Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 23, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Penalty u/s 271(1)(c) Claim of exemption u/s 10B - it would not be open to the assessee to claim that transactions, which are not exports in a strict sense of the term and in which the assessee does not receive foreign exchange remittance, be treated as such - penalty was justified - HC
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Tribunal committed no error in holding that the assessees were entitled to the benefit u/s 80IB(10) of the Act even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners - HC
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Liability of the directors u/s 179 - During the devastating earthquake of 26.01.2001, the hotel building was severely damaged - building were insured - there was no negligence on the part of directors - HC
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Addition u/s 68 - Addition of donations - the affidavit of a third person is mere self-serving evidence unless the same is backed by some other evidence justifying the nature of the transaction - additions confirmed - HC
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Rejection of books of accounts Inflation of price - sales have increased by 29% but manufacturing expenses have increased by 45.93% - order of tribunal confirmed - HC
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Addition u/s 69A - AO has to bring the summons proceedings to a logical conclusion - Merely because summoned person did not respond, cannot be held against assessee - AT
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Failure to audit accounts u/s 44AB the contention that the receipts which was received by him was received in a fiduciary capacity which did not belong to him is acceptable - AT
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Rate of depreciation - the electrical cables, fittings and other electrical works connected with windmill are single composite unit are eligible for depreciation at the rate of 80% - AT
Customs
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Although the appellant has financed for the importation of the consignments but there is no whisper about the ownership and the financer having handled or have made any declaration on the Bill of Entry filed, penalty under Section 112(a) cannot be imposed - AT
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Valuation of goods - The royalties/licence fees paid for the import of beta/digibeta tapes containing films are includable in the assessable value of the said tapes. - AT
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Waiver of pre deposit - The appellant not only mis-declared the value of the goods but also imported duplicate goods bearing the brand name of well known brands there by contravening the provisions of IPR - prima facie case is against the assessee - AT
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Extension of time for warehousing the goods - As no time limit is prescribed, therefore, appellant are at liberty to file application for extension of warehousing till the period they have not been asked to pay duty - AT
Service Tax
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Sovereign and public activities -technical inspection and certification of seeds produced by seed producers in Maharashtra State as per the Seeds Act, 1966 - not covered by the Circular dated 18.12.2006 and are chargeable to Service Tax - AT
Central Excise
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Condonation of delay - Bar of limitation - The starting point of limitation under Section 35 was the date of communication of the order which was required to be decided with reference to the facts pleaded by the assessee. - HC
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CENVAT Credit - Group Insurance Scheme - credit is not allowable in respect of family members of the employees - AT
Case Laws:
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Income Tax
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2014 (5) TMI 728
Transfer pricing adjustment - International transactions with the Associated Enterprise Held that:- The reason given by the Transfer Pricing Officer and DRP for not accepting the segment results are that the assessee has not shown the same in the audited financial accounts and the segment reporting was done only for transfer pricing purposes - They have also stated that allocation of expenses between the contract manufacturing segment and non AE local/domestic segments are abnormal Relying upon DCIT Vs. Stratex Net Works (India) Pvt. Ltd. [2010 (4) TMI 840 - ITAT, DELHI] - rate of profit achieved in other comparable cases are to be compared with profit level declared by the assessee in respect of its AE transactions after excluding domestic transactions - the net cost plus margin reported by the assessee in respect of its contract manufacturing segment stood at 20.89% and whereas the net margin of the external comparables selected by the Transfer Pricing Officer stood at 8.87%. The Transfer Pricing Officer / DRPs approach in comparing external comparables margin of 8.87% with entity level margin of the assessee i.e. 1.08% is wrong, since segmental results are available and as per this the margin in contract manufacturing segment is 20.89% and this margin should have been compared with the comparable margin of 8.87% in determining the upward adjustment in AE sales - the net cost plus margin of the assessee in contract manufacturing segment is 20.89% which is more than the operating profit of 8.87% on the external comparables of the Transfer Pricing Officer, there is no need for any upward adjustment to be made on the AE sales of the assessee the AO is directed to delete the addition made towards upward adjustment of purchase price on determination of ALP with Associated Enterprise Decided in favour of Assessee. Disallowance of Provision for discount Held that:- when the liability is ascertained and not quantifiable during the year and is simply a contingent based on estimates, the same cannot be allowed as deduction - the assessees version clearly states that the only reason for creating a provision and not charging the same as an expenses is because of the fact that the exact quantification could not be undertaken for the various reasons - the basis for the provision is simply adhoc and arbitrary - It depends on the facts of each and every case to come to a conclusion as to whether the liability is ascertained or unascertained one and it cannot be generalized Assessee contended that they had reversed excess provision which was disallowed in earlier year - as the provision was disallowed in earlier year, reversal made during this assessment year ought to be allowed as deduction while computing total income of the year the AO is directed to verify the claim of the assessee. Computation of deduction u/s 10A of the Act - Exclusion of expenses Expenses incurred in foreign currency from export turnover Inclusion in turnover Held that:- Following Income-Tax Officer. Versus Sak Soft Limited [2009 (3) TMI 243 - ITAT MADRAS-D] - travel expenses incurred in foreign currency have to be excluded both from export turnover as well as from total turnover for the purpose of computing relief u/s 10A of the Act the AO is directed to exclude the travel expenses incurred in foreign exchange from export turnover as well as total turnover for the purpose of computing relief u/s 10A of the Act Decided in favour of Assessee.
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2014 (5) TMI 710
Penalty u/s 271(1)(c) of the Act Claim of exemption u/s 10B of the Act Foreign exchange remittance Held that:- The assessees submissions based upon the reading of the provisions of the Exim policy are of no assistance - the terms of the statute are clear and they do not allude to or refer to any external document or instrument or even other enactments, the admissibility of benefits in those external documents or enactments cannot automatically be used as aids of construction or read into the provisions of the controlling enactment - the reference to the exim policy or a pointed reference to admissibility of reliefs as are given in that policy u/s 10B, it would not be open to the assessee to claim that transactions, which are not exports in a strict sense of the term and in which the assessee does not receive foreign exchange remittance, be treated as such - The plain text of Section 10B particularly Section 10 B (3) exclude the possibility of a reasonable argument in this regard the contention of the revenue is accepted that there is some relief to the assessee, to the extent that convertible foreign exchange may be received or brought into India by the assessee - the claim to Section 10B benefit was inaccurate thus, the order of the Tribunal is upheld Decided against Assessee.
