Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 25, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Allowability of deduction u/s 37(1) of the Act - Amount of service tax included with interest expenses have direct nexus with the business operation - expense allowed - HC
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Allowability of Credit for TDS AOP has paid the tax in full on his own, or has not preferred to claim credit in respect of the TDS, is no ground for allowing credit to the individual - AT
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Penalty u/s 271(1)(c) - even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance - no penalty - AT
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Validity of revised return - TP adjustments - determination of ALP - both the TPO and DRP erred in not considered the same, the AO is directed to consider the revised return as a valid return - AT
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Deletion of allowance u/s 40(a)(ia) - payment of commission in relation to securities is covered by explanation (i) to section 194H and hence, TDS is not deductible - AT
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DIT should have initiated the proceedings u/s 263 on the order of the TPO instead of sending proposal to the CIT for revising the order of the TPO - the CIT wrongly initiated the proceedings - AT
Customs
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Liability for Penalty & Interest payment of duty/differential duty, whether before or after the show cause notice is issued cannot alter the liability for payment - interest and penalty confirmed - HC
Service Tax
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Fees for filing appeal before the CESTAT relating to refund/rebate of Service Tax, Customs and Central Excise matters - Tribunal has correctly held, there is no residuary provision in Section 86 (6) - no free required to be paid for refund appeal - HC
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Denial of refund claim - Bar of limitation - Once a period of limitation was prescribed in the exemption notification for submitting the refund application, that would necessarily govern. - HC
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Waiver of penalty u/s 80 - reasonable cause - delayed payment of service tax on Intellectual property rights service - adjudicating authority held that there was some confusion in regard to the applicability of the service tax - penalty waived - HC
Central Excise
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Waiver of pre-deposit - MRP Valuation u/s 4A - Insulated Wares - when there is no requirement of affixation of MRP on the said final products, the clarification by the CBEC in the Central Excise manual prima facie would cover the issue - AT
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Valuation of goods - differential duty required to be paid by the present respondents was available as Cenvat credit to their sister concern - entire exercise is revenue neutral - no mala fide can be attributed to the assessee - AT
VAT
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Scope of term Goods u/s 2 (d) of the Act - Taxation of Transfer of Right to use goods - besides plants and machinery, entire land and building was leased out and there was no provision/agreement that plants and machinery shall be severed or removed from earth - cannot be treated as goods - HC
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Waiver of Pre-deposit when the petitioners have neither pleaded any undue hardship and / or financial hardship it cannot be said that the learned Tribunal has committed any error and / or illegality in directing the petitioner original appellant to deposit a sum of Rs. 20 crores as predeposit - HC
Case Laws:
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Income Tax
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2014 (4) TMI 830
Matter remanded to Commission Exemption u/s 80G(5) of the Act - Held that:- The Tribunal has mainly remanded the question of granting recognition u/s 80G (5) of the Act for fresh consideration of the Commissioner - Being a mere remand, the appeal cannot be entertained but, the Commissioner shall take a fresh decision, as provided by the Tribunal, after giving opportunity to the assessee Decided against Revenue.
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2014 (4) TMI 829
Allowability of deduction u/s 37(1) of the Act - Amount of service tax included with interest Held that:- The Tribunal rightly was of the view that the liability has been crystallized in the year under consideration revenue had not brought on record any material that the service tax including interest had been recovered from the parties for which it had rendered service - The expenses were incidental and arising out of the business of the assessee - The interest payment is compensatory in nature - The expenses have direct nexus with the business operation. Relying upon Commissioner of Income Tax v. Luxmi Devi Sugar Mills P. Limited [1990 (9) TMI 8 - SUPREME Court] - the amount was expended by the assessee during the course of business, wholly and exclusively for the purpose of business - If the assessee had taken proper steps and charged service tax to the service recipients and deposited with the Government, there was no question of assessee expending such sum - It is only because the assessee failed to do so, that he had to expend the said amount, though it was not his primary liability - this cannot be stated to be a penalty for infraction of law - payment of interest is compensatory in nature and would not partake the character of penalty Decided against Revenue.
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2014 (4) TMI 828
Exemption from the liability of the impact fee - Production of certificate of exemption u/s 80G of the Act Charitable educational institution Held that:- The fact that the Prescribed Authority Regulated Area has granted 15 days time to the assessee to produce the certificate from the Income Tax Department indicates that the Prescribed Authority Regulated Area would take into account the claim of the assessee in case the certificate u/s 80-G of the Income Tax Act is issued in favour of the assessee it would be appropriate to grant time to the assesseee as prayed for to produce the certificate u/s 80-G of the Act.
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2014 (4) TMI 827
Disallowance of 10% of claim of other expenses No specific rejection placed Vouchers not produced - Held that:- The Tribunal rightly held that neither the AO nor the CIT(A) had any material on record to reject the claim of the assessee - once the AO held that 90% of the expenditure was liable to be accepted, there was no reason for restricting the claim to 90% alone and disallow 10% - the issue is purely a factual one Decided against Revenue.
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2014 (4) TMI 826
Entitlement for deduction of ex-gratia payment - Whether the Tribunal was right in holding that the assessee is entitled for deduction of ex-gratia payment made to the employees since bonus cannot be paid as the employees are excluded from the category of bonus under the Payment of Bonus Act Held that:- The Tribunal rightly was of the view that the payment was made to those employees who did not fall within the purview of the Payment of Bonus Act - Relying upon Commissioner Of Income-Tax Versus National Engineering Industries Limited [1993 (7) TMI 40 - CALCUTTA High Court] - the payment was a matter of business expediency thus, the payment made by the assessee to its employees who were not covered under the provisions of the Payment of Bonus Act was in the nature of ex-gratia payment as an incentive to the employees to be considered for deduction u/s 37(1) of the Income Tax Act,1961 the order of the Tribunal is upheld Decided against Revenue.
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2014 (4) TMI 825
Applicability of section 2(22)(e) of the Act Deemed dividend Scope of loans and advances - Amount received for the purpose of executing the construction work Held that:- The amount received from M/s.Vista Securities Technics Pvt.Ltd., is stated to be to the tune of Rs.1,90,00,000/-, whereas the amount treated as deemed dividend in the order of assessment was to the tune of Rs.87,57,297 - this has no correlation to the assessed figure and the deemed dividend considered u/s 2(22)(e) of the Act to the extent of Rs.87,57,297 - apart from agreeing with the conclusion in the order of the Tribunal pointing out to the confusion in the assessment order, the ground also suffers from the same error - the assessee had executed work for the company in the nature of construction of buildings and the said transaction being in the nature of a simple business transaction there is no justifiable ground to bring the case of the assessee within the definition of deemed dividend u/s 2(22)(e) of the Act Decided against Revenue.
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2014 (4) TMI 824
Validity of remission made by Tribunal - Admission of the suo-moto disallowance u/s 14A of the Act Held that:- Revenue contended that the assessee had filed a return in which the disallowance was offered suo motu, the assessee could not have resiled from such position without filing a revised return - When all materials necessary to examine the nature of disallowance to be made u/s 14A of the Act are already on record and when once AO as well as CIT (A) have already considered the issue and given detailed findings, it would be appropriate for the Tribunal to give its final conclusive opinion on the entire issue thus, the issue is placed before the Tribunal for consideration Decided partly in favour of Revenue.
