Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 26, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Non-grant of registration u/s 12A - trust was not established for Christian community only, but for the public at large. - CIT directed to grant registration - AT
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Delayed filing of the e-TDS quarterly return - There is neither any willful negligence nor any malafide on the part of the assessee in the matter of compliance and the delay was due to reasonable cause, the default being beyond the control of the assessee deductor - no penalty - AT
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Application for grant of registration under section 12A - f the objects of the society are charitable and its activities are genuine, then registration cannot be refused to the assessee. - AT
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Promotion expenses - revenue v/s capital expenditure - even if to be treated as capital asset, the proof of acquiring the same had to be brought on record - claim of expenses & depreciation disallowed - AT
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Registration of trust u/s 12AA(1)(b) r.w.s 10(23C)(iiiad) - franchisee fee paid to Zee Learn Ltd - If the existence of the assessee was not for the purposes of profit, but solely for educational purpose, then the receipts of the assessee, if the same did not exceed ₹ 1 crore per annum, will be outside the purview of total income - AT
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Validity of Revision of assessment order - In the absence of any independent finding and leaving the AO to start a fresh investigation is not within the powers assigned us. 263 of the IT Act - the order us. 263 is not sustainable in the eyes of law- AT
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TDS u/s 194 - dividend distributed by the assessee did not part-take the character of interest and consequently, the assessee was not liable to deduct tax at source. - AT
Customs
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Denial of refund claim - Finalization of provisional assessment - prior to the amendment i.e. 13-7-2006, this doctrine of unjust enrichment was not attracted to refund claim under Section 18 - HC
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Seizure of Chinese silk - had they been purchased through acceptable channels, some support in the form of invoices, receipts etc. would have invariably found their way into the record - HC
Indian Laws
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Taxability of Sodexo Meal Vouchers - goods or not - consumability within the municipal limit is relevant or not - the said vouchers will fall in the category of printed material which attracts Octroi in terms of the Octroi Rules - levy upheld - HC
Service Tax
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Penalty u/s 76 & 78 - short payment of service tax - once in a year, the appellant themselves reconcile the statements and discharge the differential service tax liability short paid therein along with interest. - this is a fit case for invoking the provisions of Section 80 of the Finance Act, 1994 for setting aside the penalties - AT
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Denial of refund claim of cenvat credit - Notification No. 5/2006-CE (NT) Nowhere in Rule 5 of the CCR, 2004, is there any condition of establishing a nexus between the input service credit taken and the output service exported. - AT
Central Excise
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Denial of CENVAT Credit - GTA Service - freight has been paid by them and further the sale is on MRP basis and duty has been arrived on the basis of MRP - appellant has made out a prima facie case in their favour. - AT
Case Laws:
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Income Tax
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2015 (5) TMI 762
Addition on account of profit on sale of plot of land - CIT(A) deleted the addition - Held that:- It is not in dispute that the assessee had given a plot of land to M/s.Tirupati Corporation for development. As the entire payment for this transfer was not received by the assessee, the assessee had a lien over the said plot of land and in government records, the name of the assessee continued as registered owner over the said plot of land. M/s.Tirupati Corporation constructed complex which was the property of M/s.Tirupati Corporation. The FSI over the said construction also belonged to M/s.Tirupati Corporation. The said M/s.Tirupati Corporation vide two sale deeds in question sold the FSI for ₹ 46,08,000/- and ₹ 72,00,000/-. Name of the assessee appeared on those sale deeds as a vendor along with the name of M/s.Tirupati Corporation as confirming party, because, the title over the said land was not yet recorded in the government records in the name of M/s.Tirupati Corporation. The entire consideration of ₹ 46,08,000/- and ₹ 72,00,000/- was received by M/s.Tirupati Corporation, and they have duly shown the same as their income in their return of income. No material has been brought on record by the Revenue to show that any part of the said consideration of ₹ 46,08,000/- and ₹ 72,00,000/- was actually received by the assessee or the assessee was the owner of the complex, in respect of which FSI was sold. The sale consideration of ₹ 45,64,000/- which was shown by the assessee in its return of income was in respect of sale of land and had nothing to do with the sale of FSI of ₹ 46,08,000/- and ₹ 72,00,000/-. Thus, the AO clearly erred in adjusting the sale consideration of ₹ 45,64,000/- with the sale consideration of ₹ 46,08,000/- and ₹ 72,00,000/-. Thus no error in the findings of the CIT(A), which is confirmed. - Decided against revenue.
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2015 (5) TMI 761
Unexplained share capital - CIT(A)deleting the addition of ₹ 9 lacs out of the addition of ₹ 30 lacs made by the AO - Held that:- Assessing Officer is not justified on the basis of this inspector report to hold that the identity of the shareholder company [A.C. Steels & Holdings Pvt. Ltd, Grewal Steels & Holdings Pvt. Ltd. & Sumit Credit Co. Pvt. Ltd. ] has not been established. On the contrary, as rightly pointed out, the common surname “Grewal” is good enough to indicate that the office of these companies were at that premises. The inspector did not make any effort to make any further enquiry about these companies and also Assessing Officer did not make any effort to carry the investigation further. The sole basis for making addition about these companies is the inspector report. No doubts have been raised by the Assessing Officer about the documents filed by the assessee company. The inspector report as alleged above cannot be a basis for disbelieving the assessee’s version. Further in the case of Sofed Comtrade Pvt. Ltd. we note that no enquiry whatsoever has been done by the AO. The observations made by him are only raising a doubt without carrying out any investigation. Surprisingly we note that the AO was having doubt in mind but he never issued any notice or summon to any of the directors. It is not a case where any confessional statement has been recorded by any entry provider of accommodation entry. It is a case of a doubt raised by the Assessing Officer but such doubt has not been converted into any evidence or material so as to substantiate the addition. We are of the view that the additions made by the AO in respect of share capital received from these four companies are not justified and accordingly the same is directed to be deleted. As regards the fifth company i.e. Prime Vyapar Pvt. Ltd. we note that the inspector has carried out the enquiry and in this report the inspector has pointed out that on local enquiry it is revealed that there is no company called this name at the address and there is only a residential place at the said premise. The Ld. AR during the course of the hearing could not rebut this finding of the inspector. In view of this specific finding of the inspector which remains unrebutted, we are of the view that addition of ₹ 5 lacs in respect of the share capital received from Prime Vyapar Pvt. Ltd. has been rightly been made by the Assessing Officer and accordingly this addition is confirmed. - Decided partly in favour of assessee and revenue. Disallowance u/s 14A read with Rule 8D - Held that:- The assessment year under consideration is 2005-06 and Rule 8D is effective from assessment year 2008-09. Accordingly the Assessing Officer was not justified in invoking the provisions of Rule 8D for the assessment year under consideration. We further note that assessee’s investment is mainly in group companies. Considering these facts we delete this addition - Decided in favour of assessee.
