Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 4, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Applicability of Section 50C while claiming deduction u/s 54 - exemption is allowable with reference to the amount of Capital Gain and not with reference to the amount of net consideration - Exemption allowed despite additions made u/s 50C - AT
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Deemed dividend - only the assessee is holding 15% of the voting power in the lending company and 45% of voting power in the borrowing company - there is no question of any proportionate addition when the assessee is the only share holder who fulfills the condition prescribed u/s 2(22)(e) - AT
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Deemed dividend u/s.2(22)(e) - advanced by the company - Mere reliance on legal proposition without furnishing the supporting material does not help the cause of the assessee. It only amounts to a bald claim - AT
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Exemption u/s.10B - whether the interest received and the consideration received by sale of import entitlement is to be construed as income of the business of the undertaking. There is a direct nexus between this income and the income of the business of the undertaking. - Held Yes - AT
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Levy of interest u/s. 234B - there is no default on the part of the assessee in payment of advance tax which was as per the estimated income of the assessee and is consistent with the practice followed by the assessee right from the beginning - no interest - AT
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Reopening of assessment - reasons for assessment reopened are identical to the objections of the audit party - A.O. has reopened the assessment without any application of mind and accordingly the reopening is not sustainable in law - AT
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Deemed dividend u/s 2(22)(e) - refundable security deposits in lieu of letting of the properties - It is a trite law that the deeming fiction has to be strictly construed and such legal fiction cannot be extended for any kind of payment by a company to its shareholder - no penalty - AT
Customs
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Denial of refund claim - preferential rate of country of origin - once Bill of Entry assessed and duty paid and appellants cleared the goods the assessment becomes final and the appellant did not contest or file appeal against the assessment order, refund not allowed - AT
Indian Laws
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Distribution of estate of deceased's investments - Nomination of FDs in favor of Daughter - whether such nominated assets to be excluded from the estate of the deceased - Held no - Nominations cannot and do not displace the law of succession, nor do they open a third line of succession - HC
Service Tax
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Arrest of person for default in payment of service tax - the show cause notice was issued subsequently, after arrest which is yet to be adjudicated upon. The hurry to arrest prima-facie amounts to a punitive measure, prejudging the issue - interim bail granted - HC
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Renting of immoveable property service - The argument that as per the amended lease deed dated 29.03.2011, the building was only let out for ₹ 55,000/- per month out of ₹ 7,00,000/- and the rest of the amount was only on account of the rent of the immoveable plant and machinery, which was moveable and not liable to service tax, prima facie, cannot be accepted - HC
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Denial of CENVAT Credit - whether the respondent was entitled to credit on management, maintenance or repair services provided on windmills installed by the respondents - Held Yes - Rule does not say that input service received by a manufacturer must be received at the factory premises - HC
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CENVAT Credit - Trading activity - input services - Quantification of credit to reversed towards trading activity - period prior to 1.4.2011 - credit should be apportioned with reference to the turnover of the manufactured cars and turnover of the traded cars - AT
Central Excise
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Imposition of penalty - Issue of bogus invoices - Penalty under Rule 26, whether under sub-Rule (1) of Rule 26 or under sub-Rule (2) of Rule 26 can be imposed on a juristic person also i.e. on a company or a firm. - AT
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Levy of duty on aluminium dross - whether Aluminium Dross emerging as product is excisable or otherwise - Everything which is sold is not necessarily a marketable commodity as known to commerce and which it may be worthwhile to trade in - AT
VAT
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Attachment of property - Preferential creditor - the claim of the petitioner that it had preference over the tax dues of the borrower of the petitioner, does not merit any acceptance in view of the provisions of Section 35 of the VAT Act. - HC
Case Laws:
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Income Tax
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2015 (6) TMI 71
Addition on account of bogus purchases - Deduction of loss of goods by fire - Penalty u/s 271(1)(c) of the Income Tax Act, 1961 - Held that:- We are of the view that the fact of damage of goods by fire was not denied in this case. That loss was stated to be the reason of big financial loss suffered by the Assessee. Although, this should not be the reason for proving the genuineness of the purchases but loss due to fire could lead to one possible conclusion that the assessee was not having sufficient evidence to support its claim of purchases. Undisputedly, he was going through hardship and therefore the correct factual position could not be demonstrated. In the compilation, the assessee has placed before us the purchase bills of Pirth Trade Link along with delivery challans. The compilation also consist the purchase bills of Sydney Sales Corporation along with the delivery challans. The Assessee has also placed on record the evidence of transportation of goods from Panch Mahal Transport Company. All these documents were stated to be filed before the AO as well. In addition to these evidences, the Assessee has also placed on record the audited financial statement for the year under consideration to demonstrate that without these purchases there was no possibility to execute the sales. There was no allegation of the Revenue Department that the sales have also not tallied with the corresponding purchases as shown by the Assessee. However contrary to this; payments have been seriously doubted, although it was made through cheques but to some other party. It is also held by several courts that mere payment by cheque do not establish genuineness if not corroborated. Be that as it was, as also to settle the issues; we hereby accept the alternate submission of learned AR not to assess the entire purchases but to assess a reasonable amount of profit earned from those purchases. For this reason, we hereby follow the decision of the Respected Co-ordinate Bench pronounced in the case of M/s. Baldiwala Brothers [2013 (8) TMI 515 - ITAT AHMEDABAD] wherein the profit @ 12.5% was directed to be assessed in respect of alleged bogus purchases. We direct accordingly. Both the lower authorities have merely adopted an estimated figure of value of the stock. The AO was expected to arrive at the justified conclusion of valuing the cost of closing stock. Merely by applying a gross profit rate, the AO has adopted an estimated figure of cost of closing stock which cannot be approved in the eyes of law. We, therefore, hold that in the absence of any corroborative evidence placed from the side of the Revenue to justify the change in the valuation of the closing stock we hereby dismiss such estimation. In the result the addition made merely on suspicion is hereby reversed. - Decided partly in favour of assessee. Penalty u/s 271(1)(c) of the Income Tax Act, 1961 - On perusal of the orders of the authorities below, we have noted that the assessee has furnished the books of accounts and relevant details. The fact about the purchases from those two concerns was duly disclosed. On the basis of those facts and the information available on record, the AO has initiated certain inquiries. Therefore, it is not a case that the facts about the purchases were concealed by the Assessee. However, the question still to be examined that whether these facts were true or not? As far as the Assessee is concern, he has explained that the purchases were made from those parties in the regular course of business as is proved by producing delivery challans and confirmation of transporters for transportation of goods. It has also been pleaded that the accounts were duly audited and there was no adverse remark by the auditor. It has also been pleaded that the sales were duly recorded in the books of accounts which were not disturbed by the AO. Therefore, the argument was that there was no possibility of execution of sales if the corresponding purchases have not been made. In addition to these facts, one more aspect is that we have now directed to assess the income by applying 12.5% of profit. Meaning thereby the total purchases amount has not been added but an estimated figure of profit is now to be assessed in the hands of the Assessee. In such situation, when an estimation is made by this Court then the issue of concealment has come under the cloud of suspicion. Merely on the ground of suspicion as also considering the total facts it is hereby held that concealment penalty need not to be levied. We, therefore, direct to delete the penalty. - Decided in favour of assessee.
