Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 10, 2014
Case Laws in this Newsletter:
Income Tax
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
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GST to be a Major Milestone for Indirect Tax Reform
DTC required as a Clean Modern Replacement for existing it laws
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RBI Reference Rate for US $ and Euro
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Development of Model Salt Farms in Gujarat
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Incentives to Industries to Boost Economic Growth
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Performance of Special Purpose Vehicles for Implementation of 39 Projects
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Performance of Manufacturing Sector
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Import of Gold
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EU Ban on Import of Alphonso Mangoes
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Facilitating Export of Value Added Marine Food Products
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Decline in Tea Production in Assam and West Bengal
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Import Duty on Chinese Bicycles
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India Has Second Fastest Growing Service Sector
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Poverty ratio declines to 21.9 per cent
Expenditure on Education increases to 3.3 per cent of GDP
United Nation’s Human Development Report signifies existing gaps in Health and Education indicators in India need to be bridged faster
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Planning with Affirmative Action for Inclusion of Women and Children in Growth and Development Process Focused
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Highlights of Economic Survey 2013-14
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Regulators Adopt Non-Legislative Aspects of FSLRC Report
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Biometric Identification to Improve Subsidy Schemes
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67.11 lakh members enrolled under the National Pension System with a corpus of ₹ 51.14 crore.
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Agriculture Sector: Highlights
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Industrial Growth to be Revived by Corporate Sector Investment, Pushing Ahead Critical Reforms and Removal of Infrastructure Bottlenecks
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Liberalising Agriculture
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Performance of Core Industries and Infrastructure Services shows a Mixed Trend in 2013-14;
Survey Calls for enhanced Infrastructure Investment, Improving Productivity and Removing Procedural Bottlenecks
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Human Development to be Taken into Account in Formulating and Implementing Social Sector Programmes: Economic Survey 2013-14
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Urgent Initiatives in Infrastructure, Iron and Steel, Textiles, Aviation, and Mining
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Massive Investment Needed in Social Infrastructure, Skill Development and Empowerment of Women: Arun Jaitely
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Need to Promote Structural Changes in Manufacturing in the Medium Term
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Moderate Deployment of Credit to Industries in 2013-14
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Low and Stable Inflation, Tax and Expenditure Reform and a Well-Functioning Market Economy a Must to Improve Long-Term Growth Prospects
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Industrial Upturn Depends on Improved Policy Environment and Higher Investment Rates
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Fresh Thinking on a Responsible Fiscal Policy Framework Required
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Milk production touches a record high of 132.43 mt in 2012-13
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Stepping up Business Environment
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Economic Survey asks the government to move towards a Low and Stable Inflation Regime through Fiscal Consolidation.
Survey calls for Revamping Social Sector Schemes like MNREGA, NRHM, and SSA;
Favors Reforming the Food Market.
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Record Production of Foodgrains & Oilseeds in 2013-14
Groundnut Records Highest Rate of Increase in Productivity
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Next Wave of Financial Reforms to Strengthen Institutional Foundations for a Globalized India
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16 National Investment and Manufacturing Zones(NIMZS) to Boost Manufacturing Sector
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Growth forecast for Next Fiscal to remain between 5.4 to 5.9 per cent. Improvements in Current Account and Fiscal deficits to spur higher growth in 2014-15 A record food grains production of over 264 million tonnes is estimated in 2013-14 indicating an increase of 20 million tonnes in last 5 years
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Developing countries must get judicious Carbon and Development Space in new climate deals
Human- induced Greenhouse gas emissions are chiefly responsible for climate change
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Trade deficit improves, falls sharply by 27.8 percent Turnaround in exports, grows by 4.1 percent over minus 1.8 percent in 2012-13 Imports fell by 8.3 percent after steep slowdown during previous year
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Agriculture sector: Challenges & Reforms Required
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Agricultural Exports Increase by 5.1% in 2013-14, Marine Exports up by 45% Credit flow to agricultural sector exceeds target
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Highlights –Industrial Performance
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Highlights International Trade
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India’s BoP Position Improves Dramatically in 2013-14
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WPI Inflation Shows Sign of Receding fell to 5.98% during 2013-14
Food Inflation Remains High
Wholesale and Consumer Price Inflation expected to Decline
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The passage of the PFRDA Act, the shift of commodity futures trading, FSLRC report were the three major milestones of the year 2013-14
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Fiscal deficit for 2013-14 contained at 4.5% of the GDP
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Fiscal Outcome of Central Government in 2013-14 achieved; Fiscal Deficit Contained at 4.5% of the GDP
Fiscal Consolidation Remains Imperative for the Economy, says the Economic Survey
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Long-term Borrowings Account for 78.2 per cent of Total External Debt
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Sustaining Improvement in BoP Position – A Challenge
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Economic Survey Underlines Significant Improvement in BoP Position
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The Economic Survey 2013-14, presented today in the Lok Sabha by the Union Finance Minister Shri Arun Jaitley, has noted that as India had a large trade deficit in the first quarter
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External Debt Remains within Manageable Limits
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India’s Foreign Exchange Reserves Increase
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India has the Second Fastest Growing Services Sector with Compound Annual Growth Rate at 9.0 Per Cent
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Annual Average Exchange Rate Goes UP
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Text of the Joint Press Statement Issued by The UK Chancellor of the Exchequer and the Finance Minister of India After the Seventh Round of The UK-India Economic and Financial Dialogue
Highlights / Catch Notes
Income Tax
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Order u/s 201(1)/201(1A) of the Act – four years was a reasonable period for passing an order u/s 201(1)/201(1A), particularly when no limitation was prescribed - AT
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Nature of expenses - Revenue or capital - Loss of extinguishment of debt – Expenses on cancellation of debentures – Assessee foreclosed the loan account by paying some additional amount which would save the Assessee from making periodic payment of interest - held as revenue in nature - AT
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Income to be offered for tax – though the liquor license was issued in the name of individual but, the liquor business was carried on by the company - income not taxable in the hands of individual - AT
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Computation of income from shipping business u/s 44B - the assessee firm is the managing owner and in that capacity only, it manages the affairs of these two companies - not taxable u/s 44B - AT
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Business income or income from other sources – Invocation of section 68 is confirmed in relation to the credit/s, assessing them under the residuary head of income, i.e., ‘income from other sources’ - AT
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Re-opening of assessment u/s 148 - The words of the statute are ‘reason to believe' and not ‘reason to suspect' - The reopening of an assessment is a serious matter and must be used properly - AT
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Provision for post-retirement medical benefits to employees – post-retirement medical benefit is also a liability which gets attached to the company the moment, the service contract is signed - expense allowed - AT
Service Tax
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Relevant date for refund claim - export of services - it would be appropriate that the relevant date for calculating the time limit under Section 11B also should be the date on which consideration is received - AT
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Commercial or industrial construction - valuation while availing abatement - it is not necessary to include in the taxable value, the value of supply of goods free of cost by a service recipient - AT
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Valuation of goods - reimbursement - pure agent - since the expenses in question, incurred by the appellant in course of providing the taxable service are reimbursed by the service recipients - cost not to be included - AT
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GTA service or Cargo handling service - there were two separate contracts for handling and transportation and stevedoring - value cannot be clubbed - AT
Central Excise
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Valuation of goods - transaction value is available but the value addition is very low - no justification for determining the transaction value by cost construction method - AT
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Manufacture - Marketability - process of converting ‘ores’ to ‘concentrates’ - products, viz. Ileminite, Sillimenite, Rutile, Zircon and Garnet - deemed manufacture - prima facie case is in favor of assessee - AT
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Cenvat Credit - Manufactures and clears Dutiable as well as Exempted goods - In the absence of any specific provisions, the appellant is bound to reverse the credit taken - but credit to be allowed towards Rule 6(5) services - AT
VAT
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Whether the chemicals and dyes used in the job work are not liable to tax under the provisions of UPTT - process of dyeing, colouring, printing, bleaching, washing etc. of gray cloth - held as not taxable - HC
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Whether the dealer, who is executing the works contract, is entitled for the deduction of amounts pertaining to the depreciation on trippers, maintenance expenses of trippers and consumables, used in the execution of works contract - held yes - HC
Case Laws:
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Income Tax
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2014 (7) TMI 309
Order u/s 201(1)/201(1A) of the Act – Deemed dividend u/s 2(22)(e) of the Act – Held that:- CIT(A) has held that this is not a case which is hit by the provisions of Section 2(22)(e) read with Section 194 of the Act - four years was a reasonable period for passing an order u/s 201(1)/201(1A), particularly when no limitation was prescribed for initiation of such proceedings under the Income-tax Act, 1961 - the proceedings u/s 201(1)/201(1A) were initiated after a lapse of nine years - CIT(A) has also erred in holding that payment to M/s Pure Drinks (New Delhi) Ltd. could not be treated as deemed dividend on the ground that M/s Pure Drinks (New Delhi) Ltd. is not the shareholder of the assessee (company) ignoring the fact that payment to this entity is very much covered by the definition of ‘dividend’ u/s 2(22)(e) of the Act - Revenue has failed to controvert the findings of CIT(A) on the issue – thus, there was no infirmity in the order of CIT(A). Assessee has also been able to prove that the provisions of section 2(22)(e) of the Act are not applicable in as much as both the conditions of a shareholder holding 10% shares in the payer company and more than 20% beneficial stakes in the payee entity do not exist - since the payments have been made to Statutory authorities for meeting the liabilities of the payee company Pure Drinks (New Delhi) Ltd. - the transactions have not resulted in any benefit to any of the shareholders of the company - in the case of deemed dividend the provisions of section 194 are applicable - no proceedings had been initiated in the normal assessment proceedings for the relevant AY i.e. A.Y. 2000-01, 2001-02 and 2002-03 in the case of the company - it is not a case which could be said to be hit by the provisions of Section 2(22)(e) of the Income Tax Act, much less for operation of Section 194 of the Act – Decided against Revenue.
