Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 12, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Default in deduction of TDS - Assessee is fully aware of the payee but postpones credit to the account of the payee for want of receipt of invoice. - levy of interest confirmed - AT
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Penalty u/s 140A(3) - non payment of self assessment tax which was shown as payable in the return of income filed - assessee was denied opportunity of hearing to discharge its onus and to show “good and sufficient cause” for non payment of tax - penalty waived - AT
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Transfer pricing adjustment - rejection of benchmarking - it has to be shown that the high profit margin does not reflect the normal business conditions and only in such circumstances high profit margin companies can be excluded - AT
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Determining arm’s length price adjustment - part of loan was subsequently converted into equity. To the extent of loan converted into equity, no transfer pricing adjustment is required with effect to the date of such conversion - AT
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Registration U/s.12A canceled - there is no prohibition in the Act that a charitable institution should not indulge in any business activity. The only restriction is that it should conform to the provisions of subsections 4 & 4A of section 11 of the I.T. Act and the activity should come within the provisions of section 2(15) - AT
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MAT - Applicability of clause (vii) to the Explanation 1 of S.115JB(2) - the net profit of the sick industrial undertaking is to be reduced while computing the book profit. - AT
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Addition u/s. 41(1) - cessation of liability - assessee had continuously avoided the payment of tax by showing the said interest liability as payable, whereas the creditor AOP had not shown it as its ‘income’ because of the different accounting methods, that too, so managed by the assessee - additions confirmed - AT
Corporate Law
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Default in payment of bills - Maintainability of Winding up application - Once the bona fide dispute is raised it would weaken the chance to have admission of the winding up petition, otherwise admission is an obvious consequence. - HC
Indian Laws
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Dishonour of cheque - No Separate notices issued to the directors in addition to the company - There is nothing in Section 138 which may even remotely suggest issuance of notice to anyone other than the drawer. - SC
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Delay in possession of flats - if the developer, pays simple interest @ 12% per annum to the buyer, that would not only take care of the additional financial burden on them but also give some monetary compensation to them for their sufferings on account of the delay in handing over possession of the flat purchased by them. - CCI
Service Tax
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Waiver of penalty u/s 80 - ill-health of the mother of the assessee's partner cannot be considered as a reasonable cause so as to invoke the provisions of Section 80 of the Finance Act, 1994. - AT
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Valuation - Charges, which the appellant received from the tenants, on account of the actual consumption of electricity and water and which are further deposited by them to the respective departments, cannot be considered to be the value of the services being provided by them - prima facie case is in favor of assessee - AT
Central Excise
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Interest u/s 11AA - Once an advantage of an interim order has been taken and the Revenue is deprived of the amount of tax, then, the recovery of public dues is deferred and delayed. The advantage cannot continue after such interim orders are vacated or set aside - HC
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Whether subject Cannula are eligible for full duty exemption under Notification No. 6/03-CE dated 01/3/03 and its successor exemption notifications - Held Yes - AT
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Manufacturing activity or not - whether making pencil slats from wooden logs (timber) would amount to manufacture and whether such pencil slats would attract Central Excise duty - Held Yes - AT
VAT
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Difference between tax due after final assessment and advance tax paid by the assessee - penalty u/s Section 12-B(4) - Revisional Authority was duty bound to interfere with such erroneous order which was prejudicial to the interest of the Revenue - HC
Case Laws:
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Income Tax
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2015 (6) TMI 347
Penalty levied by the AO u/s. 271(1)(c) - the assessee did not file the returns of income as per the provisions of Sec. 139 and the assessee was issued the notices u/s. 148 - Held that:- It is not in dispute that the assessee was treated as a local authority u/s. 10(20) of the Income-tax Act up to the A.Y. 2002-03. Subsequently, there was an amendment to section 10(2) of the Incometax Act and the APMC was removed from the definition of the local authority. It is pertinent to note that the Finance Act, 2008 has introduced Sub-sec. (26AAB) to Sec. 10 and again the income of the APMC has been exempted from tax. There is no dispute about the fact that APMC is constituted for Marketing of the Agricultural Produce helping the Agriculturists to get the better price in the open market and to avoid the brokers and agents. It appears that the collective efforts were made by the different APMCs in India after the amendment to Sec. 10(20) for getting exemption. Moreover, as per the facts on record the Govt. audit of the assessee for period ending on 30-09-2007 and 31-03- 2008 was completed on 14-07-2009 and hence, there was a delay in finalizing tax audit report. It is also seen that in both the assessment years the returns filed by the assessee were accepted without making any addition. We find that the Explanation 3 below Sec. 271(1)(c) which is deeming provision, is applicable to the assessee as period mentioned u/s. 153(1) has expired and then only the assessee filed the returns of income but at the same time the assessee can still avail the Explanation 1 to establish the bonafide for not filing the returns of income within the time allowed u/s. 139 of the Act. In the present case, we are of the opinion that the explanation of the assessee is bonafide for not filing the returns of income for both these assessment years within the meaning of Explanation 1 below Sec. 271(1)(c) of the Act and in our opinion no penalty can be levied on the assessee - Decided in favour of assessee.
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2015 (6) TMI 346
Exemption claimed u/s. 11 denied - Managing Trustee enjoyed benefits out of the income derived by the trust which is against the provisions of Section 13(1)(c)/(d) - Held that:- In the present case, the Assessing Officer has out rightly held that the assessee is not entitled to the benefit of Section 11 without ascertaining the reasonableness of the amount paid for the services rendered. We find that, the construction contract has been awarded to the firm M/s. Sri Vekkaliamman Builders on the basis of open bid. Since, the firm quoted lowest rates, the contract was awarded to the firm. The CIT(Appeals) has given a categoric finding that in cases of civil construction contracts, especially were no proper books are maintained the Act recognizes normal profit margins @ 8%. Whereas, the firm M/s. Sri Vekkaliamman Builders has earned a profit of 5.8% which is very reasonable. We are of the considered opinion that since, the contract was awarded on competitive basis and the profit earned is reasonable, the provisions of Section 13(2)(c) are not violated. We do not agree with the submissions of the ld. DR that the Trust has advanced a sum of ₹ 19,25,657/- as on 31-03-2009 which is against the provisions of Act and thus disentitles the assessee to claim exemption u/s. 11 as the CIT(Appeals) has given a well reasoned finding that the sum advanced by the assessee to M/s. Sri Vekkaliamman Builders in not advance simpliciter but business advance. The aforesaid advances do not come within the ambit of advances u/s. 13(1)(d) of the Act. The amounts were advanced for the on-going construction work in the normal course of business activity. - Decided against revenue.
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2015 (6) TMI 345
Non deduction of TDS - whether Transmission charges, SLDC charges and wheeling charges amount availing of professional/technical services u/s 194J r.w. 9 (1)(vii)? - Held that:- Going through the relevant clauses of the agreement between the assessee and the RRVPNL and have found that there is no such clause in the agreement which prevents RRVPNL to allow any other power generating company to use transmitting lines. Rather, it is noticed that if any other neighbouring entity in Chanderi wished to use open access system of RRVPNL to transfer the power to another entity, it could very well do so. Charges for such utilization are given by the Rajasthan Regulatory Body and not controlled by the assessee company in any manner. Tarrifs are uniform for everyone using their infrastructure and the assessee company does not have any say in that matter. Accordingly, we are also of the opinion that the A.O/ITO-TDS was not justified in holding that the payment of transmission charges, wheeling charges and SLDC charges would attract the provisions of section 194J of the Act. Therefore, we approve the finding of the ld. CIT(A) in holding that the demands created u/s 201(1) of the Act in all these years and so also the related interest charged u/s 201(1A) would not survive and have been correctly deleted/cancelled by him. Accordingly, we dismiss all the four appeals of the revenue. - Decided in favour of assessee.
