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TMI Tax Updates - e-Newsletter July 14, 2014 Case Laws in this Newsletter: Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Articles Budget Highlights - IDT Tax Terrorism Continues in Finance Bill 14 KEY FEATURES BUDGET 2014-2015 Non Commercial entities- still not in Service tax ambit News SERVICE TAX - SEZ – procedural simplification: [changes to have immediate effect] - THE FINANCE (No. 2) BILL, 2014 SERVICE TAX - Simplification of partial reverse charge mechanism - THE FINANCE (No. 2) BILL, 2014 SERVICE TAX - Point of Taxation Rules - THE FINANCE (No. 2) BILL, 2014 SERVICE TAX - Place of Provision of Services Rules - THE FINANCE (No. 2) BILL, 2014 SERVICE TAX - Cenvat Credit - THE FINANCE (No. 2) BILL, 2014 Service Tax Rules - changes to have immediate effect - THE FINANCE (No. 2) BILL, 2014 SERVICE TAX - Compliance enhancement - THE FINANCE (No. 2) BILL, 2014 SERVICE TAX - other amendments in Chapter V of the Finance Act, 1994 - THE FINANCE (No. 2) BILL, 2014 SERVICE TAX - Retrospective Exemption - THE FINANCE (No. 2) BILL, 2014 SERVICE TAX - New exemptions - THE FINANCE (No. 2) BILL, 2014 Service tax on taxable portion in respect of transportation service by vessels - THE FINANCE (No. 2) BILL, 2014 Service tax on service portion in Works Contracts - Rationalization - THE FINANCE (No. 2) BILL, 2014 SERVICE TAX - Broadening the tax base - THE FINANCE (No. 2) BILL, 2014 Central Excise - Proposals involving changes in rates of duty - THE FINANCE (No. 2) BILL, 2014 Central Excise - THE FINANCE (No. 2) BILL, 2014 Customs - Proposals involving changes in rates of duty - THE FINANCE (No. 2) BILL, 2014 Customs - Baggage Rules - THE FINANCE (No. 2) BILL, 2014 CUSTOMS - THE FINANCE (No. 2) BILL, 2014 Credit of Alternate Minimum Tax - THE FINANCE (No. 2) BILL, 2014 Extension of tax benefits under section 80CCD to private sector employees - THE FINANCE (No. 2) BILL, 2014 Assessment of income of a person other than the person who has been searched - THE FINANCE (No. 2) BILL, 2014 Obligation to furnish statement of Information - THE FINANCE (No. 2) BILL, 2014 Provisional attachment under section 281B - THE FINANCE (No. 2) BILL, 2014 Failure to produce accounts and documents - THE FINANCE (No. 2) BILL, 2014 Mode of acceptance or repayment of loans and deposits - THE FINANCE (No. 2) BILL, 2014 Interest payable by the assessee under section 220 - THE FINANCE (No. 2) BILL, 2014 Estimate of value of assets by Valuation Officer - THE FINANCE (No. 2) BILL, 2014 Inquiry by prescribed income-tax authority - THE FINANCE (No. 2) BILL, 2014 Mutual Funds, Securitisation Trusts and Venture Capital Companies or Venture Capital Funds to file return of income - THE FINANCE (No. 2) BILL, 2014 Power of survey - THE FINANCE (No. 2) BILL, 2014 Income-tax Authorities - THE FINANCE (No. 2) BILL, 2014 Losses in Speculation Business - THE FINANCE (No. 2) BILL, 2014 Capital gains exemption on investment in Specified Bonds - THE FINANCE (No. 2) BILL, 2014 Capital gains exemption in case of investment in a residential house property - THE FINANCE (No. 2) BILL, 2014 Cost Inflation Index - THE FINANCE (No. 2) BILL, 2014 Capital gains arising from transfer of an asset by way of compulsory acquisition - THE FINANCE (No. 2) BILL, 2014 Speculative transaction in respect of commodity derivatives - THE FINANCE (No. 2) BILL, 2014 Transfer of Government Security by one non-resident to another non-resident - THE FINANCE (No. 2) BILL, 2014 Extension of income-tax exemption to Special Undertaking of Unit Trust of India (SUUTI) - THE FINANCE (No. 2) BILL, 2014 Income Computation and Disclosure Standards - THE FINANCE (No. 2) BILL, 2014 Business of Plying, Hiring or Leasing Goods Carriages - THE FINANCE (No. 2) BILL, 2014 Tax Deduction at Source - THE FINANCE (No. 2) BILL, 2014 Disallowance of expenditure for non- deduction of tax at source - THE FINANCE (No. 2) BILL, 2014 Corporate Social Responsibility (CSR) - THE FINANCE (No. 2) BILL, 2014 Applicability to earlier years of the registration granted to a trust or institution - THE FINANCE (No. 2) BILL, 2014 Levy of Penalty under section 271G by Transfer Pricing Officers - THE FINANCE (No. 2) BILL, 2014 Rationalisation of the Definition of International Transaction - THE FINANCE (No. 2) BILL, 2014 Anonymous donations under section 115BBC - THE FINANCE (No. 2) BILL, 2014 Cancellation of registration of the trust or institution in certain cases - THE FINANCE (No. 2) BILL, 2014 Clarification in respect of section 10(23C) of the Act - THE FINANCE (No. 2) BILL, 2014 Rationalisation of taxation regime in the case of charitable trusts and institutions - THE FINANCE (No. 2) BILL, 2014 Signing and verification of return of income - THE FINANCE (No. 2) BILL, 2014 Tax deduction at source from non-exempt payments made under life insurance policy - THE FINANCE (No. 2) BILL, 2014 Taxability of advance for transfer of a capital asset - THE FINANCE (No. 2) BILL, 2014 Alternate Minimum Tax - THE FINANCE (No. 2) BILL, 2014 Characterisation of Income in case of Foreign Institutional Investors - THE FINANCE (No. 2) BILL, 2014 Roll back provision in Advance Pricing Agreement Scheme - THE FINANCE (No. 2) BILL, 2014 Reduction in tax rate on certain dividends received from foreign companies - THE FINANCE (No. 2) BILL, 2014 Concessional rate of tax on overseas borrowing - THE FINANCE (No. 2) BILL, 2014 Deduction from income from house property - THE FINANCE (No. 2) BILL, 2014 Raising the limit of deduction under section 80C - THE FINANCE (No. 2) BILL, 2014 Deduction in respect of capital expenditure on specified business - THE FINANCE (No. 2) BILL, 2014 Extension of the sunset date under section 80-IA for the power sector - THE FINANCE (No. 2) BILL, 2014 Investment Allowance to a Manufacturing Company - THE FINANCE (No. 2) BILL, 2014 Taxation Regime for Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (Invit) - THE FINANCE (No. 2) BILL, 2014 Tax on long-term capital gains on units - THE FINANCE (No. 2) BILL, 2014 Long-term Capital Gains on debt oriented Mutual Fund and its qualification as Short-term capital asset - THE FINANCE (No. 2) BILL, 2014 Dividend and Income Distribution Tax - THE FINANCE (No. 2) BILL, 2014 RATES OF INCOME-TAX - THE FINANCE (No. 2) BILL, 2014 Growth of Leather Based Industries Strengthening of Rubber Sector Export and Import of Palm Oil Subsidy in Sugar Circulars / Instructions / Orders DGFT 66 (RE: 2013) /2009-2014 - dated 11-7-2014 Amentment in SIONs A1143, A1170, A3627 and K134. Highlights / Catch Notes Income Tax Deemed income u/s 69B of the Act – Tribunal erred in holding that the DVO’s report did not corroborate the statement made by the assessee before the Income Tax Authorities - HC Visit to Get Source AO disputed the assessee’s eligibility to deduction u/s 10B - Revenue’s objection that the assessee is not entitled to deduction u/s 10A only because it was not claimed in the return of income cannot be accepted. - AT Visit to Get Source It cannot be said that assessee is not eligible for deduction u/s 80 IA(4) for the reason that the assessee on its own did not develop an infrastructure project - AT Visit to Get Source Accrual of interest income – interest was not received - doubt on receipt of income in future - non-receipt of interest alone cannot be a criteria for not offering the same as the income of the assessee - AT Visit to Get Source Treatment of STCG on income from business – Sale of shares - the assessee has been employed and therefore the assessee has earned salary income - income from sale of shares to be held as LTCG or STCG - AT Visit to Get Source Customs 100% EOU - benefit of the DTA Scheme - debonding - conversion of free shipping bills into Advance Licence/DEPB/DFRC shipping bills - tribunal allowed the conversion - order of tribunal is erroneous - HC Visit to Get Source Appeal against the order of CESTAT where on some points of difference of opinion matter referred to larger bench and on some issues, tribunal has given their decision by consensus - appeal is premature - dismissed - HC Visit to Get Source Central Excise Denial of Refund claim - due date of filing of claim in case of buyer of goods - law differentiates the “manufacturer“ and the “purchaser“ for purposes of refund of duty - refund rejected on the ground of delay - AT Visit to Get Source CENVAT Credit - commercial invoice issued by a dealer not registered with Central Excise - He has satisfied that the goods received have been used for the manufacture of final products - credit allowed - AT Visit to Get Source CENVAT Credit - Credit on oxygen - oxygen was used in three factories but credit availed in one factory only - it was not correct on the part of the appellant to avail all the credit in respect of oxygen - AT Visit to Get Source VAT Mere entry of the material in form 38/tax invoice as rails (defective/RE) would not be sufficient and conclusive to hold that the material was actually defective or rejected basis of iron steel and not a waste or a scrap material - HC Visit to Get Source Case Laws: Income Tax 2014 (7) TMI 432 Stay application – Violation of principle of natural justice – opportunity of being heard – Held that:- Revenue has not afforded an opportunity of personal hearing to the assessee even though it was specifically requested, thus, the order passed is against the principles of natural justice - pursuant to the demand made, assessee has already paid 50% of the same – thus, the revenue is directed to dispose of the appeal as expeditiously as possible and pass orders on merits and in accordance with law after affording an opportunity of personal hearing to the assessee - there shall be an order of stay of the demand till the disposal of the appeal alone – Stay granted. 