Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 2, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Non sustaining the re-computation of books profit made after bifurcating the interest expenses and other expenses between SEZ and DTA units - Simply making a claim that the assessee is having maintained account in SAP software in scientific manner shall not establish the correctness of the allocation of the expenses between the two SEZ and DTA - AT
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Cancelling the registration u/s 12AA(3) - charging bus fees from the students - certain buses plied were belonging to the office bearers - none of the expenditure relating to buses have been borne by the school - nothing has been brought on record that any payment for plying of bus or the fees charged for the bus fees violates the concept of reasonableness as enshrined in section 13(2)(c) - AT
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Unexplained bank deposit - ingenuity of firm - AO doubted that the partnership deed was not registered - that cannot be made a basis for not treating the firm as a genuine - AT
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Exemption u/s. 54 - new property purchased was in the name of two persons namely the assessee and his brother - 100% consideration paid by the assessee - full exemption allowed to assessee - AT
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Disallowance u/s 14A - The benefit derived by the assessee by virtue of the investment is not dividend income but is subsidized rate of power. This subsidy is not exempt from tax. Further, if the benefit has resulted in enhanced business income/profits and has been taxed, then, no disallowance u/s 14A r.w.r. 8D can be made - AT
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Nature of the sales tax refund - Addition u/s 41 - Estimation of income where books of accounts have been rejected - AO was not correct in treating sales tax refund separately while determining the N.P rate - AT
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Levy of fees for delay in filing the TDS return U/s 234E - section 234E of the Act is not punitive in nature but a fee which is a fixed charge for the extra service which the Department has to provide due to the late filing of the TDS statements. - AT
Corporate Law
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Shareholder - the shares have not been transferred in favour of the appellants in accordance with law, i.e. no entry having made in the register of the company, we hold that the respondents/ petitioners continue to be shareholders till their shares are registered in the name of other persons - AT
Indian Laws
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Criminal Proceedings u/s 138 of the N.I. Act - cheque bounce - The prosecution launched against only one of the partners of the partnership firm, without joining the partnership firm, cannot be maintainable. - HC
Service Tax
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Evasion of service tax - security service and manpower recruitment and supply service - willful evasion - difference of turnover as per balance sheet and as per their ST-3 Returns - Amount shown in TDS certificates / 26AS returns - reconciliation between bank account and books of account - Department is not able to disprove the explanation of the assessee - demand set aside - AT
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Refund claim by the recipient of services - in absence of dispute regarding the classification of service by the service provider who has discharged the service tax liability, the appellant in the capacity of recipient of service, in our opinion, has no locus standi to file the application claiming refund on a different classification of service- AT
Central Excise
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Area Based Exemption - Substantial expansion of installed capacity - it is nowhere set out that there should be increased in more than 25% in the machinery installed in the factory of the appellant. The CBEC Circular clarified that there should be additional plant and machinery which should result in increase of more than 25% in the installed capacity. - AT
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100% EOU - shortage of goods - Just because appellant has lodged F.I.R for the short receipt of the goods by their clients in USA, would not mean that the goods were diverted to DTA and duty can be demanded - AT
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CENVAT credit - capital goods acquired on lease basis for another part of the respondent’s factory - denial on the ground that M/s IISIPL is not a Finance Company but is engaged in industrial operation. Rule 4(3) of CCR cannot be interpreted in the this manner to disallow the credit - AT
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Interest on delayed refund of pre-deposit - the amount of pre deposit paid by the assessee under Section 35N is equivalent to the amount paid under Section 35 (F) of the Act and the same is to be treated as pre-deposit accordingly - AT
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SSI exemption - turnover exceeding threshold limit - the clearances bearing the brand name or trade name of another person shall be excluded from the turnover - AT
VAT
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VAT liability - The petitioner is a Corporation, wholly owned and controlled by the State of Andhra Pradesh. The creator cannot fight with the creation. - HC
Case Laws:
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Income Tax
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2017 (5) TMI 20
TDS from the compensation amount awarded under Section 28 of The Land Acquisition Act, 1894 - Held that:- We are of the opinion that the law laid down by Division Bench of this Court in the case of Movaliya Bhikhubhai Balabhai [supra] is squarely applicable to the facts of the present case wherein held as not to deduct TDS amount from the compensation awarded under Section 28. - Decided in favour of assessee
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2017 (5) TMI 19
Adopting the sale consideration of shares to be the index cost of acquisition - Held that:- The returned income for assessment year 2006-07 and 2007-08 was for ₹ 26,775 and ₹ 9465/- respectively. Advance and self assessment tax was not paid, only TDS was claimed. The total share capital of the company was of ₹ 9,70,000/- only and the reserve and surplus declared were ₹ 79,16,450/-. The ld AR has not produced further details of the sales and closing stock as declared in the P&L account even when these were asked by the Bench. All these facts in respect of these two purchase companies suggest that these companies’ were not having sufficient worth to purchase the shares of crores of rupees when the market value of the shares was zero due to the negative net worth of the company MSIL and when the sales of the shares were suspended at stock exchange. The transaction was claimed to be through negotiations but how these two companies of small worth agreed to purchase shares of negative worth by paying crores rupees. By this transaction, the assessee had claimed loss of ₹ 80,88,29,697/- on the inquiry from the Bench. Ld. AR stated that the assessee had not utilized the benefit of this loss till date. Therefore, all these factual aspects need to be looked into prior to finalization of the issue. Hence, in the interest of justice and equity, the issues under appeal are restored back to the file of ld. CIT(A) to decide de novo. Accordingly, the appeal of the revenue is allowed for statistical purposes only.
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2017 (5) TMI 18
Non sustaining the re-computation of books profit made after bifurcating the interest expenses and other expenses between SEZ and DTA units - Held that:- The assessee has admitted during the appellate proceedings that no separate books of account for SEZ and DTA were maintained. However, it was claimed that the books of account are so maintained that revenue earned the expenditure incurred, the additions/deletions made to the work in progress could be precisely determined separately in DTA and SEZ at any point of time w.e.f. 01/4/2009. It was also claimed that the accounts were maintained in SAP software and for bifurcation of expenses between the SEZ and DTA, various cost centers which has been assigned different codes in SAP are maintained and it was claimed that once the expenditure has been bifurcated in the cost centers then they are further bifurcated into the revenue or capital. The revenue expenses further bifurcated between the DTA and SEZ on the basis of turnover. This claim of the assessee itself appears to be contradictory as once it has been claimed that various cost centers assigned different codes bifurcate the expenses between the SEZ and DTA and then the expenses are further bifurcated into revenue and capital and then further again revenue expenses were finally bifurcated into DTA and SEZ on the turnover basis. Further with regard to the interest cost it is claimed that it is based on the area developed under DTA and SEZ. In our considered view, although the assessee has claimed that he is maintaining books of account and SAP software and various expenses are allocated by the various cost centers on a predetermined and scientific basis and revenue component of the interest expenses were allocation on turnover basis, appears to be misleading. The assessee has got various types of loans and the loans are utilized for the development of SEZ and DAT. Since the area is demarcated and the loan expenditure incurred on these areas can be identified without any difficulty. Further the income of the one area qualified for deductions while the income of other area is taxable. Therefore, the obligation is on the assessee to identify the borrowed amount spent on the development of SEZ and DTA separately. Simply making a claim that the assessee is having maintained account in SAP software in scientific manner shall not establish the correctness of the allocation of the expenses between the two SEZ and DTA, therefore, in the interest of justice and equity, we find it appropriate to remand the issue to the file of the Assessing Officer to be decided de novo. - Appeal of the revenue allowed for statistical purposes only.
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2017 (5) TMI 17
Addition in respect of sundry creditors - Held that:- We are at loss to understand as to from where the AO has picked up the figures mentioned in the remand report and cognizance of the same was taken by the CIT(A) without verifying the figures. Since the assessee has filed the confirmation letters of all the creditors and the revenue has not brought out anything on record to disbelieve the confirmation letters filed by the assessee, we find no justification in the addition made by the AO. On account of slight difference in the figures, the credit balance shown in the books of accounts of the assessee cannot be disbelieved. We therefore find no merit in the additions and we accordingly set aside the order of the CIT(A) and delete the additions. The other ground of appeal is with regard to chargeability of interest under section 234B, 234C and 234D. Since this ground is consequential in nature, it needs no independent adjudication. Accordingly, the appeal of the assessee is allowed.