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2014 (4) TMI 823
Addition of disallowance of ESIC contribution Held that:- After hearing both the parties and in view of the admitted facts, which also forms part of the details submitted by the assessee in the paper book, that all the payments of ESIC have been made before the due date of filing of the return of income, the amount is allowable as deduction u/s 43B Decided in favour of Assessee. Addition of advances written off Held that:- The assessee had made deposits with the various Government Departments as per the tender requirement with various Government and Semi Government organizations as well as undertakings for getting the business in which the assessee is engaged i.e., inspection, verification, testing and certification services - The payments have been made in the form of demand draft / cheque at the time of tender submissions - The payments can very well be said to have been made in the course of business only - Once the amounts have not been recovered, the same results into loss - This aspect has not been examined either by the AO or by the DRP despite specific descriptions and details furnished thus, the matter is remitted back to the AO for verification Decided in favour of Assessee. Disallowance of deduction of right back of leave encashment Held that:- The assessee has made a provision for leave encashment in the assessment year 2005-06 which was disallowed by the assessee itself in the computation of income and the same was added back - the view taken by the DRP cannot be sustained for the reason that it is not a new claim which is being made before the AO - If the assessee has written back the leave encashment on the basis of actuarial valuation, the same has to be allowed even though the assessee could not claim in the computation of income thus, the matter is remitted back to the AO for verification of the claim Decided in favour of Assessee. Non-grant of credit for TDS Disallowance of TDS credit Held that:- The issue needs to be remanded back to examine the conditions of Article 24 of the Indo- Korean DTAA and whether credit of deduction can be given - Decided in favour of Assessee. Addition on account of TPA Technical fee paid to AE Held that:- The Tribunal in assessee's own case for the previous assessment years have decided that the royalty @ 5% to 8% was accepted as per FIPB instruction issued by the Ministry of Commerce, Govt. of India - the assessee's payment of license fee @ 3% to its AE on the total turnover is at ALP - the rate of license fee @3% of the total turnover for the use of intellectual / intangible properties, is at ALP is accepted Decided in favour of Assessee. Admission of additional ground - Benefit of Article 10 of India Switzerland DTAA Liability for dividend distribution tax @ 10% - Held that:- The assessee has raised the contention that the correct tax liability for deducting the TDS is at 10% in view of the Article-10 of the India Switzerland DTAA which is admittedly applicable in the case of the assessee - there is no requirement for investigation or examination of facts albeit it is clearly borne out from the records there is no reason to admit an additional ground which goes to the root of the tax liability of the assessee in accordance with the provisions of law thus, the additional ground is admitted and the matter is remitted back to the AO for adjudication Decided in favour of Assessee.
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2014 (4) TMI 822
Validity of re-computation of deduction u/s 80HHC of the Act Inclusion of income from sale of DEPB license in the profits Held that:- The CIT(A) had rightly held that DEBP entitlement is available to the importer only after making the initial payment of custom duty and the credit of an amount equivalent to the duty paid is the available to the importer - Relying upon M/s Topman Exports Versus Commissioner of Income Tax, Mumbai [2012 (2) TMI 100 - SUPREME COURT OF INDIA] The CIT(A) also rightly held that the credit of DEPB can be used to offset custom duty payable in respect of further imports - As per accounting principle, at the time of initial import, custom duty paid was debited to P&L account, therefore, when the corresponding credit was availed, a matching amount was shown as revenue receipt in the P&L account - the DEPB credit should be considered as a sum covered by the provisions of section 28(iv) of the Act Decided against Revenue. Re-computation of deduction u/s 80HHC of the Act - Non-exclusion of interest from profits Held that:- As decided in assessees own case for the previous year, it has been held that the context of Section 80HHC the interest income earned on fixed deposits having to be kept by the assessee for availing of credit facilities from bank, does not qualify as business income - The matter is remitted back to the AO for examination Decided in favour of Revenue. Inclusion of interest income received from AEPC and banks Held that:- As decided in assessees own case for the previous year, it has been held that, the expression "any profits and gains derived from any business of an industrial undertaking or an enterprise" appearing in sec. 80IA(1) has been referred to the business specified in sub section (4) of the said section. Sub section (4) does not include the business from earning of interest on FDRs - the interest income though may be in the nature of business income cannot be said to have been derived from the business of industrial undertaking within the meaning of sub section (4) of section 80IA - The decision in Pandian Chemicals Ltd. Versus Commissioner of Income-Tax [2003 (4) TMI 3 - SUPREME Court] followed CIT(A) wrongly allowed the claim of the assessee treating the interest income as eligible business income Decided in favour of Revenue. Reduction of book profits Held that:- The decision in Ajanta Pharma Ltd. v Commissioner of Income Tax [2010 (9) TMI 8 - SUPREME COURT] followed - section 115J of the Act was a self-contained code and applied notwithstanding any provisions in the Act - section 115JB of the Act is the successor section to section 115JA and section 115JB of the Act continues to remain a self-contained code - 100% export profits earned by the assessee as computed u/s 80HHC(3) of the Act was eligible for deduction under clause (iv) of the explanation to section 115JB of the Act - the CIT(A) rightly directed the AO to recompute the income taxable u/s 115JB of the Act after allowing deduction u/s 80HHC of the Act as per earlier decision of the Tribunal Decided against Revenue.
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2014 (4) TMI 821
Refusal to grant registration u/s 12AA of the Act Conditions necessary for registration u/s 12A(a) not fulfilled - Held that:- The main objects of the company to be pursued on incorporation are contained in clause A(1) of the Memorandum of Association, wherein it is clearly mentioned that "no objects of the company shall be carried out on commercial basis" - the winding up / dissolution clause is in conformity with the conditions laid down under the Act the CIT, Jamnagar clearly erred in refusing to grant the registration sought by the assessee u/s 12AA of the Income-tax Act, 1961 thus, the CIT is directed to read the clause X of Memorandum of Association and clause 52 of Articles of Association, wherein it is clearly stated that "if upon winding up or dissolution of the company there remains, after satisfaction of all the debts and liabilities any property whatsoever the same shall not be distributed amongst the members of the company but shall be given or transfer to such other company having object similar to the objects of this company" - The assessee is an Educational and Charitable Trust and issuance of registration u/s 12AA is a primary condition for the start of the charitable activity of the trust, therefore its case has to be decided on priority basis - Decided in favour of Assessee.