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2015 (5) TMI 760
Permanent establishment (PE) of the assessee in India - whether receipts on account of advisory services and guarantee commission had to be assessed in India? - Whether particular articles of the Agreement of the Avoidance of Double Taxation between India and Netherlands were applicable or not? - Held that:- We find that Rabo India [RI] had made payment to the assessee for providing advisory services to it and under the head guarantee commission,that RI was paying the assessee more than 30% of its income,that the basic dispute between the AO and the asessee is as to whether the assessee had permanent establishment in India or not and as to whether the services rendered by RI could be treated activities carried out by the assessee. Before proceeding further, we are of the opinion that there is nothing on record to prove that provisions of Article5(1)of the Agreement are applicable. Article 5(1) stipulates that PE for the purpose of convention meant a fixed of business through which the business of the enterprise was wholly or partly carried on. Thus it is clear that the asessee was not having fixed place of business in India. FAA had rightly held that provisions of said Articles i.e.5(1)were not applicable. - Decided in favour of assesse. Whether particular articles of the Agreement of the Avoidance of Double Taxation between India and Netherlands were applicable or not? - None of the receipts comprising in total amount of ₹ 1,30,21,079/-, is taxable in India as held by CIT(A) - hHeld that:- The agreements entered into by RI with outsiders and the agreements entered in to by RI with the asessee have to examined to understand the real nature of the transaction.It also appears that some material was made available to the FAA,but it is found that he did not call for a remand report from the AO in that regard.The role of expatriate Director deputed to India has not been inquired in to.What were his duties and what function actually he had performed,is not known. Similarly, the circumstances in which guarantee commission was paid by RI to the asessee are not discussed by the FAA.The circumstances,under which RI for approached the asessee which entitled it to get roughly one third of the commission,are not known.In short,the appeal has been decided by discussing the principles governing DTAA and not mentioning as to how those principles were applicable to the facts of the case.In our opinion,the matter needs further investigation.Therefore, in the interest of justice, the matter is restored back to the file of the AO to determine the issue afresh after affording a reasonable opportunity of hearing to the asessee - Decided partly in favour of revenue for statistical purposes.
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2015 (5) TMI 759
Non-grant of registration under section 12A - activities carried on by the trust were meant for members of the Christian community and thus it is established for the benefit of specific religious community attracting the provisions of section 13(1)(b) and therefore no purpose will be served by granting registration u/s.12A as held by CIT(A) - Held that:- Looking at the objects of the trust, we find that one of the objects of the assessee trust was to provide Ambulance facility to people at large. The object Nos. 2, 6 and 7 of the Trust, were admittedly relating to Christian community. However, other object Nos. 3, 4, 5 was to provide Ambulance facility to people at large, to establish and administer educational institutions for needy and deserving Christian students in particular and others in general, to establish hostels, libraries, etc. for Christian boys and girls in particular and other deserving & needy boys and girls in general. - trust was not established for Christian community only, but for the public at large. The Hon'ble Gujarat High Court in Chandra Charitable Trust case (2006 (7) TMI 96 - HIGH COURT , GUJARAT) had laid down that even where the objects of the trust were not only to propagate the Jainism or help and assist maintenance of temples, Sadhus, Sadhvis, Shraviks and Shravaks, and other goals as set out in the trust deed, the trust was a charitable as well as religious trust and section 13(1)(b) of the Act would not be applicable. Similar proposition has been laid down in CIT v. Barkate Saifiyah Society [1993 (11) TMI 13 - GUJARAT High Court] wherein it was held that the exclusion from exemption under section 13(1)(b) of the Act applies only to charitable trust and charitable institution and if the trust was charitable as well as religious in nature, the assessee would be entitled to exemption under section 11 of the Act. Thus we hold that the assessee is a charitable religious trust and the provisions of section 13(1)(b) of the Act would not be applicable. In view thereof, we direct the Commissioner to grant registration to the assessee under section 12A of the Act as charitable religious trust - Decided in favour of assesseee.
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2015 (5) TMI 758
Penalty u/s 272A(2)(K) - delay filing the TDS return - Held that:- In the present case of the assessee, either Government bodies or aided by Govt., are public office and since the tax deduction and payment are made by treasury and there is undisputedly no default. There arises, no reason for non-filing of TDS return with an intentional act or willful act to attract a quasi-criminal, imposition of penalty. The assessee has relied on the decisions of CIT Vs. Superintendent Engineer [2002 (5) TMI 13 - RAJASTHAN High Court] and Royal Metal Printers Pvt. Ltd. Vrs. Asst CIT [2010 (1) TMI 938 - ITAT, Mumbai] wherein held that for such technical or venial breach supported by reasonable cause, penalty under sec. 272(A)(2) is not leviable and imposition of penalty is not justified for the reason that it was for the first time the requirement to convert the hard-copy into soft-copy was to be learnt by respective Government DDOs from the department officials. There is reasonable cause for delay in filing ETDS return U/s 273B. Considering the facts and circumstances of the cases in its entirety, we are of the considered view that the penalty so levied in the case of the assessee is not all justified. We, therefore, cancel the penalty levied u/s.272A(2)(k) for the assessee for the respective AYs. - Decided in favour of assessee.
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2015 (5) TMI 757
Reopening of assessment - specific information was received from the Dy. Director (Inv.) Mumbai as to assessee providing bogus speculation profit/loss, Short Term /Long term capital gain/loss, commodities profit/loss on commodity trading and had been continuing this business for many years - Held that:- Section 147 and 148 are charter to the Revenue to reopen earlier assessments and are, therefore protected by safeguards against unnecessary harassment of the assessee. They are sword for the Revenue and shield for the assessee. Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147. The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer. If, after applying his mind and also recording his reasons, howsoever briefly, the Commissioner is of the opinion that the AO’s belief is well reasoned and bonafide, he is to accord his sanction to the issue of notice u/s. 148 of the Act. In the instant case, we find from the perusal of the order sheet which is on record, the Commissioner has simply put “approved” and signed the report thereby giving sanction to the AO. Nowhere the Commissioner has recorded a satisfaction note not even in brief. Therefore, it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction. - Decided in favour of assessee.
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2015 (5) TMI 756
Income from sale of shares - income from capital gain or business income - Held that:- The assessee though had classified all unsold shares as on the close of accounting year as investments yet he was a both trader and an investor. CBDT in its circular No. 4 of 2007 has also emphasized that it is possible for a tax payer to have two portfolios one as investment portfolio and another as trading portfolio and where, the assessee has both portfolios, the income has to be assessed under both heads i.e. capital gain and business income. Moreover, we find that assessee had earned significant income from portfolio schemes and therefore the nature of income as to whether the same was capital gain or business income, has to be looked into keeping in view the objectives of such schemes and other terms and conditions of such schemes and also on the basis of settled law with respect o taxation of income from portfolio schemes. In view of the above facts and circumstances, we set aside the order of Ld. CIT(A) and direct him to re-adjudicate on the issue after taking into account all facts and circumstances as enumerated above. The Ld. CIT(A) should examine the three years independently as entire facts in one year may not be available in another year. The case laws relied upon by Ld. A.R. are distinguishable on the facts as in the case law as M/s. Devasan Investments (P) Ltd.[2014 (4) TMI 682 - DELHI HIGH COURT] the number of scripts was quite low and there was no frequency of transactions. Moreover, in determination of the nature of income of an assessee as to whether income is from capital gains or from business, a combination of factors has to be considered and no case law can be made as a precedent. - Decided in favour of revenue for statistical purposes.
