Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 24, 2016
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
Income Tax
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S.O.1525 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Karuna Setu Trust, Vadnagar, Gujarat
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S.O.1524 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Bellur Krishnamachar & Seshamma Smaraka Nidhi Trust, Bangalore
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S.O.1523 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Indian Medical Centre, Chennai, Tamil Nadu
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S.O.1522 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Vishwas – Vision for health, welfare and special needs, New Delhi
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S.O.1521 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Bharti Foundation, New Delhi
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S.O.1520 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Valluvar Gurukulam, Chennai
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S.O.1519 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Development Initiative for Self-Help and Awakening (DISHA) Pune
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S.O.1518 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Rajah Charitable Medical Trust, Trichur, Kerala
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S.O.1517 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Abhaya Ashraya, Mangalore Taluka, D.K. District, Karnataka
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S.O.1516 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Sree Sree 108 Karunamoyee Kalimata Mandir, Dr. Meghnad Saha Sarani,Calcutta
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S.O.1515 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Sahyog Care for You, Paschim Vihar, New Delhi
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S.O.1514 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Shri Ramana Maharishi Academy of the Blind, J.P. Nagar, Bangalore
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S.O.1513 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Delhi Council for Child Welfare, Delhi
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S.O.1512 (E) - dated
26-4-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Sri Ramakrishna Sevashrama (Swami Vivekananda Integrated Rural Health Centre Shree Sharada Devi Eye Hospital), Tumkur, Karnataka
Highlights / Catch Notes
Income Tax
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Capital gain - transfer - the transaction entered into by the parties herein, which have the effect of transferring or enabling the enjoyment of any immovable property, then capital gains would be taxable in the year in which the transactions were entered into even if the transfer of the immovable property was not effective or complete under the general law. - AT
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Registration granted to the assessee u/s 12A cancelled - legally the impact of the proviso to section 2(15) being attracted is that the assessee will not be eligible for exemption u/s 11 of the Act. As a corollary to this legal position, registration u/s 12AA cannot be impacted by the object being hit by the first proviso to section 2(15). - AT
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Allowability of excise duty refund u/s 80IB - There is an inextricable link between the manufacturing activity, the payment of central excise duty and its refund - Deduction allowed - AT
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Revision u/s 263 - correctness of the record or valuation ascribed by the assessee to the fixed assets - it is a case of complete lack of enquiry which renders the order of the AO erroneous so far as prejudicial to the interest of the revenue - AT
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TDS - the payment paid by the assessee to scheduled banks for opening letters of credit was in the nature of interest u/s 2(28A) - but since the amount had been paid to scheduled banks no tax was required to be deducted at source u/s 194A - No disallowance u/s 40(a)(ia) - AT
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Revision u/s 263 - the disallowances under sections 14A and 36(1)(iii) of the Act were the "matters" before the CIT (Appeals) - the same does not come under the jurisdiction of the CIT u/s 263 - AT
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Salary income - taxability of interest free or concessional loan offered by a bank to its own employee - If salary is taxable and some perquisite or benefit forms part of a package, the same should also be taxed. Therefore, we are of the considered view that the challenge to Section 17(2)(viii) as well as Rule 3(7)(i) has to fail. - HC
Customs
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Levy of penalty on CHA - Import of Ivory and its articles - Ld. Commissioner has not given reason how the appellant has contravened the aforesaid provision. Therefore, it cannot be alleged that the appellant has not followed the provision of Rule 13(d), (e) and (o) of CHALR, 2004 - AT
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Leviability of Anti Dumping Duty - import of complete goods or import of parts only - The missing parts such as Control Unit (Computer Controller), Electrical Parts (Control Cabinet) and Drive Unit (Servo Drives & Pumps) are critical parts without which the injection moulding machine cannot be complete and operated - No demand - AT
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Restriction on import of Random Polished Marble Slabs - there is no whiff of any deliberate misrepresentation and the goods were in violation of Exim Policy only marginally as the CIF value worked out to be only marginally less than US $ 60 per SQM and that too due to monthly exchange rate changes notified vide Customs Notification after the appellant obtained quotation for the goods on 10.09.2011. - AT
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Classification - Import of LED panel or LED Television - LED panels devoid of speakers, remote controls, power cables, Mother board and sockets can scarcely be called as having essential characteristics of Television. - AT
Service Tax
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Availment of Cenvat credit - the services related to cell phone, courier agency, it is quite possible as to the use of those services for the purpose of manufacturing and commercial activity of the appellant - credit allowed - AT
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Entitlement of Cenvat credit and consequential refund - particular works contract service does not fall under the exclusion category in the definition of input service, therefore works contract service in the present case is input service and eligible of refund under Rule 5. - AT
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Refund claim - Notification No. 41/2007-ST and 17/2009-ST - the condition of non claiming of drawback was prevailing during the relevant period therefore, the appellant are not entitle for the refund for the relevant period - AT
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Imposition of penalty u/s 78 - Unable to understand that how the collected amount, which was required to be deposited, can lead to any financial hardship on the part of the assessee inasmuch as it was collected amount only which was required to be deposited - levy of penalty confirmed - AT
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Recovery of interest - Section 73B of the Finance Act, 1994 - Collected Service tax from the transporters when no service tax was payble and not deposited to the Government - later amount was deposited with the government - Demand of interest set aside - AT
Central Excise
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Valuation - Sale through dealers - in the absence of any extra commercial relationship between the dealers and the main respondent, there can be no reason to allege undervaluation on this ground alone - AT
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Entitlement of Cenvat credit - Returned goods - Rule 16 - Respondent neither maintained separate records nor could establish that the same were processed and returned to the same customer or sold to others - there is no reason to deny the CENVAT Credit - AT
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Claim for exemption on electric cables were supplied for river water pump house at project for drawing water from Godavari river - Notification No. 3/2004-CE dated 8.1.2004 - Exemption allowed - AT
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Refund - debit entry was countersigned by Superintendent (Preventive) and the show cause notice itself mentions that the debit was made on pursuance of the officers of the Central Excise Division - to be treated as deposited under protest - refund allowed - AT
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Refund claim - paid excess duty on the removal of input - the legitimate claim of refund stand made within one year itself even though the formal refund application was filed subsequently (after one year), therefore the refund cannot be rejected on the ground of time bar. - AT
VAT
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Imposition of VAT on the dyes, chemicals etc. - treating them to be deemed sales - used in the dyeing, colouring and printing of cloth for various traders - If the transaction does not satisfy the definition of sale, the question of subjecting it to tax under Vat Act does not arise. - HC
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Validity of law - rate of tax - interstate movement of goods - The law validly enacted by a State Legislature, cannot be challenged on the ground that it defies logic and common sense. - HC
Case Laws:
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Income Tax
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2016 (5) TMI 935
