Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 31, 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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Computer peripherals and accessories - depreciation @ 60% has been allowed on computer peripherals. - AT
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Status of HUF - whether CIT(A) erred in granting the assessee the status HUF & deleting the addition made being the capital asset treated as income of AOP - held no - AT
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Non deduction of TDS u/s 194J - TPA - TPAs, when they make payments to hospitals are liable to deduct tax at source under the provisions of section 194-J. - AT
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Nature of share transactions - the transaction which have been shown under the head investment portfolio and, hence, the short term capital gain or long term capital gain as the case may be, will be applicable. - AT
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Penalty u/s. 271(1)(c) - Clearly, a false claim was not only made by the assessee, but it was agitated before the highest fact finding authority - penalty confirmed. - AT
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Deemed dividend u/s 2(22)(e) - oan or advance to a non-shareholder cannot be taxed as deemed dividend in the hands of the a non shareholder - AT
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Charge of fringe benefit tax - whether a person is a “servant“ or an “agent“ - Since those services were professional services FBT is not applicable - AT
Customs
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Condonation of delay - appellant had deliberately approached wrong forum to cause prejudice to the interest of Revenue - prayer for condonation rejected - AT
Service Tax
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Franchise service or not - Appointment of agents - collection of fee form the agent of Rs. 15000/- each - prima facie case is in favor of assessee - stay granted. - AT
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Valuation - inclusion of the value of SIM-Cards in providing the (communication) services by the appellant - extended period of five years cannot be invoked - demand set aside - AT
Central Excise
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Eligibity of Cenvat credit on welding electrodes - without repair and maintenance, manufacturing operations, though theoretically possible, are not commercially feasible - credit allowed - AT
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Condonation of delay - the Courts take reasonably lenient view in examining the delay and causes of delay explained by a litigant on the premise that ordinarily, a litigant would not gain by not pursuing his remedies. - delay of 215 days condoned - HC
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Cenvat Credit - The invoices issued by the registered licencee being genuine and in the absence of any allegations against the appellants of fraud, the Tribunal should not have remanded the matter back as the claim was totally barred by limitation - HC
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CESTAT dismissed the appeal - The petitioners had deposited the amount of pre-deposit, of course after some delay - appeals are required to be heard on merits - HC
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Revenue appeal - There are no statutory rules, providing that the Commissioner will sit on the same day at the same time and take a decision authorising a Central Excise Officer to file the appeal - HC
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Cenvat credit - ISD - credit could not be denied on the ground that the input services were received in some other units and distribution need not have been made on the basis of receipt or unit of receipt - AT
Case Laws:
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Income Tax
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2013 (5) TMI 731
Computation of deduction u/s 10A by excluding communication expenses from the total turnover as well - Held that:- View taken by the CIT(A) that when the 'total turnover' includes “export turnover”, the very same meaning given to the “export turnover” by the legislature is to be adopted while understanding the meaning of the “total turnover”. Further, it is also noted that the “total turnover” is sum total of “domestic turnover” in the appellant’s case, the “export turnover” will be equal to “total turnover”. Hence, if an item of expenditure is excluded from “export turnover" the same has to be excluded from “total turnover” as well relying upon Patni Telecom (P) Ltd.& Cymbal Information Services (P) Ltd. [2008 (1) TMI 452 - ITAT HYDERABAD-A] & CIT vs Genpact India (2011 (11) TMI 119 - DELHI HIGH COURT). The judgement relied upon by the AO in the context of “expression attributable to” and “derive from” addresses, the settled legal position however in the facts and circumstances of the present case, the nature of expenses in the context of deduction u/s 10A in the peculiar facts and circumstances of the case has been considered. No contrary view of the Jurisdictional High Court or of the Hon’ble Apex Court has been brought to notice in order to canvass that the impugned order deserves to be upset. Against revenue. Computer peripherals and accessories - whether eligible for depreciation @ 60% - Held that:- The issue whether the computer peripherals i.e. printers, inverters, modems, routers for network connectivity, EPABX, tape drive etc. are integral parts of the computer is no longer in question as the issue has consistently been decided in favour of the assessee by various orders of the Tribunal following the judgments of the jurisdictional High Court of Delhi in CIT vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] & CIT vs. Orient Ceramics & Inds. Ltd. [ 2011 (1) TMI 26 - DELHI HIGH COURT] where depreciation @ 60% has been allowed on computer peripherals. In favour of assessee. Training expenses - revenue v/s capital - Held that:- Expenses have been incurred for training programmes on regular basis provided to the employees of the assessee in order to update them on a continuous basis of the changes in the industry so as to better adapt them to the changing environment. Thus there can be no two opinions that training is an imperative exercise which when imparted to its employees necessarily impacts the better functioning of the employer. In the present case where the business needs of the assessee demand the training and upgradation of the skills of the staff of the employer and the assessee has incurred such an expenditure the same as per the settled legal position as considered by coordinate orders of various Benches of the Tribunal has to be allowed as a revenue expenditure. See Schneider Electric India (P) Ltd (2008 (8) TMI 778 - ITAT DELHI) & ACIT vs Hero Management Services Ltd. [2013 (5) TMI 730 - ITAT DELHI]. In favour of assessee.