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2014 (4) TMI 820
Allowability of Credit for TDS assessee, an individual, claimed credit for tax deduction of source (TDS) on interest for ₹ 56.80 lacs received by her for and on behalf of an Association of Persons (AOP) - Held that:- The AOP returned the interest income on the bonds, with the assessee excluding the same from her return. Why, we wonder, then, the TDS could not be claimed in the hands of AOP? Tax deduction at source, it is to be appreciated, is only toward the charge of tax u/s. 4 of the Act and, therefore, credit for same would normally be to the person in whose hands the said income is assessable (u/s. 199(1)), and for the relevant year/s (ss. 199(2) & (3) r/w s. 190), being consistent and in accord with the scheme of the Act. That the said person has paid the tax in full on his own, or has not preferred to claim credit in respect of the TDS, is no ground for allowing credit to another. The amendment to sec. 199, as already clarified, is toward mitigating and resolving difficulties that may arise on account of the difference in the ostensible and the real owner of the underlying security (property) and the income thereon, so that on a declaration being made by the deductee, credit for TDS could be claimed by and allowed to the real (de facto) owner, even as the TDS certificate/s is in the name of the ostensible owner (deductee). Recourse to the rule 37BA, introduced subsequently (w.e.f. 01/04/2009), would arise only where the rule denies, as it did in some of the cases cited, credit to the AOP on the ground the TDS certificate being in the name of the assessee (deductee). Relying upon ITO v. Shri Anupallavi Finance & Investments [2010 (12) TMI 334 - ITAT, CHENNAI] the deduction of tax at source does not necessarily, or is required to, march alongside the corresponding income, recognition of which by the recipient could be either on accrual or on receipt basis - The tax liability would arise only on it becoming assessable - It is in view of and to address this mismatch in time between the TDS and the accrual and/or receipt of the corresponding income that section 199 r/w ss. 190 and 191 clarifies that the credit for TDS shall be available for the year/s in which the corresponding income is assessable - there was complete harmony between the erstwhile section 199 and section 199 as it stands after substitution by Finance Act, 2008 w.e.f. 01.04.2008 read with r. 37BA Decided in favour of Revenue.
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2014 (4) TMI 819
Penalty u/s 271(1)(c) of the Act Held that:- The decision in COMMISSIONER OF INCOME-TAX Versus MAHENDRA C. SHAH [2008 (2) TMI 32 - GUJARAT HIGH COURT] followed - There is no payment of tax along with the return of income which was originally filed and payment of last tax has been made only subsequently after disclosing such income in the revised return of income which is not warranted by the language employed in exception No.2 so as to be entitled to immunity from penalty for concealment - there would be sufficient compliance with the provision if tax is shown to have been paid before the assessment was completed - when the statement is being recorded by the authorized officer it is incumbent upon the authorized officer to explain the provisions of Explanation 5 in its entirety to the assessee concerned and the authorized officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement - even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any further denial of the benefit under exception No.2 in Explanation 5 is commendable Decided against Revenue.
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2014 (4) TMI 818
Validity of assessment u/s 153C of the Act - Held that:- The condition precedent for assuming jurisdiction u/s 153C is seizure of article or thing or books of account or any documents belonging to the assessee concerned - AO has not referred to any seized material for making the additions in dispute - there is no material available before the AO leave alone any seized material on the basis of which the AO could have made the addition - The AO has simply relied upon the information submitted by the assessee in the original return filed by him prior to the date of search for making additions in question - there is no material before the AO either as a result of search or enquiry made by him, to come to the conclusion that the amount of Rs. 3,00,000/- and Rs. 5,00,000/- are unexplained income of the assessee - when admittedly there is no seized material belonging to the assessee, the AO could not have proceeded to make assessment u/s 153C of the Act Relying upon Vijayabhai N. Chandrani Vs. ACIT [2010 (3) TMI 770 - Gujarat High Court] there was no reason to interfere with the order of the CIT(A) Decided against Revenue. Addition made on account of income from other sources Held that:- The addition was made solely on the reason that the assessee has failed to establish that he was earning agricultural income by furnishing proper details and evidence - the assessee has shown the land as an asset and even though the confirmation letter mentions about payment of annual lease rental, but, there is no other evidence to show that Sri K. Subhash Chandra Bose was carrying on agricultural operation on the said land - the household card of Sri K. Subhash Chandra Bose mentions his annual income at Rs. 18,000 - it raises serious doubt as to how a person having annual income of Rs. 18,000/- can pay lease rental of Rs. 75,000/- to the assessee - The assessee has not at all proved with sufficient evidence that agricultural operation was being carried on the said land or it was generating income from agriculture thus, there is no infirmity in the order of the CIT(A) in sustaining the addition as income from other sources Decided against Assessee. Addition on account of gift received from Father-in-law Held that:- Sri M. Krishnama Naidu has mentioned that he is owner of 2.97 acres of land and earning agricultural income of Rs. 80,000/- to Rs. 1 lakh per year - there is no other evidence produced by the assessee to establish that his father-in-law did actually earn agricultural income to the extent mentioned in the conformation letter - the gift has been made in cash and the donor Shri Krishnamma Naidu is not an income-tax assessee - there is no evidence produced by the assessee either to prove the capacity of the donor or the fact of earning agricultural income by him, the addition on that account is justified Decided against Assessee. Disallowance of expenses incurred on development of the site Held that:- CIT(A) was of the view that the expenses incurred for agricultural land development cannot be allowed since the sale of agricultural land and profit derived therefrom cannot be assessed for capital gains there is no reason to interfere with the order of CIT(A) as the assessee has not produced even a semblance of evidence to prove the expenditure incurred towards development charges Decided against Assessee. Addition of loss on account of sale of car Held that:- The assessee had purchased a Santro car on 06/05/2003 for a consideration of Rs. 3,65,070/- and the said car was sold on 19/07/2007 for Rs. 2,35,000 - the assessee is estimating his income from business, the contention of the revenue that depreciation is deemed to have been allowed to the assessee requires to be looked into thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Admission of STCG on sale of site Held that:- After perusing the details of purchase of land made by the assessee, the matter is required to tbe remitted back to the AO for fresh adjudication Decided in favour of Assessee. Deletion of unexplained cash credits Held that:- CIT(A) has set aside the addition solely on the ground that they are made through banking channel - this may be correct in case of Smt. Santhoshamma in whose case Assessee furnished copies of bank account of the creditor as well as his own bank account reflecting the advancement of Rs. 5 lakhs - Smt. Santhoshamma worked as a head nurse also to a certain extent proves her capacity to make the gift - so far as the other two creditors are concerned, namely, Sri Sudhakar and Sri Ananda Kumar admittedly both are non-resident Indians residing outside India thus, in their case strict proof of evidence is required with regard to creditworthiness and genuineness of the loan - it is required to be verified from their bank accounts whether they had source to advance the amount to the assessee - the CIT(A)'s finding with regard to the amount of Rs. 5 lakhs from Smt. Santoshamma is accepted but so far as loan of Rs. 4,17,670/- and Rs. 2,01,890/- from Sri Sudhakar and Sri Ananda Kumar are concerned, the matter is remitted back to the AO for verification Decided partly in favour of Revenue.
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2014 (4) TMI 817
Validity of reassessment order u/s 147 of the Act - Treatment of technology expenses Mere change of opinion - Held that:- Neither the AO nor the DR was able to pinpoint, as to what material was gathered or came to light, which was resulted or indicated that there was an escapement of income, to attract reassessment proceedings - The issue was examined by the AO thread bear, is apparent from the fact that the disallowance made by the AO on technological expenses traveled up to the ITAT, itself proves the issue against the revenue authorities that they were proceeding on the aspect with a different reasoning - the law does not allow proceedings based on change of opinion from one incumbent to the other Relying upon Kelvinator of India vs CIT [2002 (4) TMI 37 - DELHI High Court] - the AO has traveled beyond the statutory accord Decided in favour of Assessee.