Section 17(2)(iii) or 17(2) (vi) or Rule 3(7)(i) of the Income Tax Rules or both challenged - by taking the rate of interest charged by the State Bank of India as the base for determining whether the interest free or concessional loan offered by a bank to its own employee as a perquisite or not, the Rule has taken away the right of the employees to contest an important jurisdictional fact namely whether what is granted to them is a concession, amenity or benefit ? - Held that:- Section 17(2)(ii) did not make the provision of any and every residential accommodation as a perquisite. It made only a concession in the matter of rent as a perquisite. Therefore, there was a need for adjudication. On the contrary, the Parliament made any fringe benefit or amenity as prescribed by the Rule Making Authority, as a perquisite, leaving no scope for any adjudication. The method of valuation is prescribed by Rule 3(7)(i). Therefore, the decision in Arunkumar [2006 (9) TMI 115 - SUPREME Court] has no bearing upon the constitutional validity of Section 17(2)(viii) or Rule 3(7)(i). Apart from the fact that the first ground of attack is legally untenable, it also defies logic. By contending that the question about the interest free or concessional loan granted to them is a jurisdictional fact and that the same should be allowed to be adjudicated individually before the Assessing Officers, the petitioners have taken a stand that the arbitrary exercise of power by the Law Enforcing Authorities is acceptable to them, but the prescription of a standard formula by the Executive for avoiding arbitrariness and for ensuring uniformity is not acceptable to them. This is why their contention is unacceptable to us. Rule is violative of Article 14 - Held that:- If the employees of different banks, who are before us, are in enjoyment of an interest free or concessional loan, paying different rates of interest such as 6%, 7% or 8%, what is sought to be included in their salaries under Rule 3(7)(i), is only the difference between the rate of interest charged by the State Bank of India in respect of loans for the same purpose and the interest actually charged by their employer. Therefore, Rule 3(7)(i) does not even make a classification between different categories of employees or between employees of different banks. The petitioners cannot compare themselves with the employees of the State Bank of India, to contend that there is discrimination. If at all, it is the employee of the State Bank of India, who can perhaps raise an argument that they are suffering a handicap in the form of a higher rate of tax. This will be clear from the example that we have given in paragraphs 32 and 33. If the State Bank of India charges interest at 10% per annum on the loans advanced to its employees and another bank charges 7% per annum on the loans advanced to its employees, then the employees of the State Bank of India end up paying more in the form of interest than their counterparts in other banks. The employees of other banks end up paying income tax at the rate of 10 - 30% on the differential interest of 3% (between the SBI rate and the rate charged by their employer). Therefore, the attack on the basis of Article 14 is completely meaningless. Whether Rule works out a great hardship to the employees ? - Held that:- This argument completely lacks merit. A common man, either in business or in profession or in any employment other than in the banking sector, pays a higher rate of interest on the loan taken by him from a bank. But, by virtue of being an employee of the bank, if such employee receives an interest free or a concessional loan, then he is in enjoyment of a privilege. It is that privilege, which is sought to be taxed under Rule 3(7)(i). If converted into monetary terms, what is taxed at the hands of the employee, at the maximum, is about 30% of that privilege, which he enjoys as an extra benefit on account of being an employee of the bank. In other words, Rule 3(7)(i) causes a dent in the value of the privilege given to an employee by an employer, perhaps to the maximum extent of about 30%. This can never be considered as a hardship. Therefore, the third ground of challenge is also liable to be rejected. Rule 3(7)(i) is vitiated in as much as it tends to overrule the judgment of the Supreme Court in Arunkumar [2006 (9) TMI 115 - SUPREME Court]- Held that:- e completely fail to understand as to how Rule 3(7)(i) can be said to have been brought into force with a view to overreach the judgment of the Supreme Court in Arunkumar. The judgment of the Supreme Court in Arunkumar was delivered on 15.9.2006. The decision arose out of a challenge to the validity of Rule 3 of the Income Tax Rules, 1962 and Section 17(2)(ii) of the Income Tax Act, 1961. The original cases were actually filed by the employees of Tata Iron and Steel Company Limited before the High Court of Jharkhand, challenging a Notification bearing No.S.O.940(E) dated 25.9.2001. By this Notification, Rule 3 of the Income Tax Rules stood amended. What is now under challenge is Clause (i) of Sub-Rule (7) of Rule 3 that was incorporated with effect from 1.4.2004 under the Income Tax (First Amendment) Rules, 2004. But, the decision in Arunkumar, as we have pointed out earlier, was rendered on 15.9.2006, much after the Rule came into force. Therefore, the contention that the Rule was inserted to overreach the decision in Arunkumar defies chronology of events. Hence, the fourth ground of attack to the impugned provisions is also liable to be rejected. If salary is taxable and some perquisite or benefit forms part of a package, the same should also be taxed. Therefore, we are of the considered view that the challenge to Section 17(2)(viii) as well as Rule 3(7)(i) has to fail.
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2016 (5) TMI 934
Revision u/s 263 - Disallowance u/s 14A and 36(1)(iii) - Held that:- The issues of sections 14A and 36(1)(iii) of the Act were open before the Assessing Officer, who after due verification preferred to make certain disallowances under these sections. Once the disallowances under respective sections have been made, we can safely presume that the provisions of these sections in whole were there before the Assessing Officer i.e. he was seized of all the issues involved in these respective provisions. The learned CIT (Appeals) have the powers of wide amplitude, co-terminus powers with that of the Assessing Officer as well as the power of enhancement. Since these issues were before him also, we cannot say that one of the aspects related to both these issues were not open before him. What has been referred in the Explanation-1 to section 263(1) of the Act is the term "matter". The issues relating to sections 14A and 36(1)(iii) of the Act in its entirety consists of "matters". However, there may be many aspects of a "matter". We cannot say that the issues of sections 14A and 36(1)(iii) of the Act were not the "matters" before the CIT (Appeals). Though we can say that one of the aspects related to these "matters" were not there before the Assessing Officer or the CIT (Appeals). In this view, we do not hesitate to hold that the disallowances under sections 14A and 36(1)(iii) of the Act were the "matters" before the CIT (Appeals). Therefore, the same does not come under the jurisdiction of the Commissioner of Income Tax in provisions of section 263 of the Act. - Decided in favour of assessee
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2016 (5) TMI 933
Disallowance of proportionate interest under section 36(1)(iii) - Held that:- In any case the assessee had enough interest free funds to make impugned advances and therefore it was to be presumed that the advances had been made out of interest free funds and no disallowance under section 36(1)(iii) was therefore warranted in this case. In view of the above we set aside the order of the Ld. CIT(A) and delete the disallowance of interest made under section 36(1)(iii) of the Act by holding that the advances had been made for business purposes and that the assessee had enough interest free funds for making the same. - Decided in favour of assessee. Disallowance made under section 14A - Held that:- We do not find any infirmity in the order of the Ld. CIT(A), who deleted the disallowance made following the decision of the jurisdictional High Court in the case of Lakhani Marketing [2014 (7) TMI 44 - PUNJAB AND HARYANA HIGH COURT ] The argument of the Ld. DR that the CBDT Circular No. 5/2014 dt. 11/02/2014 stating that even in the absence of any exempt income disallowance under section 14A has to be made, is binding on the Revenue authority, we find has no merit. The Hon'ble Supreme Court in the case of Commissioner of Central Excise, Bolpur Vs. M/s Ratan Melting & Wire Industries [2005 (2) TMI 138 - SUPREME COURT OF INDIA ], has categorically held that decision of the High Court / Supreme Court would overrule Circulars issued by the Boards. - Decided in favour of assessee. Addition made on account of disallowance under section 40(a)(ia) - Held that:- We do not find any infirmity in the order of the Ld. CIT(A) deleting the disallowance by holding that the impugned payment was not liable to tax deduction at source in view of section 194A(3) and thus could not be a subject matter of disallowance under section 40(a)(ia) of the Act. Undeniably the impugned payment of ₹ 64,37,342/- made by the assessee to scheduled banks for opening letters of credit was in the nature of interest as per the provisions of section 2(28A) of the Act but since the amount had been paid to scheduled banks no tax was required to be deducted at source on the same in view of the provisions of section 194A (3)(iii) which categorically exclude interest paid to banks from the perview of tax deduction at source. In view of the above since the assessee was not required to deduct tax at source in the impugned payments the provisions of section 40(a)(ia) were not applicable to the facts of the present case and Ld. CIT(A) has rightly deleted the disallowance made on this account - Decided in favour of assessee.
