Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 25, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Merely because the CIT is having a different view, the same would not entitle him to initiate revision proceedings u/s 263, if the view taken by the assessing officer is one of the possible views. - AT
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Repayment of capital balance in cash would not attract the provisions of sec. 269T since it does not constitute loan or deposit. - AT
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Penalty u/s 271E - violation of sec. 269T - the interest amount and the principal amount were paid in two different occasions - each amoount less then Rs. 20,000 - No penalty - AT
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Disallowance under section 14A required finding of incurring of expenditure and where it was found that for earning exempted income no expenditure had been incurred, disallowance under section 14A could not stand. - AT
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Disallowance u/s 40(a)(ia) - non deduction of TDS - If the element of income cannot be established, provisions of section 40(a)(ia) cannot be invoked - AT
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Gift of immovable property - assessee's brothers and mother have gifted their 1/8th undivided share - very heavy burden lies on the department to prove that it is not the real one - AT
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Addition on account of negative stock - The quantitative details as submitted duly explained that there was no negative stock in any of the month. - AT
Customs
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Fulfillment of export obligation – it is not open to the customs authorities to presume that extension of the LOP would be granted by the Development Commissioner to facilitate evasion of duty. - HC
Corporate Law
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Appeal u/s 483 – modification sought by the appellant is against the fabric of the Scheme and in the domain of modifications of the Scheme and not of modification for working of the Scheme. - non-compliance of Section 2(19AA), would not render the Scheme unworkable. - HC
Service Tax
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An educational qualification recognized by law will not cease to be recognized by law merely because for practicing in the field to which the qualification relates, a further examination held by a body regulating that field of practice is to be taken. - HC
Central Excise
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Refund claim denied - period of limitation - cause of action arose only on 15/11/06, when they paid for the second time as a result of audit objection - refund claim is withing period - AT
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Rejection of Refund claim – appellant filed under protest letter on 7.1.1987. - after two days they filed six nos. classification lists - thus, the under protest letter has no effect in the eye of law - AT
VAT
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Rate of tax on the sale of Copper Wire Bars and Copper Cathods - whether would be charged and retained @ 4% or 1% - chargeable at 1%. - HC
Case Laws:
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Income Tax
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2013 (5) TMI 589
Unaccounted purchase of plot - rejection of books of accounts - assessee pleaded that he had purchased a plot of land with funds provided by his second wife who gave him cash of Rs. 9 lakhs and her two brothers has also gifted him Rs. 4 lakhs on the eve of second marriage - Held that:- AO has written a letter dated 17.12.2008 to the assessee and provided him final opportunity to explain and said that as to why Rs. 12 lacs may not be added to his taxable income for the assessment year in dispute but assessee could not explain the source of Rs. 9.99 lacs and he has written a letter dated 22.12.2008 to the AO and surrendered Rs. 9.99 lacs as additional income for the assessment year in dispute. Assessee has explained only the source of Rs. 2,80,000/- which was given to the assessee by his second wife by selling residential house in 2001 on 23.03.2001. Thus Revenue Authority is wholly justified in making the addition of Rs. 9.99 lacs u/s 69 because assessee voluntarily surrendered Rs. 9.99 lacs vide his letter dated 22.12.2008 offered for taxation purpose. As regard to the addition of bank loan interest debiting in the Profit and Loss Account, which is said to be returned in installment by the assessee to the HDFC Bank, AO verified the same from HDFC Bank under Section 133(6) and the said bank informed that the loan in dispute was raised by assessee's son, Sh. Jasbir Singh, Prop. M/s Milap Foundry Works and not by the assessee for his own business purposes and he has acted simply as a guarantor for the same. Thus FAA has passed a well reasoned order by rightly upholding the addition in dispute - appeal filed by the assessee is dismissed.
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2013 (5) TMI 588
Undisclosed deposits in the bank account - addition u/s 69 - assessee is a shares dealer and earns income of interest - reopening of assessment - Held that:- Assessee, who is maintaining proper books of account was having a savings account which was his personal account but utilized for trading in shares in so far as the shares were held in assessee's personal name and the refunds were to be in the personal name and not in the name of its business. The business income was rendered to tax by the assessee from share trading was to be assessed and the information was received with respect to cash deposit in the personal account. As the above was considered in the immediately preceding assessment year as well for the purpose of taxation on the basis of peak credit and has been accepted by the assessee to not involve further litigation it was the AO's duty to telescope the taxation of the same, in so far as the debits and credits have led to depletion in holding the assets in the form of investment in bank as on 31st March, 2005. AO is directed to accept the peak amount as brought on record by the asessee in the impugned assessment year for taxation after giving telescope effect that a part thereof has already been taxed in the immediately preceding assessment year when the bank balance in the said account as on 31st March, 2005 stood at Rs.1,22,000/- only & to verify the balance as per the bank statement in the impugned assessment year and reduce the amount to be taxed after determining the peak credit in the impugned assessment year, the amount of difference between the opening and closing balance in the said bank, which amount should be less than the peak credit determined and taxed and accepted by the assessee for the A.Y.2004-05 - appeal of the assessee partly allowed.
