TMI Tax Updates - e-Newsletter
June 16, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. Service tax paid by Service provider, on being pointed out by Department, can be treated as business expenditure

   By: Bimal jain

2. FORM MGT-14 APPLICABILITY

   By: CA C M JAIN

3. COST AUDIT UNDER COMPANIES ACT, 2013

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

Notifications

Companies Law

1. F. No. 7/4/2014-CL.I (B) - dated 13-6-2014 - Co. Law

Notification for registrar of Companies at Hyderabad having territorial jurisdiction in the whole State of Telangana

2. F. No. 7/4/2014-CL.I (A) - dated 13-6-2014 - Co. Law

Notification for the Official Liquidator at Hyderabad having territorial jurisdiction in the whole State of Telangana

3. File No. 1/31/2013-CL.V - dated 12-6-2014 - Co. Law

The Companies (Declaration and Payment of Dividend) Amendment Rules, 2014

Customs

4. 46/2014 - dated 13-6-2014 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

DGFT

5. 81 (RE – 2013)/2009-2014 - dated 13-6-2014 - FTP

Exemption to Bhutan from the application of export bans by India on export of Milk Powder, Wheat, Edible Oils, Pulses and Non Basmati Rice.

Circulars / Instructions / Orders

Customs

1. 08/2014 - dated 13-6-2014

Customs Broker Licensing Regulations 2013- regarding.

Highlights / Catch Notes

Income Tax

• Section 40A(3) Disallowance Removed for Assessees with Income Computed via Gross Profit Rate; Invocation Unnecessary.

  Case-Laws - HC : Deletion of disallowance u/s 40A(3) - where the income of the assessee has been computed by applying gross profit rate, there is no need to invoke the provisions of Section 40A(3) of the Act - HC
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• High Court: Proceeding with Criminal Complaint Post-Tribunal Decision on Income Concealment is Court Process Abuse.

  Case-Laws - HC : Criminal prosecution – once the Tribunal of a Department holds that there is no concealment of income on part of the accused and the penalty is deleted, the very basis of the complaint is knocked down and continuation of complaint will be an abuse of the process of the Court - HC
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• Section 12AA: Registration Deemed Granted Unless Commissioner Intervenes Under 12AA(3) in Specific Cases.

  Case-Laws - AT : Registration not granted u/s 12AA - The registration will be deemed to have been granted - this is subject to exercise of Commissioner's power u/s.12AA(3) in appropriate cases, but the registration will be deemed to have been granted - AT
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• Tax Scrutiny: Bogus Loss Claim to Offset Short-Term Capital Gain Exposed by Broker's Denial of Transaction Authenticity.

  Case-Laws - AT : Bogus loss from share broker to set off as STCG - - When the person from whom the alleged transaction has been taken place categorically denies the genuineness of the transaction there remains nothing to be proved - AT
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• Court Rules Opening Capital Balance Can't Be Ignored in Section 68 Income Tax Disputes; Advocates Nuanced Assessments.

  Case-Laws - AT : Addition made u/s 68 - availability of opening capital balance cannot be discounted altogether - it may not be proper to altogether reject the claim of savings from past income also - AT
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• Penalty Confirmed for Foreign Travel Expense Disallowance u/s 271(1)(c); Assessee Failed to Justify Claims.

  Case-Laws - AT : Penalty u/s 271(1)(c) – Disallowance of expenses on foreign travel – assessee have not furnished any explanation nor even the primary details in support of its claim - Penalty @ 100% of the tax sought to be evaded confirmed - AT
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Customs

• Customs Duty Remission Tied to Mandatory Insurance for Natural Calamity Coverage in Favor of Commissioner of Customs.

  Case-Laws - AT : Remission of duty - applicants were duty bound to insure the goods against natural calamity by comprehensive insurance policy drawn in favour of Commissioner of Customs/Central Excise. - AT
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• Refund Denial of Special Additional Duty Overturned; SAD Refund Allowed Despite Initial Rejection by Commissioner (Appeals).

  Case-Laws - AT : Refund of SAD - commissioner (appeals) is not correct in denying the refund by observing that, as the amount of SAD has shown as recoverable only after the sale takes place - refund allowed - AT
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• Delay of 1234 Days in Filing Revision Applications Condoned Due to Non-Receipt of Order; Applications Proceeded.

  Case-Laws - AT : Condonation of delay - Inordinate delay of 1234 days - Non receipt of order - revision applications were rejected as being filed beyond jurisdiction by a common order - delay condoned - AT
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• Valuation of Imported Retro-Reflective Sheetings Needs Rule 5 or 6 of Customs Valuation Rules, 1988 for Similar Goods.

  Case-Laws - AT : Valuation of goods - Import of Retro-Reflective Sheetings - To invoke Rule 5 or 6 of the CVR, 1988, the goods should be substantially of the same commercial value and of the same quantity. - AT
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Service Tax

• Penalties Under Service Tax Law: Section 78 Penalty Invoked, Section 76 Penalty May Be Redundant for Same Infraction.

  Case-Laws - AT : Penalty u/s 76 & 78 - provisions of Section 78 having been invoked and penalty imposed, Section 76 penalty may not be justified - AT
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Central Excise

• Exporters Can Claim CENVAT Credit on Inputs for Exempted Goods Despite MRP Issues on Exported Biscuits.