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2015 (6) TMI 70
Dis-allowance of interest on borrowed funds - Interest free advances given - Commercial Expediency - Held that:- It is not disputed that the advance given to M/s Prayag Enterprises Ltd. was directly out of the borrowing from the Bank. According to the assessee M/s Prayag Enterprises Ltd. was appointed as assessee's sales promotion agent/representative throughout the state of Andhra Pradesh for the sale of IML products of UB Group of Companies, manufactured by the assessee. At that time, the assessee was a partnership firm and later on converted into a limited company. This relationship has been continued through the agreements dated 28.10.2004, 1.4.2006, 1.4.2009 and 1.4.2010 and is still continuing. During the period the business relationship of the assessee with M/s Prayag Enterprises Ltd has been very extensive both in volume and value. M/s Prayag Enterprises Ltd has very efficient and vast marketing network in the state of Andhra Pradesh including the UB Group of Companies and is engaged in the services for marketing their products. In our opinion M/s Prayag Enterprises Ltd. may have continued its relationship with the assessee in the course of business of the assessee, but there should be a valid reason and expectation that the amount advanced is for the purpose of the business and the recipient is expected to carry out some specific activities to improve the business of the assessee. In the present case it has been stated that the assessee expected to expand the market reach. It was further stated that the assessee was looking out for fresh acquisition of additional manufacturing facility. The assessee has not explained elaborately as to how Prayag Enterprises Ltd. is expected to expand its market reach and also not brought out any details of specific direct companies which have been identified in connection with fresh acquisition. Hence, a mere statement that advances have been made for these purposes cannot be accepted. Further examination as to the specific services expected to be done either for expanding the market reach or for making fresh acquisition do not appear to have been made by the lower authorities. In SA Builders [2002 (6) TMI 162 - ITAT CHANDIGARH-A],it has been held that the borrowed funds, if advanced to a third party, it should be for commercial expediency if it is sought to be allowed u/s 36()(iii) of the Act. Hence commercial expediency should be established more specifically in this case which requires further examination. The assessee is to be more specific as to what they expect M/s Prayag Enterprises Ltd to do and what exactly M/s Prayag Enterprises has achieved by granting of these advances of ₹ 43.60 crores to the assessee. In these circumstances, we are of the opinion that the matter should be set aside to the file of the AO and the assessee should be given another opportunity to explain in detail the specific reasons and purposes for which the trade advance of ₹ 43.60 crores has been given and what has resulted from the utilisation of the advance - Allowed revenue's appeal for statistical purpose.
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2015 (6) TMI 69
Unaccounted investments made in immovable properties - Block assessment - Held that:- The assessee has declared all the impugned immovable assets in the VDIS declarations filed by him, much earlier to the date of search. The entire quantum of declaration was not accepted due to technical reasons, i.e., non-payment of entire amount of tax before the due date. Under these set of facts, the right course that was available to the Department was to assess those income, i.e., that was not covered by the VDIS certificate, by reopening the assessments under section 148 of the Act. It appears that the Department has failed to assess those income under section 148 of the Act. The Department is not entitled to make good its failure by assessing those assets under block assessment proceedings, since the block assessment made under Chapter XIV is a complete code by itself and it is well settled proposition that the regular assessment proceedings and block assessment proceedings are parallel to each other and can be taken up simultaneously. The decision rendered in the case of CIT v. Naveen Gera [2010 (8) TMI 194 - Delhi High Court] is applicable to the facts of the instant case wherein held that, if the details of the properties already disclosed to the Department under VDIS, then it cannot be said that the Department came in possession of any information which it did not possess earlier. - Decided in favour of assessee. Addition made in respect of vehicles - undisclosed income of the assessee was computed under investment method - AO took the view that the depreciation is admissible only if the undisclosed income is computed under the income method - CIT(A) held that the depreciation is admissible as deduction against income determined even under "investment" method also - Held that:- There should not be any dispute that the depreciation is a statutory deduction and the same is allowable as deduction while computing the total income. Further the depreciation is a non-cash expenditure. The total income may be computed under different methods and the "investment" method is only method of computing the total income. Hence, even if the value of vehicles is taken at cost, the depreciation should be allowed separately. However, if the value of vehicles is taken at written down value, then the depreciation is deemed to have been allowed. - Decided in favour of assessee. Unaccounted investment in stock-in-trade - CIT(A) deleted the addition -Held that:- Assessing Officer has simply placed reliance on the sworn statement given by the assessee at the time of search, wherein the assessee had accepted the value of ₹ 12,86,021. However, the assessee has pointed out that the abovesaid value was determined on the basis of selling price, whereas the cost price of those goods actually work out to ₹ 10,57,990. There should not be any dispute that the value of stock is normally valued at cost or market price, whichever is lower. Though the assessee might have admitted the value determined by the search officials in the statement taken at the time of search, yet he has found out the mistake and corrected the same at the time of filing block return. In our view, the mistake pointed out by the assessee in the valuation taken by the search officials cannot be ignored.In the absence of any other material to contradict the stock valuation (at cost) shown by the assessee, we are of the view the same should be adopted - Decided in favour of assessee. Undisclosed investment in jewellery and silver articles - CIT(A) deleted part addition - Held that:- CIT(A) has granted relief to the extent of gold belonging to the mother and spouse of the assessee and also that declared under VDIS scheme, we do not find any infirmity in his order, since the ladies in the Indian families normally possess jewelleries to that extent. Accordingly, we approve his order on this issue. In respect of the silver articles also, the learned Commissioner of Income-tax (Appeals) gave relief in respect of silver items belonging to the assessee's mother (2500 gms), spouse (3750 gms) and that declared under VDIS scheme (1000 gms). The learned Commissioner of Income-tax (Appeals) did not accept the claim of receipt of gifts (1500 gms) by the assessee. No infirmity in the order of the CIT(A) - Decided in favour of assessee partly. Disallowance of sundry creditors - CIT(A) deleted the addition -Held that:- Undisclosed income of the assessee was computed under "investment method". While computing the income under this method, the loans and ascertained liabilities are required to be deducted from the aggregate value of assets for the purpose of arriving at the income. The assessee has pointed out that the liability towards creditors are collated from the seized material only and the assessee has also linked the outstanding liability with specific seized material. However, it is seen that the Assessing Officer did not bring any material on record to disprove the claim of the assessee. We notice that the CIT(Appeals) has observed that the Assessing Officer was not correct in ignoring the seized materials in selective manner, i.e., the view of the CIT (Appeals) was that the seized materials should be given due credence in toto, unless contrary is shown. - Decided in favour of assessee. Addition made towards insufficient drawings - CIT(A) deleted the addition - Held that:- It is an admitted fact that the Assessing Officer has made this addition on estimated basis without making reference to any of the seized materials. It is a well settled proposition of law that the block assessment can be made only on the basis of seized materials. Apart from this legal position, we notice that the learned Commissioner of Income-tax (Appeals) has also taken into consideration about the fact that the assessee was residing in a rural place, where the cost of living is generally low vis-a-vis the metro cities. Hence, in our view, the learned Commissioner of Income-tax (Appeals) was justified in deleting this addition made only on estimated basis and not with reference to any seized material. - Decided in favour of assessee.
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2015 (6) TMI 68
Deduction of Interest income on account of transfer to Trade Guarantee Fund, Broker's Contingency Fund etc. - Fund established as per guidelines laid down by SEBI - Interest income required to be transferred to such funds as directed by SEBI - Held that:- We have perused the compilation filed before us in the light of the case laws cited. We are able to trace an account in the compilation pertained to "brokers contingency fund" in which the Assessee has credited the interest on loan as granted by the Assessee as well as debited an amount given as loan to members. Rest of the accounts were not found in the compilation although it was specifically asked to refer but learned AR has failed to indicate that account. The issue has to be decided in the light of the facts that if there was an overriding title of SEBI then the accrual interest cannot be taxed from the assessee. The Assessee is expected to place on record the SEBI guidelines to substantiate the creation of the fund. The Assessee is therefore directed to place all the three accounts to establish that the interest was made part and parcel of the fund and no part of the interest so accrued was the income of the Assessee. We, therefore, restore this issue back to the stage of the AO to consider all these three accounts and if it is demonstrated that the interest is accrued but funds were taken out for the purpose of the benefit of the members and the assessee has no benefit of accrual of interest then naturally in the absence of the element of "income" the additions so made deserves to be deleted. With these remarks the grounds may be treated as allowed but for statistical purpose being restored back for denovo consideration by the AO. - Appeal is allowed for statistical purpose.