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2013 (5) TMI 587
Undisclosed investment - CIT(A) deleted the addition - Held that:- Assessee in his wisdom has agreed to the proposition that the Cross Objection for considering a part portion on the AO's order u/s 251 remains a question to be addressed by the CIT(A) in so far as the whole of the amount on Rs.18,65,190/- stood explained cannot be taxed in the hands of the assessee alone. Assessee therefore has rightly pointed out that the direction was not proper in so far as the factual facts as brought on record by the AO was dealt with in detail and not to be split for considering otherwise the amount of interest as not shown but this has been accepted by the AO. In the result the appeal of the Revenue is dismissed and the Cross Objection by the assessee with respect to the direction to the AO by the CIT(A) is futile exercise to be conducted for the AO in view of the assessment of 50% share of the co-owners has not been brought on record in the specific accounting therein was submitted by the assessee at the time of assessment. The amounts shown as investment on behalf of the mother has been taxed in the hands of the assesee would have resulted in double taxation in the impugned assessment in so far as the disallowance or addition made u/s 69 was not existing. The amount of investment whether in the flat or with the mother, who is co owner had been correlated by the CIT(A), therefore was rightly considered for deletion by the CIT(A). The same did not require further verification as directed by him to the AO in view of the provision of the Income tax Act in respect of A.Yr.2001-02. The Cross Objection stands allowed to the extent that the AO is directed to delete Rs.18,65,190/- and give effect accordingly. In favour of assessee.
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2013 (5) TMI 586
Unexplained investment - value of security provided to bank i.e. equitable mortgage on land and building - Held that:- This is a simple case of taking a bank loan by adopting the fair market value of the property for the purpose of equitable mortgage but actually the book value of the property is Rs.2.35 lakh. AO cannot make addition on the basis of market valuation done by the valuer for the purpose of obtaining higher loan. A higher valuation in no way gives any right to the AO to make addition of income, under any of the provisions of the Act, in the hands of the assessee, rather it is only for obtaining loan or cash credit limit from bank. Thus delete the addition and this issue of assessee's appeal is allowed. Addition on account of undisclosed FDR from the bank mortgage - Held that:- Assessee stated the facts that original RIP certificate of Rs.40,000/- i.e. FDR was obtained by assessee on 14.11.1998 and this was renewed on 14.11.2005 at Rs.71,205/- and there is no FDR of Rs.83,000/- ever assessee had. It is clear that assessee's FDR is only of Rs.71,205/- and which was also made out of withdrawn amount of Rs.40,000/- made on 14.11.1998. As the facts are not available in the assessment order or in the order of CIT(A), this needs verification. The assessee can lead the evidence and AO will decide accordingly. This issue is set aside to the file of AO. This ground of appeal of assessee is allowed for statistical purposes. Disallowance of depreciation on computer - CIT(A) confirmed the disallowance on the basis that no evidence was filed before him - Held that:- As the assessee has filed evidence before us but these need verification. Hence, restore this issue to the file of AO for verification and decide the issue as per law - in favour of assessee for statistical purposes.
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2013 (5) TMI 585
Levy of interest u/s. 220(2) - demand was raised for the first time pursuant to the rectification under section 154/251/143(3) - Held that:- The issue is squarely covered in favour of the assessee by the decision of Seshasayee Paper & Boards Ltd. Vs. CIT [2002 (9) TMI 59 - MADRAS High Court] considering the decision of Vikrant Tyres Ltd. Versus Income Tax Officer [2001 (2) TMI 129 - SUPREME Court] wherein held that the very foundation for a claim for interest under section 220(2) is the notice of demand. Without it there can be no sustainable claim for interest. Since the issue is squarely covered that no interest can be charged u/s. 220(2) of the Act for the period when there is no demand outstanding. In the present case also the demand arises from the order passed u/s. 154/251/143(3) dated 07.11.2008 whereby addition of Rs.25 lakh was made disallowing the liability of PF and Gratuity. That means the AO has to recompute interest u/s. 220(2) in term of the above. AO is directed accordingly. Appeal of assessee is allowed.