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2017 (5) TMI 16
Penalty u/s.271(1)(c) - long term capital gains addition - nature of land sold - Held that:- There is no dispute that assessee’s land in question sold was both agricultural and non agricultural whereas he had converted the same in latter category. There is further no quarrel that the assessee had clearly demarcated the necessary dimensions of the land sold in the two categories. And also that he thereafter did not disclose the non agricultural lands consideration for the purpose of computing capital gains in original return of income. The same position continues even after Assessing Officer’s specific query regarding omission of taxable income in notice dated 08.10.2013 (supra). The assessee rather went step further in claiming all of his land measuring 11534 sq.mtr. to be agricultural not forming a capital asset in spite of the fact of having executed sale deed specifying the same as non agricultural. There is further no evidence that he declared the capital gains in question in the year of receiving sale consideration; if any. It therefore emerges that assessee’s above attempts were neither bonafide mistakes nor silly ones so as to be condoned. We thus conclude that the learned CIT(A) has rightly confirmed the impugned penalty in above narrated facts of the case. - Decided against assessee.
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2017 (5) TMI 15
Cancelling the registration u/s 12AA(3) - salary have been paid to specified persons in violation of clause 5 of the Memorandum of Association, because these two persons were also the office bearers of the society - Held that:- As seen that so far as the first allegation that the assessee has paid salary to the office bearers in violation of clause 5, we find that the said clause itself provides that remuneration can be paid to any members of the institution if he is appointed as officer of the school. Such a payment again has not been held to be excessive under the terms of section 13(2)(c) read with section 13(3) in order to show that the payment of salary is in violation of section 13. It is incumbent that certain bench marking vis-a-vis some comparable instances should be brought on record to show that if these services would have been rendered by the person from outside he would have been paid lesser amount. Thus such a payment cannot lead to any adverse inference for doubting the genuineness of the activities carried out by the assessee’s society. So far as the observation of the Ld. CIT that their appointment cannot be said to be fair and transparent, this again is a very general proposition, because unless it is pointed out that the payment made to such person falls within the realm of diversion of funds or giving undue benefit to the persons specified u/s 13(3), no adverse inference can be drawn. Even if it is held that no salary at all was required to be paid to these persons, then also after invoking the provisions of section 13, the entire surplus can be taxed. Thus, these allegations do not hold ground for the cancellation of registration within the scope of section 12AA (3) albeit it could be subject matter of scrutiny and addition or forfeiting of surplus amount during the course of assessment proceedings and in terms of section 13 the entire surplus of the assessee can be taxed if the assessee’s society is being found to be violating the conditions laid down in various clauses of section 13. Assessee has been charging bus fees from the students - Held that:- Providing of bus facilities to students and charging fees is directly related to the objects of the society, i.e. imparting education to the students and facilitating the students for picking and dropping to and from the school. Even if certain buses plied were belonging to the office bearers then also no adverse inference can be drawn on the facts of the present case for the reason that none of the expenditure relating to buses have been borne by the school and again nothing has been brought on record that any payment for plying of bus or the fees charged for the bus fees violates the concept of reasonableness as enshrined in section 13(2)(c). As regards the filing of an affidavit of the Principal before the RTA that bus charges will not be charged from the students, then again it cannot be point of adverse inference to doubt the genuineness of the activities of the assessee albeit it can be some kind of violation under Road Transport Laws which is not relevant for the conditions laid in section 12AA (3). Again this is subject matter of scrutiny during the assessment proceedings and from the perusal of the reassessment orders passed in the subsequent to the cancellation of the registration it is seen no adverse inference with regard to the bus charges or for violation of any law has been drawn. Assessee has been found to maintained two parallel registers for annual general meeting for certain period - Held that:- Maintenance of two parallel registers does not lead to any adverse inference because it is neither in violation of any of the objects nor leads to any inference regarding non genuine activity if any carried out by the assessee, because nothing incriminating is indicated from such parallel register maintained for the brief period. Assessee appeal allowed.
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2017 (5) TMI 14
Unexplained bank deposit - ingenuity of firm - Held that:- The assessee is an individual and partner in M/s M.K. Enterprises and M/s Kailash Yadav & Company. The source of cash deposited in the bank account is out of the cash withdrawals from M/s Kailash Yadav & Company and the books of account of M/s Kailash Yadav & Company reflects such advancement in its books of account. The assessee produced cash books of M/s Kailash Yadav & Company alongwith capital account of partners and proof of filing of income tax return for A.Y. 2010-11. The assessee also submitted copy of the partnership deed of the firm and also a confirmation. Therefore, the assessee has substantially proved the source of cash deposited in the bank account. Further the Assessing Officer doubted that the partnership deed was not registered, is also cannot be made a basis for not treating the firm as a genuine. - Decided in favour of assessee
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2017 (5) TMI 13
Income from sale of the agricultural land - year of assessment - claim of deduction on account of cost of improvement.Held that:- As per our considered view, since not only sale deed was executed in the A.Y. 2008-09 but also possession was given in the A.Y. 2008-09, capital gain was liable to be taxed in the A.Y. 2008-09 and not in the A.Y. 2009-10, merely because sale deed was got registered in the A.Y. 2009-10. We also found that the same land of ₹ 1,45,00,000/- has also been assessed in AY 2008-09. It is the case of the department that sale of land should be accessed to tax in AY 2008-09. This finding of fact was not contested by the Assessee or the Department during both Assessment proceedings as well as remand proceedings. We also found that the assessee has gone in for Dispute resolution scheme and hence the entire amount in accordance with the scheme was stated to have paid. As per our considered view since, the capital gains on sale of land is liable to be taxed in AY 2008-09 and tax has already been paid in accordance to the Income Declaration Scheme, the said long term capital gain is taxable in AY 2008-09 and not in the' current AY 2009-10, If the capital gain on Long term capital gain on sale of land is also taxed in 2009-10, then it shall result in double taxation of the said Capital gains. So far as deduction of ₹ 90 lakhs is to be allowed as the cost of improvement since the same has been paid before 31/03/2008, the same is liable to be allowed while computing the capital gain.
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2017 (5) TMI 12
Exemption u/s. 54 - Assessment of capital gain - joint ownership - new property purchased was in the name of two persons namely the assessee and his brother - 100% consideration paid by the assessee - AO allowed 50% exemption u/s 54 - CIT(A) diallowed entire exemption - Held that:- There is no justification in the AO’s action, in so far entire investment was made by the assessee and only for the safety reason he has included the name of his brother. As found that in the assessment order itself at page 2, the AO has observed that entire cot of new property was borne by the assessee though the property is in the joint name with his brother. Under these facts and circumstances, there is no justification for giving 50% benefit of investment in the new house. The issue is also covered by the decision of hon’ble Delhi High Court in the case of CIT v Ravinder Kumar Arora (2011 (9) TMI 343 - DELHI HIGH COURT) wherein held that the assessee was entitled to full exemption u/s. 54F when the full amount was invested by the assessee even though the property was purchased in the joint names of the assessee and his wife. Thus no merit in the action of AO for restricting exemption u/s.54 to the extent of 50% of the value of the new house. The CIT(A) was also not justified in directing the AO to tax entire capital gain on sale of old property in the hands of assessee when 50% of the old house was owned by his wife and she had paid capital gain separately for her share of the house. - Decided in favour of assessee
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2017 (5) TMI 11
Unaccounted investment - Disallowance on account of peak credit - set off the impugned peak credit while adding the peak credit in the subsequent year - Held that:- Admittedly the assessee was engaged in the business activity which was not disclosed to the income tax Department. Therefore the profit from such business activity and the fund invested in such business activity should be brought to tax. However on the examining the order of lower authorities we find that the addition on account of profit on undisclosed business was made in the assessment years 2007- 08 to 2009-10 only. But the addition on account of undisclosed investment was only made in the assessment year 2007-08. Therefore, there is no question of the set off of the peak credit added to the taxable income in the earlier years as no such addition was made in earlier years i.e. AYs 2004-05, 2005-06 and 2006-07. Therefore, we find no infirmity in the order of ld CIT(A). Hence, this ground of appeal of assessee is dismissed. Undisclosed investment in the land - Held that:- CIT(A) has given relief to the assessee in part by observing that double addition cannot be made on the basis of same impounded documents.Thus, it is also pertinent to note that once the addition has been made on the basis of impounded documents towards the profit and undisclosed investment as discussed above, then in our considered view the new addition on the basis of same impounded documents cannot be made. However, it is important to note that the impugned undisclosed investment for ₹ 27,55,198/- was made in the year under consideration whereas the amount in the impounded documents is of ₹ 20,97,870/- only. Thus from the above it is clear that the investment was made over and above the amount shown in the impounded documents in the year under consideration. Therefore, the balance amount of ₹ 6,57,328/- does not arise out of the impounded documents. Hence, we find no infirmity in the order of ld CIT(A) and therefore this ground of appeal of the assessee is dismissed.