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2013 (5) TMI 730
Disallowance u/s 14A r.w.r. 8D - CIT(A) deleted the disallowance - Held that:- As per Godrej Boyce case (2010 (8) TMI 77 - BOMBAY HIGH COURT) Rule 8D of the Rules is applicable only prospectively with effect from assessment year 2008-09 and it is not applicable to assessment year 2007-08, i.e., the year under consideration here and CIT(A) as seen, has taken one half percent of the value of the total average assets of the assessee as the expenses attributable to earning the dividend income. This was also the basis of the determination of the apportionment of expenses for assessment year 2006-07, as arrived at by the AO. The disallowance restricted by CIT(A) from Rs. 73,96,192/-, as made by the AO, to Rs. 55,40,562/-, as such, is found to be reasonable, calling for no interference. The assessee is also not in appeal against this disallowance. The Department has not been able to show as to how the aforesaid basis taken by the CIT(A) for determining the apportionment of expenses is not reasonable. More-over, the assessee's contention that the AO had wrongly taken the average cost of total assets resulting in excess disallowance has also not been successfully refuted by the Department. Against revenue. Market development expenses - CIT(A) deleted the disallowance - Held that:- None of these payments was made by the assessee to CRMI as no Agreement between the assessee and CRMI was in existence. Moreover, a similar claim of Market Development expenses had been made for the assessment year 2006-07. The same had been allowed. It has not been shown that there has been any change in the facts for the year under consideration. CIT(A) has duly taken into consideration all these facts while rightly deleting the addition made. Against revenue. Consultancy charges paid to Arman Auto Group - failure to deduct TDS - CIT(A) deleted the disallowance - Held that:- AO merely rejected the explanation offered by the assessee, without recording any finding as to why it was being so done. While deleting the addition, CIT(A) has correctly observed that it had not been pointed out by the AO as to which clause of section 9 was applicable to the assessee and as to why TDS was required to be made on the payment. There has been no contravention of the assessee's stand to the effect that the services were rendered outside India and that being so, no income either accrued or was received or could be deemed to have accrued or been received in India. As such, the TDS was not deductible on the payment made and the disallowance of the expenditure was not justified. No error there-with, the CIT(A)'s conclusion on this issue too - Against revenue. Difference in the rate of interest on loan to the group company - CIT(A) deleted the disallowance - Held that:- The loan given was the old loan outstanding from 2003-04. The loan taken , on the other hand, was taken during the year under consideration, F.Y. 2006-07. As such, the AO did not prove any nexus between 7% interest bearing loan received and the 6% interest bearing loan given by the assessee company. It has also not been shown that for giving the loan, any loan was taken by the assessee Company. Therefore, finding no merit therein - Against revenue. Recruitment and training expenses - CIT(A) deleted the disallowance - Held that:- It remains undisputed that it is the business requirement of the assessee Company to train the staff recruited for voice in UK and US accents. This is necessary for operating Call Centre and BPO Services, it is the business of the assessee Company. As such, the expenditure was an expenditure incurred wholly and exclusively for the purpose of assessee's business. That being so, the expenditure incurred cannot be said to be a capital expenditure. See Shriram Piston & Rings Ltd. [2013 (5) TMI 729 - ITAT DELHI]. Against revenue. Addition on account of provision - CIT(A) deleted the disallowance - Held that:- It is seen that the assessee is following the Mercantile System of Accounting, in which, the expenditure items, for which, the legal liability has been incurred, are immediately debited even before the amounts are actually disbursed, as also held in "Morvi Industries Ltd. v. CIT" (1971 (10) TMI 5 - SUPREME Court). The payment to Palam Court Maintenance Agency was a monthly payment after TDS, for the maintenance requirements of the assessee, including electricity. The provision in this regard was made in accordance with the Settlement Statement between the assessee and the Agency, the details whereof were duly filed. The payment was, in fact, for the services rendered by the Agency for the assessee. Undisputedly, the payment was made in the next year. The provision cannot be said to be an unascertained liability. The same goes for the AMC charges as well as the salary provision. See Triveni Engg case [2010 (11) TMI 90 - DELHI HIGH COURT] Payment made to Palm Court Maintenance Ltd. - disallowance was made u/s 40 (a)(ia) - CIT(A) deleted the disallowance - Held that:- The amount as stated, a Balance Sheet item. It has not been debited to the Profit and Loss Account. The payment, in fact, represented charges on account of monthly electricity, generator and building maintenance and not rent of the building, as wrongly concluded by the AO. It is available from Schedule 12 to the assessee's Balance Sheet that rent of Rs. 2.54 crores had separately been paid by the assessee. The electricity expenses and repair and maintenance expenses have also been mentioned in Schedule 12 of the Balance Sheet, under administrative and other operating expenses. Hence, once the amount paid did not represent rent, the AO obviously erred in concluding that TDS had to be made thereon @ 22.2%. The assessee, on the other hand, had correctly made TDS @2% on the payment. Against revenue.
