TMI Tax Updates - e-Newsletter
June 5, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. BAGASSE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. IICA signs MoU with Grant Thornton

2. RBI Reference Rate for US $ and Euro

3. RBI has chosen to maintain a Balance between Growth and Inflation while keeping the Policy Rates Unchanged and Followed a Caliberated Approach to that effect: FM

Notifications

Income Tax

1. 29/2014 - dated 3-6-2014 - IT

Deductions u/s 80G of the Income Tax Act 1961- Donations to religious/charitable funds etc.

Circulars / Instructions / Orders

FEMA

1. 138 - dated 3-6-2014

Liberalised Remittance Scheme (LRS) for resident individuals-Increase in the limit from USD 75,000 to USD 125,000

2. 137 - dated 3-6-2014

Exim Bank's Line of Credit of USD 46 million to the Government of the Republic of Mauritius

DGFT

3. 10/2014 - dated 4-6-2014

Online complaint resolution system relating to EDI issues

4. 61/2009-2014 (RE-2013) - dated 3-6-2014

Amendment in Public Notice No.59/2009-14(RE2013)/ dated 15.05.2014-Inclusion of an agency under Appendix 4D-reg.

Highlights / Catch Notes

Income Tax

• Expenses for Repairs on Leased Property Deemed Revenue Expenditure u/s 37 for Non-Owner Assessee.

  Case-Laws - HC : Deduction u/s 37 – assessee was compulsorily required to build a new shop on land which was not his own property - Expenses on premises taken on lease towards repairs, fixtures etc. allowed as revenue expenditure - HC
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• Section 40(a)(ia) isn't punitive for non-deduction of TDS if recipients reported income and paid taxes.

  Case-Laws - AT : Section 40(a)(ia) cannot be seen as intended to be a penal provision to punish the lapses of non-deduction of TDS particularly when the recipients have taken into account income embedded in these payments, paid due taxes thereon and filed ITR in accordance with the law. - AT
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• Brand Lab & Registration Fees Classified as Revenue Expenses, Not Capital; No New Asset Created or Enduring Benefit Provided.

  Case-Laws - AT : Brand lab and registration charges – Capital expenses or not – expenditure is revenue in nature as it does not bring into existence any new asset or benefit of enduring nature but these are recurring annual charges/renewal fee - AT
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• Reopening Tax Assessment: Authority of Assessing Officer u/ss 144 and 147 of Income Tax Act Explained.

  Case-Laws - AT : Validity of reopening of assessment u/s 144/147 - AO can very well assess as well as reassess the ROI if it is so done - AT
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• Leased assets in sale-leaseback eligible for full depreciation if used for business, u/s 32.

  Case-Laws - AT : Claim of depreciation @100% on leased out assets – sale and lease back - as long as the asset is utilized for the purpose of business of the assessee, the requirement of Section 32 will stand satisfied, notwithstanding non-usage of the asset itself by the assesse - AT
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• FM Radio Operations Not Classified as Manufacturing; Additional Depreciation Claim Denied Under Tax Rules.

  Case-Laws - AT : FM radio operations do not result in manufacture or production of any article or thing - claim of additional depreciation denied - AT
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Customs

• Court Orders Revenue Authorities to Accept Petitioner's Compounding Application After Admission of Goods Ownership in Court.

  Case-Laws - HC : Compounding of offences - it is apparent that the petitioner after initially refuting ownership, later on admitted ownership in his subsequent statements - revenue directed to accept the compounding application and pass consequential orders - HC
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• Copper-Nickel Alloy with 60.6% Copper Classified as Copper Alloy for Customs and Tax Purposes.

  Case-Laws - AT : Classification of Alloy consisting of 60.6% of Copper and 13.90% Nickel - ‘Nickel’ silver alloy in question, can not be treated as Nickel alloy but has to be treated as copper alloy - AT
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Indian Laws

• Penalty of Rs. 250/Day Imposed for Delayed RTI Responses u/s 20(1) to Ensure Timely Compliance.

  Case-Laws - HC : Penalty under s. 20(l) RTI Act - delayed reply - Commission to impose a Rs. 250 daily penalty till the application for information is received or the information is given. - HC
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Service Tax

• Applicants Denied Complete Waiver of Service Tax for Complex Construction Services; No Prima Facie Case Established.

  Case-Laws - AT : As the applicants had undertaken construction of complex service which is taxable, therefore, prima facie the applicants have not made out a case for total waiver of the service tax - AT
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Central Excise

• Appellant's Failure to Deposit Duty per Rule 8(1) Leads to Tribunal and High Court Upholding Demand Despite Cenvat Credit Use.

  Case-Laws - HC : Failure to deposit the monthly duty liability in terms of rule 8(1) of the Central Excise Rules - It was the Cenvat credit which was utilized by the appellant despite the default. - demand as confirmed by the tribunal sustained - HC
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• Appellants fail to rebut presumption of clandestine removal of man-made fabrics; notebook evidence supports department's case.

  Case-Laws - AT : Clandestine removal - Recovery of note book - appellants have not rebutted the presumption - Department has discharged the onus of establishing clandestine clearances of man made processed fabrics by the appellants. - AT
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Case Laws:

• Income Tax

• 2014 (6) TMI 82
  Sale of carbon credits – Capital receipt or not – No cost of acquisition of production –Held that:- The Tribunal was rightly of the view that “Carbon Credit is not an offshoot of business but an offshoot of environmental concerns - No asset is generated in the course of business but it is generated due to environmental concerns -” Carbon Credit is not even directly linked with power generation - on the sale of excess Carbon Credits the income was received it is capital receipt and it cannot be business receipt or income – Decided against Revenue.