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2014 (4) TMI 816
Validity of revised return - Whether Assessee's return filed along with TP report is to be considered or not Held that:- When Assessee files a revised loss return reducing claim of loss, the return can certainly be considered as a revised return under the provisions of section 139(5) of the Act. First of all, the return filed originally on 28-10-2006 cannot be considered as a valid return as it did not include statutorily prescribed TP documentation and Assessee declared the value of international transaction as per its accounts books. Therefore, the other/revised return filed on 29-11-2006 enclosing TP documentation and declaration of higher value of international transaction by making suo-moto adjustment under the provisions of the Act cannot be rejected as the same was a valid return, even though, stated to be filed u/s 139(5) of the Act. In fact, to the extent of declaration of international transaction and adjustments, it can be certainly be stated as omission on the part of Assessee or in a worse situation a wrong statement in the original return, as provided u/s 139(5) - both the TPO and DRP erred in not considered the same, the AO is directed to consider the revised return as a valid return Decided in favour of Assessee. Validity of AOs adjustment Suo-moto adjustment ignored - Whether adjustment made by the AO ignoring suo-moto adjustment made by the Assessee is correct or not Held that:- Relying upon Haworth (India) P. Ltd. Versus Deputy Commissioner of Income-tax [2013 (8) TMI 421 - ITAT DELHI] - the TPO/DRP are not correct in not considering suo-moto adjustments made by Assessee - For arriving at the profit margins realized by the enterprise, suo-moto adjustment has to be taken into account in arriving at the difference to be added so as to make the 'net profit realised' to arrive at the arm's length price in relation to the international transaction as provided under 10B(e)(v) - The AO is directed to consider suo-moto adjustment made by Assessee accordingly Decided in favour of Assessee. Adoption of operating cost - Whether operating cost adopted by TPO is correct or not Held that:- Without considering the objections of Assessee, TPO determined the operating cost based on the proportionate cost on the ratio of sales in various segments - The action of the TPO was not justified at all when Assessee has maintained separate books of account, which was also accepted under the provisions of the Act - there is no reason for rejecting the same and estimating the operating cost on the basis of the proportionate turnover - Assessee has incurred loss in these transactions, whereas there was profit in other activity, which constitute 95% of Assessee's turnover - Taking sales as basis and arriving at the OP cost does not result in correct appreciation of Assessee's transactions - since segmental working is available on the basis of separate books of account maintained for EOU unit, operating cost has to be taken at Rs. 18,84,61,988/- and the TPO/AO is directed to take operating cost as stated Decided in favour of Assessee. Invocation of threshold limit - Whether (+)/(-) 5% threshold limit available under the Act can be invoked Held that:- The actual transaction undertaken by Assessee as reported is the sale at Rs. 17,17,79,149 - If the ALP determined by the AO/TPO is (+)/(-) 5% of this transaction on actual sales reported, then no adjustment is required - While making any adjustment, first step is to verify whether this (+)/(-) 5% threshold has exceeded when compared to actual transaction undertaken by Assessee, if yes, adjustment is required under the provisions of the Act - The next step is the quantification of adjustment which is to be made under Rule 10B(e) - suo-moto adjustment made by Assessee cannot be ignored and if any adjustment is required over and above suo-moto adjustment made by Assessee, difference only can be considered - the actual transaction undertaken by Assessee should be the base and not revised transaction reported by making suo-moto adjustment - the Assessee exercised option provided u/s 92C particularly of proviso of (+) or (-) 5% threshold and did not treat the actual sale transaction as ALP no assessee cannot contend that the threshold of (-) or (+) 5% is available again, if TPO action results in further addition Decided against Assessee. Selection of comparables Held that:- There are two sets of objections on the comparables selected by TPO; one being data pertaining to companies which have different accounting period than that of Assessee and the second one being the functional comparability of selected companies, being in business of compressor manufacturing whereas adjustments were done in the segmented results of supply of components (to the compressors) - selection of comparables by TPO suffers from these basic deficiencies, the matter required re-examination thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Disallowance of depreciation Held that:- If proper analysis was made there would not be any difference from the price paid to the price determined, as demonstrated before the TPO both on the basis of the third party quotations which are considered as internal CUP and the VG Bouw Certificates as external CUP - Under both the workings Assessee is able to justify the price paid - assessee justified the price paid by way of a certificate which can be considered as external CUP - TPO/DRP did not rely on any other certificate and in the absence of any contrary information, price paid by Assessee, which was lesser than the value mentioned in the certificate can be accepted as such- decided in favour of Assessee.
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2014 (4) TMI 815
Disallowance of deduction u/s 10A of the Act - Whether the Assessee manufactures or produces "Computer Software" Held that:- The nature of services rendered for which the Assessee receives foreign exchange can be established by the Assessee by tracing back each payment with the purpose for which the payment is received - There is no such correlation established by the Assessee - the nature of work to be performed for British Council, would be in the nature of, if not "manufacture or production of computer software", at least in the nature of "Data Processing" or "Engineering" or "Support Centre" which are all notified services for available the benefit of deduction u/s.10A of the Act - the Assessee has not established correlation between the receipts in foreign exchange and the nature of services rendered for which the payment was received - the Assessee has not made any attempts to demonstrate that it was engaged in production or manufacture of Computer Software or was rendering notified IT-Enabled Services. Whether the Assessee exported computer software/ITES out of India Held that:- There can be no doubt on the satisfaction of this condition - Sample copies of Software Export Declaration (Softex) forms filed with the STPI (relating to/ corresponding to the invoices raised by the Assessee on overseas SAP entities) have been filed before the Revenue authorities - The Softex forms are certified by the STPI authorities as being exported out of the country - the arguments raised by the assessee are not being considered elaborately for the reason that the nature of services rendered needs to be ascertained first thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Levy of interest u/s 234D of the Act Held that:- Assessee contended that the interest u/s 234C of the Act, can be levied only when there is a shortfall in payment of advance tax instalment by considering the advance taxes paid on the tax due on the "returned income" and not the "assessed income" - the grievance has probably not been properly projected by the assessee nor appreciated by the CIT(A) in proper perspective - thus, the AO is directed to charge interest accordingly. Disallowance of staff welfare expenses Held that:- The expenses are essential for the purpose of employee welfare, and clearly allowable as business expenditure - it is an industry-wide practice followed in India by IT companies - Such facilities are extended in the industry to ensure low employee attrition which will progress the growth of the Assessee - With effect from AY 2005-06, value of free food and non-alcoholic beverages provided by the employer to an employee is not even treated as "perquisites" in the hands of - even under the Fringe Benefit Taxes ("FBT") regime, though inapplicable for AY 2005-06, it may be pertinent to note that a specific exemption has been provided in respect of expenditure incurred on food or beverages procured by the employer for providing to his employees in an office or factory - such benefits not to be considered as the expenditure which would provide any benefit of a personal nature for the employees there was no basis for disallowance of the remaining expenses out of staff welfare expenses also Decided in favour of Assessee. Disallowance of sales promotion expenses Held that:- The Assessee claims that it is responsible for advertising and promotion of SAP products in the Indian sub-continent and undertakes advertising for SAP products including designing product brochures, deciding the medium of advertising and developing advertising content for the products thus, sales promotion expenses, being incurred wholly and exclusively for the purpose of the Assessee's business, are fully allowable as deduction u/s 37(1) of the Act Decided in favour of Assessee.