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2014 (7) TMI 308
Nature of expenses - Revenue or capital - Loss of extinguishment of debt – Expenses on cancellation of debentures – Expenses on prepayment of future interest – Held that:- CIT(A) was of the view that by paying the amounts the company is saved from making periodic payment of interest and hence the payment has to be considered as revenue in nature and allowable as deduction – The decision in CIT vs. Associated Cement Companies Ltd. [1988 (5) TMI 2 - SUPREME Court] followed - if the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more effectively and profitably, while leaving the fixed capital untouched, the expenditure would be on revenue account, even though advantage may endure for an indefinite future - even though a benefit may endure for an indefinite period, so long as the expenditure, if incurred in the subsequent year, is allowable as Revenue in nature, the pre-payment would also need to be considered on the same plane - the Assessee incurred expenditure for laying water pipelines which would have otherwise been considered as capital expenditure but the fact remains that the expenditure was in lieu of saving municipal tax and fees payable in future for a period of 15 years - the Assessee foreclosed the loan account by paying some additional amount which would save the Assessee from making periodic payment of interest - it has to be treated as Revenue expenditure – Decided against Revenue.
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2014 (7) TMI 307
Reopening of assessment u/s 147 of the Act – Verification and addition of profit u/s 145A of the Act – Held that:- The assessment has been completed u/s 143(3) after detail scrutiny and examination of records, which is evident from the fact that the AO had made additions on various counts – AO had rejected the assessee’s contention and has made the addition of ₹ 78,34,362 - such an assessment has been sought to be re-opened after the expiry of four years from the end of the relevant assessment year, which is clearly hit by the first proviso to section 147 - on a perusal of the “reasons recorded”, it is seen that nowhere the AO has ascribed any failure on the part of the assessee to disclose truly and fully all material facts necessary for the assessment - This is a condition precedent for acquiring jurisdiction u/s 147, in the case where assessments have been completed u/s 143(3). Where the assessment has been made u/s 143(3) or u/s 147, then no action can be taken for re-opening the case u/s 147, after the expiry of four years from the end of the relevant assessment year - The only exception Carved out from such a limitation is that, income chargeable to tax has escaped assessment by the reason of the failure on the part of the assessee to furnish the return u/s 139 or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment - The “reasons recorded” should clearly spell out what is the failure on the part of the assessee and it should provide direct link with the material brought on record and the income which has escaped assessment on the reason of failure on the part of the assessee. The limitation provided under the first proviso to section 147, is absolute and there is no escapement of limitation of four years unless the case falls within the saving clause as provided therein - The re-opening cannot be justified on the ground that notice u/s 148, has been approved by a higher authority, as held by the Commissioner (Appeals) - The jurisdiction can be acquired under the provision of the statute and not by sanction of any superior authority - the “reasons recorded”, neither there is any whisper about the failure on the part of the assessee nor there is any material to show on record that there has been any failure on the part of the assessee – thus, the order of the CIT(A) is set aside – Decided in favour of Assessee.
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2014 (7) TMI 306
Disallowance u/s 14A of the Act – Dividend income - Tax Audit Report – Held that:- The relevant AY is 2007-08 under consideration is outside the scope of provisions of Rule 8D - The provisions cannot be treated as applicable to the AY 2006-07 under consideration, as it is already decided in Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - percentage of the exempt income can constitute a reasonable estimate for making disallowance in the years earlier to the assessment year 2008-09 - the disallowance made by the assessee is in accordance with the judgment in the case of M/s. Godrej Agrovet which is more than 2% and therefore, no addition is call for – Decided in favour of Assessee.
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2014 (7) TMI 305
Rectification of mistake u/s 154 - Appeal against the order u/s 154 rejected by the CIT(A) – Claim on inflated purchase – Held that:- The assessee may have a good case on merits, it is not a case of any mistake apparent on the record - a mistake is apparent on the record if no external help either on fact or in law is required to detect such mistake - If the mistakes require investigation into facts or determination of law or discussion of debatable points are involved or two opinions are possible on the issue then such pointed mistakes cannot be said to be mistakes apparent on record which can be rectified under section 154 of the Income Tax Act. - Decided against the assessee. Appeal before CIT(A) against order u/s 154 - condonation of delay - Held that:- The assessee was under the bonafide belief that the finding of the AO could be corrected/rectified u/s 154 of the Act - if a litigant is found pursuing a remedy under the wrong provision of the Act or the law under bonafide belief, which the courts ultimately found to be not maintainable under that provision or law and that the assessee should have pursued his remedy under another provision of the law, then the period consumed in pursuing such litigation under bonafide belief should be excluded for the purpose of calculation of limitation period, if the litigation chooses to pursue the remedy under the correct provision of the law - assessee is at liberty to approach to CIT(A) accordingly – present appeal dismissed - Decided against Assessee.
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2014 (7) TMI 304
Interest paid and received on project – AO did not allow the set off - Held that:- There is no clarity as to the source of investment into the two projects pending for completion - There is no clear cut finding of the AO that the unsecured loans have not gone into the completed project in respect of which income is recognized in the year - the issue raised in the grounds needs to be remanded to the files of the AO for examination and unambiguous conclusions – the AO is directed to pass a speaking order on the issues raised in the grounds after affording a reasonable opportunity of being heard to the assessee - the assessee mentioned that he is maintaining mixed accounts and the AO did not examine the project wise analysis of the expenses and the investments - the finding of the AO that the interest payments relate to the investments made in the pending projects is far from reality - Decided in favour of Assessee.