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2013 (5) TMI 584
Jurisdiction power u/s 263 by CIT(A)- initiating the impugned revision proceedings - Re opening of assessment - disallowance of claim of deduction u/s 80IB as the assessee is not engaged in manufacture or production of articles or things while it is only engaged in processing of milk - Held that:- There may not be any dispute that the revision proceeding shall not lie on the issues on which the AO has taken a plausible view after examining and applying his mind on it. In the instant case, notice that AO has re-opened the impugned assessments for the purpose of examining the eligibility of the assessee to claim deduction under section 80IB to which assessee has given a detailed reply demonstrating its eligibility and it has also drawn support from the decision of Sumaraj Seafoods Pvt. Ltd. (2007 (6) TMI 302 - ITAT MUMBAI). As AO has passed a speaking order by duly extracting the reasons recorded for re- opening, the reply given by the assessee, the relevant observations made by the Mumbai bench of the Tribunal in the case referred supra there is proper application of mind on the part of the AO and further the view taken by him is one of the possible views, since it is in accordance with the decision rendered by the Tribunal. It is now well settled proposition of law that merely because the CIT is having a different view, the same would not entitle him to initiate revision proceedings, if the view taken by the assessing officer is one of the possible views. Thus CIT was not right in initiating the impugned revision proceedings. In favour of assessee.
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2013 (5) TMI 583
Penalty u/s 271E - violation of the provisions of sec. 269T - Held that:- A careful perusal of the provisions of sec. 269T would show that the said provisions are attracted only if the principal and the interest are paid together and further the aggregate amount of such payment is Rs.20,000/- or more. According to the assessee, he has been paying interest on these two loans at the end of every year. In the year under consideration also, according to him, the interest was paid prior to the payment of principal amount and the principal amount of Rs.18,000/- each was paid subsequently. Thus, the claim of the assessee is that the interest amount and the principal amount were paid in two different occasions. The claim of the assessee, if accepted, would not lead to contravention of the provisions of sec. 269T since the principal amount repaid was less than Rs.20,000/- in both the cases. It is seen that the said claim was not controverted by the tax authorities. Since, it was claimed that he has been paying interest to these creditors at the end of every year there appears to be some veracity in the claim that he paid interest initially. Since the principal amount outstanding was less than Rs.20,000/- in each case, the said explanation also constitutes reasonable cause. With regard to the amount repaid to Sri M. Suryanarayanamurthy, the claim of the assessee that the amount outstanding in his name actually represented his capital amount, when the business concern was run as a partnership firm up to 31.3.2002& Shri M. Suryanarayanamurthy is the brother of the assessee. When the partnership firm was dissolved, the capital balance remained in the business books and the same was repaid during the year under consideration. The fact that the balance outstanding in the name of Sri M. Suryanarayanamurthy represents is capital balance is not disputed. There does not appear to be any difference of opinion with regard to the fact that the repayment of capital balance in cash would not attract the provisions of sec. 269T since it does not constitute loan or deposit. Thus the view entertained by the assessee that the amount outstanding in the name of Sri M. Suryanarayanmurthy does not constitute loan or deposit cannot be considered as an altogether false view - direct AO to delete the penalty levied. In favour of assessee.
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2013 (5) TMI 582
Addition of delayed payment of PF on account of employees' contribution - CIT(A) deleted the addition - Held that:- Assessee has made payment on or before the due date of filing of return u/s. 139(1) thus this issue is squarely covered by the decision of Vijay Shree Limited [2011 (9) TMI 30 - CALCUTTA HIGH COURT] wherein the deletion of the amount paid by the Employees' contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) as introduced by Finance Act, 2003. In favour of assessee. Disallowance u/s 14A r.w.r. 8D - Held that:- The expenditure incurred in relation to the income which does not form part of total income has to be disallowed. However, it should be proximate relationship between the expenditure and the income, which does not form part of total income. Once such proximity relationships exist, the disallowance is to be effected. In case the assessee had claimed that no expenditure has been incurred for earning the exempt income, it was for the assessing officer to determine as to whether the assessee had incurred any expenditure in relation to income which did not form part of total income and if so to quantify the extent of disallowance. Thus, in order to disallow the expenditure under section 14A, there must be a live nexus between the expenditure incurred and the income not forming part of total income. No notional expenditure can be apportioned for the purpose of earning exempt income unless there is an actual expenditure in relation to earning the income not forming part of total income. Thus no disallowance under section 14A is called for when the assessee has not incurred and claimed any expenditure for earning the exempt income. AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same he invoked Rule 8D of the Rules. From the facts of the present case it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value. Thus respectfully following the decision in the case of J. K. Investors (Bombay) Ltd. [2013 (5) TMI 580 - ITAT MUMBAI] ground of appeal of revenue is dismissed.