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2014 (4) TMI 814
Rectification of order Error apparent on the record u/s 254 of the Act - Disallowance of deduction u/s 10A of the Act - Held that:- Relying upon The Commissioner of Income Tax-2. Versus Western Outdoor Interactive Pvt. Ltd. [2012 (8) TMI 709 - BOMBAY HIGH COURT] - In case there is no change in the facts and circumstances subsequent to the first year, which could have rendered the assessee ineligible for deduction under section 10A, the claim of the assessee cannot be denied in the subsequent assessment year when the same is accepted in the first assessment year the direction for remitting back the case to the AO will not affect the claim of the assessee if there is no change in the facts and circumstances - the assessee has not made out a case of apparent error which can be rectified u/s 254(2) of the Income tax Act Decided against Assessee. Transfer pricing adjustment Selection of comparables Held that:- The issue has been remanded to the record of AO/TPO to consider the segmental results - If the assessee has any doubt about the reliability of the data/details, then it would have been raised before the TPO/AO - the issue has been remanded for considering the segmental results and related party transactions in ITES segment, then there was no substance in the submission of the assessee Decided against Assessee. Comparability of Infosys and Wipro High turnover Held that:- The finding has been given on examination and analysis of the facts and the assessee has not pointed out in the miscellaneous application any factual mistake in the facts which are considered by the Tribunal while giving the finding Relying upon H.A. Shah & Co. v. CIT [1955 (9) TMI 53 - BOMBAY HIGH COURT] - if while deciding a case the First Tribunal did not have a particular material before it and if the second Tribunal is satisfied that if those material facts have been taken into consideration the decision of first Tribunal would have been different, it would justify the second Tribunal in not adhering to the decision of the first Tribunal thus, when the issue has been decided after considering certain vital facts which were not before the Co-ordinate Benches relied upon by assessee then taking a different view on the basis of new facts would not amount to taking a divergent view of the matter on same facts, material and aspects already considered - nothing has been brought on record by the assessee to show how the brand value has an influence on the margins in the case of the comparables - no quantitative details of the adjustment if any on account of brand value are given Decided against Assessee. Comparability of Maple-Esolution Ltd. Allegation of fraud against the director - Held that:- It is clear from the finding of the Tribunal that the objection was found not relevant for the business of the companies and for the year Decided against Assessee. Comparability of Eclerx Services Ltd Held that:- Once the issue has been decided by the Tribunal by holding that the company providing data processing and data analysis service is similar to the services of the assessee then it becomes irrelevant whether the assessee has raised the objection before the authorities below or not Decided against Assessee. Comparability of Mold Tex Technologies Ltd Tolerance range of related party transaction - Held that:- It is clear from the finding of the Tribunal that the tolerance range of 15% was taken in the case of assessee by considering the various decisions of the Tribunal wherein this range has been considered from 0-25% - The assessee's grievance is against reasoning and view of the Tribunal and not against any error or mistake apparent on record Decided against Assessee. Justification of carrying out fresh search by the TPO Held that:- The Tribunal has not taken any divergent view from the views in the other cases - when the TPO itself did not choose to carry out further search then issue of justification of TPO did not arise before the Tribunal thus, there was no substance in the arguments of the assessee Decided against Assessee. The scope of section 254(2) is very limited and circumscribed - For exercising jurisdiction u/s 254(2) it is mandatory condition that such mistake should be vide apparent manifest, and patent on record and not something which involve serious circumstances of disputes of question of fact or law - Section 254(2) does not confer power on the Tribunal to review its earlier order - the Tribunal has no power to review its order passed on merits and in the garb of rectification of mistake no order can be passed u/s 254(2) which amounts to reversal of order passed after discussing all facts and statutory provisions in detail Decided against Assessee.
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2014 (4) TMI 813
Deletion of estimated addition of interest Violation of Rule 46A of the Rules Admission of additional evidence Held that:- CIT(A) has correctly accepted the additional evidences - It cannot be said that AO was denied any opportunity to go through the additional evidences - AO has asked three months time, for submission of the Remand Report, CIT(A) has duly given the time - AO did not analyze the additional evidences properly - CIT(A) evaluated the additional evidences and gave a very cogent and speaking order on all issues concerned thus, the AO has been given proper opportunity by the CIT(A) to examine the additional evidence - CIT(A)s order cannot be said to be suffering from any shortcoming Decided against Revenue. Deletion of investment in property Held that:- The assessee has duly explained that the property was purchased by assessee jointly with Smt. Swati Paliwal, with each of them made an investment of Rs. 1 crore - The assessee has duly explained that she has paid her share of Rs. 1 crore for purchase of land through her bank account - it has been duly explained that other expenses on account of stamp duty and Registrar fees was shared 50:50 by her along with co purchaser Smt. Swati Paliwal - As regards the source, the assessee has duly explained that she had taken a loan of Rs. 1 crore from her husband Sh. Mahender Pal Paliwal by transfer from his account - The original source of money in the hands of the family of the assessee as well as Smt. Swati Paliwal was amount received as compensation on account of acquisition of land by the Government - CIT(A) rightly held that the assessee has submitted all the necessary documents to establish the genuineness and veracity of the source of investment Decided against Revenue. Claim of agricultural income Agricultural income treated as income from other sources - Held that:- CIT(A) has noted that assessee has submitted a copy of ownership of agricultural land and earning of agricultural income. - The assessee submitted that she has been earning agricultural income regularly and she had also declared the same in the Asstt. year 2005-06, 2006-07 and 2007-08 which has been accepted by the Department - CIT(A) has held that the AO has made a mistake by assessing an agricultural income declared by the assessee at Rs. 1 lakh under the head income from other sources the order of the CIT(A) upheld as the assessee has duly established the ownership of land Decided against Revenue. Addition of interest income on FDR Held tha:- CIT(A) was of the view that the assessee has submitted complete details of FDRs along with interest and TDS deducted, copies of Form No. 16A was also enclosed - CIT(A) held that adhoc addition made by the AO by mentioning that the value of principal amount invested in FDRs is not disclosed and in the absence of details the interest income is taken at Rs. 5.50 lacs as against Rs. 3,43,026/- is not tenable Decided against Revenue. Deletion of capital gain Held that:- CIT(A) set aside the additions on the submissions made by the assessee, the assessee had dealt with the purchase and sale of the shares during the year under consideration - The details of purchase and sale of shares were filed along with return of income and the assessee had incurred a loss - these were declared in the computation of income - the loss was not adjustable under any other head being Short Term Capital Loss, therefore, the income under the head Capital Gain was taken at NIL - CIT(A) properly taken into account the submissions made by the assessee - Assessee has submitted the details of share transactions made by her thus, the order of the CIT(A) upheld Decided against Revenue.
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2014 (4) TMI 812
Deletion made u/s 68 of the Act Onus to prove Creditworthiness of the creditors Held that:- The assessee has given the confirmation in respect of all the creditors, copy of their income tax returns, identity proof, PAN proof, balance sheet, copy of bank statement as well as source of funds from where they invested in the share capital - the onus is upon the assessee to prove the credit in his books of account - To discharge such onus, the assessee has to establish the identity of the creditor, the creditworthiness of the creditor and genuineness of the transaction - the identity of the share applicants cannot be doubted - All the money has come by cheque, all the share applicants have confirmed the same and the amount is duly debited in the share applicants' bank account - the genuineness of the transactions also cannot be doubted - the capital of each and every creditor is much more than the investment made by him in the share capital - The amount has duly been disclosed in their balance sheet which is also furnished by the assessee before the AO - the assessee was able to discharge the onus of proving the credit in the form of share application money of its books of account thus, there was no infirmity in the order of the CIT(A) Decided against Revenue.
