Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 8, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Letting out of 3rd floor to another company for commercial purpose proves that what has been constructed is not a hospital but a commercial property - Renewal of extension u/s 80-G rejected - HC
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Claim of set off against the surrendered income - in case, the surrendered amount is treated as an income from business, then assessee is entitled to get set off - HC
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Assessment in pursuance of research u/s 153A - It is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment - HC
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Deduction u/s 80-IB/80-IC - assembling of air conditioner, DVD, microwave would fall within the ambit of expression “manufacture“. - AT
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Addition of interest in the assesee’s income - assessee was custodian of money of Central Government and GHB/SGCC - addition deleted - AT
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Difference between the excess stock and closing stock would reveal that the assessees purchased stock using unexplained money - addition u/s 69A and penalty u/s 271(1)(c) confirmed. - AT
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Additional deprecation - the freight charges and other charges are directly linked to the purchase of plant and machinery and cannot be delinked. - AT
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Disallowance u/s 40A(3) - when income of the assessee was computed by applying the gross profit rate, there was no need to look into the provision of section 40A(3) - AT
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Estimation of income based on MRP - retail trade in liquor - estimate of net profit above 5% of the purchases made by the assessee is to be adopted - AT
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Exemption u/s 11 - revocable transfer - Just because seller had sold the properties and given the money to the assessee, that would not be sufficient to hold that there was an agreement in the nature of a revocable transfer between them. - AT
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Penalty u/s 158BFA(2) - willful attempt - assessee has given the explanation in respect of source of jewellery - no case of imposition of penalty - AT
Customs
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Conviction u/s 22 of the Narcotic Drugs and Psychotropic Substances, Act, 1985 - smuggling - Evidence of this case is sufficient to prove the guilt of the accused beyond reasonable doubt - HC
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Refund of SAD - Interest on belated refund - When the circular is contrary to the provisions of act, it has to be struck down as bad - interest allowed - HC
Service Tax
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Cenvat Credit on service tax on inward transportation - removal of inputs as such - reversal of cenvat credit is not required - AT
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A new service was introduced for ATM service covering various other activities in relation to ATM service cannot be interpreted to mean that prior to that date certification service was not taxable. - AT
Central Excise
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Collection of reversal of cenvat credit from Customers - Recovery order issued by the Department on the basis of Section 11D of the Act was absolutely illegal and is liable to be quashed - HC
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Extended period of limitation - mens rea - absence of any deceitful practice - duty demand sustained by the Tribunal isnot correct - HC
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Extended period of limitation - discrepancy in filing of return - the findings that the officers receiving the Returns had all the information to enable him to verify the facts is correct and cannot be termed as perverse - HC
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Refund - unjust enrichment - burden to prove and to rebut - All the authorities have concurrently found that the assessee has failed to discharge that burden - no perversity in that finding - HC
VAT
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No availability of Form ST 18 A with truck - No notice to assessee - firm cannot be represented through the driver of the vehicle in absence of any authority given to him - No penalty - HC
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Penalty u/s 54(1)(14) of UPTT - seizure of goods as the weight of the consignment was more than that disclosed - petty quantity of goods - no intention of evaision of tax - no penalty - HC
Case Laws:
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Income Tax
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2013 (6) TMI 173
Exemption under Sec.10 (38) on Long Term Capital Gains from the sale of quoted shares and equity oriented Mutual Funds - Income derived from sale of shares - capital gain v/s income from business or profession - assessee is a private limited company registered as NBFC initially was a franchisee of M/s Coca-Cola Company was taken over by the said Company as a going concern and the assessee received Rs.56.23 Crores as consideration/compensation which was invested in stages in shares of Companies quoted on the Stock Exchange and in units of Mutual Funds - Jurisdiction power u/s 263 by CIT(A) - Held that:- The contention of the Revenue that there are no reasons given by the AO about the nature of activity of the assessee cannot be accepted because a query was raised by him in the course of the assessment proceedings and was replied by the assessee. Obviously, he was satisfied with the explanation of the assessee and therefore did not think that the issue needs to be specifically mentioned. It is settled law that the Assessing Officer in the assessment order is not required to give detailed reasons and once it is clear that there was application of mind by an enquiry, the respondent, merely because he entertains a different opinion in the matter, cannot invoke his powers u/s. 263. It is therefore not correct to say that there was no proper enquiry by the AO. The decision in P.V.S Raju (2011 (7) TMI 818 - Andhra Pradesh High Court) does not apply to the present case because in the said case, the assessee had accepted that it was a trader in the earlier years but in the assessment years 2005-06 and 2006-07, in view of the amendment to S.111-A brought into effect from 01.04.2005, the assessees sought to change their stand contending that they were investors in order to claim the benefit of S.111-A. It was also found as a fact that all the shares were held by the assessee for less than two months and some shares were sold even before the purchase indicating the mind of the assessee that they were not intending to hold the same as investment. On those facts it was rightly held that the assessee was only doing trading activity and was not an investor. Moreover it was not a case u/s.263 to which totally different parameters would apply. AO had not only taken a possible view but in the circumstances the only view possible and therefore his order could not have been termed as erroneous or prejudicial to the revenue warranting exercise of revisional jurisdiction u/s.263 of the Act by the respondent. The fact that the Revenue from A.Y 1998-99 had accepted that the assessee is an investor and the shares and mutual funds are investments and not stock-in-trade (except for A.Y 2006-07), the fact that 99 % of the shares were held for considerable time after their purchase before their sale; that the action of the assessee in undertaking large volume of transactions in March,2006 was because of the change in law sought to be made effective from 01.04.2006 with regard to treatment of LTCG u/s.115JB for book profit tax and was not a colourable action and was permissible under the law, lead to an irrefutable conclusion that the assessee was only an investor and the Assessing Officer had rightly taxed his income under the head “Capital Gains”. The respondent had no different or new material to take different view from the one taken by the AO and the reasons given by him to reopen the assessment and sustain the revision are totally unacceptable. The respondent is not vested any power u/s.263 to initiate proceedings for revision in every case and start re-examination and fresh enquiries in matters which have already been concluded under the law. The Tribunal had grossly erred in agreeing with the order of the respondent and in upholding it on grounds which have not been found in the show cause notice of the respondent, that too without considering the several issues of fact and law raised by the assessee in his written submissions and grounds of appeal. Both the respondent and the Tribunal have based their orders on preconceived notions, conjunctures and surmises, manifestly misread the facts and twisted them to justify their conclusions. Thus the order of the AO dated 16.12.2008 for the A.Y.2006-07 accepting the assessee to be an Investor and holding that the income chargeable from sale of shares and units of Mutual Funds was chargeable under the head “Capital Gains”is restored.