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2014 (5) TMI 709
Scope and benefit of amnesty scheme of 1986 Penalty u/s 271(1)(c) of the Act or u/s 273(2)(a) of the Act Held that:- The claim for investment allowance and depreciation which was otherwise inadmissible, the assessee surrendered the amount on 25.3.1987 - It is perhaps possible to take either view as to whether the assessee in the circumstances of the case in fact, surrendered the amounts after detection, which would of course justify the penalty - the Tribunal in its earlier order have concluded that the penalty was not justified u/s 273 (2) could not have, without distinguishing that reasoning, upheld the penalty u/s 271 (1) (c) Decided in favour of Assessee.
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2014 (5) TMI 708
Deletion of disallowance of deduction u/s 80IB(10) of the Act Owner of land and development permission not granted - Construction and development of housing project Held that:- Following Commissioner of Income-tax v. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] - It is true that the title in the land had not yet passed on to the assessee the title would pass only upon execution of a duly registered sale deed - the term works contract contained in the Act is inclusive definition and includes not merely the works contract as normally understood but it is a wide definition which includes any agreement for carrying out building or construction activity for cash, deferred payment or other valuable consideration - the interpretation was based on not the normal meaning of term works contract but on the special meaning assigned to it under the Act itself, which provided for a definition of the inclusive nature - the Tribunal committed no error in holding that the assessees were entitled to the benefit u/s 80IB(10) of the Act even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners Decided against Revenue.
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2014 (5) TMI 707
Nature of expenses - Provision made for expenses - Aircraft re-delivery charges, Aircraft heavy maintenance and major engine repairs, which are in the nature of contingent expenditure and not on actual basis? provisions made for expenses in respect of frequent flyer programme although the same was contingent in nature? - Held that:- in relation to the applicability of circular No.9 of 1943 issued on 23rd March, 1943 and the permissible deductions thereunder being inconsonance therewith the matter will have to go back to the Assessing Officer. The Assessing Officer will follow the instructions issued in the 1943 circular for dealing with the case in which the assessee has acquired the Aircrafts under what is known as a hirepurchase agreement and particularly clause (iii) thereof in relation to the assessee before us. The Assessing Officer shall complete this exercise as expeditiously as possible and within a period of two months from the date of receipt of copy of this order.
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2014 (5) TMI 706
Invocation of section 179 of the Act - Liability of the directors of private company in liquidation Held that:- The dues were paid to the creditors at the time when assessment order was yet to be passed - The assessee made a bona fide claim of set off - It may be that according to the AO such claim was not maintainable - The issue has not yet achieved finality and is pending before the appellate authority - There is nothing on record to suggest that the company raised such a claim wholly mala fide - the ground that while paying all other creditors, the company made no provision for income tax liability, was not a valid ground - on the date when the creditors were paid off, there was no outstanding liability towards the income tax department. During the devastating earthquake of 26.01.2001, the hotel building was severely damaged - The ground that the directors should have taken appropriate measures to protect the property of the company is neither maintainable in law nor in fact - The company had insured its property - It was not a case where the directors failed to take measures for protecting the property or interest of the company as suggested by the Tax Recovery Officer - by itself it didnt mean that the directors were negligent in performing their duties or they committed breach of duty in affairs of the company. The ground being deliberately false claim raised by the company is not borne out from any material on record - if the company raises a completely bogus and mala fide claim of tax deduction, with the sole purpose of defrauding the Revenue, it may still be open for the Revenue to argue that provisions of section 179 of the Act would be applicable thus, the order of the Tribunal is set aside Decided in favour of Assessee.
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2014 (5) TMI 705
Valuation of share - Block transferred from investment to stock in trade - Whether the valuation of the shares of Off-Shore India Limited made on 1st April, 2003 when the block was transferred from investment to stock-in-trade was justified in law Held that:- The assessee did not value the shares of Off Shore India Limited on 1st April, 2003 as per the mandate appearing from the guidelines - The assessee valued the shares at more than Rs. 5 per share whereas the shares on the date of conversion had a negative value of Rs. 1.89 paisa each on the basis of the balance sheet as on 31.03.03 - both the CIT (A) and the Tribunal failed to notice the fact that a similar treatment can be made where investment was in shares of a similar nature - There is no rule or principle which enjoins similar treatment between the two dissimilar objects. The shares of Off Shore India Limited were valued at a negative price on 29th April, 2004 by the Auditor of the assessee on the basis of the balance sheet as at 31.3.2003 whereas the shares of Yield Investment Private Limited were treated by the assessee during the Financial Year 2003-04 - The shares of Yield Investment Pvt. Ltd. were tradable shares whereas the shares of Off Shore India Limited were junk shares - The AO did not in fact apply discriminatory standard - He has demonstrated that the assessee valued the closing stock with respect to the shares of Yield Investment (P).Ltd. at the same rate at which they were valued at the beginning of the year whereas the block of 45,00,000 shares of Off Shore India Limited valued by the assessee on 1st April, 2003 at more than Rs. 5/- per share was valued on 31.3.2004 at Re.1/- only - It is not a fact that the assessee had given the same treatment to the shares of Off Shore India Limited and Yield Investment (P) Ltd. thus, the order of the Tribunal is set aside - as opined by both the CIT (Appeals) and the learned Tribunal The Valuation of the shares of Off Shore India Ltd. would be made in accordance with law and in doing so the Explanation to Rule 11 of 3rd Schedule to the Wealth Tax Act, 1957 may be taken into consideration by the AO - Decided against Revenue.
