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TMI Tax Updates - e-Newsletter
May 16, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Penalty for technical breach of law - Wrong mention of section 272A(2)(C) in place of 272A(2)(K) - recourse Sec. 292B of the Act would also not help the case of the Revenue because the mistake cannot be said to be a pure technical objection - AT
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Provision for diminution in the value of closing stock – Had it had claimed the net realizable value of closing stock in trading account, the debit of provision for diminution in value of stock in P&L Account under schedule 15 would not have appeared - no addition - AT
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Interest u/s 220(2) - assessee was required to pay interest u/s 220(2) as it had not initially satisfied the demand raised in 2003 - interest on refund is to be charged from the date of grant of refund - AT
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Addition made u/s 56(2)(vi) - Fair Value Trust (FVT) – department having already exercised the option to tax the income directly in the hands of the trust, there is no provision to review the option taken in the case of trust and again to change the option from one beneficiary to another - AT
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Valuation of closing stock – Addition of proportionate transport charges – adjustment sought to be made is revenue neutral and at best may result in preponement or postponement of revenue - no addition - AT
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Confirmation u/s 80IB - assessee is not entitled for the claim of deduction u/s 80IB in respect of loss of machinery because it was rightly held by the Revenue Department that the same was a capital loss which was recouped by the Insurance Company - AT
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In a situation when the unaccounted stock had been taxed u/s 69B, on one hand, and on the other hand the sale value of the stock was also taxed – the correct position ought to be that the difference between the two is required to be taxed in the hands of the assessee - AT
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Disallowance of assets written off – depreciation has been claimed on those assets in the past - AO has not doubted the genuineness of the claim and disallowed it only holding the loss to be capital in nature - claim allowed - AT
Customs
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Revenue directed to issue an official circular to all the concerned officials that the confiscated goods which are the subject matter of appeal before any Tribunal or Court shall not be auctioned or disposed of without prior written permission or order from the concerned Tribunal or the court. - HC
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Import of 20kgs of Oats for home use - In view of the subsequent development, viz., the shelf life of the product itself has expired. No useful purpose will be served in re–packing and re–labeling the imported food product for the purpose of testing it - HC
Service Tax
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When the appellant did not avail opportunity to reconcile the figures and guide the authorities below as to which figure shall govern the appellant, there is no necessity to remand the matter for further opportunity. - AT
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Erection, commissioning and installation services - abatement of 67 % - unless the said exemption is claimed and necessary conditions laid down therein are fulfilled by the applicant its benefit cannot be extended to them - prima facie case is against the assessee - AT
Central Excise
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Demand of duty on generation of the floor sweeping as waste - appellants are not required to reverse Cenvat credit attributable to generation of these floor sweepings as same has been emerged during the course of manufacture of final product i.e. biscuits. - AT
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Duty demand - Printing of MRP with indelible ink on manufactured footwear - These two certificates indicate that the printing done by the appellant on the footwear was indelible and, therefore, the appellant was entitled to the benefit of the said exemption. - AT
VAT
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Exemption of purchase Tax – Genuineness of the transactions - Goods bought prior to cancellation of registration – When the said dealer has not proved the genuineness of the transactions, demand confirmed - HC
Case Laws:
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Income Tax
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2014 (5) TMI 482
Validity of assessment order passed u/s 147 despite stay order - notice u/s 148 of the Act – Disallowance u/s 40(a)(ia) of the Act – TDS not deducted u/s 194H - Trade discount provided by newspaper publishers to advertising agencies – Held that:- We have duly considered the explanation which has been tendered by the Assessing Officer in her affidavit. The Assessing Officer has stated that a copy of the order of stay passed by this Court was not produced before her and only a letter was placed as a result of which she proceeded to pass an order of re-assessment having regard to the bar of limitation which was to expire on 31 March 2014 but subject to the decision of the Supreme Court in the pending special leave petition and of this Court in these proceedings. We consider it appropriate to accept the explanation of the Assessing Officer and drop the notice to show cause which has been issued to her. Decision in case of Jagran Prakashan Limited Versus The Deputy Commissioner Of Income Tax (Tds) [2012 (5) TMI 488 - ALLAHABAD HIGH COURT]followed wherein it was held that, (i) there is no relationship of principal and agent between the petitioner and the advertising agencies; (ii) the advertising agencies do not render any service to the petitioner; (iii) 15% trade discount allowed by the petitioner to the advertising agencies is not a payment of commission within the meaning of section 194-H of the Income Tax Act; and (iv) the petitioner was not liable to deduct tax at source on the trade discount allowed to the advertising agencies and, hence, proceedings under section 201/201(1A) could not have been initiated against the petitioner. - Decided in favour of Asessee.
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2014 (5) TMI 481
Validity of notice u/s 148 of the Act – Reopening of assessment – Change of opinion - Depreciation not claimed in the current year while set off of unabsorbed business loss - Held that:- The original assessment was not made after scrutiny - It was a case of acceptance of return u/s 143(1) of the Act – Relying upon Assistant Commissioner of Income-Tax Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME Court] - In any case, there would be no case of change of opinion since the AO could not have been stated to have formed any opinion previously - reopening is resorted to u/s 147 of the Act and the basic requirement of the AO having reason to believe that income chargeable to tax had escaped assessment must be fulfilled. The sole ground on which the AO desires to reopen the assessment is that the assessee did not claim depreciation of the current year while seeking set off of the unabsorbed business loss of earlier years – according to the AO, would enable the assessee to claim depreciation selectively and prolong the claim beyond eight years - what the assessee had done was well within thin the legal framework - It was open for the assessee not to claim depreciation till the amendment was made by explanation 5 in section 32(1) of the Act which had the effect only from 1.4.2002 - the very belief of the AO that income chargeable to tax had escaped assessment lacks validity – the notices are set aside - Decided in favour of Assessee.
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2014 (5) TMI 480
Rectification of order u/s 154 of the Act – Scope of power of AO - Withdrawal of deduction u/s 80IB(10) of the Act – Held that:- Following MANAN CORPORATION Versus ASSTT COMMISSIONER OF INCOME TAX [2012 (9) TMI 700 - Gujarat High Court] - amendment introduced in section 80IB(10)(d) was not applicable to a project which was approved prior to 01. 04. 2005 – the project was approved prior to 01. 04. 2005 - thus the matter is covered by the pre amended section - pre amended section did not mandate the ceiling of commercial area - the order of the FAA cannot be endorsed - He had interpreted the provisions of section 80IB(10)(d)in a particular manner and had relied upon one of the orders of the Tribunal - AO was not justified in amending the order by passing order u/s. 154 of the Act - enhancement made by the FAA to the income of the assessee- AOP has to be set aside – Decided in favour of Assessee.