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• 2014 (6) TMI 81
  Penalty as per clause (a) of Explanation 4 to section 271(1)(c) of the Act - Quantum additions confirmed – Inaccurate particluars furnished – MAT u/s 115JB of the Act paid - Held that:- Following Commissioner of Income Tax Versus M/s. Nalwa Sons Investments Ltd. [2010 (8) TMI 40 - DELHI HIGH COURT] – the tax paid by the assessee before and after additions would remain exactly the same - since the Commissioner did not permit any increase in the assessee's book profit computation u/s 115JB of the Act, even after unearthing the concealed income, the assessee ended up paying the same amount of minimum alternative tax u/s 115JB of the Act even after the concealments were unearthed and accepted by the assessee - the assessee's tax liability did not change despite unearthing of concealed income, no penalty could have been levied - before and after the additions the assessee remained a MAT company and paid tax under section 115JB of the Act or such similar provision, that by itself would mean that no penalty could be imposed - If the effect of the addition of the concealed income results into higher minimum alternative tax by increasing the book profit also, penalty could as well be imposed – Decided against Revenue.

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• 2014 (6) TMI 80
  Deduction u/s 37 of the Act – Expenses on premises taken on lease towards repairs, fixtures etc. – assessee was compulsorily required to build a new shop on land which was not his own property - Held that:- The nature of business prior to expenditure in question and afterwards being the same without any change, except some improvements to augment more profits in order to compete with the other competitors in the business regarding new interior designs etc. it cannot be termed as capital expenditure - There was no fresh venture by the assessee so far as the business is concerned - Intended object and the effect must be with reference to business realities - Whether advantage or benefit is for a shorter or longer period, it is immaterial - character of expenditure is alone the deciding factor – thus, the stand of the revenue that the Tribunal was justified in rejecting the claim of the assessees has to be rejected - the business expenditure irrespective of creating enduring benefit or advantage even if it is a profit earning effort unless at the end of the term of lease the items on which expenditure was spent could be retrieved by the appellants-assessees, it shall not amount to capital expenditure but it can be termed only as revenue expenditure. Transfer pricing adjustment – Held that:- There is no justification for the revenue to ignore certain comparable cases only on the ground that those two assessees sustained losses in some years - In comparable cases produced by the assessee with respect of international transactions, the revenue has to bear in mind the case of the assessees based on the computations made in the comparable cases – Decided in favour of Assessee.

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• 2014 (6) TMI 79
  Disallowance u/s 40(a)(ia) of the Act – Tax withholding obligations u/s 194A of the Act not discharged – Held that:- The net effect of the amendments is that the disallowance u/s 40(a)(ia) shall not be attracted in the situations in which even if the assessee has not deducted tax at source from the related payments for expenditure but the recipient of the monies has taken into account the receipts in computation of income, paid due taxes, if any, on the income so computed and has filed his income tax return u/s 139(1) - it is beyond doubt that the underlying objective of section 40(a)(ia) was to disallow deduction in respect of expenditure in a situation in which the income embedded in related payments remains untaxed due to non-deduction of tax at source by the assessee - section 40(a)(ia) cannot be seen as intended to be a penal provision to punish the lapses of non-deduction of tax at source from payments for expenditure- particularly when the recipients have taken into account income embedded in these payments, paid due taxes thereon and filed income tax returns in accordance with the law. A curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced - it cannot subscribe to the view that it could have been an "intended consequence" to punish the assessees for non-deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax - That will be going much beyond the obvious intention of the section - the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004 – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.

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• 2014 (6) TMI 78
  Deletion of estimation of income from FDR – Accrual of interest - Held that:- CIT(A) was rightly of the view that the Visnagar Nagrik Sahakari Bank Ltd. is in liquidation as per the directions of the RBI - the chances of recovery of the principal amount of the FDR made with Visnagar Nagrik Sahakari Bank Ltd. was doubtful - When the recovery of the principal amount itself was doubtful, then, the question of recovery of interest was almost impossible – thus, the assessee was justified in not accounting the interest income on accrual basis in the income for the year – Relying upon CIT vs. Ferozepur Finance Pvt. Ltd. [1980 (5) TMI 29 - PUNJAB AND HARYANA High Court] - assessee in earlier year also had not disclosed interest income on these FDRs which has been accepted by the Revenue – assessee was right not to book interest income on the basis of accrual- thus, there was no income in form of interest on FDRs – Decided against Revenue.

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• 2014 (6) TMI 77
  Deletion of disallowance of expenses - Brand lab and registration charges – Capital expenses or not – Held that:- The expenses are not for registering of any new brand or product but it was the annual renewal fee/charges of the already registered brands and further for putting the brands on record in other states for the purpose of more convenient and better business activities - the expenses incurred were not for registering new brand I level but were either renewal of fees paid or to get the said brands being put on record in other states in, the country so that assessee's right in respect of said brand /levels even in those states get protected from being copied - the expenses incurred are either renewal fees paid or to get the said brands being' put on record in other states in the country so that assessee's right in respect of said brand / level even in those states get protected from being copied - CIT(A) rightly was of the view that the expenditure is revenue in nature as it does not bring into existence any new asset or benefit of enduring nature but these are recurring annual charges/renewal fee - thus, there is no reason to interfere in the order of the CIT(A) – Decided against Revenue.