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2016 (5) TMI 932
Capital gain - transfer - CIT(A) held Joint Venture Agreement did not result in transfer of capital asset in the year under consideration and hence no capital gain had arisen - Held that:- In the present case, vide JDA dated 20.10.2007, the developer will get 60 to 65% of the constructed area and the assessee will get 30 to 35% of the constructed area. The assessee has also received ₹ 2.50 crores as interest free refundable security deposit and the developer agreed to develop the property after getting necessary plan from the CMDA. Further, it is also mentioned that the assessee has to hand over all original title deeds pertaining to the property for the purpose of getting plan sanction for construction. The assessee has also executed Power of Attorney in favour of Shri Suresh Jain, Managing Director of the developer company and the developer has the right to sell all flats and also to complete the assessee’s share of construction of flats within 36 months from the date of obtaining of plan sanctions. If there is a failure on the part of the developer to hand over the vacant possession of the property within the grace period of 12 months, there is a penalty clause that ₹ 20 lakhs per month shall be payable to the assessee. Further, by December, 2011, the developer almost constructed 9 towers each having 9 floors, which is mentioned in para 3.2 of this order. All these show that the JDA entered on 20.10.2007 actually acted upon. Subsequent agreements executed by the parties took only paper documents so as to postpone tax incidence. If one party is performed his part of duty i.e. developer shows that the other party also performed its part of obligation. Thus, the transaction entered into by the parties herein, which have the effect of transferring or enabling the enjoyment of any immovable property, then capital gains would be taxable in the year in which the transactions were entered into even if the transfer of the immovable property was not effective or complete under the general law. In our opinion, all the ingredients of sec.2(47)(v) of the Act are satisfied and it has to be inferred that a “transfer” took place within the meaning of sec.2(47)(v) of the Act. The completion of “transfer” of an immovable property under the general law was not required for the applicability of the provisions of sec.2(47)(v) of the Act, as held by various High Courts as discussed in earlier para. Accordingly, in the present case, there is a transfer u/s.2(47)(v) of the Act in the asst. year 2008-09. Accordingly, we reverse the order of the CIT(Appeals) and restore that of the AO. - Decided against assessee
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2016 (5) TMI 931
Revision u/s 263 - conclusion drawn by the CIT that the depreciation on enhanced cost was allowed by the Income Tax Officer without application of mind - Held that:- There is no dispute that the assets in question were used by the seller viz., M/s.Southern Ferro Ltd., prior to the transfer of the same to the assessee. The written down value of these assets was shown in the books of the seller at ₹ 24,05,230/- whereas the assessee has shown the value of the assets in its books of account at ₹ 4.5 crores. Therefore, the value in the books of the assessee is enhanced about 20 times of the WDV in the books of the seller. Once the assets in question were used by the seller before the date of acquisition by the assessee, then matter of valuation of such assets falls in the purview of Explanation 3 to section 43(1) of the Act The issue in question is not regarding correctness of the record or valuation ascribed by the assessee to the fixed assets but it is about allowability of the claim of valuation under Explanation 3 to section 43(1) of the Act. When there was no examination by the AO as per the provisions of Explanation 3 to section 43(1) because the AO has not even raised any query on this issue, then it is a clear case of nonconduct of any enquiry on the issue. The AO did not ask any question, any record or explanation to justify the value assigned by the assessee which is 20 times of the WDV in the books of seller. Therefore, it is absolutely impossible to infer that the AO has conducted any enquiry on this issue. Hence, it is a case of complete lack of enquiry which renders the order of the AO erroneous so far as prejudicial to the interest of the revenue. In view of the matter when there is a complete and absolute lack of enquiry and non-application of mind on the part of the AO, decisions relied upon by the learned AR of the assessee would not help the case of the assessee. As regards the alleged visit of the AO to the factory of the assessee, in the absence of any record as well as any other material to indicate such visit or undertaking exercise of verification of valuation, the same cannot be a material aspect to convert a case of lack of enquiry into application of mind of the AO. In view of the above facts and circumstances of the case, we do not find any reason to interfere with the order of the CIT. - Decided against assessee
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2016 (5) TMI 930
Registration granted to the assessee u/s 12A cancelled - assessee is a body corporate formed under UP Urban Planning and Development Act, 1973 - Held that:- The facts in the present case, we find, are identical to the facts in the case of Tamil Nadu Cricket Association (2013 (12) TMI 833 - MADRAS HIGH COURT ). In the present case the assessee had been granted registration u/s 12AA after considering its stated objects. Undeniably there has been no change in the objects of the assessee. The registration has been later on cancelled only on account of the proviso to section 2(15). It is not the case of the Ld. CIT that the activities are not being carried out in accordance with the objects of the assessee trust on the basis of which registration was granted under section 12A. Thus we find that the decision of the Hon’ble Madras High Court squarely applies to the case of the assessee. We therefore hold that the amendment to section 2(15) of the Act cannot be the basis for cancellation of registration granted earlier under section 12A of the Act, and that the Ld. CIT had erred in holding that the activities of the assessee were not genuine since it was not charitable in view of the first proviso to section 2(15) of the Act. The applicability of the proviso will have to be examined every year and thus cannot be the basis of granting or cancelling registration u/s 12AA. Moreover, the legislature has provided a safeguard against the objects being vitiated on account of the first proviso by virtue of section 13(8), which was brought into effect from the same point of time when proviso to section 2(15) was introduced i.e. w.e.f. 01.04.2009, which provides for denial of exemption of income u/s 11 in the year in which the first proviso becomes applicable. Thus, legally the impact of the proviso to section 2(15) being attracted is that the assessee will not be eligible for exemption u/s 11 of the Act. As a corollary to this legal position, registration u/s 12AA cannot be impacted by the object being hit by the first proviso to section 2(15). The grant of registration u/s 12AA(1)(b) requires satisfaction about the objects of the trust as well as genuineness of the activities, while for cancellation u/s 12AA(3) all that is insisted upon is the satisfaction as to whether the activities of the trust or institution are genuine or not and whether the activities are being carried on in accordance with the objects of the trust. Further we find that on the issue under adjudication in the present case, there are decisions of the Hon’ble Tribunal in favour of the assessee as pointed out by the Ld. AR and in such a situation it is settled law that the view favourable to the assessee has to be taken. Moreover the decision of the Hon’ble Madras High Court has precedence on the decisions of the Hon’ble Tribunal on this issue following the principles of judicial precedence. Thus in our considered view, the action of the Ld. Commissioner in canceling registration under section 12AA(3) is wholly devoid of any legally sustainable merit. - Decided in favour of assessee
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2016 (5) TMI 929
Allowability of excise duty refund - whether the excise duty refund can be treated as income derived from industrial activity for the purposes of allowing deduction under section 80IB ? - Held that:- As decided in Commissioner of Income-tax Versus Meghalaya Steels Ltd. [2010 (9) TMI 679 - GAUHATI HIGH COURT ] the Central Board of Excise and Customs in its Circular dt. 19th Dec., 2002 clarified that the refund is not on account of excess payment of excise duty but is basically designed to give effect to the exemption and to operationalise the exemption given by the notifications. In that sense, the central excise duty refund does not appear to bear the character of income since what is refunded to the assessee is the amount paid under the modalities provided by the Department of Revenue for giving effect to the exemption notifications. There is also nothing to suggest that the assessee has recovered or passed on the excise duty element to its customers. Even assuming the refund does amount to income in the hands of the assessee, it is a profit or gain directly derived by the assessee from its industrial activity. The payment of central excise duty has a direct nexus with the manufacturing activity and similarly, the refund of the central excise duty also has a direct nexus with the manufacturing activity. The issue of payment of central excise duty would not arise in the absence of any industrial activity. There is, therefore, an inextricable link between the manufacturing activity, the payment of central excise duty and its refund. In the circumstances, we are of the opinion that question must be answered in the affirmative, in favour of the assessee and against the Revenue Addition on account of assumptions of less wages shown in Profit & Loss account - Held that:- From the details filed before us, we see that there is a vast difference between the amount of machinery installed by the assessee with that of M/s Industrial Equipment Company. The contention of the assessee that M/s Industrial Equipment Company is more labour intensive, therefore, pays more wages and since the operation of the assessee are automated which require lesser labour, seems to be a correct explanation. Further, at the lower level, nobody pained to quantify the said difference because of the difference in the model of the business carried on by M/s Industrial Equipment Company and that of the assessee. If the Assessing Officer had to make a comparison, it is a trite law that the apples are to be compared with apples and not with oranges. We are not in agreement with the way the estimation has been made by the Assessing Officer or even by the CIT (Appeals). The books of account have not been rejected, comparison of wages paid with wages paid in earlier or preceding year has also not been made. No material or evidence has been brought on record to rebut the explanation filed by the assessee. The contention of the assessee that the provisions of ESI and PF Act are applicable to it which have been complied with by it diligently, has also not been verified. Thus we direct the Assessing Officer to delete the disallowance - Decided in favour of the assessee
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2016 (5) TMI 928
Reopening of assessment - Addition u/s 68 - Held that:- HC order confirmed [2014 (7) TMI 47 - PUNJAB & HARYANA HIGH COURT ]. There were cash deposits in the bank account and thereafter cheques were issued to different parties and in such circumstances, the theory of peak credit could not be accepted - assessee had not been able to show that there existed any nexus whereby the amount deposited in cash had been withdrawn in cash and thereafter re-deposited to take benefit under peak credit theory - Decided against assessee.
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2016 (5) TMI 927
Recovery proceedings - attachment of the bank account - applications made by the petitioner under section 220(6) - Held that:- Application under sub-section (6) of section 220 of the Act was made by the petitioner on 04.05.2015. The Assessing Officer not only did not pass any order thereon, but even though he was not inclined to entertain the application, he did not even deem it fit to inform the petitioner about the same. It is for the first time, in the affidavit-in-reply filed in these proceedings that the Assessing Officer has come out with the case that the application could not be entertained as it was filed after the period stipulated in the notice under section 156 of the Act had expired. On the other hand, the Assessing Officer has chosen not to take any decision on the application under section 220(6) of the Act and on the other hand, despite the pendency of the stay application, the respondents have resorted to coercive recovery against the petitioner by attaching the bank accounts as well as 114 flats of the petitioner. In the opinion of this court, during the pendency of the stay application, which had been filed almost immediately after the period stipulated in the notice under section 156 of the Act had expired, there was no warrant for the respondents to resort to drastic measures of making coercive recovery without first taking the decision on the application under section 220(6) of the Act. The action of the respondents in attaching the bank accounts and flats of the petitioner, therefore, cannot be sustained. Demand under the recovery notices shall remain stayed subject to the petitioner depositing with the Tax Recovery Officer a total amount of ₹ 2,25,00,000/- (Rupees two crore twenty five lacs only) in three equal installments of ₹ 75,00,000/- (Rupees seventy five lacs only) each on 31st May, 2016, 30th June, 2016 and 29th July, 2016. Shri Ankit Manubhai Kuchhadiya, Partner of the petitioner firm, shall file an undertaking before this court that he shall regularly make payment to the Tax Recovery Officer as stipulated hereinabove as well as to the effect that he will cooperate in the early disposal of the appeal, failing which the stay order will be cancelled. Upon the petitioner filing such undertaking before this court, the respondents shall forthwith lift all attachments made on (i) all properties belonging to the petitioner, particularly on 114 flats and the land belonging to the petitioner and (ii) Bank Account No.05332560003644 of the petitioner with HDFC Bank Ltd., Varachha, Surat. The respondents shall also ensure that the registration of attachment in the revenue records shall be forthwith deleted.
