Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 12, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
Notifications
Highlights / Catch Notes
Income Tax
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TDS on Payment made for acquisition of telecast rights broadcasting operations in Singapore - That has no connection with the marketing activities carried out through its alleged permanent establishment in India - No TDS - HC
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Provisional attachment of bank accounts - so far as provision of section 281B is concerned, statute has not yet decided to make provisions of giving reasonable opportunity to the assessee before passing an order under Section 281B - decided against the assessee - HC
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Rejection of condonation of delay Delay of 2005 days The fact that despite instructions of the Commissioner, the appeal was not filed came to the light of the department only when tax appeal of the same assessee for other year came up for hearing - delay condoned - HC
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Genuineness of the existence of partnership Tribunal rejected the claim of the assessees that they received the amounts not as consideration for transfer of their lands but by way of retirement as partners in the firm - order of tribunal sustained - HC
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Exemption u/s 10(37) - Merely because the assessee was not residing close to the land or was also pursuing some other business would not by itself be sufficient to hold that the land was not used for agricultural purposes by the assessee - HC
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Entertainment tax capitalized - Addition as subsidy - Merely because the amount was not directly meant for repaying the amount taken for construction of the cinema hall, its purpose could not be considered to be other than that of promoting construction of new cinema hall - additions deleted - HC
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Withhodlign Tax / TDS u/s 195 on LTCG Benefit of proviso to section 112 - assessee is entitled to benefit of lower rate of tax @ 10% while computing the tax under the head long term capital gain - AT
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Computation of LTCG Whether the value of surrender of tenancy right is to be considered as cost of acquisition of house property - Held yes - AT
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Denial of deduction u/s 80M on the ground that dividend was subject to dividend distribution tax (DDT) - provisions of section 115-O will not negate the assessees claim for deduction u/s 80M in the year - AT
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Additional depreciation providing food services and manufacturing eatables - production of food articles - eligible for additional depreciation - AT
Customs
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Interest on delayed payment of refund of pre-deposit Interest to the appellant was due after three months from remand order dated 30-4-2002 and not after three months from 29-1-1998, the date of pre-deposit made by assessee - AT
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100% EOU - Since the Development Commissioner has accepted the export performance as enough to fulfil the export obligation and therefore it cannot be said that the unit has not fulfilled the export obligation and therefore is liable to pay duty - AT
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Refund claim of the duty - Notification No. 21/2002 - short supplied goods are not used in the manufacture of intended finished goods - Therefore, the benefit of notification is not available - AT
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Valuation - Assessable value - Assessable value has to be worked out based on USD existing on date of filing the Bill of Entry to which the Insurance, LC Charges and Margin as shown in the final invoice have to be added - AT
Service Tax
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Demand of service tax on GTA service - Transporting of sugarcane - fortnightly bills cannot be held to be consignment notes, in which case transporters cannot be called goods transport agency - AT
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Modification of the stay order - there is a change in circumstances in the instant case and the law has been interpreted in favour of the appellants and against the revenue - stay granted - AT
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Services provided to railways - appellants contracts with the railways have nowhere been analyzed for ascertaining as to whether the contracts were providing erection, installation and commissioning service or otherwise. - AT
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Business Auxiliary Service - packing operations in the factory premises - cleaning and testing of empty tin containers, affixing of lebels on the containers and thereafter filling up and sealing of the same - prima facie case is in favor of assessee - matter remanded back - AT
VAT
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The proceedings for recovery initiated for the amount under the provisional assessment shall not become non-est merely by passing of the final assessment order.n - HC
Case Laws:
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Income Tax
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2014 (5) TMI 328
Allowability of exemption u/s 10(23C)(iiiad) of the Act Trust not solely for charitable purpose Held that:- The Tribunal was of the view that there may be certain dormant objects which have never been pursued in reality by the assessee and the mere existence in a Memorandum constituting the assessee would not be sufficient to decline an exemption - it has never been the contention of the revenue either before the CIT(A) or before the Tribunal that the assessee had carried on any activity other than education - The AO relied on the prospectus of the assessee which made a reference to the business carried on by a Private Limited Company in the same "group" as the assessee - The observations which are extracted in the order of the AO are from the order passed by the CIT-II, Agra on 23 August 2011 rejecting the request of the assessee for registration u/s 12AA - the assessee is a trust and not a Private Limited Company - The trust does not carry on any other business save and except conducting education - the entitlement of the assessee to the exemption u/s 10(23C) was dealt with by the CIT(A) there was no reason or justification to hold that the CIT(A) ought to have remitted the proceedings before the AO no substantial question of law arises for consideration Decided against Revenue.
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2014 (5) TMI 327
TDS on Payment made for acquisition of telecast rights Royalty as per Explanation 2 of section 9(1)(vi)(c) of the Act or not Article 12(7) of DTAA Chargeability of payment Held that:- Both the CIT(A) as also the Tribunal was of the view that if the underlying facts are not in dispute, then, the payment for the cricket rights is made only for broadcasting operations of the assessee which are carried out from Singapore - The liability for the payment is incurred by the assessee in connection with the broadcasting operations in Singapore - That has no connection with the marketing activities carried out through its alleged permanent establishment in India - There is no economic link between the payments assuming that they are in the nature of royalties made out of India cannot be termed as perverse - the Revenue stand cannot be upheld - There has been no general rule laid down nor can the Tribunal's order be seen as having any impact or repercussion on cases pending before the authorities or before the Tribunal - none of the apprehensions of Mr.Tejveer Singh can enable the court to entertain the appeal no substantial question of law arises for consideration Decided against Revenue.
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2014 (5) TMI 326
Validity of order u/s 281B(1) Provisional attachment of bank accounts of society requirement of hearing before passing the order - Held that:- So far as Section 142 (2A) is concerned, the provisions contained therein have been substantially amended and proviso has been added to Section 142 (2A) with effect from 1.6.2007 which provide that no direction for special audit shall be issued without affording reasonable opportunity of hearing to the assessee. - But so far as provision of section 281B is concerned, statute has not yet decided to make provisions of giving reasonable opportunity to the assessee before passing an order under Section 281B of the Act. The assessment has been completed and the liability of Rs. 840 and odd crores has been fastened against the assessee regarding tax during the relevant assessment year though in fact, the amount attached in the Banks is only of Rs. 22 crores and odd, which is very meagre amount - the amount under attachment shall not be appropriated against the demand raised till the period of preferring appeal against the assessment order is expired - the AO has duly discharged its obligation under the statute while passing the order u/s 281B of the Act which has been validly approved by the Commissioner Decided against Assessee.