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2015 (6) TMI 67
Transfer pricing adjustment - Arm's length price adjustment in International Transactions - Matter of exclusion of one comparable company - Comparable company is not functionally same - Held that:- From the perusal of the objections filed by the assessee before the DRP, as well as annual report of Kals, it is seen that the said company is engaged into development of software and software products and also running a training centre for training of software professionals. The said company offers variety of software products in the area of web solutions, e-commerce, software consultants, content management ERP applications etc. It’s functional profile is quite different from the assessee company, which is purely providing software services in the field of 3D animation. Thus, it cannot be held to be a comparable company for the purpose of bench marking the assessee’s margin or caring out any comparability analysis. The ITAT Pune Bench in the case of PTC Software (I) Pvt. Ltd. [2015 (1) TMI 466 - ITAT PUNE], has held that the Kals, which is engaged in the sale of software products cannot be held to be a comparable case with the companies providing software services. Similarly, in view of series of other decisions of the Tribunal as noted by the DRP, Kals cannot be held to be comparable company for bench marking with the companies providing software services. Thus, the order of the DRP as noted above is upheld. Accordingly, the ground raised by the Revenue is dismissed. - Decided against the revenue.
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2015 (6) TMI 66
Withdrawal of credit allowed for tax deducted at source - amount received by the assessee towards mobilisation advance during the year under consideration - Revision u/s 263 - Held that:- Once the TDS was deducted and paid to the Central Government, a credit of the same should be given to the assessees in order to avoid all sorts of complications in the year of deduction of the TDS. Therefore, we find no infirmity in the order of the Commissioner of Income-tax (Appeals) who has rightly directed the Assessing Officer to allow the credit of the TDS in the impugned assessment year. Accordingly, the order of the Commissioner of Income-tax (Appeals) is confirmed." It is manifest from the relevant portion of the Tribunal's order as reproduced above that the issue involved in the present case is squarely covered in favour of the assessee by the co-ordinate Bench's order on merit whereby, similar issue involving identical facts has been decided by the Tribunal in favour of the assessee after taking into consideration all the relevant aspects of the matter including the provisions of section 199 as applicable to the assessment year 2006-07. The learned Departmental representative has also not been able to dispute this position clearly evident from the order of the Tribunal, a copy of which is placed on record before us. Moreover, the order passed by the Tribunal in the case of P. Srinivasa Rao (2011 (3) TMI 1495 - ITAT VISAKHAPATNAM) deciding a similar issue on merit in favour of the assessee clearly shows that the view taken by the Assessing Officer while allowing credit for the TDS made from mobilisation advance was a possible view and the learned Commissioner of Income-tax, in our opinion, was not justified in substituting his own view for such possible view taken by the Assessing Officer by his impugned order passed under section 263 as the same is not permissible under the provisions of section 263 as held in the case of Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME Court]. We, therefore, set aside the impugned order of the learned Commissioner of Income-tax passed under section 263 and allow the appeal of the assesse - Decided in favour of assesse.
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2015 (6) TMI 65
Dis-allowance of franchise fee - Dis-allowance of excess depreciation on computer peripherals - Accrual of royalty income - Held that:- We find that in revenue's appeal, ground No.1 relates to the issue of franchise fee which the A.O. had held to be capital in nature. However, Ld. CIT(A) had allowed it as revenue expenditure following its own order in Assessment Year 2008-09. We find that similar issue arose in Assessment Year 2003-04, wherein Hon'ble Delhi High Court vide its order [2014 (8) TMI 353 - DELHI HIGH COURT] dated 01.08.2014 has decided the issue in favour of assessee. Similar view was also expressed by the Delhi High Court in Salora International Ltd. [2008 (8) TMI 138 - DELHI HIGH COURT].We have also examined the order passed by the Assessing Officer. Other than relying upon the decision of the Madras High Court in the case of Southern Switchgear Ltd. [1983 (3) TMI 18 - MADRAS High Court], there is no discussion relating to the factual matrix to justify his conclusion that 25% of the franchise fee should be treated as capital expenditure. No facts were highlighted and stated to justify the conclusion. In view of the aforesaid reasoning, we are not inclined to issue notice on the first question/issue raised by the appellant Revenue. - Decided against the revenue. Dis-allowance of excess depreciation on computer peripherals - We find that similar issue in the case of assessee was decided by Tribunal [2014 (10) TMI 657 - ITAT DELHI] for Assessment Year 2008-09, in favour of assessee. The facts in the present appeal remains the same, therefore, respectfully following the Tribunal order, Ground NO.2 is also dismissed. - Decided against the revenue. Accrual / Addition of royalty income - This issue has also been decided by ITAT in the case [2014 (10) TMI 657 - ITAT DELHI] of assessee itself in Assessment Year 2007-08, 2008-09.The facts relating to this issue are that during assessment proceedings the A.O. observed that an amount of ₹ 9,59,881/- was not recognized as income by the assessee. The A.O. held that the said income had accrued to the assessee, therefore, he made addition thereof. The Hon'ble Tribunal in I.T.A. No. 4626 in the case of assessee itself vide its order dated 17.10.2014 has decided similar issue against the assessee. We find that the issue is similar in the present case. Following the above tribunal order in the case of assessee itself we dismiss this ground of appeal of assessee. - Decided against the assessee.
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2015 (6) TMI 64
Determination of capital gain on sale of house property - Indexation benefits considering holding period of previous owner - Addition on account of additions i.e. renovation & repair, made to the new residential house - Applicability of Section 50C while claiming deduction u/s 54 - Held that:- As per the provisions of Section 49(1) of the Income-tax Act, when a property is acquired by the assessee by inheritance, then the cost of acquisition of the previous owner is taken as the cost of the assessee and the period of holding of the previous owner is also taken as the period of holding of the assessee. It is not in dispute that the assessee received the property in question by way of inheritance on the death of his father who acquired the property on 13.09.1969. Therefore, in our considered view, the assessee is deemed to be holding the property since 13.09.1969. As the assessee is deemed to be holding the said residential property from a period prior to 01.04.1981 as per the provisions of Section 55 of the Act, the assessee is entitled to adopt the fair market value as on 01.04.1981 as the cost of the property and also entitled for indexation from 01.04.1981. We, therefore, set aside the orders of the lower authorities in respect of this part of the issue and direct the Assessing Officer to allow indexed-cost of the fair market value as on 01.04.1981 by allowing indexation with reference to 01.04.1981. We find that the additional cost of ₹ 6,00,000/- claimed by the assessee was not accepted by the lower authorities on the ground that evidence in respect of the same was not produced before them. We find that no evidence could either be produced before us. Further, also no details as to how the payments were made in respect of the above alleged renovation expenditure was made was brought on record either before the lower authorities or before us. In absence of the same, we do not find any infirmity in the orders of the lower authorities in respect of this part of the issue. Applicability of Section 50C while claiming deduction u/s 54 - The deeming fiction created by virtue of section 50C in determining ‘capital gain’ from transfer of any long-term capital asset for purpose of section 54F has to be worked out by applying section 48 without imposing section 50C into it.Thus, it was held that for computing Capital Gain, Section 50C is to be taken into consideration but the exemption u/s 54F or 54 being a complete code in itself, exemption has to be worked out as per the provisions of that section itself. As per the provisions of Section 54, exemption is allowable with reference to the amount of Capital Gain and not with reference to the amount of net consideration. Therefore, the issue which arose with reference exemption u/s 54F wherein exemption is allowed with reference to amount of net consideration does not arise in granting exemption u/s 54. We, therefore, dismiss this contention of the AR of the assessee. - Decided partly in favour of assessee.