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2014 (4) TMI 811
Deletion of allowance u/s 40(a)(ia) of the Act Payment of commission u/s 194H of the Act Held that:- CIT(A) rightly set aside the disallowance on the basis that since the commission income earned by the assessee and commission expenditure incurred by the assessee were in relation to securities, as per the provision of section 194H, no TDS was required to be deducted on such expenditure and consequently, no disallowance is to be made u/s 40(a)(ia) of the Act for this amount - the decision in Deputy Commissioner of Income-tax Versus SJ. Investment Agencies P. Ltd. [2011 (2) TMI 1427 - ITAT MUMBAI] followed - as per Explanation (i) to section 194H, no TDS was required to be deducted from such payment of commission because it is in relation to securities - payment of commission in relation to securities is covered by explanation (i) to section 194H and hence, TDS is not deductible Decided against Revenue.
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2014 (4) TMI 810
Admission of additional grounds - Exclusion of income and expenditure relating to demerged units Held that:- Assessee company was declared a sick industrial company by the Board for industrial and financial structuring (BIFR) - The revised rehabilitation scheme stipulated inter alia demerger of 3 units of the assessee - assessees original return of income was filed on the basis of then available audited accounts which included the profit/loss of the demerged units - Assessing Officer passed assessment order dated 21.12.2009 which was based on the claims / figures as per original return of income thus, assessee could not file the revised return along with the revised financial statements before the Assessing Officer and the same were filed before the Ld. CIT(A) as additional evidences under Rule 46(A) of the Income Tax Rules the additional grounds are admitted - CIT(A) should have adjudicated the additional grounds of appeal raised by the assessee seeking exclusion of income and expenditure relating to demerged units Decided in favour of Assessee.
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2014 (4) TMI 809
Jurisdiction u/s 263 of the Act Determination of ALP Held that:- The decision in CIT vs. Max India Limited [2007 (11) TMI 12 - Supreme Court of India] followed - where two views are possible and the TPO has taken one possible view the proceedings u/s 263 cannot be invoked - in the case instead of initiating proposal on TPO order, the CIT initiated the proceedings under AOs order which is not erroneous or prejudicial to the interests of the Revenue, as AO sincerely followed the mandate of provisions of section 92CA in proceeding to compute the total income under sub section 4 of section 92CA in conformity with the arms length price so determined by the TPO - the provisions of section 92CA(4) have been amended w.e.f. 1.6.2007 which used the word shall AO is bound to follow the TPOs order determined under sub section 3 (which was itself modified by an order under sub section-5) of 92CA. No issue arises as the CIT wrongly invoked the proceedings u/s 263 on AOs order when the proposal by the TPO itself is for initiating the proceedings u/s 263 on the TPO order u/s 92CA(3) - Therefore, the order passed by the CIT cannot be justified on the facts of the case - any order of TPO is prejudicial to the interests of Revenue - CIT cannot exercise jurisdiction over TPO as TPO functions separately under the Director of Income Tax (TP) - the DIT should have initiated the proceedings u/s 263 on the order of the TPO instead of sending proposal to the CIT for revising the order of the TPO - the CIT wrongly initiated the proceedings on the assessment order u/s 143(3) which was in conformity with the TPO order u/s 92CA(3) Decided in favour of Assessee.
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Customs
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2014 (4) TMI 833
Liability for Penalty & Interest Deposition of Duty before issuance of show cause notice - Whether penalty and interest could be imposed when the duty had been deposited before the issuance of the show cause notice Judgment in Union of India v. Rajasthan Spg. Wvg. Mills [2009 (5) TMI 15 - SUPREME COURT OF INDIA] and UNION OF INDIA V. DHARAMENDRA TEXTILE PROCESSORS [2007 (7) TMI 307 - SUPREME COURT OF INDIA] followed - The Supreme Court has taken a view that the payment of duty/differential duty, whether before or after the show cause notice is issued cannot alter the liability for payment - The law laid down in the judgments relied upon by Tribunal in the impugned order is no more a good law and that it stands set aside - Appeal allowed wherein hardly ₹ 50,000/- penalty had been imposed - Accordingly, the order dated 12-07-2005 passed by the CESTAT in Appeal No.C/ 195/2004 is set aside - Decided against the assessee.
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2014 (4) TMI 832
Validity of Assistant Commissioner order - Genuineness of the transaction value - Alternate Remedy - Procedure for appeals - Section 14 of the Customs Act, 1962 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 Held that:- The impugned order is appealable - An assessment has to be finalised after considering provisions of the Act and the Rules - Norms issued by a department, as rightly asserted by counsel for the revenue, are merely guidelines - A guideline whether styled as a norm or an instruction, is framed for guidance and, therefore, cannot replace statutory provisions - The necessity to issue guidelines and instructions arises from the extremely complicated taxation regime which more often than not is incomprehensible even to experts - Norms, guidelines and directions cannot replace provisions of the statute or the Rules - Impugned order is admittedly appealable - The petitioner is relegated to the remedy of filing the appeal Decided in favour of Appellants.
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Corporate Laws
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2014 (4) TMI 831
Winding up of company - whether the jewellery was manufactured from out of the gold supplied by the respondent or from out of its own gold by the petitioner - Held that:- there is no dispute about the manufacturing of jewellery by the petitioner at the request of the respondent and exporting the same to the designated customer of the respondent at Dubai. The value of jewellery exported by the petitioner and received by the respondent's customer is also not in dispute - Such a dispute would not have arisen if there were clear terms of understanding between the parties. The petitioner filed a copy of the MOU, a perusal of which would show that the same is bereft of essential terms such as the quantity of jewellery that was agreed to be exported and whether the jewellery has to be manufactured from out of the gold supplied by the respondent or from out of the petitioner's own gold. This Court is at a loss to know as to the reason for such a cryptic MOU between the parties while dealing with a very valuable subject matter of the contract, namely; manufacturing and exporting of gold ornaments. Under Section 433 read with Section 434 of the Act, a company cannot be ordered to be wound up, unless either the debt is admitted or the dispute as to the debt raised by the respondent is not bona fide. In the absence of a clear understanding between the parties stipulating that the petitioner will manufacture the jewellery from out of its own gold or at least any contemporaneous correspondence between the parties unequivocally proving the claim of the petitioner that it has manufactured the jewellery from out of its own gold and that the respondent has not supplied the gold, it is not possible for this Court to hold that the denial of the debt by the respondent is not bona fide. The respondent has filed purported vouchers in order to substantiate its plea that it has supplied its own gold under the said vouchers to the petitioner. However, the petitioner raised a plea that these vouchers are fabricated. This Court, while exercising its jurisdiction under the Act, will not adjudicate on this disputed issue - Company petition does not deserve to be admitted, as it has not satisfied the requirements of Sections 433 and 434 of the Act - Decided against appellant.