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2014 (5) TMI 479
Quantum of income – construction activity - working of the profit computed at the time of the survey towards (a) Opening WIP (b) total saleable area (c) Average cost of construction - Held that:- It is only the income for the entire year and not that for a part of the year or a truncated period thereof, that could be subject to tax as the income for the relevant assessment year, and which therefore has to be for the full year - the assessee having not furnished any explanation/s substantiating its claims during the assessment proceedings - there is no case for the deletion of the entire addition as made in assessment - there being no finding regarding the income for the second half of the year, more particularly considering that the construction cost had crystallized, and which would therefore obtain for the second half of the year as well, during which there has been economic activity by way of sales – This would become much more apparent and striking in view of the glaring and vast unexplained differences between the results obtaining for the two parts - the matter is factually indeterminate, it would be fit and proper that the issue of determination of income for the year is set aside to the file of the AO for fresh adjudication – Decided in favour of Revenue.
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2014 (5) TMI 478
Assessment order passed on dead person – STCG treated as LTCG – Expenses incurred on transfer of residential flat – Held that:- The notice was issued in the name of the dead person but the assessment has been properly framed in the hands of the legal heir which means that the AO has substituted the deceased with the legal heir – there was no infirmity in the legality of the assessment order - The assessee was a tenant since 1960 and that tenancy rights was converted into an ownership rights in a flat by virtue of an agreement with the builder - The flat was subsequently transferred giving rise to Long Term Capital Gain. - Decided against the assessee. Relying upon CIT Vs Abrar Alvi [2000 (3) TMI 20 - BOMBAY High Court] - what was transferred vide sale deed was not tenancy right but the building itself and therefore, cost of ownership rights was to be allowed as deduction for working out capital gains - asset sold by the assessee is the property which was given to him on surrender of tenancy rights - Cost of acquisition of this asset is the market value of the tenancy right as on the point of time when it was surrendered - the assessee came into possession of the sold flat on surrender of his tenancy rights - the flat sold by the assessee is the property which was given to him on surrender of tenancy rights – the AO is directed to re-compute the capital gain tax liability by taking the cost of acquisition of the flat as market value of the tenancy right as on the point of time when it was surrendered – Decided in favour of Assessee.
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2014 (5) TMI 477
Penalty for technical breach of law - Wrong mention of section 272A(2)(C) in place of 272A(2)(K) of the Act - Penalty u/s 272A(2)(c) - CIT(A) delete the penalty by observing that since the tax was deducted only in the last quarter of the year under consideration, the TDS return was also filed for the last quarter and hence there was no loss to revenue and default is only of technical nature – Held that:- The AO issued notice for levy of penalty u/s 272A(2)(c) of the Act - the AO was clear in his mind when he was initiating penalty proceedings - the AO imposed penalty u/s 272A(2)(c) of the Act - this is a case of oversight or wrong mentioning of the section - when the assessee carried the matter before the CIT(A), the AO did not cared to appear before the CIT(A) to bring to his notice that he has mentioned the section wrongly - the conduct of the AO clearly suggest that he intended to proceed u/s 272A(2)(c) of the Act and completed his proceedings under that very section itself - CIT(A) has very correctly mentioned that no penalty can be levied under this section 272A(2)(c) of the Act from A.Y. 2006-07 onwards - recourse Sec. 292B of the Act would also not help the case of the Revenue because the mistake cannot be said to be a pure technical objection – there is no reason to interfere with the findings of the CIT(A) – Decided against Revenue.
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2014 (5) TMI 476
Deletion made on account of provision for diminution in the value of closing stock – Held that:- The AO had made the addition in view of the fact that assessee had claimed an amount in the P&L A/c as provisions for diminution in valuing of stock whereas the fact remains that assessee has been following its policy of valuing stock at cost price or net realizable value whichever is lower which is apparent from the accounting policy being followed by the assessee – the net realizable value of stock is always determined after reducing the value of damaged/un-useable stock from the gross value of stock - The assessee instead of taking the net realizable value of stock in the trading account took gross value of stock in trading account and claimed the decrease in value in its P&L A/c - Had it had claimed the net realizable value of closing stock in trading account, the debit of provision for diminution in value of stock in P&L Account under schedule 15 would not have appeared - The valuation of stock has been done on the basis of general accounting policy as regularly followed by the assessee - CIT(A) has rightly deleted the addition – Decided against Revenue.
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2014 (5) TMI 475
Transfer pricing adjustments - Determination of ALP - Lack of jurisdiction - Statutory onus not discharged – Held that:- The legislature has provided sufficient safeguards to protect the interest of the assessee in this regard - assessee gets two opportunities to put forth its point of view before the finalization of the assessment order - there is no need to device and introduce one more protection in terms of the recording of detailed satisfaction by the AO before making reference to the TPO that the price charged/paid in an international transaction is not at ALP - the value of the assessee’s international transactions standing at Rs.116 crore is far in excess of the threshold limit of Rs.5 crore given in the Instruction - which has been issued in the context of section 92CA - the case of the assessee is covered u/s 92CA and not section 92C. Relying upon SONY INDIA P. LTD. Versus CENTRAL BOARD OF DIRECT TAXES AND ANOTHER [2006 (10) TMI 88 - DELHI HIGH COURT] - the prescribed procedure is to be presumed as having been rightly complied with by the concerned authority unless it is specifically and explicitly shown otherwise - Scrutiny in this regard can be undertaken by the appellate authorities only when the assessee adduces some evidence to indicate that there was a failure on the part of the authority to adhere to the prescribed procedure - No material worth the name has been brought on record by the assessee to demonstrate that the AO failed to form a prima facie view at the time of making a reference to the TPO – Decided against Assessee. Rule of consistency – Determination of ALP – Held that:- The mere fact that no Transfer Pricing Adjustment was made in the preceding year would simply mean that the profit shown by the assessee from its international transactions is equal to or more than the benchmarked profit - If the assessee has shown profit at Arm’s Length Price in one year, which has been accepted as such, it does not necessarily mean that the assessee’s profit from international transaction in the succeeding year is also better than that of the comparables - It is axiomatic that if profit from the assessee’s international transactions in succeeding year is equal to or better than that of comparables after considering the cushion available, then there can be no question of making any transfer pricing adjustment notwithstanding the fact that the international transactions were scrutinized in terms of section 92 - there are several factors which affect the determination of the ALP, which may be present in one year but absent in the other year - It is too far to claim that the acceptance of international transaction at ALP in one year should preclude the authorities from the determination of ALP in a subsequent year – Decided against Assessee. Exclusion of Foreign exchange fluctuation gain/loss – Operating revenue/cost – Held that:- There was merit in the contention raised on behalf of the assessee about the inclusion of foreign exchange gain/loss in the operating revenue/costs of the assessee as well as that of the comparables - the nature of foreign exchange gain earned by the assessee is in relation to the revenue earned by the assessee from its AEs in connection with the provision of I.T Enabled data conversion services, which has been reported as international transaction. When the foreign exchange gain directly emanates from the consideration received for rendering of services to its A.E, it could not be appreciated as to how such foreign exchange gain fluctuation can be considered as an item of non-operating revenue - What is true for foreign exchange gain from the transactions of the revenue nature being considered as part of operating revenue is equally true for the foreign exchange loss being considered as part of operating costs from the transactions of the revenue nature - Relying upon SAP Labs India Pvt. Ltd. Vs ACIT [2010 (8) TMI 676 - ITAT, BANGALORE] - foreign exchange fluctuation gain is part of operating profit of the company and should be included in the operating revenue - the order is set aside and the matter is remitted back to the AO/TPO to re-compute the assessee’s margin as well as that of the comparables by considering foreign exchange gain/loss as an item of operating revenue/cost – Decided in favour of Assessee. Selection of comparables – Coral Hub Ltd. – Held that:- Nothing has been brought on record to demonstrate that the related party transactions of VITL for the current year exceed the threshold limit of 25% - simply because a case has been held to be incomparable for one year cannot per se be considered as incomparable for the succeeding year - the Tribunal in a preceding year of the same assessee has held this case to be not comparable on the strength of filter of percentage of employees cost to total cost and the assessee passes the test of this filter for the instant year as well – the exclusion of the company in the list of comparable is directed – Decided in favour of Assessee.
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2014 (5) TMI 474
Computation of interest leviable u/s 220(2) of the Act – Held that:- Following Girnar Investment Ltd. Vs. CIT [2012 (1) TMI 10 - DELHI HIGH COURT] = the assessee was liable to pay interest u/s 220(2) of the Act on the amount of tax due from him on the basis of the assessment order - The interest was payable for the entire period on the amount of tax as computed in the assessment order till the date on which it was actually paid - In computing the interest, no notice shall be taken of the fact that by virtue of the order of the Commissioner (Appeals) there was a reduction of the tax liability from the date of the order till the date on which the Tribunal restored the assessment order – thus, the assessee was required to pay interest u/s 220(2) as it had not initially satisfied the demand raised in 2003 - interest on refund is to be charged from the date of grant of refund - The assessee has given computation which may be considered by AO while computing the interest leviable u/s 220(2) – thus, the order of the CIT(A) is set aside – Decided in favour of Revenue.
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2014 (5) TMI 473
Addition made u/s 56(2)(vi) - Fair Value Trust (FVT) – Gift received without consideration by the appellant from the trust – option to assess the appellant as beneficiary u/s 166 or otherwise, in respect of share of income received by the appellant as a beneficial owner under the trust - assessing the income in the hands of the trustees as a representative assessee u/s 161 - Held that:- The FVT was already assessed by the department at Pune at the maximum marginal rate has not been denied by the revenue - the assessment in the case of another beneficiary of the same trust Shri Atul Kirloskar having been finalized u/s 143(3) on 1-12-2011 i.e. prior to the assessee’s assessment dated 29-12-2011 also has not been disputed - the beneficial share from the same trust has been allowed to be exempt being already assessed in the hands of the trust - the department has already exercised the option to tax the trust income directly in the hands of trustees in terms of sections 161 to 166 - The fact that in the case of another beneficiary of the same trust for the same year i.e. Shri Atul Kirloskar his beneficial income from trust has been held to be exempt as not includible having been taxed in the hands of trust - Both the assessments stand testimony to the fact that option has not only been exercised by the department but it has been also implemented in the case of other beneficiary – there was no justification in assessing the amount of beneficial share from trust in the hands of the assessee again. As per the scheme of assessment of private discretionary trust department has to opt whether to assesses the income in the hands of trust or beneficiaries - The option is clearly exercised first in the hands of trust as demonstrated by its assessment order. This is reconfirmed by the assessment of Shri Atul Kirloskar - department cannot take a course to review, re-opt or rewrite what has been statutorily exercised and change its stand from beneficiary to beneficiary - it has not been disputed that entire trust income is from dividends exempt u/s 10(34) and what comes in the hands as beneficial share retains the same colour and is also exempt u/s 10(34) – Relying upon Jyotendrasinhji Versus SI Tripathi And Others [1993 (4) TMI 1 - SUPREME Court] - the beneficial share being part of exempt dividend income is exempt from tax and is to be excluded while computing the assessee. The action taken by the department is contrary to the settled scheme and interpretation of sections 161 to 164 and CBDT Circular - the department having already exercised the option to tax the income directly in the hands of the trust, there is no provision to review the option taken in the case of trust and again to change the option from one beneficiary to another, the income is therefore held to be exempt in the hands of the assessee – Decided in favour of Assessee.
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2014 (5) TMI 472
Nature of Commission income - business income or income from other sources - shame transaction or not – AO observed that none of the expenses are allowable in view of his assessing the income of the appellant as ‘Income from Other Sources’ as against the ‘Business Income’ disclosed by the appellant - Held that:- The assessee has declared its business to be carrying out the marketing activities for M/s Sarthak Metals Marketing Pvt. Ltd. - Sh. Amit Kumar Aggarwal has stated that the commission was received from the parties but, he could not remember the names of the parties from whom orders were procured for these parties - CIT(A) rightly held that it cannot lead to the conclusion that these were sham transactions - assessee has provided the services to the parties, CIT(A)’s order is reasonable in this regard – there is no infirmity in the order of the CIT(A) – Decided against Revenue. Commission expenses – Held that:- CIT(A) has rightly observed that these persons have given the general replies to the specific queries and were not able substantiate as to what were the specific activities carried out by them for which they receive commission - They were also not able to produce the books of accounts - No proper books or agreements was provided in ascertaining the commission payment nor it could be proved that they have knowledge / experience in providing such services - the onus is on the assessee to link up the commission payment made to various parties with the particular transactions - AO was justified in disallowing the commission payments – Decided against Assessee. Other expenses – Held that:- CIT(A) has adjudicated the issue granting part relief to the assessee - assessee has claimed that he has submitted voluminous details and submissions before the CIT(A) which have not been properly adjudicated – it is true that the CIT(A) has not properly considered the submissions of the assessee – thus, the matter related to the claim of expenditure by the assessee except for the claim of commission expenses is remitted back to the AO – Decided in favour of Assessee.