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2014 (5) TMI 325
Rejection of condonation of delay Delay of 2005 days Held that:- The Revenue desired to file appeal against the assessee for the present year also namely, the assessment year 2004-2005 - the delayed appeals of the Government agencies are treated more strictly and not to routinely condone such delay which is sought to be explained merely on administrative difficulties or mere shuffling of files from one table to another Relying upon Post Master General v. Living Media India Ltd. reported in [2012 (4) TMI 341 - SUPREME COURT OF INDIA] - explanation by the Revenue is not of mere tossing file from one table to another or from one authority to another - The explanation is somewhat unusual, nevertheless, appears to be genuine - On account of unusual circumstances, where the person in charge proceeded on leave handing over the charge to another incumbent - No sooner did he resume duties after the leave period, he was transferred. The incumbent to whom he had given additional charge was also under order of transfer. Both these officers thus left on the same day - The charge was handed over to the new incumbent - In the process, one file for filing appeal before the tribunal was lost sight of - It is not even seriously disputed that the Revenue always desired to prefer appeal for the year 2004-2005 also - The fact that despite instructions of the Commissioner, the appeal was not filed came to the light of the department only when tax appeal of the same assessee for other year came up for hearing - the tribunal upon which after making inquiries and finding out that due to such lapse, the appeal was not filed, steps were taken to do so with condonation of delay application the delay to be condoned Decided in favour of Revenue.
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2014 (5) TMI 324
Genuineness of the existence of partnership Transfer of capital asset - Held that:- The assessees did not place on record the original partnership deed or a Certificate of its Registration at any point of time - They claim that though the partnership firm was formed in 1988, it was registered with the Registrar of Firms only in 2003 i.e., after the lapse of 15 years - Though they so claimed, they did not produce Certificate of Registration before the authorities - It has come on record that subsequent to the Retirement-cum-Reconstitution Deed of partnership dated 22.5.2004, the landed properties were transferred to M/s.Prestige Estate Project Private Limited by the firm vide agreement dated 23.12.2005 - The agreement to sell was executed not only by the firm but also by the assessees - the Tribunal rejected the claim of the assessees that they received the amounts not as consideration for transfer of their lands but by way of retirement as partners in the firm there is no reason to interfere in the order of the Tribunal no substantial question f law arises for consideration Decided against Assessee. Validity of notice u/s 148 of the Act Reopening of assessment Held that:- The assessee-wife had declared her total income of ₹ 1,37,990/- for the assessment year 2005-06 and it was processed u/s 143(1) of the Act AO noticed that the assessee-wife had also received a sum of ₹ 2,90,00,000/- during the assessment year 2004-05 from Srihari Khoday as sale consideration for transfer of property the notice issued u/s 148 of the Act cannot be said to be invalid Decided against Assessee.
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2014 (5) TMI 323
Treatment of STCG Business income or not Sale of shares - Held that:- The assessee was not carrying on business but was a HUF comprised of various members - It made investment in 12 companies and indulged in actual sale and purchase transactions for 45 days out of 250 trading sessions - The karta of the HUF was also a full time employee - director of various companies - the average holding period was more than 50 days in respect of each scrip that was transacted in sale and purchase Relying upon Commissioner of Income Tax v. Sutlej Cotton Mills Supply Agency Ltd. [1975 (7) TMI 2 - SUPREME Court] - emphasis on no single test can be determinative or conclusive of the matter - the overall tests noticed and applied by the Tribunal cannot be faulted Decided against Revenue.
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2014 (5) TMI 322
Sustenance of 50% of disallowance towards travelling expenses Held that:- The disallowance is sustained to the extent of 50% - the trips have been undertaken by the employees - there is no dispute with regard to the trips but the extent of the material required to be produced that the Tribunal has sustained the disallowance partially thus, no substantial question of law arises for consideration Decided against Revenue. Admission of appeal - Guest house expenses Held that:- The Tribunal has assigned cogent and satisfactory reasons - The expenditure incurred on maintenance of guest house is an issue which has been examined Relying upon Britannia Industries Ltd. v/s CIT [2005 (10) TMI 30 - SUPREME Court] - factual matters have to be verified and examined in the light of the legal principles that the matter has been remitted back to the AO as such the direction does not raise any substantial question of law Decided against Revenue. Fully convertible FCCBs into equity shares Held that:- The CIT(A) had confirmed the disallowance on the footing that the bonds were fully convertible into shares, the issue of bonds was made after creating an authorized capital and which could take into account stock of shares, therefore, a debatable question is raised the appeal admitted on this question Decided in favour of Revenue. Development expenses Applicability of section 35AB of the Act Held that:- The Tribunal has considered the matter essentially in the light of the factual position brought on record - The matter has been decided in the light of the payment made to the M.S.E.B. as non- refundable and that is towards consumers' contribution/service charges on account of availing additional power - the fact that the claim of development expenses has been examined by the Tribunal in the light of the provisions of Section 35AB of the Act this aspect is also admitted to be considered - Decided in favour of Revenue. Deletion made u/s 40(A)(9) of the Act Held that:- The Tribunal rightly noted that the expenses already incurred are reduced and the balance was accounted as provision - This is found to be an admissible deduction - the provision for pending labour demands and its disallowance made by the AO is rightly deleted - The Tribunal has found that the demands were pending - There was wage issue raised by the labour unions and, therefore, in the given facts and circumstances and to maintain industrial harmony and peace, the assessee company made a provision of Rs.537.09 - The revenue may term it as contingent in nature thus, as such there is no substantial question of law arises for consideration Decided against Revenue.