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Service Tax
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2014 (4) TMI 846
Appointment of Members of CESTAT - Appointment on reserved category - By notification/advertisement dated 17.8.2009, applications came to be invited for appointment to the post of Member (Technical), CESTAT - Held that:- notification/advertisement dated 17.8.2009, by which the applications were invited for appointment to the posts of Member (Tech.) CESTAT did not indicate that any of the posts had been reserved for the members of Scheduled Caste and Scheduled Tribes. The circumstance that format of application, at clause '5' required the applicant to state whether he belongs to Scheduled Caste/ Scheduled Tribes category, cannot lead to the inference that the notification/advertisement indicated that any of the posts of Member (Tech.) CESTAT were reserved posts. There is no scope to assume that the Petitioner was mislead into believing that any posts had been reserved for the Members of Scheduled Caste/ Scheduled Tribes. In absence of any clear indication in the notification/advertisement, the Petitioner could never have insisted that one of the posts be treated as 'reserved post' and the candidature of the Petitioner be considered against the same. The Petitioner, in the present case did not choose to challenge the notification/advertisement dated 17.8.2009 on the ground that no vacancy was declared as 'reserved vacancy'. Instead the Petitioner applied for appointment in pursuance of the notification/advertisement dated 17.8.2009 without any demur. Besides, it is clear that the Petitioner 'took his chance' with the selection process and merely because the Petitioner was not successful, has now turned around and questioned the entire selection process. In such circumstances, relief was rightly denied to the Petitioner - Decided against Petitioner.
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2014 (4) TMI 845
Fees for filing appeal before the CESTAT relating to refund/rebate of Service Tax, Customs and Central Excise matters - Whether on the facts and in the circumstances of the case the CESTAT, New Delhi has gravely erred in interpreting the provisions of Section 86 (6) of the Finance Act, 1994 and holding that no fees is payable in filing appeal before the CESTAT relating to refund/rebate of Service Tax, Customs and Central Excise matter depriving the revenue to collect fee from the parties from all over India with regard to filing of appeals in the matters of refund/rebate of Service Tax, Customs and Central Excise matters - Held that:- Section 86 (6) refers to the fee which has to accompany an appeal. The fees are respectively 1000 rupees, 5000 rupees and 10,000 rupees based on "the amount of service tax and interest demanded and penalty" levied. Where the service tax and interest demand and penalty levied is rupees five lakhs or less, the fee is one thousand rupees; where the service tax and interest demanded and penalty levied is more than five lakhs but does not exceed rupees fifty lakhs, the fee is five thousand rupees; and where the amount of service tax and interest demanded and penalty levied is more than fifty lakhs, the fee is ten thousand rupees. Section 86 (6) does not speak of a refund/rebate. As the Tribunal has correctly held, there is no residuary provision in Section 86 (6) - In the circumstances, there is no error in the interpretation which has been placed by the Tribunal upon the provisions of 86 (6) of the Finance Act, 1994 - Decided against Revenue.
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2014 (4) TMI 844
Denial of refund claim - Bar of limitation - Whether the Tribunal was justified in not granting refund of the amount which according to the department was claimed after one year, though the entire refund claim was within time and was not hit by limitation in terms of Section 11B of the Central Excise Act 1944 under which the refund application was filed - Held that:- The entire argument pre-supposes that Notification 18/2009 would apply in respect of the taxable services in relation to the exports for the period April 2008 to June 2009. Notification 18/2009 is prospective. Thereafter, the only requirement is that a return should be filed in respect of the exempted taxable service. In respect of the taxable services which were rendered in respect of the export of goods prior to the date of Notification 18/2009, that notification would have no application whatsoever. The assessee had made exports between April 2008 to June 2009. Under the relevant notification, service tax was liable to be paid and then an application for refund was required to be presented within 60 days of the end of the relevant quarter in which the goods had been exported. Once a period of limitation was prescribed in the exemption notification for submitting the refund application, that would necessarily govern. There being no appeal by the revenue against the order of the Commissioner (Appeals), the Tribunal did not disturb the finding of the Commissioner (Appeals). Hence, the Tribunal has in our view, appropriately not interfered with the finding of the Commissioner (Appeals) that the assessee was entitled to refund to the extent of one year from the date of export. - Decided against the assessee.
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2014 (4) TMI 843
Waiver of penalty u/s 80 - reasonable cause - delayed payment of service tax on Intellectual property rights service - Penalty u/s 76, 77 & 78 - Commissioner deleted penalty u/s 80 - Tribunal upheld penalty - Held that:- adjudicating authority while deciding not to impose a penalty, had due regard to the fact that the assessee had obtained registration for the purposes of service tax in respect of 'Intellectual Property Right Services' on 30 September 2006; that the entire dues on account of service tax together with interest for the period from 10 September 2004 to 30 September 2007 had been paid on 10 December 2008 and there was compliance by the assessee thereafter - In this background the adjudicating authority held that there was some confusion in regard to the applicability of the service tax. This circumstance must be also coupled with the admitted circumstances in the present case which were that a notice which was issued to the assessee on 8 November 2004 (together with a corrigendum dated 22 January 2006) seeking to levy service tax on scientific technical consultancy service had resulted in an order of adjudication by which the demand had been dropped on 28 December 2006 - adjudicating authority had correctly granted to the assessee the benefit of the provisions of section 80 of the Finance Act, 1994 as it then stood by deleting the penalty and that the exercise of revisional jurisdiction under section 84 by the Commissioner was not in accordance with law - Decided in favour of assessee.
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Central Excise
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2014 (4) TMI 839
Waiver of pre deposit - Denial of CENVAT Credit - Cenvat credit of service tax paid on housekeeping and cleaning service availed for cleaning of the factory shed, legal services and event management service availed for organising functions for honouring the employees for their outstanding work - Held that:- Prima facie, I find that so far as the service of housekeeping and cleaning availed in respect of the factory shed is concerned, keeping the factory neat and clean is a statutory requirement in terms of Section 11 of Factories Act, 1948 and, hence, this service has to be treated as service having direct nexus with the manufacture of the final product, as without compliance with the provisions of the Factory Act, no manufacturer can engage in the manufacturing activity. Therefore, the impugned order disallowing the Cenvat credit in respect of this service is not correct. Impugned orders denying the Cenvat credit in respect of the above-mentioned services are not correct and the appellant have strong prima facie case in their favour. Hence, the requirement of pre-deposit of Cenvat credit demands, interest thereon and penalty is waived for hearing of these appeals and recovery thereof is stayed till the disposal of the appeals - Stay granted.
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2014 (4) TMI 838
Waiver of pre-deposit - Demand of differential duty - MRP Valuation under Section 4A of the Central Excise Act, 1944 - Insulated Wares - Held that:- there is no dispute that the items which are cleared and sold by the appellant are without affixation of MRP by them. It is also admitted that the said items are being distributed free by the purchasers. In such circumstances, when there is no requirement of affixation of MRP on the said final products, the clarification by the CBEC in the Central Excise manual prima facie would cover the issue. In our view, the appellant has made out a strong prima facie case for the waiver of pre-deposit of amounts involved. Accordingly, the applications for waiver of pre-deposit of amounts involved are allowed and recovery thereof stayed till the disposal of appeals - Stay granted.
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2014 (4) TMI 837
Denial of CENVAT Credit - Outdoor catering service - Held that:- waiver and stay can be granted to the appellant in this case, inasmuch as all the significant facts were pleaded before the adjudicating authority as evidenced by the impugned order and these very facts have been reiterated before us at the Bar. Moreover, the crucial mandatory requirement of maintaining canteen as per the provisions of Section 46 of the Factories Act has been specifically incorporated in the grounds of appeal - Stay granted.
