Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 3, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Custom duty paid on purchase of plant and machinery - capital or revenue expenditure - assessee has converted its unit from 100% EOU under EPCG Scheme to DTA Unit and would sell goods in domestic market so this amount was paid for the more profitable business - allowed as revenue expenditure - HC
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Reopening of assessment - Whether the tribunal is justified in setting aside the assessment order as confirmed by the Commissioner of Income Tax, Appeals holding the notice to be bad and assessment illegal only for the reason that the objections to the notice were not decided? - Held No - HC
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TDS u/s 195 - it is only elementary that existence of PE is sine qua non only for taxation of business profits but that the foreign entity not having a PE in India does not come in the way of taxation of royalties - the payment for sharing of the SOPs, as is the case before us, indeed taxable as ‘royalties’ under the Indo German tax treaty - AT
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Depreciation on Capital subsidy - subsidy was granted for the specific purpose of technology up-gradation - for the purpose of computing depreciation allowable to the assessee, the subsidy amount cannot be reduced from the actual cost of the capital asset. - AT
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Penalty u/s. 271(1)(c) - calibre and expertise of the assessee has little or nothing to do with the inadvertent error. Absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income - no penalty - AT
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Addition on account of gain on settlement of loan u/s 28(iv) or 41(1) - the instant loan was not utilized for the trading liability of the assessee and therefore the waiver off the same cannot amount to income which is chargeable to tax - AT
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Expenditure development of software - If over the period of time the said product could not be sold and has become obsolete due to fast changing technologies and software programme, then it has to be left to the prudence of the businessman to write it off in the year in which it considers that the said product cannot be sold at all or it has become scrap. - AT
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Bank guarantee commission paid by the assessee is not in the nature of interest expenditure warranting disallowance u/s 14A r.w.r 8D(2)(ii). - AT
Customs
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Jurisdiction of CESTAT - as per section 129C, if the value of the goods confiscated without right of redemption exceeds ₹ 50 lakhs, a single member of the CESTAT is not competent to decide the appeal in respect thereof - HC
Service Tax
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Renting of immovable properties - case of petitioner is that they were landlords or tenants of leased premises and contended that they could not have been saddled with liability of service tax inasmuch as it amounts to tax on 'land' - HC dismissed the petition affirming the levy of service tax.
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The only requirement is that against the export of service payment should be in convertible foreign exchange. If that is satisfied even though the DFRC is not submitted the status of the export cannot be rejected as DFRC is only a procedural requirement - AT
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SSI exemption - Benefit of N/N. 6/2005-ST dt. 01/03/2005 - denial on the ground that the services rendered were under a brand name or trade name of another person - the appellant did not make their defence submission with material and evidences in support before the original adjudicating authority - matter remanded back - AT
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Refund of cenvat credit - export of services - The appellants are entitled for refund of the amount incurred on General Insurance Services and all other services except rent-a-cab services. - AT
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CENVAT credit - input service of commissioning erection and installation of said transmission towers/lines would also be eligible to Cenvat credit - AT
Central Excise
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CENVAT credit - fake invoices - it would be impractical to require the assessee to go behind the records maintained by the first stage dealer - credit cannot be denied - HC
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Refund claim - courier services availed for the export of goods - rejection on the ground of non-realization of foreign exchange - appellants are under obligation to supply the parts under free warranty replacement, then in that case no monetary consideration flow from the buyer - refund allowed - AT
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CENVAT credit - duty paying invoices - invoices which are not addressed to it and are addressed to its sister concern which is only a technical lapse - the rejection of CENVAT credit on this ground is not legally justified. - AT
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CENVAT credit - input services - Club Bill which is paid to Madras Gymkhana Club and Presidency Club - these are private clubs and are not business clubs and therefore the expenditure of the club cannot be termed as an 'input service' - AT
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Cenvat credit taken on the inputs, input services and capital goods, cannot be denied on the ground that those goods and services were used for manufacture of non-dutiable goods, on which duty liability has been discharged from cenvat credit account - AT
VAT
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ITC - Whether on the purchase of cement, sand, steel, greet, concrete etc. that are used for manufacturing of capital goods viz. Dry Dock and Fit Out Berth, the Dealer is entitled to Input Tax Credit or not? - applying the “User Test”, credit allowed - HC
Case Laws:
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Income Tax
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2017 (6) TMI 87
Custom duty paid on purchase of plant and machinery - capital or revenue expenditure - Held that:- ITAT accepted the plea of assessee regarding expenditure on custom duty and returned the finding that assessee is entitled to deduction either by way of depreciation or by way of allowance of entire expenditure, as revenue expenditure as it has been incurred wholly and exclusively for the purpose of business. Since Income Tax Appellate Tribunal has accepted the plea of assessee that the amount of ₹ 8,19,44,049/- can be treated as revenue expenditure, as it has been incurred wholly and exclusively for the purpose of business, as the above mentioned amount was paid as excise duty, as assessee has converted its unit from 100% EOU under EPCG Scheme to DTA Unit and would sell goods in domestic market so this amount was paid for the more profitable business and finding of the tribunal in this regard treating the above amount as revenue expenditure in the alternate cannot be found faulty - Decided in favour of assessee Depreciation on the purchase of plant and machinery - whether claim admissible on the actual cost of the plant and machinery excluding the custom duty, which was paid subsequent? - Held that:- Hon'ble Supreme Court in Saharanpur Electric Supply Co. Ltd. Vs. CIT (1992 (1) TMI 2 - SUPREME Court )has opined that it is incontrovertible that, under Section 43 (1) read with Section 43 (6), the Officer has to determine the actual cost for all assets, new and old, and the definition in Section 43 (1) only requires that, at the time of doing so, he has to examine whether the actual cost has been fully met out by the assessee or has been met by someone else in whole or in part. The words "has been met" squarely fit into this reading of the section and the use of those words does not restrict the definition in Section 43 (1) to assets acquired in the previous year and moreover, in appeal the representative of the department conceded that the judgment of the Hon'ble Supreme Court in Saharanpur Electric Supply Co. Ltd. (Supra) was directly on this issue and was in favour of the assessee. So depreciation will be computed on the cost of plant and machinery and in its cost custom duty will also be added. Deduction permissible on account of revenue expenditure even though no such plea was raised before it - Held that:- In the present case assessee has taken this ground before Commissioner (Appeals) and if he has not further challenged the finding on this ground then as per Rule 27 of the Income Tax Rules assessee can advance his arguments even though he has not filed cross objection against the finding on the assessee against him. So learned ITAT did not commit any mistake in permitting the assessee to support the order of C.I.T. (Appeals) on the ground that have been decided against him. Consequently, this question of law is also decided against the revenue and in favour of the respondent, assessee.
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2017 (6) TMI 86
Reopening of assessment - Whether the tribunal could have permitted addition of a new ground assailing notice under Section 148 of the Act when there was no challenge to it before the Assessing Officer or the CIT (Appeals) by way of any objections? - Held that:- Consedering the amplitude of power of the tribunal as per Section 245 of the Act, as the facts were not in dispute and were clear, the tribunal had committed no jurisdictional error in entertaining the additional ground assailing the notice issued under Section 148 of the Act. Accordingly, question no. 1 as above is answered in favour of the assessee and against the department holding that despite no plea regarding the validity of the notice having been taken by the respondent assessee before the Assessing Officer and the CIT (appeals) but as his objections against the notice were left undetermined, the tribunal was justified in permitting the said ground to be taken for the first time in appeal before it. Whether the tribunal is justified in setting aside the assessment order as confirmed by the Commissioner of Income Tax, Appeals holding the notice to be bad and assessment illegal only for the reason that the objections to the notice were not decided? - Held that:- The non disposal of the objections vitiates the reassessment proceedings. However, it can not be a ground for invalidating the notice itself unless any lacuna in the notice is established which we are afraid, has not been done by the tribunal. Accordingly, the proceedings for reassessment may stand vitiated but the notice can not held to be bad in law. There is no finding by the tribunal for holding the notice to be bad or illegal except for the fact that the objections of assessee filed against it were not decided. In view of the fact that the objections were not considered and decided and that no illegality in the notice was established, the tribunal erred in holding the notice to be bad. The discussion above permits us to answer the second question partly in favour of the assessee and partly in favour of revenue and it is held that as the objections of the assessee respondent were left undecided the reassessment could not have been done and as such the tribunal has not erred in setting aside the order of assessment but the notice issued under Section 148 of the Act can not be said to be illegal and bad in law without recording finding that it is contrary to law. This aspect has to be dealt with by the tribunal before passing a fresh order of reassessment.