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• 2014 (6) TMI 76
  Penalty u/s 271(1)(c) of the Act – Undisclosed income - Held that:- The assessee derived income from salary, rent, interest and business - in case the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing and thereafter the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income which is related to any previous year which has ended before the date of search and the return of income for such previous year has been furnished before the said date but such income has not been declared furnished before the date of search or for such previous year which is to end on or after the date of search and such income is declared by him in his ROI furnished on or after the date of search. The deeming provision about concealment of income or furnishing of inaccurate particulars of such income shall not be applicable when such income or transaction resulting income which are recorded on or before the date of search in the books of account maintained regularly during the course of business or when he makes a declaration in his statement u/s 132(4) of the Act that money etc. found in his possession or under his control was acquired out of his income which has not been disclosed in his ROI to be furnished before the expiry of time specified in section 139(1) and specifies the manner in which the said income has been derived and pays due tax thereon together with interest in respect of such income – Relying upon CIT Vs. Kanhaiyalal Saruparia [2007 (12) TMI 46 - RAJASTHAN HIGH COURT] - thus, a penalty u/s 271(1)(c) of the Act cannot be imposed - The assessee has fulfilled the conditions laid down in Explanation 5 – thus, the order of the Penalty is set aside – Decided in favour of Assessee.

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• 2014 (6) TMI 75
  Power of revision u/s 263 of the Act - Prejudicial to the interest of revenue – Proper enquiry made by AO – Reply with documentary evidences furnished by assessee – Held that:- An order can be revised only and only if twin conditions of ‘error in the order’ and ‘prejudice caused to the Revenue’ co-exist - the CIT does not have unfettered and unchequred discretion to revise an order - The CIT is required to exercise revisional power within the bounds of the law and has to satisfy the need of fairness in administrative action and fair play with due respect to the principle of audi alteram partem as envisaged in the Constitution of India as well as in section 263 - an order can be treated as ‘erroneous’ if it was passed in utter ignorance or in violation of any law, or passed without taking into consideration all the relevant facts or by taking into consideration irrelevant facts - The ‘prejudice’ that is contemplated u/s 263 is the prejudice to the Income Tax administration as a whole. Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted - Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view under with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under the law – thus, there is no error in the order which can be said to be prejudicial to the interest of the revenue – Decided in favour of Assessee.

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• 2014 (6) TMI 74
  Deletion made u/s 68 of the Act – Unexplained creditors – Held that:- The assessee produced duly sworn in affidavits of 6 creditors - For the remaining, the assessee produced confirmation through affidavits etc. before the CIT(A) - the creditors have admitted their respective credits and have also explained their source(s) - unless the AO controverts the averments of the affidavits, the version given therein cannot be rejected - the evidence produced by the assessee in respect of the creditors were also considered – thus, the order of the CIT(A) is setting aside the addition is upheld – Decided against Revenue. Deletion of disallowance out of expenses – Held that:- All the expenses are in relation to the trading activities of the assessee - The AO has not rejected the books of account - AO has not doubted the receipts etc. and have accepted them – Relying upon CIT Vs. Maharaja Shree Ummaid Mills Ltd. [1991 (5) TMI 46 - RAJASTHAN High Court] – thus, the order of the CIT(A) is upheld – Decided against Revene. Deletion of low withdrawals for household expenses – Held that:- The addition is based on no material but on wild guess and pure estimation with reference to the size of the family and the standard of living - The AO has not brought any evidence on record, in this regard – the order of the CIT(A) is upheld – Decided against Revenue.

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• 2014 (6) TMI 73
  Validity of reopening of assessment u/s 144/147 - ROI had not been regularly verified and it was only processed u/s 143(1) – capital gain not disclosed by the assessee in his ROI - nvestment was also not disclosed - Held that:- The contention of assessee cannot be accepted because u/s 147 the AO can assess or reassess income - When the ROI had not been regularly verified and it was only processed u/s 143(1) of the Act, the AO can assess income after the Return of Income is processed u/s 143(3) of the Act - The AO has enough evidence of escapement of income – thus, the action taken u/s 147 r.w.s.148 and section 144 is a valid action - The AO can very well assess as well as reassess the ROI if it is so done – Decided against Assessee. Addition of unexplained capital expenses – Expenses incurred in on erection and installation of plant and machinery – Held that:- The genesis of the addition is the Inspector’s report - the report was never confronted to the assessee - The assessee has argued that no such capital expenditure was incurred during the year - Entire working and finding of the CIT(A) again is found to be based on Inspector’s report - Untested statement of the Inspector given in his report cannot be made a basis of any addition unless it is confronted with the assessee and moreover, certain other corroborative evidence is found – thus, this baseless addition is set aside – Decided in favour of Assessee.