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2014 (5) TMI 704
Block assessment - Return filed beyond the due date u/s 139(1) of the Act - Whether the Tribunal was justified in holding that in the Block period, for the AY 1994-95, 1996-97, 1998-99, 1999-2000 and 2000-2001, though the return of income had been filed by the assessee beyond the date prescribed u/s 139 (1) of the Act, the income disclosed cannot be brought to tax in the Block assessments as per section 158 BB of the Act Held that:- Block assessment is not intended to be substitute for regular assessment - Its scope and ambit is limited in that sense of the materials unearthed during search - This is in addition to the regular assessment already done or to be done. The income unearthed on the basis of evidence found as a result of search or requisition of books of account or documents or such other materials or information available with the AO and relatable to such evidence alone could be assessed so as to declare undisclosed income for all the six assessment years in the block period - The Tribunal has not examined the case in proper perspective - The income that has been disclosed by the assessee in the returns of income, other than the income unearthed as a result of search, cannot be treated as undisclosed income while assessing the income during the block period thus, the matter is remitted back to the Tribunal for fresh adjudication Decided in favour of Revenue. Acceptance of agricultural income Failure to prove the carrying on of agricultural activity Held that:- The Appellate Authority deleted the addition as undisclosed income for the block period - the agricultural income for 1995-96 was accepted by the AO - the income of Rs.3,50,000/- for the AY 1996-97, was deleted being undisclosed income for the block period there was no reason to interfere in the order of the Appellate Authority and the Tribunal Decided against Revenue. Availability of deduction u/s 54 and 54F of the act assessees had sold their undivided interest in the land - Capital gains derived Held that:- Section 54F provides that if the assessee has a residential house he cannot seek the benefit of long term capital gain - Under this provision, merely because, the words residential house are preceded by article 'a' would not exclude a house shared with any other person - Even if the residential house is shared by an assessee, his right and ownership in the house, to whatever extent, is exclusive and nobody can take away his right in the house without due process of law - co-owner is the owner of a house in which he has share and that his right, title and interest is exclusive to the extent of his share and that he is the owner of the entire undivided house till it is partitioned - The right of a person, may be one half, in the residential house cannot be taken away without due process of law or it continues till there is a partition of residential house the order of the Tribunal is set aside Decided in favour of Revenue. Valuation of closing stock of immovable property Held that:- The Tribunal was of the view that the amount received may include both capital as well as profit, if any - treating the entire amount as income would also not be correct - the question as regards valuation of closing stock in respect of the land in litigation deserves to be considered afresh in the light of the settled position of law that the assessee, in such a situation, has a choice to value the stock at cost or market price whichever is lower - None of the authorities have considered this question in proper perspective - It was necessary to find out the value of the land at which it was purchased and the market price, at the relevant time, in the light of the fact that the property was in litigation, and then fix the liability thus, the matter is remitted back to the Tribunal for fresh adjudication - Decided in favour of Revenue. Treatment of undisclosed income - Amount standing in credit - Whether the Tribunal was justified in holding that the amount standing to the credit of G. Anand having not been claimed as expense cannot be treated as undisclosed income of the assessee during the block period Held that:- The amount of Rs.10,00,000/- remained unexplained and treating the same as undisclosed income - the assessee has not only not disclosed the said amount but failed to file return of income for the AY 1998-99 before the search - he did not file return of income for this AY within the time stipulated u/s 139(1) and (4) of the Act - he also failed to maintain books of account for the AY thus, the amount of Rs.10,00,000/- has rightly been brought to tax - the Tribunal did not consider the materials on record in proper perspective and has simply by single sentence in the order set-aside the concurrent findings of fact recorded by the authorities below - the order of the Tribunal is set aside Decided in favour of Revenue.
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2014 (5) TMI 703
Addition made u/s 68 of the Act - Addition of donations collected and interest Genuineness of transactions Held that:- The Tribunal was rightly of the view that the onus is upon the assessee to establish the nature of entries in his books of account including the bank account, expenditure and sources of the same with evidence - The onus cast upon the assessee is not an empty formality but is to be discharged with evidence which can stand the test of judicial security - the assessee claims that it had received certain amount on behalf of another person who in turn is in charge of a Gurdwara and he was out of country, the amount remitted by the Sangat being in the form of foreign exchange, after encashment was deposited in his bank account, which latter was returned to the person by cheque - assessee has tried to explain the source of money deposited in his bank account, without evidence - Mere explanation is not sufficient to discharge the onus cast upon him under the Act - the assessee has not established the veracity of his explanation - the affidavit of a third person is mere self-serving evidence unless the same is backed by some other evidence justifying the nature of the transaction or the concerned party appears in person to verify its contents thus, the order of the Tribunal is upheld and as such no substantial question of law arises for consideration - Decided against Assessee.
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2014 (5) TMI 702
Rejection of books of accounts Inflation of price - Held that:- The findings of fact recorded by the authorities below did not call for any interference as they were based on appreciation of evidence on record - The assessee has milled almost equal paddy in comparison to previous year, sales have increased by 29% but manufacturing expenses have increased by 45.93% - the increase in the figures of sales is partly due to opening stock at ₹ 92,94,527/- for which no manufacturing expenses have been incurred as there is no paddy in the opening stock - Had there been no sales out of opening stock, the increase in sales would have been even lower - It shows that either the assessee has inflated the expenses or depressed the sales - The cases relied upon by the assessee cannot be followed as they were based on individual fact situation involved and the Court in view of the findings of fact no substantial question of law arises for consideration Decided against assessee.
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2014 (5) TMI 701
Addition made Dealing in scrap Inflated expenses Material not examined - Held that:- The assessee did not appear before the AO in the proceedings in pursuance to the revision order passed u/s 263 - the AO has not examined any material on record while deciding the issue of inflated expenditure - AO has made additions simply on the basis of difference found between the details containing in the floppy seized during the search and the expenditure booked in the audited final accounts of the assessee the contention of the assessee is accepted that the AO has made addition mechanically without proper examination of the record - the CIT(A) has also not made any effort to get the issue properly examined and dismissed the appeal of the assessee on the basis of presumption raised u/s 292C thus, the order is set aside and the matter is remitted back to the AO for fresh adjudication Decided partly in favour of Assessee.
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2014 (5) TMI 700
Admission of appeal Rule 19 of the ITAT Rules, 1963 - Held that:- Following Commissioner Of Income-Tax. Versus Multiplan India (Private) Limited [1991 (5) TMI 120 - ITAT DELHI-D] - issuance of notice under Rule 19 itself does not make the appeal admissible - Non-attendance makes the appeal defective and the assessee has to correct the same by giving proper address - the appeal to be unadmitted with a liberty to assessee to move appropriate application and correct the defect in the memo about its address to ensure a proper hearing of the appeal Decided against Assessee.