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2017 (5) TMI 10
Addition on account of interest received on delayed payments/ compensation - Held that:- We find that the provision of Sec. 145A(b) of the Act is not applicable by the CBDT in its Circular for the year under consideration. It is because it has been clarified to be applicable with effect from AY 2010-11. Thus, the issue of impugned interest is duly covered by the judgment of Hon'ble Supreme Court in the case of Rama Bai (1989 (11) TMI 2 - SUPREME Court). Accordingly, respectfully, following the precedent as above we hold that there is no infirmity in the order of the Ld. CIT(A). It is also important to note that the Revenue is at liberty to tax the impugned interest income in the respective assessment years as per the provisions of law. Accordingly, we uphold the same. Disallowance of the TDS credit - AO disallowed the same by observing that the corresponding income was offered to tax in the earlier year and therefore the amount of TDS which pertaining to the income which has been offered to tax in earlier year was not allowed - Held that:- Form the facts of the case we find that the assessee has been following system to claim the benefit of TDS amount deducted by the party consistently and no disallowance has been made by the Revenue. Moreover the ld. DR has not brought anything on record anything contrary to the findings of ld. CIT(A). Thus in our considered view there is no defect in the order of ld. CIT(A). Besides the above we also find that the assessee has already shown income corresponding to the TDS of ₹ 51,615.00 in the earlier years which shows that the assessee has already suffered the burden of income tax in the earlier years without claiming the benefit of TDS. Indeed in this case the assessee has borne the burden of the tax out of his own fund. Moreover if the party has not deducted the TDS in the relevant year, there is no fault of the assessee. There is also no loss to the Revenue. Therefore we find no infirmity in the order of the Ld. CIT(A). Accordingly, we uphold the same. - Decided against revenue. Disallowance of additional depreciation u/s. 32(1)(iia) - AO disallowed the claim as the assessee is not engaged in any manufacturing activities - Held that:- Instant issue is already covered by the decision in the sister concern of assessee in the case of CIT vs. G.S. Atwal & Co. [2001 (2) TMI 32 - CALCUTTA High Court] held that [after winning coal something that was not thee comes up, and it is, therefore, a production of coal. - Decided in favour of assessee
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2017 (5) TMI 9
Addition u/s 40(a)(ia) - tax withheld with respect to purchase of software from foreign sellers - addition under the head ‘software purchases’ - Held that:- CIT(A) had correctly came to the conclusion that income from overseas operations cannot be brought to tax in India and to that extent, supported by various case law, he has rightly concluded that profits earned by the USA branch cannot be brought to tax in India. We affirm the order to that extent. The claim of purchases to an extent of ₹ 49,83,08,802/- made in the branch accounts are not covered by the provisions of TDS as the transactions occurred overseas. Even with reference to the software purchases, claims made with reference to exports from India, it was submitted by Ld. Counsel that they are not covered by the provisions of TDS. Even though various case law relied that the software purchases that it does not amount to royalty, we are not adjudicating that issue on the simple reason that there are no outstanding payments ( payble) at the end of the year to be disallowed u/s. 40(a)(ia). If the issue is considered u/s. 201, then a finding is required whether the amounts paid are covered by TDS provisions or not? Since the disallowance made was under the provisions of Section 40(a)(ia), following the Special Bench decision in the case of Merilyn Shipping and Transport Ltd., Vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ), we are of the opinion that since there is no outstanding payable at the end of the year, provisions of Section 40(a)(ia) are not attracted. To that extent, order of the CIT(A) gets affirmed and Revenue grounds on this issue are to be dismissed. Estimation of income and allowance of deduction u/s. 10A - Held that:- As can be seen from the order of the AO, there is no dispute with reference to claim of 10A. In fact, AO has re-worked out the profit and allowed the deduction more than what assessee has claimed by way of his own working by taking a less export turnover and more profit. There is no dispute with reference to the fact that assessee is eligible for a deduction u/s. 10A. Therefore, order of the CIT(A) that deduction u/s 10A is not to be allowed has no basis. As seen from the record also, there is no such admission by assessee that he will not claim 10A deduction. Therefore, assessee’s grounds to that extent are allowed. To that extent, order of the CIT(A) gets modified. Estimation of income u/s. 10A, assessee himself has accepted the estimation of income by rejecting the books of account. Assessee admitted for estimation up to 6%, whereas Ld.CIT(A) without any basis, has estimated the income at 10%. Whether it is 3% or 6% or 10%, the same does not matter as the entire income get exempted u/s. 10A. In view of that, we do not intend to estimate the profit at any particular rate. Since Ld. CIT(A) has already, rather arbitrarily, fixed the rate at 10%, we are of the opinion that the estimation of income at 10% can be resorted to only on the software exports from India of ₹ 20,80,35,745/-. Income offered under MAT provisions - Held that:- Subject to satisfying the AO with reference to the export proceeds received into India, the AO is directed to estimate the income only on the export turnover from India at 10% and allow the deduction u/s. 10A as applicable as per the provisions of the Act. In case the total income determined becomes less than the income offered the income under the MAT provisions, AO is directed to accept the income offered under MAT provisions by assessee at ₹ 1,27,55,690/-. Subject to the above observations, assessee’s grounds are considered allowed partially. Unexplained cash credits - Held that:- The principle is established that AO has power to bring to tax unexplained cash credits as income from other sources provided they are not connected to business activity/business income. In view of that, the order of the CIT(A) to that extent is not justifiable. However, it is the contention of assessee that necessary evidence for proving the genuineness of the credits were already furnished before the AO which are not verified/accepted. In view of that we are of the opinion that in principle while accepting that income from other sources can be brought to tax by way of unexplained cash credits, the issue is restored to the file of the AO to examine the cash credits separately and give due findings whether they are explained cash credits or unexplained cash credits. Assessee is directed to furnish necessary evidence and cooperate with the AO in making necessary enquiries
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2017 (5) TMI 8
Eligibility to registration u/s.12A - withdrawl of registration - proof of charitable activities - Held that:- There is no allegation that funds are being misused or diverted or assessee is not imparting education. The activities of the trust cannot be considered as not genuine. Further, the trust is spending the funds for fulfilling the objects of the trust for which it is formed. Therefore, twin conditions prescribed for cancellation of trust registration have not been fulfilled. It is open to the authorities to deny the benefit u/s.11 but this cannot be a ground for cancellation of registration. Respectfully following the principles laid down by the Hon’ble Karnataka High Court in the aforesaid cases i.e., CIT Vs. Islamic Academy of Education [2015 (9) TMI 450 - KARNATAKA HIGH COURT] and Maharashtra Academy of Engineering & Educational Research Vs. CIT [2009 (9) TMI 952 - ITAT PUNE] we have no hesitation to hold that Ld.DIT(E) erred in cancellation of the registration already granted to the assessee. Therefore, we hereby set aside the impugned order of the DIT(E) and restore the registration already granted to the assessee by the then Commissioner of Income Tax, Andhra Pradesh-II, Hyderabad - Decided in favour of assessee
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2017 (5) TMI 7
Transfer pricing adjustment suggested by the TPO on corporate guarantee provided - Held that:- Brief facts relating to this issue are that during the financial year under consideration, the assessee through a common set of agreement, dated 17.07.2007 has provided a corporate guarantee for a combined loan of USD 150 million. The assessee did not charge any fee for the corporate guarantee given, whereas the TPO was of the opinion that the assessee has to charge guarantee fee. We find that the very same issue had arisen in the assessee’s own case for the A.Y 2009-10 and this Tribunal by order above has held the corporate guarantee fee at 0.50% to be reasonable. Computing the deduction u/s 10B AO has set off of the business loss of co generation unit before allowing the deduction u/s 10B - Held that:- As decided in Commissioner of Income-tax Versus Yokogawa India Ltd. [2011 (8) TMI 845 - Karnataka High Court] the deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression "total income of the assessee" in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression "total income of the assessee" in Section 10A as 'total income of the undertaking'. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly. Disallowance u/s 14A r.w.r 8D - Held that:- We find that the assessee has earned dividend income and the A.Y being 2011-12 the provisions of Rule 8D r.w.s 14A are applicable. The only question to be considered now is whether the investment in APGPCL is to be excluded while computing the disallowance u/r 8D(iii) of the Act. The assessee’s contention that APGPCL does not declare dividend to its shareholders and further that the benefit of subsidized rate of power is taxed in the hands of the company has not been verified by the authorities below. The benefit derived by the assessee by virtue of the investment is not dividend income but is subsidized rate of power. This subsidy is not exempt from tax. Further, if the benefit has resulted in enhanced business income/profits and has been taxed, then, no disallowance u/s 14A r.w.r. 8D can be made. Therefore, this limited issue is remitted to the file of the AO to verify the contention of the assessee and exclude the investment if the assessee’s contention is found to be correct. TP adjustment on Interest on funds advanced to WOS - Held that:- It is an international transaction and to adopt LIBOR as the rate of interest for T.P. Adjustment. TP adjustment on shareholder corporate guarantee - Held that:- This issue is covered in favour of the assessee by the decision of the Coordinate Bench at Mumbai in the case of Siro Clinpharm Pvt Ltd [2016 (5) TMI 633 - ITAT MUMBAI] wherein it was held the corporate guarantee was not international transaction prior to the amendment of section 92B by the Finance Act of 2012. Thus, ground of appeal is allowed and other grounds 5 & 7 to 12 are not adjudicated at this stage.