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2016 (5) TMI 926
Transfer pricing adjustment - ALP determination - Held that:- Assessee has determined ALP using the cost plus method but failed to submit the necessary the working for the same at the time of assessment under section 92CA of the Act. Therefore the TPO opined that the auditor of the assessee has not carried out any working in determining the ALP. So the TPO adopted the TNMM method and worked out the ALP in the case of the assessee. However before us the learned AR admitted that the assessee failed to produce the working in support of its claim in the determination of the ALP prepared using the cost plus method as the administrative office was located in Chennai. We further find from the records that in the subsequent assessment years the assessee has determined the ALP on the basis of cost plus method and the same was accepted by the TPO. Now in our considered view and in the interest of natural justice and fair play we are inclined to restore this file to TPO for fresh adjudication as per law after giving opportunity to the assessee. Deemed dividend addition u/s 2(22)(e) - Held that:- AO has treated the advance received by the assessee against a sale of properties as deemed dividend because assessee was holding the equity shares of the company, carrying voting rights more than 10%. However from the facts of the case we find that the money received by the assessee was representing the sale of the flats and therefore we conclude that the advance received by the assessee was not on returnable basis. The advance representing against the consideration for the sale of the flats is out of the purview of the provisions of section 2(22)(e) of the Act. In holding so we are putting our reliance in the decision of Hon'ble Bombay High Court in the case of CIT v. Nagindas M Kapadia ( 1988 (12) TMI 89 - BOMBAY High Court ) wherein Hon'ble court has held that only the payments and advances to the extent of accumulated profits could be treated as loans or advances within the meaning of Sec.2(22)(e) and this was what the Tribunal had done and, therefore, the Tribunal was right in holding that only ₹ 28,500 and ₹ 10,000 could be treated as deemed dividend in the assessment years 1968-69 and 1969-70.
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2016 (5) TMI 925
Addition on account of alleged delayed payment of PF - Held that:- We do not hesitate to hold that the employees' contribution to the EPF deposited by the assessee before the due date of filing the return, is an allowable expenses. Since, in the present case, the same is deposited before the due date of filing of the return the ground raised by the assessee is allowed. Payments for expenses in cash in violation of provisions of section 40(A)(3) - Held that:- The provisions of section 40A(3) of the Act have been framed in order to curb the transactions to be done in cash and in order to encourage the banking transaction. In fact, these provisions appear to us as 'in terrorem' in nature. We observe from the order of the lower authorities that no aspersion have been cast on the genuineness of these expenses. Therefore, we find ourselves in agreement with the argument of the learned counsel for the assessee that the addition will enhance the income earned from the undertaking, therefore, he is eligible for deduction under section 80-IB of the Act. In view of this, we direct the Assessing Officer to give the assessee the benefit of these additions, if the assessee is eligible for deduction under section 80-IB of the Act, since the issue was not in question before us, we are not aware whether the assessee is eligible for said deduction or not. - Decided in favour of assessee for statistical purposes.
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2016 (5) TMI 924
Disallowance of provision on account of pay arrear payment - Held that:- As find from the records that the notification was issued by the Finance Department, Govt.of Rajasthan to pay the arrear of Sixth Pay Commission to the Govt. employees in two equal instalments and the sanction was also accorded by the Registrar of Cooperative Society, Govt. of Rajasthan, Jaipur also vide its order dated 5-07-2011 in the assessee company’s employees. We find that the ld. CIT(A) has rightly deleted the addition - Decided against revenue Disallowance of provision for audit fees - Held that:- We find from the Income Tax Act, 1961 that Audit Fee is not covered by section 43B of the I.T. Act. The ld. CIT(A) has rightly deleted the addition made by the AO on account of Audit Fee as it is not covered by Section 43B of the Act. To this effect, the decision of Hon'ble Bombay High Court in the case of CIT vs. Shree Warna Sahakari Sakhar Karkhana, (2001 (7) TMI 54 - BOMBAY High Court) is relied on wherein it is confirmed that the provisions of Section 43B do not apply to the Government Audit Charges - Decided against revenue Disallowance on account of provision for interest - Held that:- We feel that when the provision for interest does not relate to this year then the ld. CIT(A) has rightly deleted the addition made by the AO.- Decided against revenue Disallowance of proposed commission in the absence of payment details - Held that:- It is observed from the record that the assessee society as per its constitution and guidelines have to pay 1.5% procurement overhead expenses (proposed commission) to its member cooperative societies and proposed cooperative societies and such expenses are debited to trading and profit and loss account and credited to individual cooperative societies / proposed cooperative societies account. This amount is paid to its member cooperative societies and proposed cooperative societies as and when required as per the bye laws of assessee society. We find that the ld. CIT(A) has rightly deleted the addition made by the AO as to overhead expenses which is paid to the respective societies on passing a Resolution.- Decided against revenue Addition on account of unutilized subsidy which was treated as cessation of liability u/s 41 - Held that:- It appears from the record that the subsidy is not a loss, expenditure or trading liability incurred by the assessee. The unutilized subsidy is the capital receipt from Govt. of Rajasthan at the time of the inception of organization and reconciliation of accounts as when is finalized then the same will be paid back to the Govt. Hence, it does not amount to cessation of the liability and it does not cover u/s 41 of the Act. Therefore, we find that the ld. CIT(A) has rightly deleted the addition made by the AO - Decided against revenue
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2016 (5) TMI 923
Treatment of income arising out of EOU unit in Mumbai SEPZ - ‘income from capital gains’ as against ‘business income’ - Held that:- From the facts of the case it is apparent that the assessee had only transferred his right to occupy / possession of the unit to the buyer and had dismantled the machinery, furniture fittings etc., and shifted the same to his place of work in Chennai. It is also obvious that the right over the unit can only be treated as right of owning a license. Therefore, the learned Commissioner of Income Tax (Appeals) is justified in holding that the consideration received for transfer of such right being a capital asset to be assessable under the head ‘income from capital gains’. Hence we do not find it necessary to interfere with his Order. Accordingly, we hereby confirm the order of the learned Commissioner of Income Tax (Appeals) on this issue. - Decided against revenue Debonding charges / Name transfer expenses - Held that:- It is evident from the order of the CIT(Appeals) that he has examined the issue in detail and observed that the Debonding charges and name transfer expense were already excluded and only the balance amount of ₹ 2.38 crores was treated as capital gain of the assessee thereby any further disallowance would amount to double addition in the case of the assessee. For these reasons, the learned Commissioner of Income Tax (Appeals) had deleted the addition made on account of Debonding charges and name transfer expense. Therefore we do not find any infirmity in the order of the learned Commissioner of Income Tax (Appeals) on this issue. Hence we hereby confirm the order of the learned Commissioner of Income Tax (Appeals) on this issue also. - Decided against revenue
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2016 (5) TMI 922
Penalty u/s 271(1)(c) - whether the penalty can be imposed on the basis of estimated addition by applying the gross profit on the basis of immediate preceding year’s gross profit on the estimated turnover? - Held that:- AO has proceeded to pass the assessment order with biased mind that the raid was conducted on the premises of the assessee on1 2.09.2004 and FIR was registered regarding seizure of three trucks of spurious cement. But, merely on the basis of registration of FIR, no order to the prejudice to the assessee can be passed that he had been making sales and purchases outside the books of accounts. Undisputedly, no such material has been brought on record by the AO nor called upon by the CIT (A) during appellate proceedings, if the allegations levelled in the said FIR have been proved in the court. AO proceeded to adopt the estimated gross profit at 33% on the ground that, “in the assessment year 2000-01, a TEP was received by the department wherein it was informed that the appellant had indulged in making sales and purchases outside the books. Such old habits seldom vanish and the same is indicated in terms of discrepancies pointed out by the AO in the books of accounts and the Excise Department has also reported evasion of tax.” These observations of the AO are based upon conjecture and surmises without having any cogent material on record which have been confirmed by the CIT (A) in mechanical manner and then the said order has been blindly adopted by the AO to pass the penalty order. Merely on the basis of the fact that the Excise Department has conducted raid on the business premises of the assessee and detected tax evasion, the assessment order cannot be passed that too on the basis of estimated turnover and estimated gross profit in the face of books of accounts which have never been rejected by the revenue authorities - Decided in favour of assessee
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2016 (5) TMI 921