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2013 (5) TMI 729
Commission income disallowed - Held that:- While the assessee is agitating deduction of the whole amount of the commission paid to the agents, the revenue is agitating that commission is not deductible in computing the total income at all. These grounds stand covered by order for assessment year 1998-99 wherein held that the assessee is entitled to deduct the full amount of commission paid to the agents in computing its total income. In favour of assessee. Computation of deduction u/s 80HHC - whether miscellaneous income be included in in the total turn over for computation of the deduction - Held that:- From the submissions of assessee it is obvious that no part of this income represents export turn over. Therefore, there is no question of including any part thereof in the total turn over as in the case of income arising on account of fluctuation in the rate of foreign exchange. Further, total turn over can only mean the receipts by way of sale of goods. Therefore, the composition of income is required to be examined by the AO for including only that part of the income in the total turn over which represents consideration received for sale of goods. Accordingly, this matter is restored to the file of AO for taking fresh decision after hearing the assessee. Receipt of service charges - Held that:- As submitted by assessee that the amount represents after sale service charges received from the customers to whom the goods are sold. However, the details of this income also are not available and, thus, the aforesaid submission has to be verified by the AO - matter is restored to the file of AO for taking fresh decision. Receipt of interest from customers on account of late payment - Held that:- As the same is in the nature of sale proceeds. Therefore, CIT(A) rightly included this amount in the total turn over. Interest on security deposit with the Government, interest on I.T. refund and interest on housing loan given to the employees - Held that:- Obviously, these receipts do not include any element of turn over. Therefore, these amounts have to be excluded from the total turn over. Deduction u/s 80HHC on DEPB benefits - Held that:- The decision of CIT Vs. Kalpatru Colours and Chemicals (2010 (6) TMI 63 - BOMBAY HIGH COURT) came up for discussion wherein held that the whole of the amount received on transfer of license amounts to profit and not the difference between sale consideration and the face value of the licence. The rival parties submitted that the matter may be remitted to the AO for fresh decision after considering this decision of Hon’ble Bombay High Court, thus remitted. Treatment given to the interest received from bank on fixed deposits for computing deduction u/s 80HHC - CIT(A) held that the interest is taxable under the head “income from other sources” excluding 90% from the profits of the business for computing deduction - Held that:- the order of the Assessing Officer merged with the order of learned CIT(A), which was arrived at after following the due process of law, namely, issuance of notice of enhancement to the assessee thereby giving him a reasonable opportunity of being heard. The assessee could not explain as to how the income was to be treated as business income. No error in the order of CIT(A). Royalty expenses - Fees paid to foreign technician - Research and development expenses - new model development expenses - revenue v/s capital - Held that:- This ground stands settled in favour of the assessee in its own case for assessment year 1980-81 [2008 (4) TMI 273 - DELHI HIGH COURT] treating it as revenue expenditure. Excise duty whether excluded from the total turn over for the purpose of computing deduction u/s 80HHC - Held that:- Ground has to be decided against the revenue in view of the decision of CIT Vs. Lakshmi Machine Works (2007 (4) TMI 202 - SUPREME Court) wherein held that the excise duty and the sales tax do not form part of the total turn over u/s 80HHC(3), otherwise the formula becomes unworkable. Sales tax and excise duty do not have any element of turn over which is the position even in the case of rent, commission, interest etc. Training expenditure - revenue v/s capital - Held that:- The expenditure is in the revenue field, which enhances the capacity of the employees, leading to improvement of the productivity and profits. The expenditure has been incurred from year to year, and the ratio of the expenditure to the turn over has been decreasing from year to year. Accordingly, it is held that the expenditure is in the nature of training expenditure, deductible in computing the income. ISO-9001 expenses - Held that:- The issue stands covered by the decision of Climate Systems India (P) Limited Vs. ACIT [2009 (12) TMI 699 - ITAT DELHI] in which it has been held that the expenditure is revenue in nature. 5-S and safety expenses - Held that:- 5-S stands for sorting, systematic arrangement, keeping environment spic and span, standardization and self-discipline. These expenses are obviously in the nature of training expenses. The other expenses are also in the nature of training expenses of the staff and refilling of fire extinguisher, printing of banners, awareness of safety and audit fees for ensuring compliance of safety standards. These expenses are also training expenses in nature. Therefore, all these expenses are deductible in full.
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2013 (5) TMI 722
Status of HUF - whether CIT(A) erred in granting the assessee the status HUF & deleting the addition made being the capital asset treated as income of AOP - Held that:- CIT(A) while deleting the addition by his well reasoned order has given a finding that after perusing the various documents, the gift of Rs. 11,000/- has been rightly shown as capital of HUF of Paresh M. Shah HUF. With respect to gift of Rs. 5 lacs CIT(A) has held that gift was recorded in memorandum of gift, & it was reflected in the return of donor and as well as ledger of assessee, which along with other documentary evidence support the contention that the assessee had received the gifts. He has further held that provisions of sub section 9 of Section 171 are effective for partitions effected after 31.12.1978 but the partition of Mansukhlal M. Shah HUf has been effected on 1.11.1978. As Revenue could not controvert the findings of CIT(A) no reason to interfere with the order of CIT(A) and thus dismiss the appeal of Revenue.
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2013 (5) TMI 721
Disallowance of unexplained cash credit - CIT (A) deleted the addition restricting the addition to business income @ 11% GP - Held that:- AO had made addition on the basis that the assessee had deposited cash in his bank account & has not detected any other source of income during the assessment proceedings as transpired from the records by making such finding fact that CIT(A) has not called for remand report from the AO when a specific finding has been given by the AO that the assessee has not produced any document, books of account and other details for verification. Thus this issue should be remitted back to the file of AO for fresh decision. Assessee before AO did not produce the requisite details despite a specific request however, CIT(A) has observed that the assessee had produced some of the confirmations along with their PAN in respect of creditors disallowed by the Assessing Officer. Since the assessee has produced fresh evidence CIT(A) ought to have taken a remand report from the AO. Therefore restore the matter back to the AO for fresh decision. Revenue's appeal stands allowed for statistical purposes.
