TMI Tax Updates - e-Newsletter
June 1, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Wealth tax

Articles

1. RECOVERY CIRCULAR THRASHED BY JUDICIAL FORUMS

   By: Dr. Sanjiv Agarwal

News

1. Change in Tariff Value of Gold Notified

2. Index of Eight Core Industries (Base: 2004-05=100), April, 2013

3. Government Approves Eight (8) Proposals of Foreign Direct Investment Amounting to About Rs. 696.23 Crore

4. Provisional Estimates of Annual National Income, 2012-13 and Quarterly Estimates of Gross Domestic Product, 2012-13

Notifications

Income Tax

1. 38/2013 - dated 30-5-2013 - IT

Amendment of Income-tax Rules, 1962 - INSERTION OF RULES 6AAD & 6AAE AND FORM NOS. 3C-O & 3CP

Highlights / Catch Notes

Income Tax

• Assessee Can Claim Benefits Under Both Section 10(10C) and Section 89(1) for Voluntary Retirement Scheme Compensation.

  Case-Laws - AT : Assessee is eligible to claim simultaneous benefit under section 10(10C) as well as section 89(1) in respect of the compensation received under the voluntary retirement scheme - AT
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• Taxpayers can use lower valuation for slow-moving inventory lacking a market.

  Case-Laws - AT : Diminution in value of inventory - in the case of slow moving items which did not have a ready market, it was permissible for the assessee to adopt a lower value - AT
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• ITAT Appeal Dismissed for Non-Compliance with Rule 18: No Valid Paper Book Submitted, No Representative Present.

  Case-Laws - AT : Appeal before ITAT - con compliance of Rule 18 - As there is no valid paper book on record and there is nobody present before the Tribunal on behalf of the assessee - appeal dismissed - AT
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• Court Waives Penalty u/s 271(1)(c) of Income Tax Act; Lack of Due Care Doesn't Implies Guilt.

  Case-Laws - AT : Penalty u/s 271(1)(c) - absence of due care does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income - penalty waived - AT
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• Tax Exemption for Dubai Remittances: Section 10(15) Applies to Non-Resident and Not Ordinarily Resident Status.

  Case-Laws - AT : Exemption u/s 10(15) - as he was Non-Resident for the said period and resident but Not Ordinarily Resident for succeeding eight years remittance sent by him from Dubai are held to be exempt from tax. - AT
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• Taxpayer's Account Adjustment Overturned Due to Unsustainable Household Expense Assessment; No Addition Made.

  Case-Laws - AT : Addition on account of low household expenses on protective basis - the protective addition made in the regular assessment order has no legs to stand. - no addition - AT
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Corporate Law

• Court Ensures No Disadvantage for Parties Relying on Incorrect Legal Provisions in Company Law and Tax Cases.

  Case-Laws - HC : A party taking recourse to a wrong provision of law while approaching the Court cannot be placed in a worse situation. - HC
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Wealth-tax

• High Court Rules on Validity of Tax Assessments for Karta Post-Partition in Hindu Undivided Family (HUF) Cases.

  Case-Laws - HC : HUF - Whether assessment proceedings in the name Karta would be legal in the event of partition having taken place between the parties? - HC
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Service Tax

• Interest Initially Credited to Consumer Fund, Later Cash Refunded Permitted with Interest Also Allowed.

  Case-Laws - AT : Interest on Refund - initially the amount was credit to Consumer Welfare Fund later cash refund was allowed - interest on refund allowed. - AT
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• Cenvat Credit Permissible for Pre-Registration Input Services Despite Delayed Availment.

  Case-Laws - AT : Cenvat Credit - input services received prior to the date of registration - belated availment of cenvat credit - cenvat credit allowed - AT
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• Cenvat Credit Rule 2(L) Allows Flexible Utilization Without Direct Input-Service Correlation for Smoother Service Tax Claims.

  Case-Laws - AT : Cenvat Credit - Input services - Rule 2(L) of CCR - there is no requirement of one to correlation of the cenvat credit availed. - AT
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• Appellant Wins: Section 12B Inapplicable as Club and Members Deemed Single Entity, Not Separate Parties.

  Case-Laws - AT : Refund - The appellant has passed the hurdle of unjust enrichment - the provisions of Section 12B will not be applicable in this case as the club and the members are not separate and are one - AT
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Central Excise

• Input Service Credit Must Be Distributed Fairly Across Units, Cannot Be Denied Based on Location Differences.

  Case-Laws - AT : ISD - credit cannot be denied on the ground that the input services were received in some other units and during distribution of input services credit was given to another unit of the appellant - AT
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• Court Rules No Excise Duty on Cough Syrups with Codeine Phosphate Below Prescribed Limits for Petitioner.

  Case-Laws - HC : Revenue directed not to charge excise duty on the cough syrups being prepared and sold by the petitioner if it contains Codeine Phosphate less than the prescribed limits. - HC
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• Misinterpretation of SSI Exemption and Export Provisions Leads to Duty Payment Errors and Rebate Issues.

  Case-Laws - HC : SSI Exemption and export - payment of duty on export and claiming rebate / refund - The adjudicating authority as well as the Government committed an error in interpreting provision - HC
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• High Court refrains from reviewing Commissioner's order as appeal is pending before CESTAT under Article 226 jurisdiction.

  Case-Laws - HC : Attachment order - As the petitioner has elected to file an appeal, which is pending before the CESTAT, the merits of the order-in-original passed by the Commissioner ought not to be examined by this Court in exercise of its jurisdiction under Article 226 of the Constitution of India. - HC
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• High Court Upholds Tax Exemption for Indian Mouth Freshener Unit in Sikkim, Citing Promissory Estoppel Principle.