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2015 (5) TMI 755
Transaction through PMS and market broker - capital gain v/s business income - CIT(A) directed the Assessing Officer to treat the appellant as an investor and treat the profit on sale of shares as "capital gains" - Held that:- As decided in assessee's own case for the Assessment Years 2004-05 and 2005-06 when totality of all the above facts are considered, the inference drawn by the CIT (A) that the assessee is an investor in shares, appears to be correct. Apart from the above, on the principle of consistency also order of the CIT (A) on this point deserves to be upheld because in the original returns income from sale of shares was disclosed under the head "capital gain" and the same was accepted by the Revenue. Income tax proceedings the rule of res judicata does not apply but there should be uniformity in treatment and consistency under the same facts and circumstances. See CIT vs. Gopal Purohit,[2010 (1) TMI 7 - BOMBAY HIGH COURT] - Decided against revenue.
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2015 (5) TMI 754
Transfer pricing adjustment - entity M/s. E-Infochips Bangalore Ltd. taken by the Assessing Officer/TPO as comparable should be excluded from the list of final comparables for the purposes of transfer pricing analysis on the ground of functional differences as well as on the ground of insufficient information available in respect of the said entity in public domain - Held that:- The profit margin of such entity in the immediately preceding year(s) may also be taken into consideration and the FAR analysis in such cases may be reviewed to ensure that the potential comparable earning higher profit satisfies the comparability condition. Since this exercise has not been done either by the AO/TPO or the DRP in the present case, we are of the view that the matter should go back to the Assessing Officer/TPO for fresh consideration. This, in our opinion, will also take care of the grievance of the assessee relating to the lack of sufficient information in respect of M/s. E-Infochips Bangalore Ltd. available in the public domain in as much as the TPO can obtain such information in the form of relevant schedules of the Profit & Loss Account of the said entity as well as the segmental details, if any, directly from the said entity. We therefore, set aside the impugned order of the Assessing Officer as well as the direction given by the DRP on this issue and restore the matter to the file of the Assessing Officer/TPO for deciding the same afresh in the light of the observations already made by us, after giving the assessee proper and sufficient opportunity of being heard - Decided in favour of assesse for statistical purposes.
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2015 (5) TMI 753
Penalty U/s.272A(2)(k) - whether appellant has not deliberately and consciously deposited the TDS amount in time? - Held that:- We do find that the penalty so levied by the AO and confirmed by the learned CIT(A) appears to be leaning more on holding assessee in default for such penalty as a mechanical/ automatic levy insofar as it is the Department itself, who has insisted the e-filing of such returns as late as making the assessee literate about the data to be uploaded on the basis of tax deducted at source already given credit to by the I.T. Department on the basis of TDS certificates furnished by the assessee namely the deductee. The bonafide is established beyond doubt when the very fact that the quarterly returns for more than four quarters and less than eight quarters were filed simultaneously on the same date when assuming but not accepting that the assessee in default become suddenly computer literate. Concluding, we observe that it is only a question of delayed filing of the e-TDS quarterly return, which was entrusted to an authorized service provider and the delay has occurred unintentionally. The assessee deductor is law compliant and the delay occurred only due to the reason that the assessee deductor is dependent on information of TDS and its deposit from the sub treasury of the Government and filing of e-return through the designated service provider of Income-tax Department. The assessee deductor has no technical competency to file the return by itself without external aid. The assessee is also not competent to do so by itself as per rule 37B and "Filing of Return of Tax deducted at source" scheme 2003, which requires the submission of quarterly statement through NSDL or other approved agencies i.e third party, not under the control of the assessees. There is neither any willful negligence nor any malafide on the part of the assessee in the matter of compliance and the delay was due to reasonable cause, the default being beyond the control of the assessee deductor. It is at best a technical or venial breach of the provisions of the act or where the breach flows from a bonafide belief that the assessee is not liable to act in the manner prescribed by the statute. The penalty u/s 272 (A)(2) cannot be levied in a routine manner. Law is well settled that a bonafide breach cannot lead to a penalty u/s. 272(A) [Hindustan Steel Ltd. Vs. State of Orissa (1969 (8) TMI 31 - SUPREME Court)]. - Decided in favour of assessee.
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2015 (5) TMI 752
Application for grant of registration under section 12A of the Act - Rejection of application on the ground that it is not established for charitable purpose - Held that:- The first objection of the CIT is with regard to the fact that the assessee is not imparting any education, but only giving coaching for EAMCET examination. However, in our view such finding of the CIT is not based on facts on record. As can be seen the assessee has established a Jr. College in the name and style of R.K. Science and Commerce Jr. College which is imparting education in two year intermediate course. This fact is clearly evident from the affiliation granted on 9.4.2012 by the Board of Intermediation, A.P. Therefore, there cannot be any doubt that the assessee is running an educational institution which is as per the objects of the society. The next objection of the CIT is, the assessee is charging fee over and above the fee prescribed by the govt. However, the learned Authorised Representative has demonstrated before us by referring to the relevant G.O issued by the Govt. that fees charged by the assessee is more or less at par with the tuition fees prescribed by the govt. Moreover, whether the assessee is charging fees in excess or what is prescribed can be considered by the Assessing Officer while examining assessee’s claim of exemption under section 11. At the time of granting registration, the CIT has to act in accordance with the provisions contained under section 12AA of the Act. As per the said provision at the time of granting of registration, the CIT has to examine the object of the society and the genuineness of its activities. If the objects of the society are charitable and its activities are genuine, then registration cannot be refused to the assessee. The same views are supported by decisions in the case of Kusumba Dhirajlal Parekh & Lila Nautamlal Parekh Foundation [2014 (1) TMI 933 - ITAT HYDERABAD] and Lucknow Educational and Social Welfare Society [2011 (2) TMI 1185 - Allahabad High Court] - Decided in favour of assessee.
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2015 (5) TMI 751
Disallowance of deduction claimed u/s.80P - the assessee had violated the provisions of AP Mutually Aided Co-Operative Societies Act, 1995 - whether, having given a finding that Nominal/Associate Members are not Members of the society, the incomes from them are excluded while calculating deduction u/s.80P(2)(a)(i)? - Held that:- Assessee-society is clearly a co-operative society and Assessing Officer herself has stated that assessee is a co-operative society, but violated the provisions of the Co-operative Societies Act. There is no restriction of getting any deposits from outsiders, leave alone from nominal Members and Associate Members. As rightly pointed out by the Ld.CIT(A), the source of funds for doing the business is not a criteria. What is required to be examined by the Assessing Officer is whether the deduction u/s.80P(2)(a)(i) is from the profits and gains of providing credit facilities to its Members. To that extent the Assessing Officer can examine the assessee's transactions. Just because assessee has deposits from Non Members, it does not prevent being a co-operative society nor it prevents claiming deduction u/s.80P(2)(a)(i), if it is otherwise eligible on the said incomes. In view of this, while accepting in principle that assessee is eligible for deduction u/s.80P(2)(a)(i) and 80P(2)(d), quantification of income ie. income/profits and gains on credit facilities provided to Members, is restored to the file of Assessing Officer for necessary examination of the details of the transactions and quantifying the same. Therefore, while upholding the order of the CIT(A) on the principles of law, the quantification of deductions made by CIT(A) is therefore set aside and restored to the file of Assessing Officer to examine it afresh, in the light of the above observations/ directions. - Decided in favour of revenue for statistical purpose.