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2015 (6) TMI 329
Disallowance under Section 14A read with Rule 8D - ITAT deleted disallowance influenced by the fact that the assessee had not applied any borrowed fund towards the investment that yield exemption income - Held that:- The AO's initially determined disallowance to the extent of ₹ 75,41,105/- as against the tax exemption income earned by the assessee of ₹ 25,77,300/-, was finally incorrect and excessive. It is based on misapplication of Rule 8D(2)(ii). The CIT(Appeal), to certain extent dealt with that misapplication but the fact remains that the tax exempt income of ₹ 25 lakhs was in effect brought to tax by disallowance of ₹ 37 lakhs. Moreover, the relevant component of the expenditure was on account of the interest paid by the assessee. The ITAT after examining the records has returned a clear finding that no interest element could be attributed to the earning of exempt income. No substantial question of law arises. - Decided against revenue.
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2015 (6) TMI 328
Notice under Section 143(2) - CIT(A) arrived at the conclusion that no notice under Section 143(2) was served upon the assessee on or before 30.9.2010, therefore, the process under the provision aforesaid was impermissible - Held that:- So far as service upon Shri Bherulal said to be an employee of the assessee is concerned, it is pertinent to notice that by way of filing an affidavit Shri Bherulal stated on oath before the Commissioner of Income Tax (Appeals) that he was not in service with the assessee after 12.11.2008 and was not in touch with the assessee and never visited business place after leaving the service. He also stated that no notice from any government department/agency in his name or in the name of assessee was received by him. No counter to the statements made by Shri Bherulal on oath was made by any officer of the revenue. In view of it, we are of considered opinion that the Commissioner of Income Tax as well as learned Income Tax Appellate Tribunal rightly relied upon the statements made by Shri Bherulal. The other argument advanced by learned counsel for the appellant is also bereft of merit in view of the fact that the presumption as per Section 292-BB of the Act of 1961 could have been drawn only if the assessee did not have raised objection about the service of notice before completion of the assessment in question. In the instant matter the assessee not only raised the objection but also contested the same before the Assessing Officer - Decided against revenue.
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2015 (6) TMI 327
Attachment of the refund done under Section 281-B - Held that:- Petitioners furnishing a Bank Guarantee of a Nationalised Bank for an amount of ₹ 28,79,81,050 to the satisfaction of the Commissioner of Income Tax, the Respondent would vacate the attachment of the refund of ₹ 28,79,81,050 done under Section 281-B of the Act. It is made clear that the Petitioners will keep the Bank Guarantee alive till the final disposal of the re-assessment notice dated 16.07.2014 issued for the assessment year 2009-10 and eight weeks thereafter as it is the amounts likely to become due on the reassessment that the Revenue is seeking to secure by attachment of the refund. Once the Bank Guarantee in the above terms is furnished to the satisfaction of the Commissioner of Income Tax, Panaji, the Respondent-Revenue will hand over to refund of ₹ 28,79,81,050/- to the Petitioners within one week thereafter.
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2015 (6) TMI 326
Penalty under section 271(1)(c) - disallowances under section 40(a)(i) and income of Head Office / Branch Office - ITAT deleted penalty levy - Held that:- On the merits of the disallowances have not been accepted and the special Bench had to be constituted to resolve the legal issue. All this indicates that there were two views possible on the issue and before it was settled by a special Bench decision of the Tribunal. Thus, on a debatable point and legal issue, a penalty could not have been imposed and the ingredients of section 271(1)(c) of the Income Tax Act are not attracted in such cases. This is essentially a finding of fact and clearly emerging from the admitted position. In the circumstances, the Tribunal's direction to delete the penalty does not raise any substantial question of law. - Decided in favour of assessee.
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2015 (6) TMI 325
Stay of demand - penalty proceeding will be initiated under Section 221 - notice under Section 156 the petitioner was directed to pay a sum of ₹ 1,82,20,010/- within fifteen days from the date of service of notice - Held that:- Though the petitioner has prayed for the larger relief of quashing the impugned notices, this Court is of the view that it would be suffice to direct the respondent to keep in abeyance further proceeding in terms of the impugned notice till 04.05.2015. Hence these writ petitions are disposed of with a direction to the respondent to keep in abeyance further proceeding in terms of the impugned notice till 04.05.2015 and the petitioner is at liberty to file statutory appeal and move for appropriate orders
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2015 (6) TMI 324
Revision u/s 263 - commissioner had held that the computation of deduction u/s.10A of the Act when computing total income should be in respect of both STP units as well as non-STP units i.e., in respect of the entire company - Held that:- We are unable to accept the said submission of the learned Counsel for the appellants, as by accepting the return filed by the assessee in which the requisite details had been given, it was not necessary for the Assessing Officer to give detailed reasons, although it could be said that had such reasons been given, it may have been better. However, the order cannot be said to be erroneous in sofar as it is prejudicial to the interests of the revenue or taken up for revision under Section 263 of the Act, merely because no reasons had been given, even though the order of the Assessing Officer was in terms of the amended provision of Section 10A(4) of the Act. As such, we are of the view that no substantial question of law arises for determination of this Court. - Decided against revenue.
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2015 (6) TMI 323
Non deduction of TDS - Assessee in default u/s.201(1) and also levying interest on tax not paid u/s.201(1A) - Consequences of failure to deduct or pay - Held that:- The assessee company has deducted tax at source on these amounts in the subsequent year as and when the same were paid by it.In view of the above, the demand on account of tax u/s.201(1) of the Act, in our view, will no longer survive. The argument that TDS provisions operate on income and not on payment, in the facts and circumstances of the present case, is erroneous. As we have already seen Sec.194C, 194J and 195, which are the sections applicable in the present case, does not use the expression, "Income". The above sections use the expression "Sum" and tax deduction has to be on the "sum so paid". Sec.194H and Sec.194-I deal with TDS obligation on payment of commission and rental income. These payments by its nature are specific and the entire payment is attributable to commission or rent and therefore the commission and rent paid is treated as "income" and therefore the expression income by way of commission or rent is found in these sections. Moreover as person responsible for making payment, it is the duty of the Assessee to deduct tax at source. Sec.194C, 194-J, 194-H and 194-I do not use the expression "Chargeable to tax". As we have already seen, it is not the case of the Assessee that the payments are not chargeable to tax in the hands of the payee. As we have already seen, the Assessee deducted tax on the provision made for various expenses in the subsequent financial years when the provision entries were reversed. The Assessee therefore cannot take a plea that the payments in question are not chargeable to tax and therefore there was no obligation on its part to deduct tax at source. As already held that the said CBDT circular No.30/2010 is applicable to banks and cannot be taken advantage by the Assessee who is not a bank. As we have already seen, the Assessee is fully aware of the payee but postpones credit to the account of the payee for want of receipt of invoice. We do not find any merit in the appeals that relate to challenge of levy of interest u/s.201(1A) of the Act. - Decided partly in favour of assessee.