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2014 (5) TMI 321
Nature of income STCG or not Trading in shares - Whether the Tribunal fall into error in upsetting the findings of the AO and CIT (A) that the amount determined by the AO as business income of the assessee was liable to be treated as short-term capital gain Held that:- Even though the Tribunal has made an exhaustive discussion of the law as to what kind of transaction would amount to capital gains, the assessment of the present transaction - which by all counts appears to be extremely unusual - has escaped its attention as is evident from the above extract - The assessee had in fact not purchased the shares in late October as claimed by her - She raised a loan of Rs.1 lakh indirectly from someone to pay for the purchase price of shares on 04.01.2007 - The amount was paid on 05.01.2007 and on the same day the shares were transferred to her DMAT account - the shares appear to have been sold on 10.01.2007 - the transaction was a solitary one, is justified - The conclusion of the AO and the CIT(A) that the profit derived was not a short-term capital gain but in reality a business perhaps a short-term one-engaged in by the assessee cannot be faulted at all thus, the order of the Tribunal is set aside and the matter is remitted back to the AO Decided in favour of Revenue.
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2014 (5) TMI 320
Exemption u/s 10(37) - Whether the section require that the assessee should himself carry out the agricultural activities on the land - Assessee contended that as per section 10(37) r.w.s. 45(5), no capital gain tax was payable as also allowed by ITAT - Held that:- Following Commissioner of Income Tax Versus Amrutbhai S. Patel [2013 (5) TMI 449 - GUJARAT HIGH COURT] - CIT (A) held against the assessee was staying away from the agricultural land and that he was otherwise engaged in a business - neither of the two facts, either in isolation or cumulatively, would be sufficient to hold that the land was not being used for agricultural purposes by the assessee - Merely because the assessee was not residing close to the land or was also pursuing some other business would not by itself be sufficient to hold that the land was not used for agricultural purposes by the assessee - The Tribunal had recorded that in the earlier years, the assessee had declared agricultural income, which was also accepted by the Revenue no substantial question of law arises for consideration Decided against Revenue.
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2014 (5) TMI 319
Disallowance of entertainment tax capitalized - Addition as subsidy - Capital or revenue in nature Whether the Tribunal was justified in confirming the order of the Tribunal deleting the addition made on account of disallowance of entertainment tax capitalised as subsidy Held that:- The State Government proceeded to exempt entertainment tax for a period of 5 years payable by a "new" cinema hall constructed, subject to the condition that commercial exhibition of films in such cinema hall was required to be started by 31.03.2000 - In the scheme of the Act of 1957, where entertainment tax is determined and recoverable from the proprietor of the entertainment and is levied with reference to the number of admissions to the entertainment, when the State Government had exempted such proprietor of new cinema hall from payment of entertainment tax on the given condition - the object was clearly to promote the construction of new cinema halls. Merely because the amount was not directly meant for repaying the amount taken for construction of the cinema hall, its purpose could not be considered to be other than that of promoting construction of new cinema hall - the source of funds for construction of cinema hall is irrelevant - it would also not matter if the grant would be available after the business has been set up the observations of the ITAT was correct that the remission had been granted by way of incentive of capital receipts in the construction of cinema building Following Kalpana Palace Versus Commissioner of Income-Tax [2004 (8) TMI 65 - ALLAHABAD High Court] - the Tribunal was justified in affirming the deletion of addition being the amount of entertainment tax capitalized as subsidy Decided against Revenue.
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2014 (5) TMI 318
Bogus purchases made - Disallowance of only 10% of purchases books of accounts and other material had been seized by the Excise authorities - Held that:- The Tribunal noted here that though the AO was aware of the search and seizure operations, he made no attempt to obtain the books of accounts from the Excise authorities - The failure of the Revenue could not oblige the assessees disadvantage - The findings of the Settlement Commission were based upon assessment of the materials before that authority - it was satisfied that the inputs had been used to a large measure - the assessee was unable to pinpoint or ensure the presence of the vendors in the assessment proceedings could not have been sole ground for rejecting its entire books of accounts, particularly when there was relevant material suggesting that the inputs had been utilised and paid for - The suspicion that the cash withdrawn by the vendors directly might have found its way back to the assessee could not have led to the rejection of the books of accounts and the drastic consequences, which the AO in this case had directed by way of disallowance - the restriction of the disallowance amounts, both in terms of the number of vendors and to 10%, is neither unreasonable nor without justification the order of the Tribunal is upheld Decided against Revenue. Applicability of section 40(a)(ia) of the Act Effect of amendment w.e.f. 01.04.2005 - Held that:- Section 40 directs a disallowance in the computation of profits and gains from business or profession in the case of any assessee where inter alia any amounts payable as interest, commission, brokerage, rent, royalty, fees for professional services or amounts payable to contractor or subcontractor, for carrying out any work on which tax is deductible at source under Chapter XVII-B - the assessee was not under obligation to deposit the TDS amount and could deduct addition of Section 40(ia) with its proviso as it existed then - This aspect appears to have been lost sight of the ITAT the sum is directed to be given the benefit of deduction u/s 40(a) - the disallowance directed by the AO and as upheld by the CIT (A) are set aside - Decided in favour of Assessee.
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2014 (5) TMI 317
Disallowance of deduction u/s 80IB of the Act Mandatory audit report not furnished in prescribed proforma Held that:- The assessee had filed the old Form 10CCB while claiming deduction u/s 80IB, instead of the revised format of Form 10CCB for the AY - the AO reopened the assessment, the assessee filed the revised new Form 10CCB during the re-assessment proceeding, thereby, the assessee has corrected the mistake which happened while filing the return and has admitted that the claim for deduction in the old format was an inadvertent mistake - The CIT(A) have compared the old and the revised Format 10CCB filed by the assessee and since he could not find any fault on the part of the assessee which could have resulted in escapement of income or there was any omissions in the old format which could have made an adverse impact on the claim u/s 80IB, the ld CIT(A) rightly allowed the appeal of the assessee there is no legal infirmity in the decision of the CIT(A) Decided against Revenue.