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2017 (6) TMI 85
Reopening of assessment - failure to offer for taxation the corresponding amount either separately or as royalty income in the form of 'incoming shares service charges paid by ‘OIPL to OSC', in its return of income filed for the AY 2007-2008 - Held that:- As rightly pointed out by the Assessee even for AY 2006-2007, the DRP by order dated 16th August 2013, disagreed with the draft assessment order dated 2nd November, 2012 of the AO of OIPL wherein identical additions were suggested. The DRP held that the said two items viz. (i) incoming shared service charges and (ii) alleged excess payment for software media pack/master copy, were not income in the hands of the Assessee herein. On the basis of the above order of the DRP, the final assessment order for AY 2006-2007 in the case of OIPL was passed on 30th November, 2013. This was followed in 2007-08 where again the draft assessment order of the AO of OIPL was not concurred with by the DRP. The DRP’s order dated 29th August, 2014 held that the in respect of both the issues no income resulted in the hands of the Assessee herein. This order was acted upon and the final assessment order was passed by the AO on 30th October, 2014. With the very basis of the reopening of the assessment in the present case having been eroded, the Court hereby sets aside the impugned notice dated 26th March, 2014 and the consequent order dated 23rd March, 2015 passed by the AO disposing of the Assessee’s objections.
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2017 (6) TMI 84
Additions made u/s 68 - bogus transactions - existence of the companies, their creditworthiness and the genuineness of the transactions - Held that:- We are of the opinion that this matter stands concluded by the findings of fact to the effect that the transaction as appearing in the books of accounts of the respondent assessee in respect of the share application money of the named two companies are genuine and since the respondent assessee has discharged the onus cast upon it to prove the identity and creditworthiness of the two companies, the amount is not liable to be added under Section 68 of the Act in the absence of any contrary evidence to prove the transaction to be bogus. - Decided in favour of assessee.
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2017 (6) TMI 83
Entitlement to deduct under section 80-IB - transport subsidy and excise refund receipt - Held that:- The appellant is entitled to deduction under section 80-IB in respect of excise duty refund of Income Tax Act. Supreme Court in Commissioner of Income Tax v. M/S Meghalaya Steels Lld. [2016 (3) TMI 375 - SUPREME COURT ] and in case M/S Shree Balaji Alloys v. Commissioner of Income Tax and anr, (2011 (1) TMI 394 - Jammu and Kashmir High Court ) held excise refund to be capital receipts in the hands of assesses and deduction u/s 80 IB of the Act allowed. In so for as the transport subsidy is concerned in the case of Commissioner of Income Tax income Tax Vs. M/S Meghalaya Steels Ltd, reported in (2016 (3) TMI 375 - SUPREME COURT ) 3 Scale 192, the Supreme Court held that the benefit of deduction under section 80-IB of the Income Tax Act is applicable to transport subsidy.A circular No. 39/2016 dated November 29th, 2016, issued by Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, New Delhi is also on the aforesaid terms. - Assessee appeal allowed.
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2017 (6) TMI 82
Registration of the respondent under Section 12AA - cancellation of registration as assessee has not produced /maintained the books of accounts separately and /or individually plot wise - object and purpose for which AUDA has been constituted - Held that:- Merely because AUDA is selling the plots by holding public auction, the activities of the respondent – assessee cannot be said to be in the nature of trade or business. By the aforesaid, it cannot be said that the activities of AUDA are not in consonance with the object and purpose for which the same has been constituted and as the respondent – assessee is providing public utility services, the same can be said to be charitable purpose within the meaning of Section 2(15) of the Income Tax Act. As in the books of accounts maintained, which is audited by the office of the Auditor General, income from sale of the plots have been specifically disclosed and mentioned. There is no requirement to maintain the books of accounts individually plot wise. By the aforesaid itself the activities of the statutory body cannot be doubted. Considering the aforesaid facts and circumstances of the case, more particularly, considering the relevant provisions of the Gujarat Town Planning Act and the object and purpose for which AUDA has been constituted and the activities to be carried out by AUDA, which is in the nature of public utility services, the learned tribunal has rightly quashed and set aside the order passed by the Director of Income Tax (Exemption) cancelling the registration under Section 12AA of the Income Tax Act. - Decided in favour of assessee.
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2017 (6) TMI 81
TDS u/s 195 - tax withholding demand - remittance to OSE Oncology Services Europe S.a.r.l, Germany - DTAA - PE in India - Held that:- The essence of the arrangement, even going by the material on record and admission of the assessee in unambiguous words, is on sharing the SOPs, which, as we have noted above, amounts to sharing of scientific experiences taxable under article 13 of Indo German tax treaty. As for the fact that OSE does not have a permanent establishment in India, it is only elementary that existence of PE is sine qua non only for taxation of business profits but that the foreign entity not having a PE in India does not come in the way of taxation of royalties- which precisely is the case of the revenue. In this view of the matter, the payment for sharing of the SOPs, as is the case before us, indeed taxable as ‘royalties’ under the Indo German tax treaty. We see no reasons to interfere in the conclusions arrived at by the authorities below. Once we come to the conclusion that the consideration received by the OSE, for sharing of SOPs, was taxable in its hands in terms of the provisions of the Indo German tax treaty, and there is nothing before us to even challenge its taxability under the provisions of the domestic law either, it is only a natural corollary of this finding that the assessee ought to have deduct tax at source from the payment in question. There is no, and there cannot be any, challenge to this fundamental legal position. There is thus no infirmity in the impugned tax withholding demand. - Decided against assessee.
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2017 (6) TMI 80
Slump sale - Long Term Capital Gain computation in accordance with the provisions of Section 50B - Held that:- Since the issue has been decided in favour of the assessee by the learned CIT(A) and learned Counsel of the assessee is fairly agreeing before us that there has been a mistake on the part of the assessee in submitting the computations before the Assessing Officer, interest of justice requires that all the issues raised in this appeal need to be remitted to the file of the Assessing Officer. Accordingly, the issues raised in the appeal are remitted to the file of the Assessing Officer. The Assessing Officer is directed to consider the issue afresh taking into the account the revised computations and submissions of the assessee. Needless to add the assessee shall be granted adequate opportunity of being - Appeal by the assessee stands allowed for statistical purposes.
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2017 (6) TMI 79
Claim of set off of speculation loss of A.Y.2001-02 against the speculation income - Held that:- Assessee’s claim of set off of speculation loss of A.Y.2001-02 against the speculation income of the year under consideration has to be allowed. As held by the Special Bench which followed the decision of Apex Court in the case of Govinddas & Others vs. ITO (1975 (12) TMI 144 - SUPREME COURT), (a decision of larger Bench of the Apex Court comprising three of their lordships) that the golden rule of construction is that in the absence of anything in the enactment to show that it is to have retrospective operation, it cannot be so construed as to have the effect of altering the law applicable to a claim in litigation at the time when the act was passed. Accordingly, respectfully following the precedent, we set aside the orders of the authorities below and decide the issue in favour of the assessee.
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2017 (6) TMI 78
Deduction on account of bad debts written off denied - Assessee’s claim rejected in view of the decision of Goetze (India) [2006 (3) TMI 75 - SUPREME Cour] - Held that:- It was incumbent for the ld CIT(A) to have examine the assessee’s claim of the said deduction in appeal in view of grounds raised, and particularly when the relevant material is a part of the records of assessment, as this claim was, put forth before the AO by the assessee in the course of assessment proceeding by virtue of, inter alia, letter dated 7/3/2014. In our considered view, the decision of the Hon’ble Apex Court in the case of Goetze (India) (2006 (3) TMI 75 - SUPREME Court ) does not place fetters on appellate authorities to entertain fresh claims put forth by the assessee on issues which are a part of record, and/or are material for the purpose of assessing the correct tax liabiity of an assessee in accordance with law. In coming to this finding we draw support from the ruling of the Hon’ble Apex Court in the case of NTPC Ltd. (1996 (12) TMI 7 - SUPREME Court) and CIT Vs. Motor Industries Co. Ltd. (1997 (8) TMI 70 - KARNATAKA High Court). Thus we set aside the impugned order of the ld CIT(A) and after admitting the grounds raised by the assessee on its claim for being allowed write off of bad debts restore the matter to the file of the ld CIT(A) for examination, verification and adjudication on merits after affording both the assessee and the AO adequate opportunity of being heard - Decided in favour of assessee for statistical purposes.