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2017 (5) TMI 6
Accrual of liability - Held that:- The claim of the expenditure for which the provision has been made was having direct nexus with the income as declared by the assessee, therefore, such provision made by the assessee was allowable during the year under consideration - Decided in favour of assessee.
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2017 (5) TMI 5
Nature of the sales tax refund - Addition u/s 41 - Estimation of income where books of accounts have been rejected - Treating sales tax refund separately while determining the N.P rate - Held that:- The sales tax is payable on the sales affected by the assessee and the same is considered as deemed business receipts and the same is eligible as a business deduction in the year of payment in terms of section 43B of the Act. Where the sales tax which was paid earlier is refunded to the assessee in a subsequent financial year, it will therefore form part of the business receipts which is assessable under the head “profit and loss account of business and profession”. In the instant case, where the books of account have been rejected and the N.P. rate has been estimated by the Assessing Officer, the said receipts on accounts of sales tax refund have to be taken into consideration while determining the total business receipts/turnover and the estimation of N.P rate has to be determined accordingly. We are therefore of the view that the AO was not correct in treating sales tax refund separately while determining the N.P rate - Decided in favour of assessee Interest receipts - treated as “income from other sources” or “business income” - Held that:- Firstly, regarding interest on income tax refund and interest on sales tax refund, the same has rightly been treated by the Ld. CIT (A) as income from other sources and we donot see any infirmity in the same. Regarding interest on FDR, it is noted that the FDRs were placed with the Banks to obtain bank guarantee which was necessarily required to be furnished to the various government department and in absence of such bank guarantee, the assessee could not have proceeded with the execution of contracts with the government department. Further, there is no finding that the surplus funds have been invested by the assessee in the FDRs. Any interest on such FDR, therefore, must be treated as inextricably linked with the business of the assessee and therefore to be treated as business income and not as income from other sources. It is noted that similar view has been taken by Co-ordinate Bench in case of M/s Maya Construction (2014 (7) TMI 1237 - ITAT JODHPUR). The contention the ld. AR is therefore accepted and the order of ld CIT(A) to this extent stand modified. Addition by estimating N.P. rate - Held that:- After taking into consideration the sales tax refund, interest on FDR as business income, the N.P. rate declared by the assessee is better than the N.P. rate declared in the earlier years. Further, unlike A.Y. 2006-07 wherein specific instances have been highlighted by the Ld. CIT (A) in estimating the N.P. rate, no such instances which form the basis of reasonable estimation is seen in the year under consideration. Taken into consideration, all the facts and circumstances of the case, the trading addition made by the Assessing Officer is hereby deleted.- Decided in favour of assessee
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2017 (5) TMI 4
Addition of amount deposited by the deceased assessee in his bank account as income from commission - addition u/s 68 - Held that:- The assessee expired on 04/09/2008, for which the death certificate is placed on the record and the ld. CIT(A) considered the deposit till the date of death of the assessee as commission income and the deposits were of ₹ 20,21,147/-. The ld. CIT(A) considered the amount as a commission income from insurance business and 50% of the same was estimated as income. However, from the close scrutiny of the bank account, notice that the cash was deposited and thereafter the cash has withdrawn with a regular intervals and the highest peak of deposits in this bank account of the assessee comes at ₹ 89,332/- on 30/8/2008. The pattern of deposits and withdrawals shows that the income credited in this account was out of the cash transactions of trading activity, therefore, the provisions of Section 44AF of the Act for estimating the income of the assessee on the total deposit of ₹ 20,21,147/- has to be considered. The 5% of deposit of ₹ 20,21,147/- comes to ₹ 1,01,057/-. The peak of the deposits in this account also comes at ₹ 89,332/-, thus the income of the assessee for this period out of these transactions recorded in bank can reasonably and justifiably be estimated at ₹ 1,01,057/-. Thus, this ground of the assessee’s appeal is partly allowed. Receipt of commission from insurance as reflected in Form 26AS - treated as income from other sources - Held that:- No explanation was furnished by the ld AR of the assessee before the ld. CIT(A) as well as before this Bench, therefore, find no infirmity in the order of the ld. CIT(A) and the same is hereby sustained.
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2017 (5) TMI 3
Credit of TDS u/s 199 denied - TDS deducted in the name of assessee being co-owner of the property - Held that:- As AR of the assessee filed the affidavit, income tax returns alongwith computation of income and confirmation of accounts of all 18 co-owners of the property. It is also noticed from the affidavit/ declaration of 18 co-owners wherein all 18 co-owners have mentioned that they have received the rent without deduction of any tax. Thus the assessee is directed to submit the details of income tax returns alongwith computation of income and confirmation of the accounts of 18 co-owners of the property of before the AO. The AO is directed to provide adequate opportunity of being heard to the assessee in this case in accordance with law. Thus the Ground No. 1 to 3 of the assessee is allowed for statistical purposes.
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2017 (5) TMI 2
Rejection of books of account - G.P. rate determination - Held that:- It is noted from the records that the assessee had not maintained the day to day stock register or quantitative details of commodities. It is also noted from the assessment order that the auditor in the audit report had commented that no internal vouchers had been maintained for cash expenses. It is also noted that the assessee had not furnished complete bills and vouchers regarding purchases claimed in trading account. The AO thus invoked the provisions of Section 145(3) of the Act and applied the gross profit rate of 1.14% on total turnover of ₹ 21,59,60,250/- declared by the assessee on which gross profit comes to ₹ 16,06,125/-. However, the assessee had declared the gross profit rate at 0.74% on which gross profit comes to ₹ 16,06,125/-. The AO thus added a difference of ₹ 8,55,822/- (Rs. 24,61,947 minus ₹ 16,06,125-) which in first appeal has been confirmed by the ld. CIT(A). In appeal before the Tribunal, it is observed from the facts available on records that the lower authorities have rightly invoked the provisions Section 145(3) of the Act. As regards the sustenance of addition of ₹ 8,55,822/-, it is noted that the gross profit rate of the assessee for the last three years i.e. 2008-09-, 2009-10 and 2010-11 are at 0.98%, 1.14% and 0.74% respectively. Thus looking to the past history of the assessee and assessee being engaged in the trading of sugar on wholesale basis, the addition is sustained to the extent of ₹ 2.00 lacs only. Thus the assessee will get the partial relief of ₹ 6,55,822/-. Disallowance of expenses - Telephone expenses, depreciation on car and motorcycle, traveling expenses, vehicle expenses and labour expense - Held that:- Since the books of account of the assessee has been rejected, therefore, the estimated addition has been made,no separate adhoc disallowance out of the expenses debited in the profit and loss account under the heads telephone expenses, depreciation on car and motorcycle, traveling expenses and vehicle expenses and labour expenseis not justified. See S.A. Builders vs. CIT [2006 (12) TMI 82 - SUPREME COURT ] - Decided in favour of assessee.