2014 (7) TMI 431 Reference made to DVO - Deemed income u/s 69B of the Act – Unexplained investment and levy of penalty u/s 271(1)(c) of the Act – Held that:- CIT (Appeals) had correctly appreciated the facts and the applicable law - the only reason given by the assessee was that he was suffering from high fever and had signed the papers without properly applying his mind or appreciating the contents or issue – the letter was disbelieved by the AO as well as by the CIT(A) - the value assessed by the DVO pointed out towards the truthfulness of the disclosure made - there was no infirmity in the approach of the CIT (A) - The difference in the disclosed consideration and the value as estimated by the DVO is so large that even if the valuation was not considered accurate, it nonetheless indicated that the recorded consideration was understated and the DVO’s report could be relied upon to corroborate the statement of the assessee, that he had paid an additional sum of ₹ 55 lacs in cash. The statement had been made by the assessee and not by any third party - the statement made by the assessee had been held to be voluntary and without any undue influence, both by the AO and the CIT (A) – thus, the Tribunal erred in holding that the DVO’s report did not corroborate the statement made by the assessee before the Income Tax Authorities – The order of the CIT (A) made in penalty proceedings had given effect to the Tribunal’s order in the substantive proceedings - The rights and contentions of the parties in respect of the penalty shall be gone into independently in accordance with law by the CIT (A) - Decided in favour of Revenue. 2014 (7) TMI 430 Claim of deduction u/s 10A where assessee originally claimed exemption u/s 10B and found not eligible – Specific approval by Board not obtained – Held that:- The decision in COMMISSIONER OF INCOME TAX, DELHI (CENTRAL) – I Versus CONTIMETERS ELECTRICALS PVT. LTD. [2008 (12) TMI 4 - HIGH COURT DELHI] followed - the assessee made a claim of deduction u/s 10A during assessment proceedings and also filed the audit report - the assessee’s case is in a better footing because in the return of income, the assessee had claimed deduction u/s 10B - deduction u/s 10A was only an alternative claim which assessee made only when the AO disputed the assessee’s eligibility to deduction u/s 10B - the assessee could not have claimed deduction u/s 10B and 10A both in the return of income - the Revenue’s objection that the assessee is not entitled to deduction u/s 10A only because it was not claimed in the return of income cannot be accepted. Claim of deduction u/s 10A of the Act – Manufacture or production not began in EHTP or STP but in DTA - Held that:- The assessee produced the certificate issued by the Government of India, Department of Electronics, Electronics Hardware Technology Park Secretariat dated 16th November, 1998 - on the assessee’s application for setting up 100% export oriented unit in EHTP scheme, the Government of India was pleased to extend all facilities and privileges admissible under the EHTP scheme for conversion of assessee’s DTA unit into EHTP unit - assessee has claimed to have filed the above letter before the AO – the letter has not been considered by the AO - the matter needs re-examination in the light of the letter issued by the Government of India wherein the assessee was permitted to convert its DTA unit into EHTP unit – thus, the matter is remitted back to the AO for re-examination of the assessee’s eligibility for deduction u/s 10A in the light of letter of the Government of India. Non-receipt of sale proceeds in convertible foreign exchange – Held that:- Assessee contended that all the sale proceeds were received in convertible foreign exchange and assessee had duly furnished the evidence - The auditor’s certificate was also furnished certifying the details - as the matter is remitted back to the AO for examination of assessee’s claim u/s 10A afresh in the light of letter of Electronics Hardware Technology Park Secretariat - the AO is directed to examine this aspect also – Decided in favour of Revenue. 2014 (7) TMI 429 Validity of reopening of assessment u/s 147 of the Act – Change of opinion - Held that:- Notice u/s 148 of the Act was issued on 31/03/2011, which is beyond 4 years from the end of the AY - as can be seen, section 147 of the Act empowers AO to assess income chargeable to tax which has escaped assessment for any AY - the first proviso to section 147 of the Act makes it clear that in a case where an assessment u/s 143(3) or section 147 has been made no action can be taken after expiry of 4 years from then end of the AY unless the escapement of income is attributable to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment - it needs to be examined whether in the present case there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment - the AO has reopened assessment only on the basis of the Director’s report for the previous year 2003-04 and the computation of income as well as P&L A/c of the assessee, which were furnished along with the return of income and formed part of the record when the assessment order u/s 143(3) read with section 153A was passed by the AO on 31/12/2007. There are no fresh/tangible material available before the AO for reopening of assessment - AO on re-appreciation of the same material, which is already available on record at the time of original assessment has formed his belief for reopening assessment is not permissible as it does not amount to non-disclosure of any material facts truly and fully by the assessee – Relying upon Parashuram Pottery Works Co. Ltd., Vs. ITO [1976 (11) TMI 1 - SUPREME Court] - the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary fact. It is for the AO to draw correct inference from the primary facts - It is not the responsibility of the assessee to advise the AO with regard to inference which he should draw from the primary fact. Entire reassessment is on the basis of the materials disclosed by assessee, which formed part of the record at the time of completion of the original assessment u/s 143(3) read with section 153A of the Act - the AO having completed original assessment on verifying all these facts and materials, reopening of assessment on self-same facts and material on a mere change of opinion, that too after expiry of four years from the assessment year is not permissible in law - the action of the AO u/s 147 of the Act is clearly without jurisdiction – there is no infirmity in the order of CIT(A) in holding that the reopening of assessment u/s 147 of the Act in the present case is unsustainable in law - the disallowance made by the AO will also not be sustainable in view of the reasoning given by the CIT(A), which is not only reasonable, but, in accordance with the statutory provisions - the conclusion drawn by the CIT(A) on the issue of disallowance of interest is also just and proper and deserves to be upheld - the decision of the CIT(A) both on the issue of validity of proceeding u/s 147 of the Act as well as on the merits of disallowance made by the AO – Decided against Revenue. 2014 (7) TMI 428 Claim of STCG and LTCG - Profit arriving from purchase & sale of shares instead of business income treated by the AO – Held that:- The decision in Assistant Commissioner of Income-tax 25(3) Versus Chetan K. Mehta [2011 (3) TMI 874 - ITAT MUMBAI] followed - The conduct of the assessee in showing income from delivery based transactions as STCG and non-delivery based transaction as business income only shows that but for actual delivery even income from those transactions would have been considered as speculative income and business income – Relying upon CIT v. Gopal Purohit [2010 -TMI - 35188 - HIGH COURT OF BOMBAY] - assessee has followed a consistent practice in regard to the nature of the activities, the manner of keeping records and the presentation of shares as investment at the end of the year - the conclusion of the CIT(A) that the income from sale of shares declared by the assessee as STCG has to be accepted is correct - the income shown by the assessee from the sale of shares is to be taxed under the head "short term capital gain" and "long term capital gain" – Decided against Revenue. Deduction under house property – Held that:- The assessee has made initial claim of deduction of interest of ₹ 15 lakhs on the borrowings which were utilised for acquiring residential premises as deductible business expenditure u/s 36(1)(iii) - the assessee filed revised statement of computation of income whereby the claim of ₹ 15 lakhs was given up and was disallowed by the assessee himself and instead interest claimed of ₹ 1.50 lakhs was made under section 24(b) which was the legally correct claim while computing the income from house property - Even if such a claim has been rejected by the AO on the ground that the same should have been made by way of revised return of income, however, the same does not put any fetters on the powers of the appellate authorities to entertain such a legal claim if all the facts necessary for the adjudication are available on records – Relying upon Goetze (India) Limited Versus Commissioner of Income-Tax [2006 (3) TMI 75 - SUPREME Court] - no new claim of interest has been made except for the fact that the right amount of interest has been claimed under the head "interest" and the amount of claim made in the earlier return of income - such a claim cannot be entertained as it is a trite law that it is the duty of the AO to allow deductions as per the statute under the right provisions of the Act – thus, the order of the CIT(A) is upheld – Decided against Revenue. 