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2013 (5) TMI 720
Disallowance of expenditure incurred on telephones at guest house - Held that:- CIT(A) confirmed the addition following the decision of his predecessor for earlier assessment year i.e. 1994-95 following the decision of Mumbai Bench in the case of M/s. Hindustan Lever Ltd Vs IAC [1996 (3) TMI 161 - ITAT BOMBAY-A] - Against assessee. Disallowance of Community Welfare and Rural Development expenditure - Held that:- As decided in assessee's own case relating to A.Y. 1990-91 wherein the Tribunal on the basis of the judgement of S.A. Builders Ltd. Vs CIT [2006 (12) TMI 82 - SUPREME COURT] has allowed the expenditure incurred by the assessee towards Community Welfare and Rural Development Programme in computing the taxable income. Thus following the decision of the Tribunal, AO is directed to allow the expenditure. In favour of assessee. Addition made in respect of Modvat credit - CIT(A) confirmed addition - Held that:- As decided in assessee's own case followed the decision of the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd (2003 (1) TMI 8 - SUPREME Court) wherein held that Modvat credit on account of excise duty was not includable in the valuation of closing stock, thus direct the AO to delete the additions. In favour of assessee. Disallowance of third party commission paid during the previous year - Held that:- Tribunal in assessee's own case has confirmed the disallowances made by the CIT(A) on the ground that if details of payment of commission are not coming from the assessee, such payments made in respect of contract awarded by Public Sector companies, to held as expenses incurred against public policy and therefore not entitle to be deducted in the light of the proviso to Sec. 37. Against assessee. Disallowance of pre-operative expenses - Held that:- It is found that as per the accounting practice of the assessee company, pre-operative expenditure incurred by the unit were accounted for in capital work-in-progress in the books of the unit and subsequently transferred to the head office for the capitalization. Thus it is not in dispute that the expenditure of Jharsuguda Cement works, amount works out to Rs. 24,94,727/- which should have been claimed in A.Y. 1994-95. Ground is partly allowed. Disallowance of claim for depreciation in respect of certain assets given on lease by the assessee - Held that:- As decided in I.C.D.S. Ltd. Vs CIT [2013 (1) TMI 344 - SUPREME COURT] wherein the Apex Court has allowed depreciation in the case of sale and leased back transaction. In favour of assessee. Disallowance made u/s. 40A(3) - CIT(A) deleted the addition - Held that:- A perusal of the explanation given by the assessee show that it is covered by the exception provided under Rule 6-DD(j) as it stood at that point of time. After considering the facts in the light of the exception provided under Rule 6-DD(j) prior to 1.12.1995,no reason to interfere with the findings of the CIT(A). Expenditure on construction of Jetty at Gujarat Cement Works Project - revenue v/s capital expenditure - Held that:- Tribunal in assessee's own case in A.Y. 1994-95 has followed the decision of National Organic Industries ltd.[1993 (2) TMI 48 - BOMBAY High Court] to allow the expenditure - against revenue. Unforeseeable losses in computation of value of work-in-progress amounting to Rs. 9.60 crores - Held that:- After considering the facts and the submissions of the assessee in the light of accounting standard issued by the ICAI and the fact that the practice followed by the assessee from year to year consistently recognized by the Accounting Standard should be accepted - against revenue. Interest on borrowed funds for Hirmi Cement unit - Held that:- The claim of the assessee that the Hirmi Cement plant formed a part of the existing cement business of the assessee company was accepted by the Ld. CIT(A) who rejected the view of the AO that these are pre-operative expenses need to accepted following the previous year assessments - against revenue. Disallowance of 25% of estate maintenance expenditure - Held that:- Relying on the certificate issued by the auditors of the company, the ld. CIT(A) directed the AO to consider such certificates wherein it has been stated to confirm that no capital expenditure was included in the estate maintenance expenses and take a fresh decision in the matter of such adhoc disallowance. A perusal of the Paper Book shows that for A.Y. 1990-91 to 1993-94 the adhoc disallowance has been reduced to 10%. A similar view has been taken by the Tribunal in A.Y. 1994-95 which need to be followed in this year also - Partly in favour of revenue. Claim of depreciation on foreign exchange loss - Held that:- The issue now stand covered in favour of the assessee by the decision of Woodward Governor India Pvt. Ltd [2009 (4) TMI 4 - SUPREME COURT] wherein held that loss suffered by the assessee on account of fluctuation in the rate of foreign exchange has on the date of the balance sheet is an item of expenditure u/s. 37(1). Disallowance of Rs. 15,00,000/- out of Conference expenses treating the same as in the nature of entertainment expenditure - Assessee submitted that Conference expenses represents expenditure incurred on holding seminars and conferences of stockists and distributors and therefore deserves to be allowed - Held that:- However, after the amendment to provisions of Sec. 37(2) such expense do have an element of entertainment, thus direct the AO to reduce the disallowance by 50%. The assessee will get a relief of Rs. 7,50,000/- accordingly.
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2013 (5) TMI 719
Slump sale - CIT (A) valued the Land & Building as per section 50C & taken the FMV of Rs. 1,45,03,819/- and for movable assets the sales consideration is ARBITRORILY derived as Rs. 43,13,925/- - Held that:- There is no dispute on the facts and figures that the sale consideration of the movable and immovable assets of the restaurant is Rs. 1.35 Crs. The answer is negative considering the retention of certain assets undisputedly. In such circumstances, the finding of the CIT(A) that it is not the case of a slump sale confirmed - dismiss the AO's manner of invoking the provisions of section 50B relating to the slump sale. In the result the capital gains have to be computed only in accordance with the provisions of section 50. It is also a fact that the CIT (A) should have granted an opportunity to the AO while invoking the different provisions for the first time, deviating entirely from the manner of assessment done by the AO. It is also a fact that there is no dispute about the applicability of provisions of section 50C to the depreciable assets referred to in section 50 of the Act. Of course, assessee made a concession that for want of finality of the litigation he shall not make an issue regarding the adoption of the FMV of the land and building. Considering the above there is need for re-computation of the capital gains in accordance with the provisions of section 50 of the Act - appeal filed by the assessee is allowed for statistical purposes.
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2013 (5) TMI 718
Non deduction of TDS u/s 194J - TPA - payments made to hospitals towards claims for insurance policy holders of insurance companies as their facilitator under the Third Part Administrator Agreement with the Insurance Companies - demand u/s 201(1) and 201(1A) - Held that:- As decided in assessee's own case [2010 (5) TMI 98 - BOMBAY HIGH COURT] the services rendered by the hospitals are in the course of carrying of the medical profession. Hence, it is not possible to accept the submission that TPAs, when they make payments to hospitals are not liable to deduct tax at source under the provisions of section 194-J. Three appeals of the assessee are dismissed.
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2013 (5) TMI 717
Transaction in shares subject to STT - taxable under the head "income from business or profession" OR "capital gain" - Held that:- Respectfully following the decision of Commissioner Of Income-Tax Versus V. A. Trivedi [1987 (1) TMI 12 - BOMBAY High Court] CIT(A) was not justified in confirming the order of AO, who took the transaction as business transaction instead of treating the same as short term capital gain. CIT(A) has confirmed the order of AO by observing that the transactions are frequent transactions, however, the holding period cannot be taken into consideration because under the Act itself, it has been provided that where the holding period of shares are more than one year then the long term capital gain will be applicable and where the holding period is less than one year, then the short term capital gain will be applicable, subject to the transaction are shown under the head investment portfolio. Therefore, whether the transaction are frequent or holding period is less, they are shown under the head investment portfolio, therefore, the transaction which have been shown under the head investment portfolio and, hence, the short term capital gain or long term capital gain as the case may be, will be applicable. In view of these facts and circumstances, the grounds of the assessee for both of the years allowed and direct the AO to assess the profit under the head short term capital gain instead of under the head business profit. In favour of assessee.