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2015 (6) TMI 322
Penalty u/s 140A(3) - non payment of self assessment tax which was shown as payable in the return of income filed - CIT(A) deleted the penalty levy - Held that:- No penalty notice was issued to the assessee u/s 221 of the Act and the penalty order was also not passed u/s 221 of the Act and there is no penalty provision u/s 140A of the Act and the AO misunderstood the relevant provision of the Act while issuing notice and imposing penalty against the assessee. Consequently the assessee was also not provided due opportunity of hearing prior to imposing penalty u/s 221 of the Act as required by first proviso to section 221(1) of the Act and at the same time the assessee was also denied opportunity of hearing to discharge its onus and to show “good and sufficient cause” for non payment of tax at the time of filing of return as required second proviso to section 221(1) of the Act to avoid penalty, which is also a clear violation of the mandatory provisions of the Act by the AO and thus, penalty order cannot be held as in accordance with law and sustainable and the first appellate authority i.e. CIT(A) was quite justified and correct in demolishing the same. In view of the observations of the Hon’ble High Court of Delhi in the judgment dated 12.8.2013 in assessee’s own case (2015 (6) TMI 308 - DELHI HIGH COURT), we are also in agreement with the conclusion of the CIT(A) that the assessee was facing financial constrain and acute liquidity crunch and there was a “good and sufficient cause” for the assessee for non payment of tax which was incorrectly rejected by the AO while wrongly imposing penalty u/s 140A(3) of the Act. We are unable to see any infirmity, perversity or any other valid reason to interfere with the impugned order of the CIT(A) which deleted the penalty and thus, we uphold the same. - Decided in favour of assessee.
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2015 (6) TMI 321
Transfer pricing adjustment - rejection of benchmarking approach adopted/contemporaneous documentation maintained by the appellant - selection of comparable - Held that:- From the results of Bodhtree Consulting Ltd. it is seen that there is drastic fluctuation in the operating margins with a high of 80.15% in F.Y. 06-07 and low of -4.46% in F.Y. 10-11. We find that Special Bench of Tribunal in the case of Maersk Global Centres India Pvt. Ltd. [2014 (3) TMI 891 - ITAT MUMBAI] had considered a question as to whether companies having abnormal profits should be excluded as a comparable & took the view that it has to be shown that the high profit margin does not reflect the normal business conditions and only in such circumstances high profit margin companies can be excluded. The results of Bodhtree from F.Y. 2003 to 2008 excluding F.Y. 2007 shows, that there has been a consistent change in the operating margins. Also see PTC Software (India) Pvt. Ltd (2015 (1) TMI 466 - ITAT PUNE) E-Infochip Bangalore Ltd.'s annual accounts of the company, with respect to the segment information it is stated that the company is primarily engaged in software development and I.T enabled services which is considered the only reportable business segment as per Accounting Standard AS-17 “segment reporting” prescribed in Companies (Accounting Standard) Rules, 2006. We thus find that no segmental information is available, thus to be excluded from the list of comparable. Thus restore the issue back to the file of A.O/TPO, who after excluding the aforesaid 2 companies rework the addition - Decided in favour of assessee for statistical purposes.
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2015 (6) TMI 320
Disallowance under the head “Purchase and Vendor Purchases” - CIT(A) deleted the addition - Held that:- AO has made the disallowance purely looking into the past history of the case and that too, twice the amount surrendered in the last year. Neither the AO has adduced any material, rational basis nor any justification for the doubling the addition made during the year. We further find that the business results of the assessee are certified by the audited accounts by the Auditors, M/s Vimla Chand Jain & Co., Chartered Accountants as per the Tax Audit Report in Form No. 3CB and 3 CD dated 28.10.2006 which clearly reflect that on or before 28.10.2006, vouchers / bills were available with the assessee and on the basis of which the audit of the accounts was conducted and report in Form No. 3CB & 3CD alongwith the return of income was filed on 31.10.2006. But since an accidental fire happened on 23.9.2007 i.e. after the audit was conducted on 28.10.2006, it can be safely assumed that the Auditor had prepared the Report based on the vouchers/ bills with the assessee and so it is authentic, since the said audit report have not been challenged by the AO at all. Therefore, simply on the ground that in previous year, the assessee made surrender cannot be the basis for disallowance which smacks of arbitrariness, which is the sworn enemy of Article 14 of the Constitution and the Ld. CIT(A) has rightly deleted the adhoc disallowances - Decided against revenue. Disallowance of expenses under the head Freight & Octroi, Staff & Workers welfare, traveling expenses, Diwali expenses, telephone expenses and Repair & maintenance CIT(A) deleted the addition - Held that:- We concur with the Ld. CIT(A) that AO disallowed expenditure under these heads without any material or reasons brought on record, so it is unsustainable in the eyes of law. So, we are inclined to confirm the order of the Ld. CIT(A) on this issue - Decided against revenue.
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2015 (6) TMI 319
Determining arm’s length adjustment in respect of loan given to its wholly owned subsidiaries - Held that:- The assessee has given advance to 100% wholly owned foreign subsidiaries on which no interest has been charged. Since the advance was given to its AE without charging interest, the transaction comes under the purview of international transaction requiring adjustment on account of arm’s length price u/s 92. It does not matter even if advance is given out of interest free funds available with the assessee. The issue with regard to determining arm’s length adjustment in respect of loan given to its wholly owned subsidiaries is covered by the decision of Hon’ble jurisdictional High Court in the case of CIT vs. Tata Autocomp Systems Ltd., (2015 (4) TMI 681 - BOMBAY HIGH COURT ) wherein held that the rate of interest was to be determined by applying the Euribor rate of interest i.e. rates prevailing in Europe. Similarly the decision of Tribunal in the case of VVF Ltd. vs. DCIT (2010 (1) TMI 781 - ITAT, Mumbai|) and DCIT vs. Tech Mahindra Ltd. (2011 (6) TMI 140 - ITAT, MUMBAI ) also supports this issue. Respectfully following the above decisions we direct the A.O. to make arm’s length adjustment by applying the LIBOR rate of interest. From the record we found that part of loan was subsequently converted into equity. To the extent of loan converted into equity, no transfer pricing adjustment is required with effect to the date of such conversion, in view of decision of Hon’ble jurisdictional High Court in the case of Vodafone,[2014 (10) TMI 278 - BOMBAY HIGH COURT]. We direct accordingly. Disallowance of interest on amounts spent on acquiring premises at Bharat Diamond Bourse - BDB - Held that:- From the record we also found that the assessee had huge amount of interest free funds at its disposal as well and that it is normally rational that owned funds in the form of accumulated undistributed profits are utilized for acquisition of capital assets - particularly an asset which has been under construction for more than a decade. The total non-interest bearing funds available with the assessee as of 31st March 2006 are ₹ 141.56 crores and after excluding the current year's profit, the same are ₹ 123.19 crores. The expenditure on capital assets till the year end is only ₹ 5.77 crores. Hence it would be rational to state that the same has been funded from owned funds. Accordingly we do not find any justification for the disallowance of interest expense as made by lower authorities. - Decided in favour of assessee. Disallowance arising out of purchases from subsidiary company - Held that:- From the record we found that the said materials were sold at cost and no profit was made on the same. It was also submitted that even if the assessee follows a FIFO system of valuation, cost of these diamonds would also be worked on a FIFO basis. There was no evidence to show that the sale has actually been done at a higher amount. This issue is also covered by the decision of the Tribunal in assessee’s own case for assessment years 2002-03 to 2005-06 as the facts and circumstances of the case during the year under consideration are same, respectfully following the order of Tribunal we do not find any merit in the action of the lower authorities for the disallowance made arising out of the sales to subsidiary company. - Decided in favour of assessee.