  Case-Laws - HC : Withdrawal of exemption - principle or doctrine of promissory estoppel - Indian Mouth Freshner - Pan Masala - unit in Sikkim - petitioner to continue with the exemption for the remaining period - HC
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VAT

• Court Rules 4% Tax Rate for Paraffin Wax Under Entry No. 120 Prevails Over General 20% Rate in Entry No. 1(ix).

  Case-Laws - HC : Rate of tax applied to Paraffin wax manufactured and sold by appellant - 4% or 20% - Entry No. 120 of 3rd Schedule is a specific Entry and Entry No. 1(ix) of 4th Schedule is a general Entry - prima facie rate of tax is 4% - HC
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Case Laws:

• Income Tax

• 2013 (5) TMI 760
  Interest relatable to diversion of interest bearing funds to interest free advances - ITAT deleted the disallowance - Held that:- When no interest bearing funds have been diverted to the sister concern by way of interest free advances, the question of going into the commercial expediency of such loans would not arise. In fact, in the light of the findings recorded by the Tribunal, the question as formulated while admitting the appeals would not arise as on facts there is no diversion of interest bearing funds to interest free advances. In the circumstances, the Tribunal was justified in deleting disallowance made under section 36(1)(iii). Once the revenue has accepted the decision of the Tribunal on the issue in relation to assessment year 1995-96, on the same facts and issue it would not be appropriate to allow the position to be changed in relation to other assessment years. Receipt by way of gain on cancellation of foreign exchange contracts - revenue v/s capital - Held that:- As decided in DCIT(Assessment) vs. Garden Silk Mills Ltd. ( 2009 (2) TMI 95 - GUJARAT HIGH COURT) the surplus received on cancellation of forward foreign exchange contract was a capital receipt not liable to tax and that it did not fall under section 28(iv). Thus ITAT was right in holding that the receipt by way of gain on cancellation of foreign exchange contracts is a capital receipt not liable to tax and was accordingly justified in directing the Assessing Officer to make necessary adjustment to the cost of the acquisition/WDV of the plant and machinery to which the receipt pertains and to make consequential adjustment to the depreciation granted. Depreciation in respect of Butachlor Plant - Held that:- The question as formulated partly does not appear to arise out of the impugned order of the Tribunal, inasmuch as the order of assessment itself indicates that the assessee had claimed depreciation at the assessment stage. Insofar as the merits of the controversy is concerned, it is an accepted position that identical controversy between the same parties has been concluded in favour of assessee by an order passed in [2013 (5) TMI 759 - GUJARAT HIGH COURT].

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• 2013 (5) TMI 759
  Depreciation on Butchlor Plant - Plant was ready for use but was not actually put to use due to adverse market conditions - Held that:- As decided in Commissioner of Income-tax vs. Viswanath Bhaskar Sathe (1937 (3) TMI 11 - BOMBAY HIGH COURT) wherein in the context of section 10 of the Income Tax Act, 1922 held that the word “used” in the said section may be given a wider meaning and embraces passive as well as active user. Machinery which is kept idle may well depreciate, particularly during the monsoon season. As decided in Whittle Anderson Ltd. v. CIT [1968 (12) TMI 27 - BOMBAY High Court], Capital Bus Service Pvt. Ltd. v. CIT [1980 (2) TMI 69 - DELHI High Court] that if plant and machinery are kept in ready condition but production could not be made on account of factors beyond the control of the assessee, depreciation should not be denied on that count as it is presumed that the plant and machinery were put to use for the assessee's business. Thus in in the light of the fact of present case the Butachlor plant had in fact been used for the purpose of manufacturing Butachlor for several years and had continued to be so used till the market conditions became adverse, and thereafter also though the same was kept idle it was kept in readiness for use as and when the market revived, it cannot be said that the said plant was not in use during the assessment years under consideration merely because the same was not put to actual use during the said period. Tribunal was justified in allowing depreciation claim - in favour of assessee. Receipt by way of gain on cancellation of foreign exchange contracts - revenue v/s capital - Held that:- As decided in DCIT(Assessment) vs. Garden Silk Mills Ltd. ( 2009 (2) TMI 95 - GUJARAT HIGH COURT) the surplus received on cancellation of forward foreign exchange contract was a capital receipt not liable to tax and that it did not fall under section 28(iv). Exclusion of excise duty at the time of valuing closing stock at the end of the accounting period - Held that:- As decided in ACIT vs. Narmada Chematur Petrochemicals Ltd., (2010 (8) TMI 263 - Gujarat High Court) wherein held that excise duty is required to be excluded at the time of valuation of the closing stock on finished goods at the end of the accounting period. In favour of assessee. Interest relatable to diversion of interest bearing funds to interest free advances - Held that:- When no interest bearing funds have been diverted to the sister concern by way of interest free advances, the question of going into the commercial expediency of such loans would not arise - there is no diversion of interest bearing funds to interest free advances. In favour of assessee. Donation of Rs.25 lakhs to the Narmada Integrated Rural and Environmental Development Society (NIRDES) - claimed full deduction under section 37(1) - Held that:- As decided in Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. Commissioner of Income- Tax [1996 (10) TMI 2 - SUPREME Court] contribution to the Public Welfare Fund at the instance of the Government authorities was allowed as a deduction on the ground that it was motivated by commercial consideration. Tribunal was justified to hold that the contribution made to the welfare fund was not opposed to public policy and that the same was motivated purely by commercial consideration, and that the deduction was allowable u/s 37(1) - in favour of assessee.