Liability to pay interest tax as per the Interest Tax Act - Held that:- Applying the principles for determining the nature of the transaction enunciated above to the facts of the case, we unhesitatingly hold that the transaction entered into by the assessee constituted a hire purchase transaction wherein the assessee being the owner of goods had hired the same to the customers/ hirers for specified hire charges, and gave the right to exercise the option of purchasing the asset on payment of the entire hire charges. The Registration Certificate of the vehicle also lend credence to this view wherein the hirers have been shown as owners under hire purchase agreement entered into with the assessee. The Revenue’s case we find, rests entirely on the premise that the owner of the vehicles are the hirers and hence the transaction is a financing transaction. We find no merit in this argument of the Ld. DR as there is no basis for the same which is is evident from the order of the Ld. CIT(A) wherein he has categorically stated that no purchase bills of the vehicle were produced. The argument of the Ld. DR that the AR of the assessee had admitted that the vehicle were purchased by the hirer is rebutted by the Hire Purchase agreement, which clearly states the assessee to be the owner of the goods. In the absence of any purchase bills to establish the ownership of the vehicle, the Hire Purchase agreement will override the oral statement of the Counsel of the assessee. Ld. DR has also stated that the vehicle were registered in the name of the hirer which prove that the hirer were the owner of the vehicle. We find that this argument also has no substance since the Registration Certificate clearly mentions the hirers as owners under hire purchase agreement with the assessee. Thus there is no basis to hold that the assessee was the owner of the assets. We therefore hold that the transactions entered into by the assessee were hire purchase transactions and were not amenable to Interest Tax. The order of the Ld. CIT(A) is therefore set aside and the appeal of the assessee is allowed deleting the levy of Interest Tax - Decided in favour of assessee
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2016 (5) TMI 920
Reopening of assessment - Deduction under section 80IB disallowed for non-submission of audit report in form No.10CCB - Held that:- Where the assessee had fully and truly disclosed all the material facts vis-à-vis computation of income in its hands, the reassessment proceedings, if any, could be initiated against the assessee within four years from the end of relevant year and where the reassessment proceedings are initiated beyond the period of four years, the same is to be held to be invalid. The records of proceedings in the present case reflect that return of income was filed on 31.10.2003 along with which a note was appended vis-àvis its claim of deduction under section 80IB of the Act. The Assessing Officer during the course of original assessment proceedings failed to allow any opportunity to the assessee to furnish the audit report. However, after passing of assessment order under section 143(3) of the Act, dated 30.03.2006, the assessee moved rectification application under section 154 of the Act along with copy of accountant’s report in form No.10CCB in respect of its claim of deduction under section 80IB of the Act. The Assessing Officer accepted the contention of assessee and observed that it was a mistake apparent from the record and passed rectification order under section 154 of the Act, dated 28.02.2007 granting deduction under section 80IB of the Act. These proceedings reflect that a mistake which had crept in the order of assessment was acknowledged by the Assessing Officer while passing rectification order. Accordingly, we hold the reassessment proceedings to be invalid both on account of being beyond four years and also on account of change of opinion. Since after adjustment of brought forward losses, the income in the hands of assessee is reduced to Nil, and where the assessee would not be entitled to the benefit of deduction under section 80IB of the Act in the absence of any profits, there is no merit in reassessment proceedings initiated against the assessee. Accordingly, we cancel the same holding the relevant proceedings to be invalid and beyond limitation period prescribed in the Act.- Decided in favour of assessee
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2016 (5) TMI 919
Rectification of mistake - there being no retraction of the declaration of ₹ 28 Lakhs the decision of the Hon'ble Tribunal with the assumption that applicant has retracted the declaration and sustaining the addition of ₹ 17,23,824/- is not correct on facts - Held that:- We do not find any merit in the Miscellaneous Application filed by the assessee. The main thrust of the assessee in the Miscellaneous Application is that assessee has not retracted the declaration made that the amount of ₹ 28,00,000/- is not required to be added since the same gets covered in the excess cash of ₹ 45,00,484/- and that certain observations made in Para 15 of the order are not correct. We have again gone through the findings given at Para 15 to 17 of our order, vis-à-vis the contents of the Miscellaneous Application and find that the assessee through this Miscellaneous Application requests the Tribunal to rectify certain mistakes which the assessee believes to have occurred. Such request of the assessee to rectify the order u/s.254 of the I.T. Act, in our opinion, amounts to review of its own order by the Tribunal, which is not permissible in law. The Tribunal has passed an elaborate and speaking order after considering the entire facts on record, the declaration made during the course of search/survey and the return filed in response to notice u/s.153A and has given reasons as to how & why the amount of ₹ 17,23,824/- has to be sustained. In our opinion, there is no apparent mistake in the order passed by the Tribunal. We therefore do not find any merit in the Miscellaneous Application filed by the assessee and accordingly dismiss the same. - Decided against assessee.
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2016 (5) TMI 918
Interest allowance under section 36(1)(iii) - whether the amount lent to SML by the assessee was on account of some business expediency? - Held that:- No doubt remains in our mind that the amount was given to SML by the assessee, interest free, out of business expediency only. The company was going through a bad phase of poor financial health and the assessee had provided it assistance through these funds. Nowhere at any stage from the initiation of assessment proceedings, no allegation has been levied by any of the authorities below that these funds were given out of some personal reason or these funds have been used by SML for any purpose other than business purpose. The purpose for giving funds should not necessarily be immediate or direct benefit to the assessee. In views of this, we do not find any need for the Assessing Officer to do such an exercise. In view of the above, we hold that the amount advanced by the assessee to SML was out of business expediency. - Decided against revenue
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2016 (5) TMI 905
Non-deduction of tax u/s 194H - discount allowed to the prepaid distributors - demand u/s 201(1)/201(1A) - Held that:- The impugned demand was raised against the assessee by holding it to be assessee in default for non-deduction of TDS by considering the payments made in respect of roaming charges to other Telecom Operators as liable for TDS either u/s 194J or 194C of the I.T. Act. The ITAT Kolkata Bench in the case of Vodafone East Ltd. vs. Addl. CIT, Range-7, Kolkata [2015 (9) TMI 1358 - ITAT KOLKATA ] and plethora of other judgments have settled that the payments in question made by the assessee to various Telecom Operators are not liable for TDS in any of the sections i.e. 194C and 194J or 194I. In view thereof, the issue stands decided on merit in favour of the assessee
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2016 (5) TMI 904
Addition u/s.69A - income shown against sale of Mosambi - claim of agricultural income - Held that:- Assessee during the course of appeal proceedings, has filed another letter from Talati which shows Mosambi trees appearing in the 7/12 extracts for F.Y. 2006-07 and 2011-12. However, the authenticity of the letter was not verified by the CIT(A) on the ground that there was no request for admission of additional evidence. The extent of agricultural land held by the assessee is not doubted by the AO. Thereafter, what is the extent of other agricultural income out of such land has not been considered by the AO. The records also show that the assessee is not doing any business as there is no discussion by the AO in the body of the assessment order on this issue. Under these circumstances when it is the claim of the assessee that only source of income is agriculture, therefore, in our opinion, the matter requires a re-visit to the file of the AO with a direction to give one more opportunity to the assessee to substantiate his case with necessary evidence to his satisfaction. Needless to say the AO shall give due opportunity of being heard to the assessee and decide the issue as per law. We hold and direct accordingly. - Decided in favour of assessee for statistical purposes.
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2016 (4) TMI 1135
Disallowance of expenditure u/s.14A - Held that:- Sec.14A(1) declares the law that the expenditure incurred by the assessee in relation to the income which does not form part of the total income under the Act shall not be allowed as a deduction in computing the taxable income of the assessee. Sec.14A(2) provides for determining the quantum of such expenditure which shall not be allowed as a deduction. That is the machinery provision as far as sec.14A is concerned. In that provision, it has been provided that if the Assessing Officer is not satisfied with the correctness of the computations made by an assessee, he shall compute the quantum in accordance with the method that may be prescribed. For this matter, Rule 8D has already been prescribed. Sub-sec.(3) further provides that even in a case where an assessee claims that no expenditure was incurred, the assessing authority has to presume the incurring of such expenditure as provided under sub-sec.(2) read with Rule prescribed. Therefore, it becomes clear that even in a case where the assessee claims that no expenditure was so incurred, the statute has provided for a presumptive expenditure which has to be disallowed by force of the statute. In a distant manner, literally speaking, it may even be considered for the purpose of convenience as a deeming provision. When such deeming provision is made on the basis of statutory presumption, the requirement of factual evidence is replaced by statutory presumption and the Assessing Officer has to follow the consequences stated in the statute. It means that even in a case where no expenditure is stated to have been incurred, the assessing authority has to apply Rule 8D. As the statutory presumption substitutes the requirement of factual evidence, the question of enquiry does not arise. - Decided in favour of assessee. Allowance of claim of forex loss as revenue expenditure - Held that:- In view of the provisions of sec.43A of the Act, at the time of making payments in foreign exchange towards any business asset – after the acquisition of the asset - if there is any fluctuation in the rate of exchange leading to an increase or decrease in the liability of the assessee, then the amount of expenditure would have to be considered to be of capital nature, and shall be taken into account in computing the actual cost of the asset as per the provisions of section 43A. The expenses claimed by the assessee were incurred in connection with the purchase of spares for the Dredging Machine and as rightly observed by the Assessing Officer these expenses have incurred on the capital account and therefore the same cannot be allowed as revenue expenditure. The assessee would be entitled to the depreciation on the enhanced value as per the provisions of the Sec.43A of the Income Tax Act and the assessee got relief to that extent - Decided against assessee.