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2013 (5) TMI 716
Penalty u/s. 271(1)(c) - CIT(A) deleted the penalty - AO was of the opinion that assessee had furnished inaccurate particulars of income - Held that:- In this case return of income was filed in November, 1997 and claim about the overriding commission was made by the assessee, though the agreement for paying the same had already lapsed. Original agreements for making payments for overriding commissions were up to the period of 31.03.1995 only and after last date of that financial year same were not renewed. Both the parties had not rendered any services to the assessee during the year under consideration, even then assessee - company claimed that an expenditure amounting to Rs.62.04 Lakhs was paid to them. Not only it was claimed before the AO, but the issue was agitated up to the level of the Tribunal by the assessee. There is no doubt that assessee wanted that claim made by it should be allowed, even though proof of rendering of services by NCL and GTSL or existence of agreements was lacking. Clearly, a false claim was not only made by the assessee, but it was agitated before the highest fact finding authority Assessee knew that there was no agreement for payment of commission for the year under consideration with both the companies and that the claim made was not true, even then it tried to convince both the appellate authorities that claim made by it was genuine. Therefore, it can safely be held that the claim made by the assessee was not only wrong, but also false and it was persisted with for a very long time. The assessee had not furnished any satisfactory explanation as to why a prima facie inadmissible claim was made in the return. In favour of revenue.
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2013 (5) TMI 715
Disallowance of wages paid to labour - CIT(A) dissatisfied with the quality of the vouchers maintained and furnished by assessee - AO adopted disallowance as 8% confirmed by CIT(A) by holding that such an addition will bring the NP to the level of 5%, which is reasonable one and which is close to the NP for the AY 2006-07 - Held that:- AO examined the quality of the self-made vouchers issued by the mukadams and noted that the same contains the name of the mukadams and the measurements particulars and the number of days and the amounts, TDS particulars, the signature of the mukadams, also the name of the employee of the company to prepare the vouchers etc. Further, the said vouchers are cash vouchers, no addresses of the mukadams is given, no IT particulars mentioned, no PAN number are details is given and the basic details regarding the addresses of the mukadams for facilitate issue of notices for conducting queries if any were not available. It is also the fact that there is fall in the GP Rs. 5.75% and NP Rs. 4.03% no specific reasons are mentioned for the said fall. It is also noted that labour expenses amount substantially with compare to the some debits for the AY 2006-07. These facts indicate that all is not well with this account. It is also undisputed fact that the AO has not justified for adopting 8% for making disallowances. In these circumstances, there is a need for some disallowances in these account therefore making disallowance of Rs 2 lakhs must meet the ends of the justice. Accordingly Assessee ground no.1 is allowed in part.
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2013 (5) TMI 714
Deemed dividend u/s 2(22)(e) - Held that:- As decided in assessee's own case [2013 (5) TMI 148 - ITAT MUMBAI] that nowhere it is a case of the A.O. that the assessee-company is a shareholder of M/s. Alfa Distilleries P. Ltd. or M/s. Vulcan Distilleries P. Ltd. from whom the assessee took the lain and as the assessee is not the shareholder of those companies, no addition can be made in the hands of the assessee treating the advances / loans borrowed by the assessee company from those two companies as relying on Bhaumik Colours P. Ltd. [2008 (11) TMI 273 - ITAT BOMBAY-E] wherein held that in the light of the intention behind the provisions of section 2(22)(e) to extend the legal fiction to a case of loan or advance to a non-shareholder also, loan or advance to a non-shareholder cannot be taxed as deemed dividend in the hands of the a non shareholder - assessee’s appeal is allowed.
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2013 (5) TMI 713
Charge of fringe benefit tax - whether a person is a "servant" or an "agent" - assessee pleaded that the employer is a Foreign Company registered in United States of America (USA) having a project office in India in respect of carrying out exploration of mineral oils which was granted vide a Production Sharing Contract (PSC) with the Government of India - Held that:- Examinaing the terms and conditions in the present case under which these consultants have been hired by the assessee. Once this is an admitted fact, then the consequence is that the Revenue Department has collected the tax with the understanding that the persons in question were in fact not the employee. Since tax had not been deducted u/s.192 of the Act i.e. TDS on salary. Had it been that the persons engaged were employees of the assessee, then the TDS was supposed to be deducted u/s.192. Apart from this, the persons engaged were not granted any retirement benefit, which otherwise is available to an employee. Further those persons were not given any gratuity or superannuation benefit, nor they were provided either leave encashment or rent-free accommodation. Since those services were professional services, therefore accordingly the fees was paid. So the FBT is eligible only in a case where expenditure is incurred by the employer ostensibly for the purpose of business but includes partially a benefit of a personal nature passed on to the employee. But, a legitimate business expenditure not within the ambits of employer & employee relationship is outside the scope of FBT. In view of these observations, we hereby hold that the FBT provisions have wrongly been invoked in the present case. We hereby reverse the legal findings of the authorities below and direct the AO to give relief accordingly. In favour of assessee.
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Customs
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2013 (5) TMI 712
Condonation of delay - delay of 1236 days - selection of appellate forum - Held that:- This is the case of wilful dilatory tactics followed by appellant pretending to be innocent. Following the decision of apex court in case of Ketan V. Parekh vs. Special Director, Directorate of Enforcement [2011 (11) TMI 62 - SUPREME COURT OF INDIA] , we find that the appellant had deliberately approached wrong forum to cause prejudice to the interest of Revenue when it was facing demand of ₹ 60 lakh and ₹ 75 lakh under section 114 and 114A of the Act,respectively. Thus,there is no merit to entertain the appeal same is dismissed.