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2015 (5) TMI 750
Bogus purchases - CIT(A) deleting the addition - Held that:- As relying on precedent of assessee's own case it was only on the basis of the documents put-forth by the assessee that purchases from the said parties have been held to be bogus. Notably, assessee had furnished the invoices raised by the said parties and had also explained that all the payments were made by the cheques. Assessee had also furnished their sales-tax numbers. With respect to the transportation, assessee had explained that the responsibility of transportation was of the supplier and therefore assessee could not produce the transport receipts. The explanations put-forth by the assessee were not subject to any enquiry or verification by the Assessing Officer but have been merely disbelieved. The Assessing Officer, in our view, was influenced by the outcome of enquiries made with respect to the other six parties. However, in the absence of any material on record to negate the position canvassed by the assessee with respect to the said five parties, the explanation of the assessee could not be disbelieved. Under these circumstances, in our view, the CIT(A) made no mistake in deleting the addition with respect to the aforesaid five parties. As a consequence, on this aspect Revenue fails - Decided in favour of assessee.
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2015 (5) TMI 749
Promotion expenses - revenue v/s capital expenditure - Held that:- Claim of expense as revenue has been rejected, but the AO and CIT(A) have held the acquisition of furniture and fixture as capital in nature. But at the same time, even if to be treated as capital asset, the proof of acquiring the same had to be brought on record, which the AR submitted that the assessee is unable to so. In such a case, when we do not find anything on record, as a proof of acquisition of the furniture and fixtures, we cannot even direct the AO to allow depreciation thereon, as we cannot make any observation with regard to the ownership of the asset, having been brought into existence and used for the purposes of business. Thus disallow the expense claimed by the assessee. - Decided against assessee. Amounts written off - held to be capital in nature and therefore disallowed and sustained by the CIT(A) - Held that:- On going through the submissions, we appreciate that the AR accepted that no details could be placed before revenue authorities and no details can be placed now before us to justify its claim. In these circumstances, we are left with no alternative, but to sustain the orders of the revenue authorities & consequentially reject the ground as raised by the assessee.- Decided against assessee. Disallowance of holding expense - reimbursement made to its C & F agents at Delhi, Gujarat & Kolkat - Held that:- The expense could not be held to be capital in nature, as no enduring benefit could be attained. We therefore, accept that the expense shall be revenue in nature. - Decided in favour of assessee. GP addition - Held that:- As being produced now before us, pertaining to the disallowance, we are of the opinion that this issue of sale of scrap of ₹ 11,76,000/- be restored to the file of the AO. We therefore, set aside the order of the CIT(A) on this issue and restore this issue to the file of the AO for reconsideration - Decided in favour of assessee for statistical purposes
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2015 (5) TMI 748
Registration to appellant trust u/s 12AA(1)(b) denied - CIT(A) held the appellant trust has entered into the franchise agreements with Mount Litra Zee School, whereby the applicant trust has given franchisee fee to Zee Learn Ltd thus under the agreement, the school will be run under the guidelines and specification from franchisor and therefore there is no scope with the assessee to get into any charitable activity and this venture in education is purely commercial - Held that:- As relying on case of CIT Vs. Highlanders Educational Academy [2012 (12) TMI 497 - UTTARAKHAND HIGH COURT] wherein held the Assessing Officer held that the assessee is not existing solely for educational purposes, but, at the same time, it clearly and in no uncertain terms recorded a finding that the assessee is running a school with Nursery and Kindergarten classes. No other existence of the assessee was noticed. Therefore, the conclusion would be that the assessee was existing for the purpose of running the said school with Nursery with Kindergarten classes and, accordingly, was existing solely for educational purposes and not for purposes of profit. If the existence of the assessee was not for the purposes of profit, but solely for educational purpose, then the receipts of the assessee, if the same did not exceed ₹ 1 crore per annum, will be outside the purview of total income as is the mandate contained in Section 10(23C)(iiiad) of the Act. That having not been held by the Assessing Officer was reversed by the Commissioner of Appeals and the same having been affirmed by the Tribunal, there is no scope of interference. Thus the basis adopted by the CIT to decline registration was not in accordance with law and in view thereof, CIT is directed to grant the registration to appellant trust u/s 12AA(1)(b) of the Act. - Decided in favour of assessee.
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2015 (5) TMI 747
Addition to cash deposits in various bank accounts - peak credit addition - Held that:- Considering the findings given in the CIT(A)’s order including that of AO’s comment in the remand report, it is seen that assessee has been unable to explain the source of cash deposits vis-a-vis any corroborative evidence. Whatever material has been placed on record though establishes that assessee was in some kind of money transfer business, however, the onus is upon the assessee to correlate the cash deposits with some evidence or the same has been recorded in regular books of account. It is also an undisputed fact that three of the assessee’s bank accounts was not disclosed, either in the balance sheet or in the books of account. In such a case ones lies heavily upon the assessee to prove the source of the cash deposits in the bank account. Since there was a regular cash deposits and regular withdrawals from same nature of transaction, then positive peak credit has to be worked out for the purpose of addition which has rightly done by the Ld. CIT(A). Accordingly, the Ld. CIT(A)’s conclusion that peak credit should be added is affirmed. However, it is noted that while arriving at the peak credit of all the bank accounts, it is seen that firstly, the Ld. CIT(A) has not given credit of opening balance as on 1st of April 2005 and secondly, he has also included the cash deposits made SBI bank account of Lalganj Azamgarh which belongs to his brother. If the said bank account belongs to his brother then no addition on account of unexplained credit can be made in the hands of the assessee. Though the said bank account may be relevant to work out the assessee’s commission income but definitely cannot be taken as undisclosed bank account of the assessee as it belongs to assessee’s brother who is separate and distinct from the assessee. Thus, we direct the AO to work out the peak credit only from three undisclosed bank account of the assessee, after excluding the opening balance and the entry in bank account belonging to his brother for the purpose of addition on account of unexplained deposits in the bank account.Once the addition on account of peak credit is being made, then no separate addition on account or commission income should be made separately as made by CIT(A) because the unexplained peak credit itself takes care of income element and secondly, if commission income is to be added then it leads to an inference that all the credits and deposits are accepted and only the income qua the transaction is to be taken as an income. Thus addition on account of commission income should be deleted. - Decided partly in favour of assessee.