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2015 (6) TMI 63
Deemed dividend u/s 2(22)(e) - CIT(A) deleted the addition on the ground that the loan has not been received by the assessee but by M/s Oryx Fisheries Pvt. Ltd. - Held that:- Since the assessee is a share holder of the lending company and also having a substantial interest in the borrowing company, therefore, the condition as prescribed u/s 2(22)(e) are satisfied to include the payment in question in the ambit of dividend tobe taxed in the hands of the assessee. We do not agree with the contention of Ld. Authorized Representative that only a proportionate of the amount of loan received by the borrowing company can be assessed as dividend in the hands of the assessee to the extent of his share holding in the borrowing company due to the simple reason that as per provisions of section 2(22)(e) the two conditions are required to be fulfilled viz. the person having not less than 10% of voting power in the lending company and a substantial interest in the borrowing concern. Both these conditions are satisfied, therefore, in the absence of any such provision of proportionate addition nothing can be read in between the unambiguous language of the provision of section 2(22)(e). Further it is not the case of more than one share holder complying the conditions of having not less than 10% voting power in the lending company and also having substantial interest in the borrowing company. From perusal of share holding pattern at page 141 of the paper book, we find that only the assessee is holding 15% of the voting power in the lending company and 45% of voting power in the borrowing company and no other person/share holder is common other than the assessee. Therefore, there is no question of any proportionate addition when the assessee is the only share holder who fulfills the condition prescribed u/s 2(22)(e). The decision relied upon by the Ld. Authorized Representative in the case of Shri Subrata Banik Vs. CIT (2014 (1) TMI 928 - ITAT KOLKATA ) is not applicable to the facts of the present case rather the said decision is on the question of change of opinion while exercising the jurisdiction/revisional powers u/s 263 of the Income Tax Act. - Decided in favour of revenue.
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2015 (6) TMI 62
Liability of deduct TDS - payments to banks on account of utilization of credit card facilities would be in the nature of bank charge and not in the nature of commission within the meaning of sec.194H - Held that:- The notification u/s.197A of the Act vide notification NO.56/2012 dated 31.12.2012 as relied by AO therefore cannot be the basis on which it can be said that the amount retained by the bank was in the nature of commission within the meaning of Sec.194-H of the Act. For the reasons given above, we confirm the order of the CIT(Appeals) on this issue and dismiss the appeals of the Revenue. Difference between the sale value of the sarees and the amount remitted by the bankers according to the Revenue, was nothing but commission and therefore the assessee ought to have deducted tax at source on the said sum u/s. 194H - CIT(A) deleted liability to tds - Held that:- CIT(Appeals) had rightly held that disallowance made by the AO was not warranted. The fact that such commission payments are routine in the line of business of assessee is not disputed by the AO. The genuineness of the payment has also not been doubted by the AO. There is no material on record to show that the amounts paid to individual taxi & auto drivers were above the threshold limit for deduction of tax at source. It is not the case of the AO that individual vouchers evidencing payments in cash, were in excess of the specified limit for deduction of tax at source. In our view, the addition has been made by the AO only on the basis of surmises and was rightly deleted by the CIT(Appeals). - Decided in favour of assessee.
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2015 (6) TMI 61
Assessee in default to deduct tds - short deduction of tax - payment made by the assessee to Doctors was in the nature of “Salary” and therefore the Assessee ought to have deducted tax at a higher rate than what the Assessee had deducted treating the payment as “fees for professional or technical services - Held that:- As these doctors/experts are at liberty to do the works other than the assessee’s contractual engagements but without contradicting the terms and conditions of contract entered between the assessee company and the said doctors/specialists as mentioned above. In view of the above, there is no employer- employee relationship between the assessee and eleven doctors discussed above. So, the provision of TDS u/s 192 and interest u/s 201 and 201(IA) of IT Act is not attracted. Accordingly, the appeal filed by the revenue are dismissed - Decided in favour of assesse.
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2015 (6) TMI 60
Deemed dividend u/s.2(22)(e) - whether amounts were advanced by the company for its business purposes? - Held that:- It is not clear whether these fixed deposits were really made for business purposes of the company. If the lien on fixed deposit held in the name of the assessee was marked in favour of the bankers, it may clearly demonstrate that the amounts were advanced for company purpose to the assessee. In the absence of such material on record, we are not able to come to a definite conclusion that the company had advanced this money to the assessee only for its own business purposes. Further, a mere perusal of the ledger extracts of the accounts of the assessee company it was not clear as to why two ledger accounts were maintained in the name of the assessee for the Financial Year 2007-08. Mere reliance on legal proposition without furnishing the supporting material does not help the cause of the assessee. It only amounts to a bald claim. The minutes of meeting of the board of directors cannot be the sole basis for coming to any conclusion, more so, in the case of a closely-held company. Therefore, we deem it fit and proper to restore ground to the file of the AO to make fresh assessment. Benefit of indexation in respect of computation of capital gains arising out of development of property devolved - Held that:- CIT(A) correctly allowed the claim of the assessee placing reliance in the case of DCIT vs. Manjula J. Shah [2009 (10) TMI 646 - ITAT MUMBAI] also confirmed in [2011 (10) TMI 406 - BOMBAY HIGH COURT] wherein held when the legislature by introducing the deeming fiction seeks to tax the gains arising on transfer of a capital asset acquired under a gift or Will and the capital gains under Section 48 of the Act has to be computed by applying the deemed fiction, it is not possible to accept the contention of revenue that the fiction contained in Explanation 1(i)(b) to Section 2(42A) of the Act cannot be applied in determining the indexed cost of acquisition under Section 48 of the Act. - Decided against revenue.
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2015 (6) TMI 59
Computation of capital loss - AVO adopted a detailed measurement method instead of rent capitalization method and secondly, the property was sold in distress - AO referred the property to the AVO and adopted the value reported by the AVO for calculation of capital gains rather than adopting the value of stamp valuation Authority and recomputed the long term capital gains resulting in an addition of ₹ 17,73,417/- (AVO'S Valuation of property at ₹ 28,24,100/- minus Index cost of acquisition as given by the assessee) as against ₹ 4,71,150/ - Held that:- We have perused the judgment of CIT vs. New India Construction Co. (1980 (2) TMI 64 - DELHI High Court), and therefore, we are of the view that in the interest of justice, the present issues in dispute are required thorough examination at the level of the Assessing Officer, hence, we quash the order of the Ld. CIT(A) and remit back the issues in dispute, to the file of the Assessing Officer, with the direction to decide the present issues in dispute, in accordance with the aforesaid directions of CIT vs. New India Construction Co. after giving adequate opportunity of being heard to the assessee. - Decided in favour of assesse for statistical purposes.
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2015 (6) TMI 58
Exemption u/s.10B - 'Income from Profits and Gains' - interest received and the consideration received by sale of import entitlement - Held that:- the assessee is a 100% EOU, which has exported software and earned the income. A portion of that income is included in EEFC account. Yet another portion of the amount is invested within the country by way of fixed deposits, another portion of the amount is invested by way of loan to the sister concern which is deriving interest or the consideration received from sale of the import entitlement, which is permissible in law. Now the question is whether the interest received and the consideration received by sale of import entitlement is to be construed as income of the business of the undertaking. There is a direct nexus between this income and the income of the business of the undertaking. Though it does not par take the character of a profit and gains from the sale of an article, it is the income which is derived from the consideration realized by export of articles. In view of the definition of 'Income from Profits and Gains' incorporated in Subsection (4), the assessee is entitled to the benefit of exemption of the said amount as contemplated under Section 10B of the Act. Therefore, the Tribunal was justified in extending the benefit to the aforesaid amounts also. We respectfully following the aforesaid decision of Hon’ble Karnataka High Court in the case of Motorola India Electronics Pvt. Ltd (2006 (11) TMI 541 - ITAT BANGALORE), hold that Assessee is eligible for deduction u/s. 10B of the Act on the interest received on deposits placed with Electricity Department. We thus direct accordingly. - Decided in favour of assesse.