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2017 (6) TMI 77
Additions u/s 68 - genuineness of the transaction not proved - Held that:- Sh. Inderjeet Kumar had no satisfactory explanation or evidence regarding the cash deposited in his bank account. However, Ld. CIT(A) noticed that Sh. Inderjeet Kumar deposited ₹ 4,90,000/- in cash in his bank account on 08.02.2008 and gave a cheque of ₹ 5 lacs to the assessee on 11.02.2008. Similarly, Sh. Mahavir Singh, S/o. Sh. Dilip Singh deposited cash amounting to ₹ 9,50,000/- in his bank account on 13.02.2008 and gave a cheque of ₹ 8 lacs to the assessee on 14.02.2008. Since, the genuineness of the transaction and the creditworthiness of the loan creditors has not been conclusively established before the lower authorities, hence, the Ld. CIT(A) has rightly confirmed the addition of ₹ 13,00,000/- i.e. (Rs. 5 lacs from Sh. Inderjeet Kumar and ₹ 8 lacs from Sh. Mahavir Singh) and held that these loans are not genuine and treated the same as unexplained cash credit u/s. 68 As regards the addition/confirmation of ₹ 10 lacs is concerned, which was also an unsecured loan from Sh. Kumudani Jhangu, for the assessment year 2008-09, we find that the assessee has filed the copy of Income Tax Return filed on 30.9.2008 of Sh. Kumudani Jhangu, for the assessment year 2008-09 and also his Income Tax Return for the AY 2008-09 reflecting the amount of ₹ 10 under the head ‘Deductions under Chapter-VIA’ alongwith the statement of assessable income and also copy of Statement of Affairs as on 31.3.2007 and 31.3.2008. In our considered opinion, these documents are enough to establish the genuineness of the transaction and the creditworthiness of the loan creditors, hence, the addition of ₹ 10 lacs being unsecured loan from Kumudani Janghu is hereby deleted and as a result, the assessee gets part relief of ₹ 10 lacs only. - Decided partly in favour of assessee.
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2017 (6) TMI 76
Reopening of assessment - reasons to believe - Held that:- In the present case, the assessee has not informed to AO that construction work did not progress due to acquisition proceedings initiated by Government. As per Explanation 2 of Section147, it is very clear that due to non-disclosure of this by the assessee, the income chargeable to tax had escaped assessment. The assessee has not produced anything before the Commissioner of Income Tax (Appeals) to show as to how the assessee is entitled for deduction u/s.80-IB(10) of the Act. In view of the explanation (1) it does not mean that there was no default on the part of the assessee. Hence, reopening u/s.147 is held to be valid. The assessee has tried to take shelter under the exception provided in that section. But as stated above, when the assessee has not disclosed fully and truly the facts necessary for the assessment and there is no assessment u/s.143(3) of the Act, this proviso will not come to its rescue. Consequently, we hold that the entire reassessment proceeding in this case is valid and therefore, the action of the Assessing Officer is upheld. Disallowance u/s.80-IB(10) - Held that:- In this case, admittedly, the project was not completed and it brought on record by the lower authorities that 66 customers out of 88 customers have chosen to take over the property on their own from the assessee. The project of assessee not at all completed when the project was not completed it is appropriate to withdraw the deduction already given to the assessee u/s.80-IB(10) of the Act. On this issue, we do not find any infirmity in the order of the Ld.CIT(A) and the same is confirmed. Hence, this ground of assessee’s appeal is rejected.
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2017 (6) TMI 75
Revision u/s 263 - Profit on sale of shares - business income OR short term capital gain - Held that:- Whether or not a person carried on business in a particular commodity must depend upon volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transaction must ordinarily be entered into with a profit motive. Such motive must pervade the whole series of transactions effected by the person in the course of his activity. To infer from a course of transactions that is intended thereby to carry on business ordinarily the characteristics of volume, frequency and regularity indicating an intention to continue the activity of carrying on the transaction must exist. Looking into the volume, frequency, continuity and regularity of transactions of purchase and sale in shares by the assessee, it cannot be said that the assessee entered into this activity not with a profit motive. Therefore, only inference which can be drawn is that the income earned by the assessee out of sale and purchase of these shares was an income under the head 'Profits and gains of business or profession'. No justification in lengthy argument of the assessee's counsel that the profit arising to assessee on sale of shares acquired by it was assessable as income from 'capital gain'. CIT(A) is justified in treating the profit arising out of sale of shares acquired by the assessee as income from business. Further, the AO passed order in consequent of order of CIT u/s.263 of the Act. The assessee has not preferred any appeal against the order of CIT u/s.263 of the Act. As such, that Revision order has reached finality. Hence, now the assessee cannot challenge the assessment order giving effect to order passed u/s.263 of the Act. - Decided against assessee.
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2017 (6) TMI 74
Depreciation on Capital subsidy - subsidy was granted for the specific purpose of technology up-gradation - Held that:- See Sasisri Extractions Ltd. vs. CIT [2008 (1) TMI 485 - ITAT VISAKHAPATNAM ] held that a careful perusal of "Target 2000" scheme shows that the scheme was intended to accelerate industrial development of the State and the incentive was given for setting up of industries in Andhra Pradesh and for the purpose of determining the amount of subsidy to be given the cost of eligible investment was taken as the basis, though it was not specifically intended to subsidise the cost of the capital. Under the circumstances, we are of the view that the incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost and thus it falls outside the ken of Explanation 10 to section 43(1) of the Act. In the light of the above discussion, we are of the view that for the purpose of computing depreciation allowable to the assessee, the subsidy amount cannot be reduced from the actual cost of the capital asset. - Decided against revenue Addition invoking provisions of Section 40A(3) - Held that:- See Anupam Tele Services vs. ITO [2014 (2) TMI 30 - GUJARAT HIGH COURT] as held rigors of section 40A(3) of the Act must be lifted. - if the assessee had not made cash payment and relied on cheque payments alone, it would have received the recharge vouchers delayed by 4/5 days and thereby severely affecting its business operations. - Decided against revenue
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2017 (6) TMI 73
Penalty u/s. 271(1)(c) - at the time of preparing the Return of Income, entry of Short Term Capital Gain are done in the Short Term Capital Gain on Shares instead of Short Term Capital Gain other than Shares - Held that:- Intention of the assessee is not to hide any income and any particulars but there is Data Entry mistake done by the Tax Practitioner only that please note. The intention of the assessee is not to hide and / or avoid any particulars in his books accounts but is a genuine human mistake. There is no intention of the assessee to hide the tax and income and he doesn't get any benefit. He recorded all the accounting entries in his books as well as paid the tax as he is liable for. But due to the human mistake i.e. at the time of passing the accounting entries by an accountant and calculation mistake of Tax Practitioner at the time of calculating the tax. See Price Waterhouse Coopers (P.) Ltd. vs. Commissioner of Income Tax, Kolkata-I [2012 (9) TMI 775 - SUPREME COURT ] wherein held the calibre and expertise of the assessee has little or nothing to do with the inadvertent error. Absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Imposition of penalty on the assessee is not justified - Decided in favor of assessee
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2017 (6) TMI 72
Treatment to the income of Assessee co-operative Bank as income from other sources instead of income from business - Held that:- Undoubtedly, this society has been registered under the Gujarat Society Act. Appellant has filed a copy of Resolution No.NSB/12/2005/M.97/Ch, passed by the Gujarat Government, Agriculture and Co-operative Department. Investments are stated at the cost of acquisition. ₹ 1 crore was invested with interest @12.5%, with a premium of ₹ 4.25 lacs. This amount was received and credited to account with Axis bank on its maturity. However, the premium amount is shown in the balance sheet as other current asset, and not expended out in the profit and loss account. It has been held in case of Jafari Momin Vikas Co-op Credit Society Ltd. vs. CIT. [2012 (6) TMI 838 - ITAT AHMEDABAD ], in matter, Co-operative Credit Society purely functioning as society without bank is entitled to exemption as provided above in the Act.Since the society duly registered and functioning as credit societies be allowed exemption u/s.80(P)(2)(a)(i) of the Act. We allow the set off brought forward business loss of earlier years against income. See Morvi Mercantile Bank Limited. (In Liquidation) Versus Commissioner Of Income-Tax, Gujarat [1975 (8) TMI 31 - GUJARAT High Court] - Decided in favour of assessee.
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2017 (6) TMI 71
Addition of loss not allow to be carried forward - books of account audited u/s. 44AB - loss incurred under the head “Business & Profession” - Held that:- In this case, assessee gave her funds to the PMS Manager as in investment and there is no involvement of assessee in day to day transaction of the funds. The result of profit and loss in the end of the year from PMS Account is a capital loss. In earlier year assessee was dealing in shares from her own firm. The same activity was also carried out during the year. Along with some share transactions were considered as part of the business activities and loss of PMS Account was also considered as part of the business activity. Whereas looking the facts and circumstances of the case such income cannot be a business income where assessee has least role to play in day-to-day transaction of funds. As assessee has filed its return after due date that cannot be sole criteria for rejecting the claim of the assessee. In our opinion assessee’s claim for carried forward of loss cannot be rejected. Therefore, we allow the appeal of assessee.
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2017 (6) TMI 70
Levy penalty u/s 271(1)(c) - denying the claim of the assessee towards the cost of improvement of land - Held that:- It cannot be said that the assessee has furnished inaccurate particulars of income where there is due disclosure in the return of income and necessary explanation and supporting evidence has been provided in support of such expenditure. The incurrence of the expenditure has thus not been doubted by the Revenue but given the peculiar facts of the case involving long period during which such expenditure has been incurred and that too, by different co-owners and the fact that the assessee doesnt maintain regular books of accounts , an estimation approach was adopted by the lower authorities while denying the claim of the assessee towards the cost of improvement of land. In our view, the disallowance of expenditure in such peculiar facts of the case cannot be basis for levy of penalty under section 271(1)(c) - Decided in favour of assessee.