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2014 (5) TMI 699
Confirmation of addition made u/s 68 of the Act - Search and seizure Cash sales made Held that:- There is no law which prohibits a trader or a manufacturer in making cash sales Relying upon R.B.Jessaram Fatehchand (Sugar Deptt) VS. CIT [1969 (7) TMI 10 - BOMBAY High Court ] - sales can be in cash and it is hardly necessary for the seller to bother about the name and address of the purchaser - so long as the availability of stock is there and there is nothing adverse against the cash memos issued by the assessee, such cash sales cannot be doubted - the volume of such cash sales at ₹ 22.06 is to be seen in the light of the assessees total turnover of ₹ 10.29 crore - It is but natural that if a customer makes cash purchase and lifts the goods, there is no duty cast upon the seller to insist for the address of the purchaser the assessee has himself offered the amount of cash sales as his income by duly including it in his total sales -once a particular amount is already offered for taxation, it cannot be again considered u/s 68 of the Act - thus, any addition cannot be made by treating cash sales as bogus Decided in favour of Assessee. Deletion of addition made during search Held that:- The assessee has stated before the AO that a sum of ₹ 30.62 lacs belonged to Premji Bhanushali and Radha Bhanushali - The fact was confirmed by these two persons as well - when the assessees brother and his wife admitted the possession of cash belonging to them, there can be no reason for making addition in the hands of the assessee in respect of cash when the facts and circumstances amply show that the cash did belong to them - It is for them to explain the source of cash available with them in their respective hands - CIT(A) has rightly appreciated the facts in directing to delete the addition by asking the AO Decided against Revenue. Deletion of amount credited to capital account Held that:- The AO specifically requisitioned the assessee to explain the source of fresh capital amounting to ₹ 19.00 lacs and odd introduced in his books of accounts - The assessee gave only sketchy reply which has been reproduced above - CIT(A) was not justified in deleting this addition by rather strangely mentioning that the addition was made in a summary manner - when a certain sum is credited to the assessees capital account, the onus is on him to explain the source of such deposit to the satisfaction of the AO - thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication Decided in favour of Revenue.
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2014 (5) TMI 698
Deletion of penalty u/s 271(1)(c) of the Act Applicability of section 271AAA of the Act Due date of filing already expired Held that:- The search took place on 05.10.2007 - The immediate previous year ended on 31.03.2007 for which the due date of filing the return of income was 31.10.2007 - The assessee had filed its original return of income on 31.10.2007 - the provisions of section 271AAA squarely apply, which relates to the search initiated u/s. 132 on or after the first day of June 2007 but before the first day of July 2012 - Clause 3 of section 271AAA clearly suggests that it excludes levy of penalty u/s 271(1)(c) of the Act - the AO has levied penalty u/s. 271(1)(c) of the Act which is against the facts and also against the provisions of the law thus, there is no reason to interfere in the order of the CIT(A) Decided against Revenue.
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2014 (5) TMI 697
Disallowance made u/s 14A of the Act r.w. Rule 8D of the Rules Held that:- The assessee has incurred the expenses which could be either directly or indirectly attributed to the income or for earning the same, a disallowance to the proportionate extent would follow Relying upon Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - it is not only the investment in shares, yielding dividend, but also that in the partnership firm that would stand to be reckoned for the purpose of the relevant investment in computing the disallowance under rule 8D, i.e., where no interest income is contracted for, so that the only income that could arise from the said investment is the share of profit, which is tax exempt. Inclusion of bank FDRs - Held that:- The Revenue authorities mechanically apply the formula of r. 8D and did not apply the corrective even at the appellate stage thus, the matte is liable to be remitted back to the AO for fresh adjudication Decided in favour of Assessee.
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2014 (5) TMI 696
Maintainability of appeal - Monetary limit of appeal - Filing of appeal or application for reference by income-tax authority u/s 268A of the Act - Connectivity of validity of assessment with issue of warrant Warrant issued in joint names Held that:- An appeal may be preferred by the Revenue on the merits before the Appellate Tribunal provided the tax effect is exceeded the monetary limit of Rs.3,00,000 in CBDTs Instruction No.3 of 2011, dated 9th February, 2011 it has also been clarified that in supersession of the above instruction, it has been decided by the Board that Departmental appeals may be filed on the merits before Appellate Tribunal, High Courts and Supreme Court, keeping in view the monetary limits and conditions specified Relying upon CIT & Anr v. Ranka and Ranka [2011 (11) TMI 449 - KARNATAKA HIGH COURT] it is admitted by the Revenue that the tax effect was not exceeded the monetary limits in any of the assessees as per the Instruction No.3 of 2011 of the CBDT. As per the provisions of s. 268A of the Act the Department is always at liberty to proceed against the assessees on other cases of identical issue, if they are above the monetary limit prescribed - Before parting, we would like to mention that the Revenue has not brought to our notice any exempted situation mentioned in Para 8 of Board Instruction No.3 of 2011 dated 9th February, 2011 whereby appeal is to be filed despite the tax effect being below the prescribed monetary limit Decided against Revenue.
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2014 (5) TMI 695
Levy of penalty u/s. 271(1)(c) of the Act Suppression of job charges Unexplained expenditure - Held that:- The addition was made by the AO on account of suppression of job charges and unexplained expenditure - the Tribunal vide order dated 28.12.2012 confirmed the addition to the extent of Rs. 13 lac and Rs. 10 lac on account of suppression of job charges and unexplained expenditure respectively - the addition made by AO has been reduced on account of the order of Co-ordinate Bench of Tribunal and thereby the addition to the extent upheld by the Tribunal has attained finality - since the penalty is on the original disallowance made by AO - the levy of penalty on the such amount cannot be sustained thus, the matter of levy of penalty is remitted back to the AO for fresh adjudication Decided in favour of Assessee.