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2015 (6) TMI 318
Registration U/s.12A canceled - whether assessee is not a charitable organisation as it is engaged in the business activity as a commercial concern and that it is a contractor to the Government of Andhra Pradesh - Held that:- In the present case the DIT (E) has not established that the conditions (a) and (b) mentioned in section 12AA(3) of the I.T. Act are attracted. Therefore, order of the DIT (E) improper relying on the decision of the Tamil Nadu Cricket Association vs. DIT (E) Madras (2013 (12) TMI 833 - MADRAS HIGH COURT ). Also Director of Income Tax has proceeded to hold that if business is carried on by a charitable organisation, it will forfeit its exemption. The assessee is producing nutritious food to supply the ready-to-eat food to pregnant women, undernourished children and lactating mothers. The organisation is fulfilling its objects by supplying food so produced to the beneficiaries for the implementation of schemes promoted by the Women & Child Welfare Department of the Government of Andhra Pradesh and other such related programmes. The nutritious food produced by the assessee is not sold in the commercial market nor it is supplied to the parties other than the beneficiaries under the schemes referred to above. It cannot be referred to as a contractor to the Government of Andhra Pradesh as it is involved in manufacture and supply of the food to the beneficiaries. Only, the supervisory activities are carried on by the Government of Andhra Pradesh, in bringing out schemes for the benefit of the beneficiaries and fixing a suitable price to meet the cost of manufacturing and other overheads. Thus, there is no prohibition in the Act that a charitable institution should not indulge in any business activity. The only restriction is that it should conform to the provisions of subsections 4 & 4A of section 11 of the I.T. Act and the activity should come within the provisions of section 2(15) defining the charitable purposes.For the reason given above, we set aside the impugned order of the ld DIT (E) - Decided in favour of assessee.
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2015 (6) TMI 317
Applicability of clause (vii) to the Explanation 1 of S.115JB(2) - disallowance to reduce an amount of profit of sick industrial appellant company from the net profit to determine book profit u/s 115JB - Held that:- the profit of the sick industrial undertaking is to be reduced from the book profit, beginning with the year in which the Company becomes a sick industrial company and such exemption would be available till the year in which for the first time the net worth of the Company exceeds the accumulated losses. Accordingly, for the year under consideration i.e. Assessment Year 2007-08, the net profit of the sick industrial undertaking is to be reduced while computing the book profit. We direct the Assessing Officer to re-compute the book profit accordingly. See DCIT vs. Steelco Gujarat Limited [2010 (5) TMI 792 - ITAT AHMEDABAD] and ACIT vs. M/s. Praga Tools Ltd [2013 (12) TMI 1412 - ITAT HYDERABAD] - Decided in favour of assessee. Addition on Interest waived by the State Bank of Saurashtra and State Bank of Indore - Held that:- we set aside the orders of the authorities below with regard to addition of ₹ 77,81,667/- made by the Assessing Officer on the presumption that it was the interest waived by State Bank of Saurashtra. We direct the Assessing Officer to verify whether it is waiver of interest or its conversion of interest into loan. Conversion of interest into loan does not amount to waiver of interest because ultimately the interest is to be paid by the assessee. The only benefit assessee gets on conversion of interest into loan is more time for the payment. The Assessing Officer will re-adjudicate the issue in accordance with law, keeping in view our observation above. - Decided in favour of assessee for statistical purposes.
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2015 (6) TMI 316
Exemption claimed u/s 80 IC denied - Held that:- The assessee has been granted deduction u/s 80 IC for the AY 2005- 06, 2006-07 and 2007-08. The first year of claim was the A.Y. 2005-06. The impugned AY i.e. AY 2008-09 is the fourth year of the claim. The Assessing Officers over a period of three years being assessment years 1988-89, 1989-1990 and 1990-1991 have consistently accepted the claim of the assessee for deduction under section 80-I of the Act and it would not be open for the Assessing Officer to deny the deduction under section 80-1 of the Act on the ground of non fulfillment of the conditions under section 80- 1(2) of the Act without disturbing the assessment for the assessment years relevant to the previous year in which the Unit Nos. 2 & 3 were established. Thus where relief of a tax holiday had been granted to an assessee in an initial assessment year in which the conditions for grant of tax holiday had tobe examined, denial of relief in the subsequent years would not be permissible without disturbing the assessment in the initial assessment year. See CIT vs. Delhi Patra Prakashan Ltd.[2013 (6) TMI 70 - DELHI HIGH COURT], Saurashtra Cement [1979 (2) TMI 21 - GUJARAT High Court] and Paul Brothers [1992 (10) TMI 5 - BOMBAY High Court] - Decided in favour of assessee.
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2015 (6) TMI 315
Revision u/s 263 - the interest income to the tune of ₹ 77,40,000/- has not been offered to tax - Held that- What started with a proposed revision of assessment order on the ground that "interest income to the tune of ₹ 77,40,000 has not been offered to tax" ended with a discretion to the assessing officer to examine the diversion of interest bearing funds towards investments which are not yielding any income as "the assessee directly or conclusively could not prove that he has not diverted interest bearing borrowings towards investments which are not income yielding". As to whether such a shift in the stand of the CIT, while exercising powers under section 263, we find guidance from a co-ordinate bench's decision in the case of Synergy Entrepreneur Solutions Pvt Ltd vs DCIT [2011 (3) TMI 52 - ITAT MUMBAI] to conclude that itt is thus clear that there has been shift in the stand of the CIT on whether it was a fit case for revision on the ground that the assessee was not eligible for set off of losses on speculative transactions or whether it was a case for revision on the ground that the AO did not make necessary verifications about the transactions. The reason given in the show-cause notice is former, while the reason for which revision powers are finally exercised in the impugned order are latter. Even on merits there is nothing on record to show that the assessee was under any obligation to charge interest @12% on the aforesaid advance. On the contrary, learned CIT has himself treated this advance as an investment which did not yield any income. As learned counsel points out that there is a mention about 12% interest p.a. in respect of firm's transactions with the partners and such a provision has no bearing on transactions between the partners inter se. Learned DR could not point out anything which even indicates charging of interest on such loans. The very foundation of the impugned revision proceedings was devoid of legally sustainable basis. As regards the question of disallowance of interest, we have noted that the assessee's uncontroverted stand is that no deduction has been claimed for any interest payment. When there is no claim for deduction, there is the question of disallowance of such deduction. - Decided in favour of assessee.