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2014 (5) TMI 316
Withhodlign Tax / TDS u/s 195 on LTCG Benefit of proviso to section 112 of the Act Applicability on Non-resident assessee or not - Rate of deduction 10%+ Surcharge OR 20% + Surcharge Held that:- Following Cairn UK Holdings Limited Versus Director of Income-Tax [2013 (10) TMI 430 - DELHI HIGH COURT] - The proviso is applicable to listed securities or units or zero coupon bonds - Long-term capital gains tax is not payable on listed securities sold through stock exchanges as securities transaction tax is payable - The first proviso to section 48 is applicable on sale of shares or debentures in an Indian company, whether or not the shares or debentures are listed - the proviso to section 112(1) is more restrictive and will not necessarily apply in all cases covered by the first proviso to section 48 - the proviso to section 112(1) is not applicable to debentures - the proviso to section 112(1) is applicable to units and zero coupon bonds, which are not covered by the first proviso to section 48 of the Act - The second proviso to section 48 is not applicable on transfer of a long-term capital asset being bond, debenture other than the capital index bond - Zero coupon bonds are specifically made eligible for the benefit under the proviso to section 112(1). The purpose and object behind the proviso to section 112(1) itself is somewhat debatable, except that the legislative intention was to tax long-term capital gains on listed shares, bonds and units at 10 per cent., without the benefit of indexation under the second proviso to section 48 of the Act - Legislative policy and object is nothing more, and it is impermissible to read into the provision an affirmative legislative intention on assumption and guess work and this would be beyond the acceptable principles of interpretation - the assessee is entitled to benefit of lower rate of tax @ 10% while computing the tax under the head long term capital gain Decided against Revenue.
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2014 (5) TMI 315
Computation of LTCG Whether the value of surrender of tenancy right is to be considered as cost of acquisition of house property - Cost of the property at the time of acquisition not considered Held that:- The assessee is an old tenant in a building, where she was residing with her son in the flat - Once the cost of acquisition is determinable, the benefit of such acquisition has to be given while computing the tax on capital gain - the tenancy right got converted into acquisition of a flat, when the assessee must have got the possession of new flat constructed by the builder - Thus, the market value of the flat as on the date of its possession would be the cost of its acquisition the cost is to be deductible while computing income by way of capital gains, whether long term capital gain - This is as the holding period of the capital assets, being the residential flat, would only commence from the date the assessee is put in possession after its completion thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication AO was directed to take the value of the flat for the purpose of cost of acquisition from the year in which the assessee got the actual possession of the flat and then only he shall compute the capital gain Decided partly in favour of Assessee.
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2014 (5) TMI 314
Disallowance of interest Nexus between interest free loans out of interest bearing funds Held that:- The assessee has given interest free loan to various persons - The availability of various interest free loans and funds have also been provided which goes to show that at the year-end such interest free loans were at Rs. 29,76,48,648 CIT(A) has held that interest free loan is out of these funds only - findings of the CIT(A) appears to be prima-facie correct - during the month of April 2005 itself, the assessee has received huge interest free loans which aggregated to more than Rs. 50 crores - a presumption can be drawn that the interest free loan has been given out of these interest free unsecured loans received by the assessee thus, there is no reason to interfere in the order of the CIT(A). The assessee has also given huge loans which are interest bearing and on which the assessee had shown interest income of Rs. 1.96 crores - The interest which has been incurred for the purpose of the business, has been shown at Rs. 1.83 crores, which has been claimed as deduction u/s 36(1)(iii) - Such a claim of deduction cannot be disallowed, unless it has been shown that the assessee has actually diverted its interest bearing loan either for some non-business purpose of for personal use - There is no diversion of interest bearing loan for any other purpose except for the purpose of the business Decided against Revenue. the claim of the assessee under section 36(1)(iii) cannot be disallowed. Thus, the finding and the conclusion drawn by the learned Commissioner (Appeals) appears to be factually and legally correct and we decline to interfere in the matter as such. Thus, the ground raised by the Revenue is dismissed.
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2014 (5) TMI 313
Denial of deduction u/s 80M on the ground that dividend was subject to dividend distribution tax u/s 115-O - Whether the provisions of section 115-O, which has been brought in the statute by the Finance Act, 2003, w.e.f. 1st April 2003, can be made to be applicable so to deny the statutory deduction u/s 80M of the Act Held that:- The purpose and intent of section 115-O is entirely different inasmuch as it sought to tax the dividend at the time of declaration / distribution / payment and such payment of tax cannot be claimed as deduction under any section or any other provision thus, the deduction is allowable u/s 80M to the assessee is not overridden by section 115-O as held by the AO as well as the CIT(A) the claim of deduction u/s 80M is clearly allowable as all the conditions mentioned has been fully complied with. Distribution of dividend - Whether the dividend has been distributed from the profits of assessment year 2003-04 or not Held that:- The assessee has distributed the same quantum of amount of dividend which was received in September 2002 to its shareholders on 29th October 2003 - The assessee had the time limit for such distribution up to the date of filing of the return of income - the presumption can be drawn that the dividend has been distributed out of the same quantum of dividend received only, unless something is brought on record that the said dividend income has been specifically used for some other purpose. This has not been controverted by the AO - he is only drawing a presumption that this amount of dividend distributed is out of the profits of the assessment year 2004-05 and not assessment year 2003-04 - There is no material on record to the conclusion of the AO, especially when in the original round of scrutiny proceedings u/s 143(3), the assessees contention has been accepted - the assessees claim of deduction u/s 80M is clearly allowable as the same is within the mandate of section 80M, as all the conditions mentioned stands fulfilled for which there is no dispute by the Department - provisions of section 115-O will not negate the assessees claim for deduction u/s 80M in the year, as the provisions of section 115-0 is for different purpose altogether Decided in favour of Assessee.
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2014 (5) TMI 312
Various additions made Proper facts not appreciated Held that:- Assessee contended that the AO made various uncalled for and unjustified additions - assessee derives income from trading of bags etc. and declared the turnover of Rs.1.33 crores on which gross profit of Rs.10,12,007/- and net income of Rs.1,21,650/- was declared - after considering the submissions of both the sides and perusing the material placed also, considering the facts of the case and arguments of both the sides, the matter is required to be remitted back thus, the matter is remitted back to the AO for fresh adjudication AO is directed to allow adequate opportunity of being heard to the assessee - the assessee is directed to produce the books of account before the AO and also furnish necessary evidences/explanation before him Decided in favour of Assessee.