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2014 (5) TMI 694
Addition u/s 69A of the Act Unexplained cash deposits in back account - Date of purchase and sale of land do not match Documents not made available Held that:- The facts involved in the subject matter have not been streamlined in a proper manner and the adverse inferences have been summarily drawn - If the assessee is owner of above pieces of land holding GPA, it gives a fair assumption that the land could be sold - if there is no subsequent deposit in assessees bank account which may give indication that the sale price have been fetched by the assessee, then the issues are to be decided on the basis of preponderance of probabilities - such preponderance has to be reasonably worked out - besides, copy of AIR information needs to be given to the assessee and the summons having not come back unserved or marked as no such person, implies that persons are available Relying upon Commissioner of Income-Tax, Orissa Versus Orissa Corporation Pvt. Limited [1986 (3) TMI 3 - SUPREME Court] - the AO has to bring the summons proceedings to a logical conclusion - Merely because summoned person did not respond, cannot be held against assessee - thus, the matter is required to be remitted back to the AO for fresh adjudication Decided in favour of Assessee.
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2014 (5) TMI 693
Failure to audit accounts u/s 44AB Payment received exceeded monetary limit Held that:- Assessee contended that he was acting as an agent and had arranged the trucks owned by others on hire for his principal and the receipts which was received by him was received in a fiduciary capacity which did not belong to him and were paid by him and he had only retained his commission the contentions of the assessee, prima facie, appears of be bonafide and the Revenue has not brought any material on record to support that the belief of the Assessee was not bonafide - CBDT vide Circular No 452 dated 17.3.1986 regarding the applicability of section 44AB in the cases of commission agents, arhatias etc has clarified that in the case of agent whose position is similar to that of Kuccha Arhatia, the turnover is only the commission and does not include the sales on behalf of the Principals. Penalty u/s 271B of the Act Held that:- The AO is vested with discretion to levy the penalty - when there is technical or venial breach of the provisions of law, the ends of justice require that discretion should not be exercised in favour of punishing a minor default Relying Hindustan Steel Ltd. Vs State of Orissa [1969 (8) TMI 31 - SUPREME Court] - no penalty u/s 271B of the Act was imposable - Decided in favour of Assessee.
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2014 (5) TMI 692
Rate of depreciation on electrical cables & fittings connected with windmill Held that:- Specialized foundation and specialized area specifically earmarked to facilitate a flow of wind without hindrance, and specialized electrical fittings and high tension lines are all basic requirements for a wind mill plant - None of the requirements including the premises can be seen detached from what is called a wind mill since a wind mill to work these are essential all these are necessary inputs going into ultimate cost of wind mill thus, the electrical cables, fittings and other electrical works connected with windmill are single composite unit are eligible for depreciation at the rate of 80% - Decided against Revenue.
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Customs
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2014 (5) TMI 714
Penalty u/s 112 - Mis declaration of goods - Goods declared as Chicpeas - ownership of goods - financier of importer - Held that:- goods were declared in the IGM as 'Chic Peas' and the IGM was in the name of M/s. Dhanlaxmi Enterprises (I). Section 2(26) of the Customs Act, 1962, defines who the importer is. As per the said provisions, the importer is who files the Bill of Entry for importation of the goods and who claims the owner of the goods. Admittedly, in this case no Bill of Entry has been filed and nobody claimed to have imported the goods, although the findings of the adjudicating authority state that Shri Ravi Divecha was the master-mind to import the goods. In that case, it cannot be held that Shri Ravi Divecha or Shri Pravin Gupta are the importers of the impugned goods. As nobody has claimed to be owner of the goods therefore, as per the IGM the importer is only M/s. Dhanlaxmi Enterprises (I). If at all penalty is to be imposed that has to be considered by the adjudicating authority during the adjudication proceedings. In this case, a penalty of ₹ 50,000/- have also been confirmed against Shri Mukund Mayani, proprietor of M/s Dhanlaxmi Enterprises (I). Further, it is on record tht Shri Pravin Gupta has financed a sum of ₹ 5,00,000/- to Shri Ravi Divecha on persuasion of Shri Jayesh Gosalia, who is not an impugned party to the show-cause notice. To finance an importer does not make the appellants being importer of the goods and in the case of Ashwin Doshi (supra) this Tribunal held that although the appellant has financed for the importation of the consignments but there is no whisper about the ownership and the financer having handled or have made any declaration on the Bill of Entry filed, penalty under Section 112(a) cannot be imposed - decided in favour of assessee.
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2014 (5) TMI 713
Valuation of goods - Inclusion of royalty in assessable value of goods - Suppression of facts - Invocation of extended period of limitation - Evasion of tax duty - Difference of opinion - Decision of Third member - Bar of limitation - The royalties/licence fees paid for the import of beta / digibeta tapes containing films are includable in the value of the said tapes in terms of Rule 9(1)(c)/ Rule 10(1)(c) of the Customs Valuation Rules, as they stood at the relevant time, inasmuch as such payments were made / required to be made prior to importation in terms of the agreement between the importer in India and the supplier abroad and consequently the demand of differential duty of ₹ 79,19,049/- under the provisions of Section 28(1) of the Customs Act, 1962 is sustainable in law - Held that:- appellants made import of beta tapes and digi-beta tapes falling under Chapter Heading 8523 of the Customs Tariff during the period in dispute. The recorded media in question contains feature films programmes etc. The duty liability under the Customs Tariff was discharged by the appellant only on the cost of media as declared by the courier agency based on invoice submitted by the foreign supplier. As per the sale agreement under which the goods were sold to the appellant on payment of licence fee, the appellant has been given rights such as video rights. Cinematic rights, television rights and other ancillary rights. These rights also include the right to exhibit and right to broadcast. The royalty/licence fee is charged either on a flat lump sum basis or on minimum guarantee basis. As per the agreement, the payment of royalty/licence fee is a condition for sale of the goods in question. The royalties/licence fees paid for the import of beta/digibeta tapes containing films are includable in the assessable value of the said tapes. However, the demand in the present case is time barred and consequently, Customs duty demand with interest and penal consequences are not sustainable - Decided partly in favour of assessee.