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2015 (6) TMI 314
Additional depreciation u/s 32(1)(iia) on plant and machinery - disallowance of claim as it had not been claimed as per explanation 5 to section 32(1) - Held that:- As relying on ase of Goetze (India) Ltd. vs. CIT [2006 (3) TMI 75 - SUPREME Court] wherein held as regards the explanation 5 to section 32(1) which speaks of allowing depreciation u/s 32 whether or not the assessee has claimed deduction in respect of depreciation in computing total income. In the said explanation which was inserted by the Finance Act, 2001 w.e.f. 1.4.2002, has in fact, been inserted after the sub-section (ii) of section 32(1). But at the same time, in our view, the same is applicable for section 32(1)(iia), since normal depreciation and additional depreciation are part of depreciation u/s 32(1) especially of section 32(1)(i), which includes the machinery for allowing depreciation. Therefore, on this account, a legal claim of additional depreciation has to be allowed by the Income Tax Authorities and accordingly, we direct the AO to allow the additional depreciation as per law, so claimed by the assessee. Decided in favour of assessee.
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2015 (6) TMI 313
Determination of net taxable income - CIT(A) allowing revenue expenditure to be set off against quantum of subsidy receipts from the Government disclosed at ₹ 5,04,04,286/- - whether the subsidy received is not covered u/s 14A as the same is merely a reimbursement of expenses by the Government and is not in the nature of income of the assessee? - Held that:- Since the entire income of the assessee had been held to be non-agriculture income, hence all the expenses incurred on purchase of seeds, transportation to remote areas like Jammu & Kashmir, Srinagar etc. would constitute revenue expenditure and ought to be deducted from the revenue receipts. Therefore, ld. CIT(A) had directed the AO to determine the net taxable income after verifying the revenue expenditure and allowing the same to be set off against the revenue receipts of ₹ 5,04,04,286/- i.e. the quantum of subsidy received. We, therefore, do not find any infirmity in the order of ld. CIT(A) on this count. As we have held that there is no exempt income, therefore, the question of applicability of section 14A, in any case, does not arise. - Decided against revenue.
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2015 (6) TMI 312
Addition u/s. 41(1) - cessation of liability of outstanding interest shown as payable by the assessee to his group concern - CIT(A) deleted the addition - Held that:- The assessment year under consideration is A.Y. 2008-09 in respect of which, the A.O. noticed that the assessee had continuously avoided the payment of tax by showing the said interest liability as payable, whereas the creditor AOP had not shown it as its ‘income’ because of the different accounting methods, that too, so managed by the assessee. After the addition has been made by the A.O., and the litigation has started, the assessee to avoid further consequences, has allegedly been paid the said amount in the year 2013. We find that the appeal in this case before us, had been filed on 08.05.2012 and the said liability has allegedly been paid even after the filing of the present appeal by the Revenue. The payment of a liability in the year 2013 by the assessee, in our view, it is nothing but an afterthought to avoid the consequence of addition made by the A.O. during the assessment proceedings for the year consideration. In view of this, we do not agree with the contention of the assessee in this respect. In view of our observation made above, we hold that the A.O. has rightly made the addition u/s.41(1) of the Act in this case and the same is confirmed. The order of the ld. CIT(A) is set aside and that of the A.O. is restored on this issue. - Decided against assesse.
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2015 (6) TMI 311
Disallowance of provision for depreciation on government securities - CIT(A) deleted the addition - Held that:- Hon'ble Mumbai High court in case of CIT vs Bank of Baroda (2003 (3) TMI 80 - BOMBAY High Court) has held that "Depredation in value of investment held by bank was allowable as deduction more so when the loss was debited to P&L A/c which was reflected as provision for liability in the balance sheet and the share and securities were valued at cost on the asset side " Similar view has been taken in case of CIT vs Nedungadi Bank Ltd (2002 (11) TMI 29 - KERALA High Court). Therefore, depreciation in value was allowable even if specific instructions of the board were not there. Circular and instruction of the CBDT being squarely applicable on facts of assessee’s case, so CIT(A) was justified in allowing the same which needs no interference from our side. - Decided in favour of assesse. Disallowance of provision for bad debts - CIT(A) deleted the addition - held that:- It is proposed to amend the Explanation to the said item (fa) in view of the amendment to the definition of "scheduled bank" as given in the explanation to clause (viia) of sub-section 36 which excludes co-operative bank from purview of the said definition. This amendment is of consequential nature. This amendment will take effect retrospectively from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent years. In view of this, no ambiguity remains on the issue and assessee had justified the computation of allowable deduction. In view of above, CIT(A) was justified in deleting the disallowance of the claim made u/s.36(1)(viia) - Decided in favour of assesse.
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2015 (6) TMI 310
Depreciation on moulds - @ 30% OR 15% - Held that:- In the given facts and circumstances, Tribunal Judgment in the case of BPL Refrigeration Ltd. [2004 (3) TMI 317 - ITAT BANGALORE-A ] and Kinetic Honda Motor Ltd. (2000 (3) TMI 201 - ITAT PUNE) are applicable to the assessee's case, respectfully following them, we uphold order of the CIT(A) allowing higher depreciation at the rate of 40% on moulds.” . We also find that in A.Y. 2003-04 and 2007-08 similar issue was decided by the Co-ordinate Bench of Tribunal in favour of the assessee by relying on the decision of Tribunal in assessee’s own case for A.Y. 2001- 02. Before us, Revenue has not brought any contrary binding decision in its support nor could controvert the findings of CIT(A). - Decided against revenue. Addition on account of delayed payment on employee’s contribution to provident fund - Held that:- . In view of the undisputed fact that the Employees share of contribution of Provident fund was paid after the prescribed due date, and following the decision of Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Corporation (2014 (1) TMI 502 - GUJARAT HIGH COURT), we are of the view that the AO was justified in disallowing the belated payments and thus this ground of Revenue is allowed. - Decided against assesse.
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Customs
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2015 (6) TMI 333
Exemption from additional duty of customs u/s 3(5) of the Customs Tariff Act, 1975 - unit situated at KASEZ - Revenue felt that the appellant had not followed the provisions of law correctly and was engaged in clearance of goods into DTA without carrying out any manufacturing activity as per Section 2(r) SEZ Act, 2005 and as such they were not entitled for the benefit of exemption of additional duty of customs - Bar of limitation - Whether the CESTAT has committed any error in rejecting the appeal of the Revenue on the ground that invocation of the extended period of limitation by the lower authorities was unjustifiable - Supreme Court after condoning the delay dimissed the petition filed by the Revenue against the decision of High Court [2013 (10) TMI 1318 - GUJARAT HIGH COURT], wherein High Court held that Tribunal was justified in not allowing the extended period to the Revenue in absence of any intention on the part of the respondent to evade duty, particularly when there was neither any suppression nor any misdeclaration which would permit any extension of limitation beyond the period of six months.