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2013 (6) TMI 165
Renewal of extension under section 80-G rejected - petitioner-Trust claims to be running a public charitable Homoeopathic dispensary - Held that:- A cogent and categorical finding has been recorded in the impugned order that although huge amount has been received as donation by the Trust during the previous years, but amount spent for the charitable purpose is merely an eye wash. The claim of the assessee that building constructed by it is for running a charitable hospital has been found to be incorrect as it failed to produce the sanctioned plan and other documents to prove the nature and user of the building constructed by it. Letting out of IIIrd floor of the said building to another company for commercial purpose rather goes to support that what has been constructed is not a hospital but a commercial property. In such circumstances, no fault can be found with the order of the CIT refusing to extend exemption under section 80-G of the Act. Challenge the notice u/s 12A (3)- Held that:- Suffice it to say that it is merely a show cause notice and challenge to it at this stage is premature. It is open to the petitioner to file its reply to the show cause notice against purposed action before the CIT and in such proceedings it is open to the petitioner to produce all such evidence which may justify its claim for continuation of its registration as a charitable institution. See Madhya Pradesh Madhyan Vs. CIT.(2002 (2) TMI 56 - MADHYA PRADESH High Court) - writ petition is dismissed with liberty to the petitioner to file its reply to the show cause notice.
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2013 (6) TMI 164
Reopening of assessment - income assessed as loss under the had “Profit and Gains of business or profession” as against the head “Income from other sources” has escaped assessment as banking license had been cancelled by the Reserve Bank of India and its business had been in the process of winding up by the Official Liquidator - Held that:- There was no failure on the part of the assessee to disclose truly and fully all material facts. The crucial fact that the banking licence of the petitioner has been cancelled by the Reserve Bank of India was disclosed in the original return itself. The averment of the counsel for the Revenue that despite such cancellation of the banking licence, the petitioner lodged a false claim, even if were to be corrected, would not per se indicate that there was any failure on the part of the assessee to disclose truly and fully all material facts. As long as this requirement is satisfied, it was simply not open for the Assessing Officer to reopen the assessment beyond the period of four years from the end of relevant assessment year. In favour of assessee.
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2013 (6) TMI 163
Claim of set off against the surrendered income - nature of surrendered income - whether the surrendered amount of Rs.1,75,00,000/- should be treated as income of Assessee from business or from other sources. - held that:- CIT(A) and ITAT both have recorded a concurrent finding of fact based on cogent material available before them, that surrendered amount was an income of the assessee from business and not from other sources. - Revenue is unable to point out any perversity in the said finding recorded by Appellate Authority as well as Appellate Tribunal. There is no dispute between the parties on the issue that in case, the surrendered amount is treated as an income from business, then assessee is entitled to get set off of the amount of Rs.54,10,054/- . - Decided in favor of assessee.
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2013 (6) TMI 162
Deduction u/s 80HHC - as amount of Rs.14,00,817/- towards receipt from interest was not treated as part of export income and the same was decided against the assessee. - Held that:- Income Tax Appellate Tribunal was absolutely justified in coming to a conclusion that the said amount cannot be business income. In these circumstances, we find that the judgment passed by the Income Tax Appellate Tribunal is based on factual aspect of the case and needs no interference by this Court.
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2013 (6) TMI 161
Assessment in pursuance of research u/s 153A - claim of deduction which were not claimed earlier - Sales tax incentive - Capital receipt or revenue receipt - Held that:- It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. Income Tax Officer : [1981 (9) TMI 1 - SUPREME Court] that “it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided.” The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded upto the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese [1981 (9) TMI 1 - SUPREME Court]. It is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made. - Decided against the assessee.