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2014 (5) TMI 311
Additional depreciation providing food services and manufacturing eatables - production of food articles - Held that:- Following Deepkiran Foods (P.) Ltd. Versus Assistant Commissioner of Income-tax, Range-1, [2013 (2) TMI 483 - ITAT AHMEDABAD] - the manufacturing of eatables like paratha, samosa, dhokla have been held to be a manufacturing process - The AO has held that eatables retained the characteristics of original ingredients - The assumption has been categorical dislodged by holding that the raw material being in the form of wheat, potato etc. are totally different which is a new commercial commodity called by various names and distinctly sold in the market thus, the assessee is engaged in the activities of production and manufacture of article or thing and is eligible for additional depreciation Decided against Revenue.
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2014 (5) TMI 310
Restriction of disallowance u/s 14A r.w. Rule 8D of the Rules Earning of exempt income - Investment in shares and securities - Held that:- All the facts were duly taken into consideration by the CIT (A) while reducing the disallowance made by the AO - no disallowance could be made u/s 14A of the Act read with Rule 8D of the Rules - Disallowance of interest to the extent of Rs.22,92,332/- was rightly set aside revenue has not been able to bring anything to show that the well-reasoned elaborate factual findings recorded by the CIT (A) contain any error whatsoever thus, the order of the CIT(A) is upheld Decided against Revenue.
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Customs
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2014 (5) TMI 332
Interest on delayed payment of refund of pre-deposit Remand Order - Bar of Limitation - Section 27A of the Customs Act Held that:- Judgment in Sowbaghya Lakshmi Silicate v. CCE, Trichy [2009 (6) TMI 854 - CESTAT, CHENNAI] followed Reliying upon Commissioner v. I.T.C. Ltd. [2004 (12) TMI 90 - SUPREME COURT OF INDIA] - In case of remand also when refund of any pre-deposited amount accrues, then interest liability will also start from three months after the date of remand order which is also the clarification as per C.B.E. & C. Circular No. 802/35/2004 CX., dated 8-12-2004 - Interest to the appellant was due after three months from remand order dated 30-4-2002 and not after three months from 29-1-1998, the date of pre-deposit made by assessee Decided partly in favour of assessee.
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2014 (5) TMI 331
100% EOU - Duty-free goods - Failure in fulfillment of export obligation Whether assessee failed to fulfil the export obligation and whether duty can be demanded on the goods procured duty-free Manufacture of prawn and prawn seeds Circular No. 13/95-Cus., dated 15-2-1995 -100% EOU - Freedom to transfer of goods imported or manufactured to another 100% EOU Requirement of Permission to transfer goods - Held that:- Appellants did not need any permission to transfer their goods to another 100% EOU and unless it is shown that the clearances made by the appellants to other unit was DTA clearance and was not to a 100% EOU, the duty could not have been demanded - Other than stating that no permission was taken, there is no contradiction of the claim that the unit to whom prawn and prawn seeds were cleared by assessee was a 100% EOU - Thus, Commissioner was right in not demanding the duty on domestic clearances even though he did not make these observations and he did not record a finding on the same. Duty demand on raw materials and capital goods imported and indigenously procured Held that:- The concerned DC in Order-in-Original No. 8/EOU/ADJLIO6/VEPZ condoned the shortfall and accordingly, upheld the fulfillment of the conditions of LOP during the period from 1-10-1994 to 31-3-2000 - Therefore, the Development Commissioner did not declare the unit as defaulter for the period when the show cause notice is issued - Moreover, it is not the case that the unit has opted for de-bonding - There is no cause for demanding duty at this juncture - In the light of the above, the show cause notice proceedings cannot sustain. No doubt, Development Commissioner is the competent authority to decide the fulfilment of export obligation and achievement of minimum NFEP under the License - This aspect has been affirmed by the C.B.E. & C. in its Circular No. 21/95-Cus., dated 10-3-1995 Since the Development Commissioner has accepted the export performance as enough to fulfil the export obligation and therefore it cannot be said that the unit has not fulfilled the export obligation and therefore is liable to pay duty - Accordingly, the appeal filed by the Revenue has no merit and is rejected - The Cross-objection filed by the respondent also gets disposed of - Decided in favour of assessee.
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2014 (5) TMI 330
Refund claim of the duty - Notification No. 21/2002, dated 1-3-2002, Sl. Nos. 321 and 322 Short Suppliance of Base Station Controllers and Base Transceiver Systems known as BSC/BTS Importation of certain parts from China Held that:- Considering fact that assesse has found short supplied goods and claimed the benefit of Notification No. 21/2002 and it is also admitted position that these short supplied goods are not used in the manufacture of intended finished goods - Therefore, the benefit of notification is not available to assessee Thus, confirmation of demand of duty is correct. In the impugned order the learned Commissioner (A) rejected refund claim of assessee holding that same is not legally correct - In fact the issue of refund claim was not the subject matter in the impugned show cause notice - Therefore, the said part of the impugned order is set aside - The appellants are at the liberty to proceed their refund claim on its own merits Decided partly in favour of assesse.
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2014 (5) TMI 329
Valuation - Assessable value - USD or INR on date of filing Bill of Entry - Exchange Rate Certificate of MMTC Held that:- Value has to be taken on the basis of USD as indicated at the time of filing the Bill of Entry - Further, margin claimed by MMTC has increased compared to the original invoice margin taken at the time of filing Bill of Entry - This margin has to be added to the assessable value worked out on the basis of exchange rate existing on the date of filing, the Bill of Entry It is also noted that Insurance and LC Charges have not changed and only margin is changed - Assessable value has to be worked out based on USD existing on date of filing the Bill of Entry to which the Insurance, LC Charges and Margin as shown in the final invoice have to be added - Insurance and LC Charges are shown in terms of USD that also to be added as on the date of filing the Bill of Entry and if not, as on the date of filing of final invoice - Actual margin charged in terms of Indian Rupees has to be added to the assessable value Decided in favour of assesse.