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2015 (6) TMI 332
Import of metallurgical coke or the coke breeze - According to the Customs Authority, the import of metallurgical coke or the coke breeze is permissible against the export of hot metal/pig iron - The department says that the metallurgical coke or coke breeze are two distinct and separate items and have been put into different categories. - Held that:- Regulation provides the manner of discretion to be exercised by the proper officer and to be regulated in a particular mode. This Court does not find that such provision offends the substantive power conferred under sub-section (1) of Section 18 of the said Act. Had it been a case that the power conferred under the statute upon the proper officer have been negated and/or taken away by framing the regulations, the regulation cannot have a paramount impact upon the substantive statute. It would be a different thing where the power is circumscribed to be exercised in the manner to be provided in the subordinate legislation. It is clearly discernible from Regulation 2 thereof that where the provisional assessment made by the proper officer, the importer is required to pay maximum 20% of such provisional duty as assessed together with certain conditions as to the surety and/or security provided under Regulation 4 thereof. Regulations have its applicability at the pre-stage of provisional assessment and not at the stage of provisional assessment. Such interpretation in my view shall render the entire Regulations unworkable and meaningless. The decision of the authority in directing the petitioner to pay the entire amount of provisional duty so assessed and the surety of equal amount in the absence of P.D. Bond is contrary to the aforesaid Regulations and, therefore, cannot be sustained. - Matter remanded back - Decided in favour of assessee.
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Corporate Laws
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2015 (6) TMI 331
Default in payment of bills - Maintainability of Winding up application - Three different lines of defence taken by company - Held that:- We thus conclude, the petition by a creditor would be maintainable on both counts. Once the creditor established his right to claim the amount more than ₹ 500/- the onus would shift on the company to rebut such claim by raising bona fide dispute. Once the bona fide dispute is raised it would weaken the chance to have admission of the winding up petition, otherwise admission is an obvious consequence. In our view, the learned Judge was right in not going into the merits of the matter at the post admission stage. We have discussed the law on the subject as the same was raised by Mr. Sen. The facts would however, not in any way change the situation even if we hold otherwise.It is settled proposition of law; a claim, if bona fide disputed, would successfully resist a winding up proceeding. Three different lines of defence indicated above, would run contrary to each other, they would however, draw a common interference, those were cooked up only to stall the process of winding up. - Decided against the appellant.
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Service Tax
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2015 (6) TMI 343
Waiver of penalty u/s 80 - Whether the fact of the appellant's mother suffering from heart decease, resulting in non-payment of tax, can be held to be sufficient reasonable cause so as to set aside the penalty imposed on the appellant - Held that:- Appellant did not shut their business on the said ground and continued to do so as during the said period, As is seen they have done the business to the extent of more than ₹ 17 lakhs. They also filed the returns showing their tax liability. The said facts are sufficient to observe that the appellant was aware of his liability to pay service tax. I also note that the service tax required to be paid by the appellant was not much on the higher side and they have done business of around ₹ 17 lakhs. They were definitely in a position to deposit the service tax of ₹ 2,00,000. However, instead of doing so, they took more than one and a quarter year to deposit the amount in question. - ill-health of the mother of the assessee's partner cannot be considered as a reasonable cause so as to invoke the provisions of Section 80 of the Finance Act, 1994. - Decision in the case of Triton Communication Pvt. Ltd. Vs. Commissioner of Central Excise, Mumbai [2005 (7) TMI 595 - CESTAT, MUMBAI] - no justifiable reason to interfere with the order of the lower authority - Decided against assessee.
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2015 (6) TMI 342
Valuation - Classification of service - Business Auxiliary Services or management, maintenance or repair service - Collection of electricity and water charges - Held that:- Charges, which the appellant received from the tenants, on account of the actual consumption of electricity and water and which are further deposited by them to the respective departments, cannot be considered to be the value of the services being provided by them. At the most the commission which they received for doing the said service would be the value of the services. - it is with the change of definition of input service w.e.f. April 2011, Assessee can be held as not entitled to CENVAT credit. - Partial stay granted.
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2015 (6) TMI 341
Waiver of pre deposit - Manpower Recruitment or Supply Agency - Appellant arranged loading and unloading from/to the trucks at M/s Hindustan Unilever Ltd. as required - Held that:- Service provided by the appellant does not fall under the category of 'Manpower Recruitment or Supply Agency'. Accordingly, we grant waiver from pre-deposit of the dues adjudged against the appellant and stay recovery thereof till disposal of the appeal - Stay granted.
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Central Excise
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2015 (6) TMI 338
Interest u/s 11AA - Held that:- The Revenue was engaged in prolonged litigation and had to move a Notice of Motion in contempt and thereafter as well the amounts were not paid. Then, notices were issued for encashment of bank guarantees and which are to be found from page 67 onwards. Despite such notices, the petitioner did not come forward to clear the dues. Thereafter, Detention Memo was issued detaining the immovable properties. That also did not have any effect and impact till 2004. On 6th October, 2004, the petitioner came forward and offered to pay the duty amount. After that amount was paid, the detention was raised. Thereafter, there was communication from the Deputy Commissioner, Central Excise that the petitioner will be disallowed to pay central excise duty on fortnightly basis as it was doing earlier and that it will have to pay the duty for each consignment by debiting the current account or by cenvat for a period of two months from the date of communication of that order. The petitioner preferred to follow the cenvat method from 16th November, 2000, onwards. Thereafter, a Corrigendum was issued making it clear that the petitioner will have to make payment by debiting to the credit account only. That is how thereafter the petitioners made payment from the personal ledger account. - claim ought to be adjudicated and such communications were held to be untenable in law. We are not in any manner doubting this proposition but its application must depend on facts and circumstances in each case. The claim for interest could arise in various situations. The demand may also arise if the admitted and adjudicated sum is not remitted and paid within the time stipulated by law or within a reasonable period. The party being deprived of its legitimate dues and without any cause can seek to compensate itself by raising a demand for interest and which demand could be based on the undisputed facts. Then there is nothing required to be adjudicated or decided. Once an advantage of an interim order has been taken and the Revenue is deprived of the amount of tax, then, the recovery of public dues is deferred and delayed. The advantage cannot continue after such interim orders are vacated or set aside. Thereafter, if the amounts are not paid on demand or if demanded but paid belatedly, the interest can be recovered and it is the duty of the Court to ensure that one deprived of legitimate and legal dues particularly public money is compensated. It is this principle which we have applied. Demand was justified in this case and deserves to be upheld. We clarify that our view must be seen in the light of the admitted and undisputed facts noted above and of the present case. The applicability of the principles laid down in the Supreme Court decisions must be seen in the facts and circumstances of each case. No general rule can be laid down. Our conclusion does not mean that in each and every case of such nature no prior opportunity should be given or the demand can be made and anytime for any period, prior and subsequent. Ultimately, equitable principles should be applied if the facts and circumstances demand and not otherwise. - Decided against assessee.
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2015 (6) TMI 337
Waiver of pre deposit - Ex parte order - Held that:- It is apparent that no reasonable explanation has been furnished by the Petitioner for non-appearance on 7-1-2009 much less any unavoidable reason or circumstances. A litigant can certainly seek an adjournment of a case but not as a matter of right much less can it take the Tribunal or Court for granted in adjourning the matter at the wish of the litigant. Adjournment of the case on a prefixed date is the discretion of the Court to be exercised reasonably and prudently keeping all aspects and interest of the parties in mind. Nothing prevented the Petitioner from ensuring appropriate representation on its behalf on 7-1-2009 and making the same prayer. If the Petitioner adopted a presumptive stand in its favour it has only itself to blame. If that were not enough, the petitioner did not bother to even ascertain as to what was next date fixed before the Tribunal and again ignored appearance on 12-2-2009 at its own risk. Adjournment before a Court or a Tribunal cannot be sought by sending a Fax letter. If that were to be so the entire system of adjudication would itself collapse for uncertainty of hearing. - petitioner is directed deposits the sum of ₹ 50,00,000/- with interest at the rate of 9% per annum from 12-2-2009 within a maximum period of 30 days - Decided conditionally in favour of assessee.