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2013 (6) TMI 160
Deduction under sec. 80-IB/80-IC - denial of claim as per AO assembling of parts for the air-conditioners or microwave oven do not constitute manufacturing activities and, therefore, assessee is not entitled for deduction under sec. 80-IB of the Act - With regard to deduction u/s 80-IC the unit of the assessee is not situated in an industrial area and assessee is not entitled for deduction under sec. 80-IC - case of the assessee was selected for scrutiny assessment - Held that:- Considering a flow chart wherein it was demonstrated that for manufacturing air conditioners inputs required are (a) base (b) motors (c) coil (d) gas (e) condensers etc. Apart from these, a compressor would also be required. Learned First Appellate Authority has observed that AC does not merely involved assembling. The assessee has to carry out various operations/activities on each of the components before the same could be utilized. Thus, the alleged assembling of air conditioner, DVD, microwave would fall within the ambit of expression "manufacture". The Board has simplicitor removed the confusionn as in the latest notification, larger area has been shown as a industrial estates which includes khasra number 262 MI Selokni. The area according to the new notification includes the areas which were already notified plus Central Hope down. The learned counsel for the assessee has placed on record report of the Patwari, wherein he has submitted that khasra No. 262 MI is part of khasra No. 262. AO was considering khasra No. 262 and 262 MI as independent khasra number. The copy of the site plan available in the revenue record, exhibiting the geographical location of each killa number and khasra number was also filed before the GIT(Appeals) along with patwari's report and this document has been placed before us also. Therefore, convinced that there is no confusion about the location of assessee's units. They are situated within the notified area. The basic conditions for allowability of deduction under sec. 80-IB are also similar. Thus AO except pointing out these two objections has not pointed out any other objection in assessment year 2004-05 also. Therefore, no error in granting deduction under sec, 80-IB/80-IC. In favour of assessee. Disallowance of bad debts and advances given by the assessee to 30 parties for job work/supply of parts - Held that:- AO neither discussed the nature of amounts claimed by the assessee nor discussed how they are not connected with the business of the assessee. With regard to issue of bad debts that after 01.04.1989, assessee is not supposed to give demonstrative evidence that debt has gone bad. It is sufficient if the amounts are written off in the books as decided in TRF Ltd. v. CIT [2010 (2) TMI 211 - SUPREME COURT]. As for amount claimed as written off, but in fact they were the business expenditure, which assessee failed to recover. FAA has appreciated the issue in right perspective. Prior period expenses - Held that:- If the liability for an expense is determined and crystallized during a particular year then the same cannot be disallowed as prior period expense, merely on the ground that the expense relates to a transaction of an earlier year. Disallowance of excess depreciation claimed on computers - @ 35% or 60% - Held that:- As decided in BSES Rajdhani case [2010 (8) TMI 58 - DELHI HIGH COURT] computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60%. Disallowance of employees contribution to employees PF and ESI - Held that:- As decided in CIT v. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] that if the employees contribution was paid before the due date of filing of the return then the deduction of these amounts would be allowed to the assessee. In the present case FAA held that payments to the EPF and ESI accounts have been made before the due date of filing of the return. Thus, the issue in dispute is squarely covered in favour of the assessee.
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2013 (6) TMI 159
Addition of interest in the assesee’s income - Whether interest received in respect of Grant in Aid can be treated as income of the assessee or not? - As per appellant he was custodian of money of Central Government and GHB/SGCC. It had no entitlement either to contribution, grant or to interest earned on the subjected money placed in Bank FD. The appellant contended before the A.O. that this interest earned on the grant and contribution not earned by it as grant and contribution is alongwith interest was either belonged to Central Government or GHB. There was a rider on this grant/contribution. He further placed reliance on Hon'ble Gujarat High Court decision in case of Gujarat Municipal Finance Board v. DCIT [1996 (5) TMI 71 - Gujarat High Court], wherein the Hon'ble Gujarat High Court has categorically held that interest received in respect of Grant in Aid cannot be treated as income of the assessee in view of the specific directive of the Government that interest earned will be treated as part of Grant. Held that:- The appellant was a custodian and Government of India had prohibited grant as well as interest from any use, except the purposes given in the approval letter. In case of project is not materialized the same has not be repaid to the respective agencies with interest. The case laws cited by the appellant i.e. Gujarat Municipal Finance Board v. DCIT (supra), are squarely applicable. It is true that the appellant had been granted refunds on the basis of TDS Certificate, even though, income earned by way of the interest earned on FDs had not been disclosed as income but the appellant has to refund the grant/contribution with interest to the Government of India and GHB. Thus, we have considered view that in both the years, the CIT(A) was not justified in confirming the addition. Accordingly, appeals in both years are allowed.
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2013 (6) TMI 158
Addition u/s 69A - Levy of penalty u/s 271(1)(c) - difference in stock - addition made in the assessment proceedings is on account of the addition agreed upon by the assessees before the Central Excise authority under the KVSS scheme. As per revenue the search was carried out by the Central Excise Authorities for three days and they have listed out in the panchanama the value of excess goods referable to finished and semi-finished excisable goods and at the same time listed out the shortage of goods referable to raw material which in itself proves that the assessees have not maintained books properly, which resulted in additions made by the Central Excise Authorities and for the same reason the AO made the additions. Held that:- According to the AO the difference between the excess stock and closing stock would reveal that the assessees purchased stock using unexplained money and therefore the addition is maintainable u/s 69A of the Act. The assessees herein could not point out that the unexplained stock found by the Central Excise Authorities was merely on "eye sight basis". The search proceedings continued for three days and the Panchanama was written in presence of the Directors of the respective companies. If burning losses, etc. were not properly taken into consideration that issue could have been raised before the Central Excise Authorities at the time of preparing the Panchanama or immediately thereafter. No such efforts appear to have been made by the assessees herein. Even before us no material, whatsoever, was placed to indicate that the addition made and ultimately confirmed by the AO is not in accordance with law. Therefore, the assessees' explanation is not substantiated with any material and hence there is no infirmity in the orders passed by the learned CIT(A). - Levy of penalty confirmed - Decided against the assessee.