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2013 (5) TMI 711
Mis-declaration - valuation - import of Semi-Refined Paraffin Wax - held that:- the test report of CRCL does not confirm whether the goods are Refined Paraffin Wax. The report does not state whether any parameter other than oil content is relevant and tested. That being the case it is not proper to hold that the goods were mis-declared. The real issue in this case is not the description of the goods per se because even if the goods are Semi- Refined Paraffin Wax, there is no prohibition on its import. Revenue is trying to establish their case of mis-declaration of description to prove their contention that the value has been mis-declared. At the same time Revenue has no evidence to show whether the goods of which prices were taken for comparison was identical goods or similar goods compared to the impugned goods. There is no evidence of remittance of additional consideration either. In the matter of deciding undervaluation these two are crucial and no such evidence is forthcoming. - Decided in favor of assessee.
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Corporate Laws
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2013 (5) TMI 710
Winding up petition - By Resolution dated 23rd May 1963 Lokmanya Cooperative Housing Society (‘LCHS’) which owned lands at Versova in Bombay decided to sell a parcel thereof to Mr. R.P. Anand looking after branch office at Mumbai of Anand Finance Private Limited (‘AFPL’) and 16 other joint purchasers - whether the land was purchased benami but who was the real owner of the property? - winding up petition as AFPL owes more than Rs. 1.70 crores to its creditors and was incapable of meeting its liabilities - Held that:- An analysis of the evidence renders the version of Mr. R.P. Anand that the Versova land was purchased by him in his own name by borrowing the funds in part from AFPL more probable. On the other hand, the OL has been unable to produce credible evidence in support of the plea that the Versova land had in fact been purchased by Mr. R.P. Anand as a benami for AFPL or that the Board of Directors of AFPL had resolved the land in Versova should be purchased by AFPL in the name of Mr. R.P. Anand. The declaration alleged to have been given by Mr. R.P. Anand was not produced and was unable to be proved. The minutes book produced before the Court showed that the crucial part of the minutes 30th April 1966 was admittedly written by Mr. R.L. Anand in his hand writing later on and not counter-signed by the Chairman of the meeting. Consequently, this Court rejects the case forthwith by the OL that the land at Versova actually belongs to AFPL. The Court rejects the plea forthwith by the OL that the land ad measuring 38681 sq. yards at Versova at Rs. 7.60 per sq. yd under a sale deed dated 17th September 1964 which has remained in possession of Mr. R.P. Anand in fact belongs to AFPL. What is the amount that should be directed to be paid by Mr. R.P. Anand to AFPL, treating the money advanced to him by AFPL as a loan that has remained unpaid till date? - Held that:- The factors that weigh with the Court are in the first place with the land not belonging to AFPL but to Mr. R.P. Anand, at the highest the sum advanced to him by AFPL for its purchase can be treated as an unpaid loan. There was no agreement at any point in time that he would pay AFPL compound interest of the sum. On the other hand as a result of pendency of the present petition for over 47 years, Mr. R.P. Anand has effectively been deprived of the right of dealing with the property. The extent available is about 7,000sq.yds and not 11,700 sq.yds as contended by the OL. At one stage of proceedings Mr. R.P. Anand himself offered to pay a sum of Rs. 50 lakhs and this fact was noticed in the order by the Court in its order dated 6th May 2002. However, even before the said offer could be acted upon, a higher offer was made. In light of the above factors the Court considers it appropriate to direct Mr. R.P. Anand to pay to the OL in the account of AFPL a sum of Rs. 65 lakhs by 15th July 2013 in full discharge of all of his liabilities towards AFPL and all interim orders operating against him as well as the property in question will stand vacated. Mr. R.P. Anand will be free to deal with his portion of the Versova property. With the payment of Rs. 65 lakhs by R.P. Anand, the final curtain would be drawn on this beleaguered litigation that has persisted for well over four decades. Upon such payment being made, nothing would remain to be examined as there are no claims to be settled, no assets to be realised and none of the contributories other than Mr. R.P. Anand surviving. Thus in exercise of its powers under Section 481 of the Act, the Court directs that upon payment of Rs. 65 lakhs by Mr. R.P. Anand, the OL will transfer a sum of Rs. 10 lakhs to the Common Pool Fund of the OL to defray the expenses incurred over the years in this matter by the OL and after settling any other statutory dues transfer the balance sum to the Reserve Bank of India within thirty days thereafter. With that event happening, AFPL will stand dissolved and its name will be struck off from the register of companies. Within thirty days of the transfer of the sum as directed to the RBI, the OL will file a certified copy of this order with the Registrar of Companies for compliance.
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2013 (5) TMI 709
Model Code of Conduct for prevention of Insider Trading not framed - the company approved the unaudited accounts for the quarter ending June 2010 in the meeting held on July 06, 2010 but submitted the said approved quarterly reports to Bombay Stock Exchange Limited vide letter dated July 07, 2010 - proceedings against the appellant, the Whole Time Directors of the said company for their failure in exercising overall supervision in framing the Model Code of Conduct concluding violation of clause 1.2 of the Code of Conduct - Held that:- There seems to be no legal infirmity in holding of enquiry by Adjudicating Officer & as he conducted the enquiry and proceeded against the appellants in a just and fair manner by affording reasonable opportunity of being heard and producing the documents and reply in support of their case. The requirement of framing a Code of Conduct for prevention of insider trading by the companies is a mandate of law and nobody can be allowed to violate the same. Similarly, the requirement of communicating the decisions of the Board of the company to the Stock Exchange promptly is an important check on the unscrupulous persons who may utilise the information for their personal gains in an improper and illegal manner and thereby jeopardizing the interest of bonafide investors. In the present case, the requirement of conveying the Board's important decisions to the Stock Exchange within 15 minutes is a crucial provision binding on the company and the same is having an underlying object which can only be achieved by quick communication of the said decision by the company to the Stock Exchange. The appellant can have very well conveyed the said decision by way of fax or e-mail etc. within 15 minutes so as to avert the possibility of being misused the sensitive information in question. In view of this, the three impugned orders are upheld. As it is submitted that the Company Secretary who had since long been associated with the company unfortunately fell sick as he suffered from cancer in January, 2009. He unfortunately expired on 5.1.2011 and in the circumstance there was nobody to guide the appellants properly. Similarly the company as well as the other Directors including the Managing Directors have been very prompt in intimating the outcome of the board meetings in all preceding years and they have never defaulted in the matter and this is the first instance of this kind penalty imposed on the appellant is reduced accordingly.