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2015 (6) TMI 336
Waiver of pre deposit - Clandestine manufacture of goods - Reliability of statements without corroborated evidence - Working condition of machine - Difference of opinion - Majority order - Held that:- For determining the duty liability, what is relevant is as to whether or not, not there was manufacture or clearance of Laxmi brand unmanufactured tobacco pouches in the premises of M/s. Rajesh Tobacco Co. and for demanding duty, it is not relevant as to whether the machines found in the premises were in working condition or not or were in use or not. For demand of duty from M/s. Goyal Tobacco Co. Pvt. Ltd. based on these three machines found in the premises of M/s. Rajesh Tobacco Co., what has to be seen is as to whether there was clear evidence of manufacture or clearance of Laxmi brand unmanufactured tobacco pouches at/from those premises. - Though other persons have not retracted their statements, their cross-examination was not allowed though the same had been requested. In my prima facie view, the statement of Shri Rajesh Goyal which had been retracted by him cannot be used for confirming duty demand against the appellant company unless that statement is corroborated by some other evidence. As regards the fact that at the time of search of premises of M/s. Rajesh Tobacco Co., a tempo brought by Shri Babu Lal Meena had brought lime tube and packing rolls, this fact, in my view, cannot be the evidence of manufacture of Laxmi brand unmanufactured tobacco pouches at the premises of M/s. Rajesh Tobacco Co. as it is very much possible that those premises may have been used for storage of these raw materials and merely the unloading of the Laxmi brand packing rolls and lime tubes at those premises cannot lead to inference that these raw materials were going to be used for manufacture of Laxmi brand unmanufactured tobacco pouches at those very premises. At the time of search, no attempt has been made by the Investigating officer to get the machines found in the premise of M/s. Rajesh Tobacco Co. examined by an expert to ascertain as to whether the same were in working condition. Though the fact as to whether the machines were in working condition or not, at that time, is not a factor relevant for demand of duty, this is an important fact to ascertain as to whether the statements of Shri Rajesh Goyal and his employees are true or not. Though one machine had been found connected to a power point and its bulb was glowing, it is also on record that there was no motor or fan belt in the machine and a number of other parts were either missing or in damaged condition and, as such, it could not be operated. No inquiry has been made either with Shri Rajesh Goyal or its employees - Production Manager or Production Assistant as to how the machines found in the premises of M/s. Rajesh Tobacco Co. were being operated. The bland statements of these persons simply stating that these machines were being operated, without giving any details as to how the same were being operated in view of the condition in which the same had been found and without opportunity having been given to the appellant to cross-examine them on these points, the statements are of no evidentiary value. When there is no evidence to infer that manufacture of Laxmi brand unmanufactured tobacco pouches was going on in the premises of M/s. Rajesh Tobacco Co., the provisions of Rule 18(2), and explanation to Rule 19 cannot be invoked and by treating the machines found in the premises of M/s. Rajesh Tobacco Co. as operating machines, duty liability cannot be fasten on to the appellant company. The appellant, thus, have strong prima facie case in their favour. - Decided in favour of assessee.
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2015 (6) TMI 335
Denial of exemption claim - whether subject Cannula are eligible for full duty exemption under Notification No. 6/03-CE dated 01/3/03 and its successor exemption notifications - Held that:- On the basis of the certificates of various experts certifying that the scalp vein infusion sets, in question, are Cannula which can be used for blood vessels, the Tribunal held that the same would be eligible for exemption. In the same para, the Tribunal s has accordingly given a finding on perusal of all the certificates from both the sides, a clear string of opinion is in favour the respondents and the item having satisfied the term Canula and it is used in blood vessels, therefore, the Commissioner (Appeals) having granted the benefit is totally justified . Thus, the Tribunal in this order has held that the term blood vessels in the entry No. 34 in the Notification No. 55/95-CUS is not qualified by the word similar appearing before the word veins and has to be read independent of the expression for aorta, vena cavae and similar veins . Notification is not confined only to the IV Cannula meant for aorta or vena cavae and for intra-corporal spaces. It is also applicable to IV Cannula meant for the arteries and veins similar to aorta and vena cavae, if the Department s stand that similar veins and blood vessels means the veins and arteries similar to vena cavae and aorta is accepted. In this Regard, Dr. Prabhu Vinayagam, Assistant Manager (Training) of the appellant company has claimed that cipahlic veins, basilic veins and metacarpal veins etc. are similar to vena cavae and the IV Cannula can be used for these veins. The Department, however, has chosen to rely only on the opinion of Dr. P. Ravindran which, as discussed above, is silent on the point as to which blood vessels are similar to aorta and vena cavae and whether the Cannula, in question, can be used for the blood vessels similar to aorta and vena cavae. In view of this, permitting the cross examination of Dr. P. Ravindran was necessary, but unfortunately the same has not been allowed. In our view, therefore not permitting the cross examination of Dr. P. Ravindran in the circumstances of the case has vitiated the proceeding. Impugned orders denying the exemption under Notification No. 6/03-CE and its successor notification to the IV Cannula being manufactured by the appellant would not be sustainable. - Decided in favour of assessee.
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2015 (6) TMI 334
Manufacturing activity or not - whether making pencil slats from wooden logs (timber) would amount to manufacture and whether such pencil slats would attract Central Excise duty - Exemption Notification No. 56/02-CE dated 14/11/02 - Held that:- Timber logs are cut into blocks, which are further cut into smaller blocks and, thereafter, these smaller blocks are subjected to the process of boiling to soften the wood and it is the softened wooden blocks which are sliced into the slats. The slats, thereafter, are subjected to further processing in the pressure vessel where they are subjected to pressure at high temperature and also treated with the colouring material and into termite chemicals. The slats obtained by this process are stained slats while the slats obtained by slicing the boiled wooden blocks are called un-stain slats. There is no dispute that these slats are meant only for manufacture of pencils. From the manufacturing process described in the appeal memo and also in the order of the Assistant Commissioner it is clear that there is transformation of timber block into a new commodity in course of making of pencil slats from timber logs/wood blocks in as much as (a) boiling of wooden blocks results in certain changes in the wood which makes it soft and (b) subjecting the un-stained slats to pressure at high temperature in the pressure vessel and treating them with certain chemicals and colouring matter gives the pencil slats changes their properties which makes them suitable for use in the manufacture of pencil. The pencil slats obtained by the above process have no other use except in the manufacture of pencil. Pencil slats are specifically covered by HSN sub-heading 44219040. Harmonised commodity description and coding system, generally referred to as harmonised system of nomenclature (HSN), is a multi purpose international product nomenclature developed by the world customs organisation and it harmonises customs and trade procedure and thus reduces the cost relating to international trade. Moreover when the manufacturing units of both the appellants were located in the areas notified under Notification 56/02-CE and HPPL was in fact availing of this exemption, there would be absolutely no incentive, in fact, negative incentive, for them to avoid the payment of duty, as (a) as per the scheme of Notification 56/02-CE, whatever duty is payable through PLA after availing the Cenvat credit available at the end of the month to the extent possible, is exempt and is available as refund in form of credit in PLA, and (b) while the assessee availing of 56/02-CE exemption gets refund of the duty paid through PLA, in terms of Rule 12 of the Cenvat Credit Rules, 2004, the manufacturing units (customers) receiving the goods from him would be eligible for full Cenvat credit as if no part of duty payable on the goods was exempt and for this reason the tendency of the units availing of exemption under Notification No. 56/02-CE would be to pay as much duty as possible rather than avoid the payment of duty. In view of this position, we hold that in both the cases, the appellants cannot be accused suppressing of any material fact from the Department with intent to evade the duty. Only the normal limitation period would be available to the Department for recovery of duty and for the same reason, no penalty under Section 11AC of Central Excise Act, 1944 or Rule 25 (1) of the Central Excise Rules, 2002 would be justified. However, for quantification of the demand within normal limitation period, the matter would have to be remanded to the original Adjudicating Authority. In the case of HPPL, since they were initially paying the duty and availing of exemption under Notification No. 56/02-CE and since it is only on the orders of the Assistant Commissioner rejecting their refund claims under Notification No. 56/02-CE holding that the process undertaken by them does not amount to manufacture, they stopped payment of duty, if they claim the exemption under Notification No. 56/02-CE, the same would have to be allowed. - Decided partly in favour of assessee.