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• 2013 (5) TMI 751
  Claim of exemption u/s. 10(10C) - assessee has received ex-gratia payment on voluntary retirement from State Bank of India under the Exit Option Scheme - as per AO Exit Option Scheme of State Bank of India did not fulfil the basic conditions as laid down in Rule 2 BA of the I.T. Rules - CIT(A) deleted the disallowance - Held that:- Decision in the case of Shri Narendra J. Chokshi [2013 (5) TMI 234 - ITAT AHMEDABAD] is equally applicable to Assessee's case wherein held as relying on CIT vs. G. V. Venugopal [2004 (12) TMI 35 - MADRAS High Court] that there is no prohibition to the twin benefits in respect of the amount received under the voluntary retirement scheme - The mere fact that the relief has been spread over several years does not mean that the relief is not in respect of a particular assessment year, thus assessee is eligible to claim simultaneous benefit under section 10(10C) as well as section 89(1) in respect of the compensation received under the voluntary retirement scheme – Further, it is well settled that if two reasonable interpretations of taxing statutes are possible, the one in favour of the assessee should be accepted. In favour of assessee. Penalty u/s. 271(1)(C) - Held that:- As the addition on which the penalty has been levied itself is deleted, there is no question of levy of penalty u/s. 271(1)(C). Against revenue.

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• 2013 (5) TMI 750
  Diminution in value of inventory - A.O. was of the view that in the case of talc and marble lumps the value adopted by the assessee for certain locations was Rs.400/- per Mt. ton. & could not substantiate the claim that it was landed cost - CIT(A) deleted the addition - Held that:- CIT (A) apart from considering the submission of assessee that he had explored the possibility of removing the fungus as informed by one of the major customers so that it could be used but the cost of removal of impurity was very costly and further it was not possible to completely remove fungal growth also considered the documentary evidence like lab report, correspondence from customers, report of independent expert has given a finding that the stock was contaminated by fungal microbacterial growth which necessitated for revaluation of stock duly supported by sound technical and commercial reasons. The aforesaid finding of CIT(A) could not be controverted by Revenue by bringing any contrary material on record. Thus considering the totality of facts and relying on decisions of CIT vs. Bharat Commerce & Industries Ltd., [1999 (8) TMI 41 - DELHI High Court] wherein held that in the case of slow moving items which did not have a ready market, it was permissible for the assessee to adopt a lower value - issue decided against revenue. Expenditure on repairs of plant and machinery - revenue v/s capital - AO observed that assessee had debited these expenses as an Extra ordinary items in its profit and loss account - Held that:- It is an undisputed fact that the machinery was damaged due to earthquake and expenses were incurred for its repairs. It is also a fact that no new asset have come into existence. In the present case what was replaced was only a part of the machinery and not the entire machinery. Nothing has been brought on record by the Revenue to prove that the entire machinery was replaced and the replacement was not a part of the existing machinery. Thus cosedring totality of fact & CIT vs. Tanjavore Textile Mills [2001 (1) TMI 14 - MADRAS High Court] wherein held that expenditure on replacement of worn out parts of machinery is expenditure of revenue character as it is meant to keep the business without break down of machinery and not expenditure incurred for starting a new business. Against assessee. Disallowance of bad debts - CIT(A) deleted the addition - Held that:- CIT (A) while deleting the addition has held that the debt had become bad & considering the nature of the receivable which was long overdue and the difficulties associated with the recovery, the assessee was reasonable in concluding that the amount was not realizable and therefore, it was written off. CIT (A) has also placed reliance on the decision of Tribunal in the case of Oman International Bank Ltd.(2006 (5) TMI 117 - ITAT BOMBAY-H) & Dhall Engineers Enterprise [2006 (11) TMI 99 - HIGH COURT, GUJARAT] - Against revenue.

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• 2013 (5) TMI 749
  Maintainability of appeal - Held that:- Considering a paper book containing 1044 pages available on record are not as per the Tribunal rules because in the Index of the paper book, there is no certificate given by the assessee as to whether these pages in the paper book were furnished before the authorities below and if yes, then which paper was furnished with which authority. Moreover, as per sub-rule 6 of Rule 18 of Appellate Tribunal Rules 1963, only those documents which are referred to and relied upon by the parties during the course of argument shall alone be treated as part of record of the Tribunal. As per sub Rule 7 of Rule 18, it is also prescribed that the papers /paper book not confirming to sub-Rules 1-6 of rule 18 are liable to be ignored. In the present case, the assessee has neither complied with sub-rule 7 of rule 18 nor with sub-rule 1-6 of Rule 18 and hence, this paper book filed by the assessee cannot be treated as part of the record of the Tribunal and the same is liable to be ignored. As there is no valid paper book on record and there is nobody present before the Tribunal on behalf of the assessee to make any argument in respect of these two appeals of the assessee decline to interfere in both these orders of CIT(A) to decide the validity of reassessment proceedings against assessee.

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• 2013 (5) TMI 748
  Jurisdiction power u/s 263 by CIT(A) - as per CIT AO should have excluded the income on account of unaccounted advances from the books profit for the purpose of computing allowable deduction u/s 40(b)(v) - Held that:- It is an undisputed fact that during the course of assessment proceedings, on the basis of the documents seized during the course of survey, addition on account of unaccounted advances was made by the Assessing Officer. In his order the AO has also noted that the assessee had advanced loan out of his unaccounted income which were not reflected in his regular books and which were received by cash. Before us, the A.R. has not brought any material on record to prove that the Assessing officer has examined the issue as to taxing the same under business income or under any other head. The decision relied by the A.R. is distinguishable on facts and cannot be applied to the facts of the present case. Thus CIT while setting aside the assessment has distinguished the decisions relied by Assessee and has given reasons for considering the order of A.O. to be erroneous and prejudicial to the interest of Revenue. Thus no reason to interfere with the order of the CIT (A) and therefore, dismiss appeal of Assessee.