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2017 (6) TMI 69
Disallowance under section 14A - Held that:- What is relevant to examine is whether any expenditure sought to be disallowed had actually been incurred in earning the dividend income. The AO has not brought on record any material to show that the assessee has incurred any expenditure in relation to the income which do not form part of the total income. No reasonable nexus between the expenditure disallowed and the dividend income received has been established by the AO. It is equally relevant to note that out of ₹ 30.82 crores worth of investments in subsidiary/associate concerns, an amount of ₹ 6.50 lacs has been invested during the year out of company’s own funds and the rest all investments have been made in the earlier years wherein the AO has not established any reasonable nexus between the expenditure disallowed and the dividend income received in the respective years. Further, in earlier years, the Coordinate Benches have decided the matter in favour of the assessee company holding no disallowance under section 14A other than the administrative expenses suo-moto disallowed by the assessee company and we see no reason to deviate from the same. AO has lost sight of the fact that the assessee company is in the business of financing wherein the funds are borrowed and lend as part of its regular business activity. Therefore, looking at interest expenditure of ₹ 180.91 crores without taking into consideration interest earned on loans/advances to its customers amounting to ₹ 370.69 crores will not be factually correct. - Decided against revenue
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2017 (6) TMI 68
Unabsorbed depreciation brought forward to be carried forward in the year under consideration - Held that:- The intention of the legislature is to provide the benefit of brought forward unabsorbed depreciation to be allowed for unlimited years. It is a fact that the amendment in section 32(2) by the Finance Act will be effective from 1st April 2002, but intention behind the amendment could only be interpreted as if it has the effect retrospectively. In addition to above we also find that the Hon'ble jurisdictional High Court in the case of M/s India Jute And Industries Ltd. (2016 (8) TMI 1206 - CALCUTTA HIGH COURT) after having reliance in the case of General Motors (2012 (8) TMI 714 - GUJARAT HIGH COURT) we hold that the decisions of the Special Bench of ITAT in the case of Times Guarantee [2010 (6) TMI 516 - ITAT, MUMBAI ] has been overruled. Thus we find no reason to interfere with the finding of the Ld. CIT(A). Under the circumstances, this issue of Revenue’s appeal is dismissed Addition u/s 40A(9) and 36(1) on account of staff welfare expenses Held that:- The issue has already been decided by the Co-ordinate Bench of this Tribunal in assessee’s own case to hold that the expenses incurred for welfare of the employees does not come within the purview of section 40A(9). We also find that the case of AO is not excessive or unreasonable expenses. In our view the AO before disallowing the school running expenses should have considered the earlier expenses. More over from the submission of the assessee before the ld. CIT-A, we find that the AO disallowed the expenses on the ground that the order of ITAT cited by the assessee at the time of assessment has not reached finality. The ld. DR has not brought anything contrary to the finding of ld. CIT-A. Accordingly respectfully following the precedent as above we hold that there is no infirmity in the order of the ld. CIT(A) - Decided against revenue Addition on account of gain on settlement of loan - Held that:- In the instant case, the fact that the loan was utilized for the acquiring of fixed assets has not been disputed by the AO. Thus, it is clear that the instant loan was not utilized for the trading liability of the assessee and therefore the waiver off the same cannot amount to income which is chargeable to tax. In holding so, we find guidance & support from the judgment in the case of CIT v. Tosha International Ltd. [2008 (9) TMI 31 - HIGH COURT DELHI] - Decided against revenue Depreciation on the amount of interest capitalized which was not claimed in the return of income - Held that:- ITAT has decided the issue in favour of assessee [2011 (8) TMI 780 - ITAT, KOLKATA] whereby it was directed to allow the depreciation on the amount of interest which was capitalized.- Decided against revenue Addition on account of bad debts written off in the computation of income - Held that:- It is the established practice once the provision has been created in the books of account against the debtors then the actual bad debt will be written off to the amount of provision only against such provision. Thus, it cannot be inferred that the book debt has not been actually been written off in the books of account. - Decided against revenue Deduction of unabsorbed depreciation u/s. 115JB of the Act though brought forward loss was nil - Held that:- The issue is decided by the Co-ordinate Bench of this Tribunal in assessee’s own case [2011 (8) TMI 780 - ITAT, KOLKATA] as held that assessee was entitled to deduction in terms of clause (iii) of the Explanation to section 115JB(2) of the Act the adjustment of debit balance in the Profit and Loss Account with share Premium Account and Revaluation Reserve made on September 30, 2000, which is required to be excluded from consideration and accordingly, AO is required to determine amount of loss brought forward or unabsorbed depreciation for each of years without taking said adjustment into consideration and allow deduction in respect of lesser of two amounts - Decided against revenue Disallowing the expense u/s 14A - Held that:- When there is direct nexuses between the interest expenses and interest income. The ld. AR has not brought anything on record to establish the nexuses between the interest expenses and interest income. Therefore we are not inclined to accept the argument for netting off the interest. Hence, we reject the claim of the assessee. Alternative contention that even if section 14A read with Rule 8D is held to be applicable in the case of the assessee, the Assessing Officer may be directed to compute the disallowance as per Rule 8D of the IT Rules, by taking into consideration only those shares which have yielded dividend income in the year under consideration. Since this issue raised by the assessee as an alternative contention is squarely covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the case of CIT Vs. Teenlok Advisory Services Limited (2016 (8) TMI 682 - ITAT KOLKATA) we direct the Assessing Officer to compute the disallowance as per Rule 8D by taking into consideration only those shares, which have yielded dividend income in the year under consideration. The alternative contention of the ld. counsel for the assessee is accordingly accepted. Disallowances under the provisions of MAT in relation to exempted income we find that the disallowance needs to be made in terms of the clause (f) to the explanation 1 of the provisions of section 115JB of the Act. The provisions of the MAT are self contained code. Thus provisions of section 14A read with rule 8D are not applicable to expenses to be disallowed under clause (f) to the explanation 1 of section 115JB of the Act. In view of above we hold that the AO needs to work out the disallowances independently in relation to exempted income as envisaged in the MAT provisions under the Act. The working for the disallowance of the expenses in relation to exempted income shall be based on the expenses debited in the profit & loss account. Thus in our view the provisions of section 14A read with rule 8D cannot be applied under the provisions of MAT. Thus the assessee's appeal is partly allowed in terms of above.