  Case-Laws - AT : Duty demand - Non putting MRP on export of biscuits - CENVAT Credit - even in respect of exempted goods, CENVAT credit can be availed on inputs/input services if such goods are exported - AT
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• CENVAT Credit Valid Even When Services Used at Job-Worker's Premises, Denial Unjustified.

  Case-Laws - AT : CENVAT Credit - merely because the services were availed at job-worker's premises, there is no reason why the same should be denied. - AT
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• Extension of Stay Granted: Appeal Unresolved Within Section 35C Period, Vacating Stay Would Unfairly Penalize Assessee.

  Case-Laws - AT : Extension of stay granted - appeal was not disposed of within the stipulated period as specified in Section 35C and therefore vacating the stay order amounts to punishing the assessee. - AT
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Case Laws:

• Income Tax

• 2014 (6) TMI 410
  Disallowance u/s 40(a)(ia) of the Act – TDS on Pay channel charges as royalty payment - Failure to deduct TDS u/s 194J of the Act – Held that:- assessee cannot be held to be liable to deduct tax at source relying on the subsequent amendments made in the Act with retrospective effect. – Though the Explanation 6 to sec. 9(1)(vi) inserted by Finance Act, 2012 is clarificatory in nature, yet in view of the fact that the view entertained by the assessee gets support from the decision of Delhi High Court, referred above, we are of the view that the assessee cannot be held to be liable to deduct tax at source from the Pay Channel Charges. - Decision in the case of Asia Satellite Telecommunications Co. Ltd. Versus Director of Income-tax [2011 (1) TMI 47 - DELHI HIGH COURT] followed – Decided in favour of Assessee.

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• 2014 (6) TMI 409
  Disallowance made u/s 14A of the Act – Held that:- The Tribunal has restored the proceedings back to the AO for working out the amount of disallowance – The AO made a disallowance of Rs.37,60,774.00 inclusive of a disallowance of Rs.87,285.00 out of interest expenditure and the balance of Rs.36,73,516.00 on account of administrative expenses - the disallowance on account of interest expenditure was not sustainable but restored the disallowance in respect of the balance to the AO - since the matter has been restored to the AO, thus, no substantial question of law arises for consideration – Decided against Assessee. Disallowance of petty sums of commission – Held that:- The Tribunal has furnished cogent reasons - The assessee had paid commission to nine individuals - no details regarding the services rendered were filed by the assessee nor was any confirmation in respect of the commission filed - The AO made the disallowance holding that in the absence of details regarding these items of petty commission paid by the assessee, it was unverifiable and was liable to be disallowed - Tribunal was of the view that the CIT (A) has totally failed to dislodge the main objection of the AO that no details were provided by the assessee and no confirmation had been obtained from the nine persons – thus, no substantial question of law arises for consideration – Decided against Assessee.

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• 2014 (6) TMI 408
  Condonation of delay - Validity of order u/s 269F(6) of the Act – Ancestral property mortgaged – Motive to evade tax u/s 269C of the Act - Held that:- The assessee has produced the order of Acquisition Officer wherein the Inspecting Assistant Commissioner of Income Tax, Acquisition Range, Dharwar, the Competent Authority has passed the order - the fair market value of the immovable property under consideration would be not less than Rs. 1,40,000 as against the apparent consideration of only Rs. 45,000 - Thus it would be clear that the fair market value of the immovable property would exceed the apparent consideration at least by 25% of such apparent consideration, if not more - This shall be conclusive proof that the real consideration agreed to between the parties had not been truly stated in the instrument of transfer - The immovable property under consideration is a capital asset within the meaning of Section 2(14) of Income tax Act, 1961 and the profits arising on the sale of the same would be liable to capital gains tax - any understatement of real consideration in the transfer document would definitely facilitate the transferor to reduce or evade his liability to capital gains tax in respect of the transfer - In the case of the transferee also the rebuttable presumption that the understatement of the real consideration in the transfer document had been done with a view to facilitate him to evade taxes in the manner laid down in Section 269C(1)(b) of the Income Tax Act, 1961 has not been rebutted with any evidence leave alone convincing evidence. The mere assertion that the price paid is what has been shown in the sale document cannot be accepted in the light of the special Rules of Evidence introduced under Chapter XXA of the Income tax Act, 1961 through Section 269C(2)(b) unless the contrary is shown – the assertion is only a self-serving statement without any independent evidence - all the requirements of Section 269F(6) of the Act, 1961 are satisfied - the application for condonation of delay is dismissed and assessee’s appeal is dismissed – Decided against Assessee.

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• 2014 (6) TMI 407
  Deletion of disallowance u/s 40A(3) - dis-allowance of cash expenditure where income assessed on estimated basis – Held that:- Following Commissioner of Income Tax v. Smt.Santosh Jain [2006 (8) TMI 167 - PUNJAB AND HARYANA High Court] - where the income of the assessee has been computed by applying gross profit rate, there is no need to invoke the provisions of Section 40A(3) of the Act as the gross profit rate takes care of expenditure incurred otherwise than by way of cross cheques also – Decided against Revenue. Chargeability of interest u/s 158BFA(1) of the Act – Late filing of return – Held that:- There was no delay on the part of the assessee in filing the return - assessee could not file the return for the block period as the department had taken time to supply the copies of the seized documents on the basis of which the assessee had filed the return for the block period on 25.2.1999 - There was no delay on the part of the assessee in filing the return after the supply of copies of the seized documents by the revenue - deletion of levy of interest by the Tribunal is justified – Decided against Revenue.