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2015 (5) TMI 746
Ad hoc disallowance - N.P. estimation @ 12% - Held that:- Assessee's conduct during the course of assessment and appellate proceedings does not give a conducive picture, in the entirety of facts and circumstances of the case, there is no infirmity in the order of ld. CIT(A) holding that the assessee's books of account should have been rejected and NP should be estimated at 12%. This way of estimation in case of rejection of books is also a recognized manner. It is trite law that while challenging the estimate made by the income tax authorities, the burden is on the assessee to convincingly demonstrate that the estimate is arbitrary, so as to enable the appellate authority to interfere. In absence of any convincing arguments or evidence in this behalf, we see no reason to interfere in the order of estimate made by the learned CIT(A). In these circumstances, we see no reason to interfere with the rate of N.P. as estimated by the learned CIT(A). However, we find merit in the alternate prayer of the learned counsel for the assessee that a relief of interest of ₹ 42403/- and depreciation of ₹ 26641/- should be given which is allowed to the assessee. - Decided partly in favour of assessee.
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2015 (5) TMI 745
Validity of Revision of assessment order - Set-off of losses against income enhanced vide TPO order u/s 92CA(3) of IT Act - Income under Double Taxation between India and United Kingdom - Applicability of Surcharge & Education cess on income covered under DTAA - Held that:- As far as the first objection of the Ld. Commissioner about the correct method of the computation of assessed income is concerned, since other authority of the Revenue Department i.e. DRP has already held that the benefit of set offcarry forward of losses are to be computed as per the regular provisions of the Act, therefore, we hereby hold that there was no legal sanctity on the part of Ld. Commissioner to direct the AO to verity and decide afresh this issue. Further, we hereby hold that the decision of Hon’ble Delhi High Court pronounced in the case of DG Housing Project Ltd. [2012 (3) TMI 227 - DELHI HIGH COURT] is applicable wherein it was held that the Ld. Commissioner again remitting the matter for a fresh decision to the AO to conduct further inquiries without a finding that the order of the AO is erroneous is not sustainable. Therefore, we are of the view that the manner in which the Ld. Commissioner has given direction to the AO are not in line with several decisions of Hon’ble courts namely, Arvind Jewellers [2005 (7) TMI 90 - GUJARAT High Court]. About the second issue raised by Ld. Commissioner, we hereby hold that firstly the AO has examined that issue on those relevant facts hence cannot be said to have committed an error and secondly the issue can not be said to be controversial because in the case of DIC Asia Pacific Lt. [2012 (6) TMI 686 - ITAT, KOLKATA], it was held that Surcharge and education cess is not applicable on income covered under DTAA . Moreover,We have noted that Ld. Commissioner has not demonstrated any breach of law or procedure by the AO to allege that the impugned order of the AO was prejudicial to the interest of the revenue. Rather the direction of Ld. Commissioner appears to be general in nature asking the AO to verify the facts again afresh. In the absence of any independent finding and leaving the AO to start a fresh investigation is not within the powers assigned us. 263 of the IT Act. We therefore hold that the order us. 263 is not sustainable in the eyes of law. - Decided in favour of assessee.
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2015 (5) TMI 744
Disallowance of 20% of the discount and credit notes allowed to clients - CIT(A) deleted the disallowance - Held that:- In the present case since the AO had accepted the books of accounts maintained by the assessee in regular course of business and also did not bring any material on record to substantiate that the expenses on account of credit notes / discounts were not related to the business of the assessee. Therefore, the ad hoc disallowance made by the AO was not justified and the Ld. CIT(A) rightly deleted the same. In that view of the matter and by considering the totality of the facts as discussed hereinabove, we do not see any merit in this appeal of the department. - Decided against revenue.
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2015 (5) TMI 743
Disallowance of dividend / interest paid to chit subscribers due to non deduction of TDS - Disallowane of expenses on collection of subscription for other group companies - Disallowance of expenses - Additional evidence put before tribunal for consideration by assessee - Held that:- We find that this issue has been decided by the ITAT in the assessee’s own case [2015 (4) TMI 938 - ITAT HYDERABAD] for A.Y. 2005-06 dated 24th September, 2014 wherein it has been held that the issue involved in the appeal of the Revenue is squarely covered in favour of the assessee by the decision of the coordinate bench of this Tribunal in assessee’s own case [2012 (2) TMI 468 - ITAT HYDERABAD] for assessment year 2008-09 rendered vide order dated 24.2.2012, wherein a similar disallowance made by the Assessing Officer was held to be unsustainable, following the decision of the Madras high Court in the case of Bilahari investments (P)Ltd. [2006 (6) TMI 59 - MADRAS HIGH COURT], wherein it was held that the dividend distributed by the assessee did not part-take the character of interest and consequently, the assessee was not liable to deduct tax at source. Disallowance of expenses - We do not find any infirmity in the CIT (A)’s disallowing meager expenditure of ₹ 2.00 lakhs only, as a very little expenses would be actually deployed for collection of subscription from other group companies. Collection was done as minor additional work along with their regular employment. We confirm the order of the CIT (A) on this issue. Additional evidence - We admit the additional evidence as the same substantiated the merits of the case and the evidence goes to the root of the issue, relying on the decision of the Hon'ble Bombay High Court in the case of Smt. Prabhavati S. Shah [1998 (2) TMI 107 - BOMBAY High Court] and Abhay Kumar Shroff [1997 (6) TMI 75 - ITAT PATNA]. We set aside the issue to the file of the AO to consider the additional evidence and re-decide the issue in accordance with law. - Appeal filed by the Revenue is dismissed and the appeal of the assessee is allowed for statistical purposes.
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Customs
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2015 (5) TMI 768
Denial of refund claim - Finalization of provisional assessment - Whether the doctrine of unjust enrichment inserted by way of Sub-section (5) of Section 18 of the Act with effect from 13.7.2006 was applicable to refund under Section 18 prior to the amendment in view of Section 27(2) of the Act - Held that:- Sub-section (2) of Section 27 of the Act provides that any excess duty so paid after such determination shall be credited to the Fund. The proviso may be in exception instead of crediting to the Fund, the said amount is payable to the assessee, if the said amount does not fall within any of the categories mentioned in (a) to (f) of the said proviso. One such instance where the assessee was not entitled to refund was where he had already passed on the burden of duty on the customer. That is, if it is refunded to him, it would be a case of unjust enrichment. Such a provision was conspicuously missing in Section 18 of the Act. It is by way of amendment which came into effect from 13-7-2006 the said provisions contained Sub-section (2) of Section 27 of the Act was added to Section 18 by way of Sub-section (5). If for a claim under Section 18 of the Act, if an assessee has to put forth a claim under Section 27 of the Act, there was no necessity for the parliament to introduce Sub-section (2) of Section 27 of the Act by way of Sub-Section (5) of Section 18 of the Act. It only demonstrates Sections 18 and 27 are merely exclusive. To claim refund under Section 18 of the Act, the assessee was not expected to invoke Section 27 of the Act. Refund under Section 18 of the Act is independent of refund under Section 27 of the Act. It is for this reason when the Parliament wanted to prevent unjust enrichment, they amended Section 18 of the Act and introduced by way of Sub-section (5) what is contained in Sub-section (2) of Section 27 which includes unjust enrichment. Therefore, it follows prior to the amendment, this doctrine of unjust enrichment was not attracted to refund claim under Section 18 of the Act. - Decided in favour of assessee.