2014 (7) TMI 427 Treatment of income – Capital gain or business income – Assessee Trader or investor in shares – Held that:- The decision in Asst. Commissioner of Income Tax Versus M/s Passionate Investments Management Pvt. Ltd. [2013 (8) TMI 136 - ITAT MUMBAI] followed - the total number of transaction is 68 out of which 40 transactions relate to LTCG - 15 transactions relate to STCG and 30 transactions relate to close out transaction of STCG - The total number of scrips dealt by the assessee is 26 - average holding period for capital gains is 37 days or 1.75 years - The average holding period for STCG is 217 days – revenue has accepted the profit under the head capital gain - the reasoning given by the AO and the Commissioner (Appeals) are akin to that of the earlier years – the order of the CIT(A) is upheld that the income derived by the assessee from the transactions of the shares is to be taxed under the head “capital gain” and not “income from business” – Decided against Revenue. Restriction of disallowance u/s 14A r.w. Rule 8D of the Act – Administrative expenses – Held that:- The assessee submitted that the working of computation of disallowance and also the expenses which can be said to be directly attributable to the other business activities – CIT(A) was of the view that the AO should disallow the administrative expenditure as per rule 8D(2)(iii), the disallowance should not exceed the total administrative expenditure incurred – there was no infirmity in the order passed by the CIT(A) as the disallowance u/s 14A, cannot exceed the total administrative expenditure debited by the assessee in the Profit & Loss account - Even under the formula given in rule 8D, the disallowance cannot exceed the overall expenditure claimed in the Profit & Loss account – Decided against Revenue. 2014 (7) TMI 426 Foreign Travel Expenses - Expenditure incurred for non-business purpose – Held that:- On hearing both the parties and on perusal of the relevant material, it would be reasonable to remand the issue to the file of the AO to examine the same and to take a fresh decision in the light of the information furnished – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Expenses on guest house and residential flats – Held that:- Assessee mentioned that the confirmation given by Shri Sharma is supported by the “guest house register” - issue can also be remanded to the file of the AO to examine the expenditure incurred on guest houses and residential flats owned by the employees - the expenditure incurred on employees may be fully allowed as it is incurred for the business purposes - it is not clear from the record that why the assessee has to incur on the residential flats allotted to the employees of the company - the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Valuation of closing stock – Held that:- On hearing both the parties and on perusal of the material on record, the issue needs to revisit the file of the AO and the closing stock valuations have to be redone in the light of the provisions of section 145A of the Act – thus, the issue is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Disallowance of 50% of license fees – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that nature of the expense is that under an agreement the assesee became a licensee member of RPG Enterprises Ltd and was entitled to use its trade mark “RPG” and also have full access to various organizational facilities developed by RPG Enterprises - there was no rationale explanation for the benefit which the assessee received by making payment - In the past 50% of disallowance had been made and the AO made disallowance of 50% of the expenses – thus, the order of the CIT(A) is upheld – Decided against Revenue. Disallowance u/s 14A of the Act – Dividend income – Held that:- CIT (A) was rightly of the view that Rule 8D is applicable only from AY 2008-2009 – Relying upon M/s. Cheminvest Ltd vs. ITO [2009 (8) TMI 126 - ITAT DELHI-B] - even if no exempt income is earned, a proportion of the expenditure incurred is attributable to managing the said investments and therefore section 14A of the Act would definitely be applicable - while adjudicating the issue, the CIT (A) has rightly considered the decisions of the ITAT as well as the judgments of the higher judiciary and the direction given by the CIT (A) to calculate the disallowance u/s 14A of the Act at 5% of the dividend income is fair and reasonable – Decided against Revenue. 2014 (7) TMI 425 Allowability of 50% of service charges – Held that:- CIT(A) rightly of the view that the appellant is allowed 50% of service charges as expenditure incurred for earning the income - the 50% service charges is allowed as expenditure incurred for earning the income - Revenue could not bring any law or decision of any higher court contrary to the view taken by the Tribunal in the own case of the assessee – there was no infirmity in the order of the CIT(A) while allowing the claim of the assessee at the rate of 50% of the service charges following the decision of the Tribunal – Decided against Revenue. Transfer fees and repairs and maintenance fund received from buyers – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that, the assessee has received transfer fees from the incoming member of the society i.e. the buyer of the flats - payment made by the buyer is in the nature of transfer fees which is received on becoming the member of the society, hence as per principle of mutuality any receipt from member to society is not taxable - the transfer fees is accepted only on admission of the member to society - transfer fees are not taxable - CIT(A) has allowed the claim of the assessee - revenue could not bring before us any contrary law to the decision – Decided against Revenue. 2014 (7) TMI 424 Claim of deduction u/s 80IA of the Act - Infrastructure facilities – AO contended that assessee had acted in the capacity of a contractor - second contention of AO is that assessee has only built some part of the project and it has neither operated or maintained the infrastructure project - Held that:- assessee is entitled to get deduction u/s 80IA(4) of the Act - for claiming deduction u/s 80 IA(4), it is not necessary for the assessee to develop the entire project in order to qualify for a deduction u/s 80 IA(4) - If the provisions are so construed then it will be a condition impossible of compliance because of the magnitude of the entire project - For qualifying deduction u/s 80 IA(4) what would be necessary will be that the work carried on by the assessee must be an integral part of the project and if it is so, then it cannot be said that assessee is not eligible for deduction u/s 80 IA(4) for the reason that the assessee on its own did not develop an infrastructure project - only development of infrastructure project is sufficient to make entitle an enterprise to be eligible for deduction u/s 80 IA(4) - assessee is entitled for deduction u/s 80 IA(4) - CIT(A) has held that assessee is not entitled to get deduction u/s 80 IA(4) – thus, the assessee is entitled for deduction u/s 80 IA(4) in respect of A.Y. 2004-05 and 2005-06 – Decided in favour of assessee. 2014 (7) TMI 423 Provision for post-retirement medical benefits to employees – Held that:- The decision in Hindustan Petroleum Corporation Ltd. Versus Jt. Commissioner of Income Tax [2014 (7) TMI 290 - ITAT MUMBAI] followed - The 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 - a 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 – post-retirement medical benefit is also a liability which gets attached to the company the moment, the service contract is signed, - thus, the matter is remitted back to the AO – Decided in favour of Assessee. Interpretation of section 37(1) r.w. section 35B of the Act - Expenditure incurred for acquiring the right to use the know-how - Expenses on implementation of welfare projects - Interpretation of section 43B of the Act – Deduction of excise and customs duties paid –Deduction u/s 80HH/80I/80IA of the Act - Claim for deduction of profits of the new LPG Bottling Plants commissioned – 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 claim – 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. Repairs & maintenance, telephone and telegram expenses, property tax of 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. 