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• 2013 (5) TMI 747
  Penalty u/s 271(1)(c) - assessee submitted that he had claimed deduction only on account of wrong interpretation of u/s. 36(2) - Held that:- As seen in the light of the decision of Price Waterhouse Coopers Pvt. Ltd. (2012 (9) TMI 775 - SUPREME COURT) and Zoom Communication P. Ltd. (2010 (5) TMI 34 - DELHI HIGH COURT) wherein held that absence of due care does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income, thus concluded that since all the necessary facts with respect to the claim of disallowance and deductions were furnished in the return income the fact that the disallowance has been made does not call for levy of penalty us/ 271(1)(c). Thus penalty levied by the AO cancelled. In favour of assessee.

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• 2013 (5) TMI 746
  Reopening of assessment - Unaccounted purchases - survey u/s 133A - CIT (A) deleted the addition on account of construction adopted by the A.O. @ Rs.210/- per sq. ft. as against Rs.177/- per sq. ft. declared by the assessee - Held that:- As from the assessment order it is seen that AO has worked out the average cost of construction on the basis of total area of construction and the total cost as per the books of accounts and came to the conclusion that the average rate of Rs.177/sq ft was very low. Nothing has been brought on record by AO to justify his conclusion that the average rate of Rs.177/- sq ft was very low. AO has estimated the cost of construction at Rs.210/ sq. ft. without justifying its basis. CIT(A) has given a finding that the inference drawn by the AO was based on suspicion, conjectures and surmises. Revenue has not placed any material in support of the findings of AO. Nothing is on record to justify the conclusion of CIT(A) that the rate adopted by Assessee was also not correct. It is a fact that Assessee has constructed the shops and incurred cost for its construction and without incurring the cost the Assessee could not have completed the shop for its sale. It is also a fact that the estimate made by the assessee of Rs. 133/ sq. ft. has been held to be two low by AO and at the same time the estimate of Rs. 220/sq. ft made by the AO is held to be without any books by CIT (A). Thus an estimate of addition of Rs.8 lacs would meet the ends of justice instead of Rs.11,10,552/- made by the AO - appeal of the Revenue partly allowed.

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• 2013 (5) TMI 745
  Addition on account of low household expenses on protective basis - CIT(A) deleted the addition - Held that:- the Commissioner (Appeals), in the block assessment, has deleted the addition purely on merits. Even though this may be a subject matter of appeal before the Tribunal by the Department in the block assessment proceedings but that issue would be decided there only and not in the regular assessment proceedings wherein only protective addition has been made. Thus, the protective addition made by the Assessing Officer in the regular assessment order dated 30th March 2001, in our opinion, has no legs to stand. Consequently, the findings given by the Commissioner (Appeals) in this appeal are upheld. The grounds raised by the Revenue is treated as dismissed. Against revenue. Income from hiring of tankers as undisclosed income - computation under the normal provision of the Act or the special provision of Sec. 44AE - Held that:- it is noted that the assessee was having eleven tankers which is not in dispute. Provisions of section 44AE, will only apply to the assessee who owns not more than ten goods carriages. Thus, in case of the assessee who is in possession of more than ten goods carriages, then by virtue of the provisions of sub-section (1) of section 44AE the deeming provision of section 44AE will not apply to the facts of the present case. Moreover, it has also not been disputed that the assessee has been maintaining regular books of account for the business of hire of eleven tankers which are also subjected to audit under section 44AB. On this ground also, the provisions of section 44AE will not apply in view of sub-section (7) of section 44AE. Against revenue. Exemption u/s 10(15) - whether CIT(A) erred in holding that in A.Y. 1999-2000 the assessee's status was that of R & NOR and allowed exemption u/s 10(15) - Held that:- As decided in assessee's own case assessee was out of India for more than 182 days in both the A. Ys. so he was not resident of India for that period. As far as employment is concerned, it is found that he had gone to Dubai as a Manager of a Dubai firm. The assessee had filed copies of the visa, passport, appointment letter of Dubai concern to the A.O. The said documents are at page nos. 13 to 18 of the paper book filed by the assessee. The A.0. has not mentioned anything contradiction the said factual position. Considering the fact of the case provisions of section 6(1)(c) are held not to be applicable in assessee's case. In light of the above discussion,assessee was non-resident for the A.Y.1999-2000 following the predessor & as he was Non-Resident for the said period and resident but Not Ordinarily Resident for succeeding eight years remittance sent by him from Dubai are held to be exempt from tax. Against revenue.

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• 2013 (5) TMI 744
  Addition on account of unrealized sales - Held that:- Facts of the case of the year under appeal are identical to that in AY 2005-06 wherein AO has passed a very cryptic orders without giving any finding on the accounting treatment followed by assessee. He has also not examined the assessee's contention that the amount was in the nature of retention money. Thus following the earlier decision of Co- ordinate Bench the issue be directed to the file of CIT(A) to pass a speaking order - assessee's appeal allowed for statistical purposes. Disallowance of interest and administrative expenses made u/s. 14A - Held that:- To work out the disallowance by following Rule 8D Godrej Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT] is to be relyed wherein held that Rule 8D cannot be applied retrospectively i.e., prior to assessment year 2008-09 -remit the issue back to the file of Assessing Officer to work out the disallowance u/s. 14A of the Act in line with the direction of the judgment above - assessee's appeal allowed for statistical purposes.