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• 2014 (6) TMI 72
  Claim of amount due to business associates – Held that:- There was no reason to interfere with the order of the CIT(A) - Assessee has computed his gross assets and claimed deduction of various amounts borrowed from others so as to arrive at the unaccounted amount and the details of which were placed before the AO - Working of amounts due to business associates was also based on the seized note book marked as ‘AC-79 – the assessee’s claim is based on the books seized in the course of search and also since the incomes are arrived at on the basis of the gross assets minus liabilities found during the course of search, thus, there is no reason to interfere with the amounts arrived at by Assessee, which is based on the seized material itself – Decided against Revenue. Pronotes found but amounts not advanced – Held that:- CIT(A) rightly held that the assessee was found to be recording unaccounted all his transactions in his book/registers – the assessee is maintaining pronotes in Sl. No. and Investigation Unit found that most of the pronotes duly accounted for in the note books seized - no amounts were advanced against 11 pronotes, but, they are taken in the total gross assets, the claim of Assessee for exclusion is proper – Decided against Revenue. Disallowance of time barred pronotes – Held that:- There was no reason to interfere with the order of the learned CIT(A) as the non-recovery of the amounts against the time barred pronotes is a valid claim as bad debt when the entire amount advanced is considered in gross assets in the computation of income made by Assessee on the basis of note books and there is no such allegation that Assessee has collected the amounts outside the books of account, since all the transactions are found entered in the books of account - Non-recovery of the amounts on these pronotes has resulted in loss to Assessee – thus, the claim made by Assessee as deduction is to be upheld – Decided against Revenue. Disallowance on time barred cheques – Held that:- There was no reason to defer from the finding of the CIT(A) - The issue is similar to the earlier two claims of pronotes found but not advanced and time barred pronotes - In the case of time barred cheques also the claim is allowable as the amounts involved in the cheques have been taken into consideration and arrived at the gross assets - Non-recovery of the amounts will certainly make a reduction in the assets availability and there is no allegation that the amounts borrowed to these cheques have been encashed, since the books of account also corroborate the working of the assessee hence, the claim of Assessee is to be allowed – Decided against Revenue. Disallowance of deficit cash balance – Held that:- There was no reason to interfere with the order of the CIT(A) - Not only the present CIT(A) even his predecessor CIT(A) has deleted the amount (while confirming other amounts) by stating reason in his order dated 15-07-2005 - The reasoning given by the CIT(A) is valid since the unaccounted income was arrived at on the basis of gross assets minus liabilities method, the deficit cash would certainly result in a reduction to the gross assets as the same would have been accounted for in any of the other assets found in the course of search - There is no allegation that the amounts could have been spent outside the books as the assessment was based on seized material and the assets found during the course of search – thus, there was no reason to consider the issue raised by Revenue – Decided against Revenue.

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• 2014 (6) TMI 71
  Treatment of income of sale of shares – Allowability of exemption u/s 10(38) of the Act – Held that:- The number of shares, the date of purchase and dates of sale at the prices of specific number of shares as set out in the order has not been shown to be incorrect by the Revenue - none of the facts are disputed neither the dates are disputed nor the nos. of shares nor the price of sale or purchase - revenue has also not attempted to upset the finding of the CIT(A) inasmuch as that the assessee was maintaining two separate portfolios one for Investment and one for business - CIT(A) records that he has personally verified the position for the last 7 years from the P&L A/c of the assessee as well as the inventory of closing stock and then has come to a finding that neither during the year nor in the earlier years the assessee has ever traded in those shares which are kept as an investment - Nothing has been placed by the Revenue in order to take a contrary view. The factum of maintaining two separate portfolio was found to be correct even on a perusal of the position emanating from the 143(3) order of the AO in 2002-03 AY - No evidence to the contrary upsetting these findings as incorrect finding has been placed - the holding period has also not been argued to be incorrect which is more than one and a half year or more. - Decided against Revenue. Deletion of expenses – Held that:- The only relief available to the assessee can be the deletion of the expenditure estimated for the month of June 2006 when Mr. Aman Gupta returned to India - Nothing has been placed on record before us except oral arguments to demonstrate that Mr. Aman Gupta was also financed by his father - No arguments have been advanced requesting for the admission of evidence of withdrawals available to the assessee's husband - In the absence of any relevant evidence the assessee being the best judge to know its affairs, there was no reason to deviate from the order – thus, the addition @ Rs. 1 lac per month for the month of April and May is upheld and the addition to the extent of Rs. 2 lac is sustained – Decided partly in favour of Assessee. Disallowance of foreign visit expenses – Held that:- The claim of the assessee that the amount was sufficient to cover the two foreign travels has not been accepted by the department – the argument has been advanced but nothing has been placed on record to show the actual withdrawals available to her husband for the specific period - the foreign travel for tourism purposes has been done by the assessee to Dubai and Singapore for specific days - The information available in regard to the travel whether it was executive class or ordinary class and the nature of stay whether it was a Five Star Hotel or an ordinary bed and breakfast arrangement is an information which necessarily is known only to the assessee who has chosen to evade the same as the stand taken is that no records have been maintained - Nothing has been placed to show that the addition is excessive – there was no alternative but to confirm the addition as necessary evidence in the knowledge of the assessee have not been made available to take a contrary view – Decided against Assessee.

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• 2014 (6) TMI 70
  Disallowance of depreciation @100% on leased out assets – Genuineness of transaction of sale and lease back of COPS - Held that:- Once the assessee has established with supporting evidence that the transaction in question has been actually carried out then in the absence of any contrary material or facts brought on record, the action of the authorities below in holding the transaction as bogus is not sustainable – Following ICDS Vs CIT [2013 (1) TMI 344 - SUPREME COURT] - as long as the asset is utilized for the purpose of business of the assessee, the requirement of Section 32 will stand satisfied, notwithstanding non-usage of the asset itself by the assesse - even otherwise the claim of 100% depreciation was otherwise allowed by the revenue on the COPS in the case of SSL other than the COPS - the Revenue itself has allowed 100% claim on the COPS - there is no dispute regarding the actual payment of consideration, valuation made by the Government Approved Chartered Engineer, ownership of asset and sale at the end of lease period - the investigation carried out by the ADI(Inv.)-II, Indore, wherein the transaction in question was confirmed – thus, the assessee is eligible for 100% depreciation on the COPS – Decided in favour of Assessee.