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2015 (6) TMI 57
Levy of interest u/s. 234B - payment of advance tax on estimated basis - assessee accounted the said merchant banking income on actual realization basis/receipt basis and claimed that this is as per consistent method of accounting followed by the assessee right from the beginning - Held that:- There is no quarrel on the point that charging of interest u/s. 234B is mandatory but firstly it is to be determined whether the assessee has committed default in payment of advance tax which is a necessary condition for levy of interest u/s. 234B as mandatory in nature. In view of the facts and circumstances of the case and by following the judgment of Hon'ble Jurisdictional High Court in Prime Securities Ltd. Versus Assistant Commissioner of Income Tax (Investigation) [2010 (12) TMI 475 - Bombay High Court] we are of the considered opinion that there is no default on the part of the assessee in payment of advance tax which was as per the estimated income of the assessee and is consistent with the practice followed by the assessee right from the beginning which was accepted by the revenue for earlier years. Accordingly, we delete the interest levied u/s. 234B. - Decided in favour of assesse.
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2015 (6) TMI 56
Reopening of assessment - reasons for assessment reopened are identical to the objections of the audit party - tangible material i - Held that:- Reasons for which the assessment is sought to be reopened are identical to the objections of the audit party and therefore the reasons did not rely upon any tangible material in the audit report but merely upon an opinion and the existing material already on record. This itself indicates that there is no independent application of mind by the A.O. before issuing the notice u/s 148 of the Act. The facts in the case before us are identical to that of the case of ICICI Home Finance Ltd. (2012 (8) TMI 312 - BOMBAY HIGH COURT), therefore, following the judgment above as well as in the case of Asian Paints Ltd. (2008 (7) TMI 237 - BOMBAY HIGH COURT), we hold that the A.O. has reopened the assessment without any application of mind and accordingly the reopening is not sustainable in law. Hence, we quash the reassessment for both the assessment years. - Decided in favour of assesse.
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2015 (6) TMI 55
Unexplained credits u/s 68 - assessee received share application money are providers of accommodation entries - CIT(A) deleted the addition - Held that:- In view of observations of the AO as well as CIT(A) we clearly note that the AO noted that the assessee expressed its inability to produce copies of IT Return and director or of Officer of the company which provided or contributed share application money and the CIT(A) in para 5.2 at page 16 observes that the assessee has furnished all the relevant details during the course of assessment proceedings and granted relief by relying of decision of Lovely Exports (2008 (1) TMI 575 - SUPREME COURT OF INDIA). Hence, we are unable to satisfy ourselves as to whether the assessee discharged its onus before AO to prove the identity of the third party or contributor which made payment, its creditworthyness and genuineness of the transaction on casted upon the assessee to escape from addition u/s 68 of the Act to presume that the onus is thus shifted to the Revenue to controvered explanation and supporting evidence and material filed by the assessee while discharging its onus as required as per ratio of the recent decision dated 19.02.2015 of Hon’ble High Court of Delhi in the case of CIT Vs. M/s Jasampark Advertising and Marketing (P) Ltd. [2015 (3) TMI 410 - DELHI HIGH COURT]. Thus sole issue require verification and examination at the end of the AO. Therefore, the sole issue is restored to the file of the AO for proper of adjudication after affording due opportunity of hearing for the assessee - Decided in favour of revenue for statistical purposes
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2015 (6) TMI 54
Unexplained stock of finished goods - CIT(A) deleted the addition on the basis that the books of account and documents pertaining to survey were not examined by the Assessing Officer as per directions of the ITAT and has simply followed the findings made in the assessment order which was passed under sec. 147/143(3) - Held that:- The Learned CIT(Appeals) has also reproduced his predecessor’s order wherein it has been mentioned that the books of account were produced before the Assessing Officer during the course of assessment as well as reassessment proceedings; in the course of assessment proceedings, all the information and documents called for by the Assessing Officer were furnished; the books of account were audited by a firm of Chartered Accountants and their report was unqualified, full quantity tally of raw-material, finished goods etc. was maintained; the total turnover declared for the year has been accepted as correct by the Assessing Officer; complete books of account and vouchers for purchases, sales and expenses were maintained; the purchases were made from the dealers registered with the sales-tax department and they were paid for by account payee cheques and the appellant’s bank account corroborated this, etc. In absence of conduction of its independent investigation by the Assessing Officer in the matters, as directed by the ITAT, we are thus of the view that the Learned CIT(Appeals) was justified in deleting the additions in question. The same is upheld. - Decided against revenue.
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2015 (6) TMI 53
Disallowance of purchases made from sister concern under sec.40A(2) - Held that:- Having gone through the decision of CIT vs. Glaxo Smith Kline Asia (P) Ltd. (2010 (10) TMI 21 - Supreme Court of India ) wherein held that while making disallowance under sec. 40A(2) regarding payment to related concerns, the authorities are ought to examine as to whether there is any loss of revenue in any of the assessment years in question and to find out that the exercise is a revenue neutral exercise then there no interference is called for. Respectfully following this ratio of the decision, we set aside the matter to the file of the Assessing Officer to decide it afresh - Decided in favour of assesse for statistical purposes. Addition on account of proceeds by sale of jewellery - Held that:- There is no dispute that Mr. Prince Goel and Mr. Nitin Goel of M/s. Shanti Abhushan Bhandar in their statements recorded by the Assessing Officer have confirmed the claimed sales of jewellery by the assessee to them but the assessee has failed to furnish any satisfactory reply to the observations of the authorities below that on 18.11.2001 i.e. during the course of assessment proceedings for the assessment year 2006-07, assessee had claimed to have inherited 185 gms. of jewellery only from his father but now the assessee is claiming to have actually inherited 1198.77 gms. from his father. The assessee has not been able to rebut the above observation of the authorities below by furnishing any proof regarding inheritance of 1198.77 gms. of jewellery from his father. In absence of such rebuttal by the assessee and keeping in view the totality of facts and circumstances as well as preponderance of the probabilities, we are of the view that the Learned CIT(Appeals) has rightly upheld the addition - Decided against assesse. Addition received by way of sale of plot under sec. 68 - Held that:- there is prevailing practice of transfer of such plot allotted by some government authorities/department for some specific purpose without getting it registered in the name of purchaser from the original allottee on the record of such authorities/department but at the same time some agreement is entered into between the seller and purchaser for such transaction. In absence of such evidence, we are of the view that the authorities below have rightly denied the genuineness of the claimed transaction - Decided against assesse. Disallowance of of advance given to Shourya Developers for purchasing of plots - Held that:- the genuineness of claimed refund of advance money for purchase of land from Shorya Developers has been denied on the basis that the assessee did not furnish any evidence with regard to the credit entries amounting to ₹ 2,85,000. The Assessing Officer has denied the claimed refund without examining the veracity of the documents filed by the assessee before it as discussed above. We, thus in the interest of justice, set aside the matter back to the file of the Assessing Officer to examine the correctness of the documents filed by the assessee in this regard and decide the issue afresh after affording opportunity of being heard to the assessee. - Decided in favour of assesse for statistical purposes. Disallowance of interest on car loan, vehicle running and maintenance and depreciation - Held that:- the Assessing Officer had made disallowance on account of interest on car loan, vehicle running and maintenance as well as deprecation claimed on car @ 25% of the claim on the basis that the assessee had not furnished evidence with regard to the exclusive use of car for business purposes. The Learned CIT(Appeals) has reduced the disallowance by applying 10% of the claimed amount of ₹ 3,75,498 resulting into disallowance of ₹ 37,550 only. We do not find infirmity in the First Appellate Order as in absence of maintenance of proper log book etc. the possibility of personal user of the car cannot be totally ruled out. - Decided against assesse.