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• 2014 (6) TMI 406
  Criminal prosecution – complaint u/s 276 C and Section 277 read with Section 278-B of the Act – Levy of penalty u/s 271(1)(c) of the Act - Whether it is not an abuse of the process of the law to prosecute an assessee for concealment of income when Adjudicatory Authority of the tax Department has itself held that return of the assessee was voluntary return filed in good faith and before the detection of any concealment by the AO – Held that:- Criminal prosecution had been launched against the petitioners on January 29, 1993 on the ground that they had concealed their income for the assessment year 1988-89 - once authorities under the Act return a finding that there is no concealment of income, the prosecution is not sustainable on the allegation of concealment of income – the Tribunal held that there is no concealment and the return filed by the assessee was voluntary, filed in good faith and before the detection of any concealment - the penalty imposed u/s 271 (1) (c) of the Act has been set aside - once the Tribunal of a Department holds that there is no concealment of income on part of the accused and the penalty is deleted, the very basis of the complaint is knocked down and continuation of complaint will be an abuse of the process of the Court – thus, the criminal complaint and the proceedings are set aside – Decided in favour of Assessee.

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• 2014 (6) TMI 405
  Validity of reassessment u/s 143(3) r.w.s. 147 of the Act – Bar of limitation - Deemed dividend u/s 2(22)(e) of the Act - Held that:- The material/or documents filed by the assessee is the source of information for reopening by the AO on the issue relating to the provisions of section 2(22)(e) of the Act - There is no tangible material gathered by the AO which worked as a live wire for the AO to assume jurisdiction validly - the AO already enquired into the issue during the making of the regular assessment – thus, the reassessment made by the AO on the reasons recorded invoking the provisions of section 2(22)(e) of the Act cannot be upheld – Decided in favour of Assessee. Chargeability of the gains on sale of shares/units on proper head of income – Held that:- The gains are short term capital gains and they are earned on the sale of shares/units – the amount even if taxed under the head “Business Income”, there is no tax implication, and thus, there is no tax yielding - concealment of income - no concealment of income is made on this ground. Reassessment relates to the capital nature – expenditure for amalgamation of work - Held that:- the details were available as disclosed by the assessee to the AO and the assessment was completed without making addition on the account after examining the relevant details - There is no defect of disclosure on the issue also on part of the assessee - the proviso to section 147 of the Act has no application – thus, the matter is liable to be remitted back to the AO for reexamination – Decided partly in favour of Assessee.

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• 2014 (6) TMI 404
  Validity of assessment u/s 147 of the Act – Notice u/s 148 of the Act not served – Burden to prove - Addition of income from undisclosed sources - Held that:- The AYs involved are 2004-05 and 2005-06 - The notice for reopening u/s 148 of the Act was given on 30.3.2011 that is beyond a period of 04 years - Revenue has not demonstrated that the provision of law has been complied with - on the sole ground the reopening has to be quashed as bad in law - assessee submitted that the notice u/s 148 has not been served on him - Revenue has not been able to specifically point out as to which is the particular remittance made by M/s Komori Corporation, which has not been accounted for by the assessee - In spite of the repeated attempts by the assessee requesting for the details the assessee has not been furnished with the same - the assessee has discharged the onus that lay on it by furnishing all the necessary documentary evidences and whereas the Revenue has failed in its duty to discharge the burden that lay on it – thus, the addition is liable to be set aside – Decided in favour of Assessee.

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• 2014 (6) TMI 403
  Validity of reopening of assessment u/s 147 of the Act – Sufficient reason for reopening of assessment - Denial of exemption u/s 11 of the Act - Held that:- Following East Point Education Society Versus ADIT [2011 (12) TMI 364 - ITAT, New Delhi] - The proceedings u/s 10(23C) were taken up only in AY 2007-08 and the factum of a loan disputed conversion of donation of one of the Governing Body members, Mohinder Singh was effected in the books of account in AY 2005-06 and not in 2006- 07 - mere note about the audit being on the basis of test check voucher and auditor's audit does become the basis of reopening of assessment of 2006-07 as the same is the standard auditing practice - the theory of change of opinion may not be applicable but the nexus of reasons and application of mind are still imperative for upholding the action to reopen the assessment - There is mention of 2nd reason in the assessment order about any member having taken any building loan - In the order only exemption u/s 11 is denied - Following RANBAXY LABORATORIES LIMITED Versus COMMISSIONER OF INCOME TAX [2011 (6) TMI 4 - DELHI HIGH COURT] - as far as the AY 2006-07 is concerned, the reopening of assessment is invalid – Decided in favour of Assessee.

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• 2014 (6) TMI 402
  Denial of exemption u/s 11 of the Act – Registration not granted u/s 12AA of the Act – Held that:- Earlier the Tribunal directed the CIT to re-adjudicate the issue of grant of registration u/s 12A of the Act - Despite lapse of almost two years, the CIT has not passed any consequential order – thus, Following Harshit Foundation, Jaunpur vs. CIT, Faizabad [2014 (6) TMI 298 - ITAT LUCKNOW] - where Commissioner does not pass any orders even after six months from receipt of Tribunal's order remitting the matter to him - The registration will be deemed to have been granted - this is subject to exercise of Commissioner's power u/s.12AA(3) in appropriate cases, but the registration will be deemed to have been granted - without grant of registration by the CIT, benefit of exemption u/s 11 of the Act cannot be allowed to the assessee – thus, the matter is required to be remitted back to the AO to re-adjudicate the issue of claim of exemption u/s 11 of the Act – Decided in favour of Assessee.