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2014 (5) TMI 712
Waiver of pre deposit - Import of of mobile phone accessories using the IEC code - Violation of provisions of Rule 3 of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - Held that:- From the statements recorded from the appellant as also the IEC holder, it is evident that the appellant Avesh Hanif Pitodia is the real importer and he has placed the order with the foreign supplier, engaged the CHA, paid the Customs duty and has taken delivery of the goods M/s Cell On Traders in whose name of the goods have been imported as declared in the imported documents are merely a dummy or a front for the illegalactivities undertaken by the appellant and the said firm is a proprietorship belonging to the employee of the appellant. It is also on record that merely for the use of the IEC, the appellant has been paying a fixed sum per container basis to the IEC holder. It is further seen that the appellant has been importing Nokia brand mobile phone accessories which are duplicate in nature and therefore, violating of IPR (Imported Goods) Enforcement Rules is also involved. Thus it is not a mere case of misuse of IEC code but involves violations of a number of laws including undervaluation and mis-declaration of the goods - The appellant not only mis-declared the value of the goods but also imported duplicate goods bearing the brand name of well known brands there by contravening the provisions of IPR (Imported Goods) Enforcement Rules, 2007 and Foreign Trade (Regulations) Rules, 1993. Thus the appellant has not made out a case for total waiver of the penalty imposed on the appellant - Conditional stay granted.
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2014 (5) TMI 711
Penalty u/s 117 - violation of Section 61 of Customs Act, 1962 - extension of time for warehousing the goods - Held that:- no time limit has been prescribed for filing extension for warehousing of the goods. As no time limit is prescribed, therefore, appellant are at liberty to file application for extension of warehousing till the period they have not been asked to pay duty. In this case, admittedly, after expiry of the bonded period, no duty liability was fastened on the appellant and extension has been granted to them. In these circumstances, the appellant has not violated provision of Section 61 of the Customs Act, 1962 - penalty under Section 117 of the Customs Act, 1962 are not imposable - Decided in favour of assessee.
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Service Tax
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2014 (5) TMI 727
Security services - Invocation of extended period of limitation - appeal no. ST/275/2011-Mum. - period 1st February 2001 to 30th September 2004. - Held that:- appellant was not declaring the value of the service tax correctly. It was based upon the painstaking exercise done by the Revenue covering 422 customers that the correct value of the services and the amount of service tax have been computed. This is a clear cut case of suppression of facts with willful intention to evade payment of duty. ST-3 returns field during the period did not reflect the correct position. - Demand invoking extended period of limitation confirmed - Decided against the assessee. Appeal no. ST/85626, 85627, 85633/2013-Mum. - Extended period of limitation - Security Agency Services, Manpower Recruitment or Supply Agency Services, Business Support Services and Cleaning Activity Services. - Security Agency Services provided to SEZ and ONGC - Held that:- In the facts and circumstances particularly when all the activities were informed, detailed investigation had taken place and another show cause notice invoking extended period was already issued, one cannot justify invocation of extended period on this ground. Commissioner is correct in holding that in view of Hon'ble Supreme Court's Decision in the case of Nizam Sugar Factory (supra), extended period of limitation cannot be invoked in the present facts and circumstances. We also note that Hon'ble Supreme Court decision in the case of Chemphar Drugs Liniments (supra) is fully applicable in the present circumstances. - Decided against the revenue. Demand for normal period of limitation - Held that:- adjudicating authority has found that the appellant has produced the requisite certificate in requirement of security agency services provided to SEZ unit or to developers of the SEZ and based on these certificates along with Chartered Accountant certificate, and hence adjudicating authority found that the demand does not survive except a small amount relating to one STEP unit (which was confirmed). - order of original authority is correct - Decided against the revenue. Appeal no. ST/85713, 86826, 86827/2013-Mum - valuation - security services provided to ONGC - demand in respect of reimbursement / compensation received - Held that:- The fact that ONGC is not paying to the appellant/assessee will not make any difference as far as appellant/assessee's liability to pay the service tax to the Government is concerned. The fact that ONGC is not paying to them is a matter between the appellant/assessee and ONGC. We, therefore, hold that appellant is liable to pay the service tax as the services provided to ONGC and on the gross amount including salary, EPC, ESIC etc. - Decided against the assessee. Service tax on cleaning activity - scope of show cause notice - Held that:- It may be true that the demand notices did not speak of the cleaning service or demanded the service tax but same was demanded as Manpower Recruitment and Supply Service, but the fact remains the appellant/assessee was aware of the same, has provided the same service, is not disputing the taxability of the said service and therefore, at this stage appellant/assessee cannot be permitted to go back on his words. Even the payments made by the appellant/assessee were voluntarily and cannot be considered under duress as the payments were made after the adjudicating order was passed and before the appeals were filed before this Tribunal. - Demand confirmed - Decided against the assessee.
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2014 (5) TMI 726
Technical inspection and certification agency - sovereign and public activities - activities of technical inspection and certification of seeds produced by seed producers in Maharashtra State as per the Seeds Act, 1966 - Circular No. 89/7/2006-ST dated 18.12.2006 - Penalty - Interest - Held that:- The said Seed Act provided for regulating the quality of certain varieties of notified seeds for sale. It is noted that the provisions of the said Act are applicable only for the notified varieties of seeds. Further even in respect of notified varieties of seeds no such certification is required, if the seeds are grown by a person and sold or delivered by him on his own premises direct to another person for being used by that person for the purpose of sowing or planting. It is thus clear that only if somebody wants to sale specified varieties of seeds through the intermediaries or in the market then certification from the appellant or similarly placed agency is required. Activities of the appellant cannot be considered as mandatory and statutory functions provided by a sovereign/public authority. - the activities of the appellant are not covered by the said Circular dated 18.12.2006 and are chargeable to Service Tax under the Technical Inspection and Certification Service. - Decided against the assessee. Extended period of limitation - Held that:- Service became taxable with effect from 1.7.2003 and the appellant started collecting the same with effect from 1.4.2005 and the amount collected by the appellant was initially kept in bank account which alongwith interest have already been deposited with the revenue. Keeping in view the fact that the service became chargeable to service tax only with effect from 1.7.2003, the fact that appellant is an organization controlled by the Government of Maharashtra, the certification of the seed is done by the appellant as per the provisions of the Seeds Act, 1966 read with Seeds Rules, 1968, the said Act provides for regulating the quality of certain seeds for sale, we do not find that ingredients of proviso to Section 73 of the Finance Act, 1994 are present in the facts and circumstances of the case. Therefore, the demand within the normal period of limitation is only upheld and that beyond the same is set aside - Decided partly in favour of assessee.