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2013 (6) TMI 157
Disallowance towards interest u/s 14A of the Act read with Rule 8D - Held that:- In the absence of any material on record to contradict the findings of the learned CIT(A) the Revenue cannot challenge the order of the CIT(A) merely on the ground that the assessee has not furnished documentary proof that borrowed funds were not utilised for the purpose of investments. The learned CIT(A) also perused the bank documents in regard to the loan/credit facilities given to the assessee. In so far as the credit facility obtained for the purpose of working capital is concerned there cannot be any dispute that interest thereon cannot be attributed to investments made by the assessee and hence computation of disallowance u/s 14A is not permissible thereon. – Matter is sent for recomputation of disallowance to AO, if any. Rejection of claim of additional deprecation related to purchase of plant & machinery – Revenue appeal - Held that:- After perusal of material records and papers it highlights that the freight charges and other charges are directly linked to the purchase of plant and machinery and cannot be delinked. It is not in dispute that normal depreciation was allowed by the AO by treating the impugned expenditure as part of the expenditure incurred on plant and machinery since the impugned expenditure was capitalised and treated as part of cost of plant and machinery. It is also not in dispute that the plant and machinery was used for manufacturing purpose and in fact the AO has allowed additional depreciation on the plant and machinery. Therefore it is illogical to hold that the assessee is entitled to normal depreciation on plant and machinery including freight charges, etc. but with regard to additional depreciation it should not be treated as part of cost of plant and machinery. Therefore, the findings of the learned CIT(A) is justified and upheld. Assessee is entitled for additional depreciation.
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2013 (6) TMI 156
Reopening of assessment - assessment ex parte u/s 144 - additions on account of hypothetical tax liability that is chargeable in US with reference to the services rendered in India. CIT(A) following the decision of the Tribunal in CIT vs. Mr. Jaidev H. Raja [2012 (11) TMI 343 - BOMBAY HIGH COURT] and the decision in Nicco Corporation vs. CIT [2001 (5) TMI 42 - CALCUTTA High Court] directed the A.O. to consider the perquisite only to the extent of tax paid by Amex India on behalf of the assessee for additional Indian income tax liability paid for equalization of income earned which comes to Rs. 16,84,498- and accordingly deleted the addition of Rs. 39,03,900/- made by the A.O. Revenue appeal. Held that:- In the absence of any distinguishing feature brought on record by the Revenue, and following the decision of the Hon'ble jurisdictional High Court in CIT vs. Mr. Jaidev H. Raja [2012 (11) TMI 343 - BOMBAY HIGH COURT], there is no need to interfere with the order passed by the ld. CIT(A) on this account and accordingly the Revenue appeal is rejected.
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2013 (6) TMI 155
Lessor Gross profit - estimation of income - AO enhanced GP by rejecting the books of account invoking the provisions of section 145 - Held that:- as per the evidence produced before us, book results along with Audit Report and Tax Audit Report were before the AO. - AO referred to those book results to compare the preceding years' results with that of the current year. - order for rejection of books of account can not sustain - Decided against the revenue. Addition of Rs. 20,97,355/- - Held that:- AO did not give any finding on the decline in turnover and increase in the raw material cost. - there is nothing except for the reasons, as recorded by the AO with regard to unreliability on the books - Decided against the revenue.
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2013 (6) TMI 154
Disallowance under section 40A(3) - whether any addition u/s 40A(3) can be made by making disallowance over and the above ad hoc addition made and/or when gross profit rate is applied after rejecting books results - Held that:- When estimated profit is considered after rejecting the assessee's books of account by invoking the provision of section 145(3) no separate addition can be made even under section 68 even though the assessee has failed to discharge the onus of proof in explaining the amount shown in the books of account as "market outstanding". As in the case of CIT v. P. Pravin and Co. [2004 (11) TMI 47 - GUJARAT High Court] held that once the addition has been made by increasing the gross profit rate then there is no further scope of making separate addition under different heads. A similar view has also been taken by in the case of CIT v. Banwari Lal Banshidhar [1997 (5) TMI 37 - ALLAHABAD High Court] wherein it was held that when income of the assessee was computed by applying the gross profit rate, there was no need to look into the provision of section 40A(3) of the Act. Thus CIT (A) has rightly deleted separate addition made by AO of ₹ 21,59,700 under section 40A(3)
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2013 (6) TMI 152
Jurisdiction power u/s 263 by CIT(A) - Exemption u/s 11 - application of income - transfer of four immovable properties - revocable transfer - accumulation of income - Held that:- For a transfer to become a "revocable transfer", there has to be a provision whereby the transferee agrees to, directly or indirectly, transfer any part of the income or assets to the transferor. Alternatively, the transfer should be such that the transferor has a right to resume power over the transferred assets. Thus both these conditions were not satisfied. When M/s. India Financial Association transferred the properties to the ultimate purchaser, there was no provision for any re-transfer. There was no agreement between the assessee and the India Financial Association, for any re-transfer of properties or any income to the assessee. Just because the India Financial Association had sold the properties and given the money to the assessee, that would not be sufficient to hold that there was an agreement in the nature of a revocable transfer between them. None of the relevant conveyance would show that the assessee had any right to re-assume power over the transferred properties. There was neither any transfer effected by the assessee during the relevant previous year, much less any transfer which was revocable. So, not only had the AO taken a lawful view after considering the issues relating to holding of the property, but the view with which the DIT (Exemptions) was trying to substitute was a patently unlawful one. Both the assessee as well as M/s. India Financial Association were entitled to claim exemption under section 11 and hence there could never have been any prejudice caused to the Revenue, this way or that way. There was nothing in the assessment order which could be considered as erroneous and/or prejudicial to the interests of the Revenue. The order of the Director of Income-tax (Exemptions) passed under section 263 stands quashed In favour of assessee.