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2014 (5) TMI 471
Setting up and commencement of business – Held that:- Following Styler India (P.) Limited. Versus Joint Commissioner Of Income-tax, Special Range - 1, Pune [2008 (4) TMI 388 - ITAT PUNE-A] - the expenditure on building was capital in nature is not allowable - the assessee-company was constituted to develop and operate infrastructure facilities in India towards development of Special Economic Zones at Positra, in the State of Gujarat - The requisite approval was also obtained from the government. After obtaining the approval from the Ministry of Commerce - prospecting activity itself is to be considered as assessee's business activity - There is no dispute with reference to the expenditure being spent on prospecting activities in the year under consideration - the assessee has commenced its business activities. Income from other sources - Taxing of interest receipts on staff loans and deposits for letters of credit - Disallowance of expenses – Interest and bank charges u/s 57(iii) of the Act – Held that:- Following DE Beers India Prospecting (P) Ltd. Versus ITO [2011 (12) TMI 409 - ITAT, Mumbai] - the assessee has commenced its business and is eligible for claim of deduction u/s 37(1) on expenditure of non-prospecting activities and depreciation - the assessee is eligible for set off of the interest income - Most of the issues arose as deductions are being claimed on non-operational incomes also - the assessee is expected to place on record the purpose of the deposit, utilization of funds and most important fact is also to be brought on record about the nexus of interest earned and interest paid - the matter should be remitted back to the AO so that the procurement of funds, its utilization and the source of deposit has to be examined afresh by the AO and the nexus can be established in respect of the interest earned and interest paid – Decided in favour of Assessee.
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2014 (5) TMI 470
Valuation of closing stock – Addition of proportionate transport charges – Whether freight expenses incurred on account of purchases were to be included in the value of closing stock or not - Held that:- Following Hero Motocorp Limited vs. ACIT [2013 (8) TMI 57 - ITAT DELHI] - the Revenue has rejected the method of accounting which is consistently followed by the assessee on the ground that there may be chance where in a particular year, the method adopted by the assessee may result in underestimation of profits - the Revenue failed to demonstrate with facts and figures that the impugned method of accounting may result in material underestimation of profits - the assessee has demonstrated that the change in the method of accounting for year under appeal would result in loss to the revenue as the opening stock would also require similar adjustment and the cascading effect will be loss to revenue - in many of the additions made in this case by the revenue, the consistent method of accounting is unnecessarily disturbed, though it has been accepted in many years - such tinkering with the method is unjustified when the exercise does not materially alter the profits - such petty additions should be avoided on the ground of materiality, as AS-1 which talks about materiality, consistency, prudence etc. is part of the I.T. Act after it is notified u/s 145(2). Adjustment made to total value of closing stock and consumption of stock is uncalled for - If valuation of closing stock is changed then the value of opening stock should also be changed on the same basis or method - The closing stock of a particular year is the opening stock of the subsequent year - the method of valuation of closing stock is materially affecting the accounts and profits disclosed by the assessee – the adjustment sought to be made is revenue neutral and at best may result in preponement or postponement of revenue - Accounting standards notified by the CBDT u/s 145(2) mandate that the concept of materiality be taken into consideration when finalizing the accounts of an assessee – the addition made on account of proportionate inward transport charges is set aside – Decided in favour of Assessee.
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2014 (5) TMI 469
Confirmation u/s 80IB of the Act – amount received as Insurance Claim - Derived from manufacturing activity or not - Held that:- Following CIT Vs. Shree Rama Multi Tech Limited [2013 (8) TMI 381 - GUJARAT HIGH COURT] - duty drawback was held to be profits/gains derived from an industrial undertaking and hence eligible for deductions u/s 80- IB - the assessee is entitled for claim of 80IB deduction only in respect of amount of Insurance Claim in respect of raw material, work in progress and finish goods - the assessee is not entitled for the claim of deduction u/s 80IB in respect of loss of machinery because it was rightly held by the Revenue Department that the same was a capital loss which was recouped by the Insurance Company - the receipts were capital in nature – the re-computation of deduction u/s 80IB is directed – Decided partly in favour of Assessee.
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2014 (5) TMI 468
Attempt to reduce the total income – Addition of unexplained jewellery – Held that:- The Revenue has not controverted the fact that the business premises and the personal residential premises, both, were situated in a single building - why the gold jewellery was taxed in the hands of the assessee-firm and why not in the hands of the respective partners - The partners have declared the value of ornaments as per the respective balance sheet and that fact could have been verified from their assessment records - The assessee has informed the PAN numbers of those partners. Relying upon CIT Vs. Prafulbhai @ Rohitbhai J. Shah [2013 (7) TMI 116 - GUJARAT HIGH COURT] - in a situation when the jewellery belonged to different family members and it was a customary of owning the jewellery as permitted by the CBDT circular, the addition was deleted - the provisions of CBDT circular are required to be applied especially when the partners are subject to tax independently - In a situation when the unaccounted stock had been taxed by treating as taxed u/s 69B of IT Act, on one hand, and on the other hand the sale value of the stock was also taxed – the correct position ought to be that the difference between the two is required to be taxed in the hands of the assessee - Decided partly in favour of Assessee.
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2014 (5) TMI 467
Disallowance of assets written off – depreciation has been claimed on those assets in the past - The auditors categorized the amount under the head “assets written off” and classified it under capital nature – Held that:- CIT(A) was of the view that the schedule of fixed assets annexed with the B/sheet that the assets which has been written off are depreciable assets and depreciation has been claimed on those assets in the past and allowed and the amount of deficiency/ difference is written off in the books of accounts by the assessee company during the year under question which is clearly allowable u/s 32(ii)/[iii] of the Act – AO has not doubted the fact that assessee had to vacate the premises due to expiry of lease and closure of business - premises were to be vacated, the question of any portion of block of assets remaining with the assessee does not arise - the disallowance has been made after accepting the loss but on the ground that the claim of the assessee is capital in nature, therefore what is to be decided is whether the CIT(A) was correct in holding that the amount was allowable to the assessee in view of the clear provisions of sec. 32(1)(ii)/(iii). There was no infirmity in the order of CIT(A) - the claim of the assessee clearly falls within the scope of sec. 32(1)(iii) - The part of the amount realized by the assessee has been offered to tax - The balance of the amount pertaining to the block had no realizable value, has not been disputed by the assessing officer - The difference is allowable u/s 32(1)(iii) – AO has not doubted the genuineness of the claim and disallowed it only holding the loss to be capital in nature - part of the sale proceeds have been accepted and there is no allegation that the assessee’s business was not conducted in this year – the order of the CIT(A) upheld – Decided against Revenue.