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Service Tax
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2013 (5) TMI 732
Recovery during pendency of stay application - circular No. 967/01/2013-CX, dated 1 January 2013 - Held that:- There shall be interim stay of recovery of the amount involved, till the appellate authority disposes of the application for stay. Recovery proceedings thirty days after the filing of an appeal, if no stay is granted, cannot be applied to an assessee who has filed an application for stay, which has remained pending for reasons beyond the control of the assessee.
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2013 (5) TMI 726
Penalty u/s 76 - The original Adjudicating Authority while confirming the demand of service tax and imposing penalty under Section 77 and 78 of the Finance Act, 1994, did not impose any penalty under Section 76. - Commissioner appeals imposed the penalty u/s 76 with penalty u/s 78 - held that:- In view of the fact that Delhi Benches fall under the jurisdiction of Punjab & Haryana High Court and as such, are bound by the declaration of the law by the said High Court and also in view of fact that, that the Punjab & Haryana High Court decision is later in point of time, and that both the decision stand discussed by the decision of CCE, Haldia vs. Mittal Technopack P. Ltd. (2013 (5) TMI 701 - CESTAT, KOLKATA). Penalty u/s 76 set aside - decided in favor of assessee.
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2013 (5) TMI 725
Franchise service or not - Appointment of agents - collection of fee form the agent of Rs. 15000/- each - The appellants main stand is that such agents are not franchise inasmuch as there is no franchise agreement between them and the agents. - held that:- said agents are being paid by the appellants for the services done by them in respect of each transaction. The franchise agreement is allowing another person to use the brand name or trade name etc. for his own business. In the present case, agents so appointed by the appellant are not doing their own independent business in there own name but are raising invoices in the name of the appellants and are actually working for the appellant and are being paid by the appellant for such working done by the agents. As such, at this prima facie stage, we are of the view that such collection of sign of fee of Rs.15,000/- services so as to tax the same. - major part of the demand is barred by limitation. - full stay granted.
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2013 (5) TMI 724
Valuation - Photography Services - cost of a material used in providing the service - extended period of limitation - held that:- the issue of addition of cost of materials in providing photography services stands decided against the applicant by the Larger Bench Decision of the Tribunal in the case of Aggarwal Colour Advance Photo System Vs. CCE [2011 (8) TMI 291 - CESTAT, NEW DELHI (LB)]. However we do not find any justification for imposition of penalty upon the assessee as the law was declared subsequently by the Larger Bench and the previous decisions were in favour of the assesse. As such revenue appeal is allowed partially by upholding the confirmation of demand against them. - demand confirmed - penalty waived.
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2013 (5) TMI 723
Valuation - inclusion of the value of SIM-Cards in providing the (communication) services by the appellant. - extended period of limitation - held that:- The Hon’ble Supreme Court in the case of Jaiprakash industries Ltd. vs. CCE, Chandigarh reported in [2002 (11) TMI 92 - SUPREME COURT OF INDIA] has observed that when there is a bonafide doubt as regards the non-excisability of the goods due to divergent views of the High Courts, extended period of five years cannot be invoked. By applying the ratio of law declared in the above decisions, we find that since the earlier decisions of the Tribunal were in favour of the assessee, it has to be held that there was bonafide doubt about the non inclusion of the cost of SIM card in the value of services. If that be so, no malafide can be attributable to the appellant so as to invoke the extended period of limitation. - demand set aside - decided in favor of assessee.
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Central Excise
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2013 (5) TMI 708
Eligibity of Cenvat credit on welding electrodes - Held that:- As decided in Ambuja Cements Eastern Ltd., (2010 (4) TMI 429 - CHHAITISGARH HIGH COURT), Hindustan Zinc Ltd. (2008 (7) TMI 55 - HIGH COURT RAJASTHAN), CCE, Bangalore-I vs. Alfred Herbert (India) Ltd. [2010 (4) TMI 424 - KARNATAKA HIGH COURT] since without repair and maintenance, manufacturing operations, though theoretically possible, are not commercially feasible, the same has to be treated as an activity having nexus with manufacture and hence any inputs used for repair and maintenance would be eligible for cenvat credit - order denying the cenvat credit is not sustainable. In favour of assessee.
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2013 (5) TMI 707
Demand of duty - Scrap cleared without payment of duty - Appellant contended that the scrap is of the old and used capital goods and no credit has been availed in respect of capital goods - Held that:- Appellant failed to produce any evidence in support of their claim in this regard. Therefore, appeal is dismissed.
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2013 (5) TMI 706
Condonation of delay - delay of 215 days - appeal before CESTAT - appellant claimed that though he did receive the impugned order of the Commissioner on 10-6-2010, he could not take action for filing appeal because of various legal disputes and litigation including the criminal prosecution for the cases of the Excise and Customs Department, which consumed considerable time. It was only when he received a recovery notice dated 22-3-2011 from the local Superintendent of Central Excise, Jetpur, he realized that the appeal was not filed against the order of the Commissioner. Held that:- The Courts normally prefer the cause of substantive justice when pitted against technicalities. Ordinarily, therefore, the Courts take reasonably lenient view in examining the delay and causes of delay explained by a litigant on the premise that ordinarily, a litigant would not gain by not pursuing his remedies. In the present case, the delay was not so gross, nor was the conduct of the petitioner so negligent that his appeal should have been dismissed without hearing on merits. We are informed that the revenue involved in the present case is close to ₹ 2 crores. - matter restored before tribunal - delay condoned.