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• 2013 (5) TMI 743
  Addition on account of notional rent - CIT(A) deleted the addition - Held that:- CIT(A) has decided the issue in favour of assessee on the basis of light bill for the period from Aug.08 to Mar. 09 which showed zero reading & has also noted that this bill was produced before him during the course of appellate proceedings. Hence, this bill was never produced before AO & CIT(A) has decided this issue in favour of assessee on the basis of this bill without obtaining any remand report from the AO. This issue is restored back to the file of CIT(A) for a fresh decision. In favour of revenue by way or remand. Unexplained investment observing there was a difference in the purchase consideration and jantri rate of the shop purchased by the assessee - CIT(A) deleted the addition - Held that:- The addition on the basis of jantry value can be made u/s 50C in the case of sale of property for the purpose of computing capital gain but there is no such production for making addition on the basis of excess jantry value in the hands of the purchaser. There is no other evidence brought on record by the AO showing that any extra price was paid by the assessee for purchase of this property and hence no reason to interfere in the order of CIT(A) - In favour of assessee. Unaccounted sundry creditors - CIT(A) deleted the addition - Held that:- For examining the genuineness of transaction, it should be examined as to when the sale of property in question is actually declared by the assessee because even if sale deed was not executed in the present year or in the year of receipt of this amount also, then the sale has to be considered in the light of clause (v) or (vi) of sub-section 47 of Section 2 in the year when payment is received by the assessee and possession was handed over to the buyer. Since no light is thrown by the assessee or by any authorities below on this aspect set aside the order of CIT(A) on this issue also and restore the matter back to his file for fresh decision - In favour of revenue by way or remand.

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• 2013 (5) TMI 742
  Undisclosed income - search u/s. 132 - Held that:- Regarding the addition of Rs.3.40 lakh in the case of Smt. Dipikaben Y Gandhi and of Rs.3.30 lakh each in the case of remaining two cases, since this much income was declared by these assessees in the revised return of income filed by them and consequential tax was also paid by them, there is no merit in the arguments of assessee regarding these additions in these three cases. Hence, this ground of assessee regarding addition decided against the assessee. Regarding addition of Rs.231,133/- in the case of Smt. Dipikaben Y Gandhi and Rs.2,41,133/- each in remaining two cases, was made by the AO on the basis of valuation report obtained by the assessee for which it was submitted by assessee before the CIT(A) that it was obtained for the purpose of obtaining loan from the bank. It is noted by the Assessing Officer that these three plots were purchased on 05-09-2001 and during the same year, construction was done and valuation report was obtained and the AO has not given even the date of valuation report. There is no finding given by CIT(A) as to how this submission of assessee that valuation report was obtained for the purpose of obtaining loan from the bank is not acceptable. Thus this further addition made by AO on the basis of so-called valuation report in the absence of any other cogent evidence, is not sustainable. therefore delete the same. As a result, assessee, Smt. Dipikaben Y Gandhi's case gets relief of Rs.2,31,133/- whereas the remaining two assessees get relief of Rs.2,41,133/- each - assessee's appeals are partly allowed.

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• Customs

• 2013 (5) TMI 741
  Classification dispute - Issue involved in this case is regarding classification of only Air freshener (Paper Type). The appellants claimed classification under Heading 3307.49 whereas the department has classified the product under Heading 3307.90. - Held that:- It is well settled that HSN is safe guide for classification. It is also a settled principle that the entry which comes last to be preferred. The entry 3307.90 comes last. Therefore there is no reason to interfere with the concurrent findings of the lower authorities. The ld. Commissioner (Appeals) order is upheld. The appeal filed by the appellants is dismissed.

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• 2013 (5) TMI 740
  Penalty - U/S 114 of the Act - Held that:- It is a case of mis-declaration of value and description of goods fro claiming undue export benefit. We have noticed that the goods have already been exported. After considering the submission of the learned counsel and the facts of the case, we modify the impugned order insofar as by reducing the penalty to Rs.50,000/- in Appeal No. C/108/2004 and Rs.75,000/- in Appeal No. C/109/2004 respectively and otherwise the impugned order is upheld.