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2014 (5) TMI 466
Deletion of voluntary disclosure of unaccounted income – Held that:- The assessee has furnished the supporting evidences in respect of the sale value of the unaccounted stock - The AO has not made any enquiry on the evidences given by the assessee – Relying upon Commissioner of Income-Tax, Gujarat Versus A. Raman And Company [1967 (7) TMI 2 - SUPREME Court] - the law does not oblige a trader to make the maximum profit that he can out of his trading transactions - Income which accrues to a trader is taxable in his hands - income which he could have, but has not earned is not made taxable as income accrued to him. CIT(A) has rightly observed that the assessee in its return of income offered for taxation the sale value of undisclosed stocks discovered during survey and not the full value of investment in undisclosed stock – it makes no difference to the income which would ultimately arise to the appellant during the year from unexplained stocks discovered during survey - The Revenue has not brought any material on record suggesting that the claim of the assessee is false or without any basis. Therefore, we do not find any infirmity in the order of the ld.CIT(A), the same is hereby upheld. Thus, this ground of Revenue’s appeal is dismissed. Deletion on account of fall in GP rate – Held that:- CIT(A) was rightly of the view that the argument of the assessee is found to be broadly acceptable but fall in G.P. indicates suppression of income and therefore made a lump sum addition - no such addition on account of fall in GP was warranted because the explanation given by the assessee was “broadly acceptable” to the AO and he has not given any reason for partial non-acceptance nor has he shown any specific defects in the books - the AO was not justified in making lump sum addition without pointing out any specific defect – there was no infirmity in the order of the CIT(A) – Decided against Revenue.
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Customs
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2014 (5) TMI 488
Recall of order - Order once passed reviewed or modified - offence punishable under the provisions of Narcotic Drugs and Psychotropic Substances Act, 1985 (for short ‘NDPS Act’) - Held that:- We do not find any forcible submission advanced on behalf of the petitioners that once the order had been dictated in open court, the order to review or recall is not permissible in view of the provisions of Section 362 Cr.P.C. for the simple reason that Section 362 Cr.P.C. puts an embargo to call, recall or review any judgment or order passed in criminal case once it has been pronounced and signed. In the instant case, admittedly, the order was dictated in the court, but had not been signed. - it is evident that a Judge’s responsibility is very heavy, particularly, in a case where a man's life and liberty hang upon his decision nothing can be left to chance or doubt or conjecture. Therefore, one cannot assume, that the Judge would not have changed his mind before the judgment become final - Decided against assessee.
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2014 (5) TMI 487
CESTAT procedure – reopening of an order - Gist of the decision pronounced without detailed order by CESTAT in open court – direction issued to Member(Technical) to draft detailed order who posted the matter for re-hearing – on writ petition filed by assessee, Court directed Tribunal to pass detailed order in line with pronouncement made in the open Court and gist of the decision recorded and signed on 04.6.2009 - Supreme Court after holding that pursuant to the direction issued vide [2010 (11) TMI 166 - MADRAS HIGH COURT], and a fresh order has been passed by the Customs, Excise and Service Tax Appellate Tribunal, Chennai referred the petition as infructuous.
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2014 (5) TMI 486
Auction of confiscated goods when the appeals were pending - Whether the petitioner is entitled to a value of the goods assessed at the time of seizure or the value received by the respondent authorities from selling the said goods to a third party - Valuation of goods - Held that:- Merely because it is open to the applicant to initiate such an action it would not be just and proper to refuse the claim made in these applicants as in any case the applicant is entitled to return the money value of the goods which were illegally confiscated by the respondent. Even though the applicant has claimed interest @21% we do not think it proper to award interest at such a high rate andconsidering the facts and circumstances of the case it would be in the interest of justice if the respondent is directed to return the amount of ₹ 33.04 lakhs with interest at the rate of 12% from 1-2-1989 till the date of payment as the Collector by its order dated 31-1-1989 had held that the goods were properly described and the import was legal. During the pendency of the appeal confiscated goods could not have been auctioned without the prior permission of the appellate court - this lapse is being repeated in a large number of cases, therefore, we are constrained to observe that the respondents have not been diligent in discharging their duties. The respondents are directed to issue an official circular within four weeks to all the concerned officials that the confiscated goods which are the subject matter of appeal before any Tribunal or Court shall not be auctioned or disposed of without prior written permission or order from the concerned Tribunal or the court. Since the sale has already been effected it is too late for a day to say that the same was conducted contrary to the provisions or without any reasonable explanation or not. The respondent authorities have not disputed that at the time of seizure the competent authority assessed the value of the goods at ₹ 7,75,792/- and refunded a sum of ₹ 2,28,010/-. By applying the ratio as laid down in reports the respondent authorities are bound to pay the value of the goods assessed at the time of the seizure and not the value which it fetched from the sale of the said goods after the seizure is declared to be illegal by the CESTAT. The authorities are thus directed to pay the petitioner the differential amount within eight weeks from the date of the communication of this order. - Decided in favour of assessee.
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2014 (5) TMI 485
Waiver of pre-deposit - whether the prayer of the appellant to examine, whether he was liable to pay the amount demanded (duty and interest or the penalty levied) even before depositing of the amount as per the order dated 27.12.2012 passed under Section 129-E of the Act - Held that:- having considered the intendment of the legislature in introducing the provisions contained in section 129E of the Act, it is not open to the appellant to seek dispensation on merits of the case and it is mandatory for such appellant to deposit the amount, as contemplated under Section 129E of the Act, without prejudiced to his rights and contentions raised in the memorandum of appeal, to be argued at the stage of final hearing of the appeal - No reason to interfere with Tribunal's order - Decided against assessee.
