shall restore the appeal to its file - The appeal is disposed of accordingly - Matter remitted back to First Appellate Court - Decided partly in favour of assessee.

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