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2015 (5) TMI 767
Detention of appellant's husband - Habeus corpus - Prevention from abatement of smuggling - Delay in communicating order to appellant - Held that:- The manner in which the representation of the detenue was dealt with does not in our view comply with the constitutional mandate and falls foul of the obligation to decide the representation “ as soon as may be” in Article 22(5) of the Constitution. In our view the representation could have been decided much earlier. The duration of time that has lapsed between the receipt of representation and consideration by the Authority and communication of the order of detention. As stated above the delay is of 23 days and 19 days respectively. We have noticed that in many cases, holidays are cited as reason for delay. This has become routine. What has been lost sight of is the fact that the detenu continues to be incarcerated without trial even on holidays. The mere fact that four holidays intervened still does not justify the delay in considering and communicating the decision on the representation. - If indeed the mandate of Supreme Court is to be honestly carried out by the Authority, the Authority should endeavor to prepare themselves to deal with such representation more expeditiously in the interest of upholding the law. The file is said to have been received from Nagpur in Mumbai on 23.12.2014 after which the rejection intimation was sent to Nashik Road central prison. If that be so, we wonder how in the affidavit on behalf of DRI it is stated that it received a communication from the office of Detaining Authority to the effect that the representation made by the detenu was rejected by the Detaining Authority on 19.12.2014. Surely, there is more than meets the eye. Since admittedly, the Additional Chief Secretary had rejected the representation on 20.12.2014 there is no explanation on how communication of the said decision could have been received by the DRI on 19.12.2014. We are, therefore, convinced beyond all reasonable doubt that the delay is not properly explained and continued detention of the detenu is in violation of the constitutional mandate of Article 22(5) of the Constitution of India and order of detention stands vitiated - Decided in favour of appellant.
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2015 (5) TMI 766
Seizure of Chinese silk - no legal authorization of purchase could be traced - Held that:- Whether the appellant was aware of the fact that he was involved in contraband goods, or was an innocent agent of the real culprit is therefore, a matter of fact, appreciation of which has been undertaken by two adjudicating authorities. Besides, the Court notes that the conclusions here were based not only on the retracted confessional statement but also based on the seizure -which was witnessed by the appellant’s father, who recorded a statement (and who was cross-examined during the adjudication proceedings). Moreover, there was no material adduced by the appellant to substantiate the legitimate source of these seized goods; had they been purchased through acceptable channels, some support in the form of invoices, receipts etc. would have invariably found their way into the record. The complete absence of such material or documents negates the appellant’s arguments. - Decision in the case of M.P. Goenka [2015 (2) TMI 263 - DELHI HIGH COURT] distinguished - Decided against assessee.
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Corporate Laws
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2015 (5) TMI 765
Application under Section 560(6) of the Companies Act, 1956 for restoration of name - Name stuck off due to non-filing of Annual Returns - Initiation of proceedings under Section 560 of the Companies Act, 1956 - Primary responsibility for ensuring that proper returns and other statutory documents are filed, in terms of the statute and the rules, remains that of the management - Held that:- It has been averred on behalf of the respondent that though the notices/letters under S.560(1) and (3) were sent, their copies and dispatch proof are not traceable. It is pertinent to note here that since per the petitioner’s enquiries and inspection of its official record the updated address of the registered office of the petitioner-company was not reflected in the records of the respondent; and further, in absence of any submission and/or documents to the contrary, it is entirely possible that the respondent had sent notices under S.560 to the petitioner on the old address of its registered office and the same may not have been received by the petitioner. Under the facts and circumstances, it is possible that notice in respect of action under S.560 of the Companies Act, 1956, was not sent to the registered office of the company. Consequently, the condition precedent for the initiation of proceedings to strike off the name of petitioner from the Register maintained by the respondent, was not satisfied. And looking to the fact that the petitioner is stated to be a running company; and that it has filed this petition within the stipulated limitation period; and also to the decision of the Bombay High Court in Purushottamdass and Anr. (Bulakidas Mohta Co. P. Ltd.) [1984 (4) TMI 247 - HIGH COURT OF BOMBAY ] , it is only proper that the impugned order of the respondent dated 23.06.2007, which struck off the name of the petitioner from the Register of Companies, be set aside. At the same time, however, there is no gainsaying the fact that a greater degree of care was certainly required from the petitioner company in ensuring statutory compliances. Accordingly, the petition is allowed. The restoration of the company’s name to the Register maintained by the Registrar of Companies will be subject to payment of costs of ₹ 22,000/- to be paid to the common pool fund of the Official Liquidator, within three weeks; and on completion of all formalities, including payment of any late fee or any other charges which are leviable by the respondent for the late deposit of statutory documents. The name of the petitioner company, its directors and members shall, as a consequence, stand restored to the Register of the respondent, as if the name of the company had not been struck off, in accordance with S.560(6) of the Companies Act, 1956. - Application for restoration of company name approved.
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2015 (5) TMI 764
Application for Scheme of Amalgamation under sections 391(2) & 394 of the Companies Act, 1956 - Regional Director's observation regarding all FEMA compliances , Non filing of e-form 32 (DIR 12) regarding regularization of their Additional Director duly addressed - Held that:- Although no objection has been raised by the Regional Director, but in Para 4 of his report, he has submitted that on perusal of the shareholding pattern of both the companies, it has been observed that all the shares are held by foreign companies. He, therefore, prayed that the petitioner company may be asked to give an undertaking for all compliances from Reserve Bank of India as required under FEMA for above transactions involving foreign banks/entities. Further, in para 5 of the report, he has pointed out that the petitioner has not filed the requisite e-form 32 (DIR 12) regarding regularization of their Additional Director, namely Sh. Raman Nagpal. In reply to the aforesaid, the petitioner has undertaken to comply with the statutory provisions under the FEMA and the RBI Act, and the rules and regulations framed thereunder. The same is accepted and the petitioner shall remain bound by the same. The Assistant Registrar of Companies has submitted that the petitioner has also filed the relevant e-form 32 (DIR 12) with regard to the Director, Sh. Raman Nagpal for regularization of his directorship. In view of the aforesaid, the observations raised by the Regional Director, Northern Region stand satisfied. Considering the approval accorded by the equity shareholders and creditors of the petitioner companies to the proposed Scheme of Amalgamation and the affidavits filed by the Regional Director, Northern Region not raising any objection to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, subject to sanction of the Scheme of Amalgamation in respect of the transferor company from the court of competent jurisdiction, sanction is hereby granted to the Scheme of Amalgamation under Sections 391 and 394 of the Companies Act, 1956. - Application for Scheme of Amalgamation approved.