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2015 (6) TMI 52
Penalty u/s 271(1)(c) - deemed dividend u/s 2(22)(e) - CIT(A) deleted penalty levy - Held that:- The assessee’s explanation that the money received from these companies were in the nature of refundable security deposits received by the assessee in lieu of letting of the properties owned by her has not been found to be false and in fact has been substantiated by the evidence in the form of internal bank vouchers and the entries in the books of account of the assessee as well as of the companies. The revenue has no material to rebut such an evidence or that the assessee’s explanation is false based on material on record. The assessee’s onus in the penalty proceedings stands fully discharged. Once, it has been shown that the amount has been received not as loan but as deposits, the deeming fiction of 2(22)(e) cannot be stretched to hold that the payment made by a company to a shareholder by way of deposit in lieu of usage of property for its business purpose is in the nature of loan. It is a trite law that the deeming fiction has to be strictly construed and such legal fiction cannot be extended for any kind of payment by a company to its shareholder. Thus, on the facts and circumstances of the case, we find that the reasons recorded by the Ld. CIT(A) for deleting the penalty is legally and factually correct and accordingly the same is affirmed. - Decided in favour of assesse.
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Customs
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2015 (6) TMI 74
Denial of refund claim - Benefit under notification No. 26/2000 - preferential rate of country of origin - Held that:- Appellant claiming preferential rate of duty under notification No. 26/2000 for the goods imported for from Srilanka origin ought to have claimed the notification at the time of input and before clearance of goods. The conditions stipulated in the said notification is specific and it is mandatory that the Asst. Commissioner of Customs shall satisfy whether the conditions are met before clearance of the goods. As rightly held by the lower appellate authority once Bill of Entry assessed and duty paid and appellants cleared the goods the assessment becomes final and the appellant did not contest or file appeal against the assessment order. Therefore, in view of Hon'ble Apex Court judgment in the case of Priya Blue Industries (2004 (9) TMI 105 - SUPREME COURT OF INDIA) the appellants are not eligible to claim the notification benefit by way of filing refund. - Decided against assessee.
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Corporate Laws
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2015 (6) TMI 73
Penalty under section 15C of the Securities and Exchange Board of India Act, 1992 - Failed to obtain SEBI Complaints Redress System (SCORES) Login ID and the password within time stipulated in the Circular dated 13.08.2012 - Held that:- It is only after SEBI notice dated 21.03.2014 the appellant chose to apply for and obtain SCORES registration on 05.04.2014. Fact that the appellant on receipt of notice took immediate steps to obtain SCORES Login ID and password and also took steps to resolve the investor grievances immediately thereafter would not obliterate the inordinate delay on part of the appellant in applying for and obtaining SCORES Login ID and password. If the appellant had obtained the SCORES Login ID and password within time stipulated by SEBI then the appellant could attend to the investor grievance much earlier. Therefore, it is apparent that time and again the appellant has failed to obtain the SCORES registration within the time stipulated by SEBI and thereby the appellant has failed to resolve the investor grievances within the time stipulated by SEBI. Fact that there was only one investor grievance and the fact that appellant took steps to resolve the same immediately after receiving the show cause notice from SEBI does not wash out the inordinate delay in taking the first step under SCORES i.e. obtaining Login ID and password and thereafter resolve the investor grievances within the time stipulated by SEBI. In these circumstances, failure to obtain SCORES Login ID and password for redressing the investor grievances within the time stipulated by SEBI would constitute violation of Section 15C of SEBI Act. For violating provisions contained under section 15C of SEBI Act, penalty is imposable at the relevant time was ₹ 1 lac per day during which the failure continues or ₹ 1 crore whichever is less. In the present case, failure on part of the appellant to obtain SCORES Login ID and password is more than one and half year and therefore the penalty imposable would be ₹ 1 crore. However, after taking all mitigating factors into consideration the adjudicating officer has imposed nominal penalty of ₹ 1 lac on the appellant which cannot be said to be excessive or arbitrary or unreasonable. Thus, no case is made out to interfere with the order passed by the adjudicating officer, wherein imposing nominal penalty of ₹ 1 lac is imposed on the appellant. - Decided against the appellant.
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2015 (6) TMI 72
Application for Scheme of Amalgamation - Regional Director's observations regarding compliance required by RBI for NBFC and Further time required for examination of records by Income tax department, duly addressed - Commissioner-IT observations regarding non competitiveness of transferor / transferee companies , Non transfer of certain assets and share exchange ratio duly addressed - Held that:- It is submitted that all documents as had been asked for by the RBI have already been submitted, and the remaining documents will be submitted post the approval of the Scheme by this Hon’ble Court. Moreover, the Transferor Company is a non deposit taking NBFC. Hence there has been compliance by the Transferor Company. Copies of the entire correspondence between the Transferor Company and the RBI are annexed herewith as Annexure A. f. That the deponent further undertakes that all compliances as may be required by the RBI, referred to here in above, shall be duly complied with by the Transferor Company. In view of the clause 4.2 of the Scheme it is incumbent upon the Transferee Company to take over and be responsible for any liability of the Transferor Company, whether reflected in its books or not. Thus in the event of any demand raised by the Income Tax Department, the deponent undertakes that the Transferee Company shall duly discharge the same, in accordance with law. The learned counsel, Mrs. Munisha Gandhi, contended that even though the Transferor company may be having a small capital base but it also has other assets which would definitely be used in a more fruitful manner once they merged with the Transferee company which is having a greater capital base and greater resources. She further submits that the companies are part of the same group of companies and economies of scale would be achieved by merging the two entities. She submits that the current balance sheet and assets submitted to this Hon’ble Court and the Scheme clearly prescribes the entire assets of the Transferor Company which stands transferred to the Transferee Company. Moreover, the phrase “whether reflected in the books of accounts or not” in normal business parlance refers to the swapping of new assets with the existing assets or the future income during the course of ongoing business transactions of a running company.It is also submitted that in view of the undertaking given by the authorized signatory of the Transferee Company that in the event of any demand raised by the Income Tax Department, the Transferee Company shall duly discharge the same, in accordance with law; the observation of the Income Tax Department is irrelevant and meaningless. The shareholders are the sole authority to decide regarding the exchange ratio of merger and once the shareholders have approved and accepted the same it would not lie with the Income Tax Department to sit in judgment on the wisdom and decision of the shareholders. She further submits that the Official Liquidator has in Para 5 of his report submitted that the amalgamation is not prejudicial to the interest of its Members or to public interest. Thus the objection / observation made by the Income Tax Department is unsustainable and irrelevant. - Application for Scheme of Amalgamation approved.