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• 2014 (6) TMI 401
  Addition made u/s 68 of the Act – Amount deposit in bank account – Peak credit balance not worked out - Held that:- The AO has not brought on record any material to show that the cash withdrawals made on earlier dates were not used for any other purpose, it would be reasonable to accept that the withdrawals were used for making subsequent deposits – after carrying out the exercise of placing withdrawals and deposits in chronological order and after infusing the negative cash balance as a source (to be assessed as income), one has to ascertain the peak balance of the year and the peak balance so arrived has to be considered as the income of the assessee - assessee has not worked out the “Peak credit balance” as per the method prescribed - the working made by the assessee also requires verification at the end of the AO – thus, the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

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• 2014 (6) TMI 400
  Disallowance of interest expenditure – Violation of Rule 46A of the Income tax Rules - Held that:- There is violation of Rule 46A on the part of CIT(A) in not confronting the additional details furnished by the assessee to him – revenue pleaded that this issue may be set aside to the file of the AO for considering the fresh consideration by duly considering the additional details that were furnished by the assessee before CIT(A) – assessee did not object to the plea - thus, the matter is required to be remitted back to the AO for fresh consideration – Decided in favour of Revenue. Disallowance made u/s 40(a)(ia) of the Act – Non-deduction of TDS - Held that:- Following Commissioner of Income Tax Versus M/s Vector Shipping Services (P) Ltd. [2013 (7) TMI 622 - ALLAHABAD HIGH COURT] - tax was deducted as TDS from the Salaries of the employees paid by M/s Mercator Lines Ltd and the circumstances in which such salaries were paid by M/s Mercator Lines Ltd for M/s Vector Shipping Services, the assessee were sufficiently explained - both the parties pleaded that the matter requires fresh adjudication, since the AO has made the addition without properly examining the applicability of the TDS provisions to the quantum of payment made to each of the parties – thus, the matte is remitted back to the AO for fresh adjudication – Decided in favour of Revenue.

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• 2014 (6) TMI 399
  Computation of capital gain – Sale of land - Relief u/s 54F of the Act – Held that:- Shri G.Sudhakar Rao has also submitted details of the payments made on various dates and also copies of the relevant extracts of bank statements - the CIT(A) directed the AO to adopt a sum as the sale consideration while computing the capital gains from the sale of the land by the assessee - In the absence of any material to the contrary brought on record by the Revenue, to contradict the above finding of the CIT(A), there was no justification to interfere with the order of the CIT(A). Any precondition cannot be suggested that construction of the new residential house must commence after sale of the original asset - The only condition imposed is that it is to be completed within three years from the date of sale of original asset – Relying upon Commissioner Of Income-Tax Versus JR. Subramanya Bhat [1986 (6) TMI 7 - KARNATAKA High Court] - the date of commencement of construction of the new property has preceded the date of sale of the asset giving rise to capital gains computed – there was no justification to interfere with the order of the CIT(A) on this aspect also – Decided against Revenue.

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• 2014 (6) TMI 398
  Confirmation of addition – Bogus loss from share broker to set off as STCG - Reassessment - Held that:- One of the Directors of the group of share broking companies, Shri Mukesh Choksi has admitted that his companies were indulging in fraudulent billing activities and in the business of providing bogus profit/loss and capital gains/loss, etc. - through the Investigation Wing the AO came to know that the assessee has taken bogus loss from the said share broking company - The assessee is a salaried employee and nothing has been brought on record to show that she has been trading/investing in the stock market in the past/subsequent years - no delivery of shares was taken - the assessee never paid for the shares purchased by her nor received the sale consideration on sale of shares - Only the difference, i.e. the loss was settled - The transactions of purchase and sale of shares were neither subjected to security transaction tax nor any evidence has been brought on record to suggest that STT was paid on these transactions. This conduct of the assessee defies all logics because such practice is done only in the derivatives market where no delivery is taken and the settlement is done only on account of profit or loss - The statement of the Director of the share broking company cannot be brushed aside lightly - When the person from whom the alleged transaction has been taken place categorically denies the genuineness of the transaction there remains nothing to be proved more because a contract for unlawful activity is void abinito - the assessee has purchased bogus loss from the share broker to set off the sort term capital gains to reduce tax liability – thus, there was no infirmity in the findings of the CIT(A) – Decided against Assessee.

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• 2014 (6) TMI 397
  Addition made u/s 68 of the Act – Held that:- Relying upon Manoj Aggarwal and others Versus Deputy Commissioner Of Income-tax, Central Circle - 3, New Delhi [2008 (7) TMI 446 - ITAT DELHI-A] - CIT(A) has expressed the view that the assessee might have saved Rs.2.00 lakhs over the years - CIT(A) has failed to give relief at least to the extent of Rs.2.00 lakhs, as estimated by him - CIT(A) did not take into account the Opening Capital balance that was available with the assessee, i.e., the Ld CIT(A) has considered the income declared by the assessee and not the opening capital balance - the assessee has shown opening capital balance as on 1.4.1991 at Rs.22,06,210 - the availability of opening capital balance cannot be discounted altogether - it may not be proper to altogether reject the claim of savings from past income also – thus, the amount saved out of opening capital balance and past income is estimated at Rs.6,00,000 – Decided partly in favour of Assessee.