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2017 (6) TMI 67
Provision for warranty expenses - Held that:- Learned representatives fairly agree that this issue is covered, in favour of the assessee, by a coordinate bench decision in assessee’s own cases for the assessment years 2000-01, 2001-02, 2002-03, and year 2004-05. Learned Departmental Representative, nevertheless, relies upon the stand of the Assessing Officer, even as he has no submissions to make on as to why should the Tribunal not follow these binding judicial precedents. We have also noted that Hon’ble jurisdictional High Court has declined to admit the appeal on this issue and the matter has thus attained finality. Disallowing provision for expenses - Held that:- So far as the amount of ₹ 92,444 is concerned, there cannot be any dispute about the genuineness of the provision to this extent, as the related payment has indeed been made, in respect of the expenses of that year, in the subsequent year. We, therefore, deem it and proper to allow the provision to this extent. The alternate plea of the assessee is thus upheld. In any case, learned counsel for the assessee did not have much to say in support of the basic plea either inasmuch as no scientific basis, for quantification of provision, was furnished. Allowability of expenditure - prior period expenses - Held that:- There is an inherent fallacy in the stand of the Assessing Officer inasmuch as in the event of assessee’s being able to make a provision for these expenses in the preceding year, the amount would have been claimed as a deduction in the preceding year, and not in the current year, yet the Assessing Officer has declined the deduction on the ground that the provision was not made in the preceding year. In any case, as we have noted, while dealing with the earlier grounds of appeal, this is a peculiar case in which the accounts are finalized within 10 days of the annual closing, so as to facilitate consolidation of accounts by the US based parent company, leading to practical problems with respect to creation of adequate provisions on the basis of cogent material. We have also noted that the assessee had presented a copy of the ledger account to the AO which showed that the expenses were actually incurred in October 2005. The incurring of expenses, or its bonafides, are thus not really in doubt. In these circumstances, in our considered view, the disallowance of ₹ 97,286 was not really called for. We, therefore, direct the Assessing Officer to delete this disallowance Denying the claim in respect of the carry forward of Long Term Capital Loss and setting it off against exempt Long Term Capital Gains - Held that:- As relying on case of GK. Ramamurthy. Versus Joint Commissioner Of Income-tax [2010 (2) TMI 28 - ITAT BOMBAY-G] we uphold the plea of the assessee. The action of the Assessing Officer on this point is reversed, and the set off of loss carried forward as thrust by the Assessing Officer, is vacated. Adjustment of international transaction of sales made to the Associated Enterprises - Held that:- Just because the assessee has sold the same product, as exported to the AEs, to the domestic enterprises, CPM method cannot be applied. That is precisely what the TPO has done. There is no other objection taken by the authorities below. There is a difference in geographical location of the market as also in the value chain and utility of the product. It is also important to bear in mind that while the products sold by the assessee to the AEs are propriety products, having unique specifications which non AEs cannot obtain from others, the assessee is in a position to fetch higher prices for the same from non-AEs. The action of the TPO, in imposing internal CPM by comparing margins on sale to AEs and non-AEs, cannot thus be justified. The benchmarking, on TNMM basis as a corroborative measure, also justifies this conclusion.In view of all these factors, and as sales to the AEs and non-AEs, which belong to different class of markets, cannot be compared on the peculiar facts of this case, the assessee is indeed justified in its plea. We uphold the same and direct the Assessing Officer to delete the impugned ALP adjustment ALP adjustment relating to payment of Royalty - Held that:- Whether or not the higher ceiling of rates, per se, prescribed by the RBI for payment of royalty can be accepted as an arm’s length price may possibly have different approaches to this issue, there can be no dispute that there is a difference in approach to the rates of royalties in respect of domestic sales and exports. This commercial reality is duly recognized and accepted by the regulatory framework in India. In any case, even if one is to ignore this reality it for a minute, what is being used as a valid CUP input is an intra AE transaction, which a parent subsidiary transaction inherently is. Even in a case in which the royalty is being given to a rank outsider, by the virtue of 92A(2)(g), the entities paying and receiving royalties become AEs. It is only elementary that a transaction between the AEs can never be a valid CUP input.What the TPO has adopted to be an ALP is essentially on the basis of intra AE transactions but in the scheme of CUP analysis such an approach is not permissible. The approach adopted by the authorities below is thus wholly devoid of legally sustainable merits. There is no other justification for the impugned ALP adjustment. In any case, in the assessment year 2006-07, these royalty payments have been held to be arm’s length payments by the DRP and that matter rests there. In view of these discussions, as also bearing in mind entirety of the case, we uphold the plea of the assessee. The Assessing Officer is, accordingly, directed to delete the impugned ALP adjustment. Thus we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned disallowance TDS u/s 195 - non deduction of tds - payment of commission to non residents - Held that:- As the recipient of the commission did not have any tax liability in respect of income embedded in such payments and as liability under section 195 can come into play only when the recipient has a tax liability in respect of income embedded in the related payments, the assessee cannot be faulted for not having deducted tax at source, and, disallowance under section 40(a)(i) does not, therefore, come into play.
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2017 (6) TMI 66
Addition of expenditure incurred on development of software - CIT(A) confirming that the expenditure on development of software is covered under section 35D and thereby sustaining the disallowance of expenditure incurred on development of software - assessee is in business of software development and sale of software products - Held that:- It is an undisputed fact that the assessee did incurred expenditure for development of software way back in the A.Y. 2004-05 and such development of software was meant to be sold in the market as a part of core its business activity. If over the period of time the said product could not be sold and has become obsolete due to fast changing technologies and software programme, then it has to be left to the prudence of the businessman to write it off in the year in which it considers that the said product cannot be sold at all or it has become scrap. In the year under consideration, the assessee has written off the said amount of expenses, which has been amortized since 2004-05, therefore, the same needs to be allowed as business loss in this year. The revenue has not disputed the fact that software is not saleable or has ‘nil’ realizable value. It is also the fact stated before us that this software is not sold as it has lost its utility. Thus, on this ground we are of opinion that the said amount of ₹ 24,65,578/- is to be allowed as business loss as technical obsolescence of the inventory while computing the income under section 28/29 of the act in this year. Hence, the appeal of the assessee is allowed on the reasoning given above.
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2017 (6) TMI 65
Addition to bogus purchases - assessment of profit - grievance of the assessee is that the amount of profit which is already disclosed by the assessee should be deducted; otherwise it will lead to excessive addition - Held that:- The assessee emphatically stated before us that if this issue is sent back to the file of the AO then, the assessee shall be able to match the amount of the sales with the corresponding amount of alleged bogus purchases and therefore the exact amount of profit disclosed on these purchases can be factually worked out. This issue is accordingly sent back to the file of the AO where the assessee shall submit requisite details and evidences to show the corresponding amounts of sales against the impugned bogus purchases and then the amount of addition sustained @ 8% by the Ld. CIT(A) shall be further reduced by the amount of gross profit actually shown on these purchases. The addition shall be sustained on the balance amount. The AO shall give adequate opportunity to the assessee before deciding this ground afresh. Thus, assessee would get part relief. This ground may be treated as allowed for statistical purposes.
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2017 (6) TMI 64
Addition on account of bogus purchases - Held that:- From the documents placed on record as find that the purchased material has been used in the business of the Assessee in manufacturing cable reeling drums and cable drag chain. The same were subsequently sold to the various parties and income received from the said transaction was offered for tax. The Assessee to substantiate the genuineness of the purchases furnished purchase bills, sales bills, bank statement, party wise purchase and sales details before the A.O. Gross Profit of the impugned assessment year is in consonance of the Gross Profit declared for the earlier and subsequent assessment years. Under these facts and circumstances, relying on the decision of Bombay High Court in case of Nikam Exims Pvt. Ltd.[2013 (1) TMI 88 - BOMBAY HIGH COURT] hold that addition to the extent of 10% of such bogus purchase will serve the purpose, keeping in view the nature of trade being carried on by the assessee vis-a-vis other facts and circumstances of the case. - Decided partly in favour of assessee.
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2017 (6) TMI 63
Addition made u/s 68 - proof of identity of the lender, capacity and genuineness of the loan - Held that:- It is noted that addition has been made in the case of assessee broadly on the basis of statement of Shri Harish Sharma, which was retracted by him, supported by an affidavit. However, the assessee has fulfilled the conditions required u/s 68 of the Act. Nothing prevented the Ld. Assessing Officer to record the statement of shares subscribers or other persons and confront the assessee, if something is found against the assessee. The present assessee was never examined by the Assessing Officer with respect to the statement tendered by Shri Harish Sharma or Shri Shirish Shah. The present assessee was never provided the statement of Shri Shirish Shah. Neither any query was raised from these persons with respect to the present assessee. Even it is presumed that M/s Encee Securities Pvt. Ltd. got the money from certain share applicants/some persons, how addition can be made u/s 68 in the hands of the present assessee. It seems that addition has been made of the same amount in difference hands like substantive addition in the hands of M/s Encee Securities Pvt. Ltd. and on protective basis in the hands of the present assessee, which cannot be said to be justified. Totality of facts and the circumstances clearly indicates that at least the addition in the hands of the present assessee cannot survive. Even no question was put to Shri Harish Sharma against Shri Shirish Shah, while recording the statement. Thus, considering the totality of facts, and the material available on record, we don’t find any justification to make the addition u/s 68 of the Act in the hands of the present assessee, therefore, the appeal of the assessee is allowed.
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2017 (6) TMI 62
Disallowance u/s 14A - whether the amount of disallowance u/s 14A cannot be exceeded the exempt income? - Held that:- As held in the case of Maxopp Investment Ltd. Vs. CIT (2011 (11) TMI 267 - Delhi High Court) it is not the purpose of the expenditure which is relevant. Once exempt income is earned, it means that some expenditure being incurred in relation to the exempt income which should be disallowed by applying formula laid down in rule 8D(2)(iii). Therefore, action of the AO is correct in applying rule 8D(2)(iii) but the amount of disallowance should be restricted to the dividend income. Thus we set aside the order of ld.CIT(A) and direct the AO to restrict the disallowance to ₹ 17,50,000/- i.e. exempt income earned by the Appellant during the year under consideration” only. The appeal of the assessee is allowed. Rental income - taxed as income from house property OR business income - Held that:- The case of the assessee stands covered in favour of the revenue and against the assessee by a decision of Reliance Infrastructure & Consultants Ltd., V/s ACIT [2012 (10) TMI 1144 - ITAT MUMBAI] as relying on Reliance Infrastructure & Consultants Ltd., V/s ACIT [2003 (1) TMI 99 - SUPREME Court] as relying on case of Shambhu Investment Pvt Ltd V/s CIT reported (2003 (1) TMI 99 - SUPREME Court ) came to the conclusion that the rental income has to be taxed as income from house property and not business income - Decided against assessee.