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Service Tax
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2015 (6) TMI 85
Default in payment of service tax - punishable office u/s 89 & 90 - Arrest under Section 91 - Interim bail - punishment under the provisions of Section 89(1)(i) (ii) - Held that:- The statements of various persons had been recorded and on the strength of the same, the show cause notice was issued subsequently, after arrest which is yet to be adjudicated upon. The hurry to arrest, in such circumstances prima-facie amounts to a punitive measure, prejudging the issue. It is also admitted by counsel for respondent No.2 that after the arrest of the petitioner on 08.04.2015, the judicial remand had been ordered on 09.04.2015 and no effort, thereafter, has been made to seek any further information from the petitioner which goes contrary to the argument that investigation is in progress and his personal custody is required. Once such was the situation, the requirement of arrest for the arrears due for the last more than 4 years, of which, there was no quantification, prima facie, in our opinion, would only infringe on the fundamental rights of the petitioner, as the calculations on the basis of which, he is sought to be arrested, as per the arrest memo, was issued only at his back and without having given him appropriate opportunity to file reply to the show cause notice, which admittedly was issued on 23.04.2015, post his arrest. Even after seeking instructions, counsels for the respondents could not confirm as to when the said process will be completed so that this Court prima facie could go into the question as to whether the offence has been made out or not which is, now, sought to be contended on the basis of alleged admissions made by the petitioner with the respondent-authorities. Further detention of the petitioner, in such facts and circumstances, amounts to taking away his liberty in the absence of any complaint having been filed against him and it would be a fit case where the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India is liable to be exercised. The interest of the Revenue can be safeguarded by imposing certain conditions which the petitioner will adhere to. - petitioner is granted interim bail subject to the satisfaction of the Chief Judicial Magistrate/Illaqa Magistrate, Rohtak, on the certain conditions - Interim bail granted subject to conditions.
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2015 (6) TMI 84
Waiver of pre deposit - renting of immoveable property service - Held that:- Renting of immoveable property had been brought in to the service net w.e.f. 01.06.2007 vide notification dated 22.05.2007. The explanation to Section 65(90a) of the Finance Act provide that renting of immoveable property includes use of immoveable property, factories, office buildings, warehouses plus for use in the course or furtherance of business or commerce. Sub-section (105)(zzzz) also provides that taxable service means providing of any service by renting of immoveable property The argument that as per the amended lease deed dated 29.03.2011, the building was only let out for ₹ 55,000/- per month and the rest of the amount was only on account of the rent of the immoveable plant and machinery, which was moveable and not covered under the Act, prima facie, cannot be accepted. The Adjudicating Authority has noticed that a consolidated ledger account is being maintained and that there is no breakup for the different heads of land and building and the plant machinery and the agreement dated 29.03.2011 was not registered under the Registration Act, 1908. Court is not inclined to interfere with the discretion which has been exercised and where the benefit of pre-deposit has been restricted to a reasonable amount, in favour of the appellant. However, since an interim order had been passed in favour of the appellant on 24.12.2014 that the appellant would deposit a sum of ₹ 8 lacs towards service tax, which is stated to have been deposited, liberty is granted to the appellant to deposit the balance outstanding amount within a period of 2 months, from the date of this order. - Decided partly in favour of assessee.
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2015 (6) TMI 83
Reverse charge mechanism - Section 73 - Levy of tax on GTO service - Held that:- even the amended Section 73 takes in only the case of assesses who are liable to file return under Section 70. Admittedly, the liability to file return is cast on the appellants only under Section 71A. The class of persons who come under Section 71A is not brought under the net of Section 73. The above being the position show cause notices issued to the appellants invoking section 73 are not maintainable - Decision in the case of L.H. Sugar Factories Ltd. [2005 (7) TMI 106 - SUPREME COURT OF INDIA] followed - Decided against Revenue.
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2015 (6) TMI 82
CENVAT Credit - input services - activities in relation to business - whether the respondent was entitled to credit on management, maintenance or repair services provided on windmills installed by the respondents - Held that:- management, maintenance and repair of windmills installed by the respondents is input service as defined by clause "l" of Rule 2. Rule 3 and 4 provide that any input or capital goods received in the factory or any input service received by manufacture of final product would be susceptible to CENVAT credit. Rule does not say that input service received by a manufacturer must be received at the factory premises. - Decision in the case of Commissioner of Central Excise Versus Ultratech Cement Ltd. [2010 (9) TMI 19 - High Court of Bombay] and [2010 (10) TMI 13 - BOMBAY HIGH COURT] followed - Decided against Revenue.
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2015 (6) TMI 79
CENVAT Credit - Trading activity - Revenue is of the view that the appellant is not eligible for credit of input services in proportion to the turnover of trading activities and that of manufacturing activities - Invocation of extended period of limitation - Held that:- Eligibility of credit is defined in Rule 3 read with definition in Rule 2(l). It is only after that various questions in Rule 6, come into play. Rule 6(5) cannot be read in isolation but has to be read in the overall scheme of the things. - t trading was not a service and therefore, cannot be considered as an exempted service during the period prior to 1.4.2011 and the amended provision with effect from 1.4.2011 will not have retrospective effect Quantification of credit to reversed towards trading activity - period prior to 1.4.2011 - Held that:- the credit of tax paid on such sales promotion activities should be apportioned with reference to the turnover of the manufactured cars and turnover of the traded cars. For example, if the turnover in particular period is say ₹ 1000 crore out of which turnover of ₹ 700 is pertaining to the indigenous cars and turnover of ₹ 300 crores pertains to the imported and traded cars then if the input credit of 10 crores is available then 7 crore should be considered for the manufactured cars in India and credit of ₹ 3 crore should be considered pertaining to imported and traded cars. Credit of input or input services is allowed only in order to eliminate the cascading effect of taxes. Thus, for taking credit, the trading activity should be taxable under Service Tax or Excise Law. The credit of input or input services is not allowed in respect of non-taxable activities. Here is a case where the services were used for trading activity. The appellant should have not taken the credit in the first instance itself, which was totally wrong on their part. They did not indicate in the returns that the credit relating to the trading activities was also being availed by them. Therefore, this is a clear case of suppression, and conduct of the appellant in this regard does not take him further and the extended period of limitation has been rightly invoked. No hesitation whatsoever in holding that taking credit in respect of services used in trading activity cannot be considered as bona fide at all. Just because the Government has put a trust in the trade and permitted them to take credit without any reference to tax authorities, it does not imply that the appellant can avail any credit whether permissible or not under the law and the later on, take the plea that the same is not recoverable on the grounds that the issue involves interpretation and hence the extended period of limitation cannot be applied. Undoubtedly, the returns filed by the appellant as ISD were not in accordance with law. The declaration made in the ST-3 returns was not correct. Hence the penalty imposed is upheld. - letter contains more than what was submitted during the course of hearing as also in the grounds of appeal filed before this Tribunal. As per Rule 10 of the CESTAT (Procedure) Rules, 1982, the appellant shall, except by the leave of the Tribunal, urge or be heard in support of any grounds not set forth in the memorandum of appeal. The procedure being followed by the learned counsel for the appellant is totally incorrect and we, therefore, refuse to discuss the submissions made in the said letter (even though we have gone through the said letter and find that the submissions made are devoid of even any consideration). - Decided against assessee.
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Central Excise
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2015 (6) TMI 78
Waiver of pre deposit - Imposition of penalty - Issue of bogus invoices - Evasion of duty - penalty under Rule 26 - Whether penalty can be imposed on companies or firms under Rule 26 - Difference of opinion - Majority order - Held that:- W.e.f. 01/3/07 Rule 26 of Central Excise Rules, 2002 was amended and the main Rule 26 as mentioned become sub-Rule (1) and a sub-Rule (2) was added which provided that any person who issues any excise invoice without delivery of goods specified, therein or abets making such invoices or any issues other document or abets in making such documents on the basis of which the user of the said invoice or document is likely to take or has taken any ineligible benefit under the Act or the Rules made thereunder, like claiming of Cenvat credit under Cenvat Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or ₹ 5,000/- whichever is greater . Penalty under Rule 26, whether under sub-Rule (1) of Rule 26 or under sub-Rule (2) of Rule 26 can be imposed on a juristic person also i.e. on a company or a firm. Moreover, if a private limited company or public limited company or a partnership or a proprietorship firm as a registered dealer issues bogus invoices without supply of any material to enable another person avail the Cenvat credit, it would not be correct to say that in such cases the person who had issued the bogus invoices would not be liable for penalty under Rule 26 (2). - this is not the case where the requirement of pre-deposit of penalty for compliance with the provisions of Section 35F should be totally waived - Partial stay granted.