2014 (7) TMI 422 Claim of depreciation on leased assets – Held that:- The decision in M/s ICDS. LTD. Versus COMMISSIONER OF INCOME TAX MYSORE & ANR [2013 (1) TMI 344 - SUPREME COURT] followed - the assessee is entitled to claim the depreciation on sale and leased back assets - CIT(A) in allowing the claim of depreciation is upheld – Decided against Revenue. Interest on borrowed funds – Expenses u/s 14A of the Act - Held that:- The proviso to section 14A of the Act prohibits all situations where the officer is otherwise entitled or required to revise an assessment which includes order of enhancement issued by the CIT(A) in exercise of his powers – the bar in the proviso to section 14A is applicable in relation to the exercise of appellate power by the CIT(A) also - CIT(A) is not within his powers to direct the AO to allocate the expenditure u/s 14A, on account of interest on borrowed funds against the tax free dividend income earned by the assessee - CIT(A) has completely ignored the contentions of the assessee against the disallowance of interest expenditure made by the AO as the CIT(A) has altogether proceeded to decide the issue in the light of section 14A, which already held as not legally tenable in view of the proviso to section 14A – thus, the matter is to be remitted back to the CIT(A) for re-adjudication – Decided in favour of Assessee. Deduction of expenses as interest paid on late payment of dividend tax u/s 115(O) of the Act – Held that:- The interest paid u/s 115(P) of the Act is to re-compensate the Government on account of loss of interest due to delayed payment of the tax, is not penal in nature and hence the same has to be allowed as an expenditure - the disallowance/addition made/confirmed by the AO/CIT(A) on the count is set aside – Decided in favour of Assessee. Stamping expenses – Held that:- The AO has disputed only the correctness of the details as regards the expenses claimed by the assessee on account of stamp charges in view of the fact that the assessee has not reconciled the expenses claimed - CIT(A) without giving any opportunity to the AO in the appellate proceedings, has simply accepted the contention of the assessee - No doubt the stamp duty charges are to be treated be incurred for the purpose of the business of the assessee - the details of the expenditure claimed has not been verified by the CIT(A) for the purpose of quantifying the claim of expenses – thus, the matter is remitted back to the AO for verification of details of the claim made by the assessee and accordingly quantify the eligible amount as allowable deduction – Decided in favour of Assessee. Disallowance u/s 14A of the Act – Held that:- Rule 8D of the Income-tax Act Rules is not applicable, the CIT(A) directed the AO to make the reasonable expenditure – there was no infirmity in the direction of the CIT(A) that since Rule 8D of the Income Tax Rules is not applicable for the assessment year under consideration – Decided against Revenue. 2014 (7) TMI 421 Accrual of interest income – interest was not received - doubt on receipt of income in future - Held that:- the assessee did not produce any document to show that there existed the circumstances at least by the due date for filing return of income, which has lead him to come to the belief that he will not receive interest any more - the non-receipt of interest alone cannot be a criteria for not offering the same as the income of the assessee, since it has accrued to him and the accrual has also been acknowledged by the debtors - CIT(A) was justified in confirming the assessment of difference amount of interest – Decided against the assessee. Interest expenses u/s 14A r.w. Rule 8D of the Act – Held that:- There is no discussion about the examination of the details furnished by the assessee, particularly the Capital account copy of the assessee in the firm M/s Nathalal Shivlal on which the reliance is placed by the assessee, has not been examined by CIT(A) - there is also transfer of funds to the Partnership concern from M/s Shreeji Textiles - the contention of the assessee requires critical examination - one can accept the claim of the assessee that the investment has been made out of own funds only after examination of the relevant money transactions - the AO has made the disallowance without considering the submissions of the assessee – thus, the matter is to be remitted back to the AO for fresh examination. 2014 (7) TMI 420 Deletion of addition made during search - The assessee is a partnership firm falling within “M/s Pathnik Constructions Group” and is engaged in the business of building construction and development – Held that:- The addition of ₹ 1,44,36,000/- was made by the AO on the basis of the incriminating document found at the residence of Shri Ramesh Nakrani - The question about the entries found noted in the document was asked to him only and he has only decoded the coded entries found - the aggregate amount of consideration noted in that document was found to be ₹ 3,42,63,000/-, yet the AO accepted the deposition made by Shri Ramesh Nakrani that the actual consideration was ₹ 309.36 crores - the explanation about the land deal and involvement of on money payment have been admitted by Shri Ramesh Nakrani only - The incriminating document was also found at his residence only - Shri Ramesh Nakrani has admitted that the cash portion amount (on money) was paid by him only. The profit sharing ratio of each partner, which is RKN-50%, RDN-30% and PVP-20% and the investments were made in that ratio - there is no reason to doubt his statement that the unaccounted amount was contributed by him out of his undisclosed sources - all the documents proves the contention of the assessee that the unaccounted payment involved in the land deal was financed to the extent of ₹ 1.00 crore by the undisclosed income declared by Shri Ramesh Nakrani in his hands - there was no reason to reject the submissions of the assessee firm that the unaccounted portion involved in the land deal was met out of undisclosed income delared by Shri Ramesh Nakrani - the assessee has explained the sources for making payment to the extent of ₹ 1.00 crore in respect of the land deal - CIT(A) was justified in giving credit of ₹ 1.00 crore against the addition of ₹ 1,44,36,000/- made by the AO. There should not be any doubt that the suppressed amount of consideration should be arrived at by comparing the actual consideration with the accounted consideration - the AO has adopted the figure of ₹ 1,65,00,000/- as accounted consideration and accordingly computed the suppressed amount - the claim of the assessee is admissible under Rule 27 of Appellate Tribunal Rules, 1963 – the contention related to computation of unaccounted income only - the contentions require factual verification at the end of the AO - Decided against Revenue. 2014 (7) TMI 419 Assessment of Gift amount – Proof of source of the gift - Held that:- The AO in the original assessment proceedings had assessed the gift only for the reason the donor did not explain the source for making the gift. In the present proceedings - the AO assessed the gift amount again for the reason that there is contradiction in the dates of making gift - the assessee had received loans from the donor in the earlier years and the said loan was converted into the gift - If that is so, the sources for making gift stands explained - the necessity of receiving gifts from specified relatives have been introduced into the Act only from the succeeding assessment year – thus, there was no reason to assess the gift receipt during the year - for the limited purpose of verifying the claim – the matter is remitted back to the AO - Decided in favour of Assessee. Assessment of Loan receipt – Held that:- The assessee has repaid a sum of ₹ 4.00 lakhs to Shri Vikram G Menda on 03.11.2003 – the cheque was realised on 06.11.2003 and he has used the proceeds to give a sum of ₹ 3,50,000/- to the assessee on 09.11.2003 - the source of the amount stands explained - In respect of the amount of ₹ 3,20,000/-, the lender Shri Deepak G Menda has encashed the mutual fund units and realised a sum of ₹ 3,19,141/- and the same was credited into his bank account on 25- 08-2003 - the lender has used the amount to make a deposit of ₹ 3,20,000/- into Fixed deposit - Shri Vikram G Menda has used the proceeds to advance a sum of ₹ 3,20,000/- to the assessee - the sources for giving the loan of ₹ 3,20,000/- also stands explained - Shri Vikram D Menda is also assessed to Income tax and he has been filing return of income for the past several years - there is no reason