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• 2014 (6) TMI 396
  Weighted deduction u/s 35(2AB) of the Act – in-house R & D unit - reopening of assessment - disallowance of 5% of business development expenditure on adhoc basis. - Held that:- Following Nagarjuna Agrichem Ltd. Versus Dy. Commissioner of Income-tax [2014 (6) TMI 316 - ITAT HYDERABAD] - the statutory formalities for getting approval u/s 35(2AB) are that application in Form No. 3CK and 3CL are to be submitted and an order of approval has to be obtained in Form No. 3CM from the prescribed authority - the assessee has not furnished Form No. 3CM either before the revenue authorities or before us for claiming weighted deduction u/s 35(2AB) - there is justification for reopening of assessment - assessee is entitled for 100% of the allowance at present and as and when received Form 3CM, weighted deduction may be allowed. Restriction placed in Section 35(2AB) will apply, in our opinion, only in the case when amount was allowed under section 35 itself - These two provisions are mutually exclusive but an assessee can claim a particular deduction either u/s 35 or u/s 37 so long as the amount spent is for the purpose of business – there was no merit in the AO’s contention that the amount once considered u/s 35 cannot be considered u/s 37 – Decided in favour of assessee. Claim of expenses on research and development u/s 35(1)(ii) of the Act – Held that:- Following Nagarjuna Agrichem Ltd. Versus Dy. Commissioner of Income-tax [2014 (6) TMI 316 - ITAT HYDERABAD] - assessee is entitled for necessary deduction u/s 35(1)(ii) - AO can also consider allowing the claim u/s 37(1) as well in case the expenditure is not allowed u/s 35(1), subject to fulfilling the conditions of that provision – AO is directed to examine the evidence and allow as per the provisions of the Act, after satisfying himself that the assessee has fulfilled the conditions – Decided in favour of assessee. Adhoc disallowance – Held that:- Following Nagarjuna Agrichem Ltd. Versus Dy. Commissioner of Income-tax[2014 (6) TMI 316 - ITAT HYDERABAD] - expenditure under the head is not related exclusively for the business development - he has disallowed 10% of the total expenditure u/s 37(1) - CIT(A) was of the view that the gifts purchased were of complimentary in nature and necessary for the purpose of business - assessee relied on various case law to substantiate that expenditure is wholly and exclusively for the purpose of business and is allowable u/s 37(1) – thus, 5% adhoc disallowance of the amount is reasonable – Decided in favour of Revenue.

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• 2014 (6) TMI 395
  Deductibility of expenses on foreign travel – Burden to prove - Held that:- Not only has the assessee been totally unable to prove the business purpose of the expenditure, his case stands thoroughly discredited by the adverse, definitive findings by the authorities below - it would have only being preceded by as telephonic conversations, e-mails, etc. to firm up the arrangements with them - no supplies from foreign suppliers during the entire year, and which could have in fact commenced since inception, as all that was required was to book the goods from the regular suppliers in the name of the assessee’s firm. An IEC code is the first thing a person intending to import would obtain, which is a matter of simple procedure, while the assessee waits for years to do so - The other two trips during the year, i.e., in May and June, 2005 and December, 2005, expenditure on which is being claimed, are by the assessee’s father, and toward which no explanation stands furnished at any stage - The assessee has also not advanced any reason toward admission of additional evidence - any credence to the assessee’s claims cannot be made and the disallowance of the expenditure is upheld in-as-much as the assessee has clearly failed to prove the same as being incurred for business purposes, much less wholly and exclusively – thus, the disallowance id sustained on the basis of the finding of a complete absence of the discharge of the burden of proof u/s. 37(1) of the Act –Decided against Assessee.

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• 2014 (6) TMI 394
  Levy of penalty u/s 271(1)(c) of the Act – Disallowance of expenses on foreign travel – Failure to furnish the primary evidences – Held that:- Following CIT., Delhi Versus Atul Mohan Bindal [2009 (8) TMI 44 - SUPREME COURT] - the scope of the Explanation 1(B), and with specific reference to the word ‘substantiate’ occurring therein, confirming, as a result, the penalty on an addition of Rs.7 lacs where the assessee was found unable to substantiate its explanation – the order confirms both the position of the law in the matter as well as the fact that the matter is principally factual is to be decided on an appreciation of the facts and circumstances of the case - the assessee have not furnished any explanation nor even the primary details in support of its claim, have therefore no hesitation in confirming the penalty, levied @ 100% of the tax sought to be evaded – Decided against Assessee.