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Service Tax
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2014 (5) TMI 342
Demand of service tax on GTA service - Transporting of sugarcane - non issuance of consignment notes - Held that:- appellate authority has factually accepted the fact that for transporting sugarcane from the cane sugar collection centers from the factory of the appellant, the persons providing such transportation have raised periodical bills for which the freight was paid by the appellants. - fortnightly bills cannot be held to be consignment notes, in which case transporters cannot be called goods transport agency and as such, the transportation of sugar cane from the cane sugar collection centre to the factory would not be covered by section 65(105) (zzp) - Following decision of M/s. Nandganj Sihori SugarCo. vs.CCE Lucknow [2014 (5) TMI 138 - CESTAT NEW DELHI] - Decided in favour of assessee.
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2014 (5) TMI 341
Modification of the stay order - Previous order passed for pre deposit - Held that:- It is a settled decision in law that the Tribunal has no power to review its own order, however, modification of the order can be asked in the event of change in circumstances as held in Baron International Ltd. case cited [2003 (9) TMI 97 - HIGH COURT OF JUDICATURE AT BOMBAY] relied upon by the Revenue. Therefore, the only question to be decided is whether there is a change in circumstances in the present case or not. The order of this Tribunal in the case of P. Gautam & Co. cited [2011 (9) TMI 392 - CESTAT, AHMEDABAD] after the pronouncements of the impugned order dated 19.08.2011. In the said order, this Tribunal held that discounts and incentives received from the advertising agency cannot be included in the value of taxable services under the category of "Business Auxiliary Service‟. Further, this Tribunal in the case of Group M Media India Ltd. [2012 (7) TMI 631 - CESTAT, MUMBAI], while considering the stay application, also followed the ratio laid down in the P. Gautam & Co. cited [2011 (9) TMI 392 - CESTAT, AHMEDABAD] and granted waiver from pre deposit of dues adjudged. The Hon‟ble High Court of Gujarat in the case of Amar Food Products cited supra has held that even a reference to a Larger Bench on a question of law would amount to change in circumstance. If that be so, a decision interpreting the law would certainly amount to change in circumstance, if such interpretation came about after passing of the impugned order. Thus, in our view there is a change in circumstances in the instant case and the law has been interpreted in favour of the appellants and against the revenue - Modification allowed.
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2014 (5) TMI 340
Waiver of pre deposit - Security Agency Service and Manpower Recruitment and Supply Service - Held that:- tax liability in principle is not in dispute and the issue involved in the case pertains to quantification of Service Tax to be paid by the appellant. According to the appellant, the liability is only to the extent of Rs. 63,83,600/-. However, the appellant in a statement dated 24-9-2009 clearly admitted the entire tax liability amounting to over Rs. 1.24 crores. The adjudicating authority found that this admission of tax liability was never retracted. These findings of the adjudicating authority, we note, have not been challenged in the appeal. In this view of the matter, the appellant cannot claim waiver of pre-deposit and stay of recovery in respect of the demand of over Rs. 1.24 crores less the appropriated amount of Rs. 25 lakhs - Conditional stay granted.
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2014 (5) TMI 339
Services provided to railways - Erection, installation and commissioning service - pumping of water from Mahi River to railways overhead tanks, boring for tube wells, developing and testing of tube wells, painting and dismantling of lever frames, erection of structures, laying of S&T cables and supply and installation of signaling material in connection with providing interlocking of railways - Held that:- even if their contracts with the railways are vivisected for charging the service tax on the taxable service components, the component of the taxable service would be very small whose value during each year would be within the exemption limit prescribed under Notification No. 6/2005-S.T. However, on going through the impugned order, we find that in para 6.1 of the order, the Commissioner (Appeals) had given a categorical finding that the appellant have not disputed that their service to railways falls under the category of erection, installation and commissioning service and their main contention is that the same is not taxable as the service has been provided to the railways. In the impugned order, the appellants contracts with the railways have nowhere been analyzed for ascertaining as to whether the contracts were providing erection, installation and commissioning service or otherwise. In view of this, the impugned order is not sustainable. The same is set aside and the matter is remanded to the Commissioner (Appeals) for de novo decision after hearing the appellant and examining their contracts with the railways. - Decided in favour of assessee.
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2014 (5) TMI 338
Business Auxiliary Service - Job work - manufacturing activity or not - packing operations in the factory premises - cleaning and testing of empty tin containers, affixing of lebels on the containers and thereafter filling up and sealing of the same - Held that:- There is no dispute about the fact that the appellant, as per their contract with M/s. Kirti Industries Limited, are engaged in the activity of vacuum cleaning of the tin containers, filling up of the same with oil and sealing and their labelling. This activity is performed by the appellant in the factory of M/s. Kirti Industries Limited. The show cause notice has been issued on the basis that the appellants activity is auxiliary or incidental to production of goods and hence is covered by the definition of Business Auxiliary Service taxable w.e.f. 16-5-2005 and would be liable to service tax. On perusal of the impugned order-in-original, it is seen that the appellants activity has been looked at in isolation ignoring the fact that it is part of manufacture of vegetable oil by solvent extraction process by M/s. Kirti Industries Limited. When M/s. Kirti Industries Limited manufacture oil by solvent process and only the job of cleaning up the tin containers, packing of oil and their sealing and labelling has been given to the appellant and this job has been performed by the appellant in the factory of M/s. Kirti Industries Limited and when in terms of Chapter Note 5 of Chapter XV, the packing from bulk to retail pack, labelling and relabelling of the goods of heading 1507 would amount to manufacture, the process undertaken by the appellant would amount to manufacture and if the process is manufacture, the same would not be service. However, we find that this aspect has not been examined either in the order-in-original or in the impugned order-in-appeal. In fact, in the impugned order-in-appeal, the Commissioner (Appeals) has observed that the services being provided by the appellant are procurement of goods or services, while the show cause notice mention the services provided by the appellant as ancillary or incidental to production of goods. In view of this, the impugned order is not sustainable. The same is set aside and matter is remanded to the original authority for de novo adjudication after hearing the appellant. - Decided in favour of assessee.