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Customs
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2016 (5) TMI 917
Leviability of Anti Dumping Duty and imposition of penalties - Confiscation of imported goods - Appellant classified the goods as parts of injection moulding machine whereas revenue classified it as injection moulding machine - Held that:- it is clear that the ADD is imposed only on the plastic processing or injection moulding machines when they are imported from the specified country and subject to other conditions. Looking at the nature of goods imported vide the two Bills of Entry as presented, the nature of goods was "parts of the injection moulding machine". The technical aspects of the imported goods have been gone into by the Chartered Engineer who in his certificate dt. 25.2.2010 has categorically concluded that the parts imported in the two shipments will not form complete individual machines. The missing parts such as Control Unit (Computer Controller), Electrical Parts (Control Cabinet) and Drive Unit (Servo Drives & Pumps) are critical parts without which the injection moulding machine cannot be complete and operated. Once it is concluded that what has been imported are nothing but parts of injection moulding machine, the case of the Revenue for imposition of Anti Dumping Duty fails and it is not warranted to examine other pleadings of both sides. - Decided in favour of appellant
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2016 (5) TMI 916
Seeking release of imported goods from Sri Lanka - Petitioner produced the necessary documents as well as the confirmation letters issued by the Government of Sri Lanka - Revenue contended that Petitioner is not coming forward to produce the requisite documents to satisfy the requirements - Held that:- it is directed that the authorized representative of the Petitioner will appear before the concerned Deputy Commissioner of Customs with the B/Es, with all the necessary documents. After examining the said documents, and seeking further clarification/verification as may be necessary, the concerned Officer will pass either provisional assessment order within one week or final assessment order within two weeks and communicate the said order to the Petitioner forthwith. In the event of passing the provisional assessment order, the orders passed by the Court including the one G.S. Nuts v. Commissioner of Customs reported in [2016 (3) TMI 430 - DELHI HIGH COURT] shall be kept in view. - Petition disposed of
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2016 (5) TMI 915
Restriction on import - Import of Random Polished Marble Slabs of CIF value less than US Dollar 60 per SQM - freely not importable as per Notification No. 65(RE-2010)/2009-14 dated 04.08.2011 - Held that:- the good were of “CIF” value less than US $ 60 per SQM even on the date of shipment and remained in violation of Exim Policy on the date of their imports as the CIF value was admittedly less than US $ 60 per SQM. Consequently, the impugned goods became liable to confiscation under Section 111(d) of Customs Act, 1962. However, it is also evident that in the above scenario, there is no whiff of any deliberate misrepresentation and the goods were in violation of Exim Policy only marginally as the CIF value worked out to be only marginally less than US $ 60 per SQM and that too due to monthly exchange rate changes notified vide Customs Notification after the appellant obtained quotation for the goods on 10.09.2011. Therefore, in all fairness and in the interest of justice, considerable leniency is called for in adjudging the redemption fine and penalty. Impugned order is upheld except that the redemption fine and penalty are reduced to ₹ 1,50,000/- and ₹ 50,000/- respectively - Decided partly in favour of appellant
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2016 (5) TMI 914
Classification - LED panel or LED Television - Import of goods having essential characteristics of Television in terms of Rule 2(a) of the General Rules of Interpretation of the Customs Tariff Act - Held that:- the examination report and re-examination report of Customs officers categorically stated that the goods were branded LED Panels and encased in TV casing but without the speakers, without the remote controls, without the power cables, without the Mother board and without the sockets. The box in which the goods were contained is also found to have been labeled LED panel as per the photocopy of one side of the box. It is further seen that as per the sale invoices the appellant has been selling these goods to the various traders in the name of LED panels only. Further, LED panels devoid of speakers, remote controls, power cables, Mother board and sockets can scarcely be called as having essential characteristics of Television. Indeed in the trade, LED panels are commonly available and they become television when speaker and mother board and other parts mentioned earlier are attached thereto. Therefore, the goods have to be treated as LED panels (and not as LED Television) and LED panels are freely importable and do not require any BIS registration. - Decided in favour of appellant with consequential relief
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2016 (5) TMI 913
Levy of penalty on CHA - Import of Ivory and its articles - Prohibited under Foreign Trade Policy and under Wildlife (Protection) Act, 1972 - Mis-declaration of goods and value of goods - Two invoices - Held that:- nothing found on record which suggests that appellant was aware of the content and nature of goods which was subsequently found as two statues made of ivory and other materials which was prohibited. As per Section 114AA, the penalty can be imposed only if a person has knowledge about the false declaration in the documents. As I stated above, as regard the content and nature of the goods and value thereof, the appellant had no knowledge. Therefore, they are not liable for penalty under Section 114AA. As regard findings of the Ld. Commissioner that the CHA has not followed the rule 13(d), (e) and (o) of CHALR 2004, however the Ld. Commissioner has not given reason how the appellant has contravened the aforesaid provision. Therefore, it cannot be alleged that the appellant has not followed the provision of Rule 13(d), (e) and (o) of CHALR, 2004 supported by various judgments. - Decided in favour of appellant
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2016 (5) TMI 907
Revokation of CHA licence and forfeiture of security deposit - Licence suspended prior to SCN - No proceedings took place for almost 3 years after replies were filed by the petitioner to the SCN - Failure to adhere to the time limit under Regulation 22(5) of CHALR - Held that:- the case is identical to that of M/s S.K. Logistics Versus CC (General) New Delhi [2015 (11) TMI 1155 - CESTAT NEW DELHI]. The only explanation offered by the Department is that the earlier inquiry officer appointed to adjudicate the SCN dated 14th October, 2011 retired and it was only after the new inquiry officer was appointed by the letter dated 8th December, 2014 that the inquiry could be completed and a report submitted on 23rd January 2015. In the case of S. K. Logistics, this Court held that this was hardly a justification for not adhering to mandatory time limit set out in Regulation 22(5) of the CHALR. Therefore, this Court quashes the Order-in-Original passed in the case of the Petitioner. Any action taken consequent to the impugned order and the Inquiry Report that led to its passing shall also stand quashed. The Petitioner's CHA licence is stated to have expired in the meanwhile and not renewed. The Respondent will process the Petitioner‟s application for renewal of its licence in accordance with law without any unnecessary delay. - Decided in favour of petitioner
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Corporate Laws
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2016 (5) TMI 910
Validity of interim order - CLB had passed the interim order directing the parties to maintain status quo as regards the share holding and composition of the Board of Directors of the company with a further restraint order upon both the rival groups from creating any third party interest over the fixed assets of the company without the leave of the Board - Held that:- In order to succeed in getting a reference of the disputes raised under Section 397, 398 read with Section 402 and 403 of the Companies Act to arbitration, the applicant/ appellants would not only be liable to show that the entire gamut of the dispute falls within the purview of the arbitration agreement but also the fact that company petition is a sham and mischievous one which has been decked up deliberately so as to gainfully sustain the plea of non-arbitrability of such dispute. There would also be a heavy burden cast upon the appellants to show that the arbitration agreement would bind the non-signatory respondent No 10-15. In a case involving such complex questions of law and facts determination of the aforesaid aspect may call for deeper examination of the matter by the CLB. As such, the CLB cannot be found fault with for non-disposal of the C.A.907/2015 on the date of issuing the order dated 27/07/2015. Coming to the argument made by Mr Banerjee that due to the pendency of the C.A. No 907 /2015, the CLB did not have any jurisdiction to pass the order dated 27/07/2015 it may be mentioned here-in that there is nothing in the Act of 1996 that supports such a conclusion. In the absence of any express provision contained in the statute, ouster of jurisdiction of the CLB cannot be readily inferred by this court. There can be no doubt about the fact that in the instant case an obligation was cast upon the CLB to decide the objection as to the question of jurisdiction raised under section 8 of the Act of 1996 at the earliest point of time. But a perusal of the impugned order also indicates the reasons that have been recorded by the CLB for issuing the said order despite the pendency of the section 8 application. As such, the submission of Mr. Banerjee to the effect that the CLB did not have any jurisdiction to pass the order dated 27/07/2015 pending disposal of the section 8 application is found to be wholly untenable and hence, does not commend acceptance by this court. Thus the company appeal find under section 10(F) of the Act of 1996 is held to be devoid of any merit and the same is hereby dismissed. The questions of law would stand answered accordingly.