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2017 (5) TMI 1
Levy of fees for delay in filing the TDS return U/s 234E - Held that:- The timely processing of returns is the bedrock of an efficient tax administration system. If the income tax returns, especially having refund claims, are not processed in a timely manner, then (i) a delay occurs in the granting of credit of TDS to the person on whose behalf tax is deducted (the deductee) and consequently leads to delay in issuing refunds to the deductee, or raising of infructuous demands against the deductee; (ii) the confidence of a general taxpayer on the tax administration is eroded; (iii) the late payment of refund affects the Government financially as the Government has to pay interest for delay in granting the refunds; and (iv) the delay in receipt of refunds results into a cash flow crunch, especially for business entities. Looking at this from this perspective, we are clearly of the view that section 234E of the Act is not punitive in nature but a fee which is a fixed charge for the extra service which the Department has to provide due to the late filing of the TDS statements. See case of M/s Dundlod Shikshan Sansthan & ors. [2015 (9) TMI 807 - RAJASTHAN HIGH COURT ] - There is no valid reason or justification to interfere with the compensatory fees imposed for late filing of TDS return. Accordingly the demand raised by AO for late filing fees u/s 234E is confirmed. - Decided against assessee
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Customs
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2017 (5) TMI 29
Revocation of CHA licence - forfeiture of security deposit - time limitation - case of appellant is that the the SCN proposing revocation was issued only on 29.7.2016, which was more than three years after the receipt of offence report, the SCN is time barred in terms of Regulation 22(5) - Held that: - The CHA licensing Regulations, 2004, prescribed very strict time limits for the proceedings to be undertaken against the CHA’s. These regulations require that the CHA being proceeded against is required to be issued a SCN within a period of 90 days from the date of receipt of offence report, which is to be followed by an enquiry report - Commissioner (Customs) has proceeded to suspend the CHA licence of the appellant on 14.07.2013 in terms of Regulation 20(2) of CHALR, 2004. This action on the part of Commissioner (Customs) clearly indicates that he had considered the letter of DRI as the offence report. The enquiry report has been finalized only on 26.10.2016, which is more than three years from the date of receipt of offence report - appeal allowed - decided in favor of appellant-CHA.
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2017 (5) TMI 28
Confiscation - redemption fine - penalty - case of appellant is that Out of the past consignments of 167 MTs of TFSSD Coils imported, customs baselessly alleged that 100 MTs of coils were good coils. There was neither misdeclaration of value or description. Therefore, there should not have been levy of duty, redemption fine and penalty - Held that: - There is absolutely no material came to record to appreciate that appellant was innocent and imported defective coils and sheets. Misdeclaration found by Customs could not be contradicted leading any cogent evidence, by the appellant. NML report proved misdeclaration of description of goods imported by visual examination itself - It may be stated that once the goods were subjected to be confiscation by the aforesaid act, that became smuggled goods under section 2 (39) of the Customs Act, 1962. In such circumstances, there is no possibility at all to grant any relief to the appellant or to intervene to the adjudication finding. Thus duties, penalty and redemption find imposed on various misdeclared consignments are confirmed - appeal dismissed - decided against appellant.
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2017 (5) TMI 27
Mis-declaration of goods - denial of benefit of N/N. 6/2002-Cus. dt. 1.3.2002 - appellant declared the goods as "Shima Seiki Fully Fashioned High Speed Glove Knitting Machine". But that was ultimately found by the Textile Commissioner to be "old and used Shima Seiki Glove Knitting Machines" - Held that: - The goods came without proper accompanying documents - Misdeclaration of description of the goods was apparent when Discharge Port Chartered Engineer physically examined the goods in the presence of appellant. He valued the goods systematically which remained unrebutted stating any logical reason by the appellant. Such material on record proved misdeclaration of the goods on both count. There was undue claim of notification benefit - appeal is liable to be dismissed and misdeclaration of description of goods has also crippled the appellant to get notification benefit - decided against appellant.
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2017 (5) TMI 26
Refund claim - unjust enrichment - price escalation clause - denial on the ground that the finalization of assessment was not challenged by the claimant as prescribed in Board Circular No.24/2004-Cus. Dated 18.3.2004 - whether the bar of unjust enrichment is applicable to this case or not? - Held that: - the bar of unjust enrichment is not applicable because the provisional assessment was completed before 14.7.2006 and moreover, the assessee is a public sector undertaking - the assessee has also produced the certificate of Chartered Accountant (CA) specifically certifying that incidence of duty has not been passed on to the buyer - appeal dismissed - decided against Revenue.
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Corporate Laws
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2017 (5) TMI 23
Reserved price for the purpose of auction - Held that:- Regard being had to the submissions of the official liquidator and the affidavit that has been filed by the contemnor, we direct that the reserved price for the purpose of auction be fixed at ₹ 37,392 Crores. The Official Liquidator shall proceed in accordance with the Rules of procedure and prepare a draft terms and conditions and sale notice and the same shall be filed for our approval on 19.6.2017. The terms and conditions for the auction shall be finalised by Mr. Vinod Sharma, the Official Liquidator in consultation with Mr. Justice B.N. Agarwal, formerly a Judge of this Court. The official liquidator will be at liberty to avail the expertise of an expert for drafting the terms and conditions. The official liquidator shall remain personally present with his team, on the next date of hearing. List the matter at 10.30 a.m. on 19.6.2017. Be it clarified that the matter is directed to e listed on that day to scrutinise the action/steps taken in pursuance of the order passed today. Guilty of contempt - Held that:- In pursuance of our earlier order, Mr. Prakash Swami, the CP 412/2012 power of attorney holder for M.G. Capital Holdings is present. The sum of ₹ 10,00,00,000/- (Rupees ten crore only) has not yet been deposited. In view of the aforesaid, he is in violation of the order passed by this Court. Having heard his explanation which is not satisfactory, we hold him guilty of contempt of this Court and convict him accordingly. Regard being had to the explanation offered, we think it appropriate to impose a simple imprisonment for a terms of one month. The Police personnel present in Court are directed to produce Mr. Prakash Swami before the concerned Registrar of this Court, who shall issue a warrant so that he can be put in Tihar Jail to serve the aforesaid sentence.
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2017 (5) TMI 22
Maintainability of petition under Section 397 and 398 of the Companies Act, 1956 - respondents/petitioners are not the shareholders and, thereby, do not have the locus standi to file the petition - Held that:- To decide the question whether the respondents/petitioners have ceased to be shareholders or not, the Tribunal has not refused to rely on the MOU on the ground that any agreement against the provisions of Indian Contract Act cannot be noticed. Having heard the learned counsel for the appellants and on perusal of the record, we are of the view that the observation made by the Tribunal at paragraph 14 of the impugned judgement cannot be treated to be a finding with regard to the validity of the MOU reached between the parties on 16.4.2011. It is merely a premise view to decide the question whether shares stood transferred. Further, as admittedly the shares have not been transferred in favour of the appellants in accordance with law, i.e. no entry having made in the register of the company, we hold that the respondents/ petitioners continue to be shareholders till their shares are registered in the name of other persons. For the reasons aforesaid we are not inclined to interfere with the impugned judgement dated 2.1.2017. However, we make it clear that the order passed by the Tribunal or by Appellate Tribunal will not come in the way of the appellants in registering their name, if transfer is genuine and in accordance with law. The appeal stands disposed of with the aforesaid observations.
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Service Tax
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2017 (5) TMI 57
Evasion of service tax - security service and manpower recruitment and supply service - willful evasion - difference of turnover as per balance sheet and as per their ST-3 Returns - Amount shown in TDS certificates / 26AS returns - reconciliation between bank account and books of account - Held that: - the books of accounts maintained by the appellant and the audited financial statements produced before the authority below have not been rejected. - The explanation(s) given at the time of investigations and averments made in reply to SCN, were not found untrue. In this view of the matter we find that the demand raised is vague, having no proper basis. In this view of the matter we hold that the SCN to be untenable - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 56
Classification of service - execution of work related to fabrication, machining and assembly etc - classified under the head Manpower Recruitment or Supply Agency Service or are job-work - Held that: - During the relevant time, the position was not clear as there was conflicting decisions. Moreover, in the instant case, when question of interpretation is involved, certainly penalty is not leviable - appeal dismissed - decided against Revenue.
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2017 (5) TMI 55
Refund claim - service tax paid on exempt service - rejection on the ground of time limitation u/s 11B of the CEA 1944 and unjust enrichment - Held that: - the limitation prescribed u/s 11B is not applicable to the amount paid under mistake for the reason that such amount does not have the colour of tax/duty - the refund claim cannot be rejected on the ground of limitation. Unjust enrichment - Held that: - when CA certificate is produced to establish that the incidence of duty has been borne by the assessee, the same has to be considered if acceptable otherwise - In the present case, the veracity of the CA certificate is not in dispute. The appellants have produced the Ledger account as well as Bank Statement alongwith copy of the cheque and Chartered Accountant certificate to show that the incidence of duty has not been passed on to the educational institution M/s GMR Institute of Technology to whom the assessees had provided the services - the refund claim cannot be rejected on the ground of unjust enrichment. Appeal allowed - decided in favor of appellant.