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2014 (7) TMI 303
Transfer pricing adjustments – Selection of comparables – Related party transactions filter - Functionally different filter - Exceptional year of Operations - Error in margin computation - Held that:- There is a merit in assessee’s contentions about non-comparability of various comparable companies selected by the TPO - as regards the Exensys Software Solutions Ltd., there is an extra-ordinary event which resulted in high operating margin of that company - Bodhtree consulting Ltd, Four Soft Ltd, Infosys,., Sankhya Infotech Ltd., Thirdware Solutions Ltd, Tata Elexi (seg) etc, are also to be excluded - the AO is directed to exclude the above comparables and re-work out the arm’s length margin - inclusion or exclusion of these companies would only be academic in nature as exclusion of 7 comparables out of the 16 selected by the TPO would result in OP/TC at 14.25% against assessee’s margin of 13.89% - The above two companies average PLI is at 4.36% - inclusion of the above two would further reduce the PLI – thus, exclusion of 7 companies itself would make the assessee’s PLI at arm’s length when compared to the average mean of the balance 9 comparables – Decided in favour of Assessee. Expenses on communication and freight and expenses – Expenses incurred in foreign currency – Deduction u/s 10A of the Act – Held that:- Following Patni Telecom P. Ltd. vs. ITO [2008 (1) TMI 452 - ITAT HYDERABAD-A] - the expenditure incurred in foreign exchange and communication / internet charges should be excluded from the ‘export turnover’ as well as from ‘total turnover’ for the purpose of deduction u/s 10A of the Act – thus, the order of the FAA is upheld – Decided against Revenue.
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2014 (7) TMI 302
Claim of deduction u/s 80IB of the Act – Belated completion certificate - Held that:- CIT(A) rightly followed the decision in M/s. Satish Bora & Associates Versus Assistant Commissioner of Income Tax [2011 (1) TMI 1215 - ITAT PUNE] - deemed issue of occupancy certificate would be applicable provided there are no major deviations in the plan - There is no evidence on record to show that any such major deviation took place - objections raised after expiry of 21 days no major deviation or unauthorised construction if any has been shown, it would be just and proper to treat the date after expiry of 21 days from receipt of Completion Certificate as date of completion for the purpose of meeting the requirement of Explanation (ii) below Sec. 80IB(10)(a) with this understanding that PMC will continue with its action against the assessee to set the stated objections if any, at right - there is no need to interfere with the orders of the CIT(A) – the order of the CIT(A) is upheld and the assessee is entitled to deduction u/s 80IB and obtaining a completion certificate belatedly is only a technical default which does not affect the claim of the assessee – Decided against Revenue.
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2014 (7) TMI 301
Income to be offered for tax – liquor licence in the name of individual (assessee) - AP Beverages Corporation Ltd., while collecting payments on purchase of liquor has deducted tax at source by mentioning PAN of the assessee. – Held that:- The AO has completely mixed up facts as he has treated the amount of ₹ 88,25,300/- as rental income received from AP Beverages Corporation Ltd., which is not at all correct - though the license was issued in the name of individual because of restriction in the policy decision of the Prohibition and Excise Department, but, the liquor business was carried on by the company M/s Country Club (India) Pvt. Ltd. - The entire purchase from AP Beverages Corporation Ltd. and sales effected of liquor have been reflected in the books of account of the company and profit generated there from has been offered to tax in the return of income filed by the company - Relying upon CIT Vs. Bhooratnam & Co, [2013 (1) TMI 478 - ANDHRA PRADESH HIGH COURT] thus, there was no reason to interfere with the order of CIT(A) in deleting the addition as the particular income, which has been added at the hands of the assessee has already been offered to tax by the company in the return of income filed for the in the AY – Decided against Revenue.
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2014 (7) TMI 300
Validity of reassessment u/s 147 of the Act – Valuation of closing stock - Held that:- on perusal of the order of CIT(A) itself it becomes clear that the assessee has raised a specific ground with regard to validity of proceeding u/s 148 of the Act. However, as it appears from finding of the CIT(A) in para 5 of his order, he has not decided the issue on merit. - matter remanded back. Undervaluation of closing stock - CIT(A) has concluded that 1% of closing stock determined by the Assessing Officer is to be treated as under valuation made by the assessee. - Held that:- Though on one hand the CIT(A) has upheld Assessing Officer’s finding that closing stock for the year ending was understated but at the same time, he has not agreed with the quantum worked out by the Assessing Officer. It is also pertinent to mention here that in para 4.2.4, the CIT(A) while observing that both the assessee as well as the Assessing Officer were correct in working out the value of the closing stock for the year ending 31/03/2006, in the same breath has observed that both of them were wrong in quantifying closing stock. – matter remanded back for fresh decision.
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2014 (7) TMI 299
Validity of reassessment u/s 147 of the Act – non service of notice u/s 148 to the correct person - Held that:- Since assessee’s Managing Director has responded to the notices, it cannot be considered at this point of time that notice was not served on the correct person. Generally in most of the proceedings, Authorised Representatives or Accountants regularly appear before the authorities claiming that they represent the company/ assessee. Even before this Forum also many of the Counsels file their Power of Attorney or Vakalat stating to be representing the assessee. These are accepted in good faith. In view of this, the contentions raised by assessee company now that Revenue has not served the notice on the correct person nor the person representing the company was not employed by the company cannot be entertained at this stage of proceedings. - Decided against the assessee. Filing of appeal before CIT(A) without paying admitted tax - Held that:- Since the taxes were paid belatedly, Ld. CIT(A) may consider condoning the delay in payment of tax as per the provisions of law and principles on the issue and can maintain the appeals before him, after giving due opportunity to the assessee for seeking condonation of delay. - matter remanded back - appeals of the Assessee and Cross objections of the Revenue are allowed for statistical purposes.
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2014 (7) TMI 298
Cancellation of penalty u/s 271(1)(c) of the Act – Held that:- It is the interest payments on the working capital borrowed from the bank which were disallowed by the AO in the course of scrutiny assessments completed, that led to the penalties u/s 271(1)(c) of the Act – assessee has explained the various difficulties that it had to encounter on account of the fact of the concerned accountant and others, who were handling the accounting matters, who left the company, and the hostile relationship between the assessee company and the banker, which prevented it from complying with the requirement of the AO - there was a justifiable reason for the non-compliance from the assessee – thus, there was no justification for the imposition of penalty u/s 271(1)(c) of the Act – merely because a claim made by the assessee is disallowed in the assessment, it cannot lead to the inference of either concealment of income or furnishing of inaccurate particulars of income by the assessee. Also in COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] it has been held that there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false - mere making of a claim by the assessee in the return does not tantamount to furnishing of inaccurate particulars of income, and consequently, every disallowance made in the assessment cannot lead to the inference of concealment – thus, it is not a fit case for imposition of penalty u/s 271(1)(c) of the Act – Decided against Revenue.
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2014 (7) TMI 297
Income from LTCG – Claim of exemption u/s 54E and 54F of the Act – Held that:- In assessee’s own case Tribunal has clearly directed the AO to examine the fact whether the amount paid is for acquisition of flat or not as relying upon and to decide the issue in the light of the order of the Tribunal in the case of JAGAN NATH SINGH LODHA. Versus INCOME TAX OFFICER [2004 (6) TMI 309 - ITAT JODHPUR] - the facts have been properly verified by CIT(A) on further appeal filed by the assessee against the consequential order passed by the AO - CIT(A) observed that the amount initially advanced of ₹ 27,50,000 towards purchase of flat situated at Lakdikapool, Hyderabad, was returned back to the assessee i.e., an amount of ₹ 27 lakhs was returned and ₹ 50,000 was forfeited towards cancellation charges and the assessee ultimately constructed her house within the period of 3 years from the transfer of original asset and hence had complied with the provisions of section 54F of the Act - the amounts which were ultimately invested within the stipulated time, is to be exempted from tax although the assessee failed to technically deposit the same in the capital gain account - the intention of the Act as well as the intention of the assessee are to be considered in a right perspective – thus, the order of the CIT(A) is upheld – Decided against Revenue.