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• Corporate Laws

• 2013 (5) TMI 739
  Outstanding lease rentals payable by M/s.Sujala Pipes Private Limited (SPPL), Kurnool to M/s.Monarch Pipes Limited (MPL) - whether SPPL was a lessee of MPL in the light of the clause in the working agreements to the effect that the sums deposited by it shall be adjusted against the cost of acquisition of MPL by SPPL? - MPL was declared sick under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 - Contention against filling of application under wrong provision - Held that:- The irrefutable fact remains that SPPL utilized the infrastructure of MPL from October 2001 to May 2005 for generating its business and no payment whatsoever was made to MPL for such use of its assets. This Court is also mindful of the fact that SPPL which initially offered Rs.2.80 Crores to takeover the unit of MPL ultimately bought it at a mere Rs.1.2 Crores. SPPL therefore benefited at the cost of MPL at every turn. SPPL would consequently be liable to reimburse MPL for exploitation of its assets with interest at least at this stage. SPPL shall therefore pay interest to MPL at 6% per annum on the sums due. C.A filed under Section 446(2)(b) proceeded on the wrong assumption that this liability was yet to be determined. However, it is within the inherent powers of this Court to substitute the proper and applicable provision even if a wrong provision of law has been relied upon or if the application is filed under a wrong provision of law. Pertinent to note, even an order passed by a statutory authority under a wrong provision of law would be held valid once it is established that such authority had the power to make such order under another provision. This being the position with orders passed by authorities, a party taking recourse to a wrong provision of law while approaching the Court cannot be placed in a worse situation. As pointed out in BORPUKHURIE TEA ESTATE V/s. PRESIDING OFFICER, INDUSTRIAL TRIBUNAL (1978 (3) TMI 182 - SUPREME COURT OF INDIA) charged with the duty of administering justice, have to remember that it is not the form but the substance of the matter that has to be looked into and parties cannot be penalized for inadvertent errors committed by them in the conduct of cases. Once the relief sought is traceable to another source available in law, mere filing of the application under the wrong provision would not have the effect of denuding the party of the right to claim the relief. This Court would therefore be justified in treating an application filed by a party under a wrong provision of law as one filed under the appropriate provision and deal with it accordingly. This Court is of the considered opinion that the matter squarely falls within the four corners of Section 468 of the Act of 1956 and that SPPL stood in the status of a trustee of MPL. SPPL was bound in good faith to account for the amounts which it was liable to pay under its working agreements with MPL, as to which it suffered orders before the BIFR and the AAIFR that attained finality. As Section 468 of the Act of 1956 clearly posits that an application thereunder can be moved at any time after a winding up order is made, the question of the application being barred by limitation would not arise. The arguments advanced in this regard and the decisions relied upon to buttress these arguments are therefore wholly irrelevant. M/s.Sujala Pipes Private Limited, the first respondent, shall pay to M/s.Monarch Pipes Limited the arrears of the monthly rentals/deposits @ Rs.3,50,000/- per month from October, 2001 till 24.05.2005 along with interest at the rate of 6% per annum within four weeks from the date of receipt of a copy of this order.

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• Service Tax

• 2013 (5) TMI 755
  Interest on Refund - initially the amount was credit to Consumer Welfare Fund later cash refund was allowed - held that:- It is undisputed that the refund sanctioned by the first appellate authority has attained finality as Revenue is not challenging such a refund order. On being served upon such an order, the Revenue Authorities took their own time to grant the refund to the appellant. - the appellant’s contention is correct as regards, claim of interest from 01.04.09 to 31.10.11 as Hon’ble Supreme Court in the case of Ranbaxy Laboratories Ltd. (2011 (10) TMI 16 - Supreme Court of India) in paragraph No.15 settled the law - interest on refund allowed. - decided in favor of assessee.

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• 2013 (5) TMI 754
  Cenvat Credit - input services received prior to the date of registration - belated availment of cenvat credit - scope of the show cause notice - held that:- the issue is no more res-integra and the Division Bench of the Tribunal in the case of Well-known Polyesters Limited (2011 (1) TMI 664 - CESTAT, AHMEDABAD) squarely settled the issue in favour of the assessee. - cenvat credit allowed - decided in favor of assessee.

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• 2013 (5) TMI 753
  Cenvat Credit - Input services - Rule 2(L) of CCR - rent-a-cab operator's service, mandapkeeper's service, decorator's service, staff welfare expenses and interior designer's services. - credit denied since the above services were not covered under specific categories of input services under Cenvat Credit Rules, 2004. - held that:- The first appellate authority has clearly recorded the services utilised of various service providers as regards rent a cab operator service, mandapkeeper's service, decorator's service, staff welfare expenses and interior designer's services and had come to a conclusion that the said input services are used in or in relation for provision of output services, by the respondent. The conformation of the ground that there has to be a nexus of the utilisation of such services for providing on output service, is not in consonance with the law which has been settled as to there is no one to correlation, of the cenvat credit availed. The same ratio will be applicable in this case also. - credit allowed - decided in favor of assessee.

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• 2013 (5) TMI 752
  Refund - unjust enrichment - mandap keeper services versus club - held that:- The question involved in this case is whether the appellant is required to pass the hurdle of unjust enrichment in the facts and circumstances of the case or otherwise. - Refund claim arouse after the Decision of High Court in KARNAVATI CLUB LTD. Versus UNION OF INDIA [2009 (9) TMI 561 - GUJRAT HIGH COURT] The members of the club cannot be seen separately as a client or customer and the mandap or the club is one and the same. Since the Service Tax is sought from the club and it has been set aside at the show cause notice stage, by the Hon'ble High Court, it cannot be said that said club has passed on the incidence of Service Tax liability to its members, as the members are not separate from the club, is the ratio of their Lordships. If that be so, it cannot be said that by claiming the refund from self, the club itself will be unjustly enriched. Services rendered to self cannot be equated with the services rendered to a client or customer. The appellant has passed the hurdle of unjust enrichment - the provisions of Section 12B will not be applicable in this case as the club and the members are not separate and are one as held in this case by Hon'ble High Court, the question of producing any other evidence in support of non-passing of Service Tax liability does not arise. - Refund allowed - decided in favor of assessee.

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• Central Excise

• 2013 (5) TMI 738
  Clearance of waste and scrap without payment of duty - duty demand along with interest and penalty under Section 11AC - assessee submits that they have paid 25% of the penalty thus this payment may be considered as sufficient for final settlement - Held that:- Considering the fact that appellant is a small manufacturer and this has happened during the early stages of his operations and consedring the case of K. P. POUCHES (P) LTD. [2008 (1) TMI 296 - HIGH COURT OF DELHI] & Bhagyoday Silk Industries (2010 (2) TMI 971 - GUJARAT HIGH COURT) to the effect that matter can be settled on payment of 25% of penalty - as 25% of the duty demand which amount has already been paid thus matter closed.