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• Customs

• 2014 (6) TMI 417
  Waiver of pre deposit - Goods destroyed in fire which were in the private bonded warehouse. - Remission of duty - benefit of Notification No. 22/2003-C.E., dated 31-3-2003 and Notification No. 52/2003-Cus., dated 31-3-2003 - Held that:- As per the provisions of Customs Manual, the goods are to be fully insured against fire by a comprehensive policy drawn in favour of Commissioner of Customs or Central Excise. In the present case, the applicants have not taken such insurance in favour of Commissioner of Customs/Central Excise. The applicants only insured to the extent of value of goods excluding the duty part. The applicants relied on the decision of the Hon’ble High Court of Karnataka in the case of Sami Labs Ltd. [2012 (9) TMI 536 - KARNATAKA HIGH COURT]. In this case the provisions of Customs Manual regarding insurance against natural calamities was not brought to the notice of the Hon’ble High Court. The applicants were duty bound to insure the goods against natural calamity by comprehensive insurance policy drawn in favour of Commissioner of Customs/Central Excise. In view of this, prima facie, we find that the applicants had not made out a case for total waiver of the dues - Conditional stay granted.

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• 2014 (6) TMI 413
  Refund of SAD - appellants are being traders, sold the goods in the open market after charging VAT with an endorsement that CENVAT credit of SAD is not available to the buyers of the goods - notification no. 102/07-Cus - commissioner (appeals) denied the refund by observing that, as the amount of SAD has shown as recoverable only after the sale takes place - Held that:- Commissioner (Appeals) held that the appellants have shown the amount recoverable on account of SAD after sale has been effected, is not correct. In fact, without effecting the sale, the amount of refund of SAD available to the applicant was not known. Therefore, the observations of the learned Commissioner (Appeals) are totally irrelevant and incorrect. As the appellant has fulfilled the condition of notification 102/07-Cus and also have been able to prove that the amount of SAD has not passed on the buyer by way of a certificate issued by the Chartered Accountant and an undertaking given by them. In these circumstances, I hold that the appellants are entitled for refund of claim of SAD. In these circumstances, the impugned orders are set aside - Decided in favour of assessee.

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• 2014 (6) TMI 412
  Condonation of delay - Inordinate delay of 1234 days - Non receipt of order - Difference of opinion - majority order - Denial of drawback claim - whether the COD application is to be rejected by refusing to condone the delay of 1236 days or should be allowed - Held that:- both the appellant in this appeal and M/s Braun Textile Processors, had filed revision applications before the Joint Secretary (revision application) and their revision applications were rejected as being filed beyond jurisdiction by a common order dated 07/04/10. The order-in-revision does not indicate that this order had been passed after hearing the appellant and the copy of the same had been despatched to them. In view of this, the appellant’s contention that they became aware of the order dated 07/04/10 of the JS (RA) only when the recovery proceedings were initiated has to be accepted. When the COD application of M/s Braun Textile Processors was dismissed by the Tribunal alongwith their appeal, they filed appeal before Hon’ble Delhi High Court and Hon’ble Delhi High Court vide judgment [2014 (6) TMI 51 - DELHI HIGH COURT] has ordered that having regard to peculiar circumstances, the petitioner’s appeal before the CESTAT being [2013 (5) TMI 712 - CESTAT NEW DELHI] shall be taken up for consideration un-influenced by the question of delay and pending applications, if any, with respect to waiver of pre-deposit shall be first decided by the Tribunal before adjudication upon the merits of the case. Hon’ble High Court by this order directed M/s Braun Textile Processors to appear before the Registrar, CESTAT on 25/2/14 for appropriate order to list the appeal and stay application for hearing. Thus, in case of M/s Braun Textile Processors, the Hon’ble High Court has set aside the Tribunal’s order refusing the condone delay and has directed the Tribunal to hear the stay application and appeal on merits without being influenced by the question of delay. In view of this, in the present appeal also, where the facts and circumstances are identical, the same view has to be taken and the delay of 1236 days has to be condoned - Delay condoned.

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• 2014 (6) TMI 411
  Valuation of goods - Mis declaration of goods - Import of Retro-Reflective Sheetings - Non disclosure of assessee's relationship with exporter as sole distributor - Enhancement in value of goods - Whether the transaction value can be rejected as same has been influenced being related person or not - Held that:- During the course of investigation/search one invoice showing the sale price of the impugned goods at the rate of 66000 per roll against the import value of 1427/- per roll. The investigation team relied on that sale invoice but did not take into account all the other invoices which show the sale price of the impugned goods in the range of 1800 to 2400 per roll. - the sales invoices produced by the applicant cannot be discarded but the same are reliable evidence to determine the value of imported goods. Therefore, the enhancement of transaction value on the ground of that importer is related to the supplier is not sustainable as price is not influenced being related person. Commissioner has not taken into consideration all the sale invoice during the course of adjudication and relied on 2 or 3 stray invoices where the highest sale price is shown. More than 90% of the sale were found between the range of Rs. 1800 to 2400 per roll. Therefore, on this ground, the transaction value cannot be enhanced. Enhancement of value after comparing with contemporaneous import - Held that:- here is no comparison of the quantity imported by M/s. Cosmic Manufacturing and the appellant. - To invoke Rule 5 or 6 of the CVR, 1988, the goods should be substantially of the same commercial value and of the same quantity. None of these requirements were fulfilled in the present case. - the single import made by M/s. Cosmic Manufacturing cannot be the basis of enhancement of the transaction value. Related person - financial flow back - Held that:- No where it is coming out that the appellant has transferred money against the imported goods by some other means over and above the transaction value - if it is presumed that the appellants are related person, the transaction value is not influenced being related person has contemporaneous imports made by M/s. Rajhans Automobiles, the supplies by S.N. Corporation, Japan through other importers in India on the same price and the import made by M/s. Cosmic Manufacturing cannot be basis as without comparison of the goods imported by M/s. Cosmic Manufacturing and the appellant - No enhancement in transactional value to be done - Decided in favour of assessee.