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Service Tax
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2015 (5) TMI 776
Denial of refund claim - Unjust enrichment - documents had not been produced to show that the amount charged to the foreign network operator was as per agreement and also to show that no service tax was charged - Held that:- principle of unjust enrichment would not be applicable to export transactions as specifically provided in section 11B of Central Excise Act, 1944. The facts of the case of Vodafone Cellular Ltd. (2014 (3) TMI 117 - CESTAT MUMBAI) are similar to the facts of the present case. However, we further note that the adjudicating authority and the Commissioner (Appeals) have come to the conclusion that the appellant could not satisfy the lower authority that the amount of service tax paid by them is correlated with the invoices raised on foreign mobile operator for inbound international roaming charges. The appellant, on the other hand, claim that the information has been provided and even chartered accountants certificate has been submitted to the effect that the service tax of ₹ 15,64,222/- has been paid in connection with inbound international roaming service and that the service tax was not shown in the invoices nor collected from the customers. Matter remanded back - Decided in favour of assessee.
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2015 (5) TMI 775
Penalty u/s 76 & 78 - short payment of service tax - Held that:- that there is no such allegation on the appellant and the escapement of tax as alleged seems to be short paid due to some mis-calculation. We also find strong force in the contention raised by the representative of appellant that DGCEI which investigated the matter, did not come out with any short payment of service tax prior to April 2004. It was his submission that once in a year, the appellant themselves reconcile the statements and discharge the differential service tax liability short paid therein along with interest. - this is a fit case for invoking the provisions of Section 80 of the Finance Act, 1994 for setting aside the penalties imposed on the appellant herein. - Decided in favour of assessee.
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2015 (5) TMI 774
Denial of refund claim - Notification No. 5/2006-CE (NT) dated 14/03/2006 - nexus between the exported output service and the input services utilised - Held that:- Nowhere in Rule 5 of the CCR, 2004, is there any condition of establishing a nexus between the input service credit taken and the output service exported. Notification No. 5/2006-ST also does not stipulate any such condition. So long as the credit is admissible and has been taken and lying accumulated and the exporter is unable to utilise the credit, he is eligible for refund of the accumulated credit. This is the whole purpose and aim of Rule 5 of the CCR Rule, 2004. The board's clarification also makes this point very clear. The decisions of this Tribunal in the case of Capiq Enigneering Pvt. Ltd. [2008 (10) TMI 84 - CESTAT, AHMEDABAD] and Amdocs Business Services Pvt. Ltd. [2013 (9) TMI 31 - CESTAT MUMBAI] also support this view - impugned order passed by the lower appellate authority cannot be faulted at all - Decided against Revenue.
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2015 (5) TMI 773
Waiver of pre deposit - Non inclusion of value of spares - Free service during warranty period - Held that:- In the case of free service provided by the applicant on behalf of M/s TKML to the customers of M/s TKML is reimbursing whole of the expenses incurred by the applicant i.e. service charges plus cost of spares during the period of warranty. The applicant is paying service tax on the service part of the transaction and not paying service tax on the value of spares replaced during the period of warranty had been reimbursed by M/s TKML . In this situation also that value of spare replaced during the period of warranty is not includible in the taxable service. Therefore, the applicant has made out a complete waiver of pre-deposit - following the precedent decision in applicant's own case [2015 (5) TMI 670 - CESTAT NEW DELHI] the applicant has made out a case for complete waiver of pre-deposit - Stay granted.
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Central Excise
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2015 (5) TMI 772
Condonation of delay - Delay of 29 days - Improper advice of legal counsel - Held that:- for the lapse of the advocate or because of the fact that counsel did not advise them suitably, the appellant should not suffer. Therefore we set aside the decision and condone the delay in filing the appeal and remand the matter to the learned Commissioner (Appeals) for considering the appeal afresh in accordance with law. Needless to say principles of natural justice will be observed while considering the matter afresh. - Delay condoned.
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2015 (5) TMI 771
Waiver of pre deposit - Denial of CENVAT Credit - GTA Service - claim of the appellants is that the CENVAT Credit is taken in respect of cement wherein the appellants bore the freight and supplied the goods at the premises of customers on FOR destination basis - Held that:- Decision of the Hon ble Supreme Court [2002 (10) TMI 96 - SUPREME COURT OF INDIA] may not be applicable to the facts of this case since in that case, factory gate was admittedly the place of removal and there was no dispute about the place of removal. In the case of Madras Cements Ltd., the decision was rendered prior to the period 01/04/2008 and further it was held that prior to 01/04/2008 only credit was admissible. We are considering the period subsequent to 01/04/2008. However, in cases like this, it has to be taken note that the decisions have to be rendered on the basis of fact. On going through the invoices, we find that as claimed by the learned counsel, freight has been paid by them and further the sale is on MRP basis and duty has been arrived on the basis of MRP - appellant has made out a prima facie case in their favour. Accordingly, the requirement of predeposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.
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2015 (5) TMI 770
Denial of SSI exemption - Notification No. 1/93-CE dated 28.02.1993 - appellants had not opted the benefit of exemption in respect of the goods under the sub-heading 7325.10 and paid full duty - Held that:- The appellant contended that they were not aware that the goods under heading No. 7325.10 was within the purview of the exemption Notification No. 1/93-CE w.e.f. 01.03.94. We find that there is no dispute that after amendment of the SSI exemption Notification No. 1/93 as amended by Notification No. 59/94, the simultaneous availment of modvat and SSI exemption by the manufacturer on different goods is not permissible. - Following decisions of CCE, Raipur Vs. National Cement Corporation [2013 (3) TMI 524 - CHHATTISGARH HIGH COURT], CCE, Ahmedabad Vs. Ramesh Food Products [2004 (11) TMI 103 - SUPREME COURT OF INDIA] and Kamani Foods Vs. Collector of CE, Patna [1994 (1) TMI 109 - CEGAT, NEW DELHI] - there is no merit in the appeal filed by the appellants. Accordingly, No reason to interfere with the impugned order - Decided against assessee.
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2015 (5) TMI 769
Waiver of pre deposit - Classification of goods - Held that:- Prima facie, it appears that the contents of the goods do not substantially contain nitrogen and phosphates. To call the goods as fertilizers, these ingredients substantially dominate. Therefore, appellant is directed to deposit ₹ 10,00,000 - Partial stay granted.
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Indian Laws
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2015 (5) TMI 777
Taxability of Sodexo Meal Vouchers - whether in the nature of goods - consumability within the municipal limit is relevant or not - levy of entry tax / octroi duty / Local body tax (LBT) - Paper based vouchers - affiliates are bound to honour vouchers - On receipt of the vouchers, the Petitioner reimburses the affiliates after deducting service charges - Maharashtra Municipal Corporations Act, 1949 - Held that:- As far as the use or consumption of goods for the purposes of charging Octroi is concerned, the law is laid down by the Apex Court in the case of Hindustan CocaCola Beverage Pvt. Ltd. [2011 (7) TMI 1100 - SUPREME COURT]. Apex court held that though the use of the bottles may not amount to its destruction or total using up, but to attract octroi, the bottles must have finally rested within the Municipal limits and not taken out. This Court concluded that to attract the levy of octroi on the goods brought within the Municipal limits, there must be proof of the fact that the goods got consumed completely within the Municipal limits or were used for an indefinite period in such a way that they come to rest finally and permanently within the Municipal limits or sold within the said limits. The said vouchers are capable of being sold by the Petitioner after they are brought into the limits of the City. In fact, going by the scheme narrated above, the said vouchers are sold by the Petitioner to its customers for value. The customers give the said vouchers to its employees called as users. On presentation of the said vouchers, the users get foods and beverages from the affiliated establishments and the affiliated establishments on presentation of the said vouchers to the Petitioner get the face value of the said vouchers after deducting the service charges. Thus, the said vouchers are capable of being used or sold within the limits of a City. The decision of Apex Court in the case of Bharat Sanchar Nigam Limited [2006 (3) TMI 1 - Supreme court] distinguished wherein the issue was considered in respect of of the nature of transaction by which mobile phone calls / electromagnetic waves. The said vouchers which are printed on paper are the goods within the meaning of the said Municipal Corporations Act. After the vouchers are brought within the limits of the Municipal Corporations Act, the same are capable of being sold. The said vouchers which are capable of being sold, delivered and possessed have its own utility. The same cannot be equated with a lottery ticket which merely an actionable claim. The said vouchers cannot be equated with electromagnetic waves - the said vouchers will fall in the category of printed material which attracts Octroi in terms of the Octroi Rules - Decided against the appellant.