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2013 (5) TMI 581
Deemed dividend - Addition made on account of section 2(22)(e) - Held that:- In this case the assessee is a Director of M/s Nevco Engineers Pvt. Ltd. holding 99% share of the total paid up capital. Assessee has made investment to the tune of Rs. 12,00,000/- in Reliance Equity Fund on behalf of Nevco Engineers Pvt. Ltd. The proposal for the assessee to make investment on behalf of Nevco Engineers Pvt. Ltd. was duly approved by the Board of Directors of the said company. The reasons for the Company not being able to make the investment in its name was that at that point of time, the Company did not meet the requirement of Know Your Customer (KYC) Scheme (for Money Laundering measures) and also did not have a PAN card which were mandatory for the purpose of applying of units of mutual funds. AO reasoning for not accepting these submissions on the ground that Company could have waited to complete the formalities before the making the investment is not sustainable as it was on account of commercial expediency as to avail the business opportunity, the Company invested in the Reliance Equity Funds through the assessee. The amount investment was duly reflected in the books of accounts of the Company as an investment. Assessee did not derive any benefit for the said investment in his personal name. It has further been submitted that the said investment was redeemed on 10.12.2010 at a profit of Rs. 1,35,838.21. On 10.12.2010 on the same date there was a transfer of redemption money of Rs. 13,35,838.21 from the assessee's bank account to the Company's bank account. Thus, it was for proper and cogent reasons due to which the investment was made in the name of assessee on behalf of the Company. The assessee did not derive any benefit out of the same. The profit derived on the investment was immediately transferred to the assessee company on redemption. Against revenue.
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2013 (5) TMI 580
Disallowance u/s 14A r.w.r. 8D - Held that:- No disallowance under section 14A is called for when the assessee has not incurred and claimed any expenditure for earning the exempt income. It is all the more necessary that AO has to examine the accounts of assessee first and then if he is not satisfied with the correctness of the claim, only he can invoke Rule 8D. No such examination was made or satisfaction was recorded by AO in this case. It was noticed that AO has not considered the claim of the assessee at all and he has straightway embarked upon computing disallowance under Rule 8D on the presumption that port folio management involves atleast 2% of charges. Disallowance under section 14A required finding of incurring of expenditure and where it was found that for earning exempted income no expenditure had been incurred, disallowance under section 14A could not stand. Assessee itself disallowed the interest which is directly applicable, Dmat charges and administrative exp on estimation. AO has not examined any expenditure claimed in P& L account so as to relate to exempt income, nor gave afinding that assessee claim is not correct for any reason. Rule 8D can not be invoked directly without satisfying about the claims or otherwise. Consequently, the disallowance was not permissible. In favour of assessee. Disallowance u/s 40(a)(ia) - non deduction of TDS on payment in lieu of profession fee - Held that:- It is a case of reimbursement of amount paid to Raymond Ltd. who made payment to Mr. Dinesh Kumar, which has no income element in so far as the recipient, i.e. Raymond Ltd. is concerned. TDS provisions can only be invoked if a receipt by the recipient from the payer has an element of generation of income. If the element of income cannot be established, provisions of section 40(a)(ia) cannot be invoked. In favour of assessee. Professional fee paid to Mahajan & Aibara disallowed - Held that:- Before the revenue authorities, the assessee did not make any effort to establish the seriousness and genuineness of the project and expense incurred thereon. Merely making a statement that a feasibility report was got prepared for a proposed line of business, which finally was aborted, cannot qualify for the allowance of an expense, because, the first onus is on the assessee to establish the correctness and genuineness of the expense claimed, which the assessee has failed. Against assessee. Charge of interest under section 234C - Held that:- Interest though mandatory, can be charged if only there is a shortfall on the installments of payment of advance tax calculated on the basis of tax due on returned income and does not involve the tax due on assessed income. Therefore, set aside the direction of the CIT(A) and modify the same by directing the AO to charge interest under section 234C if at all, on any shortfall in the installments in each of the quarter calculated on the basis of tax due on returned income in accordance with law. In favour of assessee for statistical purpose. Compensation received on amenities - income from other sources v/s income from house property - Held that:- Decided in favour of assessee relying on own case & decision of Bhaktawar Constructions Pvt. Ltd. [1985 (10) TMI 55 - BOMBAY High Court] directing AO to assess the compensation received as "Income from house property". Against revvenue.