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2017 (5) TMI 54
100% EOU - refund claim - rejection on the ground that the said input services are ineligible for the CENVAT credit - Held that: - The period involved in all these appeals is from April 2012 to December 2012. After 2012 Rule 5 of CCR, 2004 has undergone amendment by which the word ‘used’ for export of goods, ‘used’ as intermediate product; ‘used’ for providing output services has been deleted. Therefore, the authorities below have wrongly denied the refund - appellants having paid service tax on the various input services used for providing output services which are exported, they are eligible for refund under Rules 5 of CCR, 2004 if other conditions are satisfied - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 53
Imposition of penalty u/s 77 and 78 of FA - non-filing of ST-3 returns and non-payment of interest within time - Held that: - the appellants cannot be found fault with for not discharging their service tax liability. However, they have paid the entire tax liability along with interest - The Tribunal relying upon the judgment in the case of Mahesh Vakatawarmal Rathod Vs CCE, Pune-III [2015 (2) TMI 147 - CESTAT MUMBAI] held that in such a situation the penalty imposed u/s 77 and 78 cannot be sustained - penalties are unsustainable - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 52
Commercial Coaching and Training Service - rendering of technical education on the computer subject - appellant was rendering of technical education on the computer subject. He provided services to the Government of India through the nodal agency M/s. Small Industries Services Institute, Chennai, who were the beneficiary of the fees received from the trainees, through the appellant - Held that: - It is necessity of the law that there should not be arbitrary taxation. The subject of the State can only be taxed under express provision of law without any intendment. Therefore, appellant is entitled to a fair opportunity of hearing for determination of the nature and character of receipt of the concerned period and to determine taxability thereof - the appeal is remanded to the adjudicating authority to reach to a judicious consideration of taxability of services provided - appeal allowed by way of remand.
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2017 (5) TMI 51
Refund claim by the percipient of services - service tax was paid by the provider of the services - rejection on the ground that classification of service has never been disputed by the service provider, and as such, the appellant has no locus standi as a recipient of service to claim the refund on service tax paid by the service provider - time limitation - Held that: - The service provider has never disputed that they have wrongly classified the service and never filed any refund application before the jurisdictional service tax authorities. Thus, in absence of dispute regarding the classification of service by the service provider who has discharged the service tax liability, the appellant in the capacity of recipient of service, in our opinion, has no locus standi to file the application claiming refund on a different classification of service that on what was paid by the service provider - as per the mandates of Section 11B, any amount claimed as refund, has to pass the test provided therein and since condition of limitation is one of the ground mentioned therein, the same cannot be overlooked for consideration of the refund application - appeal dismissed - decided against appellant.
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Central Excise
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2017 (5) TMI 50
Review Petition - refund claim - the issue in the case of Commissioner of Central Excise, Madras Versus M/s Addison & Co. Ltd. [2016 (8) TMI 1071 - SUPREME COURT] is required to be reviewed - Held that: - the decision in the case do not require to be reviewed - petition dismissed - decided against petitioner.
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2017 (5) TMI 49
Area Based Exemption - Substantial expansion of installed capacity - benefit of N/N. 50/2003-CE dated 10.06.2003 - claim of Revenue is that the corrugation machine is crucial machinery for manufacturing of corrugated boxes has not been installed, therefore, in the absence of the installation of the said machinery, there is no expansion of more than 25% of installed capacity and appellant is not entitled for the benefit of said Notification - whether the appellant has increased installed capacity more than 25% w.e.f 26.07.2004 or not? - Held that: - any increase in installed capacity means other than installation of additional plant and machinery would not qualify for the benefit of exemption notification, there should be increase in installed capacity of an existing unit by not less than 25% should be the result of installation of additional plant and machinery. In the CBEC Circular, it is nowhere set out that there should be increased in more than 25% in the machinery installed in the factory of the appellant. The CBEC Circular clarified that there should be additional plant and machinery which should result in increase of more than 25% in the installed capacity. The Hon’ble High Court of Uttrakhand in the case of Uttaranchal Iron & Ispat Ltd. [2010 (12) TMI 491 - UTTARAKHAND HIGH COURT] has held that the circular nowhere says that such machinery, in order to be additional machinery, should be in addition to those, which are in existence. The said clarification, which also used the word additional investment in plant and machinery in modernization, read with other part of circular, makes it abundantly clear that the additional plant and machinery, mentioned therein, is not in addition to the existing, but signifies something new brought-in in the manufacturing process, which is turn, increases the capacity. The appellant has made some addition in their plant and machinery which resulted in increases their production capacity more than 25% which is not disputed by the Revenue, and thus is entitled for exemption - as the appellant is entitled for benefit of exemption Notification 49-50/2003-CE dated 10.06.2003, therefore, the demand confirmed against the appellant are not sustainable. Appeal allowed - decided in favor of appellant.
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2017 (5) TMI 48
Goods found in excess - 16498 pcs were found packed in master cartoons - appellant claims that these are rejected goods - Held that: - the rejected goods cannot be packed in master cartoons - Moreover, the said rejected goods are having market value and no records of these rejected goods have been maintained by the appellant. In that circumstances, it is held that these goods are packed in master cartoons for clandestine clearance of the goods, therefore, those goods have rightly been held by the adjudicating authority liable for confiscation - redemption fine is imposed on the appellant is highly excessive - the redemption fine is reduced to ₹ 50,000/- and penalty is reduced to ₹ 25,000/-. With regard to the shortage of readymade garments of 5203 pcs, the goods were in finished condition and they were required to be entered in RG-1 register which were not entered and found their lying unaccounted. As no invoices have been issued to that effect, therefore, on these goods, the appellant is required to pay duty at the time of clearance of said goods. In that account, the appellant is required to be penalised and for these non-accounted goods. The penalty imposed on the appellant is to the tune of ₹ 10,000/-. Appeal allowed - decided partly in favor of appellant.
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2017 (5) TMI 47
CENVAT credit - ineligible inputs/capital goods in terms of Rule 2(k) and 2(a)(A)(i) to (vii) of the CCR, 2004 - MS mill plates, MS channel, MS angle, HR steel plates, chequered plates, aluminium coil, joists - whether the CENVAT credit is allowable on various structural items such as MS Plates, MS Channel, MS Angle, HR Steel Plates, Chequered Plates, Aluminium Coil, Joists, etc., which were used for making structure for supporting capital goods? - Held that: - the Hon’ble High Court of Madras in the case of Alfred Albert India Ltd. [2010 (4) TMI 424 - KARNATAKA HIGH COURT] held that the inputs used for repair and maintenance of plant and machinery is eligible for credit - the Hon’ble Supreme Court in the case of CCE vs. India Cement [2011 (8) TMI 399 - MADRAS HIGH COURT] held that steel plates and MS channels used in the fabrication of channels would fall within the ambit of capital goods - credit allowed - decided in favor of assessee.
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2017 (5) TMI 46
CENVAT credit - spare parts - along with excavator, supplied kits which are in the nature of spares parts - department is of the view that the goods supplied along with the excavator are clearances of inputs on which cenvat credit has been taken and therefore, the appellants are required to reverse the amount of equal to the cenvat credit taken on inputs - Held that: - in the appellants own case for the earlier period on the identical issue this Tribunal remanded the matter back to the adjudicating authority - we also remand matter back to the adjudicating authority to pass an appropriate order after affording reasonable opportunity to the appellant to present their case - appeal allowed by way of remand.