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2014 (5) TMI 725
CENVAT Credit - whether they were eligible for Cenvat credit of Service Tax paid on housekeeping service, rent-a-cab service, outdoor catering service, manpower recruitment, design service, advertising service and gardening services - Held that:- under the provisions of Section 11 of the Factories Act a manufacturer is required to maintain the factory neat and clean. We are of the view that services availed by the appellant for keeping the factory neat and clean is a service essential for manufacturing operations and, hence, the same would be covered by the definition of input service. service availed is taxable service of manpower supply for the purpose of cleaning which is a taxable service. As regards rent-a-cab service, we find that the cenvat credit in respect of the it same is admissible in view of the judgment of Honble Karnataka High Court in the case of Stanzen Toyotetsu India (P) Ltd. (2011 (4) TMI 201 - KARNATAKA HIGH COURT ). As regards outdoor catering service, the same has been availed for providing canteen facility to the workers in the factory and in respect of the same. Honble Bombay High Court in the case of CCE, Nagpur v. Ultratech Cement (2010 (10) TMI 13 - BOMBAY HIGH COURT ) has held that the cenvat credit would be admissible. The design and advertising service are also covered by the definition of Input Service. The appellant thus, have a strong prima facie case - stay granted.
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2014 (5) TMI 724
CENVAT Credit - Whether the respondents is entitled to Cenvat credit of Service Tax paid on housekeeping, nursery and Horticulture services availed by the respondents - Held that:- Commissioner (Appeals) has allowed the credit by following the decision of the Larger Bench of the Tribunal in the case of Commissioner v. GTC Ltd. [2008 (9) TMI 56 - CESTAT MUMBAI] by holding that both the services are integrally connected with the business activity of the assessee. He has also relied upon the Tribunals decision in the case of Millipore India Ltd. v. CCE, Bangalore [2008 (11) TMI 97 - CESTAT, BANGALORE] holding that modernizing, renovating and repair activities are covered by the definition of inputs services including the services of landscaping. It was observed much importance is given in keeping the environment of factory in the proper manner and therefore, credit of Service Tax paid on these services is allowed - Decided against Revenue.
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2014 (5) TMI 723
CENVAT Credit - input services - commission given to the commission agents for sale of their final products - Held that:- Appellant is manufacturer of electric motors and utilises the services of commission agents for sale of their final products. The commission agent receives the commission for sale of goods and for services rendered, discharges the service tax liability. In my considered view, the activities of the commission agent in selling products of the appellant would be covered under Rule 2(l) - appellant has made out a prima facie case for waiver of pre-deposit of amounts involved. - STay granted.
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Central Excise
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2014 (5) TMI 719
Condonation of delay - Bar of limitation - power of Committee of the Commissioners to review its order - Whether in the facts and circumstances of this case the Tribunal has committed substantial error of law in rejecting application for condonation of delay and consequently dismissing appeal of the appellant - Held that:- There was no opinion expressed by the Committee on the files. No reasons are stated why the Committee decided to review its previous decision. In fact, the file notings also do not suggest that the earlier decision be reviewed and appeals now be presented. The members of the Committee therefore, at-least from the file notings do not appear to have taken any formal decision that the Committee is of the opinion that the decision of the Commissioner (Appeals) is required to be challenged. Even otherwise in the facts of the present case, we are clearly of the opinion that it was not open for the Committee to review its decision which was taken long back. In June, 2006, the Committee took a conscious decision not to appeal. For the purpose of these appeals, we are prepared to accept the contention of the counsel for the appellant that the Committee while doing so did not perform any judicial function and therefore, being merely an administrative action, was open to review without any limitation of res judicata. Even then the question arises whether, such a decision can be reviewed at any time without any reference to the period. The answer has to be clearly in the negative. The Committee which took the decision after due deliberation and examination of facts that in its opinion the decision of the Appellate Commissioner was not required to be challenged, could have on better facts or correct law being brought to its notice, within reasonable time thereafter, recalled its decision and instead directed the authorised officer to file appeal before the Tribunal. However, such liberty cannot be had at any point of time after inordinate delay. - Decided against Revenue.
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2014 (5) TMI 718
Condonation of delay - Bar of limitation - Whether in the facts and circumstances of the case, the Tribunal committed a substantial error in allowing the appeal of the Department ex parte holding that assessees appeal before the Commissioner (Appeals) under Section 35 of the Central Excise Act, 1944, was time-barred - Held that:- appellant herein before the authorities that though the order of Assistant Commissioner was dated 20-3-2006, it was received in his office on 6-4-2006 by the clerk of the firm received it, who did not inform the proprietor-assessee about it, the moot question before the Tribunal was that what could be said to be the date of communication of the order. The issue of limitation was dependent thereon. Not only that the Tribunal decided the issue of limitation without hearing the assessee. While it was open to the Tribunal to arrive at its own findings it ought to have done the same only after giving opportunity of being heard to the assessee and not ex parte. Observance of natural justice and affording hearing to the respondent was sine qua non for the Tribunal in its adjudicatory process - The starting point of limitation under Section 35 was the date of communication of the order which was required to be decided with reference to the facts pleaded by the assessee. In other words the question of limitation was inextricably linked with the factual plea. Therefore also, it was not only necessary but was indispensable for the Tribunal to decide the same only after bi parte hearing and after giving the opportunity to the other side - Matter remitted back - Decided in favour of assessee.
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2014 (5) TMI 717
Condonation of delay - Bar of limitation - Whether in the facts and circumstances of the case, the Tribunal used its judicial discretion in the interest of justice while deciding the sufficient cause in the application for condonation of delay filed by the appellant - Held that:- Appeal Memorandum and related documents also contain the name of M/s. Global Overseas as the appellant. However, the order copy was forwarded to M/s. Global Services. File contains the returned postal cover. It also contains the address and it is seen that the cover was addressed to M/s. Global Services. The returned cover contains correction, whereby and whereunder, M/s. Global Services was corrected as M/s. Global Overseas. This appears to be a subsequent correction, more particularly after the return of the cover. This aspect was not considered by the Tribunal. The very fact that the postal cover was sent to M/s. Global Services instead of M/s. Global Overseas itself supports the case of the appellant that they have not received the copy of the order within the statutory period so as to enable them to file the appeal before the Tribunal. - Tribunal was not justified in rejecting the appeal as barred by limitation - Matter remitted back - Decided in favour of assessee.