to suspect the credit worthiness of Shri Vikram D Mehta – thus, the order of CIT(A) is set aside – Decided in favour of Assessee. Assessment of loan amount - Held that:- The identity of the creditor stands proved since he happens to the son of the assessee and the details of his name, address, bank details, confirmation obtained from him etc. have been furnished - The genuineness of the transaction is also stands proved since the funds were received through banking channels - With regard to the credit worthiness, the assessee has furnished only copies of income tax return filed by the creditor - the lender was only 29 years old and the possibility of earning tuition income is remote - the assessee has failed to prove the credit worthiness of this creditor - the contentions of the assessee cannot be accepted that the receipt of money by way of cheque proves the credit worthiness of the creditor - the level of income declared in his return of income, thus, the order of the CIT(A) is upheld that the assessee has failed to prove credit worthiness of this creditor – Decided against Assessee. Assessment of Car Loan – Held that:- There was a closing balance of ₹ 1,84,811/- as at 31.3.2004 - the assessee has furnished a copy of ICICI bank statement - the AO has made the addition only on the reasoning that the assessee has failed to furnish necessary details - the relevant details have been furnished in the paper book requires examination – thus, the order of the CIT(A) is set aside and the matter is to be remitted back to the AO for fresh examination – Decided in favour of Assessee. Assessment of Sundry creditors balance – Held that:- There is no reason to suspect the remaining two purchases - In respect of M/s Gayatri Textiles, the assessee did not furnish the ledger account copy and hence we are unable to analyse the same – assessee submitted that the AO has made the addition without affording necessary opportunity to the assessee – the matter is remitted back to the AO – Decided in favour of Assessee. Addition relating to the difference in the cost of Flat – Held that:- The addition has been made only for want of reconciliation of the investment cost with sources - The explanations and details furnished by the assessee explains the sources - they require examination at the end of the AO – thus, the matter is remitted back to the AO for fresh examination – Decided in favour of Assessee. Unexplained source in purchase of flat – Held that:- Since the issue relating to Tridev Flats has been remitted back to the AO, thus, this matter is also liable to be remitted back to the AO – Decided in favour of Assessee. 2014 (7) TMI 418 Disallowance of Freight and insurance charges paid to Shipping Companies u/s 40(a)(ia) - TDS u/s 194C / 195 – Held that:- The assessee has to show that the shipping companies to whom payments were made are not only non-residents, but also he has to show they were assessed u/s 172 of the Act - only if the assessee is able to prove the facts, then he will be relieved of from the liability to deduct tax at source from the payments made to them towards freight and insurance charges - the legal position will not change if the payments to the non-resident shipping companies are made through their Indian agents also - the assessee has furnished a certificate obtained from M/s MSC Agency (India ) Pvt Ltd, wherein it is stated that the concern is the General Agents of MSC Mediterraneal Shipping Company - this certificate was not considered by both the tax authorities - the fact relating to the assessment of shipping companies to whom or on behalf of whom the charges were paid by the assessee were not brought on record - the issue requires fresh examination at the end of the AO – thus, the order of the CIT(A) is set aside and the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of revenue. 2014 (7) TMI 417 Transfer pricing adjustment – Rectification of mistake u/s 154 of the Act – Held that:- The AO to be perfectly justified in rectifying his order u/s 143(3) r/w s 254 dated 24.12.2007- This is as no revision to his earlier adjustment qua lease rentals for MC has been directed by the TPO vide his order u/s 94CA(3) r/ws 254 - in allowing relief to the assessee in respect of the adjustment, had acted without any basis, legal or factual - The question is not of the binding or otherwise nature of the TPO’s direction/s u/s 92CA(3), but of the AO having acted de hors and in the absence of any such direction - The TPO having rightly or wrongly not revised his earlier direction u/s 92CA(3) dated 15.02.2005 pursuant to that by the tribunal dated 30.08.2006, the AO could not have acted suo motu in firstly disregarding the understanding of the tribunal’s order by the TPO. The rectification order (whereby the A.O. aligns himself with the directions by the TPO, i.e., to the extent the assessment was in disagreement therewith) merging with the original order (assessment), the assessee’s appeal against the rectification order would, therefore, stand to be considered only as an appeal against an assessment order. Not doing so would leave the assessee remedy less and for no fault of its’. In-as-much as rectifying a mistake would fall within the inherent powers of the court or tribunal, it could also be contended that the rectification is not constrained on account of the time limitation that attends a rectification u/s 254(2) - if only to cause the removal of the prejudice, apart from other persuasive reasons, it is only proper to conclude that the tribunal had restored the matter qua Adjustment ‘B’ also back to the AO - thus, the matter is remitted back to the TPO and allowance of proper opportunity to the assessee – Decided in favour of Assessee. 2014 (7) TMI 416 Penalty u/s 271(1)(b) of the Act - Sufficient time for reply not provided - Held that:- The decision in Kamla Madan vs. DCIT, Central Circle 21, New Delhi [2014 (7) TMI 250 - ITAT DELHI] follwed - the notices u/s 142 (1) of the Act were giving a very short time - when these notices were served does not find mention in the penalty orders - the assessee was not provided sufficient time to respond to the notice - there is no mention of any non-cooperation by the assessee with the AO during the assessment proceedings – there was no case for the imposition of penalty u/s 271(1)(b) of the Act – Decided in favour of Assessee. 2014 (7) TMI 415 Non-speaking order - Addition u/s 68 of the Act – Money lender expired – Best possible evidences produced before AO – Held that:- The AO asked the assessee to submit the evidence of the unsecured loan of ₹ 6,60,000/- received from Mrs. Manorma - The assessment was completed on 24.12.2009 - the CIT(A) has reproduced the assessee’s submission, the remand report, reply of the assessee on that remand report and thereafter, concluded his order just with one line - CIT(A) had not applied his mind – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. 2014 (7) TMI 414 Treatment of STCG on income from business – Sale of shares - Held that:- Revenue has accepted that the assessee is an investor in shares for the last 10 years and from the AY 2001-02 to 2012-13, except during the year under consideration, the short term capital gain offered by the assessee has not been disturbed by the Revenue - out of 49 scrips there are only 17 scrips which the assessee had purchased prior to 1st April, 2007 i.e. in the previous year relevant to the AY 2007-08, and shown the investment in shares as investment which has been valued at cost - It is the profit arising from sale of such scrips cannot be treated as business income as the AO has accepted those scrips as investment of the assessee - the assessee has been employed and therefore the assessee has earned salary income - The sources of income are invested by the assessee regularly and every year in equity shares of various companies which is apparent from the investment in shares shown by the assessee every year - authorities are not justified in treating the receipt as business income - the AO is directed to treat the income as the STCG – Decided in favour of Assessee. 