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2017 (6) TMI 61
Revision u/s 263 - Bank Guarantee commission to be considered as interest for disallowance u/s 14A - Held that:- Bank guarantee commission cannot be considered as interest on borrowing. The board notification no. 56/2012 dated 31.12.2012 had clearly held that bank guarantee commission paid to a bank need not suffer deduction of tax at source under Chapter XV of the I T Act. AO in the course of assessment proceedings has called for details of bank guarantee commission paid. The assessee in its reply dated 9.2.2015 had submitted the details called for by the Assessing Officer and on examination of the same no disallowance was made. It also to be noted that the Assessing Officer, in the assessment had made disallowance by invoking provision u/s 14A of the Act. Therefore, according to us, the Assessing Officer has taken a conscious decision not disallow bank guarantee commission paid by the assessee by invoking section 14A of the Act. Bank guarantee commission paid by the assessee is not in the nature of interest expenditure warranting disallowance u/s 14A r.w.r 8D(2)(ii). Investment written off during the year not considered for arriving at disallowance u/r 8D - Held that:- The rule requires the value of investment, the income from which is exempt from tax alone to be considered for the disallowance. The sum of ₹ 8,94,800/- written off during the year is in respect of joint venture in Dubai in Peninsular Middle East DMCC. The Income from this investment is not exempt from tax and hence the same need not be considered for disallowance u/s 14A r.w.r 8D. Therefore, it cannot be said that there is error in the assessment order. Provision for leave encashment - Held that:- The assessee in the statement of total income had mentioned in the footnote that no disallowance was made towards leave encashment, following the decision of the jurisdictional Kerala High Court in the case of Hindustan Latex Ltd.[2012 (6) TMI 713 - KERALA HIGH COURT ] The Assessing Officer has accepted the same while completing the assessment. There is no error in the assessment since the Assessing Officer has followed the judgment of the jurisdictional High Court. Loss on trading in shares not considered as loss from speculation business as required under explanation to section 73 - Held that:- Assessee, in the assessment proceedings, vide its reply dated 9.2.2015 has answered in detail the loss in trading, scrip wise profit and loss etc., (details are furnished from pages 38 to 47 of the paper book filed by the assessee). The AO during the course of assessment proceedings had examined the evidence furnished and had concluded the assessment. On examination of record, it is clear that loss on trading in shares amounting to ₹ 21,30,564/- cannot be from speculative business and there is no error in the Assessment order to the above extent. Appeal decided in favour of assessee.
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Customs
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2017 (6) TMI 95
Jurisdiction of CESTAT - order has been passed by a judicial member only and not by the Bench as envisaged under Section 129C of the Act - Held that: - as per section 129C, if the value of the goods confiscated without right of redemption exceeds ₹ 50 lakhs, a single member of the CESTAT is not competent to decide the appeal in respect thereof - the impugned order passed by single member of the Tribunal is without jurisdiction and in violation of Section 129C of the Act - appeal dismissed - decided against Revenue.
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2017 (6) TMI 94
Benefit of N/N. 93/2004-Cus dated 10.09.2004 - the appellant failed to produce the necessary EODC from the office of DGFT, within the stipulated time - Held that: - The customs duty has been paid in terms of direction given by the licensing authority and the same has been taken note of by the licensing authority to close the matter. In such situation, we find no further issue remains to be decided. The fulfillment of the licensing condition or other related matter cannot be again re-examined as the same has been settled by the competent authority - the impugned order cannot be varied as there is no reason for doing so - appeal dismissed - decided against appellant.
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2017 (6) TMI 93
Mis-declaration of quantity as well as nature of product - Held that: - when the impugned order was passed no original order was existing, as the same got merged with order of Commissioner (Appeals) dated 13.12.2012. As such, the impugned order has no legal sanctity and cannot be enforced. It is clear that the earlier first appellate order is by the same office and as such not taken note of, which resulted in the present order. As such, we find the present impugned order lacks legal sanctity and cannot be enforced. Appeal allowed - decided in favor of appellant.
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2017 (6) TMI 92
Classification of imported coal - whether it is to be considered as Bituminous coal or Steam coal? - Held that: - the issue has been decided by Larger Bench, where different benches of CESTAT have taken different views at the instance of the parties, and it was held that liberty is granted to the applicants/assessees to come again before this Tribunal after having the final verdict from the Apex Court, within the prescribed time - appeal allowed.
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Corporate Laws
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2017 (6) TMI 89
Scheme of Amalgamation - Held that:- In view of the approval accorded by the shareholders of the Petitioner Companies to the proposed scheme; the report filed by the Official Liquidator and the affidavit filed by the Regional Director, Northern Region, wherein all observations raised stand satisfied, there appears to be no impediment to the grant of sanction to the proposed scheme. Consequently, sanction is hereby granted to the proposed scheme. The Petitioner Companies will comply with the statutory requirements in accordance with law. Upon the sanction becoming effective from the appointed date of the proposed scheme i.e., 1st August, 2014, the Transferor Companies shall stand dissolved without undergoing the process of winding up. Resultantly, it is hereby directed that the Petitioner Companies will comply with all the provisions of the proposed scheme and, in particular, those which are referred to hereinabove. It is also made clear, that the concerned Statutory Authority will be entitled to proceed against the Transferee Companies qua any liability which it would have fastened onto the Transferor Companies for the relevant period, and that, which may arise on account of the proposed scheme being sanctioned.
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2017 (6) TMI 88
Restoration of the name of the petitioner company in the Registrar of Companies - Held that:- The attitude of the Registrar of Companies in not substantiating the averments about the service of notice as mandatorily required under the provisions of Companies Act, 1956 before striking out and dissolving the company is also required to be seriously deprecated the onus of proving that in fact, the notice as contemplated under the provisions of Section 560 (1) and 560 (2) of the Act lies with the respondent and the same cannot be done without the issue of the requisite statutory notices and in case of its service in considering its reply if any given within the mandated period by the Registrar of Companies like the petitioner company. It is another matter if the notice has been served requiring the petitioner company to show cause and despite the same, the petitioner company has failed and neglected to respond. However, that is not the case here. Taking into consideration the above aspects and in view of the petitioner demonstrating that as of today, the company is a running company and that it will be seriously prejudiced if not restored in the register of Registrar of Companies, the petition is allowed subject to following conditions, namely, the petitioner company shall :- (a) subsequent to a month of the restoration of the petitioner company's name in the register maintained by the Registrar of Companies, the petitioner will file its annual returns and Balance Sheets for the period from which there has been a default including for the period from 01.04.2000 onwards along with requisite charges/fees as well as additional fee /late charges. (b) that an affidavit of compliances of the aforesaid directions be filed by the petitioner and the other directions given hereunder within a period of 3 months from the date of this order. (c) that the petitioner company out of its reserve/cash and bank balance set apart a sum of ₹ 5 lakhs and deposit the same with the respondent to defray costs and expenses within a period of 2 months from the date of this order. (d) till all compliances are made by the petitioner company, the petitioner company shall not alienate or dispose off any of its valuable assets and the Directors shall not hold out that they all are representing the company and authorized to do so in relation to such disposal.
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Service Tax
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2017 (6) TMI 119
Renting of immovable properties - case of petitioner is that they were landlords or tenants of leased premises and contended that they could not have been saddled with liability of service tax inasmuch as it amounts to tax on 'land' hence was outside legislative competence of Parliament inasmuch as 'land' is an item covered under Entry 49 List II Schedule VII of Constitution of India and within exclusive domain of State Legislature, therefore imposition of service tax on land, by Parliament was ultra vires - Held that: - Division Bench of Delhi High vide judgment in Home Solutions Retail India Limited [2009 (4) TMI 14 - DELHI HIGH COURT] held that Section 65(105) (zzzz) does not in terms entail that renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax under the said Act. While interpreting circular, it was found obnoxious and beyond the said provision. Court therefore, struck down the same. - Appeal against the decision of Delhi HC is pending before SC. - Subsequently parliament amended the provisions with retrospective effect. Effects of amendments - retrospective or prospective? - Held that: - Though the appeal before SC are pending, the fact remains that various High Courts have affirmed the amendments which are under challenge in these writ petitions and appeals are pending before Supreme Court. Amendments made with retrospective effect are nothing but clarificatory and by way of ex abundanti cautela. Petition fails - decided against petitioner.
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2017 (6) TMI 118
Maintainability of appeal - appropriate forum - Classification of services - Held that: - “the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment” would be covered by Section 35 L of the FA, 1994 and the appeal in such case from an order of the CESTAT would lie directly to the Supreme Court - appeal dismissed on the ground of maintainability.
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2017 (6) TMI 117
Manpower recruitment agency - appellant also providing the services abroad for which they are of the belief that it is export of service and accordingly, no service tax was paid - case of Revenue is that the service provided in abroad is not export of service for the reason that in some of the cases though the service charge was received in foreign currency but DFRC was not submitted. In some of the cases, the service charge was received in Indian Rupees - Held that: - as per the statutory provision, the only requirement is that against the export of service payment should be in convertible foreign exchange. If that is satisfied even though the DFRC is not submitted the status of the export cannot be rejected as DFRC is only a procedural requirement. If otherwise it is established the payment was received in foreign exchange the same is to be accepted as an export of service - As regards the cases where the payment was received in Indian Rupees we find that there is no dispute that the payment though in Indian Rupees but received through foreign banks i.e. HSBC, Bank of Bahrain and Kuwait. On both counts when the payment received in foreign exchange as well as payment received in Indian Rupees, but through foreign banks the services provided in abroad is indeed export of service - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 116
Maintenance or management of immovable property service - levy of tax for the period prior to date of levy - Held that: - the various activities being carried out by the appellant towards maintenance of immovable properties constructed by the Prestige Group are clearly falling within the category of Section 65(64)(b) which stands included in the statute book w.e.f. 16/06/2005 - we find no justification for the demand of service tax for the period October 2000 to June 2005 which is prior to the date of introduction of new service tax levy under the category of maintenance or management of immovable property made liable to service tax w.e.f. 16/06/2005 - appeal allowed - decided partly in favor of appellant.