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2013 (6) TMI 151
Penalty u/s 158BFA(2) - willful attempt on the part of the assessee to conceal the undisclosed income - CIT(A) deleted the levy - addition on account of jewellery - appeal in the case of Smt. Shanti Bai Yadav - Held that:- There is no positive finding that jewellery was unexplained in spite of the explanation given by the assessee, case of CIT v. Ratanlal Vyaparilal Jain [2010 (7) TMI 769 - Gujarat High Court] held that instruction No. 1916 dated May 11, 1994 can be considered to presume that the sources to the extent of jewellery stated in circular stands explained. If there is anything contrary noticed then the instruction may not be sufficient to explain the source of jewellery. Therefore, the assessee has given the explanation in respect of source of jewellery and the CIT (A) has rightly referred to the fact that mother of the assessee was residing with the assessee. Therefore, there is no case of imposition of penalty in respect of addition on account of jewellery. Difference between the income and expenditure - Held that:- Penalty u/s 158BFA(2) is imposable in respect of undisclosed income which is determined as a result of evidence found during the course of search. The addition here is not based on any evidence found during the course of search and therefore, penalty was not imposable. CIT(A) was justified in cancelling the penalty. Appeal in the case of Shri Dal Chand Yadav - unaccounted marriage expenses - Held that:- It is not clear as to how the authorised officer mentioned that paper relates to the marriage expenses. The assessee has shown withdrawal of Rs. 2,06,240 in the regular books of account. The other figures may be the amounts received from the relatives or the figures may not be for the marriage expenses. The availability of the word Papa on this paper show that this paper is not in the handwriting of the assessee as he would not have used the word Papa. Hence, such document is not sufficient to impose penalty. Similarly, in respect of other additions, there was no material found during the course of search for making the addition. Hence, CIT(A) was justified in deleting the penalty. Appeal of revenue dismissed.
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Customs
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2013 (6) TMI 150
Conviction u/s 22 of the Narcotic Drugs and Psychotropic Substances, Act, 1985 - accused was indulging in smuggling activities - rigorous imprisonment for ten years and to pay fine of Rs.1,00,000/- and in default thereof, to undergo further rigorous imprisonment for one year - as argued by appeleant that although there was secret information with the police, the same was not reduced into writing nor sent to immediate official superior thus total non-compliance with Section 42 of the Act entitling the appellant to acquittal - Held that:- As there was no search of any building, conveyance or enclosed place and consequently Section 42 of the Act has no applicability to the instant case. Therefore, the secret information was neither required to be reduced in writing nor it was required to be sent to immediate official superior.Thus contention of counsel for the appellant based on non-compliance with Section 42 cannot be accepted. The appellant cannot also be acquitted merely because no independent witness was joined as there has been recovery of very huge quantity of heroine from the appellant. Prosecution version has been deposed to by Nachhattar Singh, Deputy Superintendent of Police who was SHO at the relevant time and also by two Inspectors of Customs. The said witnesses had no enmity whatsoever with the accused-appellant so as to implicate him in a false case. The three official witnesses who have deposed about recovery of the heroine from the appellant had no reason to depose falsely against the appellant. They were not hostile or inimical to the appellant in any manner. Evidence of this case is sufficient to prove the guilt of the accused beyond reasonable doubt - conviction of the appellant is well founded and is accordingly upheld. As appellant has been sentenced to the minimum sentence prescribed for the offence although in view of huge quantity of the contraband substance no scope for reduction in quantum of sentence also because minimum sentence has been imposed on the appellant. Appeal dismissed.
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2013 (6) TMI 149
Case on the basis of three bags and a blanket belonging recovered from the bus - held that:- it appears that in the statement, Sri Ram Kumar Mishra, submitted that he was falsely implicated in the case as he was not having cordial relations with the officers of the custom department. At the same time, fact remains that the items were recovered from the Bus. It was never stated that items recovered from the opposite parties who were also travelling in the bus. In the bus, there may be number of passengers along with their personal belongings. No red handed items were recovered from the opposite parties. So, the impugned order passed by the Tribunal appears reasonable. Moreover, in the instant case, total amount involved is Rs. 60,000/- (sixty thousand) only. Unfortunately, the department-shamelessly has filed the present petition for this meager amount, where the litigation cost is much higher than the amount involved. The department is advised not to file such type of petitions in future, involving the petty amount. - decided against the revenue.
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2013 (6) TMI 148
Refund of SAD - Interest on belated refund - Circular No.6/2008 - held that:- it is evident that the Board is of the view that there is no specific provision for payment of interest in the Notification No.102/2007-Customs, dated 14.9.2007. That reason is not correct as the grant of exemption under Section 25(1) of the Customs Act, 1962 is one facet. The claim for refund is contingent on complying with the requirement as specified in the notification. The exemption from payment of special additional duty as payable under Section 3(5) of the Customs Tariff Act, 1975 is exempted under Section 25(1) of the Customs Act, 1962. The refund of duty paid will have to be read in terms of Section 3(8) of the Customs Tariff Act, 1975 and not otherwise. The refund application should be filed and entertained only under Section 27 of the Customs Act, 1962 and there is no method or manner prescribed under Section 25 of the Customs Act, 1962 to file an application for refund of duty or interest. To state that no interest on delayed payment is contemplated in the notification issued under Section 25 of the Customs Act, 1962 is a misconception of the provisions of the Customs Act, 1962. When Section 27 of the Customs Act, 1962 provides for refund of duty and Section 27A of the Customs Act, 1962 provides for interest on delayed refunds, the authority cannot override the said provisions by a circular and deny the right which is granted by the provisions of the Customs Act, 1962 and Customs Tariff Act, 1975. Therefore, paragraph 4.3 of the Circular No.6/2008-Customs, dated 28.4.2008 is contrary to the statute and becomes totally inappropriate. When the circular is contrary to the provisions of the Customs Act, 1962 and Customs Tariff Act, 1975, it has to be struck down as bad. - Decided in favor of assessee.