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2013 (5) TMI 705
Cenvat Credit - reasonable steps before availing credit - original manufacturer of fabrics were alleged to be fictitious - endorsed invoices - period of limitation - the question that falls for determination is whether the department can escape its liability to find out a person who was registered with them and to pursue him for payment of duty. There is also no dispute in these cases that the goods were purchased by the merchant manufacturer officially and they have suffered the duty thereon and the amounts have been paid through cheques. Held that:- merely because today, the original manufacturer, who is registered with the Revenue, is not traceable, it does not mean that he did not exist at the relevant point of time. If today, a manufacturer is not available for various reasons that does not mean that at the relevant point of time, such manufacturer who was registered with the Central Excise, did not exist. Reasonable steps - held that:- The Appellants in these cases, however, not having taken those steps, cannot get the benefit of the credit even though he is not party to fraud. Period of limitations - held that:- in the absence of any allegation that the appellants were parties to the fraud, the larger period of limitation cannot be applied, and thus, even if the original document was assumed to be issued by practising fraud, the appellants being holders in due course for valuable consideration without notice, the larger period of limitation cannot be extended in the case before us. In this connection, we may profitably refer to the decision of the Supreme Court in the case of Commissioner of Central Excise, Belapur v. E. Merck India Ltd. [2007 (7) TMI 299 - SUPREME COURT] where the Supreme Court took a view that in the absence of a willful misdeclaration on the part of the respondent-assessee, there was no scope of invoking Section 11A of the Act. The documents, invoices in question, issued by the registered licencee being genuine and in the absence of any allegations against the appellants of fraud, the Tribunal should not have remanded the matter back as the claim was totally barred by limitation. - Decided in favor of assessee.
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2013 (5) TMI 704
CESTAT dismissed the appeal for non deposit of amount within permitted time limit as per stay order - Cenvat Credit - unprocessed fabrics procured from the weavers and manufactures of such fabrics. - held that:- It is not in dispute that some time in March, 2011 in various installments, the petitioners had deposited the said sum of Rs. 4 lacs. Despite such deposits, the Tribunal by the impugned order, rejected the appeals of the petitioners on the ground that the amount was not deposited within the time permitted nor any extension was sought from the Tribunal. Thereupon, the petitioners have approached this Court. The petitioners had deposited the amount of pre-deposit, of course after some delay - appeals are required to be heard on merits - matter restored before the tribunal - decided in favor of assessee.
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2013 (5) TMI 703
Revenue appeal - authorization by the committee of commissioners - held that:- The method and manner, in which such authorisation is obtained, is not an issue on which the Tribunal could in the absence of any objection make an enquiry to arrive at a finding whether such authorisation was given in accordance with the law. There are no statutory rules, providing that the Commissioner will sit on the same day at the same time and take a decision authorising a Central Excise Officer to file the appeal. The decision would not suffer from any fatal error unless it is shown that the decision is obtained without application of mind by the Commissioners either sitting together or at different time or dates at different places. The appeal did not lack merits inasmuch as the question as to whether the penalty under Section 11AC of the Act can be levied when the duty is deposited prior to issuing show cause notice. The order dated 23-2-2010 dismissing the appeal and the order dated 31-3-2010 dismissing the recall application suffer from gross error of jurisdiction by the Tribunal in examining the validity of the authorisation, which it did not possess. - matter restored before tribunal - Decided in favor revenue.
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2013 (5) TMI 702
Eligibility for availment of Cenvat credit - ISD - Input Service Distributor - cenvat credit of service tax on the basis of documents issued by Head Office distributing cenvat credit in respect of services availed by the company. - held that:- The issue relating to cenvat credit is covered by the decision of the Honble High Court of Karnataka in the case of ECOF Industries Pvt. Ltd. [2011 (2) TMI 1130 - KARNATAKA HIGH COURT] wherein it has been held that credit could not be denied on the ground that the input services were received in some other units and distribution of input service need not have been made on the basis of receipt or unit of receipt and not restricting of cenvat credit during the time. - decided in favor of assessee.
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CST, VAT & Sales Tax
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2013 (5) TMI 728
Direction to pre-deposit a sum as a condition precedent for hearing the objections - Special Commissioner invoked the provisions of the 3rd proviso to Section 74(1) of the Delhi Value Added Tax Act, 2004 - Held that:- Since the returns in each of these petitions had been filed much prior to the introduction of the 3rd proviso to Section 74(1) the Commissioner could not have invoked that proviso and required the petitioners to make the pre-deposits as a condition for entertaining their objections. Consequently, the impugned orders are set aside and the respondents are directed to hear the objections without the requirement of the petitioners making any pre-deposit. The writ petitions allowed.
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2013 (5) TMI 727
Incorrect claim of Input Tax credit - whether the same amount be adjusted towards disputed tax payable - TNVAT Act - Held that:- No person shall be entitled to have the appeal numbered without meeting out the statutory requirement of depositing 25% of the disputed tax amount. The stand of the petitioner that it has revised the disputed amount from its input tax credit I.T.C. and this may be treated as payment of the disputed amount of tax cannot be accepted by any stretch of imagination as the provisions in the T.N.V.A.T. Act categorically provides that the input tax credit availed by any registered dealer is only provisional and that the assessing authority is empowered to revoke the same if it appears to him to be incorrect or otherwise not in order. Thus, the decision rendered by the appellate authority in returning the appeal as not maintainable cannot be found fault with. Writ petition stands disposed of with a direction to the petitioner to re-submit the appeal papers along with payment of 25% of the disputed tax, within a period of two weeks from the date of receipt of a copy of this order. On such filing of the appeal by the petitioner, the appellate authority shall take up the matter and proceed to dispose of the same on merits and in accordance with law. Connected miscellaneous petition is closed. There shall be no orders as to the costs.
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