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• Service Tax

• 2014 (6) TMI 426
  Writ of Certiorarified Mandamus - Call for records - proceedings are in the nature of notices calling upon the petitioners herein to show cause the reasons as to the non-registration and non-payment of service taxes - Held that:- Respondent/first respondent (as the case may be), - the Joint Commissioner/the Additional Commissioner, Office of the Commissioner of Central Excise and Service Tax, Tiruchirappalli - 620 001, shall bear in mind the clarifications issued in Circular No.123/5/2010 dated 24.05.2010 and proceed further in the matters. The petitioners herein are directed to submit their objections/reply within a period of two weeks from the date of receipt of a copy of this order and the respondent/first respondent (as the case may be), is directed to consider the objections/reply submitted by the petitioners and proceed with the matters and pass final orders, within a period of six (6) weeks, from the date of receipt of objections from the petitioners.

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• 2014 (6) TMI 425
  Denial of refund claim - renting of immovable property service - Bar of limitation - Held that:- appellant has paid service tax during the impugned period for which they are not required to pay service tax at all as clarified by CBEC. As the payment made by the appellant is not of service tax, therefore, as held by this Tribunal in the case of Shankar Ramchandra Auctioneers (2010 (4) TMI 391 - CESTAT, MUMBAI) the provisions of section 11B of the Central Excise Act are not applicable. Therefore, the refund claim filed by the appellant is not time barred - appellant are entitled for refund claim as filed in time and the provisions of section 11B of the Central Excise Act, 1944 are not applicable to the facts of this case - Decided in favour of assessee.

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• 2014 (6) TMI 424
  Demand of the differential service tax - Penalty u/s 76 & 78 - Held that:- show cause notice was issued on 16.10.2009 i.e. after the amendment was made under Section 78 of the Finance Act, 1994. In my view, both the lower authorities had concurrently held that provisions of Section 78 having been invoked and penalty imposed, Section 76 penalty may not be justified is a correct conclusion that has been arrived, in view of the decision of the Hon’ble High Court of Punjab and Haryana in the case of First Flight Courier Ltd. [2011 (1) TMI 52 - High Court of Punjab and Haryana] - Decided against Revenue.

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• 2014 (6) TMI 423
  Denial of refund claim - Refund in respect of the services exclusively provided to SEZ - Held that:- There is no dispute about the refund of Rs. 43,656/-, which was also not the subject matter of the Tribunal’s order dated 04.04.2012. The dispute before the Tribunal was in respect of Rs. 1,25,920/-, which related to the refund of common services. As such, the percentage of the value of the services has to be applied to the common services and not to the entire refund claim. - Matter remanded back - Decided in favour of assessee.

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• 2014 (6) TMI 422
  Demand of service tax - Business Auxiliary Service - Held that:- Board’s Circular dated 26-9-2011 was not considered by the learned Commissioner while passing the impugned order dated 7-10-2011. We have also not found any findings on the aforesaid plea of the assessee regarding certain transactions with foreign companies for the period after April, 2006. In these circumstances, the question whether the appellant is liable to pay Service Tax with education cesses on the amounts paid by them to the foreign companies from 18-4-2006; and other issues associated therewith, need to be remanded to the adjudicating authority for de novo decision. As regards the demand raised for the period prior to 18-4-2006, the issue stands settled in favour of the appellant by numerous decisions including the Hon’ble Bombay High Court’s judgment in Indian National Ship Owners Association case (2008 (12) TMI 41 - BOMBAY HIGH COURT) which has been accepted by the C.B.E. & C. Accordingly, the demand confirmed by the adjudicating authority against the assessee for the period prior to 18-4-2006 is set aside and the corresponding penalties are vacated. For the period from 18-4-2006, the learned Commissioner is requested to readjudicate the issues in accordance with law and the principles of natural justice. It is made clear that all the contentions raised by the assessee shall be duly considered and appropriate findings recorded thereon - Decided in favour of assessee.

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• 2014 (6) TMI 421
  CENVAT Credit - Penalty - Held that:- This is not a case of availing irregular credit by reason of fraud, collusion etc. This is a case where the appellants were under the bona fide belief that credit of service tax paid on all the services utilized by them both for providing authorized service and for sale is available to them and they have paid the service tax subsequently. I am of the view that this is a case which is squarely covered under the provisions of Rule 15(1) of the CENVAT Credit Rules, 2004 which prescribes a maximum penalty of Rs. 2,000/- for taking or utilizing CENVAT credit wrongly. Hence the penalty of Rs. 71,965/- is reduced to Rs. 2,000 - Decided partly in favour of assessee.