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Central Excise
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2014 (5) TMI 343
Demand of u/s 11D - demand of amount paid under Rule 6(3)(b) of Cenvat Credit Rules as reversed, u/s 11D as recovered from the customers - Held that:- The Larger Bench of the Tribunal in the case of Unison Metals Ltd. (2006 (10) TMI 171 - CESTAT, NEW DELHI), decided the question whether the amount of 8% [in this case 10%] debited from RG 23A Part II in terms of the provisions of Rule 57CC(1) and collected from the customers is required to be debited with the Government in terms of the provisions of Section 11D of the Central Excise Act, 1944. A perusal of the invoices placed on record clearly shows that they have debited their RG 23A account while paying 8% under Rule 57CC and some invoices show debit entry in their PLA. This makes it clear that the appellants have not retained the amount collected from the customers and that they have passed on the amount to the Government as provided under Section 11D of the Central Excise Act. Hence the charge of contravention of the provisions of Section 11D is not sustainable. The amount mentioned in the invoice as stated above was debited in their CENVAT account under Rule 6(b) of CENVAT Credit Rules. So, it was not retained by them and paid to the Government. - Demand cannot be made - Decided against the revenue.
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2014 (5) TMI 333
Cenvat Credit - fake invoices issued by dealers - demand raised on the ground that no duty stand actually paid by M/s. Sulabh Impex Corpn and the invoices issued by the registered dealer were based upon fake bill of entries. - Held that:- when the buyers purchased the goods from the registered dealers under the cover of proper invoices and their being no dispute about the credentials of the cenvatable invoices issued by the registered dealer, denial of credit to the ultimate buyer of the inputs is not called for. Appellants have also availed the credit on the basis of cenvatable invoices having all the details issue by the registered dealer. The statement of the appellants representative recorded during the course of investigation is exculpatory in nature and they have nowhere accepted the fact of having knowledge about non-payment of duty by M/s. Sulabh Impex Corpn. Transporters billty indicating receipt of inputs stand produced by them. In such a case, the declaration of law of Luxmi Metal Industries [2013 (3) TMI 143 - CESTAT NEW DELHI] is fully applicable to the facts of the present case. - Even on the ground of period of limitation, the case is in favor of assessee - Demand set aside - Decided in favor of assessee.
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CST, VAT & Sales Tax
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2014 (5) TMI 337
Levy of penalty u/s 78(5) of the Rajasthan Sales Tax Act, 1994 when the declaration form ST 18-A under Rule 53 r/w Section 81 was not completely filled up mens rea - Opportunity of being heard - Held that:- Judgment in Guljag Industries Versus COMMERCIAL TAXES OFFICER [2007 (8) TMI 344 - SUPREME Court] followed - Object behind enacting Section 78(5) is to emphasise loss of revenue and to provide a remedy for such loss - Section 78(2) is a mandatory provision and goods put in movement under local sales, imports, exports or inter-state transactions have to be supported by requisite declaration - mens rea is not an essential ingredient for contravention of Section 78(2) and breach of Section 78(2) would attract levy of penalty u/s 78(5) in cases where goods in movement have travelled with an incomplete form No. 18-A/18-C - If by mistake some of the documents were not readily available at the time of checking, the principles of natural justice might require opportunity being given to produce the same - The orders passed the Board, DC(A) as well as Assessing Authority quashed and provided opportunity of being heard to the assessee u/s 78(2) Decided in favour of Revenue.
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2014 (5) TMI 336
Whether Tribunal is correct in interfering with the remand order of the Appellate Assistant Commissioner (CT) IV and restoring the order of assessment in respect of import-lease transactions and inter-State lease transactions, when it has no jurisdiction to interfere against a remand portion of the order of the Appellate Assistant Commissioner (CT) in view of the third proviso to Section 36(1) of the TNGST Act, 1959 - Jurisdiction of Tribunal - Levy of Tax on transactions of import-lease, inter-State lease and lease receipts Held That:- Considering the technical objection raised by the learned counsel for the assesee about Tribunal exceeding its jurisdiction and interfered with the remand order even in respect of import-lease and inter-State lease agreements - On a perusal of the memorandum of grounds of appeal filed by the State before Tribunal, it is found that the State contended that the order of the First Appellate Authority is not correct and they have questioned the order in respect of lease receipts on imported goods, lease receipts on inter-State goods, lease receipts on agreements entered prior to 1.4.1986 as well as on the deletion of the surcharge and penalty - Therefore, this Court is unable to agree with the learned counsel for assessee that Tribunal exceeded its jurisdiction - Accordingly, such contention is rejected - Going by the terms of the agreement on the lease and proforma invoice of the foreign supplier apart from letter of credit opened and other import documents, the assessment in this case calls for a remand - Consequently, in so far as the turnover relating to agreements entered prior to 01.04.1986 on the import of machinery is concerned, There is no hesitation in upholding the order of the Appellate Assistant Commissioner, thereby, set aside the order of Tribunal. Relying upon Infrastructure Leasing and Financial Services Ltd Vs. Commissioner of Value Added Tax and Others [2010 (2) TMI 1057 - DELHI HIGH COURT] - It is not denied by the assessee that in respect of the transactions entered into post 01.04.1986, the liability on the leasing transactions arises every year - It is not the case of the assessee that merely because the first year of the leasing transactions are assessed u/s 3A, the second year of lease goes for exemption; for the liability to make the payment for every subsequent years arises under the agreement itself so that the lease may have the economic benefit of the goods given under the lease - Thus, extending the same principle, for the contracts entered into prior to 01.04.1986, with a clause in the lease agreement requiring the assessee to make the payment every month so that he may have the beneficial possession of the machinery and to keep the agreement alive; once the amendment expands the definition of 'sale' by including leasing transaction as a deemed sale and the charge is created u/s 3A with effect from 01.04.1986, irrespective of the date of entering into the agreement, the liability to pay tax gets activated under the provisions of Tamil Nadu General Sales Tax Act Thus, contention of the assessee that transactions entered prior to 01.04.1986 would not be liable for any assessment u/s 3A - Therefore, Revisions are rejected. Whether Tribunal is wrong in holding that the lease receipts received for the lease agreements entered prior to 01.04.1986 is liable for tax under Section 3A of the TNGST Act is contrary to the law laid down by 20th Century Finance Corporation Ltd and another Vs. State of Maharashtra [2000 (5) TMI 980 - SUPREME COURT OF INDIA] Liability for Tax Held that:- Considering the fact that the nature of transactions in respect of the agreement entered prior to 01.04.1986 are not different from those transactions after that date, in fitness of things, order of Tribunal is set aside and matter is remanded back to AO for consideration of the turnover of the assessee on the question as to whether the subject matter of lease were purchases made on inter-State sale basis falling u/s 3A or on course of import and that depending on the materials that may be produced by the assessee viz., all the documents pertaining to the transactions on the leasing entered into post 01.04.1986 as well as prior to 01.04.1986, AO may consider the claim of the assessee keeping in the background the principles laid down in the case of 20th Century Finance Corporation Ltd and another Vs. State of Maharashtra [2000 (5) TMI 980 - SUPREME COURT OF INDIA]. Levy of Penalty - levy of penalty at this stage did not arise - In the result, Revisions stand disposed of on the above terms and matter is remanded back to AO Decided partly in favour of assessee.