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2017 (5) TMI 45
CENVAT credit - services received from overseas agents - reverse charge mechanism - denial on the ground that the services received from outside overseas agents cannot be treated as output service for utilising the Cenvat credit account for discharging their service tax liability arising therefrom - Held that: - the subject matter is covered by the CESTAT decision in the case of Kansara Modler Ltd. Vs. CCE, Jaipur-II [2014 (1) TMI 1095 - CESTAT NEW DELHI], where it was held that Once appellant is person liable to service tax, he becomes provider of taxable service - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 44
Liability of interest - Cenvat credit amount which was reversed - banking and financial service - Revenue is of the view that once the assessee has reversed the subject Cenvat credit taken on banking and financial services during audit without any protest they are bound to pay interest for the period when the said amount was lying in their Cenvat account - Held that: - when in the light of provisions of Rule 6(5) of CCR, 2004, the original amount of Cenvat credit which was reversed by the assessee appellant during the audit appears to be admissible to the assessee, the present interest demand against them is not sustainable - reliance placed in the case of Secure Meters Ltd. Vs. CCE & ST, Jaipur [2017 (3) TMI 1438 - CESTAT NEW DELHI] - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 43
Valuation - goods cleared to own units - IC engine sold in the market and IC engine supplied to Nashik plant - As per circular no. 692/8/2003-CX dated 13.02.2003 the cost of production should be in accordance with CAS-4 which was not followed in the present case - The department’s objection is that the assessable value which is on cost construction method is not correct in as much as the appellant have not included various expenses - Held that: - even if the duty as demanded in the SCN would have paid by the appellant the same was available as a cenvat credit to their Nagpur and Rudrapur therefore, there was neither gain nor loss either to revenue or to the assessee - reliance placed in the appellant's own case [2017 (3) TMI 369 - CESTAT MUMBAI], where it was held that even though duty is payable and the recipient unit is part of the same entity and is eligible for MODVAT/CENVAT credit paying duty from PLA also then it is a revenue neutral exercise - the impugned order, on the ground of revenue neutrality, is not sustainable - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 42
Valuation - related party transaction - case of appellant is that confirmation of demand through the impugned order is not sustainable in the absence of result of comparison of prices at which the goods were sold to PM and the goods that were sold by the appellant to other parties during relevant period - Held that: - the appellant-assessee has raised very serious grounds against the original authority that the original authority has not complied with the directions of this Tribunal - also, confirmation of demand was not on the basis of verifications carried out in respect of the prices at which goods were sold to alleged related person and to other buyers during the relevant period - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 41
Reversal of CENVAT credit - Rule 6(3) of CCR, 2004 - maintenance of separate account of inputs / input services for manufacturing of dutiable as well as exempted goods - demand on the ground that the intimation given under Rule 6(3A) of the Cenvat Credit Rules, 2004 was given after April 2008 and hence the appellant had no option but to pay 10% of the amount pertaining to exempted goods - the appellant submits that the exercise of the option is procedural and hence the amendment can be applied retrospectively - Held that: - This Tribunal in the case of CCE vs. Ludhiana Beverages (P) Ltd [2016 (12) TMI 213 - CESTAT CHANDIGARH] has held that once the cenvat credit attributable to exempted goods is reversed, that fulfills the requirements of Rule 6(3) - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 40
100% EOU - shortage of goods - It is the case of Revenue that such shortage in the containers received by an American client would tantamount to non-export of goods hence duty liability arise as per B-17 Bond excluded by appellant in respect of the goods cleared for export - Held that: - Revenue authorities have never disputed the fact that appellant had produced the proof of export to the authorities who had accepted the same. It is also not disputed that the ARE-1 forms were attested by customs authorities for the export of the goods. Just because appellant has lodged F.I.R for the short receipt of the goods by their clients in USA, would not mean that the goods were diverted to DTA and duty can be demanded - the factual matrix the containers have been cleared for export and the proof of export has been accepted and admitted by the jurisdictional Asst. / Deputy Commissioner is not disputed - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 39
Manufacture of garments - deemed duty paid - Benefit of N/N. 15/2002-CE dated 01.03.2002 - denial on the ground that the fabric which has been used in the manufacturing of garments has not suffered duty, as the same is exempt, therefore, no duty has been paid on the inputs - Held that: - the appellant is manufacturing knitted garments from the knitted fabrics and Notification No. 15/2002 prescribed nil rate of duty if cenvat credit was not availed on knitted fabrics. Knitted fabrics is also exempt from payment of duty, therefore, in view of the explanation to the notification for the benefit of said notification, the fabrics shall deemed to have been duty paid even without production of documents evidencing payment of duty thereon - benefit of notification allowed - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 38
Maintainability of appeal - appropriate forum - whether appeal against drawback claim under Chapter - X of the Customs Act, 1962 is maintainable before the Tribunal? - Held that: - On conjoined reading of sub-section (1) of Section 35B of the Central Excise Act, 1944 and sub-section (1) of Section 129A and the first proviso appended thereto, it reveals that it is only those appeals against the orders of Commissioner (Appeals), that are not maintainable before the Appellate Tribunal in certain situation. All other appeals are therefore, maintainable before the Tribunal, even if, such appeals pertain to or are in relation to rebate or claim of duty drawback. The matter is returned back to the ld. Single Member Bench, Chandigarh for decision on merits.
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2017 (5) TMI 37
CENVAT credit - supplementary invoices - whether the appellant is entitled to avail Cenvat credit on supplementary invoices issued by Jalgaon and Pune units of the appellant at stock transfer, where allegation of suppression has not been proved by the Larger Bench of this Tribunal as well as the Mumbai Bench of the Tribunal in the case of Pune of the appellant? - Held that: - the amortized cost is not required to be added in the value of the goods, in that circumstances, supplementary invoices is not required as the same has been issued and credit has been taken and that there is no suppression of facts by Pune unit - Cenvat credit cannot be denied to the appellant on amortized cost of capital goods in case of Pune as well as Jalgaon units. With regard to supplementary invoices issued by Jalgaon unit and the charge of under valuation, the Settlement Commission has not given any finding that there was suppression on the part of Jalgaon Unit and no penalty was imposed, in that circumstances, it can be presumed that charges of suppression is not proved. Therefore, in the absence of any suppression on the part of Jalgaon unit, Cenvat credit cannot be denied. Appeal allowed - decided in favor of appellant.
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2017 (5) TMI 36
Penalty u/s 11AC - Valuation - transportation cost from factory to depot - includibility - Held that: - the short payment occurred when the unit was run by M/s Standard Electricals Ltd., which was later taken over by M/s Havells India Ltd. - it is clear that M/s Standard Electricals Ltd. as a juristic person/legal entity stood dissolved, upon the scheme approved by the Hon'ble Delhi High Court coming into effect. The dissolution of the company puts an end to the existence of the company. The Central Excise duty liability is linked to the goods manufactured and cleared. The penalty is on person-juristic or natural - the case is returned back to the referral Bench for a decision on merits - matter on remand.
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2017 (5) TMI 35
CENVAT credit - capital goods acquired on lease basis for another part of the respondent’s factory - denial on the ground that M/s IISIPL is not a Finance Company but is engaged in industrial operation. Rule 4(3) of the Cenvat Credit Rules allows Cenvat credit of capital goods if such capital goods are acquired or leased from a Finance Company - Held that: - At the time of receipt of the relevant goods, M/s. IISIPL was the buyer of these capital goods. However, the goods were consigned to the respondent where they were erected. It is also not disputed that these goods have also been used by the respondent in the manufacture and clearance of dutiable goods. Further, IISIPL have since been merged with the respondent in terms of orders of the Hon’ble High Court of the Bombay w.e.f. 31.03.2008 - a similar issue had come up before the Tribunal in the respondent’s own case in respect of capital goods acquired on lease basis for another part of the respondent’s factory. He relied upon the case of Jayaswal Neco Industries Ltd. Vs. CCE, Raipur [2016 (3) TMI 127 - CESTAT NEW DELHI], where it was held that Rule 4(3) only further enlarges scope by stating that the credit would not be disallowed even if capital goods are cleared from the financing company. It does not mean that the capital goods must be acquired from a financing company and any other acquisition of capital goods from the company who is not a financing company will disentitle the availment of credit. - credit allowed. CENVAT credit - various steel items used in the manufacture of immovable supporting structures for capital goods - Held that: - The dispute on the admissibility of Cenvat credit on steel items used for fabrication of supporting structures for capital goods has been settled by the Tribunal in the case of Singhal Enterprises Pvt. Limited V. CCE [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules - credit allowed. Appeal rejected - decided against Revenue.
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2017 (5) TMI 34
Pre-deposit - Entitlement to interest - delayed payment of refund - case of Revenue is that the assessee is not entitled for the interest as it is not a pre deposit as per Section 35F of the Act and it is pre deposit in terms of Section 35(N) of the Act - whether the assessee is required to file an application for refund claim to the order of Hon'ble Apex Court on 11.12.1996 or not? - Held that: - In terms of the CBEC Circular 8/12/2004, the assessee is not required to file any application for refund - decided in favor of assessee. Whether the amount paid by the assessee under Section 35 (N) of the Act is a pre deposit or not? - Held that: - the amount of pre deposit paid by the assessee under Section 35N is equivalent to the amount paid under Section 35 (F) of the Act and the same is to be treated as pre-deposit accordingly - decided in favor of assessee. Whether the assessee is entitled to claim interest after three months from the date of the order of the Hon'ble Apex Court dated 11.12.1996 till its realization or not? - Held that: - This issue has been considered by the Hon'ble High Court in the case of Madura Coats Ltd. [2012 (7) TMI 512 - CALCUTTA HIGH COURT] and held that although the provisions of Rule 35 (FF) of the Act are not in the statute book during the relevant time but the same are applicable for interest for delayed refund - the assessee is entitled for interest after three months from the date of 11.12.1996 till the amount of refund is realised - decided in favor of assessee. Appeal allowed - decided in favor of assessee.