2014 (7) TMI 413 Rectification of order – Mistake apparent from record – Valuation and depreciation on goodwill – Held that:- The valuation of goodwill has not been decided by the Tribunal - it amounts to mistake apparent from the record – thus, the matter is remitted back to the Tribunal for fresh adjudication – the claim of depreciation on goodwill has been dismissed by Tribunal – Relying upon Commissioner of Income Tax, Kolkata Versus Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] - goodwill is an intangible asset within the meaning of Section 32 of the Act and eligible for depreciation – thus, the order is recalled as the contrary decision taken by the Tribunal amounts to mistake apparent from record – matter recalled for fresh decision. Customs 2014 (7) TMI 455 100% EOU - benefit of the DTA Scheme - debonding - conversion of free shipping bills into Advance Licence/DEPB/DFRC shipping bills - revenue submitted that, while transcending from EOU regime to that of the DTA, the Revenue had no occasion to verify whether in fact the inputs in respect of which draw-back is sought to be claimed after amendment were in fact used. - Tribunal allowed the benefit - Held that:- the verification which preceded issue of no objection certificate and the final debonding order was with respect to the benefits that could have been availed by the assessee as an EOU Unit. At that stage, the authorities had no occasion to verify whether inputs had been sourced in a proper manner as to entitle the draw back or any other benefit that a DTA unit could legitimately claim. In that sense, the ruling of this court in M/s Terra Films (2011 (4) TMI 13 - DELHI HIGH COURT) is decisive on the point. This Court is of the opinion that consequently the appeal has to succeed. Since the documents and materials which were apparently available when the exports were made, to substantiate the assessee’s claim for DTA benefits have concededly not been gone into, it would be appropriate that this aspect be duly considered by the Tribunal. - matter remanded back to CESTAT - Decided in favor of assessee. 2014 (7) TMI 454 Appeal against the order of CESTAT where on some points of difference of opinion matter referred to larger bench and on some issues, tribunal has given their decision by consensus - Held that:- Appeal filed in the present case is premature at this stage and does not raise any substantial question of law to be considered by this Court. Following the judgement of this Court in the case of Zenith Computers Ltd. (2014 (5) TMI 182 - BOMBAY HIGH COURT) we dismiss this Appeal. However, it is clarified that once the third Member passes his order, either agreeing with the Member (Technical) or Member (Judicial), both the parties shall be at liberty to challenge the view of the majority including on the issues on which the original two Members were in agreement set out earlier in this order. - Decided against the revenue. Service Tax 2014 (7) TMI 453 GTA Services - services received at their Kharagpur Unit, they have discharged the service tax at Pune - Held that:- whatever services received from goods transport agency at their Kharagpur Unit, appellant have discharged the service tax at Pune. They have placed a Chartered Accountant’s certificate in support of such claim which the Ld. Commissioner has not considered while arriving at the conclusion that the payment at Pune for liability of Kharagpur Unit is not supported by proper evidences. Now, the appellants have produced the letter from the Superintendent , Service Tax Pune-II Commissionerate whereby the Range Superintendent mentions that the Service Tax for the period 2005-2006 to 2007-2008 of Kharagpur Unit has been discharged at Pune - Matter remanded back - Decided in favour of assessee. 2014 (7) TMI 452 Penalty u/s 78 - Service tax and interest paid before issuance of SCN - whether penalty under Section 78 of Finance Act, 1994 is attracted upon the appellant or not - Held that:- It is not coming out of the case records as to how much Service Tax received by the appellant was retained and for how long. This aspect has to be seen by the adjudicating authority whether the period of retention of Service Tax remitted by the service recipient to the appellant, was reasonable or not, for deciding the quantum of penalty. As this verification can be done only by the adjudicating authority, therefore, the matter is required to be remanded to the adjudicating authority - Decided in favour of assessee. 2014 (7) TMI 451 Denial of Refund claim - Export of Business Auxiliary Service - Revenue contend that as the goods have been marketed in India therefore, the service has been received in India - However, commissioner allowed claim following CBEC Circular No. 111/05/2009 dated 24.02.2009 - Held that:- Telecom service provided in India to International in-bound roamers registered with foreign telecom network operator, payment received from impugned foreign telecom operators in convertible foreign exchange, in that set of facts this Tribunal has held that the service have been provided outside India as an export of service. IN this case, the respondent is in a better footing than in the case of Vodafone Essar Cellular Ltd. (2013 (7) TMI 178 - CESTAT MUMBAI) wherein it was held that the service recipient is the foreign telecom service provider and not the subscriber of the foreign telecom service in India and providing service in India and it is a case of export of service. In the circumstance, I hold that the learned Commissioner (Appeals) has rightly held that the case of export of service as per Rule 3 (1) (iii) of Export of Service Rules, 2005. In the circumstances, I do not find any infirmity with the impugned order and the same is upheld - Decided against Revenue. 2014 (7) TMI 450 Waiver of pre deposit - Non compliance with pre deposit order - Held that:- First appellate authority's order of directing pre-deposit of 25% of tax amount and 25% of the penalty seems to be excessive. In our view, the ends of justice will be met of the appellant is directed to deposit ₹ 5 lakhs for hearing and disposing the appeal on merits. Accordingly, we direct the appellant to deposit an amount of ₹ 5 lakhs (Rupees Five Lakhs only) within a period of eight weeks from today and report compliance before first appellate authority on or before 26.05.2014. The first appellate authority, on ascertaining such a compliance, shall restore the appeal to its original number and dispose of the same on merit, without insisting for any further deposit - Decided conditionally in favour of assessee. 2014 (7) TMI 449 Valuation - Short payment of service tax - value of taxable services, as declared in the ST-3 Returns during each financial year was much less than the gross amount received for providing various services, as declared on the balance sheets - civil and industrial construction - w.e.f. 01.06.07 this activity was classifiable as "Works Contract Service" under section 65(105)(zzzza) - Held that:- it is seen that the service tax demand on the civil and industrial construction service has been confirmed on the gross amount charged while during the period prior to 01.06.07 the appellant were eligible for exemption under Notification No.1/2006-ST dt. 01.03.06 and accordingly were liable to pay duty on 33% of the gross amount charged if they satisfied the conditions for this notification. During period w.e.f. 01.06.07 their service is classifiable as "Works Contract Service" and in term of Rule 2A of the Service Tax Valuation Rules, the value of the goods supplied for provision of service tax on which the VAT/Sales Tax had been paid would have to be excluded, but this has not been done. Moreover, during period from 01.06.07 in respect of "Works Contract Service", the appellant would also eligible for compounded rate under Works Contract Service (Composition Scheme for Payment of Service Tax) Rules, 2007 if they satisfy the conditions prescribed in this regard but their eligibility for Compound Levy scheme has also not been considered - impugned order is not sustainable - order set aside - Matter remanded back - Decided in favour of assessee. 2014 (7) TMI 448 Demand of service tax - rent a cab service - Suppression of income - whether the excess income reflected by the appellant in their balance sheet or in the income tax returns is relatable to his activity of rent a cab or not - Held that:- no evidence adduced by the appellant showing that the excess income was being earned by the party by suppressing the value of rent a cab services, we prima facie agree with the appellant that they have a strong case - Commissioner (Appeals) has rejected their legal issue of even rent a cab service not being a taxable service on the ground that it has been raised for the first time before him and is hit by the provision of Rule 5. On going through the said rules, we find that the same relate to production of additional evidence for the first time before Commissioner (Appeals) and not to the legal issues raised before him. Such legal issues can be raised before the appellate authorities and are required to be decided by him. - Matter remanded back - Decided in favour of assessee. 