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2016 (5) TMI 909
Recovery of Debts Due - provision for the recovery of debts - sale of property - Held that:- The present application are not at all the workmen of the company-in-liquidation. They are the legal representatives of one Sri N.B. Rukmangada, who was the director of the company-in-liquidation, who furnished guarantee to the financial institution when the company borrowed the loan from the said financial institution. After the demise of the said Sri N.B. Rukmangada, the guarantor, the present applicants claiming to be his legal representatives have filed the present application. The official liquidator had also appeared before the recovery officer in the case on hand, and he had also filed his statement while arguing on these applications. The official liquidator also made submission that in the above referred reported decisions, the interest of the workmen was involved but here in the case on hand, it is not so, because the applicants claiming to be the legal representatives of the said Sri. N.B. Rukmangada have no concern with the company in liquidation. So this goes to show that notice has been already given by the DRT to the official liquidator and he has been heard in the matter. Even according to the decision relied upon by the learned counsel for the applicants the relevant paragraphs are referred above. There is no bar for the DRT to proceed with the sale of the property. But before conducting such sale of the property, the official liquidator has to be heard in the matter. As I have already observed above, official liquidator has already appeared before the DRT and he has been heard. As the applicants has not availed the statutory remedies available to them under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 there are no reasons forthcoming in the applications also as to why they have not availed such statutory remedy before the filing the present applications. As I have already observed above that official Liquidator was notified about the proceedings he appeared in the matter before the DRT and the applications herein are also not from the Workmen/Employees of the Company in Liquidation and there is no allegation from the Official Liquidator that the recovery officer is conducting the sale of the property without his consultation and without hearing him. Therefore, looking to the facts and circumstances of the case on hand, and the facts and circumstances in the reported decisions relied upon by the learned counsel for the applicants, which are referred above they will not come to the aid and assistance of the applicants case in getting the orders to set-aside the judgment passed by the Debt Recovery Tribunal and to set-aside the orders passed by respondent No.2 and also to stay the execution/recovery proceedings pending before respondent No.2
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Service Tax
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2016 (5) TMI 944
Imposition of penalty - Section 78 of the Finance Act, 1994 - Construction of Complex Services - Appellant prayed that financial difficulty is a reasonable cause for non-deposit of the tax with the Revenue and as such Section 80 should be invoked - Held that:- We really fail to understand that how the collected amount, which was required to be deposited, can lead to any financial hardship on the part of the assessee inasmuch as it was collected amount only which was required to be deposited. Instead of depositing the same, the appellant have retained it for their own financial gains. We can appreciate financial difficulty to some extent if the said service tax was required to be deposited by the appellant from their own pocket. Even in that case, the appellant was under obligation to reflect their liability to the Revenue, by taking a registration and filing ST-3 returns. The use of the amount collected by the appellant from their customers in the name of the service tax, instead of depositing the same with the Service Tax Department, clearly reflects upon the malafide intention of the assessee. In such a scenario, the provisions of Section 80 cannot be invoked, in as much as the said section speaks of a reasonable cause, which is bound to be bonafide cause. The fact that service tax was being collected by the appellant from their Customers reflects upon their knowledge that the services being provided by them attract service tax. Pocketing of the said collected amount is indicative of the appellant's malafide to divert the exchequer's legitimate amount for their own financial gains, thus making them liable to penalty. - Decided against the appellant
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2016 (5) TMI 943
Recovery of interest - Section 73B of the Finance Act, 1994 - Collected Service tax from the transporters when no service tax was payble and not deposited to the Government - later amount was deposited with the government - Held that:- a close reading of the section 73B indicates that the situation as covered under sub-Section (1) of Section 73A and determination of liability under sub-Section (4) of the said section were only covered by the interest provision. Apart from the fact that no proceeding required to have been initiated against the appellant for recovery of amount not paid to the Government, the proceedings in this case apparently covered the amount in terms of sub-Section (2) of Section 73A not sub-Section (1) of the said section. Even comparing with the similar provisions in Central Excise Act, 1994 it is apparent from the wordings of Section 73B that amount covered under Sub-Section (2) of Section 73A is not covered by Section 73B. Even otherwise the fact remains that proceedings under sub-Section (3) and determination there upon under sub-Section (4) is not warranted in the present case as the amount has already been remitted to the Government. Therefore, the impugned order in so far as it relates to interest demand is not sustainable. Imposition of penalty - section 77(2) of the Finance Act, 1994 - Held that:- the appellant have not remitted the amount collected representing service tax forthwith to the credit of Central Government. The payment was made only after follow up by the Department and as such, the penalty in such situation is justifiable. Accordingly, the payment of amount representing service tax and the penalty are upheld. - Appeal disposed of
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2016 (5) TMI 942
Entitlement of Cenvat credit and consequential refund - Rule 5 of Cenvat Credit Rules, 2004 - Works Contract Services and short term accomodation service - maintenance of office equipment and building - Works contract services are excluded from the definition of input service under Rule 2(l) ibid and accommodation is for employees of the company - Held that:- it is clear that Works Contract Services are excluded only when it is used for construction service, whereas in the present case input services were used for maintenance of office equipment and building therefore, this particular works contract service does not fall under the exclusion category in the definition of input service, therefore works contract service in the present case is input service and eligible of refund under Rule 5. As regard the service of short term accommodation and works contract service, since the appellant has withdrawn the claim of refund on this, the rejection of refund on services of short term accommodation and service involved in the said invoice of M/s. Benchmark Engineering Pvt Ltd stand upheld. Entitlement for interest on delayed sanctioned of refund claim - Held that:- if there is delay beyond three months from the filing of refund, the department is duty bound to grant the interest for the delayed period in sanctioning the refund. The sanction of refund is as per the prescribed rate of interest under Section 11BB of the Central Excise Act supported by the judgment of Supreme Court judgment of Commissioner of Central Excise Vs. Reliance Industries Ltd. [2011 (7) TMI 1141 - SUPREME COURT]. It is found that there is absolutely no reason for not granting the interest on the delayed sanction of refund claim. I therefore direct that appellant shall be granted interest under Section 11BB. - Decided partly in favour of appellant
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2016 (5) TMI 941
Refund claim - Notification No. 41/2007-ST and 17/2009-ST - Claimed drawback in respect of export of goods and at the same time they have claimed refund under Notification No. 41/2007-ST - period January, 2008 to September, 2008 - Held that:- as per the notification 41/2007 there is a condition that refund claim under this notification was not admissible if the assessee claims the drawback in respect of export of goods. This condition was removed w.e.f. 18/11/2008 therefore the condition of non claiming of drawback was prevailing during the relevant period therefore, the appellant are not entitle for the refund for the relevant period. Refund claim - no co-relation between export of goods and input service - Held that:- prima facie, it appears that co-relation between input service and export goods is clearly established therefore on this ground refund could not have been rejected. However it appears that both the lower authorities have not carefully examined the documents. Refund claim - Technical Testing and Analysis Services - Held that:- the description of the goods and quantity are matching with the service providers invoices. The contract between the appellant and foreign buyer clearly indicates that testing to be carried out through SGS is on record therefore refund was wrongly rejected on these services. Refund claim - Port Services - Held that:- the Circular dated 12/3/2009 and the judgment in the case of Commissioner Vs. Adani Enterprises Ltd [2014 (11) TMI 973 - GUJARAT HIGH COURT] and SRF Ltd Vs. Comm of C. Excise Jaipur-I [2015 (9) TMI 1281 - CESTAT NEW DELHI] support the claim of the appellant therefore it needs to be re-considered by the Adjudicating authority. Refund claim - C&F Services - Held that:- container number/shipping bill number and export invoice number are appearing on the bills of service provider, this is sufficient to establish the nexus between input service and the export goods. Refund claim - Foreign Commission Service - Held that:- refund should not have been rejected only because it is pertaining to the period prior to period of export of service. There is no dispute that foreign commission exclusively related to the export of goods. It is also not in dispute that in respect of same amount of service tax appellant have not claimed refund earlier, therefore the appellant is prima facie entitle for the refund of service tax. Refund claim - Insurance of Storage of goods - Held that:- appellant's submission is that the storage of goods is exclusively for export of goods as they do not have domestic clearance therefore refund on insurance services is prima facie admissible. Refund claim - Storage of Warehousing - the submission of the appellant is that even though the storage expenses is beyond the period of export but the warehouse was taken on rent for the purpose of export only. It is pertinent that this warehouse was taken at Krishnapattam Port only therefore by any stretch of imagination it cannot be said that warehouse was taken for any purpose other than export therefore I am of the view that Storage and warehouse services is admissible. Refund claim - Transportation Services - LRs were not submitted - Held that:- the appellant in their submission shown that RSs are available and they have submitted summary of GTA service tax paid thereon therefore found correct. - Appeal disposed of by way of remand
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2016 (5) TMI 906