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2013 (5) TMI 579
Unexplained unsecured loan - assessee failed to produce loan creditors & prove identity and credit-worthiness of the creditor - Held that:- Assessee has discharged its onus by filing confirmations from the donors, copies of acknowledgment of returns of the relevant assessment year, copies of PAN card, copies of bank statements and also contra confirmation. Once this is the position and none of the authorities below have gone into the details and not doubted the genuineness of the transaction or the creditworthiness of these creditors. Respectfully following the decision of M/s. Dataware Private Limited (2011 (9) TMI 175 - CALCUTTA HIGH COURT) that in the absence of any enquiry from the AO of the creditors, the AO cannot make the addition in the hands of the assessee by treating the loans received by assessee as unexplained.Thus delete the addiitions made allow the appeal of assessee. Undisclosed receipts - CIT(A) deleted the addition - Held that:- Assessee is a co-owner in the building SKY STAR (SS). These co - owners entered into several lease agreements with various companies for letting out the property on rent and service charges. These rent and service charges were paid by the companies proportionately to the co-owners. Taxes on the same were also deducted at source and TDS certificates were issued in the name of respective co-owners. The assessee has explained that the sum of Rs.1,56,200/- being a contractual receipt i.e. service charges received from ICICI Bank vide lease agreement with ICICI Bank dated 20.02.2003, 16.10.2003 and 21.02.2003 & filed complete reconciliation and details of rent and service charges received from ICICI Bank. This sum of Rs.1,56,200/- is included in the business income of the Assessee and also TDS was claimed. In such circumstances CIT(A) has rightly deleted the addition. In favour of assessee. Bogus gift of immovable property - CIT(A) deleted the addition - assessee's brothers and mother have gifted their 1/8th undivided share in the above building Sky Star - Held that:- The burden of showing that the apparent state of affairs was not the real one, very heavy burden lies on the department. In the facts and circumstances of the instant case, apart from circumstances which by themselves could be said to be neutral, there was no material to doubt the nature of the transaction and to hold that the same was income of the assessee. Every gift made or in regard to which no quid pro quo has been made in the absence of the same automatically the income from transaction cannot be made as income of the assessee u/s. 69. Without tangible material to suspect that the gift made by the relatives or without recording any finding or evidence the conclusion reached by the CIT(A) needs to be upheld. Even otherwise, the explanations offered by the assessee has not been rejected by revenue and in such circumstances, this issue of revenue's appeal is dismissed. - In favour of assessee.
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2013 (5) TMI 578
Addition on account of negative stock - CIT(A) deleted the addition - Held that:- Assessee has maintained proper books of accounts with no defect pointed out with the quantitative details of stock were duly certified by the Auditors. AO has not been able to make the case of inflated purchases or unaccounted sales, purchase, sale gross profit & net profits amount remained the same. The quantitative details as submitted duly explained that there was no negative stock in any of the month. Thus AO has erred in his approach and the figure of negative stock arrived is totally erroneous. In favour of assessee. Interest paid on the loans and advances disallowed - Held that:- As from the figures of the opening and closing capital of the assessee it is evident that assessee has sufficient own funds to cover the interest free loans / advances of Rs. 42,52,300/-. As AO has not been able to dispute the assessee's submission that assessee had adequate own funds out of which interest free loans and advances no disallowance is called for. Similarly, again on similar facts in A.Y. 2007-08 CIT(A) deleted the similar additions by the AO and the decision of CIT(A) was not challenged by the Department in higher forums. In favour of assessee.
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Customs
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2013 (5) TMI 577
Condonation of delay - Held that:- There is a negligence on the part of the applicant and the applicant is unable to explain any sufficient cause for not preparing it within the stipulated period. Therefore no reason for condonation of delay in filing of appeal. Thus, the application for condonation is dismissed and the stay petition and appeal are also dismissed.
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2013 (5) TMI 576
Fulfillment of export obligation – Extension of LOP of 100% EOU status of an assessee for a further period of five years, by Development Commissioner, SEEPZ – Held that:- where the 100% EOU status of an assessee set up in a private bonded warehouse valid for a period of five years is extended by the Development Commissioner for a further period of five years, it would be obligatory on the part of the customs authorities to extend the private bonded warehouse licence for a further period of five years unless the assessee has violated the provisions of the Customs Act in the first block of five years. Once the LOP is extended, it is neither open to the Development Commissioner nor it is open to the customs authorities to initiate penal action against the assessee before the expiry of the extended period of the LOP, on the ground that the assessee has failed to fulfil the export obligation in the first block of five years. The apprehension of the customs authorities that the assessee may seek extension at the end of each block of five years with a view to evade payment of customs duty is without any basis, because, the Development Commissioner would grant extension of LOP only if he is satisfied that non-fulfilment of the export obligation, if any, is on account of genuine reasons. - it is not open to the customs authorities to presume that extension of the LOP would be granted by the Development Commissioner to facilitate evasion of duty. Since the assessee could not resume its operations even after extension of the LOP on 27th April, 2009 on account of the customs authorities not renewing the private bonded warehouse licence, we direct the Development Commissioner to pass a fresh order within eight weeks from today, specifically stating therein the date on which the extended period of LOP for five years would commence and the mimumum export obligation/NFEP required to be achieved by the assessee in the said extended period of five years. - order of tribunal set aside - decided in favor of assessee.