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CST, VAT & Sales Tax
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2015 (6) TMI 340
Difference between tax due after final assessment and advance tax paid by the assessee - penalty u/s Section 12-B(4) - First Appellate Authority held that the difference of 15% and above should be between the actual tax paid and tax payable as per the return as the said difference is less than 15%; levy of penalty was not justified - Held that:- If at the end of the year, it is found that the amount of tax paid in advance for the whole year in the aggregate was less than the tax payable for the whole year as finally assessed and the difference is more than 15%, then the discretion is conferred on the Assessing Authority to levy penalty in addition to the tax. - The actual advance tax paid and the tax payable on the final assessment is a fact to be taken into consideration and if the difference is more than 15%, then the penalty is leviable under sub-section (4) of Section 12B of the Act. The approach of the Appellate Authority was contrary to law, erroneous and prejudicial to the interest of the Revenue. Therefore, the Revisional Authority was duty bound to interfere with such erroneous order which was prejudicial to the interest of the Revenue and the order passed by the Revisional Authority is legal, valid and in accordance with law and does not call for interference of this court. - Decided against assessee.
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2015 (6) TMI 339
Determination of total and taxable turnover under revision of assessment - Section 27(1)(a) of the TNVAT Act - Held that:- When the petitioner had appeared before the respondent and also filed his objection, this Court is unable to find any justification to hold against the petitioner that he had failed to appear and submit his explanation. Therefore, this Court, prima facie being satisfied that the orders impugned are reflecting non-application of mind of the respondent, has no other option except to set aside the same. Accordingly, the impugned orders passed in TIN Nos.33714781413/2011-12 and 33714781413/2012-13 dated 05.12.2014 and TIN No.33714781413/2013-14 dated 11.10.2014 are set aside with a direction to the respondent to afford an opportunity of personal hearing to the petitioner and consider his case along with the objection filed on 01.12.2014 and pass final orders on merits and in accordance with law - Decided in favour of assessee.
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Indian Laws
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2015 (6) TMI 344
Dishonour of cheque - No Separate notices issued to the directors in addition to the company - Held that:- The notice under Section 138 is required to be given to "the drawer" of the cheque so as to give the drawer an opportunity to make the payment and escape the penal consequences. No other person is contemplated by Section 138 as being entitled to be issued such notice. The plain language of Section 138 is very clear and leaves no room for any doubt or ambiguity. There is nothing in Section 138 which may even remotely suggest issuance of notice to anyone other than the drawer. In our view such directors who are in charge of affairs of the Company and responsible for the affairs of the Company would be aware of the receipt of notice by the Company under Section 138. Therefore neither on literal construction nor on the touch stone of purposive construction such requirement could or ought to be read into Section 138 of the Act. - Decided in favour of appellant.
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2015 (6) TMI 330
Delay in possession of flats - Seeking delivery of flats or alternative payment of current Market value - Compensation on account of loss of rental income - Compensation @ ₹ 5/- per sq. ft. as per the agreement & compounded interest @ 18% p.a - Compensation on account of their mental torture, agony etc.- Increase in service tax with effect from 01.6.2015 - Held that:- It is an undisputed proposition of law that ordinarily the parties are bound by the terms and conditions of the contract voluntarily agreed by them and it is not for a Consumer Forum or even a Court to revise the said terms. However, a term of a contract, in my view will not be final and binding if it is shown that the consent to the said term was not really voluntary but was given under a sort of compulsion on account of the person giving consent being left with no other choice or if the said term amounts to an unfair trade practice. The builder charges compound interest @ 18% per annum in the event of the delay on the part of the buyer in making payment to him but seeks to pay less than 3% per annum of the capital investment, in case he does not honour his part of the contract by defaulting in giving timely possession of the flat to the buyer. Such a term in the Buyer’s Agreement also encourages the builder to divert the funds collected by him for one project, to another project being undertaken by him.Such a practice, in my view, constitutes unfair trade practice within the meaning of Section 2(r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practice for the purpose of selling the product of the builder. The cost of the borrowing for individual home buyers is about 10% per annum though it had gone upto 11.5% in last few years. In my view, if the opposite party, pays simple interest @ 12% per annum to the complainants, that would not only take care of the additional financial burden on them but also give some monetary compensation to them for their sufferings on account of the delay in handing over possession of the flat purchased by them. I am of the considered view that the opposite party should handover possession of the apartments booked by the complainants on or before the last date stipulated in the letter of the opposite party dated 27-05-2015. In the cases of those complainants who are the initial allottees of the apartments or who acquired the same within one year of the initial allotment, the opposite party should also pay compensation to them in the form of simple interest at the rate of 12% per annum with effect from the date of possession stipulated in the agreement till the date on which the possession is actually handed over to them. The persons who purchased the flats within one year of the initial allotment, ought to be treated at par with the initial allottees, because atleast two more years being still available to the opposite party at the time of purchase by them, they could not have anticipated that the builder will not be able to honour its commitment, as regards the stipulated date of delivery of possession. No separate compensation for the mental agony, harassment and suffering needs to be paid by the opposite party to the complainants. However, in the case of those complainants who acquire the flats by way of resale more than one year after the initial allotment, the opposite party should pay compensation in the form of simple interest at the rate of 12% per annum with effect from three years from the date of the repurchase till the date on which the possession is delivered to them. Also increase in service tax with effect from 01.6.2015 should be borne by the opposite party.If the opposite party fails to deliver possession by the last date stipulated in its letter dated 27.05.2015, it shall pay compensation to all the complainants in the form of simple interest at the rate of 18% per annum, for each day there is delay, beyond the date stipulated in the said letter dated 27.05.2015, in delivering possession to the complainants.
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