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2014 (7) TMI 296
Computation of income from shipping business u/s 44B - taxability in the hands of managing firm whereas ship is owned by two separate companies – Held that:- Following Deputy Director of Income-tax Versus AP Moller Maersk [2013 (11) TMI 827 - ITAT MUMBAI] - the assessee firm on behalf of the companies have been making applications from time to time at the beginning of every financial year for obtaining annual double income tax relief / port clearance certificate - the assessee firm is the managing owner and in that capacity only, it manages the affairs of these two companies for which it is remunerated as per the relevant terms agreed between the parties - it cannot be held that whatever income accrues during the carrying on such business belongs to the assessee firm - once the entire infrastructure including the vessels which are deployed in the international traffic belongs to the two companies, then it cannot be said that the income accruing from exploiting I deployment of such assets / vessels belong to the assessee firm - the assessee firm is separate and distinct from two companies and any income accruing on account of shipping operations does not belong to the assessee, but to these two companies only. The status in the return of income as well as in the assessment orders has always been held to be that of non-resident corporate company and not as a partnership firm. From the assessment year 2004—05, two sets of returns of income are being filed, one by the assessee firm on managing commission / fees which is being claimed as non—taxable and second return of income in the name of these two companies which has now been merged referred to as A.P. Moller Maersk A/S showing shipping income - the shipping income belongs to these companies only and not in the hands of the assessee firm which is only a representative of these companies and is carrying out its obligation for filing of the return of income as well as managing the entire affairs. Fees from managerial services treated as fees for technical services – Held that:- Following Deputy Director of Income-tax Versus AP Moller Maersk [2013 (11) TMI 827 - ITAT MUMBAI] - for taxing the royalty and fees for technical services in case of a non-resident under the Indo Denmark DTAA, the basic condition is that there has to be a P.E. or fixed base in connection with which such a liability has been incurred – the payment has not been made by any P.E. to the assessee firm albeit the payment has been made by non-resident company i.e., two Danish companies to another non-resident i.e., a partnership firm established under the laws of Denmark – the payment cannot taxed as FTS in case of the assesse - the payment of management fee cannot be subjected to tax in India by virtue of Article-13(6) – thus, the additions made are liable to be set aside –Decided against revenue.
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2014 (7) TMI 295
Nature of additions made u/s 68 - Business income or income from other sources – Unexplained income - Held that:- The applicability of section 68 is on account of the assessee’s inability to substantiate the same as having been derived or realized by the assessee in the course of its business - the contention that the income, though brought to tax u/s. 68, is assessable as business income, is contrary to the facts & circumstances of the case - both the nature and source of the credit/s are unexplained - the only head of income under which the income is liable to be considered for assessment is the residuary head, i.e., income from other sources - Revenue while assessing an income u/s 68 is under no further obligation to exhibit the source – Relying upon CIT vs. Manick Sons [1969 (2) TMI 14 - SUPREME Court] - even the assessment of the income brought to tax u/s 68, as business income u/s 28, would be of no consequence inasmuch as it would stand to be assessed for the current year - the value of the work-in-progress as at the year-end shall stand to be increased by the income - thus, the invocation of section 68 is confirmed in relation to the credit/s, assessing them under the residuary head of income, i.e., ‘income from other sources’ – Decided against Assessee.
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2014 (7) TMI 294
Levy of penalty u/s 271(1)(c) - allegation of claim of deduction u/s 80P while claiming deduction u/s 57(iii) – penalty on account of claim of double deduction - Held that:- The assessee to have claimed interest on sinking fund as per its income and expenditure account which may lead to the inference of the interest income being actually less and an excess claim for deduction u/s 80P(2)(d) of the Act - the AO has himself allowed deduction u/s 80P(2)(d) - the interest on sinking fund stands in fact suo motu disallowed by the assessee, resulting in effect to a lower claim and allowance of deduction u/s 80P(2)(d) to that extent – there was also non-claim of any standard deduction on the rental income so that the change of head of income in its respect by the AO also did not result in any change in income - The assessee has returned a taxable income, paying tax at ₹ 2,21,621 - The charge of claim of mutuality by the assessee, as made by the CIT(A), and which forms the basis of his confirming the penalty is untrue – thus, the penalty is rightly set aside – Decided in favour of Assessee.
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2014 (7) TMI 293
LTCG on sale of addition FSI/TDR in the society - transfer of right – determination of cost of acquisition - Held that:- Following Late Smt. Jamnabai Anandji Matani, L/h Shri Bhupendra Matani Versus Income Tax Officer [2010 (4) TMI 1017 - ITAT MUMBAI] - the expenditure incurred on purchase of plot and construction cannot be said to be the costs for acquisition of these rights - The rights are acquired by the virtue of being owner of the plot in the specified area but that does not mean that the cost incurred on the plot is the cost of acquiring these rights - The effect of the rights being relatable to the leasehold rights in the plot could at best be that the amount received by the assessee on assignment of rights to receive the transferable development rights ends up reducing effective cost of acquisition of the land and building in the said plot - as and when the assessee transfers the said plot, building or any portion thereof and while determining capital gains arising on such sale, the cost of acquisition may stand reduced by the amount received by the assessee on assignment of rights to receive the TDRs. What the assessee has transferred is not the plot or the building, but a right parting with which does not result in parting with land or building - The costs of obtaining BMC approval for the building plan can also not be said to be the costs of acquisition of these rights as these rights do not arise by the virtue of getting these approvals but by the virtue of a legal right in dependent - when an asset has no cost of acquisition, the gains on sale or transfer of same cannot be brought to tax - the receipts on sale of assignment of rights to receive TDRs are not liable to tax – thus, the order of the CIT(A) is upheld in deleting the addition of ₹ 22,49,203/- made by the AO on account of long term capital gain arising from the sale of additional FSI/TDR – Decided against Revenue.
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2014 (7) TMI 292
Admission of additional evidence - Claim of deduction u/s 54F - Transfer of tenancy rights – Income from other sources or capital gain – Held that:- The language of rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, prohibits the parties to produce additional evidence - It is only when the Tribunal requires such additional evidence in the form of any document or affidavit or examination of a witness or through a witness that it can call for the same or direct any affidavit to be filed - once it is found that the party intending to lead evidence before the Tribunal for the first time was prevented by sufficient cause from leading such an evidence and that this evidence would have a material bearing on the issue which needs to be decided by the Tribunal and the ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect - necessary details came in to his possession after the assessment order and the order of the FAA were passed - the assessee was prevented by sufficient cause for not adducing the evidences before the departmental authorities by a reasonable cause – thus, additional evidences produced by the assessee are admitted - the evidences will have direct bearing on the issue to be decided – thus, the matter is liable to be remitted back to the AO for fresh adjudication – Decided partly in favour of Assessee.
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2014 (7) TMI 291
Re-opening of assessment u/s 148 - Proper reason to believe the escapement of income - non-verification of the suspicious information - Whether the reasons as recorded constitute a tangible and correct and are indicative escapement of income in material terms – Held that:- In Income-Tax Officer, I Ward, Distt. VI, Calcutta, And Others Versus Lakhmani Mewal Das [1976 (3) TMI 1 - SUPREME Court] it has been held that the powers of the ITO to reopen assessment, though wide, yet are not plenary - The words of the statute are ‘reason to believe' and not ‘reason to suspect' - The reopening of an assessment is a serious matter and it should be ensured that these powers are used by the AO properly - the reason to suspect cannot be a basis for reason to believe also in Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] it has been held that for assessing officer to reopen the assessment there should be tangible material to come to the conclusion and should have a live link with the formation of belief to come to a conclusion that there is escapement of income. When assessing officer has recorded in the reasons that all the cash transactions are recorded in the assessee's books of a/cs, entire edifies of the veracity of ED information fails. Besides, in the absence of any information about the non plausible explanation from ED point of view this vague information on its own also cannot be a basis to form a reasoned belief. Thus, in our considered opinion the assessing officer has blindly relied on the suspicion intimated by ED. Assessing officer on one hand gave a reason that transactions are recorded, on the other hand without making any effort recorded reason to believe to reopen the assessment of the assessee. - the reason to believe made by assessing officer are self contradictory and based only on suspicion. - the reason to believe as formed by AO are not in terms as contemplated by sec. 147 - AO did not have valid reason to believe that income had escaped assessment – Decided in favour of assessee.