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Corporate Laws
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2013 (6) TMI 147
Joint Venture Agreement - Appellant Chandran Ratnaswami, a Director of ORE Holdings Limited based in Mauritius entered into a Joint Venture Agreement (JVA) with C.G. Holdings Private Limited (respondent No.1 - K.C. Palanisamy's Company) and N. Athappan for constructing and developing a hotel property, shopping complex etc. owned by Cherraan Properties Limited (CPL) and Vasantha Mills Limited (VML) - ORE invested Rs.75 crores and got 45% in Cheran Enterprises Private Limited (CEPL). N. Athappan invested Rs. 4 crores and got 10%. Disputes arose between the parties when respondent No.1 alleged to have transferred shares of CPL and VML to CEPL instead of bringing money and got 45% shareholdings in CEPL. Respondent No.1 allegedly swindled the said 75 crores deposited by the appellant Company ORE and transferred the immovable assets of CPL and VML, subsidiaries of CEPL. Consequently, ORE filed Company Petition before the Company Law Board on account of alleged acts of oppression and mismanagement indulged by respondent No.1. Company Law Board by order dated 13th August, 2008 directed respondent No.1, CG Holdings and CEPL to return the investment of appellant Company ORE and Athappan with 8% interest directed that respondent K.C. Palanisamy will take control of CEPL and its subsidiaries. CLB order was also confirmed by Madras High Court on 5th August, 2011 held that both parties cannot jointly run the business and, therefore, to ensure smooth exit of ORE and Athappan, the Company Law Board passed the order - Instead of complying with the order of the CLB and Madras High Court respondent No.1 started filing several criminal complaints against the appellant, first being filed before the Economic Offences Wing (EOW), Chennai, alleging that ORE invested only Rs. 75 crores and for not bringing Rs. 300 crores in Joint Venture Company which was withdrawn by HC - second complaint before the Judicial Magistrate, Perundurai which was dismissed after examining respondent No.1 and his two witnesses - another complaint before the Judicial Magistrate, Kangeyam without disclosing the dismissal of the earlier complaint filed before the Judicial Magistrate, Perundurai which finally came to be registered as FIR No.7 of 2007 - The appellant moved the High Court for quashing the said FIR. In the said petition, the High Court, after noticing the similar complaint filed earlier by respondent No.1 in the court of Judicial Magistrate, Perundurai, finally observed that the second criminal proceeding initiated by respondent No.1 has no merit passing a stringent remark against the conduct of respondent No.1 for filing cases on the same issue. Respondent No.1 then moved the Supreme Court alleging the pendency of the protest petition and non-closure of the criminal case. The Court refused to interfere with the order but observed that if any protest petition is pending the same shall be disposed of in accordance with law - as on the report of Superintendent of Police, Tiruppur, the criminal case in FIR No.7 of 2007 was directed to be reopened for re-investigation - On this FIR, the Magistrate before whom the criminal case was pending passed various orders which were time to time challenged by the aggrieved party before the High Court and before the Supreme Court. Simultaneously, the appellant also filed counter criminal cases against the respondent which were also proceeded and are pending in those criminal courts. Held that:- The dispute arising out of Joint Venture Agreement has been fully and finally settled by the Company Law Board and also the High Court and several directions were issued for compliance including the return of the amount by respondent No.1 to the appellant and to become the sole owner of those companies. Irrespective of the dispute with regard to the closure of the case, a fresh life was given to the criminal case at the instance of Superintendent of Police, who directed re-investigation and in course of the said criminal proceeding irrespective of FIR No.7/2007 the appellants were harassed and on technicalities various orders for surrender, arrest and their detention had been passed. Neither the High Court nor the Magisterial Court have ever applied their mind and considered the conduct of the respondent and continuance of criminal proceedings in respect of the disputes, which are civil in nature and finally adjudicated by the competent authority i.e. the Company Law Board and the High Court in appeal. The complainant has manipulated and misused the process of Court so as to deprive the appellants from their basic right to move free anywhere inside or outside the country.Moreover, it would be unfair if the appellants are to be tried in such criminal proceedings arising out of alleged breach of a Joint Venture Agreement specially when such disputes have been finally resolved by the Court of competent jurisdiction. Thus allowing the criminal proceedings arising out of FIR No.7 of 2007 to continue would be an abuse of the process of the Court and, therefore, for the ends of justice such proceedings ought to be quashed. Since the High Court failed to look into this aspect of the matter while passing the impugned order, the same could not be sustained in law. SLPs filed by appellant allowed and those filed by respondent dismissed.
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Service Tax
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2013 (6) TMI 170
Infrastructure support service - explanation under Section 65(104c) - non-speaking order - Held that:- while learned Authority passes the order of readjudication, he shall follow the guidelines of Honble Supreme Court in the case of Jt. Commissioner of Income Tax, Surat vs. Saheli Leasing and Industries Ltd. [2010 (5) TMI 9 - SUPREME COURT OF INDIA] to meet the interest of justice. - Matter remanded back with directions.
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2013 (6) TMI 169
Cenvat Credit on service tax on inward transportation - removal of inputs as such - reversal of cenvat credit - held that:- here is no dispute that the appellant at the time of clearance of Cenvat credit availed inputs, as such, had paid an amount equal to the Cenvat credit actually availed in terms of the provisions of Rule 3 (5) of the Cenvat Credit Rules, 2004. The dispute is as to whether in respect of the same inputs, the appellant are also required to reverse the Cenvat credit of service tax paid on the GTA service availed for bringing those inputs to the factory. In view of decisions in Bassi Alloys P. Ltd. vs. CCE, Chandigarh [2010 (1) TMI 308 - CESTAT, MUMBAI], A.R. Casting (P) Ltd. vs. CCE, Chandigarh [2009 (12) TMI 182 - CESTAT, NEW DELHI] & the judgment of Hon’ble Punjab & Haryana High Court in the case of CCE, Chandigarh-I vs. Punjab Steels [2010 (7) TMI 252 - PUNJAB AND HARYANA HIGH COURT], decided in favor of assessee.