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2014 (5) TMI 335
Whether on passing of the final assessment order, the provisional assessment order is discharged including the liabilities created under the provisional assessment order, if any - Validity of Provisional assessment order - Quashment of recovery notice Pre-deposit - Mandamus to bar recovery proceeding Rule 41 of the U.P. Trade Tax Rules, 1948 - Held that:- Judgment in Gangadhar Ramchand Oil Mills vs. Sales Tax Officer, Sector VI, Agra and another [1980 (2) TMI 244 - ALLAHABAD HIGH COURT] followed The Rules do not contemplate determination of the turnover of a dealer for a particular period again and again, that is, once under Rule 41(3) and again under Rule 41(5) - The rule contemplates that once the turnover for a particular period falling within a particular assessment year has been determined, the dealer has to pay the tax payable on such turnover and in case he does not pay the same, the Sales Tax Officer can recover it under Rule 41(6) - Viewed in this light, the question of such determination of turnover and the liability for payment of tax thereon becoming ineffective on the assessment year coming to an end or because of initiation of proceedings for final assessment under Rule 41(5), does not arise Therefore, the proceedings for recovery initiated for the amount under the provisional assessment shall not become non-est merely by passing of the final assessment order. The petitioners themselves have enclosed the copy of the security/sureties to the writ petition - The contents of the surety clearly indicate that the surety bound themselves to make the payment of surety amount even if the appeal is decided or become infructuous The petitioners have also brought on the record copy of the order passed in second appeal as to the writ petition by which order the second appeal filed by the petitioners against the provisional assessment order was dismissed by Tribunal Thus, 95% security was given under the interim order of the Tribunal which was passed in the second appeal during its pendency - The appeal having been finally dismissed, the security/surety given in pursuance of the interim order can very well be enforced by the tax authorities for realisation of the amount - In the final assessment order there is nothing that provisional assessment order has been reversed and the tax liability which was created by the provisional assessment order has come to an end expressly or impliedly Thus, according to the terms and conditions of the sureties undertaken by the petitioners, they are not entitled to contend that their sureties stood discharged - This court does not find any infirmity in the recovery notice and the citation issued against assessees - Assessees are not entitled for any relief as prayed for in the writ petition - The writ petition is dismissed Decided against assessees
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2014 (5) TMI 334
Validity of DC Order u/s 22 r/w Section 21 of the U.P. Trade Tax Act and Section 9(2) of the CST Act - Whether order dated 25.11.2011 is beyond the scope of Section 22 withdrawal of the notice - Held That:- Judgment in Deva Metal Powders (P) Ltd. Vs. Commissioner, Trade Tax, Uttar Pradesh [2007 (12) TMI 221 - SUPREME COURT OF INDIA] followed - Mistake which is rectifiable u/s 22 is the mistake which is apparent from the record - Similar view was taken in Mepco Industries Ltd. Vs. CIT and another [2009 (11) TMI 24 - SUPREME COURT] - Mistake apparent on the face of record - to attract the application of section 22, mistake must be apparent on the record and obvious mistake - Mistake existed since DC withdrew the notice for re-assessment both for Central and State by order dated 24.2.2011, whereas in the order dated 24.2.2011 only the re-assessment of provincial i.e. 27.4.2004 was considered and neither the facts, grounds given in the order dated 23.4.2004 for re-assessment of Central were adverted to nor the grounds given in the composite notice dated 20.11.2010 were adverted hence, the mistake was there and it was apparent on the record - Thus, no error was committed by DC in rectifying the mistake. Supply of SIB report Violation of Natural Justice Held that:- As the materials pertaining to inquiry and investigation of Forms-C and the result of inquiry were on the record of file, to which the petitioner was made aware, he cannot complain the violation of principle of natural justice - Although there is nothing on record to show as to whether any specific order has been passed on the said application, however, in view of the findings that the assessee was made aware of materials on record, the said complaint was substantially dealt with Relying upon City Corner Vs. Personal Assistant to Collector and Addl. District Magistrate , Nellore, [1975 (9) TMI 169 - SUPREME COURT] - It is not always necessary that documents asked for to be furnished, provided substance of the document is furnished and summary is not misleading -Further in the counter affidavit filed by the State in writ petition Nos. 635(Tax) of 2004 and 636 (Tax) of 2004, all necessary correspondences received from tax authority of State and outside State were already brought on record, which were basis for issuing re-assessment proceedings thus, the petitioner was made well aware of the entire materials which have been utilised against him - Thus, petitioner's complaint that principle of natural justice has been violated, cannot be accepted. Availability of Statutory remedy Held That: - The order of re-assessment for the year 2000-01 dated 15.12.2011, which was based on similar allegations, was challenged by the petitioner in this court by filing Writ Tax No. 257 of 2012 - The said writ petition was dismissed on 29.3.2012 - Against the order of re-assessment, assessee has statutory remedy of appeal and which was one of the grounds for dismissing the writ petition Thus, the petitioner is not entitled for any relief in this writ petition Decided against assessee.
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