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• 2013 (5) TMI 737
  Eligibility for availment of Cenvat credit - ISD - Input Service Distributor - Services pertaining to their other units when distributed by the Head Quarters who is also registered as ISD – As per appellant cenvat credit was taken by them on the basis of invoices issued by their head office to Unit-III which was utilized for discharging duty liability on the finished goods. Held that:- Following the judgment of the Karnataka High Court [2011 (2) TMI 1130 - KARNATAKA HIGH COURT] in the case of appellant itself, the tribunal in its order [2013 (5) TMI 702 - CESTAT, AHMEDABAD] has held that the appellant cannot be denied the credit on the ground that the input services were received in some other units and during distribution of input services credit was given to another unit of the appellant. Therefore, the appeal filed by the appellant is allowed. - Decided in favor of assessee.

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• 2013 (5) TMI 736
  Manufacture of cough syrups of different brand names such as Xenocof-D, Instacodin, Codistar Cough Syrup, Wilecod Syrup. - Levy of duty as “narcotic” or “narcotic drugs” - Medicinal and Toilet Preparations (Excise Duties) Act, 1955 - held that:- There is a specific contention of the petitioner that the quantity of codeine phosphate used by the petitioner is much below the prescribed limit – a fact which has not been controverted by the State Government in its counter affidavit. In order to substantiate his argument, the learned counsel for the petitioner Mr. P.R. Mullick has placed two judgments before this Court. One by the Division Bench of Bombay High Court in M/S USV Limited and another v. State of Maharashtra and others (2006 (8) TMI 217 - HIGH COURT OF BOMBAY) where the issue before the Bombay High Court was whether the Dexovon Capsules which contain 70 mg of “Dextropropoxyphene-HCl” (for short DXC) per dosages per unit and is less than the prescribed limit of 135 mg of per dosage can be classified as narcotic or narcotic drug and hence would be liable to pay State Excise Duty under the Act. The Division Bench came to the conclusion that Excise Duty cannot be charged on the said product because the dosages of narcotic in the products are much less the prescribed limit. Another judgment relied upon by the petitioner is Amrik Singh v. The State of Punjab (1996 (4) TMI 447 - PUNJAB & HARYANA HIGH COURT), where also the Codeine Phosphate was being used for preparation of cough syrups in the proportion of 9.5 mg per 5 ml, i.e. per dosage unit and the Court held that the preparation in question falls within the ambit of the exception as contained in the item at Serial No. 35 of the Notification issued by the Central Government. Revenue directed not to charge excise duty on the cough syrups being prepared and sold by the petitioner under the brand names of Xenocof-D, Instacodin, Codistar Cough Syrup, Wilecod Syrup if it contains Codeine Phosphate less than the prescribed limits. - Decided in favor of assessee.

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• 2013 (5) TMI 735
  SSI Exemption and export - payment of duty on export and claiming rebate / refund - utilization of credit of duty paid on capital goods - interpretation of exemption notification and Rule 5 of CCR - held that:- a manufacturer seeking benefit of such exemption notification was not entitled to avail credit of duty on inputs used in the manufacture of goods of which such exemption was being availed and cleared for home consumption and of which the exemption was availed. Restriction on utilization of credit of duty on capital goods - held that:- The limitation on utilization of the cenvat credit on capital goods for payment of duty is “on the aforesaid clearances”. The reference to “on the aforesaid clearances” must be seen as a reference to the goods cleared for home consumption referred to in clause (iii), just preceding clause (iv) of which the limitation of non-utilization of cenvat credit on inputs used in manufacture of such specified goods is imposed. To put it differently, clause (iv) of para 2 thereof puts a restriction on the manufacturer utilizing credit of duty paid on capital goods on the clearances made for home consumption and not for the exports. The adjudicating authority as well as the Government, in our opinion, committed an error in interpreting such provision. The adjudicating authority, therefore, erred in holding that the petitioner erroneously paid duty on clearances for export which duty was otherwise exempt under the notification. In fact, the notification itself is clear in this respect and grants exemption from payment of clearances made for home consumption. - Revenue directed to grant rebate / refund - decided in favor of assessee.

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• 2013 (5) TMI 734
  Attachment order - detention of goods - recovery of the disputed duty - As the petitioner has already elected to prefer an appeal to the CESTAT, would this Court be justified in examining the merits, of the order under appeal before the CESTAT, in proceedings under Article 226 of the Constitution of India? - held that:- The Doctrine of Election suggests that when two remedies are available for the same relief, the party to whom the said remedies are available has the option to elect either of them. [A.P. State Financial Corpn. v. Gar Re-Rolling Mills - 1994 (2) TMI 268 - SUPREME COURT OF INDIA]. There are three elements to the Doctrine of election, namely, existence of two or more remedies; inconsistencies between such remedies, and a choice of one of them. [Transcore v. Union of India - 2006 (11) TMI 349 - SUPREME COURT OF INDIA]. As the petitioner has elected to file an appeal, which is pending before the CESTAT, the merits of the order-in-original passed by the Commissioner ought not to be examined by this Court in exercise of its jurisdiction under Article 226 of the Constitution of India. As suspension of the first part of the impugned order of attachment would merely be an exercise in futility, we refrain from doing so. We consider it appropriate, therefore, to direct the CESTAT to hear and dispose of the stay/waiver petition filed by the petitioner in accordance with law within a period of three weeks from today.