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Corporate Laws
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2013 (5) TMI 575
Appeal u/s 483 – Modification of scheme of arrangement – Non - Compliance of Section 2(19AA) of IT, Act - Company Petition was preferred by IRTL/respondent for sanctioning of a Scheme and which was sanctioned. Simultaneously, the respondent had also approached the Madhya Pradesh High Court and which also sanctioned the Scheme qua the respondent. Under the said Schemes, the spinning business of the respondent was demerged as a going concern and transferred to IRTL, with the respondent retaining the polymer business. IRTL subsequently was amalgamated with the appellant. Company Application was filed by the appellant u/s 392(1)(b) for modification of the Scheme qua IRTL sanctioned by the Court and for a direction to the respondent to transfer certain assets including a part of the housing colony occupied for use by the workers/employees of the erstwhile IRTL to the appellant or in the alternative to pay to the appellant the value of the said assets. As per appellant under the Scheme sanctioned by the Court the Undertaking of the spinning business, as a going concern within the meaning of Section 2(19AA) of the Income Tax Act, 1961, was to be transferred to IRTL and for this reason only the respondent had not paid any capital gains tax on the said transfer; that under the said transfer, the properties of the Undertaking being transferred as a going concern, would also stand transferred; that the assets including the housing colony occupied by the workers of IRTL, qua which the application was filed were the assets of the Undertaking of the spinning business; however the Scheme did not mention or refer to the said assets and thus the Scheme was liable to be modified to make it Section 2(19AA) compliant. Held that:- The filing of the application u/s 392(1)(b) by the appellant after nearly three years of acquiring the said spinning business by purchase of shareholding of IRTL is nothing but an act of greed and arm twisting the respondent to continue allowing the appellant to use the said assets. A change of shareholding of a Company which has in law been conferred the status of a juristic person, does not entitle the company to wriggle out of past commitments/representations. Thus, modification sought by the appellant is against the fabric of the Scheme and in the domain of modifications of the Scheme and not of modification for working of the Scheme. For the Court to sanction a Scheme of demerger, compliance of Section 2(19AA) is not essential. The reference to Section 2(19AA) in the Scheme is only for the purpose of making the transaction tax neutral. The same cannot be said to be a pivot around which the Scheme revolved or essential to its workability. Thus, non-compliance of Section 2(19AA), would not render the Scheme unworkable. Appeal is dismissed accordingly.
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2013 (5) TMI 574
Appeal u/s 10F – Appeal against order of CLB – Declaration of Board meeting of WPIPL, as null and void - CLB held that, since there were only three shareholders and all of them were also Directors, the holding of the Board meeting in the absence of a party who had an affirmative vote was in violation of the JVA. Consequently, the Board meeting was held null and void and a direction was issued to hold a fresh Board meeting. There were two grounds on which the CLB proceeded to interfere with the decision of the Board meeting. First ground was that the decision could not have been taken without the affirmative vote of WPIGI. The other ground was that the notices of the Board meeting were issued at a time when the Respondent was not in the country and was stuck in New Jersey, USA, which was admittedly hit by a hurricane. While the notice was properly delivered to the Respondent, its request for adjournment of the meeting could have been easily accommodated by the Appellants. Nevertheless, they went ahead and held the meeting. Respondent/WIPGI also filed petition before the CLB u/s 397 and 398 of the Act read with Sections 402, 403, 406 & 408 thereof was that the AGM of the company for the financial year ended 31st March 2010, which ought to have been held on or before 30th September 2010, was not so held. Held that:- The Board meeting was held pending the decision of the CLB on the main petition u/s 397 of the Act filed by the Respondent. Therefore, the validity of any of the decisions taken subsequent to the transfer will depend on the outcome of the final decision in the petition u/s 397 of the Act filed by the Respondent/WPIGI. It is considered appropriate to direct that the interim order passed by this Court on 12th December 2012 to the effect that the resolution passed in the fresh Board meeting "shall not be given effect" is directed to continue for another period of eight weeks or till such time the CLB passes a final order in the petition filed by the Respondent, which decision, in any event, should not be later than 12 weeks from today. If for some reason, the CLB is unable to pronounce its final order in the petition within twelve weeks then, it will be open to either party to approach this Court. In that event, the interim order passed by this Court will continue till further orders are passed by this Court. It is clarified that this Court has not expressed any opinion on the principal contentions of the parties on the other issues which will be examined by the CLB on merits.
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Service Tax
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2013 (5) TMI 593
Demand of duty – Clearing and forwarding agent - Demand is dropped by the adjudicating authority on the ground that by temporarily storing the vehicles cleared by M/s. Maruti Udyog Ltd for DGS&D, they are not providing the services of clearing and forwarding agent. The vehicles supplied under the DGS&D rate contract are directly sold by M/s. Maruti Udyog Ltd. from their working factory gate under their own invoice and freight transit insurance policy are paid by the buyers to M/s. Maruti Udyog Ltd arranging the delivery of the vehicles from the direction of their various dealers located nearest consignee location. Held that:- Relying on the decision of the Hon’ble Punjab & Haryana High Court in CCE Panchkula vs. Kulcip Medicines P. Ltd. [2009 (2) TMI 89 - PUNJAB AND HARYANA HIGH COURT] as confirmed by Hon’ble Supreme Court. Therefore the impugned order is not correct and the order of the original adjudicating authority dropping the demand against the appellant is required to be upheld.