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2014 (5) TMI 716
Penalty under Section 11AC of the Central Excise Act, 1944, read with Rule 15(2) of the Cenvat Credit Rules, 2004 - Suppression of facts - Evasion of duty - Held that:- On perusal of the show-cause notice there is no allegation of fraud, collusion or willful mis-statement or suppression of facts or contravention of Central Excise Act/ Rules, 1944 with intent to evade payment of duty. Therefore, the extended period of limitation is not invokable and accordingly, penalty is not warranted - Decided in favour of assessee.
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2014 (5) TMI 715
CENVAT Credit - Group Insurance Scheme - whether the appellant is eligible for the benefit of credit of service tax paid on Group Health Insurance Policy obtained by them in respect of their employees and their family members - Held that:- Section 38 of the ESI Act requires all employees to be insured. This shows that it is not obligatory for an employer to insure that the employees family also are covered. When an employee is covered by ESI Act no doubt his family is also eligible. However it does not mean that there is a statutory obligation on an assessee to provide insurance coverage to the families of employees and Section 38 requires only employees to be covered. Therefore the submission relating to ESI Act cannot be accepted - if the credit is not admissible, the question of examination as to whether such expenditure forms cost of production does not arise. In this case after examining the definition and the relevant statutory provisions, what is seen is that the service tax paid on Group Health Insurance for the family of the employees can in no way be held to be relatable to the business of manufacture of an assessee - Matter remanded back for re quantification - Decided partly in favour of assessee.
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CST, VAT & Sales Tax
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2014 (5) TMI 722
Shaky Reassessment - Assessment proceedings in violation of natural justice No opportunity of cross examination when cash bill books cheque books etc were stolen away Jurisdiction u/s 16 of the Tamil Nadu General Sales Tax Act, 1959 Held that:- It is no doubt true that the assessee had not produced books of accounts before the Officer, for which, the assessee had given valid reason that because of his ill health, he could not appear on 07.12.1991 in respect of the notice dated 19.11.1991 regarding reassessment - Without even a verification and considering the prayer for adjournment, the reassessment order seems to have been made on 10.12.1991, which itself is a violation of principles of natural justice. When the appeal before the First Appellate Authority related to 1989-90, we do not understand the relevance of 1986-87 for reopening of the assessment of the year 1989-90 - Tribunal confirmed this order - None of the authorities had discussed as to the source of these bills and how the said bills were related to the assessee - Merely because there were certain notes carrying the name of the assessee, per se, without any enquiry or material, AO could justifiably assume jurisdiction u/s 16 of the Tamil Nadu General Sales Tax Act, 1959. The AO did not say in his reassessment order about the materials not considered while making the original assessment - Thus, the source of getting the materials relied on by the AO for reassessment remaining unanswered and unexplained, we do not find any ground to upheld the order of the Tribunal - Although, Tribunal is a final fact finding authority, yet without any material, it confirmed the reassessment order and the reasoning does not rest on any material - Therefore, the basis of the re-assessment itself being very shaky, in the absence of materials disclosed as to whether the reassessment was based on account of inspection or based on third party's information and opportunity not being granted to the assessee, No ground found for sustaining the order of assessment Therefore, the Revision stands allowed - The order of the Tribunal is set aside Decided in Favour of assessee.
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2014 (5) TMI 721
Validity of the order of the Tribunal Claim for exemption - Constructive delivery Held that:- Judgment in STATE OF TAMIL NADU v. N. RAMU BROTHERS [1992 (9) TMI 324 - MADRAS HIGH COURT] followed - The Appellate Assistant Commissioner rightly pointed out that there was no obligation on the part of the carrier to transport the goods further to any place beyond Coimbatore - Subsequent arrangement that the assessee had with the transporter to carry the goods to another place for a different person, however, did not make the movement a continuation of the original interstate sale - When once the movement of goods terminated at Coimbatore, on the doctrine of constructive delivery, the authorities rightly rejected the assessee's claim for exemption u/s 6(2) - Even though there were separate sales at the point of time in the eye of law, there were two deliveries which synchronized at the same point of time - Further movement done as per the fresh invoices prepared and trip sheets and way bill clearly pointed out to fresh movement from Coimbatore to other State and to the local purchaser from the assessee - The condition as stipulated in Explanation I to Section 3(b), thus not satisfied - A reading of the order of the Tribunal shows that without adverting to any of these facts, Tribunal merely accepted the statement from the assessee to grant the relief. Going by the materials indicating the break in the journey of the interstate movement of goods, it is held that the findings of the Tribunal is without any material and there are no materials to disturb the findings given by the Appellate Assistant Commissioner - Thus, having regard to the perversity in the order of the Tribunal there is no hesitation in allowing this revision, thereby, setting aside the order of the Tribunal Decided in favour of Revenue. Levy of Penalty Held that:- Having regard to the facts referred to by the first appellate authority, which upheld the assessment on actual stock variation and the estimation made on equal addition, there is no ground to sustain the same - Consequently, the order of Tribunal stands confirmed on penalty - Revision is allowed Decided against Revenue.
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2014 (5) TMI 720
Leviability of Tax - Advertisement via Hoardings Hoardings being immovable property Not subject matter of Sale as goods - U/s 3A of the Tamil Nadu General Sales Tax Act - Held that:- Judgment in UPASANA FINANCE LIMITED v. STATE OF TAMIL NADU [1999 (1) TMI 510 - TAMIL NADU TAXATION SPECIAL TRIBUNAL] followed Only goods can be a subject matter of sale as well as of a deemed sale - In order to bring the transaction under the provisions of Section 3A relating to transfer of right to use the goods, the transferee must have control over economic benefit of the property, in which event, the possession also has to be with the transferee - In the absence of any elements, viz., the goods, the transfer of right to use the goods, the said transaction could not be brought under the provisions of Section 3A. The Tribunal had held that the hoardings are part of the immovable property which are not dismantled to be called as goods - There is nothing on record to show that the hoardings were detachable and remained as goods to be used as and when they were required for the assessee to render its services as an advertisement agency - The hoardings erected on the concrete foundation not capable of removal without causing any damage to the structure is part of the immovable property and ceased to be goods for the purpose of attracting levy of tax under Section 3A of the Act - This court has no hesitation in dismissing the case of the Revenue - Therefore, order of the Tribunal is confirmed and revision is dismissed Decided against Revenue.
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