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2014 (7) TMI 290
Provision for post-retirement medical benefits to employees – Held that:- Post-retirement medical benefit is a provision, which has become a must for all the concerns, specially where there are health hazards - It is because of these reasons, the Government has notified that post-retirement medical benefit be allowed - service contract is worded in such a way that these benefits are integral part of the contracts and the liability gets attached, the moment a service contract is signed, inducting a new employee – Relying upon Bharat Earth Movers Ltd. vs CIT [2000 (8) TMI 4 - SUPREME Court] – post-retirement medical benefit is also a liability which gets attached to the company the moment, the service contract is signed, the revenue authorities erred in disallowing the provision under this head - thus, the matter is remitted back to the AO – Decided in favour of Assessee. Right to use technical know-how - Disallowance of 100% claim u/s 37(1) and allowance of 1/6th u/s 35 AB of the Act - Expenditure on 20 Point Programme - Held that:- The decision in assessee’s own case for the previous year has been followed, AO disallowed the claim regarding right to use technical know-how u/s 37(1) and also denied the claim for 1/6th u/s 35AB – the AO is directed to allow the expenses and also, the AO is directed to allow deduction for entire amount of excise duty and custom duty paid by the assessee irrespective of the excise duty and custom duty included in the valuation of assessee’s closing stock at the end of the accounting year - Decided in favour of Assessee. Disallowance of telephone and telegram expenses on guest house – Held that:- The decision in Britannia Industries Limited Versus Commissioner of Income-Tax And Another [2005 (10) TMI 30 - SUPREME Court] followed - expenditure towards rent, repairs, maintenance of guest house used in connection with business is to be disallowed u/s. 37(4) because this is a special provision overriding the general provision – Decided against Assessee. Entertainment expenses deduction for employees accompanying guest — 25% allowed against the claim of 50% - CIT(A) erred in allowing only 25% as against the Appellants claim of 50% towards Entertainment expenses towards employees accompanying the guests – Held that:- As decided in assessee’s own case for the previous year, it has been held that both the disallowances had been confirmed – Decided against Assessee. Disallowance of provision for write off of stores and spares – Held that:- Nowhere in the order of the revenue authority there is an objection to the fact that the provision had been made to write off old, obsolete, non-usable and non- moving items - the kind of activity that is performed by the giant Corporation like that of the assessee, huge quantity of stores and spares become unusable and because of which periodically they have to keep writing them off – the AO is directed to allow the claim only after verification that no double advantage is taken by the assessee by making the claim in the year of actual write off – Decided in favour of Assessee.
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Service Tax
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2014 (7) TMI 329
Refund claim - Relevant date for refund claim - Whether relevant date specified under Section 11B of Central Excise Act 1944 is relevant for refunds under Rule 5 of the CENVAT Credit Rules, 2004 read with Notification 5/2006-C.E. (N.T.) dated 14.03.2006 - Held that:- in the case of goods exported, the relevant date would be the date of export of goods but the same analogy may not be applicable in respect of relevant date for the purpose of refund. The liability to pay tax or duty arises in the case of manufactured goods as soon as they are manufactured whereas in the case of service tax till the law was amended, only when the consideration was received, the liability to pay tax arose. Without clearance of goods, the liability to pay tax does not arise and in the absence of liability to pay tax, further proceedings also would not happen. That being the situation, invariably even if the taxable event is manufacture, the calculation of tax took place after removal and for the purpose of calculation of duty liability it is always the date of removal that is considered - it would be appropriate that the relevant date for calculating the time limit under Section 11B also should be the date on which consideration is received. - Decision in the case of CCE, Pune-I Vs. Eaton Industries P. Ltd. [2010 (12) TMI 71 - CESTAT, MUMBAI] followed. Nexus and the admissibility of CENVAT credit - Held that:- That in respect of construction services credit would be admissible and in respect of other services, we agree that the original authority should consider each service separately - issue relating to nexus as well as the admissibility of CENVAT credit are in favour of the assessee and a more detailed consideration of each service in the light of Infosys decision of this Tribunal would be appropriate as regards services other than construction service which we have not considered. - Decision in the case of Infosys Ltd. [2014 (3) TMI 695 - CESTAT BANGALORE] to be followed - matter remanded back. - Decided in favour of assessee.
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2014 (7) TMI 328
Demand of service tax - commercial or industrial construction and construction of complex services - appellant had remitted service tax after availing abatement of 67% under exemption Notification No. 15/2004-ST dated 10/09/04 as amended by Notification No. 18/2005-ST dated 17/06/05 - Revenue contend that appellant was disentitled to avail abatement benefits since it failed to disclose the gross consideration received including the value of supplies made free of cost by service recipients to the appellant for incorporation into construction services provided - Held that:- for availment of exemption benefits under the relevant Notifications including the one in issue, it is not necessary to include in the taxable value, the value of supply of goods free of cost by a service recipient to a service provider, which are incorporated into constructions during rendition of tenable services - Following decision of Bayana Builders Pvt. Ltd. vs. CST, Delhi [2013 (9) TMI 294 - CESTAT NEW DELHI] - appellant shall be entitled to refund of the amounts remitted pursuant to the proceedings which culminated in the adjudication order, subject to entitlement for such refund in accordance with law - Decided in favour of assessee.
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2014 (7) TMI 327
Waiver of penalty u/s 80 - Penalty u/s 76, 77 & 78 - GTA services - Commissioner waived penalty u/s 76 but sustained penalty u/s 77 & 78 - Held that:- Penalties under Sections 77 & 78 also can be waived by invoking the provisions of Section 80 of Finance Act in view of the fact that if the appellants were to pay service tax promptly, they would have got the CENVAT credit benefit and therefore the situation is entirely revenue-neutral. Under these circumstances, it cannot be said that appellants had caused evasion of the tax. Apparently the claim of the appellant that it was a mistake appears to be correct - Decided in favour of assessee.
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2014 (7) TMI 326
Valuation of goods - Whether the expenses for arranging transporting from the godown to the premises of the dealers/stockists; the expenses for arranging the loading and unloading of the goods at rake points and at the godown and the godown rent paid by the appellant and which are reimbursed to them by their principals, to be included in the assessable value of the C&F Agents Service or not - Held that:- sofar as the godown rent is concerned, in terms of the agreements, it is the principals, who are required to maintain the godown and hence, it is the principals who are liable to pay the godown rent. In this regard, the appellant act only as their agent. Similarly, it is not disputed that the bills of the labour contractors for arranging loading and unloading of the goods at the rake point and at the godown and the bills of transporters are in the name of the principals and not in the name of the appellant and payment against these bills are made by on behalf of the assessee. Thus, the appellant act as pure agent. Therefore, we are of the view that these expenses would not be includible in the assessable value. Moreover, in any case, since the expenses in question, incurred by the appellant in course of providing the taxable service are reimbursed by the service recipients and the department seeks to include these reimbursable expenses in the assessable value of the services by invoking Rule 5 of the Service Tax Valuation Rules and since this rule has been stuck down by Delhi High Court as ultra vires to the provisions of Section 67 of 1994 Rules in its judgement in the case of Inter-Continental Consultants & Technocrats Pvt. Ltd. (2012 (12) TMI 150 - DELHI HIGH COURT), for this reason also, the reimbursement expenses, in question, would not be includible in the assessable value - Decided in favour of assessee.