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2014 (5) TMI 484
Sealing of premises - investigation under Section 53 of the Narcotic Drugs & Psychotropic Substances Act, 1985 - Held that:- The Directorate of Revenue Intelligence has desealed the premises and handed them over to the petitioner. The petition has, therefore, been rendered infructuous. However, before disposing of the writ petition, it would be appropriate to remind the Directorate of Revenue Intelligence that it is required to conclude investigation expeditiously. A perusal of the original record reveals that apart from addressing letters and seeking replies from various persons, no concrete steps have been taken in the matter. In case the premises in dispute were being used as a laboratory to manufacture narcotics, the investigation should have concluded. The respondents are directed to conclude investigation expeditiously and proceed in accordance with law failing which the matter be placed before the head of the Directorate of Revenue Intelligence for taking appropriate action against officers responsible for this delay.
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2014 (5) TMI 483
Import of 20kgs of Oats for home use - Denial of re packing of goods - Misbranding of products - Whether the CESTAT is right in allowing appeal of the importer when Rule 32 of Prevention of Food adulteration Rules, 1955, specifies that the name of the goods, list of ingredient, name and complete address of the manufacturer, name and address of the importers, net content by weight or volume, Lot / ode / Batch Identification, date of manufacturing and packing, expiry date / best before date, country of origin and instructions for use, should be indicated on the package, is it correct to allow goods without date of manufacture and name and complete address of the manufacturer into India and allowing them o put the details on repacking in India after import. Held that;- It is obligatory on the part of the first respondent/ importer to strictly adhere to the PFA Act and Rules framed there under and if the statue prescribed a thing to be done in a particular manner, it should be done only in that manner and not in any other manner. Since the first respondent / importer has failed to adhere to the said statue and rules framed t here under, and the Customs authorities were also mandated in the above said circulars/ instructions to strictly comply with the provisions of the PFA Act and rules framed there under, the non - furnishing of the full address of the manufacturer and the d ate of manufacturer, on the part of the first respondent/ importer, cannot be condoned. The Tribunal has not referred to any rules or regulations under which it can direct the authorities to re–pack and re–label the impugned goods in custom bonded premises and, thereafter, test the same. In view of the subsequent development, viz., the shelf life of the product itself has expired. No useful purpose will be served in re–packing and re–labeling the imported food product for the purpose of testing it - Decided in favour of Revenue.
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Service Tax
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2014 (5) TMI 505
Denial of refund claim - Tribunal allowed refund claim - Held that:- two circulars dated 20-10-2010 and 17-8-2011 issued by the Central Excise Department. These circulars provide that in the light of National Litigation Policy and with an object to reduce the burden of litigation, appeal shall not be filed where the amount involved is below a particular monetary limit. - Even as the appeal was filed before the issuance of circular dated 20-10-2010, it cannot be disputed that when the appeal came up for consideration for the first time before this court on 4-5-2011 the said circular dated 20-10-2010 prescribing the monetary limit of Rs. 2 lakhs was in vogue. Had the appellant pointed out to the court about that and the description of monetary limit therein, this court would not have issued notice. In any view when the circular was in vogue and the monetary limit was applicable on the date of consideration of appeal, the same would apply - Decided against Revenue.
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2014 (5) TMI 504
Penalty u/s 78 – Work contract service - taxability prior to 1-7-2007 - Abatement of 67% - Waiver of pre-deposit - the main plank of argument advanced on behalf of the applicant that since there is a cross-fall-breach clause specifying that breach of one contract would also constitute breach of other contract, hence, both these contracts should be read together and accordingly the entire project being a turnkey project, the same is taxable as works contract only w.e.f. 1-7-2007 and not prior to that. - Tribunal directed to make 25% of pre deposit - Held that:- an appellant is required to deposit with the adjudicating authority the duty demanded or the penalty levied. However, in any particular case where the Appellate Authority is of the opinion that deposit of duty demanded or penalty levied would cause undue hardship to such person, the Appellate Authority might dispense with such deposit subject to such conditions as he might deemed fit to impose so as to safeguard the interest of revenue. For a hardship to be ‘undue’ it must be shown that the particular burden to have to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it - The impugned order which has been passed without considering the prima facie merits of the submissions of the petitioner cannot be sustained and the same is set aside and quashed - Tribunal shall decide the issue of dispensation of pre-deposit afresh in accordance with law and in the light of the observations made above. The Tribunal may, if it so chooses, proceed to decide the appeal on merits, notwithstanding the pendency of any request for dispensation of pre-deposit - Matter remanded back - Decided in favour of assessee.
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2014 (5) TMI 503
CENVAT Credit - Whether the appellant is eligible for CENVAT credit of service tax paid - Held that:- in this case the Commissioner (Appeals) had allowed the benefit of CENVAT credit on several services against which the department is in appeal and in respect of some services it was not allowed and assessee is in appeal. Where the benefit has not been allowed, the same has not been allowed with a simple observation that these are not covered under definition of 'input service' and has no nexus with the manufacture without any further details - Since in respect of the services under dispute in this case, the decisions cited above have taken a view that credit is admissible and the issue is no longer res integra, the appeals filed by the assessee are to be allowed - Decided against Revenue.
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2014 (5) TMI 502
Demand of service tax - Held that:- When the appellant did not avail opportunity to reconcile the figures and guide the authorities below as to which figure shall govern the appellant, there is no necessity to remand the matter for further opportunity. Accordingly, service tax demand is confirmed. The show cause notice does not reflect in what manner penal consequences have arisen. Learned appellate authority reached to an abrupt conclusion in para 9(ii) of the appellate order without finding whether any mala fide was imputable to the alleged discrepancy of 4 years i.e. April, 2002 to December, 2004. In absence of minute analysis of existence of questionable circumstances and oblique motive of appellant to invoke Section 78, penalty thereunder does not sustain - Demand confirmed with interest - penalty waived - Decided partly in favour of assessee.
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2014 (5) TMI 501
Waiver of pre-deposit of Service Tax - Penalty u/s 78 - erection, commissioning and installation services - abatement of 67 % as allowed under Notification No. 19/2003 – ST - Held that:- Appellant undisputedly registered with the Service Tax department for erection, commissioning and installation services from 11.04.2005. Also on going through the ST – 3 returns we find that they have not claimed the abatement of 67 % as allowed under Notification No. 19/2003 – ST - unless the said exemption is claimed and necessary conditions laid down therein are fulfilled by the applicant its benefit cannot be extended to them. Further we find that the period involved in the present case is 2005 - 2006, 2006 – 2007 and 2007 – 2008. Service Tax on ‘works contract’ was levied w.e.f 01.06.2007 hence majority of the period was covered under the erection, commissioning and installation services for which the applicant / appellant was registered w.e.f April, 2005. Prima facie we find that the applicant are not entitled to the benefit of abatement of 67 % allowed under Notification No. 19/2003 – ST as the same was not claimed and fulfillment of the conditions could not be verified by the lower authority. Thus the applicant could not able to make a prima facie case for waiver of entire amount of Service Tax and penalty imposed - Conditional stay granted.