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• 2014 (6) TMI 69
  Disallowance of deduction under Rule 9B(4) – acquisition of the satellite and terrestrial television rights - FM Broadcasting Services. - business of printing and publishing of newspapers and magazines - Held that:- The AO has given a categorical finding that the assessee did not generate any income by using those films - assessee could not furnish the details of results of the appeal - as on date, the decision rendered by the co-ordinate bench of the Tribunal on the issue remains in force and CIT(A) has followed the decision of the Tribunal – thus, there is no reason to interfere with the decision rendered by the CIT(A) – Decided against Assessee. Deletion of disallowance of depreciation on the FM radio equipments - Held that:- Relying upon Bharat Aluminium Co. Ltd. v. CIT [2010 (8) TMI 26 - DELHI HIGH COURT] - the FM radio equipments are new machineries purchased by the assessee during the year under consideration, that too after September, 2005 - The depreciation is allowed u/s 32(1) of the Act only if the assets are owned wholly or partly by the assessee and used for the purposes of the business and further depreciation is allowed on any block of assets at such percentage on the written down value thereof, as may be prescribed - the assessee has not brought any material on record to substantiate its claim that it was using the central technical area equipments for preparing programmes - the FM radio business can be considered as "set up" only when both central technical area and common transmission infrastructure divisions are made functional - the assets would enter into the "block" only upon using them for the purposes of business – claim of depreciation denied – Decided in favour of Revenue. Disallowance of additional depreciation claimed on EM radio equipments – Held that:- The object of allowing additional depreciation, an accelerated depreciation, is to encourage new investments - the proviso lists out machineries (and not assessees) which are not eligible for deduction u/s 32(1) (iia) of the Act, even if the assessee is engaged in the manufacture or production of articles or thing - the purpose of allowing additional depreciation under section 32(1) (iia) is to allow deduction only on those assets, which are used for the purpose of manufacture or production of article or thing – thus, additional depreciation is "asset specific". In our view also, the FM radio operations do not result in manufacture or production of any article or thing - Further the assessee may also broadcast the programmes produced by others also - the primary objective of the assessee in FM radio business is only "broadcasting" only – thus, the order of the CIT(A) is upheld – Decided against Assessee. Right of the Department to file appeal before the Tribunal – Held that:- The assessee has raised this contention without properly appreciating the scheme of the Act - The remedy by way of appeal is provided only to the aggrieved party under the scheme of the Income-tax Act - the right to appeal accrues to the AO only against the appellate order passed by the CIT(A) - Since the Assessing Officer does not have right to file appeal before the learned CIT(A) against his own order cannot be said that his absence would disentitle him to file appeal before the Tribunal against the order passed by the CIT(A) – Decided against Assessee.

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• Customs

• 2014 (6) TMI 87
  Compounding of offences - Illegal import of goods - Contradictory statements given by assessee - Redemption fine paid to avoid confiscation - Held that:- The power to permit compounding of offences contained in Section 137 (3) is apparently wide; the concerned official is not empowered to allow compounding in respect of offences under Section 135 and 135 (A) and the class of offences which are spelt out in clauses (b) & (c) of the proviso to Section 137 (3). Likewise, an embargo has been placed upon the power of compounding in respect of a person who has been allowed to compound once in respect of any offence under Chapter XVI of the Customs Act, 1962. The requirement of disclosure, apparently spelt out in Anil Chanana [2008 (1) TMI 50 - SUPREME COURT] was read in to the power under Section 137 (3) of the Act, having regard to the given circumstances of the case. It was highlighted during the hearing, that the offence with which the importer or smuggler was charged with in that case attracted a minimum sentence - which impelled the Court’s observation that the petitioner was not entitled to claim compounding. it is apparent that the petitioner after initially refuting ownership, later on admitted ownership in his subsequent statements and paid up the duty amount, penalty and redemption fine. In these circumstances, considering that no minimum sentence or penalty was attracted for the offence that the petitioner was charged with, the denial of compounding meant that he would have to face a long trial which ultimately would, in all probability, culminate in a small fine. The impugned order of the Chief Commissioner in our opinion is erroneous, because apart from the initial contradiction and the first denial, there were in fact no subsequent conflicting statements in that that subsequent statements recorded under Section 108 (on 20.07.2011 and 09.08.2011) clearly admit that he purchased the articles for sale in India - The respondents are hereby directed to accept the compounding application and pass consequential orders - Decided in favour of assessee.

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• 2014 (6) TMI 86
  Revocation of CHA License - Ex parte order - Denial of right to be heard - Held that:- The reply – though termed interim – was given within the period prescribed. The noting sheet records an entry acknowledging that the reply was received by customs authorities; the noting was made on 03- 03-2014. The next day, i.e. 04-03-2014, a decision to forward the reply to the Inquiry Officer was taken. Unfortunately for the petitioner, that office prepared the report on 04.03.2014, after assuming that the petitioner had nothing to say - Regulation 22 mandates that the CHA should be given hearing before action is taken. In this case, the show cause notice was issued on 30-01-2014; 30 days’ time was given to the CHA to respond to the allegations. A reply was furnished. The respondent’s argument that the reply had to be given directly to the Inquiry Officer is without merit, because it is upon receipts of reply by the Commissioner – i.e. the notice issuing official – and a further order by him, that the Inquiry Officer assumes power – under Regulation 22(2) to proceed further. In this case, no such order was made; the Inquiry Officer’s report is premised almost entirely on the investigation report and its allegations - The insistence upon giving an opportunity of hearing to a CHA whose license is suspended, is not an idle formality which sadly the impugned order assumes it to be. The impugned inquiry report, therefore, cannot be sustained - Matter remanded back - Decided in favour of assessee.