2014 (7) TMI 447 Waiver of predeposit of tax - Denial of availment of CENVAT credit on outward freight and the warehousing of the final products after clearance of final products from the factory gate - Held that:- applicant is not eligible for availment of the credit of warehousing charges of the final products after clearance from the factory gate. Regarding the denial of credit on outward freight, the learned counsel submits that they have produced the documents that the invoices were raised on FOR destination basis which was not considered by the adjudicating authority. On perusal of the impugned order passed by the Commissioner (Appeals), I find that there is an observation that the applicant had not produced copies of documents such as agreement or so that the place of delivery is the door step of the buyer and the value of goods sold in inclusive of transportation charges. It is further observed that the copies of documents such as invoices submitted contain the remark “prices indicated are tentative”. - Conditional stay granted. Central Excise 2014 (7) TMI 442 Waiver of pre deposit of duty - body building on the chassis cleared on payment of duty - inclusion of amount of duty paid on chassis in the value of body - inclusion of amount of freight and insurance charges - Held that:- body builder is taking credit of ₹ 10,000/- paid on chassis as a special duty and there is no dispute in this regard. Hence, prima-facie, the Applicant has a strong case in this regard inasmuch as, the amount relatable to credit taken, cannot be considered as an element of cost. In respect of addition of freight and insurance to the cost of chassis at the hand of body builder, we find that the Tribunal in the case of Hyva (India) Ltd. Vs. CCEx., Bangalore reported in [2009 (10) TMI 720 - CESTAT BANGALORE], granted waiver of predeposit. We further find that in the identical case, this Tribunal in the case of Hyva (India) Ltd. (supra), has waived the duty and penalty and recovery of the same is stayed during pendency of appeals. We find that in case of M/s Tata Motors Ltd. case (2013 (6) TMI 557 - CESTAT KOLKATA) the issue was confirmation of duty against the differential value between the R.S.O (Regional Sales Office) by M/s Tata Motors and the assessable value on which the duty was paid by the body builder arrived by the body builders on costing basis. - prima facie case is in favor of assessee - Stay granted. 2014 (7) TMI 441 CENVAT Credit - assessee not maintained separate accounts in respect of inputs for the generation of electricity consumption of electricity in factory as well as sold outside - Option given under Section 73 of the Finance Act, 2010 for proportionate reversal of credit - Held that:- Considering the facts of the case and the letter dated 03.01.2011 of the Commissioner Raipur wherein he has accepted the assessee's Option under Section 73 of the Finance Act, 2010 on assessee's paying Cenvat credit attributable to the inputs consumed in production of electricity wheeled out by the assessee along with interest, I hold that the dispute has been resolved in terms of Section 73 of the Finance Act, 2010 and that the present appeal therefore needs no further deliberations. - Decided against Revenue. 2014 (7) TMI 440 Availment of CENVAT Credit - Original copy of documents not available - Additional Commissioner dropped demand as barred by limitation - Commissioner invoked extended period of limitation - Willful misstatement of facts - proviso to Section 11A (1) has not been invoked in the show cause notice - Whether the demand of duty is barred by limitation on the grounds of non-mentioning of proviso to Section 11-A in the show cause notice or such non mention has to be held as of no consequence - Held that:- Appellant have advanced the argument that since the proviso to Section 11 A was not specifically mentioned in the show cause notice, the demand should be held has barred by limitation. However, proviso to section 11A is part and parcel of section 11A. Merely because it was not specifically mentioned in the show cause notice when the allegation of suppression are clearly specified and the demand of duty is being raised under section 11A, non-mentioning of the specific proviso of section 11A will not the vitiate the proceedings as long as the charges are clearly brought out in the show cause notice. Not only that section 11A, includes the proviso to the said section and the entire section stands mentioned in the show cause notice, it has to be held that the provisos of the said section also get invoked - Decided against assessee. 2014 (7) TMI 439 Denial of Refund claim - due date of filing of claim in case of buyer of goods - Classification of goods held in favour of assessee by Supreme Court [1995 (3) TMI 89 - SUPREME COURT OF INDIA] - Revenue denied refund claim of duty paid as barred by limitation - Held that:- Section 11B dealt with claim for refund of duty. It did not deal with making of refund. Therefore, Section 11B(3) stated that no refund shall be made except in terms of Section 11B(2). Section 11B(2)(e) conferred a right on the buyer to claim refund in cases where he proved that he had not passed on the duty to any other person - purchaser is bound to file his claim for refund of duty paid under protest by the manufacturer, within the period of limitation prescribed under Section 11B, this period having to be reckoned with reference to the date of purchase of the goods. It may be noted that the law differentiates the "manufacturer" and the "purchaser" for purposes of refund of duty. - Following decisions of M/s. Western Coal Fields Ltd. [2005 (8) TMI 7 - CESTAT - Chennai] - Decided against Assessee. 2014 (7) TMI 438 Duty demand - difference in the production figures as reflected by the Appellant in their Annual Financial Accounts (Annual Statistics) for the year, 1987-88 and the figures of production shown in their monthly RT-12 Returns - Clandestine removal of goods - Penalty under Rule 173Q of the erstwhile Central Excise Rules, 1944 - Held that:- Based upon the difference shown in the annual financial accounts and RG-1 register, the findings of the clandestine manufacture and removal cannot be sustained against the appellants. It is well settled law that onus to prove clandestine manufacture and clearance is upon the Revenue and required to be proved by production of sufficient evidence. There is nothing on record to show that the appellants have been indulging into excess clearances without payment of duty. The appellants have satisfactorily explained the difference between the figures as reflected in annual financial account and those entered in RG-1 for each and every item. As such we hold that confirmation of demand of duty against the appellants is not justified - there was any suppression on the part of the appellants so as to invoke the longer period of limitation. In view of the foregoing the appellant succeeds on merits as also on the point of limitation - Following decision of assessee's own previous case [2000 (7) TMI 726 - CEGAT, KOLKATA] - Decided in favour of assessee. 2014 (7) TMI 437 Maintainability of appeal before commissioner (appeals) - effective date of delivery or order - Order sent through speed post - whether delivery of the order or dispatch by speed post can be considered as in accordance with provisions of Section 37C of Central Excise Act 1944 or not - Held that:- dispatch of the order-in-original to the appellant was not in accordance with Section 37C ibid. If that be the case, it is not open to the department to claim to have served the order-in-original on the appellant in accordance with law. The next question was whether the service by tender can be applied when the department has produced proof of delivery by whatever mode the decision has been served. - Held that:- The observations of the High Court in the case of Union of India Vs. Kanti Tarafdar [1995 (9) TMI 75 - HIGH COURT AT CALCUTTA] are very clear and therefore the delivery by speed post where the proof is available also cannot be brought under the mode of dispatch of tender. Under these circumstances, in my opinion, Commissioner’s order that date of delivery has to be taken as the date of which speed post was delivered and dispatched by registered post or speed post does not make any difference is not correct. - matter remanded back to consider COD, stay application and appeal in accordance with law. - Decided in favour of assessee. 2014 (7) TMI 436 Denial of CENVAT Credit - Availment of credit on the strength of commercial invoice issued by a dealer not registered with Central Excise - Penalty u/s 11AC - Held that:- Commissioner (Appeals) has taken a view that the dealer did not register himself with the department as first stage dealer and second stage dealer and invoice issued by him could not have been the basis for taking Cenvat credit. I find that this ground is correct. However availment of credit by the appellant can be considered as technical error. In this case, admittedly, manufacturers invoice had been sent by dealer. Therefore the appellant could have taken credit on the manufacturers invoice only. The original authority has dropped the proceedings. The original adjudicating authority has power to condone and condoned the omission in the invoice and allowed credit. He has satisfied that the goods received have been used for the manufacture of final products and appropriate duty has been paid and other relevant requirements as prescribed under Rule 9 of Cenvat Credit Rules, 2004 are available. appellant is eligible for credit taken by them - Decided in favour of assessee. 