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2013 (6) TMI 168
Dismissal of appeal for non compliance of stay order by Commissioner (appeals) - Held that:- As the appellate Commission’s direction to the assessee to pre-deposit the entire amount of duty has been found to be unreasonable and the assessee’s appeal was dismissed without considering the merits and even without offering the appellant an opportunity of being heard, the impugned order is set aside. The present appeal is allowed by way of remand with a request to the Commissioner (Appeals) to dispose of the assessee’s appeal (filed against order-in-original) on its merits subject to pre-deposit, by the appellant, of an amount of Rs.1 lakh less the aforesaid amount of Rs.79,378/-.
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2013 (6) TMI 167
Service tax on Software related activities - Maintenance or repair - Held that:- the issue whether maintenance of computer software could be subjected to service tax under the entry of Management, Maintenance or Repair services prior to 1.5.2006 was examined by the Hon’ble Madras High Court in the case of Kasturi & Sons Ltd. (2011 (2) TMI 76 - HIGH COURT OF MADRAS) and ruled that such demand is not maintainable. The decision of the Apex Court in the case of Martin Lottery Agencies Ltd. (2009 (5) TMI 1 - SUPREME COURT OF INDIA), also is very emphatic to say that Explanation added under in taxation statutes causes adverse consequences to tax payers could have only prospective effect. - Decided against the revenue. ATM services - held that:- a new service was introduced for ATM service covering various other activities in relation to ATM service cannot be interpreted to mean that prior to that date certification service was not taxable. - Their plea of bonafide belief regarding non-taxability of their activity is not based on any legal decision either. - demand confirmed invoking the extended period of limitation - Decided against the assessee. Penalties - held that:- simultaneous penalties u/s 76 and 78 can not be levied - option given to pay 25% penalty.
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Central Excise
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2013 (6) TMI 146
Recovery of dues - circular dated 1-1-2003 - held that:- this case found to be fit one to direct the Appellate Authority to decide the stay petition as early as possible and till then, no recovery will be made by the department.
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2013 (6) TMI 145
Collection of reversal of cenvat credit from Customers - Collection of amount in the guise of Central Excise duty - Section 11D of the Central Excise Act 1944. - held that:- There is no dispute in the present case between the parties that amount in question has already been deposited with the Department. The objection of department is based on Section 11D of the Act. The said provision has been considered in detail by the larger Bench of the Tribunal in Unison Metals Ltd. vs. Commissioner of Central Excise, Ahmedabad-I (2006 (10) TMI 171 - CESTAT, NEW DELHI). Recovery order issued by the Department on the basis of Section 11D of the Act was absolutely illegal and is liable to be quashed, the same has rightly been quashed by the learned Tribunal. - Decided against revenue.
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2013 (6) TMI 144
Cenvat credit on items M.S. Plate, SS Plate, Beams, Hr Coils, plain Plates, Channels, Angles Joist etc, used in fabrication and erection of various sections in existing plants - capital goods - held that:- such goods which are necessary for running of plant and upkeeping of the machinery directly involved in the manufacturing and products were held to be eligible to avail Modvat credit. - Following the decision in Union of India vs. Aditya Cement (2007 (3) TMI 190 - HIGH COURT RAJASTHAN), decided in favor of assessee.
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2013 (6) TMI 143
Personal Penalty - Cenvat Credit - Shortage of inputs and final products - differences in stock - held that:- The finding of fact recorded by the adjudicating authority and upheld by the CESTAT is that Shri Pankaj Chovatia, authorized signatory of the company was engaged in the day-to-day business of the company and said Mr. Pankaj Chovatia in his statement had stated that the credit was availed on the inputs without receiving such inputs as per the directions of Shri Dipesh Gosalia, son of Hansa Gosalia. The finding of fact recorded by the adjudicating authority and upheld by the CESTAT is that the appellants were aware of the developments taking place in the company and, therefore, the appellants are liable for penalty. The argument of the appellants that Shri Bharat Parekh and Ghansyam Bharti were looking after the day-to-day business of the company is a wholly inconsistent stand taken for the first time in this appeal and without any basis.
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2013 (6) TMI 142
Extended period of limitation - mens rea - classification of handpump - held that:- in absence of any deceitful practice by the assessee if there is short levy/payment of duty then, within the short-period of six months (now one year), duty could be ordered to be recovered with interest under Section 11AA. There would be no liability to penalty or penal interest. Department is unable to establish any deliberate act on part of the petitioner-assessee to evade tax. All it could establish was that a claim after full disclosure was made, which was later, after the period of limitation found unsustainable and, as such, all penal actions taken. That is not correct and could not have been done. The duty demand sustained by the Tribunal is, thus, not correct and that part of the order cannot be sustained. Even the adjudicatory authority, on remand, was unable to point as to what was the specific information suppressed and how it was connected with the tax sought to be evaded. Mere misstatement in some form or the other, not relevant with full disclosure of relevant facts in other forms, cannot by itself lead to finding of deliberate attempt to evade tax. At best, what can be said is that the claim of assessee was misconceived which resulted in short-payment of duty. This would be actionable within the shorter period of limitation available under Section 11A(1) and not relevant for the longer period under proviso thereto. In fact, even the Tribunal held it to be a technical breach involving no mens rea when it came to penalty. We fail to see if that were so in respect of penalty, how the demand could be sustained within the longer period of limitation in absence of mens rea. The order of the Tribunal, in so far as it sustains the duty demand with reference to the longer period available under the proviso to Section 11A(1) is unsustainable - decided in favor of assessee.