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• 2014 (6) TMI 85
  Valuation of goods - Rejection of transactional value - Held that:- there is no evidence of rejection of transaction value and no evidence of contemporaneous import, he has held that the transaction value has to be accepted as assessable value - in their memo of appeal, the Revenue has not placed any evidence on record to reject the assessee’s transaction value - Following decision of Eicher Tractor [2000 (11) TMI 139 - SUPREME COURT OF INDIA] - Decided against Revenue. Classification of goods - exemption at Sl. No. 438 of Notification No. 21/2002-Cus., dated 1-3-2002 - Whether an Alloy consisting of 60.6% of Copper and 13.90% Nickel can be considered as “Nickel” or “Articles of Nickel” for the purpose of availing exemption at Sl. No. 438 of Notification No. 21/2002-Cus., dated 1-3-2002 - Held that:- Though the “nickel silver turnings covered by ISRI code word ‘Niece’ ” is mentioned in the Tariff under sub-heading 75030010 pertaining the “Nickel waste and scrap”, which would also cover the waste and scrap of Nickel alloy, in term of sub-heading note 1(b) of Chapter 75, in Nickel alloys, nickel has to predominate by weight over each of other constituents and, therefore, a base metal alloy in which copper predominates by weight can not be treated as Nickel alloy. Even in term of Section Note 5 to Section XV, ‘Nickel’ silver alloy in question, can not be treated as Nickel alloy but has to be treated as copper alloy. There is, thus, conflict between the wordings of the heading 75030010 and the section note and sub-heading notes. Therefore the sub-heading 75030010 pertaining to “Nickel waste and scrap”, would cover only that scrap of Nickel or its alloy in which Nickel predominates by weight over other constituents. The goods, in question, in which copper predominates by weight over other constituents cannot be classified as Nickel alloy scrap and hence the same cannot be treated as ‘Nickel’. In view of this, the goods, in question, are not covered by S. No. 438 of Notification No. 21/2002-Cus., notwithstanding the fact that the goods have been classified under sub-heading 75030010, which in my view, is a mistake - goods, in question, being a copper alloy are not covered by S. No. 438 of the table of the Notification No. 21/2002-Cus - Decided against Assessee.

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• Service Tax

• 2014 (6) TMI 98
  Waiver of pre deposit - Remittion of service tax consequent on under-disclosure of the total consideration received for providing the taxable ‘banking and other financial’ services - Held that:- so far as operating lease/ hire purchase transactions are concerned, on which demand of Rs. 35,47,359/- is confirmed, that Notification No. 4/2006-ST dated 01.03.2006 has exempted levy of service tax to the extent of 90% on financial leasing services including equipment leasing and hire purchase as defined in Section 65(12)(i) of the Act and on the interest component received on these transactions. The benefit of this exemption was claimed before the adjudicating authority, who adverted to the claim but failed to deal with the same and simply assessed tax on this aspect at the full rate. It is contended by ld. Counsel for the appellant and this contention is not disputed by that ld. DR that tax liability on operating lease/ hire purchase transactions, if taxable and after granting the benefit of exemption Notification No. 4/2006-ST would be about Rs. 40,000. Prima-facie invocation of the extended period is not justified. We therefore grant waiver of pre-deposit and stay of all further proceedings for recovery of the adjudicated liability, on condition that the appellant remits Rs. 2 lakhs (comprising the interest demand on cenvat credit availed plus the service tax payable (after exemption benefit) on operating lease/ hire purchase) within four weeks - stay granted partly.

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• 2014 (6) TMI 97
  Waiver of pre-deposit of service tax - construction of complex service and commercial and industrial construction service - Held that:- land owner executed a power of attorney in favour of the applicants for entering upon the land for construction of the complex. The title of the land is not transferred to the applicants. In these circumstances, prima facie we find that the applicants are not the owner of the land on which the complex is constructed. As the applicants had undertaken construction of complex service which is taxable, therefore, prima facie the applicants have not made out a case for total waiver of the service tax - Conditional stay granted.

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• 2014 (6) TMI 96
  Waiver of pre-deposit of Service Tax liability - Port services - differential Service Tax - charge for the wharfage - water lee way charges - Held that:- agreement entered by GMB with various private parties in respect of minor ports in Gujarat State are similarly worded and the reduced rate of wharfage @ 20% of the normal wharfage charged by the appellant was given across the board to all the private parties who had constructed the infrastructures in the minor ports. We also note that the agreements in this case are the very same clauses as were in the agreements considered in the final order passed by this Bench on 01.08.2013 in as much as the infrastructure needs to be created by the private parties and same should be handed over to GMB on expiry of the lease agreement. The differences in the agreement and the facts as has been canvassed by the ld.Departmental Representative will not carry the case any further as in the case of M/s Dahej Harbour and Infrastructure Ltd, we find that the appellant therein was a special purpose vehicle created by private party, who constructed the infrastructure in the said minor ports. GMB is an appellant before us and the Service Tax liability which has been adjudged against them is on an identical ground as was in their own case. We are of the considered view that for the purposes of waiver of the amounts involved, the ratio laid down by the Bench in their own case will apply. We also record that the reasoning adopted by this Bench for directing pre-deposit in the case of M/s Dahej Harbour and Infrastructure Ltd may not apply in the case in hand as in the appellants (GMB) own case we have held on an identical issue in their favour. appellant has made out a prima facie case for waiver of pre-deposit of the amounts involved - Stay granted.