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2015 (5) TMI 763
Default in repayment of dues - Account classified as NPA - Notice for possession of property under Section 13(4) of the Act read with Rule 8 and 9 of the Security Interest (Enforcement) Rules, 2002 - Writ jurisdiction in case of Alternate remedy - Three clear-cut circumstances wherein a writ petition would be maintainable even in a contractual matter. Firstly, if the action of the respondent is illegal and without jurisdiction, secondly, if the principles of natural justice have been violated, and thirdly, if the appellants' fundamental rights have been violated - Amount classified as NPA in contravention of RBI guidelines - Bank should not classify the account as NPA only at the instance of such deficiency which was temporary in nature - The RBI guidelines provides ninety days time to the petitioners to clear the deficiency, that is, till 31.03.2015 and the same was cleared by the petitioners in January, 2015 itself - The action of the respondent-Bank in rejecting the petitioners' objection was per se arbitrary and illegal. Held that:- In the light of the rival stand submitted by the parties, we first take up the plea of alternative remedy. The respondent-Bank has relied upon a decision of the Supreme Court in United Bank of India Vs. Satyawati Tondon and others [2010 (7) TMI 829 - SUPREME COURT ]. No doubt the petitioners has a remedy of filing an application under Section 17(1) of the Act. However, the jurisdiction of the High Court under Article 226 of the Constitution of India is not ousted merely because an appeal is provided under Section 17 of the Act. The power under Article 226 of the Constitution is wide and for the exercise of such power there is no restriction except the territorial restriction. However, the exercise of the writ jurisdiction is discretionary. Ordinarily, the Court does not entertain the matter where the petitioners have an alternative remedy. In Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and others, [1998 (10) TMI 510 - SUPREME COURT] wherein this Court has held that there are three clear-cut circumstances wherein a writ petition would be maintainable even in a contractual matter. Firstly, if the action of the respondent is illegal and without jurisdiction, secondly, if the principles of natural justice have been violated, and thirdly, if the appellants' fundamental rights have been violated." The Supreme Court in Harbanslal Sahnia and another Vs. Indian Oil Corpn. And others [2002 (12) TMI 564 - SUPREME COURT], held that the petitioners' dealership, which is their bread and butter, cannot be terminated for irrelevant and non-existent cause. The Supreme Court held that the petitioners should not be relegated to the rule of alternative remedy and that the High Court should have entertained the writ petition and granted relief instead of driving the petitioners to initiate the arbitration proceedings. In the light of the aforesaid decisions, we are of the opinion that at present moment only a notice under Section 13(4) of the Act has been initiated. No action on it had been taken by the respondents and, therefore, at this stage the petitioners cannot avail the remedy of an appeal under Section 17 of the Act. It is only when an action is taken under Section 13(4) of the Act the cause of action arises for the petitioners to file an appeal under Section 17 of the Act. In any case, we are of the opinion that considering the facts and circumstances that has been brought on record, we find that the action of the respondents in declaring the petitioners' account as a NPA was arbitrary and in violation of RBI guidelines. We also find that there are no disputed questions of fact, which needs to be adjudicated and the entire matter can be decided on the basis of the guidelines framed by the RBI. It is clear that a notice can only be issued if a borrower commits default in the repayment of the security debt and his account in respect of such debt, is classified as NPA. Unless and until the account is declared as NPA, no notice under Section 13(2) of the Act could be issued, even if there is a default. Sub-section (3A) of Section 13 of the Act gives an opportunity for the borrower to make any representation or raise any objection to the said notice, which in turn is required to be considered and decided by the secured creditor. Sub-section (4) of Section 13 of the Act provides the secured creditor to adopt any of the measures for recovery of the secured debt. From the RBI guidelines, it is clear that a substandard asset is one, which has remained NPA for a period less than or equal to 12 months. The guidelines provides that such asset will have well defined credit weakness that jeopardies the liquidation of the debt and are characterised by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected, meaning thereby that if the borrower corrects the deficiency then the substandard asset would be upgraded to a standard account as per para 4.2.5 of the RBI guidelines, which provides that if arrears of interest and principal is paid by the borrower, the account would no longer be treated as non-performing and would be classified as a standard account. In this regard, the Court further finds from a reading of para 4.2.4 of the guidelines that the classification of an account as NPA must be done by Bank based on the record of recovery and that the Bank could not classify an account as NPA merely due to the existence of some deficiencies which are temporary in nature such as balance outstanding exceeding the limit temporarily. In the light of the aforesaid, we are of the view that the initial action taken by the Bank classifying the petitioners' account as NPA was wholly invalid, illegal and against the guidelines issued by the RBI, which has the force of law and which is binding upon the Bank. We further find that the temporary deficiency in the petitioners' cash credit account was cured and the petitioners had brought its account within the cash credit limit in January, 2015. The RBI guidelines provides ninety days time to the petitioners to clear the deficiency, that is, till 31.03.2015 and the same was cleared by the petitioners in January, 2015 itself. The respondent-Bank should have upgraded the petitioners' account again as a standard account, which was not done and consequently the rejection of the petitioners' reply by the respondent-Bank and issuance of notice under Section 13(4) of the Act becomes patently illegal and arbitrary. At this stage, we must observe that the finance is required so that the petitioners could run their business. If the loan or the cash credit limit is withdrawn abruptly it becomes difficult for the borrower to repay the amount since the amount sanctioned by the Bank is invested in the business. We find that the business of the petitioners is running and, it is not a case where the business has stopped running or where the business is running in a loss. No doubt the respondent-Bank is required to protect the loan which it had sanctioned but, at the same time, the respondent-Bank should adopt a practical and pragmatic approach for which the RBI has framed guidelines which are binding upon them and which are required to be followed meticulously. In the instant case, we find the respondent-Bank has failed to adhere to the terms indicated in the guidelines. Consequently, the action of the respondent-Bank in declaring the petitioners' account as NPA by its order dated 31.12.2014 as well as the notice dated 01.01.2015 issued under Section 13(2) of the Act and the notice dated 17.03.2015 issued under Section 13(4) of the Act are quashed. - Decided in favour of appellant.
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