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2014 (7) TMI 325
Waiver of pre-deposit of Service Tax - Commercial or Industrial Construction Service - Held that:- Undisputedly the Applicant had constructed residential quarters for CISF personnel on being engaged by M/s. I.O.C.L. It is not in dispute that such residential accommodation are used by M/s. CISF. Prima facie, we find that the Ld. Adjudicating Authority had confirmed the demand that besides construction of residential quarters, the Applicant along with said quarters had also constructed barracks, quarter guard room and armoury stores, welfare centre & multipurpose hall, shops, garages etc., which would not strictly fall under the category of residential complexes services. Prima facie we do not find force in the said contention of the Revenue inasmuch as that a residential complex would definitely include incidental and ancillary facilities attached to the residential quarters so as to make the residential complex livable. However, we are of the view that the Applicant had rendered services under the category of "Commercial and Industrial Construction Services" by raising boundary walls for M/s. Jindal Stainless Steel Ltd., Kalinganagar Industrial Complex - Applicant could not able to make out a case for total waiver of pre-deposit of dues adjudged - Conditional stay granted.
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2014 (7) TMI 324
Waiver of pre deposit - Denial of CENVAT Credit - On-line information and Database access/retrieval, Internet Cafe, Leased Circuit services - Trading activity - reversal of proportionate credit not accepted - non maintenance of separate accounts for trading activity and other services activities - Held that:- when the applicants are maintaining separate accounts for the input services attributable to taxable services and non-taxable services and for the common input services, they have reversed the amount attributable to non-taxable services, which is sufficient in compliance to the provisions of Section 35F of the Central Excise Act, 1944, we waive the requirement of predeposit of the balance amount of service tax, interest and penalty and stay recovery thereof during pendency of the appeal - Stay granted.
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2014 (7) TMI 323
GTA service or Cargo handling service - activity of unloading fertilizers from the vessels, transporting them to the warehouse of Indian Potash Ltd. (IPL), packing them in 50 Kg bags in the warehouse and thereafter transportation of fertilizers to railway sidings for delivery to the destination - appellant/IPL have discharged service tax liability as GTA service receiver - On packing activity, appellant has paid service tax under cargo handling service - denial of 75% abatement availed by the appellant during the period in respect of GTA service - Held that:- amendment of definition of ‘cargo handling service’ which has a consequence on the demand has not been considered by the Commissioner probably because there was no defence put up on behalf of the appellant. Further, there were CBEC Circulars issued clarifying as to which activity is to be considered as cargo handling and which activity has to be considered as GTA service which were also not considered. Moreover, there is a finding by the Commissioner that the contract is composite. On going through the records and the billing process adopted by the appellant, it appears that the contract cannot be exactly called a composite contract. - there were two separate contracts for handling and transportation and stevedoring - The packing aspect has no handling and that has been treated separately by the appellant and transportation is in any case a separate contract. Therefore, the action of the department in clubbing both under one contract is not correct since the whole case of the department is that the entire activity is to be treated as cargo handling and therefore the fact that there are two contracts, makes vital difference to the issue - appellant did not participate in the litigation before the original authority, we consider that in the interest of justice, the appellant should be given another opportunity, since on a prima facie basis, we find that the appellants have paid taxes, which according to them is correct - Matter remanded back - Decided in favour of assessee.
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Central Excise
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2014 (7) TMI 319
Waiver of pre deposit of interest - Wrong availment of CENVAT Credit - Held that:- Interest is compensatory in character, and is imposed on an assessee, who has withheld payment of any tax, as and when it is due and payable. The levy of interest is on the actual amount which is withheld and the extent of delay in paying tax on the due date. If there is no liability to pay tax, there is no liability to pay interest. Section 11AB of the Act is attracted only on delayed payment of duty i.e., where only duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person liable to pay duty, shall in addition to the duty is liable to pay interest. Section do not stipulate interest is payable from the date of book entry, showing entitlement of Cenvat credit. Interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is taken or utilized wrongly - Following decision of CCE, Bangalore Vs. Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT] - Stay granted.
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2014 (7) TMI 318
CENVAT Credit - Clearance of bagasse generated during the processing of sugarcane for manufacture of sugar without payment of duty - Non maintenance of separate accounts - Held that:- Appellant has been taking the plea before both the lower authorities that ‘Bagasse’ is a waste generated during the crushing of sugarcane and has been thought to be marketable, the same cannot be considered as a ‘manufactured product’ in order to attract the provisions of Rule 6 (3) of the Cenvat Credit Rules. - identical issues have been coming up all over the country and this Tribunal in the case of Bannari Amman Sugars Ltd. Vs Commissioner of Central Excise Salem - [2013 (12) TMI 1036 - CESTAT CHENNAI], Delta Sugars Ltd. Vs Commissioner of Central Excise Guntur - [2013 (10) TMI 796 - CESTAT BANGALORE] have been taking a view that ‘Bagasse’ is not a manufactured product and hence the provisions of Rule 6 (3) will not be applicable. We find that the based upon these decisions, the CBEC had issued a Circular No.904/24/2009-CX dt. 28.10.2009 wherein it was directed to the field formations that the amount equivalent to 5% or 10% of the value of ‘Bagasse’ needs to be demanded from the assessee. The said circular is struck down by the Hon’ble Allahabad High Court in the case of Balrampur Chini Mills Ltd. & Others Vs Union of India - [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] - Decided in favour of assessee.
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2014 (7) TMI 317
Valuation of goods - Undervaluation of goods - Alloy and Non-Alloy Round - department was of the view that the value addition shown by the appellant during the period of dispute was very low - totalling up the expenses on coal, electricity, wages, castings and consumables, metal rolls/lubricants, cartages/general expenses and the gross profit - Held that:- very basis of determining the value addition per matric tonne during each financial year is not correct and hence, in our view, no duty can be demanded merely on this basis. Moreover neither any inquiry has been conducted with the appellant's customers to ascertain as to whether any amount over and above the invoice price had been charged by the appellant nor any inquiry has been conducted for ascertain as to what was the prevailing market price of the alloy and non-alloys rounds during each financial year. If the prevailing market price of the alloy and non-alloys rounds during the period of dispute was much higher than the price at which the appellant were showing the sale, there could have been a basis for doubting the declared assessable value, but no such inquiry has been conducted. When in terms of Section 4 (1) of the Central Excise Act, 1944, the assessable value is the transaction value as defined in this Section and the transaction value of the goods at the time and place of removal i.e. at factory gate, is available and no evidence has been produced indicating that the sale price had been under declared, there is no justification for determining the transaction value by cost construction method which, in turn, is based on the arbitrarily determined valuation addition. The impugned order is, therefore, not sustainable - Decided in favour of assessee.