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2017 (6) TMI 115
SSI exemption - Benefit of N/N. 6/2005-ST dt. 01/03/2005 - denial on the ground that the services rendered were under a brand name or trade name of another person - Held that: - appellant did not engage a consultant and make an effective rebuttal before the original adjudicating authority. The adjudicating authority also did not go through the books of accounts submitted by them but went ahead with the confirmation of the service tax demand. When the issue was agitated before the Commissioner(Appeals), he records in his order that the appellant did not make their defence submission with material and evidences in support before the original adjudicating authority - the issue remanded to the original adjudicating authority for a de novo decision - appeal allowed by way of remand.
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2017 (6) TMI 114
Business Auxiliary Service - service of providing the L/C facility to the importers - whether the service provided by appellant falls under the clause (iv) of Section 65 (19) of the FA, 1994, procurement of goods for services which are inputs for the client - Held that: - if any service provider procured the goods or services for the client and the same is input for the client then the services falls under the proposed category - In the facts of the present case, it is undisputed that the appellant is not procuring any goods for their clients. The goods which was referred by the lower authorities is the imported goods, which was directly imported by the various importers. The service of the appellant is confined to only providing the facility of L/C through their bank to the various importers - demand unsustainable - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 113
Refund claim - unjust enrichment - denial on the ground that the amount paid as service tax is based on self-assessment and filed ST 3 returns voluntarily that too before issuance of SCN shows that they accepted the liability - Held that: - Rejection of the refund merely on the ground that the appellant has voluntarily paid the tax is not legally correct - Having accepted the decision of the Commissioner (Appeals), the department cannot turnaround and does not implement the decision of the Commissioner (Appeals) - the impugned orders denying the refund in both the appeals is not justified and correct - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 112
Refund of cenvat credit - export of services - rent-a-cab services - General Insurance Services - Rule 5 of the CCR, 2004 - N/N. 27/2012-CE (NT) dated 18.06.2012 - denial on the ground that the said services are utilised for insuring the premises of the appellant and other properties of the appellant - Held that: - the travel was not for personal purpose or for leave, vacation or home travel concession. Thus, such travel undertaken by the employees are not used primarily for personal use or consumption of any employee. Therefore the exclusion part of the definition does not apply for the service availed for travel insurance of the employees in the present case. Therefore, the credit availed on such services is held to be eligible. The appellants are entitled for refund of the amount incurred on General Insurance Services and all other services except rent-a-cab services. Appeal allowed - decided partly in favor of appellant.
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2017 (6) TMI 111
Refund claim - export of Information Technology Software Services for the period April 2008 to June 2008 - denial on the ground that they had not submitted bifurcated figures in respect of IT enabled services and the other services exported, non-registration for the exported services and also time barred - Held that: - these services rendered by the appellant are export services as is clearly brought out in the softech form, APR, financial etc - Further the CA certificate submitted by the appellant also certified that the appellants have rendered export services and the consideration received by the appellant is only for export of services and further the declaration from service recipient that the services have been received from PA Consulting during the disputed period - the appellants are entitled for the refund as claimed by them - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 110
100% EOU - Refund of CENVAT credit - denial on account of time limitation - Held that: - the said issue stands settled by the decision of Hon’ble Gujarat High Court in the case of CCE Vs Balkrishna Textiles Mills Pvt. Ltd [2016 (6) TMI 354 - GUJARAT HIGH COURT], wherein it has been held that when the statute does not provide limitation, no limitation can be read therein - the limitation under Section 11B does not apply for refund of accumulated Cenvat credit. The amount of Cenvat credit disallowed, is bad and beyond the scope of show cause notice - appeal allowed - decided in favor of assessee.
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2017 (6) TMI 106
CENVAT credit - input services - inputs - transmission towers including spares/parts of said towers - Held that: - the issue of admissibility of CENVAT credit on transmission towers and spares/ parts of said towers is covered by the Tribunal’s decision in case of Prism Cement Ltd. Vs CCE [2017 (3) TMI 1283 - CESTAT NEW DELHI], where it was held that Cenvat Credit is not eligible only on the ground that these goods are immovable is against the law as settled by the Hon’ble High Court of Gujarat in the case of Mundra Ports and Special Economic Zone Ltd. [2015 (5) TMI 663 - GUJARAT HIGH COURT] - the appellant is entitled to the Cenvat credit for the duty/taxes paid on transmission towers and their parts/spares. Admissibility of CENVAT credit for the input service of erection/ commissioning/ installation of transmission towers/ lines - Held that: - When the transmission towers/ lines have been held to be admissible input for claiming Cenvat credit input service of commissioning erection and installation of said transmission towers/lines would also be eligible to Cenvat credit - The Tribunal in the case of M/s Hindustan Zinc Ltd Vs CCE, Udaipur vide [2017 (5) TMI 233 - CESTAT NEW DELHI] has held that consultancy service irrespective of laying of pipelines for supply of water from dams to the mines of the appellant is an admissible service for claiming Cenvat credit - credit allowed. Appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (6) TMI 109
CENVAT credit - fake invoices - denial on the ground that the inputs not received in the factory and not utilized in the manufacture of final product - Held that: - the matter is squarely covered by the judgment of this Court in Central Excise, Customs & Service Tax Vs. Juhi Alloys [2014 (1) TMI 1475 - ALLAHABAD HIGH COURT], where it was held that The goods were demonstrated to have travelled to the premises of the assessee under the cover of Form 31 issued by the Trade Tax Department, and the ledger account as well as the statutory records establish the receipt of the goods. In such a situation, it would be impractical to require the assessee to go behind the records maintained by the first stage dealer - appeal dismissed - decided against Revenue.
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2017 (6) TMI 108
Refund claim - denial on account of time limitation - Held that: - the credit has been accumulated on account of exports of goods made against various ARE-1 during the period April 2005 to December 2005 and exports made till January 2006, has been barred by limitation prescribed u/s 11B of CEA, 1944, hence the said refund cannot be allowed to them - reliance placed in the case of Commissisoner of Central Excise Versus GTN Engineering [2011 (8) TMI 960 - MADRAS HIGH COURT], where it was held that the relevant date should be the date on which the export of the goods was made and for such goods - appeal dismissed - decided against appellant.
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2017 (6) TMI 107
CENVAT credit - steel structures used in the manufacturing of supporting structurals - Held that: - subject matter is covered by Hon’ble Madras High Court decision in case of India Cement Ltd .Vs CESTAT, Chennai [2015 (3) TMI 661 - MADRAS HIGH COURT], where on similar issue the credit stands allowed - The Tribunal in the case of Singhal Enterprise Pvt. Ltd Vs CCE Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI] has also held that structural steel items used in fabrication of support structurals are to be treated as parts of capital goods and are eligible for claiming CENVAT credit by the manufacturers - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 105
Interest on delayed refund - whether the appellant is required to file an application to claim interest on delayed refund in terms of Section 11BB of the CEA, 1944 or not? - Held that: the issue has been examined by the Hon’ble High Court of Allahabad in the case of Siddhant Chemicals [2014 (5) TMI 59 - ALLAHABAD HIGH COURT], where it was held that A bare perusal of Section 11BB of the Act, reveals that the payment of interest is not depended on the claim by the party. It is automatic - the appellant is not required to file an application to claim interest on delayed refund in terms of section 11BB of the Act - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 104
CENVAT credit - the inputs although written in their balance sheets but are still lying in their factory - applicability of provisions of Rules 3(5) of the CCR, 2004 - Held that: - in this case in respondent's own case M/s BCH Electric Ltd. Versus Commissioner of Central Excise, Faridabad-I [2016 (6) TMI 469 - CESTAT CHANDIGARH], it was held that there is no provision for reversal of cenvat credit on inputs/ components which have been used in the manufacture of final product. In fact, as per Section'3 of the Central Excise Act, 1944, the goods manufactured by an assessee are to be cleared on payment of duty, therefore, reversal of cenvat credit on finished goods does not arise. The show cause notice has been issued by invoking extended period of limitation, the same is not maintainable. Demand set aside - appeal dismissed - decided against Revenue.