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2013 (5) TMI 592
Commercial coaching or training center – u/s 65(27) – Notification No.33/2011-ST - Whether Flying Training Institutes providing training for obtaining Commercial Pilot License (CPL) and Aircraft Engineering Institutes for obtaining Basic Aircraft Maintenance Engineering License (BAMEL) come in the category of coaching centers as laid down in Section 65(27) of the Finance Act, 1994 and therefore assessable to service tax or not? - SCN was issued by the respondent / Additional Commissioner of Service Tax to the petitioner. Held that:- Section 65(27) excluded from the domain of commercial training or coaching centers, training centers or establishments issuing any certificate or diploma or degree or any educational qualification recognized by law. Even after 30th April, 2011, amendment of section 65(27) though the part of Section 65(27) making such exclusion has been deleted but the Notification No.33/2011-ST issued in exercise of powers u/s 93 of the Finance Act has exempted, coaching or training leading to grant of a certificate or diploma or degree or any educational qualification which is recognized by any law from the whole of Service Tax leviable u/s 66 of the Finance Act. The Act, Rules and CAR distinguish an approved Institute from an unapproved one and a successful candidate from an approved institute would be entitled to enforce the right, conferred on him by the Act, Rules and CAR, to one year relaxation against the DGCA in a Court of law. The inference can only be one, that the Course Completion Certificate/training offered by such Institutes is recognized by law. An educational qualification recognized by law will not cease to be recognized by law merely because for practicing in the field to which the qualification relates, a further examination held by a body regulating that field of practice is to be taken. The recognition accorded by the Act, Rules and CAR supra to the Course Completion Certificate issued by the Institutes as the petitioner cannot be withered away or ignored merely because the same does not automatically allow the holder of such qualification to certify the repair, maintenance or airworthiness of an aircraft and for which authorization a further examination to be conducted by the DGCA has to be passed/cleared. Thus, the Instruction and the SCN are quashed.
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2013 (5) TMI 591
Late deposit the service tax - Interest and imposition of penalty - assessee's submission that they are collecting the service tax from their customers and are depositing the same on tentative basis to Revenue there are sometimes shortages and sometimes excess deposits - Held that:- As far as interest is concerned, assessee is required to pay the same in terms of the provisions of Section 75 of the Finance Act, 1994 and the same cannot be waived. However, as regards penalty, it is acceptable that there can be no malafide on their behalf for late deposit of service tax, accordingly set aside the imposition of penalties. partly in favour of assessee.
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Central Excise
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2013 (5) TMI 590
Refund claim denied - period of limitation - payment of excise duty from different accounts - Held that:- There is no dispute about the fact that the appellant discharged his Central Excise liability by using a PLA, which was primarily meant for Service Tax. It was only subsequently when audit objected, they paid the duty from the Cenvat account meant for Excise duty payment purposes and claimed the refund of the first time duty paid by them. Such cause of action for claiming refund can arose only when the appellants pays the duty second time from a different account. As such, agreeing with the advocate that cause of action arose only on 15/11/06, when they paid the duty of excise for the second time out of a different account maintained by them and as a result of audit objection. Admittedly they could not have asked for refund of duty prior to the said date. As such, the refund having been filed in March 2007 has to be held as having been filed within the period of limitation. Otherwise also, it was only a question of payment of excise duty from different accounts and is not a case of any clandestine activity. The appellant having discharged his excise duty liability from PLA account meant for Service Tax, when asked to pay duty from the other Cenvat account of excise duty, is entitled to make corrective accounting entries. With the second time payment of duty, the appellant is admittedly entitled to take the credit of the duty earlier paid by them. As such, denial of refund claim on the ground of limitation is not justified - set aside the impugned order and allow the appeal with consequential relief to the appellant.
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2013 (5) TMI 573
Denial of benefit of Notification No.17/2007-CE - related to abatement from payment of duty with respect to rolling mill - Held that:- In para-8 of Special Compound Levy Procedure, prescribed under Notification No.17/2007-CE , the refund or demand of duty can be worked out only if the unit availing special compound levy procedure ceases to work or reverse to the normal duty payment procedure. In the instant case, that is not the situation and there is no provision in the prescribed special procedure to ask for rebate of duty paid under compound levy scheme. Thus, order of the Commissioner (A) is upheld and appeal of the appellant is rejected.