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2014 (7) TMI 316
CENVAT credit - readymade garments (RMG) - Notification No.30/2004-CE dt. 09/07/2004 - availing credit on returned goods under Rule 16 - Held that:- No evidence to show the method of accounting followed by the appellants in this case. The Commissioner (Appeals) seems to presume that Form IV and Form V registers are exclusive to each other. He seems to have come to the conclusion that in the Form IV register the returned goods are not included. There is absolutely no basis for this conclusion. No evidence has been gathered. No statement has been recorded. No accounting procedure has been discussed. The only alternative left is to consider what would be the correct procedure to be followed in accordance with law. Rule 16 deals with returned goods. Whether the returned goods undergo a process of manufacture or not, Rule 16 requires that whatever duty had been paid on the returned goods has to be taken as CENVAT credit and thereafter if the goods have been cleared without undergoing process amounting to manufacture, the credit originally taken should be reversed and if the goods undergo a process of manufacture, duty should be paid on transaction value/MRP based assessments under Section 4A. That being the position irrespective of the process on the returned goods, they have to be necessarily to be added to the inputs account. Therefore, the normal and natural conclusion would be that the same would be added in the Form IV register or the register which is equivalent to erstwhile RG23A part I register. This is a case where extended period could not have been invoked. When the declaration itself has been made, the Department had full opportunity to verify the submissions made by the appellants in the ER1 return within one year. Whether the declaration was made correctly as regards inputs in stock, WRP etc. could have been made. I am aware that suppression of facts/mis-declaration cannot be set aside or ignored merely because the Department had an opportunity to verify and did not verify. But when there is no evidence at all and there is no logical basis for the conclusions reached and no investigation is conducted to bring out the facts or verify important aspects, the only obvious solution would be to hold that extended period could not have been invoked - Decided in favour of assessee.
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2014 (7) TMI 315
Denial of CENVAT Credit - Merger of companies - Held that:- as on 20/02/2000 when the appellant applied for fresh registration, the High Court order approving the merger of the appellant company with Vivada had already been received and it took effect from 1st March 2000 itself. That being the position, there was no need for the stores clerk to have change the name since once the High Court approved the date of merger from that date merger said to have taken effect and therefore the credit was admissible. The stores clerk in his anxiety to ensure that appellant does not lose MODVAT credit and without proper knowledge of law has resorted to this. That being the position, I find myself in agreement with the view taken by the Commissioner(Appeals) in the impugned order that for a mistake committed by the stores clerk without proper appreciation of the legal position, the denial of entire CENVAT credit is not appropriate. Once the credit taken is held to be admissible and not denied, the question of demand of interest also would not arise and therefore the demand for interest also has to be set aside. Penalty u/s 11AC - Held that:- CENVAT credit would not have been demanded and interest also would not have been demanded. The penalty under Rule 57AH read with Section 11A is imposable only when suppression of facts, omission etc. invoked and demand for CENVAT credit is confirmed. When there is no demand for CENVAT credit under the extended period by invoking Rule 57AH(2), imposition of penalty under Section 11AC may not be imposable. At this stage, it would be appropriate to take note of the fact that penalty of ₹ 10,000/- under Rule 173Q was also imposed against the appellant which is not at all challenged. That being the position, penalty under 173Q can be attributed to the manipulation of the invoice done by the store clerk and therefore, in my opinion, non-imposition of penalty of ₹ 50,000/- on the appellant by this Tribunal is correct - Penalty cannot be sustained - Decided in favour of assessee.
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2014 (7) TMI 314
Clandestine manufacture and removal of MS Ingots and MS re-rolled products - suppression of production - denial of cross-examination - Held that:- entries made in the private record relates to the clandestine manufacture and supply of finished goods without payment of duty. These entries have been corroborated by the authors that is Shri Thorve and Shri Yadav and confirmed by the Directors also. It is a settled position in law that admitted facts need not be proved - Revenue has discharged this burden more than adequately. Thereafter, the burden to prove the contrary shifts to the appellant. The decision of the Hon’ble Bombay High Court in Phoenix Mills Ltd. [2004 (1) TMI 89 - HIGH COURT OF JUDICATURE AT BOMBAY] refers. However, appellants have not produced any evidence to rebut the Revenue’s case. Therefore, the case of clandestine production and removal without payment of duty stands clearly established. whether the appellant would be eligible for cum-duty benefit, inasmuch as they have not collected excise duty separately - Held that:- appellants have cleared the goods without payment of duty and without the cover of any Central Excise invoices and the transactions were made in cash. Thus, there is no documentary evidence indicating that the price of the goods included the excise duty payable. Therefore, as per the decision of the Hon’ble Apex Court in the case of Amrit Agro Industries Ltd. (cited supra), the question of exclusion of duty element will not arise for determination of value under Section 4(4)(d)(ii) of the Central Excise Act, 1944 - Decided against assessee.
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2014 (7) TMI 313
Waiver of pre-deposit of duty - Manufacture - Marketability - process of converting ‘ores’ to ‘concentrates’ - products, viz.Ileminite, Sillimenite, Rutile, Zircon and Garnet - deemed manufacture - The claim of the Applicant is that even after the insertion of this Chapter Note, since the goods emerge after processing of beach sand ores, which continue to remain as ‘ores’ only and are not converted into ‘concentrates’, hence no manufacture takes place and accordingly, no duty is payable. - Held that:- that even though the earlier decision of the tribunal has been delivered prior to insertion of Chapter Note 4 to Chapter 26 of CETA,1985, but its findings and reasoning on other aspects, like the marketability of resultant product, its composition, etc. which led to the conclusion that the resultant product is not excisable, requires a thorough analysis to arrive at a conclusion on its applicability after the insertion of Chapter note 4 to Chapter 26 from 01.03.2011. Also, prima facie, we find that there are four different Laboratories report, wherein, it has been opined that the aforesaid products manufactured/processed by the Applicant out of beach sand are ‘ores’ and not ‘concentrates’; whereas, only one report of RRL, BBSR describes these goods as ‘concentrates’. In nutshell, the issue is highly debatable and needs closure analysis and interpretation of the relevant Chapter Note, HSN meaning of concentrates vis-`-vis the process of manufacture and gamut of case laws on the subject including the decision of this Tribunal in the Applicant’s own case [2001 (9) TMI 167 - CEGAT, KOLKATA]. Since provisions of the Mining Act are applicable to their processing plant situated in the Mining area, and the definition of ‘mining’ as prescribed under the Mines Act being incorporated in the exemption Notification No. 63/95 CE dt,16.03.1995, accordingly, the products manufactured/processed by them could fall under the said exemption Notification No.63/95 dated 16.03.1995. - Applicant could able make out a strong prima-facie case for total waiver of pre-deposit of dues adjudged. Accordingly, pre-deposit of all dues adjudged is waived and its recovery stayed during pendency of the appeal - Stay granted.
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2014 (7) TMI 312
SSI Exemption - Manufacture of branded goods - Rural area - Held that:- jurisdictional Tehsildar has certified that the village in which the assessee s unit located is in rural area. Commissioner has not acted on the certificate of the Tehsildar. Support was also taken from rulings being 2008(223) ELT 218, 2009(233) ELT 386 and 2010 (261) ELT 241. It is further contended that the Revenue has not brought any evidence on record to show that the appellant unit is not an SSI unit situated in rural area and further contended that no case of any fraud, suppression etc. is made out under the facts and circumstances and prayed for dropping of the show-cause notice. - in the interest of justice, the matter needs to be remanded for a fresh consideration by the adjudicating authority as a prima facie case has been made out by the appellant in view of the documents perused by this Tribunal, some of which were not before the adjudicating authority - stay granted partly - appeal allowed by way of remand.