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2014 (4) TMI 836
Waiver of pre deposit - Availment of CENVAT Credit - GTA Service - Held that:- amendment in Rule 2(p) was taken note by the Division Bench of Tribunal in Shree Rajasthan Syntex Ltd. vs. CCE reported in [2011 (8) TMI 265 - CESTAT, NEW DELHI] and it was held that inasmuch as there was no simultaneous amendment in the provisions of Rule 2(r) the utilizing of the credit for disposal of Service Tax liability by the respondent was in accordance with the law - Stay granted.
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2014 (4) TMI 835
Valuation of goods - sister concern - revenue neutral exercise - Revenue contends that assessee should have cleared the goods to their sister units at the assessable value arrived at in terms of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, which provided for adoption of assessable value as 110% of the cost of production or manufacture of such goods - Held that:- admittedly goods were being cleared by the respondents on payment of duty and it is not a case of clandestine removal. The only objection of the Revenue was that the assessable value was adopted on the lower side inasmuch as the same should have been arrived at by taking into consideration 110% of cost of production. At this stage, we note that whatever duty was paid by the respondents was being availed as Cenvat credit by their sister concern. As such, the differential duty required to be paid by the present respondents was available as Cenvat credit to their sister concern, thus making the entire exercise as revenue neutral. There are umpteen number of decisions holding that in such a scenario, no mala fide can be attributed to the assessee. As such, we find no favours with the Revenues contention that short payment was made by the respondents on account of any mala fide so as to ignore the provisions of Section 11A(2B) - Decided against Revenue.
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2014 (4) TMI 834
Denial of CENVAT Credit - Waiver of pre deposit - outdoor catering service - Held that:- Commissioner examined the scope of the definition of "input service" independently and arrived at a conclusion against the assessee. This apart, we find that a few factual aspects are crucial in determining whether the appellant can claim the benefit of the two judgements. Firstly, the appellant should clearly plead the number of workers employed in the factory during the material period. Secondly, they should also clearly state whether the cost of service was included in the cost of production of the final products, and if so to what extent. Appellant has not pleaded any of these. They have not even claimed that no amount was recovered from the employees towards the cost of the service. In other words. the appellant has failed to set up the requisite factual foundation for claiming the benefit of the Hon'ble High Court's judgements. In this scenario, we are unable to hold that they have made out a clear prima facie case against the demand. nevertheless, for the moment, we are not impressed with the way in which the case of Ultratech Cement Ltd. was distinguished by the adjudicating authority - Following decision of CCE, Nagpur Versus Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] and Commissioner of Central Excise, Bangalore-III, Commissionerate Versus Stanzen Toyotetsu India (P.) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT] - Conditional stay granted.
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CST, VAT & Sales Tax
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2014 (4) TMI 842
Scope of term Goods u/s 2 (d) of the Act - Taxation of Transfer of Right to use goods - plant and machinery attached to earth Movable Property or not - Claim for exemptions - rent received for plant and machinery immovable property Rent Agreement - Whether machinery can be held to be "goods" so as to attract tax liability under Act, 1948 - Absence of intention to severe plants and machinery - Held that:- For a property and to be regarded as attached property, it must become attached to immovable property as permanently as a building or a tree is attached to earth - If, in the nature of things, the property is a movable property and for its beneficial use or enjoyment, it is necessary to embed it or fix it on earth, though permanently, that is, when it is in use, it may not be regarded as immovable property, but not otherwise Here, besides plants and machinery, entire land and building was leased out and there was no provision/agreement that plants and machinery shall be severed or removed from earth - Removal of plants and machinery would not have allowed the factory to run - There is no agreement between parties that plants and machinery shall be severed or removed from earth - Even according to definition of 'goods' under Section 2(d) in view of this Court, it cannot be included therein. The term "goods" is defined under Section 2(d) and this is in conformity with definition of "immoveable property" as contained in Section 3(26) of General Clauses Act 1897 - Items, which are fastened to or attached to earth or something attached to earth are not included in the definition of 'goods' unless there is an agreement between the parties that those items etc. would be severed pursuant to contract of sale between the parties, which is not the case here - It is not the case of the Revenue that there was any intention of parties to severe plants and machinery attached to earth - In fact, there was a lease to run entire factory and not to remove or severe plant and machinery attached or fastened to earth, which are installed in the aforesaid factory to make it functional - In view thereof and considering judgment of Tribunal, this Court do not find that plants and machinery in the case in hand can be treated to be "goods" within the meaning of Section 2(d) so as to attract and taxability - Therefore, revision is dismissed Decided against Revenue.
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2014 (4) TMI 841
Nature of agreement - Whether transaction was sale or a works contract Levy of penalty evasion of tax - Held that:- contract is a not a simple sale, it is a composite works contract, u/s 3-B of the TNGST Act and not a simple sale - The contract provides for assembling of design, manufacture assembling, supply erection, commissioning and handing over within a period and the second crane to be erected, commissioned and handed over - In the light of the nature of agreement the taxable turnover, hence, has to be worked out only in accordance with the provisions under Section 3B of the Tamil Nadu General Sales Tax Act - Various terms of the agreement show that the assessee entered into an agreement with Japanese Corporation and signed a collaboration agreement with M/s.Hitachi Limited for importing components required for cranes and whereby, Hitachi had agreed to sell the drawings and other necessary documents to the assessee - and the second crane to be erected, commissioned and handed over - the nature of agreement and the taxable turnover has to be worked out only in accordance with the provisions under Section 3B assessment set aside - Matter remitted back to the AO for re-working out the deduction In absence of details available in the books of accounts as regards the turnover not involving transfer of property of goods, the agreement falls u/s 3B(e), the assessee entitled to deduction at 30% as by way of standard deduction - Decided partly against assessee.
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2014 (4) TMI 840
Waiver of Pre-deposit Condition for waiver - Undue hardship - Under the GST Act and under Central Sales Tax Act Disposal of stay - Held that:- On merely establishing a prima facie case, interim order of protection should not be passed - But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand - Petitions for stay should not be disposed of in a routine matter unmindful of the consequence flowing from the order requiring the assessee to deposit full or part of the demand - Merely because this Court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest - Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens faith in the impartiality of public administration, interim relief can be given. While dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interest of Revenue have to be kept in view - There are two important expressions in Section 35(f) - One is undue hardship - This is a matter within the special knowledge of the applicant for waiver and has to be established by him - A mere assertion about undue hardship would not be sufficient - It was noted by this Court in S. Vasudeva Vs State of Karnataka and Ors. [1993 (3) TMI 350 - SUPREME COURT OF INDIA] that under Indian conditions expression Undue hardship is normally related to economic hardship - Undue which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it - Undue hardship is caused when the hardship is not warranted by the circumstances Relying upon Mehsana District Cooperative Milk P.U. Ltd. vs. Union of Indina [2003 (3) TMI 113 - SUPREME COURT OF INDIA] - The conditions as to predeposit in appeal can be waived mainly on the ground of undue hardship/ financial hardships - Moreover, when the petitioners have neither pleaded any undue hardship and / or financial hardship it cannot be said that the learned Tribunal has committed any error and / or illegality in directing the petitioner original appellant to deposit a sum of Rs. 20 crores as predeposit - Petitions fail and are dismissed Decided against assessee.
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