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2013 (5) TMI 572
Demand of cenvat credit/interest/penalty - physical verification of the appellant’s stock Shortage was found by the department – As per appellant shortages were due to the burning or handling losses - Held that:- In normal accounting principles the quantity of raw material cleared from the stock is only reflected/debited in the statutory records and is not based on the end product manufactured without any record that how much quantity of raw material is consumed. Therefore shortages of raw material demanding cenvat credit and interest are required to be confirmed. So far imposition of penalty u/s 11AC is concerned it is observed that this Section was introduced in the Act w.e.f. 28.09.96 which is after the offence being committed in 1995. Thus, penalty is not attracted in this case for the period when penal provision.
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2013 (5) TMI 571
Imposition of penalty - willful suppression of facts - Held that:- The adjudicating authority while passing the order in original has nowhere discussed in the findings that how the elements of suppression of facts with an intention to evade duty are established.In the absence of same it is felt that no penalty under Rule 15 (2) is not imposable. In favour of assessee.
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2013 (5) TMI 570
Rejection of Refund claim – Limitation - The grounds for refund claim are that body built on chassis supplied by the customers are classifiable under Chapter heading 87.07 of the Schedule to the Central Excise Tariff Act, 1985 and covered by SSI Notification No.175/86-CE and they were entitled to avail said Exemption and paid duty under protest during the material period. Held that :- In the present case, the appellants did not challenge the classification list at any point of time. It may be noted that the appellant filed under protest letter on 7.1.1987. But, it is undisputed fact that after two days they filed six nos. classification lists time to time classifying the goods classifiable under heading No.87.04. Thus, the under protest letter has no effect in the eye of law. Appellant relied upon the decision of the Tribunal in the case of Neptune Polymers Vs CCE Ahmedabad [1991 (7) TMI 223 - CEGAT, BOMBAY]. In that case, the assessee, after filing letter of protest, filed another classification list claiming nil rate of duty, which was approved by the Assistant Commissioner of Central Excise. In the present case, the appellant after filing letter of protest (as claimed by the appellant), they filed classification list claiming the goods are dutiable under Heading No.87.04. So, the said case law is not applicable herein. The appellant paid duty on the basis of approved classification list which was not challenged before the Commissioner (Appeals) and therefore, the refund claim application filed on 18.5.1999 is not maintainable and also barred by limitation. Thus, there is no reason to interfere with the orders passed by Commissioner (Appeals). Accordingly, the appeal filed by the appellant is rejected.
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2013 (5) TMI 569
Demand of duty/penalty - sale of the goods from the depots at a higher price - Held that:- Matter remanded back to the original adjudicating authority for re-quantification of duty after extending the benefit of cum duty price. - addition of value of batteries in the UPS system - Held that:- whenever the appellant was clearing the UPS systems along with the battery from their factory gate, they were discharging duty liability on the full value of the system inclusive of the value of the batteries. Therefore in absence of suppression or mala fide, the extended period of limitation was not available in respect of the above demand. The same is accordingly set aside along with setting aside of penalty on both the appellants.
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CST, VAT & Sales Tax
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2013 (5) TMI 595
Writ petition - Assessment order - assessment orders were ex parte order and they created a huge amount of tax liability on the Company – Issuance of recovery certificate by department – Assessee appeal challenging the said certificate. Held that:- As petitioner has already filed a representation before Respondent no. 2 against the recovery notice, a copy of which has been filed to the writ petition, Respondent no. 2 is directed to decide the representation of the petitioner on merits in accordance with law. While deciding the representation, he will also take into consideration the effect of section 18 of the Central Sales Tax Act. The petitioner is directed to appear before the authority concerned along with a copy of the said representation and a certified copy of this judgement, within three weeks. The petitioner may also file supplementary objection, if any, with regard to section 18 of the Act within the aforesaid period of three weeks. The recovery against the petitioner shall not take place for a period of three months. Accordingly writ petition is dismissed.
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2013 (5) TMI 594
Rate of tax on the sale of Copper Wire Bars and Copper Cathods - whether would be charged and retained @ 4% or 1% - Held that:- It is noticed that the Notification of Rajasthan, bearing No. F-5(25)FD/CT/72-29 dated December 31,1975 was already in force and on the basis of it, the petitioner was liable to pay the tax @ 1% only though inadvertently, the tax was collected @ 4% and the same in entirety was deposited in the Government Treasury. Refund of differential amount - As the petitioner accepted and conceded that neither the petitioner made any claim of refund nor he would make any claim in furtherance thereof, the tribunal mentioned about allowing of the appeal of the Respondent inadvertently Accepting Tax Rate @ 4% could not have been the intention of petitioner before the Tribunal nor the intention of the Tribunal as all throughout the issue of charging rate of tax of 4% was challenged, was allowed by the DC(A) and it was the respondent, who was in appeal before the Tribunal.
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