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• 2014 (6) TMI 95
  Condonation of delay - as data had to be collected from different collection centres and due to system failure assessee were enforced to calculate manually the exact receipt of Service Tax received from their customers and due to change of system in their software package, the Appellant could not file the Appeals in time - Held that:- Impugned Orders had been received by the Appellant on 31-10-2006 and they were required to file the Appeals on or before 31-1-2007. But they did not file the Appeals within the stipulated time and could only file the same before this Tribunal on 29-2-2008 with a delay of 394 days. The reasons for delay contended by the Appellant that there was a system failure in their software system, which got updated only in between September, 2006 to November, 2007. But the Appellant has not explained the cause of delay in filing the Appeals after November, 2007. It is also apparent on record that instead of filing the Appeals before this Tribunal on or before 31-1-2007, the Appellant approached before the Hon’ble High Court of Patna only on 15-1-2008, when the Department had commenced the recovery proceedings in November, 2007 itself, and by that time, they had not applied for clearance from the Committee on Disputes, to file the Appeals before this Tribunal. Delay should not be intentional and day-to-day delay in filing appeals has to be explained upto the satisfaction of the Courts. In this case, the Appellant has not explained which factors caused them to challenge the impugned Orders by way of a Writ before the Hon’ble High Court of Patna, when their counsel himself had advised them that if the Appeals are to be filed, those should be filed before this Tribunal. Moreover, the preambles of the impugned Orders clearly stated that the appeals are maintainable before this Tribunal only. The Appellant has also failed to explain the delay of another three months after upgradation of the system in Nov. 2007. In these circumstances, we hold that the Appellant has failed to explain satisfactorily the cause of delay in filing the Appeals. Therefore, the Applications for condonation of delay are dismissed - Condonation denied.

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• 2014 (6) TMI 94
  Waiver of pre deposit - management, maintenance and repair service - non existence of written contract - period from 16-5-2005 to 31-3-2008 - Held that:- for providing such service, the same must be provided under a contract. Admittedly, in the present case, there is no contract entered into by the appellant with Madhya Pradesh Government - The show cause notice for the period from 16-5-2005 to 31-3-2008 was issued on 10-11-2008 and as such the major part of the demand is beyond normal period of limitation. It is seen that the Commissioner, while confirming the demand, has not imposed any penalty on the appellant by holding that there was reasonable cause to entertain the belief that the service was non-taxable, by invoking the provisions of Section 80 of Finance Act, 1994. If there was reasonable cause for entertaining belief that the service provided by the appellant does not amount to taxable service, as held by the Commissioner, the same ground would be available to the appellant for pleading the limitation aspect. As such, at this prima facie stage, we are of the view that the appellant is not required to deposit any amount of duty as condition of hearing of their appeal. - Following decision of Ashoka Infraways (P.) Ltd. Versus Commissioner of Central Excise, Nashik [2011 (5) TMI 152 - CESTAT, Mumbai] - Stay granted.

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• Central Excise

• 2014 (6) TMI 93
  CENVAT Credit - Goods Transport Agency Service - Held that:- assessee manufacturing textile goods, and also deemed output service providers of GTA service, was entitled to utilize their Cenvat credit for payment of Service tax on GTA services - Following decision of Commissioner of Central Excise, Chandigarh Vs Nahar Industrial Enterprises Ltd. reported in [2007 (3) TMI 201 - CESTAT NEW DELHI] - Decided in favour of assessee.

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• 2014 (6) TMI 92
  Failure to deposit the monthly duty liability in terms of rule 8(1) of the Central Excise Rules - Liability to pay the duty consignment-wise and only through the PLA since the period of default was beyond 30 days from the due date - Duty paid by availing CENVAT Credit - Held that:- Orders which had been passed by the Tribunal both on the original application as well as on the modification application are fair and proper. A prima-facie finding has been recorded that there was a breach on the part of the appellant to comply with the provisions of rule 8(1), which mandates that the duty has to be paid by the fifth day of the following month. Rule 8(3A) thereafter stipulates that if there is a default in payment of duty beyond 30 days from the due date, then notwithstanding anything contained in sub-rule (1) and sub-rule (4) of rule 3 of the Cenvat Credit Rules, 2004, the assessee has to pay duty for each consignment including interest without utilizing the Cenvat credit. It was the Cenvat credit which was utilized by the appellant despite the default. The Tribunal has directed the appellant to deposit an amount of Rs. 5,26,305/- with a further qualification that upon this deposit, the Cenvat credit would be re-credited to the account. We have also noted above that the only submission which was raised before the Tribunal, was based on an order passed in a miscellaneous application dated 12 June 2013. The Tribunal has furnished cogent ground for holding that the order on the miscellaneous application in some other matter had no application for the simple reason that in that case the appellant had deposited much more than what was directed to be deposited by way of pre-deposit - No substantial question of law arises - decided against assessee.