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2014 (5) TMI 500
Demand of service tax - period prior to 15-6-2005 - recruitment of temporary contract labour unskilled, semi-skilled and skilled to Rajasthan Public Service Commission, Ajmer - Held that:- Service Tax is confirmed only on value realized from 1-5-2006 to 30-9-2006 and the benefit of Notification No. 6/2005-S.T., dated 1-3-2005 is to be extended. The Revenue authorities may verify whether tax amount, interest and penalty are discharged fully. If not, the same may be recovered after giving an opportunity to the appellant to place on records the documents evidencing such payment. It is made clear that the appellants will be eligible for paying 25% of tax due as penalty under Section 78 and no other penalty is payable by him - Decided partly in favour of assessee.
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Central Excise
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2014 (5) TMI 495
Waiver of pre deposit - CENVAT Credit for furnace procured from sister unit - Held that:- Revenues case is only and only based upon the physical condition of the furnace noticed by the Audit party at the time of their visit to the appellants factory which was after a period of 2 years from the date of receipt of furnace. There is virtually no evidence on record to indicate that the furnace was not used by the appellant during intervening period. No statement of any person stand recorded by the Revenue. If the Revenues pleads allegations, minimum required from them was to complete investigation by recording the statements of the concerned persons who were associated with the use of furnace. - Decided in favour of assessee.
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2014 (5) TMI 494
Demand of duty on generation of the floor sweeping as waste - refund of amount paid during investigation - denial of cenvat credit - Held that:- The appellant is a manufacturer of biscuit and during the course of manufacture of biscuit these floor sweeping emerges which are the waste for the appellant. Although, these floor sweeping gets certain value, but it cannot be said the appellants are manufacturing the said floor sweepings. Therefore, relying on the decision of Hon'ble High Court of Karnataka in Geltec Ltd. (2011 (4) TMI 212 - KARNATAKA HIGH COURT), I hold that appellants are not required to pay duty on these floor sweeping being waste. Further, I hold that appellants are not required to reverse Cenvat credit attributable to generation of these floor sweepings as same has been emerged during the course of manufacture of final product i.e. biscuits. In these terms, I set aside the impugned orders and allow the refund claim on the duty paid on the floor sweeping of the appellant - Decided in favour of assessee.
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2014 (5) TMI 493
Duty demand - Repacking of goods - Held that:- appellant received the goods from their principal manufacturer for only repacking of the paints from retail packs to bulk packs. There is no evidence on record that the appellant has reprocessed the goods and having any facility at their unit for reprocessing of the same. In the absence of any evidence, merely on the basis of words "sent for reprocessing" cannot be taken as evidence for ascertain the fact that the appellant has taken the goods for reprocessing of the goods. Therefore, it is held that the appellant has done only the repacking from retail packs to bulk packs of the impugned goods which does not amounts to manufacture during the impugned period. Therefore, the demand of duty is not sustainable, consequently, penalty is also not sustainable - Decided in favour of assessee.
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2014 (5) TMI 492
CENVAT Credit - Whether the assessee can avail CENVAT credit account for payment of duty during the suspended period or not - Held that:- for the period prior to 31.03.2005 during the suspended period of facility, the assessee can utilize CENVAT credit account for payment of duty and no demand of interest and penalty can be imposed on the assessee. In these circumstances, the issue is squarely covered by the decision of the Tribunal in Noble Drugs Ltd. (2007 (7) TMI 327 - CESTAT, MUMBAI). Therefore the issue is settled in favour of the appellant that they were entitled to utilize CENVAT credit account for payment of duty. In these circumstances, show-cause notice was not warranted - Decided in favour of assessee.
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2014 (5) TMI 491
Duty demand - Printing of MRP with indelible ink on manufactured footwear - exemption vide Notification no. 5/06 dated 01.03.2006 - Held that:- Court directed the appellant to lead evidence regarding the quality of the material used for printing. The appellant in response to such direction has produced before us two certificates. One from the Indian Institute of Packaging (IIP) dated 28.02.2014 where the samples have been tested for Abrasion loss and Scuff Proofness. In the said certificate, it has been certified that on the test samples submitted by the client, testing has been done and no smudging was observed and the abrasion loss is 'nil'. Another sample was sent to the National Test House (NTH) at Mumbai and said certificate dated 27.02.2014 clearly records the test result as 'Fastness to dry rubbing for 10 cycles (Crock meter with abrading member of cotton cloth at RT) and "visually, no colour fading observed and the printing is readable". These two certificates indicate that the printing done by the appellant on the footwear was indelible and, therefore, the appellant was entitled to the benefit of the said exemption. However, these certificates have not been produced before the adjudicating authority and the appellate authority - matter has to go back to the adjudicating authority and the appellant is directed to submit the test results of the IIP and the NTH and on the basis of these certificates, the adjudicating authority shall reconsider the matter afresh and pass a speaking order after giving a reasonable opportunity to the appellant of being heard - Decided in favour of assessee.
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2014 (5) TMI 490
Modification of order - Waiver of pre deposit - Default in payment of duty - restriction on utilizing cenvat credti under Rule 8(3A) - Held that:- The difference of opinion pending before the Principal Bench of CESTAT, Delhi is not an order at all and it has no binding value. - Following decision of Sharp Industries Ltd. [2014 (3) TMI 488 - CESTAT MUMBAI] - There is no merit in modification application - Modification denied.
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2014 (5) TMI 489
Waiver of pre deposit - CENVAT Credit - GTA Service - Held that:- cenvat credit on input services, namely, GTA services, could be eligible only in such cases, where the goods were delivered upto to the place of removal. Prima-facie, we find that the said case is applicable to the facts of the present case. Accordingly, considering that the amount of Rs.13.00 lakhs has already been paid during the course of adjudication by the Applicant, we direct the Applicant to deposit Rs.4.00 lakhs (Rupees four lakhs only) within a period of eight weeks - Conditional stay granted.
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CST, VAT & Sales Tax
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2014 (5) TMI 499
Liability of tax – Power to stay proceedings – consideration of merits of case and financial hardship of asseessee – Held that:- During the pendency of appeal, the Tribunal to look into the prima facie merit of the case as well as financial condition of the revisionist - the appellate authority is required to consider the relevant factor like financial hardship and other relevant facts because the condition of deposit will make the purpose of filing of appeal itself nugatory – Tribunal order dated 11.06.2013 modified to the extent that disputed tax raised by the Assessing Authority shall remain stayed till disposal of the first appeal - Order dated 11.6.2013 modified to the extent that 90% of the disputed tax shall remain stayed till disposal of the first appeal and the revisionist shall deposit 10% of the disputed tax – Decided in favour of Assessee.