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2013 (6) TMI 141
Extended period of limitation - discrepancy in filing of return - entire issue revolves around the true and correct interpretation of the words “similar goods” in the context of the controversy which has been raised in the present case. - held that:- It will not be appropriate for us to touch or observe anything in this regard as the CESTAT has directed the Commissioner to consider this issue and decide afresh. However, we do not find any merit in the contentions of the Revenue that ER-2 Returns which were filled in by the assessees did not enable the Central Excise officers to find out whether the DTA sales were in excess of the 50% of the quantities of the exported goods or not. Record reveals that the details in the prescribed format of ER-2 Returns along with the Central Excise invoices were submitted by the assessees on monthly basis for a period from 2004-05 onwards and, therefore, it is not believable that the Central Excise officers who received the Returns and invoices right from the year 2004-05 were not able to verify the exact quantity of each of the goods exported by the assessees vis-à-vis the DTA clearances made on payment of concessional rate of duty for a long period of five years. Therefore, the findings recorded by the CESTAT that the Central Excise officers receiving the Returns had all the information to enable him to verify the facts is, therefore, correct and cannot be termed as perverse so as to warrant any interference at our ends. The conclusion arrived at by the CESTAT that the demand was time-barred and the Revenue cannot invoke the extended period of limitation in this case is not based on mere assumptions or presumptions but is based on the conclusion arrived at after considering the documentary evidence on record including ER-2 Returns and Central Excise invoices of the assessees. Whether there was any fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of any Act, would be a question of fact depending upon the facts and circumstances of a particular case. In exercise of powers under Section 35G of the Act, a pure question of fact cannot be disturbed except on the ground of perversity. - Decided against the revenue.
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2013 (6) TMI 140
Refund - unjust enrichment - burden to prove and to rebut - held that:- burden was upon the appellant to rebut presumption under Section 12B. When Section 11B(1) is read along with Section 12B, it is apparent that the Parliament has acted upon the normal course followed in all commercial transactions and, therefore, there is a presumption that expenditure incurred by persons like appellants, has been recovered by them while selling their product. Because of this normal business practice, not passing burden of taxes to consumer is an exception & therefore, Section 11B(1) requires person claiming refund to produce along with his application for refund, documentary or other evidence showing that incidence of such duty had not been passed by him to any other person. The judgment of Karnataka High Court in the case of C.C.E., Bangalore-II v. Karnataka State Agro Corn. Products Ltd., (2006 (7) TMI 11 - HIGH COURT OF KARNATAKA) shows that in para 6 of judgment of Hon’ble 9 Judges of the Hon’ble Apex Court in the matter of Mafatlal Industries Limited v. Union of India & Ors. [1996 (12) TMI 50 - SUPREME COURT OF INDIA], has been looked into and a finding has been recorded that there cannot be any unjust enrichment by State Government. The contention that as final product is not exigible, there is no scope for application of principle of undue enrichment, is equally misconceived. The plea & argument that appellant has at times sustained loss is not sufficient to grant refund. The loss suffered may be on account of various factors and if while determining market price of coal, the expenditure on manufacturing process has been looked into, such subsequent loss becomes irrelevant. All the authorities have concurrently found that the appellant-assessee has failed to discharge that burden. We do not see any perversity in that finding. - Decided against the assessee.
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CST, VAT & Sales Tax
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2013 (6) TMI 172
No availability of Form ST 18 A with truck - penalty - Rajasthan Sales Tax Act, 1994 - held that:- Revenue has failed to show any material to prove that before passing of the order dated 7.1.2005 any notice was served upon the respondent-firm. The respondent-firm cannot be represented through the driver of the vehicle in absence of any authority given to him by the respondent-firm. - No penalty - Decided against the revenue.
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2013 (6) TMI 171
Penalty u/s 54(1)(14) of the U.P. Value Added Tax Act, 2008 - seizure of goods as the weight of the consignment was more than that disclosed in the documents - Held that:- It is admitted on record that the assessee is a dealer having turnover of Rs.15 crore per annum. The total consignment was of 23.84 metric tones in 465 bags and during seizure only 33 bags weighing about 805 Kg. having the value of Rs.11,000/- alone were said to have been found in excess. In comparison to the volume of the trade carried on by the assessee and the quantity of the consignment, the goods in excess were quite negligible. The tax liability on it would have been Rs.110/- only. It is not expected of any dealer to involve himself in penalty proceedings relating to such petty quantity of goods having tax incidence of Rs.110/-only. Therefore, there appears to be no intention of evaision of tax in transportation of such excess goods. It was not proper to levy penalty by taking the value of the entire consignment as base. The evasion of tax, if any, would have been only o33 bags of yellow peas excess bags found and, therefore, the penalty ought to have been in tune with the value of the said excess goods. In favour of assessee.
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Indian Laws
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2013 (6) TMI 166
Compliance of terms of agreement - petition for seeking unconditional leave to defend the present suit - the plaintiff was licensed to use the brand name INDANA on payment of monthly license fee for a period of two years. The plaintiff paid a refundable security deposit of Rs. 50,00,000/- to the defendant as interest free security deposit in terms of the said agreement, which was to be refunded at the time of determination of the aforesaid agreement. Every agreement has to be read as a whole and the meaning of a clause has to be gathered from a reading of the entire agreement. The first part of the same clause mentions that Rs. 50,00,000/- is deposited as “security deposit..... for due performance of the agreement". At this stage all the court has to examine whether if the facts as alleged by the defendant if duly proved, would afford a good and plausible defence to the plaintiff's claim. The relevant question would be whether the security amount has secured its end and is liable to be refunded/returned. The answer to this lies in the adjudication of dispute, i.e., whether there was due performance and/or violation of the agreement by plaintiff or defendant and its consequential effect on the rights and liabilities of both the parties inter se. All these issues are questions of fact which can only be established by way of trial once both the parties have led their evidence. Present application is allowed and defendant is granted unconditional leave to defend the suit.
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