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2017 (6) TMI 103
Clandestine manufacture and removal - The main case of the Revenue against the respondent is that they have indulged in clandestine manufacture and clearance of excisable goods without payment of duty, in the guise of free replacement, goods rectified and returned, short supplied, samples etc. - Held that: - the Commissioner(Appeals) has not given detailed justification for dropping the demands - it is clearly evident that description such as rectified and returned, short-supplied etc. indicated in the delivery challans are nothing but a camouflage to cover the fact that goods were being cleared clandestinely without payment of duty. Consequently, the Commissioner(Appeals) has erred in dropping such demands with the cryptic findings - Order-in-Original is restored - appeal allowed - decided in favor of Revenue.
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2017 (6) TMI 102
Levy of tax - some quantities of gases sent through pipeline to the recipient was vented out into atmosphere - Held that: - the same issue pertaining to the very same appellant for an earlier period had come up before this Tribunal wherein the issue was decided in favour of the respondent in the case of CCE, Belgaum Versus M/s. Jindal Praxair Oxygen Co. (P) Ltd. [2012 (8) TMI 825 - CESTAT BANGALORE], where it was held that gases which were vented out in the atmosphere are exempted from excise duty - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 101
Refund claim - courier services availed for the export of goods - rejection on the ground of non-realization of foreign exchange - the appellants have exported the spare parts to their dealers abroad by way of free warranty replacement as per their contract which is placed on record and for exporting the said components they have availed the services of courier agency for which they have paid the service tax - Held that: - the appellant has produced the invoices on record which clearly shows that it is free warranty replacement and the invoices have been produced on record - Appellants have also produced a copy of the agreement between his dealers by which the appellants are under obligation to supply the parts under free warranty replacement, then in that case no monetary consideration flow from the buyer and therefore the department’s view that bank realization certificate has not been produced is not justified ground for refusal of the refund - refund allowed - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 100
CENVAT credit - duty paying invoices - improper invoices, in as much as, they were photocopies of invoices and some invoices were not in their name - Held that: - the CENVAT credit taken on the basis of photocopy is not permissible - the CENVAT credit taken on the basis of photocopy is rejected. The appellant has taken CENVAT credit on the basis of invoices which are not addressed to it and are addressed to its sister concern which is only a technical lapse - the rejection of CENVAT credit on this ground is not legally justified. Appeal allowed - decided partly in favor of appellant.
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2017 (6) TMI 99
CENVAT credit - Steel Plate or Sheets, Bar Rounds etc., used for the purpose of repairing and maintenance of their capital goods - inputs or not? - Held that: - the issue has been considered by this Tribunal in Kissan Sahakari Chini Mills Ltd's case [2013 (7) TMI 2 - CESTAT NEW DELHI], where it was held that the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for Cenvat credit - credit allowed - decided in favor of assessee.
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2017 (6) TMI 98
CENVAT credit - registration was granted by the department on 8th May, 2001. They started taking Cenvat credit on inputs w.e.f. 4th May, 2001 - denial on the ground that credit cannot be allowed without having registered the premises of appellant - Held that: - on 3rd May, 2001 when the appellant have applied for the registration, they deemed to have been registered from 3rd May, 2001, accordingly it cannot be said that they have taken modvat credit without being registered - Even if it is assumed that registration has been issued on 8th May, 2001 credit cannot be disallowed only on the ground that the appellant was not registered at the time of taking credit for the reason that there is no bar or restriction provided under provision for availing modvat credit in CER, 1944 prevailing at the relevant time - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 97
CENVAT credit - input services - Insurance - Air Travel Bills - Taxi Bills - Motor Vehicle Service charges - Club Bill which is paid to Madras Gymkhana Club and Presidency Club - Held that: - the appellant has not brought any material on record to show that these Club bills are related to the business operation of the appellant - these are private clubs and are not business clubs and therefore the expenditure of the club cannot be termed as an 'input service' - credit not allowed. As far as service tax paid on Insurance, Air Travel Bills, Taxi Bills and Motor Vehicle Service charges are concerned, I allow the appeal of the appellant, by allowing credit. Appeal allowed - decided partly in favor of appellants.
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2017 (6) TMI 96
CENVAT credit - inputs - denial on the ground that the process undertaken by the appellant does not amount to manufacture - Held that: - It is an admitted fact on record that the Registration Certificate surrendered by the appellant on 14.06.2005 was restored by the Department, stating that the processes undertaken by the appellant amount to manufacture. The Department itself has recognized the processes undertaken by the appellant, as amounting to manufacture, and consequently the central excise duty paid by the appellant, was retained as the Government Revenue. As such, cenvat credit taken on the inputs, input services and capital goods, cannot be denied on the ground that those goods and services were used for manufacture of non-dutiable goods, on which duty liability has been discharged from cenvat credit account. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (6) TMI 91
Taxability - sale of flavoured milk - petitioner is selling "flavoured milk" in the name of "Amul Elaichi Shake" and "Amul Coco Shake" in tetra brick packaging. The said "flavoured milk" is a type of processed milk in which some permitted flavours, colour and sugar are added before they are packed as aforesaid for sale - whether the sale of such "flavoured milk" is subject to payment of tax under the U.P. Sales/Trade Tax Act, 1948? - Held that: - 'milk' is not taxable whereas certain forms of the 'milk' such as condensed milk, milk powder or baby milk are taxable. In exercise of its power under Section 3-A of the Act the State Government notified tax @ of 6% w.e.f. 07.09.1981 upon milk powder, condensed milk, baby milk, baby foods and all other food stuffs or products, whether used as such or after mixing them with any other food stuff or beverage, when sold in sealed tinned containers. A combined reading of Section 4 of the Act and the aforesaid notification would reveal that milk other than condensed milk, milk powder and baby milk stand exempted by the State Government from payment of tax under the Act with the exception of certain forms of milk, milk products and products sold in sealed containers. Section 4 of the Act exempts milk from tax. It does not refer to raw milk. The 'milk' as exempt would therefore include within its fold all forms of milk unless otherwise excluded. Thus, hot or boiled milk, cold milk, flavoured milk, bottled milk except the forms of milk which have been excluded specifically from the exemption stand ousted from tax net under the Act. Generally, milk is either sold raw or after some processing such as boiling or cooling to make it usable for a longer time but such processing even that of pasturising does not alter the nature of the milk or its characteristic. Even if milk is condensed, skimmed or toned it remains a milk though its form may change - as flavoured milk is basically a milk that stands exempted under Section 4 of the Act read with notification dated 31.01.1985 whether sold in open form or in sealed containers. The "flavoured milk" in controversy is a form of milk which is exempt from tax under Section 4 of the Act as no notification prescribes for levying tax upon it even if it is sold in sealed containers - the demand notice as well as assessment orders dated 08.09.2006 and 2006-07 and 2007-08 demanding and assessing tax on the sale of "flavoured milk" in sealed packs are not sustainable - petition allowed - decided in favor of petitioner.
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2017 (6) TMI 90
Input Tax credit - capital investment made by the Dealer in respect of Dry Dock and Fit Out Berth more particularly on purchase of cement, steel, greet etc. used in construction of Dry Dock and Fit Out Berth, which were used as capital goods - the main issue of this appeal is Whether the Hon’ble Tribunal has erred in holding that Input Tax Credit u/s.11(3)(a)(vii) of the Gujarat Value Added Tax Act, 2003 is available for purchase of cement, sand, steel, greet, concrete etc. that are used for manufacture of capital goods? Whether in the present case Dry Dock and Fit Out Berth shall be categorized as “capital goods” under the VAT Act or not? - Held that: - relying in the case of Scientific Engineering House (P) Ltd. [1985 (11) TMI 1 - SUPREME Court] it is held that the definition of the “Capital Goods” contained in section 2(5) of the VAT Act, Dry Dock and Fit Out Berth which are necessary for the purpose of business of the Dealer, the same are to be treated and held as “plant” - the issue is held in favor of the Dealer and against the Revenue and it is held that Dry Dock and Fit Out Berth are plant / capital goods. Whether on the purchase of cement, sand, steel, greet, concrete etc. that are used for manufacturing of capital goods viz. Dry Dock and Fit Out Berth, the Dealer is entitled to Input Tax Credit or not? - Held that: - as cement, sand, steel, greet, concrete etc. are required to be used in manufacturing of “Capital Goods” viz. Dry Dock and Fit Out Berth, which is an integral part of the final product of the Dealer are without the Dry Dock and Fit Out Berth, it is not possible for the Dealer to carry on his business which is of ship building / manufacture and repairs of ship and that the Dry Dock and Fit Out Berth are specialized in nature which are required to be constructed specially and specifically for the purpose of business of the Dealer i.e. ship building / manufacture and repairs of ship, applying the “User Test” it is to be held that on purchase of cement, sand, steel, greet, concrete etc. which are used in Dry Dock and Fit Out Berth (Capital Goods), Dealer shall be entitled to Input Tax Credit - answered in favor of assessee. Appeal dismissed - decided in favor of assessee.
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