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2014 (7) TMI 311
Cenvat Credit - Manufactures and clears Dutiable as well as Exempted goods - assessee does not avail credit on inputs, but avails credit on capital goods and input services; Commonly utilizes the input services for the manufacture and clearance of dutiable as well exempted goods. - Held that:- In fact, the Department could have demanded the amount payable as per Rule 6(3) of CCR. However, they have chosen to demand only proportionate credit. Therefore the consideration also is limited to the question as to when input service tax credit has been taken, provisions of Rule 6 regarding the availability of credit was attracted or not. Rule 6(1) clearly denies CENVAT credit in respect of exempted products. In the absence of any specific provisions, the appellant is bound to reverse the credit taken Credit can be taken only if separate accounts are maintained in the case of inputs or input services which are used for dutiable and exempted goods. In this case, appellant has taken CENVAT credit on input services and therefore they were bound by law to maintain separate account or not to avail credit. In the absence of maintenance of separate accounts, the credit on input services was clearly not eligible. In fact, the Department could have demanded the amount payable as per Rule 6(3) of CCR. However, they have chosen to demand only proportionate credit. Therefore the consideration also is limited to the question as to when input service tax credit has been taken, provisions of Rule 6 regarding the availability of credit was attracted or not. Rule 6(1) clearly denies CENVAT credit in respect of exempted products. In the absence of any specific provisions, the appellant is bound to reverse the credit taken. Rule 6(5) services - Held that:- At this stage, the learned counsel made another submission that there were services which are among the 17 services listed in Rule 6(5) and in respect of these services credit can be taken even if they are used in dutiable and exempted products. She submitted that the amount attributable to these services is ₹ 10, 361/-. - Contention of assessee is correct - therefore the payable amount to be demanded has to be reduced by this amount. Extended period of limitation - whether the similar matter was under consideration of the department earlier - Held that:- , the earlier proceedings was relating to the issue as to whether the appellant was eligible for exemption even when credit of input service tax had been taken or not. The issue was not whether the appellant is required to reverse proportionate credit when the services are used in dutiable and exempted products. Therefore the fact that there was an earlier proceedings would not be of any help. - the claim that there was no suppression or misdeclaration cannot be considered. - When the appellant did not reverse the proportionate credit or pay the amount as prescribed under Rule 6(3) or did not implement the option exercised by themselves, there is a clear misdeclaration or suppression on their part - Decided partly in favour of assessee.
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CST, VAT & Sales Tax
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2014 (7) TMI 322
Demand of tax - Whether on the facts and in the circumstances of the case, the Trade Tax Tribunal as well as the first appellate authority were legally justified in holding that the chemicals and dyes used in the job work are not liable to tax under the provisions of U.P. Trade Tax Act - Held that:- State Government had also decided the representation made by the Northern India Textile Processors Association and had come to the conclusion that dyes and chemical used in the bleaching, colouring and dyeing etc. on gray cloth are consumed in the process and not transferred. In our considered opinion, the said finding is binding upon the assessing authorities as the representation made by the Northern India Textile Processors Association was also decided by the said order. The stand taken by the respondents that the State Government had not decided any other representation except the two preferred by M/s Ganga Processors and M/s Style Dyers is not correct. - respondent no.3 was not justified in imposing tax on the dyes and chemicals used in the process of dyeing, colouring, printing, bleaching, washing etc. of gray cloth by the petitioner and the impugned orders in all the writ petitions are liable to be set aside - following decision of M/s Super Fine Processors Pvt. Ltd. Vs. State of U.P. and others [2013 (6) TMI 482 - ALLAHABAD HIGH COURT] - decided against Revenue.
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2014 (7) TMI 321
Tax liability - Valuation - Whether the dealer, who is executing the works contract, is entitled for the deduction of amounts pertaining to the depreciation on trippers, maintenance expenses of trippers and consumables, used in the execution of works contract under rule 6(2) of the Rules or not - Held that:- Assessee is entitled for exemption not only on the charges for obtaining on hire or otherwise machinery and tools used for execution of the works contract but also on the amounts spent by the contractor on such machinery as a consequence of using them for the execution of the works contract including the value of the proportionate wear and tear of the machinery which is otherwise identified as depreciation on the premise that it is equivalent to the hire charges spent otherwise. The dominant idea for exempting the said charges should be use of the machinery for execution of the works and the amounts spent by the contractor on such machinery. Otherwise, there is no necessity to use the word "or otherwise" under rule 6(2)(d). - the revised order passed by the Deputy Commissioner, dated July 31, 1993, as confirmed by the Sales Tax Appellate Tribunal by order, dated January 30, 2009, are hereby set aside and the order passed by the Commercial Tax Officer, granting exemption under the heads, viz., depreciation on vehicle, maintenance expenses on tipper and consumables, is restored. - Decided in favour of assessee.
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2014 (7) TMI 320
Constitutional validity of Section 4 - Assam General Sales Tax (Amendment) Act, 2002 - Sale of controlled commodities - Portable alcohol/rectified spirit - assessee entered into contract for wholesale supply to excise warehouse - demand of payment of sales tax from the petitioner on account of the sale of the country spirit transported by him - Assessee contends that the contractual assignments undertaken by him in transporting the country spirit did not constitute a sale exigible to sales tax but is only a transportation contract - Revenue contends that assessee has been supplying the country spirit to the retail vendors within the meaning of the charging provisions of the extent sales tax legislation thereby making him liable to pay sales tax irrespective of whether he realizes such taxes from his buyers or not - what is the nature of the transaction which was actually undertaken by the petitioner in supplying the country spirit to the specified warehouses of Assam during the relevant period. Held that:- If a sale, express or implied, is found to exist then the tax must follow. In other words, so long as mutual assent, express or implied, is not totally excluded, the transaction will amount to a sale. In the case at hand, the nature of the contract executed between the petitioner and the Staterespondents plainly shows that the four elements to constitute a sale, namely, competency of parties, mutual assent of the parties even though the same may not be total, passing of property in the goods supplied by the petitioner to the licensed retail vendors via the officer-in-charge of the warehouse/excise and treasury, and lastly, payment of price, though statutorily controlled, were all present to render the transaction liable to sales tax. Explanation 3(ii) to section 8(1)(a) of the Assam General Sales Tax (Amendment) Act, 2002, is intra vires the Constitution and the sales tax imposed thereby cannot be construed to be a tax on income beyond the legislative competence of the State Legislature of Assam. - Decided against the assessee. Jurisdiction of High Court - writ jurisdiction - Held that:- Revenue authorities appointed under section 3 of the Act are also Tribunals or, at any rate, have the trappings of a Tribunal as they are exercising quasi-judicial functions. Ouster of jurisdiction by statutory provision may either be express or implied. When the exclusion of jurisdiction is also not expressly stated in the statute, it can be implied. In the instant case, though the language of section 4 does not say so in many words that even the jurisdiction of this court under article 226 of the Constitution to issue a writ of certiorari is barred, yet it is to be necessarily implied. When the Legislature intends to oust the jurisdiction of only civil courts and not the High Courts or the Supreme Court, it has been made apparent by them as indicated by section 39 of the Act. We, therefore, hold that section 4 violates the basic feature of the Constitution, and cannot be sustained in law. The impugned assessment orders dated July 20, 2004 in the three writ petitions are valid and enforceable - Section 4 of the Act, in so far as it ousts the jurisdiction of the High Court under articles 226 and 227 of the Constitution to question the legality of the exercise of jurisdiction by the Revenue authorities under section 3, is violative of the basic structure of the Constitution and is, therefore, declared as unconstitutional - However, instead of striking down section 4 lock stock and barrel, the words "except in the High Court under articles 226 and 227 of the Constitution" shall be read into between the words "call in question" and "the jurisdiction of any authority under section 3" of section 4 of the Act - Decided partly in favour of assessee.
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Indian Laws
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2014 (7) TMI 310
Imposition of house tax u/s 177(c) of the Act – charitable society - proposal to increase the house tax - Held that:- The provision came into effect w.e.f. 21.11.2002 by which a building solely used as School and Intermediate College whether aided by the State Government or not was exempted from payment of house tax - the assessee contended that they are no longer liable to pay house tax - the assessee have made several objections, which has remained pending - they have decided the objections by the order dated 17.11.2003 is erroneous - it is apparently clear that the revenue had only determined the annual value of the building, but, had nowhere decided the objection of the petitioners with regard to the imposition of house tax - the revenue while issuing notice dated 13.8.2001 had invited the assessee to file objection to the annual value as well as to the proposed house tax - the annual value has been decided by the revenue, the objection relating to house tax has not been decided - the bill raised by the revenue is without any authority of law and is quashed – Decided in favour of assessee.
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