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• Central Excise

• 2014 (6) TMI 420
  Duty demand - Non putting MRP on export of biscuits - CENVAT Credit - credit on the biscuits manufactured and exported - Held that:- Law made in India applies to the whole of India or within the territory situated in India. They do not have extra territorial jurisdiction. This applies to Standards of Weights and Measures Act, 1976 and the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. Therefore, the requirement of affixing MRP is only meant for goods required to be sold in India and it has nothing to do with the goods exported. Therefore, any exemption given on the basis of MRP applies to goods sold in India and has no application whatsoever in respect of identical goods exported. The case laws cited by the appellants also confirm these facts. As held by the Hon'ble High Court of Bombay in Repro India Ltd. case (2007 (12) TMI 209 - BOMBAY HIGH COURT), even in respect of exempted goods, CENVAT credit can be availed on inputs/input services if such goods are exported. - Decided in favour of assessee.

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• 2014 (6) TMI 419
  Penalties on respondents-dealers - facilitated others in taking fraudulent CENVAT - paper transactions without actual movement of goods - The party was a manufacturer on paper - Held that:- This Court in Ashish Gupta and Vee Kay Enterprises’s cases [2011 (3) TMI 133 - PUNJAB AND HARYANA HIGH COURT] had held that Rule 26(2) of the Rules by virtue of which an assessee was held liable for penalty where invoices were issued without any movement of goods, was inserted by notification dated 1.3.2007 which was not applicable to alleged acts committed prior to the said date. Further, in view of the findings recorded by Commissioner (Appeals) to the effect that Rule 25(1) (b) of the Rules was not attracted to the facts of the present case, the aforesaid judgment does not advance the case of the revenue. However, the Commissioner (Appeals) and the Tribunal on facts deleted the penalty. Revenue has filed appeals where no penalty was imposed on persons who issued invoices without delivery of the goods prior to amendment of sub rule (2) of Rule 26 of the Central Excise Rules, 2002. After considering the above question of law, it has been held that where a person merely arranges modvatable document to the manufacturer without actual delivery of goods, penalty could not be imposed under rule 209A. Rule 26(2) of Central Excise Rules, 2002 prior to amendment on 1.3.2007 is akin to Rule 209A. - Decided against Revenue.

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• 2014 (6) TMI 418
  CENVAT Credit - whether the appellant is eligible to take CENVAT credit of the service tax paid on input services availed at the job-worker's premises - Held that:- services were availed at the job-worker's premises in or in relation to the manufacture of excisable goods arising at the intermediate stage. There is also no dispute that the appellant has borne the incidence of such service tax taxation. If that be so, we do not understand how the appellant can be denied the benefit of inputs/input services tax credit. Input services defined in Rule 2(l) of the CENVAT Credit Rules, includes various services which are used in or in relation to the manufacture of dutiable final products whether directly or indirectly and the scope term is very wide as held by the Hon'ble Bombay High Court in the case of Coca Cola India Pvt. Ltd. (2009 (8) TMI 50 - BOMBAY HIGH COURT). Further, we observe that when the same services were availed in appellant's own factory premises, the adjudicating authority has granted them the benefit of CENVAT credit. If that be so, merely because the services were availed at job-worker's premises, there is no reason why the same should be denied. - Stay granted.

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• 2014 (6) TMI 416
  Waiver of pre deposit - penalty under Rule 173Q - Discrepancy in RG-1 register - Held that:- The Applicant since beginning in their reply to the demand Notice have been claiming that the difference in the figures, has been due to clearance of goods for captive consumption. I also find that in the balance sheet against the said production figures, it has been mentioned by way of insertion of ‘notes’ that the said figures also include captive consumption, sample issues and sub-contracted items. No other corroborative evidences have been produced by the department in support of their claim that the goods were cleared clandestinely. Thus, prima facie the Applicant could able to reconcile the differences between the production figures shown in the RG-1 and in their balance sheet. In these circumstances, the Applicant could able to make out a prima facie case for total waiver of pre-deposit of dues adjudged - Stay granted.

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• 2014 (6) TMI 415
  Extension of stay granted - Cross appeal by revenue for vacation of stay order - Section 35C(2A) - Held that:- Hon’ble Supreme Court in the context of insertion of sub-section (2A) of Section 35C of the Act provided that if such appeal is not disposed of within the period specified in the first proviso, the stay order shall on the expiry of that period, stand vacated, observed that sub-section which was introduced in terrorem cannot be construed as punishing the assessees for matters which may be completely beyond their control. In the present case, appeal was not disposed of within the stipulated period as specified in Section 35C and therefore vacating the stay order amounts to punishing the assessee. We find that the decision of the Hon’ble Supreme Court was not placed before the Tribunal while passing the Misc. Order dated 5-6-2012 and therefore the said order is not applicable in the present case - Extension of stay granted.

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• 2014 (6) TMI 414
  Default in payment of duty - violation of Rule 8(3A) - Utilization of cenvat credit during period of default - Clandestine removal of goods - Held that:- Clearances made by the applicant were not clandestine removals because the clearances were reported in the returns filed by applicant. The applicant was liable to pay duty in cash, when they were in default. Any payment made through Cenvat credit can be taken as proper discharge only when no bar as per Rule 8(3A) of Central Excise Rules, 2002 was operating. If payment was made through credit after they came out of defaulting period it would be acceptable as proper discharge. The payment prior to coming out of default cannot be refused for the reason that it was paid earlier but for the fact that interest has to be paid. Therefore, we order the applicant to calculate interest on clearances during the default period till Mar.09 to be calculated for each clearance from date of clearance to the end of defaulting period for payments made through Cenvat and deposit such amount as pre-deposit for admission of the appeal - Stay granted partly.

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