Availment of Cenvat credit - Telephone/mobile phone, courier services and construction and repair services (pertaining to staff quarters) - period involved is April 2011 to December 2012 - Appellant contended that all the services availed by them for olr inside the factory premises, threfore, comes under the definition of input service under Rule 2(l) of the Cenvat Credit Rules 2004 - Held that:- with regard to the credit availed in respect of Telephone/mobile phone and courier services, the judgement in the case of Servall Engineering Works Pvt Ltd vs. CCE [2016 (5) TMI 889 - CESTAT CHENNAI] cited supra is squarely applicable to the appellant's case, wherein it was held that the services related to cell phone , courier agency, it is quite possible as to the use of those services for the purpose of manufacturing and commercial activity of the appellant and therefore, Cenvat credit claimed in respect of service tax paid thereon was allowed.Therefore, by following the same, the credit availed on the Telephone/mobile phone and courier services are allowed. With respect to the repair and maintenance service pertaining to the appellants staff quarters, it is found that the services are in the nature of welfare activity and from 01.04.2011 onwards the credit availed on such welfare activities are not eligible for the credit under Rule 2(l) of the CCR 2004. Since the credit is held to be eligible on Telephone/mobile phone and courier services, penalty is set aside and with regard to the repair and maintenance service in view of the fact that the issue involved is interpretative in nature and the appellants were under the bonafide belief, penalty is set aside. - Appeal disposed of
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Central Excise
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2016 (5) TMI 940
Refund claim - made by debit entry in their RG-23A Pt. I - Duty deposited under protest - Held that:- the Revenue has nowhere given any details as to how the decisions relied upon by the Commissioner (Appeals), which involve the same legal issue, are not applicable to the facts of the case. As regards the Tribunal decision in the case of CCE, Aurangabad vs. BCL Forgings Ltd. [2005 (7) TMI 231 - CESTAT, MUMBAI], which stands relied upon by Commissioner (Appeals), it has been contended that the Department has not accepted the said decision and has filed an appeal before the Hon’ble High Court of Mumbai. However, the Revenue has not been able to brought to our notice any decision of the Hon’ble Mumbai High Court setting aside the said decision of the Tribunal. Similarly, in case of the Hon’ble Gujarat High Court decision in the case of Shree Ram Food Industries vs. Union of India [2002 (9) TMI 646 - GUJARAT HIGH COURT], the Revenue has contended that the said decision is not applicable in as much as in the present case the respondents have voluntarily paid the duty. Apart from finding that the decisions relied upon by the Commissioner (Appeals) are fully applicable to the facts of the case, it is found that his observations and findings that the debit entry was countersigned by Superintendent (Preventive) and the show cause notice itself mentions that the debit was made on pursuance of the officers of the Central Excise Division, nowhere stands countered or rebutted by the Revenue. Commissioner (Appeals) order is upheld - Decided against the revenue
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2016 (5) TMI 939
Period of limitation - Refund claim - paid excess duty on the removal of input - formal refund application was filed by the appellant after one year from payment of the excess duty - Held that:- the appellant right from 15.6.2009 was continuously making the correspondence with the department regarding the refund of the re-credit of the same amount of ₹ 96,122/-. Therefore, the legitimate claim of refund stand made on 15.6.2009 itself even though the formal refund application was filed subsequently, therefore the refund cannot be rejected on the ground of time bar. Since, the lower authority has rejected the refund on time bar alone he has not verified the aspect of unjust enrichment, I, therefore remand the matter to the original adjudicating authority to decide the refund in accordance with law but the same cannot be rejected on time bar. However, the matters relates to two appeals No. E/141/12 and E/86808/13 being interconnected should also be reconsidered by the original authority. Demand of duty, Cenvat credit and penalty - Appellant have suo moto taken the recredit for which the refund claim was also filed - Held that:- the matters relates to two appeals No. E/141/12 and E/86808/13 being interconnected should also be reconsidered by the original authority. Therefore both these appeals are also remanded to the adjudicating authority for deciding afresh on the basis of the decision taken on the refund matter. If the refund is sanctioned the demand and penalty in appeal No. E/141/2012 will not survive. Consequently, the appropriation of the said amount done from sanctioned refund claim shall also not be maintainable. - Appeal disposed of by way of remand
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2016 (5) TMI 938
Valuation - Sale through dealers - short payment of central excise duty by adopting much lower price than the stipulated by the legal provisions for sale of goods to two of their dealers - Revenue contended that two dealers, who supplied items to UPRNN have realized much more amount than what they paid to the main respondent (the manufacturer). Also there are certain instances of receipt of payment directly by main respondent from UPRNN and such receipt being much higher than the price at which the goods were subjected to tax - Held that:- in the absence of any extra commercial relationship between the dealers and the main respondent, there can be no reason to allege undervaluation on this ground alone. Also it has been stated that the direct payments were as per the advice of the two dealers and by itself will not establish under-valuation of the goods. Therefore, we find no verification on method of transactions have been made at UPRNN side to link -up the possible dealings of the main respondent directly with UPRNN and to establish the role of SJT and SJE being mere dummies in these transactions and there is nothing on record warranting interference with the said findings. - Decided against the revenue
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2016 (5) TMI 937
Entitlement of Cenvat credit - Returned goods - Rule 16 - Respondent neither maintained separate records nor could establish that the same were processed and returned to the same customer or sold to others - Held that:- the Respondent recorded receipt of the goods which is not disputed by the Department. Also they manufactured final product which is recorded in RG 1 register. Therefore, there is no reason to deny the CENVAT Credit. - Decided against the revenue
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2016 (5) TMI 936
Denial of claim for exemption on electric cables were supplied for river water pump house at project for drawing water from Godavari river - Notification No. 3/2004-CE dated 8.1.2004 - Revenue submitted that the Vemagiri Power Generation Ltd. was set up for the generation of power which is not entitled for said exemption - Held that:- the electric cables were supplied for river water pump house at project for drawing water from Godavari river. The water is treated and used for the purpose of power generation. The required certificate from Collector, Godavari Distt. has been submitted. Setting up of water supply plant is for the intended purpose covered by the terms of the notification. The explanation only shows the inclusive scope of the water supply plants. Therefore, the impugned order passed after detailed examination of all the relevant points, can not be faulted. - Decided against the revenue
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CST, VAT & Sales Tax
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2016 (5) TMI 912
Validity of law - rate of tax - interstate movement of goods - Change in nature of goods merely on the basis of the location in which they are used - Section 2(11) - Petitioner contended that if certain goods are admittedly capital goods, their nature will not change merely because they were sold in the course of inter-state trade or commerce, to persons outside the State - Held that:- argument of the petitioners is based merely upon logic and common sense. Unfortunately, law, much less tax law, is not founded upon logic and common sense. The petitioners have forgotten for a moment that they are challenging the vires of a legislation. The law validly enacted by a State Legislature, cannot be challenged on the ground that it defies logic and common sense. A statutory provision can be challenged only on very limited grounds, namely (a) the infringement of any of the fundamental rights, (b) the lack of competence on the part of the relevant legislature, due to the distribution of powers, (c) contravention of any of the mandatory provisions of the Constitution that impose certain limitations upon the powers of the State legislature, (d) the operation of the impugned law beyond the borders of the State, and (e) the abdication of the essential legislative function. The petitioners in these writ petitions could not establish the existence of any of these grounds, for holding the phrase "in the State" appearing in Section 2(11) of the Tamil Nadu VAT Act, 2006. Therefore, the challenge to the statutory prescription made in these writ petitions has to be failed. The challenge to the validity of Section 2(11) of the Tamil Nadu Value Added Tax Act, 2006, is rejected and the prayer of the writ petitioners for declaration that Section 2(11) is ultra vires and unconstitutional, is dismissed.
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2016 (5) TMI 911
Imposition of VAT on the dyes, chemicals etc. - treating them to be deemed sales - used in the dyeing, colouring and printing of cloth for various traders - Held that:- it was no longer open to the assessing authorities to take a different stand as given by the State Government, which has also been affirmed by this Court. The State Government has clearly given a decision that dyes and chemicals used in the processing of the cloth loose their identity and are, therefore, consumables and is not a deemed sale, which finding is binding upon the assessing authority. The payment of additional excise duty is wholly irrelevant to the transactions made under the VAT Act. The charge under the VAT Act is on the turnover of sale and not on the manufacture. A transaction may or may not be a manufacture but it has to come within the definition of sale as provided under the Vat Act. If the transaction does not satisfy the definition of sale, the question of subjecting it to tax under Vat Act does not arise. Consequently, omission of additional excise duty as contended by the learned Special Counsel for the State has no relevance to the issue. - Decided in favour of petitioner
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Indian Laws
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2016 (5) TMI 908
Maintainability of appeal - RTI - challenge the validity of order passed by the Central Information Commissioner - Held that:- The present petition is not maintainable at the instance of the petitionercompany, that too by its Director because the petitioner-company has already been wound up vide order dated 05.08.2014 passed by this Court the Official Liquidator attached to the Court has taken over the charge of both the movable and immovable assets of the petitioner-company. Thus the present petition is hereby dismissed being not maintainable at the instance of the petitioner.
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