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• 2014 (6) TMI 91
  Condonation of delay - Bar of limitation - whether the Tribunal was justified in dismissing the writ petitioner’s appeal on the ground of limitation - Held that:- the proper remedy of writ petitioner in this case was to file an appeal under Section 35 G of the Central Excise and Salt Act to this Court against the impugned order of the Tribunal rather than the writ petition under Article 226/227 of Constitution because the impugned order was appealable to this Court under Section 35G of the Central Excise and Salt Act - Tribunal should have condoned the delay in filing the appeal by the writ petitioner (appellant) instead of dismissing it on the ground of limitation. The delay in filing the appeal was hardly of 2 months and 19 days and keeping in view the ground stated in the present writ petition, we are inclined to hold that it constitutes sufficient cause within the meaning of Section 5 of the Limitation Act in filing the appeal beyond the statutory period prescribed for its filing - Decided in favour of assessee.

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• 2014 (6) TMI 90
  Duty demand - Petty amount - lower appellate authority has dismissed the demand of excise duty for an amount of Rs.462/- and a penalty of Rs.500/- Held that: - Considering the negligible amount of Revenue involved in this matter, appeals dismissed - decided against the revenue.

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• 2014 (6) TMI 89
  Clandestine removal - Recovery of note book - invoice with new serial number inserted - However, on investigation it was found that pre-authenticated invoices bearing serial number from 172 to 177 were still lying blank and unused in the records of the Respondent. During the course of physical verification of finished goods in the respondent s factory, a shortage of 15,000 Kg of Ordinary Duplex Board, involving central excise duty of Rs. 21,600/ and Cess Rs. 169/-, was detected - Held that:- there was recovery of a small note book from the factory premises of the Respondent which has been admitted by the authorized signatory as well as the Director of the respondent factory, to be including illicitly cleared goods both of them have admitted that the said note book contained particulars of illicitly removed excisable goods from the respondent’s factory, and that this note book was being maintained to monitor the receipt of payments of against the illicitly removed excisable goods. The respondent’s Director also admitted that the note book was being maintained under his directions and the parallel invoices were later destroyed. As per provisions of Sec. 36A of the Central Excise Act, the presumption is that the note book is a genuine documents and this is further fortified by the admission of the power of attorney holder that the entries therein were made by him. The appellants have not rebutted this presumption. We, therefore, hold that the Department has discharged the onus of establishing clandestine clearances of man made processed fabrics by the appellants. Duty demand, is therefore, sustainable - Following decision of Montex Dyg. & Ptg. Works Vs. Commissioner of Central Excise & Customs [2006 (11) TMI 376 - CESTAT, AHMEDABAD] - Decided in favour of Revenue.

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• 2014 (6) TMI 88
  Rectification of mistake - Incorrect Citation mentioned for case law referred - Held that:- citation has been mentioned in the case of Global Vandana 2013 (293) ELT 186 instead of 2010 (253) ELT 440 (LB). Therefore, in paragraph 4 of the order referred therein may be read as Vandana 2010 (253) ELT 440 (LB) - Rectification granted.

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• CST, VAT & Sales Tax

• 2014 (6) TMI 83
  Penalty - Whether the penalty imposed on the assesse would be justified in the present facts and circumstances of the case, when a finding has been rendered by the authorities that the requisite document had not accompanied the goods that was being transported - Held that:- when it is seen that in fact the document, which was required to be produced had not been produced and the penalty was also imposed after providing an opportunity and in the manner as provided under the provisions of the Act, certainly at this juncture, it would not be open for the assessee to contend otherwise, more particularly in a circumstance when the initial contention was that the notification dated 08.08.2008 itself would not apply to them - once it is seen that the required document had not accompanied the goods, the levy of penalty would be justified. In the instant case, as already noticed, the original authority i.e., the Commercial Tax Officer as well as the Additional Commissioner of Commercial Taxes, while arriving at the conclusion have also taken note of the manner in which the reduced penalty has been imposed - Decided against assessee.

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• Indian Laws

• 2014 (6) TMI 84
  Penalty under s. 20(l) of the Right to Information Act, 2005 - Jurisdiction of Commission - Held that:- It is evident from the order of the Commission dated January 9, 2009 that the Commission did not impose any penalty, though it could impose penalty on the petitioner against whom the first complaint dated January 2, 2009 was filed by the fourth respondent, but only directed the petitioner to give the fourth respondent all the information according to his s. 6 application. In his letter dated February 2, 2009 the petitioner clearly said that he had received the order of the Commission dated January 9, 2009 - It is wrong to say that the provisions of s. 20 were not applicable to the case. They are applicable to a complaint filed under s. 18 of the Act. It is not the case that the complaint did not make out any case under s. 18 of the Right to Information Act, 2005. Admittedly, the petitioner did not respond to the fourth respondent’s application for information dated November 4, 2008 till February 2, 2009. He complied with the s. l8 order of the Commission dated January 9, 2009 only on July 16, 2009. It is nor acceptable that once the petitioner complied with the order of the Commission dated January 9, 2009, though belatedly, penalty under s. 20(1) of the Right to Information Act, 2005 could not be imposed on him. Nor do I see any reason to accept the argument that in each and every case the Commission is not supposed to impose Rs. 250 penalty per day. - It is evident that in all the cases mentioned in sub-s. (1) of s. 20, it is the duty of the Commission to impose a Rs. 250 daily penalty till the application for information is received or the information is given. The only thing is that the total penalty amount should not exceed Rs. 25,000. The proportionality principle based on the gravity of the proven charge concept cannot apply to a case under s. 20. That will amount to unauthorised reduction of the penalty amount. A s. 20 case can be a case of penalty or no penalty, but not a case of reduced penalty - Commission has committed no wrong, and that the impugned order is not vitiated by any jurisdictional error - Decided against appellant.

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