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2014 (5) TMI 498
Exemption of purchase Tax – Genuineness of the transactions - Goods bought prior to cancellation of registration – Whether ground that purchases made prior to the date of cancellation of registration exempt the assessee – Section 7-A Tamil Nadu General Sales Tax Act,1959 - Held that:- The mere fact of payment by way of cheque by itself would not prove the case of the assessee that the said Raghavendra Enterprises had actually dealt with the goods - Unless the purchases had suffered tax, the question of excluding the operation of Section 7-A Tamil Nadu General Sales Tax Act,1959 did not arise - Thus the tax assessment confirmed - When the said dealer has not proved the genuineness of the transactions, and there being no material to substantiate the contention of the assessee that the said Raghavendra Enterprises had in fact handled the goods, even for the period prior to the date of cancellation of registration – Tribunal order upheld – Decided against assessee.
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2014 (5) TMI 497
Liability of Sales Tax - Auction sale of the gold bullion offered by the devotees to the assessee/ Devasthanam - Religious institution – Held that:- Relying upon Sri La Sri Subramanya Desiga Gnanasambada Pandarasannadhi v. State of Madras, [1983 (7) TMI 11 - MADRAS High Court] – There is no doubt that the activity of the assessee is religious in nature - The conduct of sale of the offerings is incidental to the object which is totally religious - That has also been the finding given by the authorities below - It is very clear that to treat a person as a dealer u/s 2(g), the activity he carries on must be in the course of the business - The term "business" defined u/s 2(d) also makes it very clear that it relates to the trade and commerce and any transaction incidental thereto - Therefore, by a bare application of the definition of the above said terms which are the basis for the purpose of imposing tax under the Act – There is no hesitation to hold that there is absolutely no business or trading activity by the assessee/Devasthanam. Relying upon Tirumala Tirupati Devasthanam, Tirupati v. The State of Madras and another [1971 (8) TMI 192 - MADRAS HIGH COURT] - Which was referred with approval impliedly by the Apex Court in Commissioner of Sales Tax v. Sai Publication Fund [2002 (3) TMI 45 - SUPREME Court] wherein the Apex Court elaborately has discussed about the various terms including business, dealer, etc., and held that to term a person as a dealer there must be a profit motive - The Revenue neither contended nor proved that in sale of publications the Trust had an independent intention to do business as incidental or as an ancillary activity. Relying upon Commissioner of Sales Tax v. Sai Publication Fund [2002 (3) TMI 45 - SUPREME Court] - It may be stated that the question of profit motive or no-profit motive would be relevant only where a person carries on trade, commerce, manufacture or adventure in the nature of trade, commerce etc. - In the present case irrespective of the profit motive, it could not be said that the Trust either was dealer or was carrying on trade, commerce etc. - The Trust is not carrying on trade, commerce etc., in the sense of occupation to be a dealer – However, added here that whether a particular person is a dealer and whether he carries on business, are the matters to be decided on facts and in the circumstances of each case - The reasoning as given by Tribunal in the impugned order is unsustainable - Accordingly, this revision stands allowed and the impugned order of the Tribunal stands set aside and the order of the Appellate Assistant Commissioner stands restored - Decided in favour of the assessee.
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2014 (5) TMI 496
Liability to Tax - Agreement for importing and leasing of machinery – Deemed Transfer - Transaction in the course of import - Held that:- Once the arrangement between the assessee and the lessee as regards lease agreement got finalised for the purpose of import of machinery, the subsequent documentation is merely a follow up action and it is difficult to read each one of the documents in isolation - When the first of the documents viz., master lease agreement got dovetailed into the purchase order placed by the assessee with the foreign manufacturer/supplier, the subsequent documentation completes the balance of the transaction that the assessee had with the lessee - Relying upon 20TH CENTURY FINANCE CORPORATION LTD. v. STATE OF MAHARASHTRA [2000 (5) TMI 980 - SUPREME COURT OF INDIA] – wherein SC rejected the claim of Revenue holding that accepting Revenue`s contention that on execution of the master lease, the transfer under Sub-clause(d) of Clause (29A) of Constitution is complete, will be to give the revenue the legitimacy to tax the consideration mentioned in the master lease even before the appellants acquire a right to receive the same - This will be not only an unintended consequence of enacting Sub-clause(d), but also an improper and unjust action having approval of the Court - Referring decision in GANNON DUNKERLEY & CO., v. STATE OF RAJASTHAN [1992 (11) TMI 254 - SUPREME COURT OF INDIA], Apex Court pointed out that in taxing the deemed sale, the restrictions that are available in the case of normal sale also would have relevance. Expression of the words 'In the course of import' - Held That:- The absence of an amendment to the definition of "sale" contained in Section 2(g) of the Central Sales Tax Act, so as to include transfer of property in goods involved in execution of works contract, does not, in any way, affect the applicability of Sections 3, 4 and 5 and Sections 14 and 15 of the Central Sales Tax Act to sales under the Local Act - Relying upon INDURE LIMITED v. CTO. [2010 (9) TMI 883 - SUPREME COURT OF INDIA] - In order that the sale should be one in the course of import, it must occasion the import and to occasion the import there must be integral connection or inextricable link between the first sale following the import and the actual import provided by an obligation to import arising from statute, contract or mutual understanding or nature of the transaction which links the sale to import. The various documents placed by assessee, in particular the Bill of Lading, indicating the name of Hindustan Power Plant Limited show that the import is linked to the purchase order placed on behalf of Hindustan Power Plant Limited - Thus, but for the purchase order placed by Hindustan Power Plant Limited and later thereon approaching the assessee for financial arrangement, the question of the assessee ever placing any purchase order with the Japanese manufacturer/supplier would not have arisen - The purchase order placed by the assessee with the foreign supplier in turn clearly refers to the purchase order of Hindustan Power Plant Limited with the Japanese firm and the import itself was in connection with the master agreement between the assessee and the lessee - On the arrival of the goods, the clearing agent cleared the goods and delivered it to Hindustan Power Plant Limited - Thus, these facts clearly establish that the receipt of rental by the assessee was on account of the transaction in the course of import, which is not liable to be taxed by the State – Revision is rejected – Decided in favour of assessee
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