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2017 (5) TMI 33
CENVAT credit - explosive and lubricant - appellant claim that explosive and lubricant used in the mining area being connected with the manufacture of the cement only, the appellant should get the CENVAT credit - Held that: - While explosive was used in the mining, lubricants were used for the purpose of transportation of the goods in the mining area as well as bringing the raw materials to the factory. There appears an inextricable link between the input and output for which the appellant is entitled to the CENVAT credit - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 32
CENVAT credit - SSI exemption - Whether the Cenvat credit lying in the account of the appellant as on 03.12.2012 upon crossing of the SSI limit entitles it to the credit thereof? - whether the credit lying is necessarily to be evidenced by the receipt of raw material and recording thereof as well as use in manufacture or mere mention of address of appellant on invoices entitles the appellant to the Cenvat credit? Held that: - So far as disallowance of ₹ 95,517/- is concerned, the appellate authority's finding is without any basis. But what that comes up from the material on record is that genuineness of the purchase of the materials needs verification - so far as disallowance of credit of ₹ 13,38,257/- is concerned that also calls for verification as to whether the raw materials covered by the respective invoices was genuine and whether that relate to appellant and recorded by appellant establishing that the same was received in its factory and used in manufacture. If such conditions are satisfied positively, the appellant cannot be denied Cenvat credit to that extent. Appeal allowed by way of remand.
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2017 (5) TMI 31
SSI exemption - turnover exceeding threshold limit - denial of N/N. 8/2003-CE dated 1.3.2003 on the ground that the total value of clearances exceeded ₹ 300 lakhs/Rs.400 lakhs during the financial year 2002-03, 2003-04 and 2004-05 - inclusion of clearance bearing brand name of others - Held that: - similar issue came up before this Tribunal in the case of Savotham Care Limited [2015 (11) TMI 244 - CESTAT BANGALORE], where it was held that SSI exemption Notification No.8/93, dated 10-3-2003 provides that clearances bearing the brand name or trade name of another person, who are ineligible for the grant of this exemption in terms of Paragraph 4 shall not be taken into account for determining the aggregate value of clearances of all excisable goods for home consumption. It is clear that to determine aggregate value of clearances of excisable goods for home consumption and clearances bearing the brand name or trade name of another person, which are ineligible for the grant of this notification in terms of para 4 are not to be included - if the clearances bearing the brand name or trade name of another person, are excluded from the turnover, the same will be within the exemption limit. The assessee is entitled to SSI exemption - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 30
Withdrawal of B-1 Bond - non-fulfillment of requirements of Board’s Circular No.711/27/2003-CX dated 30.04.2004 and Circular No.284/118/96-CX dated 31.12.1996 - facility to clear the goods without payment of Central Excise duty - Held that: - the nature of adverse notice was not spelt out in the SCN. To that extent, the SCN is flawed as it is an accepted principle that full nature of allegation should be informed to the noticee - Since the sole proceeding on which adjudicating authority and Commissioner (Appeals) have relied for withdrawing the B-1 Bond dated 21.04.2006 has been set aside, the order of Commissioner (Appeals) in that background cannot be sustained and the same is set aside - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (5) TMI 25
Attachment of Bank account - Section 45 of the GVAT Act, 2003 - case of petitioner is that unless and until there is a satisfaction recorded on the part of the authority that the dealer is likely to dispose of the properties/withdraw the amount from the bank; as the case may be, with a view to avoid the liability to pay tax under the Act, the authority cannot pass an appropriate order u/s 45 of the Act - principles of natural justice - Held that: - it may so happen that having satisfied that the immediate steps are required to be taken or that the Dealer is likely to dispose of the properties and/or withdraws amount from the bank with a view to defeat the claim of the Revenue, in that case, the authority may pass an order of provisional attachment. However, that does not mean that thereafter, while passing the final order under Section 45 of the Act, the petitioner-Dealer is not required to be given any opportunity of being heard. Under the circumstances, the impugned order can be said to be against the principles of natural justice - It is ultimately for the appropriate authority to pass appropriate order in accordance with law and on merits; more particularly, considering Section 45 of the Act. Rule is made absolute to the aforestated extent - appeal allowed by way of remand.
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2017 (5) TMI 24
VAT liability - attachment of bank account - default in making repayments of tax and other financial facilities extended - case of petitioner is that Section 29(1) of the A.P. VAT Act, 2005 invoked by the 2nd respondent for attaching the current account of the petitioner, has no application to the facts on hand. The contention of the petitioner is that for invoking Section 29(1) of the A.P. VAT Act, 2005, the 2nd respondent should satisfy one pre-requisite condition, viz., that the petitioner is holding any money for or on account of the defaulter. The petitioner is not holding any money either for or on account of the defaulter. Held that: - It is true that the petitioner was not a party to the writ petition filed by the A.P. State Finance Corporation. But it is on record that pursuant to the auction conducted by the writ petitioner, a sale deed was executed on 29.01.2004. This sale deed was jointly executed by the petitioner herein and the A.P. State Finance Corporation. Therefore today the petitioner cannot totally wash their hands off as though they had nothing to do with the writ petition filed by the A.P. State Financial Corporation. In any case, the sale proceeds have gone into the coffers of the petitioner as well as the A.P. State Financial Corporation. A person, who secured an interim order from a Court, should certainly honour its decision after the case is finally disposed of. Therefore, we do not think that the petitioner can escape the liability on this score. The petitioner is a Corporation, wholly owned and controlled by the State of Andhra Pradesh. The creator cannot fight with the creation. Assuming that the 2nd respondent recovers the tax due from the defaulting dealer together with interest and penalty, the same would only cause a dent in the financial status of the petitioner. Ultimately, it is the State Government, which has to go to the rescue of a Corporation created by it. Directing the petitioner to pay to the Commercial Taxes Department, a sum equivalent to ₹ 10,51,175/- together with interest at the rate of 6% p.a. from the date of the sale, viz., 29-1-2004 up to the date of payment, would meet the ends of justice - petition allowed - decided partly in favor of petitioner.
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Indian Laws
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2017 (5) TMI 21
Partner liability - Proceedings of the Criminal Case arising from a complaint filed under section 138 of the N.I. Act. - Liability of authorized signatory of a company to be prosecuted under Section 138 of the Negotiable Instruments Act - Held that:- It appears from the materials on record that the cheque, which came to be dishonoured, was issued by the applicant herein in his capacity as one of the partners of the partnership firm running in the name of Shhlok Enterprise. Indisputably, the partnership firm has not been arraigned as an accused in the complaint. In such circumstances, the applicant cannot be held vicariously liable under section 141 of the N.I. Act. The issue is squarely covered by the decision of the Supreme Court in the case of Aneeta Hada vs. Godfather Travels & Tours Pvt. Ltd., (2012 (5) TMI 83 - SUPREME COURT OF INDIA). Section 141 of the Act is concerned with the offence by the company. It makes the other persons vicariously liable for the commission of an offence on the part of the company. Vicariously liability gets attracted when the condition precedent under section 141, namely, offence by the company stands satisfied. The issue whether a partnership firm is a legal entity within the meaning of section 141 of the N.I. Act is also no longer res integra after the pronouncement in the case of Oanali Ismailji Sadikot vs. State of Gujarat & Anr., [2016 (3) TMI 290 - GUJARAT HIGH COURT ] held that once the company is held to be an essential party and that arraigning of a company as an accused is imperative for prosecution under Section 141 of the Negotiable Instruments Act, it necessarily follows that arraigning of a partnership firm is also imperative for prosecution against the partners under Section 141 of the Negotiable Instruments Act. The prosecution launched against only one of the partners of the partnership firm, without joining the partnership firm, cannot be maintainable. Thus this application succeeds and is hereby allowed. The further proceedings of the Criminal Case pending in the court of the learned 4th Addl. Senior Civil Judge & Addl. Chief Judicial Magistrate, Surat are hereby quashed.
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