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• 2013 (5) TMI 733
  Withdrawal of exemption - principle or doctrine of promissory estoppel - Indian Mouth Freshner - Pan Masala - unit in Sikkim - held that:- Undisputedly, the petitioner acted on the assurance, promise and representation of the Government of India through its IPR and exemption Notification dated 9-9-2003 and the State of Sikkim by virtue of its Notification dated 17-2-2003 and invested huge amount of about Rs. 3.00 crores by altering its position. The respondents are bound to honour their promises, commitments and assurances and are not entitled to breach the same on mere conjectures, whims and absolute discretions. The respondents are, however, entitled to recall benefits of such promise on the basis of valid, justifiable policy and supervening public interest or in exercise of its sovereign authority or if any statute authorises them. In Mahavir Vegetable Oil (P) Ltd. (2006 (3) TMI 234 - Supreme Court), Hon’ble Supreme Court held that doctrine of promissory estoppel operates even in legislative field and accrued rights cannot be taken away by amendment of statutory notification. Since both, i.e. the exemption and withdrawal notifications, are issued in exercise of delegated legislation, the first contention of the respondents deserves to be rejected. Coming to the real and basic question of public interest, the only public interest indicated in the reply is about the nature of the product being manufactured by the petitioner, i.e. Pan Masala, which has been termed to be falling in the category of “demerit goods” and health hazardous. Both the contentions deserve to be rejected in view of the observations made hereinabove. At the cost of prolixity, it may be noticed that the demerit goods have not been defined anywhere. Pan Masala has not been declared as a health hazardous by any notification or order of the Government of India or the State Government. Even no material or scientific reports have been placed on record to demonstrate that the Pan Masala containing no tobacco is health hazardous. Mere ipse dixit terming the goods manufactured by the petitioner as health hazardous or under the category of demerit goods does not in any manner constitute justifiable public interest. The doctrine of promissory estoppel thus becomes enforceable in the present case. The petitioner is entitled to exemption from payment of excise duty on the manufacture of Pan Masala from its unit situated in the State of Sikkim for a period of 10 (ten) years from the date of commencement of commercial production, i.e. 27-6-2006. - Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2013 (5) TMI 757
  Notice issued in Form U (Notice for recovery of money) attaching the Bank Account of the petitioner - alleged that the petitioner has claimed ITC wrongly due to E1 sales not proved, stock variation and stocks were kept in the un-registered godown - Held that:- A spot inspection had been conducted by the 2nd respondent and his officials on 02.08.2012 and on the same day, a cheque for a sum of Rs. 3,75,699/- was collected from the assessee other than a sum of Rs. 2,000/- collected towards compounding fee. In fact, the 1st respondent is the original assessing authority. Though, it is the 2nd respondent who had conducted the spot inspection, after noticing the discrepancies in the books of accounts, etc., the 2nd respondent ought to have either issued a notice to the petitioner pointing out all the discrepancies or he should have intimated the discrepancies to the 1st respondent for further course of action. On the alleged discrepancies, either the 2nd respondent or the 1st respondent, should have heard the assessee and then pass an order demanding whatever be the tax due therefrom. Even after such a demand, if the assessee had not paid the tax due thereon, by all means, the authorities are empowered to take any action. But, in this case, a notice pointing out the discrepancies had not been issued to the assessee; no opportunity was afforded to the assessee to put forth its defence and no notice of demand of tax due was served on the assessee. Instead of doing all these things, the 1st respondent has cast a Notice in Form U (Notice for recovery of money) which is per se illegal and unsustainable and in violation of the principles of natural justice. Thus the impugned notice is set aside & writ petition is allowed.

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• 2013 (5) TMI 756
  Rate of tax applied to Paraffin wax manufactured and sold by appellant - 4% or 20% - Additional demand and penalties imposed - Delhi Value Added Tax Act, 2004 - Held that:- Paraffin wax manufactured and sold by the appellant is of a standard other than the Food Grade Standard. Therefore, prima-faice, the Paraffin wax manufactured and sold by the appellant would fall under Entry No. 120 of the Third Schedule. Since Entry No. 120 of the Third Schedule is a specific Entry and Entry No. 1(ix) of the Fourth Schedule is a general Entry, it is the former Entry which would cover the case of the appellant and therefore, the rate of tax would be 4%. This case is when there is a divergence of views with regard to the applicability of a particular Entry, would the benefit of doubt, even at the prima-facie stage, go to the assessee or to the revenue. Thus taking a prima-facie view of the matter and giving the benefit of doubt to the assessee at this stage, the Tribunal ought not to have directed the appellant to deposit any amount out of the tax demanded as also the penalty levied as a condition for hearing the appeals. Consequently, we set aside the impugned order dated 18.02.2013.

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• Wealth tax

• 2013 (5) TMI 758
  HUF - Whether assessment proceedings in the name Karta would be legal in the event of partition having taken place between the parties? - Tribunal rejected the appellant's claim of complete partition under Section 20 of the Wealth Tax Act & opined that family is liable to be assessed under the W.T. Act if no such partial partition has taken place - Held that:- On a bare perusal of order by which the tribunal has composed its reasoning, by no stretch of imagination, can be interpretive of the fact that there has been any kind of advertence to the facts in issue. The tribunal has only stated that at the most there is a partial partition but failure to fathom that on what basis the tribunal has come to such a conclusion and on what ground it has reversed the finding of the CWT(A). It is trite law that the tribunal is the highest fact finding authority and, therefore, it has to discharge its obligation while it reverses a factual order more so, when the assessee had suffered. Set aside the order passed by the tribunal and direct remit to it for proper adjudication as per law.

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