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2015 (6) TMI 77
Benefit of Notification No. 175/86 dated 1.3.1986 - SSI Exemption - Revenue contends that as per the wordings of Notification 175/86, once clearances of the specified goods cross the limit of ₹ 30 lakh, the benefit of Notification 175/86 cannot be extended - Held that:- Decision in the case of RAMAKRISHNA ENGG. WORKS Versus COLLECTOR OF C. EX., BOLPUR [1996 (2) TMI 208 - CEGAT, NEW DELHI] followed - Decided against assessee.
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2015 (6) TMI 76
Denial of MODVAT Credit - Non compliance with Rule 57G of the Central Excise Rules, 1944 - Held that:- There is no breach of the Central Excise Act nor there is any breach of Central Excise Rules, 1944. Modvat credit claimed by the respondent upon certain inputs. It is not in dispute that those inputs have been brought into the factory of the respondent. It is also not in dispute that these inputs have also been utilised for manufacturing process. If these two facts have established, looking to the order in original, then it appears that there is substantial compliance of the Rules, 1944 - respondent who has claimed Modvat credit. Thus, the apprehension on the part of this appellant that double benefit may not go to the parties is uncalled for and unwarranted for the very same goods. The importer cannot claim refund of the countervailing duty as well as the manufacturer cannot get Modvat credit. This is principally true but here in the facts of the present case there is no allegation levelled by the Excise Department in their show-cause notice. Twice the benefits have been claimed, one by the importer (refund of the countervailing duty) and another by the manufacturer-respondent (Modvat credit upon the inputs). It is the case of the appellant that if one benefit is availed another is not allowed. In the facts of the present case only the manufacturer who is the respondent has claimed the Modvat credit. Even department of Central Excise is not knowing whether importer has claimed any refund of countervailing duty. It appears that the department is in search of declaration to be given by the importer, but, the fact remains that the importer has not claimed even the refund of countervailing duty. Thus, in the facts of the present case out of two persons namely importer and the manufacturer, only manufacturer is claiming Modvat credit. - Decided against Revenue.
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2015 (6) TMI 75
Levy of duty on aluminium dross - whether Aluminium Dross emerging as product is excisable or otherwise - Held that:- merely selling does not mean dross and skimming are marketable commodity as even rubbish can be sold. Everything which is sold is not necessarily a marketable commodity as known to commerce and which it may be worthwhile to trade in. - Issue has already been settled by the Hon’ble Apex Court judgement in the case of Grasim Industries Ltd. Vs. UOI [2011 (10) TMI 2 - SUPREME COURT OF INDIA]. Hon’ble Bombay High Court in the case of Hindalco Industries Ltd. Vs. UOI [2014 (12) TMI 657 - BOMBAY HIGH COURT] on the similar issue allowed the appeal. The Hon’ble High Court has set aside the Tribunal s order by relying Hon’ble Apex Court decision in the case of Indian Aluminium & Co. [2006 (9) TMI 6 - SUPREME COURT OF INDIA] And Grasim Industries Ltd. (2011 (10) TMI 2 - SUPREME COURT OF INDIA). Following these decisions, impugned order is set aside - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (6) TMI 81
Attachment of property - Preferential creditor - Held that:- In the case of Punjab National Bank Vs. The State of Haryana & others [2009 (10) TMI 886 - PUNJAB & HARYANA HIGH COURT], income dues were not given any statutory preference - The statutory preference has been given to the tax arrears under the VAT Act. In view of the Supreme Court judgment in Central Bank of India's case (2009 (2) TMI 451 - SUPREME COURT OF INDIA), we find that the claim of the petitioner that it had preference over the tax dues of the borrower of the petitioner, does not merit any acceptance in view of the provisions of Section 35 of the VAT Act. Thus, we do not find any merit in the present writ petition - Decided against assessee.
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2015 (6) TMI 80
Review order - Determination of sale price - "First sale" - Assam Board of Revenue originally held that in view of the explanation 1 of section 8(1) of the Assam General Sales Tax Act 1993 the sale made by the petitioner cannot be construed as a first sale made by the petitioner to its dealers and is not taxable - Held that:- Quantity of goods sold to the petitioner by the IOC accounts for only 4.5 per cent of its total production, therefore the said quantity cannot be considered as a “a substantial part of the goods manufactured”. When that condition does not apply despite the fact that the sale price collected by the petitioner from its dealers being in excess of the 40 per cent of the purchase price the question of levy of tax does not arise, since one of the requisite conditions viz. “the sale of a substantial part of the goods manufactured” is not fulfilled. Unless both the conditions are fulfilled the question of levy does not arise. In that view of the matter the view taken by the Assam Board of Revenue in review is untenable. - Decided in favour of assessee.
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Indian Laws
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2015 (6) TMI 86
Distribution of estate of deceased's investments - Nomination of FDs in favor of Daughter - whether such nominated assets to be excluded from the estate of the deceased - Whether or not the daughter is entitled to file and maintain a caveat in opposition to the probate petition - Whether this caveat must be held to be defective and non-est - Whether 'Will' have supremacy over nomination - Held that:- The decision in Kokate does not consider the decisions of the Supreme Court in Khanchandani [2000 (8) TMI 77 - SUPREME Court], Shipra Sengupta [2009 (8) TMI 1124 - SUPREME COURT] or Challamma [2009 (7) TMI 1213 - SUPREME COURT], or those of learned single Judges of this Court in Nozer Gustad Commissariat and Antonio Joao Fernandes. Each one of these was binding on the Kokate court. The view taken in Kokate is contrary to, and does not consider any of these. It is, for that reason, per incuriam. In short, a nomination, in the Kokate formulation, is some sort of ‘super-will’, one that partakes of none of the defining traits of a properly executed will and none of the tests of its validity, one that is never displaced by a later, properly made will that deals with the very same property. Mr. Pai asks that we should place ourselves in the ‘armchair of the nominator’. That, as it happens, is the same furniture used by a testator, and it simply cannot be that the view from that seat depends on the nature of the document before the executant. There is no particular form for a will, but there are requirements attendant to its proper making. These do not apply to all nominations: even the requirement of witnesses is a matter of prudence rather than statute. If that be so, no nomination per se requires attestation, and if that be so, it is admissible in evidence under Section 68 of the Evidence Act, 1872 without the evidence of any witness (simply because a witness to a nomination is not, in any sense, an ‘attesting witness’). But no will can be so read in evidence without such evidence. From the fundamental definitions to the decisions cited, it is clear that a nomination only provides the company or the depository a quittance. The nominee continues to hold the securities in trust and as a fiduciary for the claimants under the succession law. Nominations under Sections 109A and 109B of the Companies Act and Bye-Law 9.11 of the Depositories Act, 1996 cannot and do not displace the law of succession, nor do they open a third line of succession. This is the consistent view of the Supreme Court in Khanchandai [2000 (8) TMI 77 - SUPREME Court], Shipra Sengupta [2009 (8) TMI 1124 - SUPREME COURT], all decisions that preceded Kokate; and the submission made in paragraph 9 of Kokate was correctly placed and was in line with those decisions. Those decisions were all binding on the Kokate Court. They were neither noticed nor considered. The Kokate Court could not have taken a view contrary to those decisions. Kokate is, therefore, per incuriam. - This judgment does not dispose of the Notice of Motion in Salgaonkar or the application in Ghatalia. Those will be considered on their merits in view of the legal position enunciated above. Given that this judgment deals only with a question of law, there is no question of a stay of the judgment.
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