2014 (7) TMI 435 CENVAT credit - removal as such - removal of glass bottles and crates - recovery of credit not reversed - scope of recovery after insertion of Explanation to Rule 3(5) [erstwhile rule 3(4)] w.e.f. 1.3.2003 - whether without the explanation, recovery proceedings could have been initiated or not - Held that:- the explanation is only clarificatory in nature and a study of the relevant provisions would clearly show that even without the invocation of Rule 3(4) (presently Rule 5), the amount was recoverable. Even though learned counsel sought time for making further submissions, the learned AR vehemently opposed it stating that on the one hand the learned counsel has submitted a totally new ground during the course of hearing and on the other hand when he finds that Bench was not very responsive to his submissions, he is seeking time. - Appeal has no merit- Decided against assessee. 2014 (7) TMI 434 CENVAT Credit - Credit on oxygen - oxygen was used in three factories but credit availed in one factory only - credits on other inputs are taken separately - Held that:- Appellants themselves have treated the three factories as different; they have taken separate registration from the department; they have been paying duty when the goods have been transferred from one unit to another and they have also taken Cenvat credit in respect of inputs separately. In view of the fact that the three units in this case were three corporate entities during a portion of the relevant period and the appellants themselves have treated them as three different factories, I consider that none of the decisions cited by learned counsel would help them. Further the appellants themselves have treated them as different factories and availed Cenvat credit separately in respect of the inputs oxygen, in my opinion, it was not correct on the part of the appellant to avail all the credit in respect of oxygen by ML only. Therefore, in my opinion, credit availed by ML in respect of oxygen as input is not admissible. Whether extended period could have been involved in this case - Held that:- when the omission was pointed out, the appellants paid the Cenvat credit and if the department did not initiate any proceeding, the matter would have ended there. In these facts and circumstances, invocation of extended period was not called for. Therefore, I do not find any justification to confirm the demand for the extended period. Once the demand for extended period cannot be sustained, penalty also cannot be sustained. However for the demand for Cenvat credit wrongly availed within normal period, the matter is remanded to the original adjudicating authority for re-quantification of the amount payable for the normal period and interest thereon - Decided partly in favour of Revenue. 2014 (7) TMI 433 Availment of CENVAT Credit - Conversion of DTA Unit into 100% EOU - prior to 6.9.2004, 100% E.O.U. was not eligible for Cenvat credit at all. With effect from 6.9.2004, provisions were made for providing benefit of Cenvat credit to 100% E.O.U. also in respect of the duty paid by them. The question is whether in terms of this provision, the respondent could have taken credit in 2004-05 being balance 50% of credit on capital goods. - Held that:- an E.O.U. can take balance 50% of credit of duty paid on capital goods received in the previous fiscal when it was a DTA unit and continued as E.O.U. after conversion - the unit was a DTA till 18.11.2004 and on the date of conversion as a 100% E.O.U., it was eligible for Cenvat credit. Therefore, whatever the credit available to DTA was available to 100% E.O.U. also. Therefore, it can be said that vested right has been created even in respect of 100% E.O.U. since provisions of 100% E.O.U. as well as DTA are same. Assessee relied upon the tribunal decision in the case of GTN Exports Ltd. vs. C.C.E., Coimbatore [2008 (7) TMI 320 - CESTAT CHENNAI] and submits that in this case, it was held that an E.O.U. can take balance 50% of credit of duty paid on capital goods received in the previous fiscal when it was a DTA unit and continued as E.O.U. after conversion. - Revenue further points out that in this case, the unit was a DTA till 18.11.2004 and on the date of conversion as a 100% E.O.U., it was eligible for Cenvat credit. Therefore, whatever the credit available to DTA was available to 100% E.O.U. also. Therefore, it can be said that vested right has been created even in respect of 100% E.O.U. since provisions of 100% E.O.U. as well as DTA are same. Even though, the respondent should not have been denied Cenvat credit on the capital goods to the extent of balance 50% of credit, it is not possible to take a different view in view of the statutory provisions. Tribunal being a creation of statute cannot go beyond the statute - Credit denied, however, penalty imposed is set aside - Decided partly in favour of Revenue. CST, VAT & Sales Tax 2014 (7) TMI 446 Revision application - Procedure for filing revision - filing of an affidavit of service - Service of notice not done properly - Held that:- In case no such affidavit is filed and the assessee is not served by Commissioner of Trade Tax, meaning thereby there is no notice or opportunity to the assessee and revision has not been filed in the manner prescribed in the Rules. It is true that revision filed by Revenue, may not be dismissed for technical reasons, but where service has not been effected upon assessee for several years all together and Commissioner of Trade Tax apparently has failed to comply with the statutory requirement of filing affidavit of service, this Court finds no justification, still to continue with said revision to remain pending and give further opportunity to Revenue, after such a long time - This revision was filed in 2007 and till date affidavit of service has not been filed - it is fit case where this Court must reject revision having not been filed in accordance with rules and for non-compliance of requirement of Chapter 27 Rule 5(2) of High Court Rules - Decided against Revenue. 2014 (7) TMI 445 Revision application - Procedure for filing revision - filing of an affidavit of service - Service of notice not done properly - Held that:- In case no such affidavit is filed and the assessee is not served by Commissioner of Trade Tax, meaning thereby there is no notice or opportunity to the assessee and revision has not been filed in the manner prescribed in the Rules. It is true that revision filed by Revenue, may not be dismissed for technical reasons, but where service has not been effected upon assessee for several years all together and Commissioner of Trade Tax apparently has failed to comply with the statutory requirement of filing affidavit of service, this Court finds no justification, still to continue with said revision to remain pending and give further opportunity to Revenue, after such a long time - This revision was filed in 2007 and till date affidavit of service has not been filed - it is fit case where this Court must reject revision having not been filed in accordance with rules and for non-compliance of requirement of Chapter 27 Rule 5(2) of High Court Rules - Decided against Revenue. 2014 (7) TMI 444 Demand of higher rate of tax - Constitutional validity of the newly introduced provisos to section 8(a)(iiii) of the Kerala Value Added Tax Act, 2003 by the Finance Act, 2007, taking away the benefit of the lesser rate of compounding, being availed of by the petitioners with retrospective effect from April 1, 2005 - Held that:- There is no challenge with regard to the source of power to bring about the enactments, with reference to the relevant entry in the State List under the Seventh Schedule of the Constitution of India. Similarly, why the provisos become inequitable is also not substantiated. If there was a works contract, as on March 31, 2005 and the assessee opted to pay compounded rate of tax under section 7(7) or 7(7A) of the KGST Act, such assessee is entitled to continue to pay at the same rate of tax in respect of the unexecuted portion of said works contract. It is corollary to note that, if the works contract is on or after April 1, 2005, it was not a works contract prior to the date of coming into force of the KVAT Act and in such case, the benefit of lesser tax under section 8(a)(iii) is not available. There was no works contract prior to coming into force of the said Act, in respect of any agreement executed on or after April 1, 2005. This being the position, it cannot be said that the petitioners had commenced the construction of the buildings prior to April 1, 2005, pursuant to any agreement executed on or after April 1, 2005, for claiming lesser compounded rate of tax as given in section 8(a)(iii), (dehors the newly added provisos as per the Finance Act, 2007). By virtue of the very nature of contract being undertaken by the petitioners, whereby "independent" residential flats are intended to be constructed on behalf of the different prospective purchasers (awarders) based on different agreements to be executed in between, accepting consideration from such different persons, it gives rise to several independent works contracts and is taken care of by section 8(a)(iii) itself. This being the position, the petitioners cannot be heard to say that they became aggrieved only by introduction of the newly added provisos as per the Finance Act, 2007. With reference to the substitution of the newly added proviso as per the Kerala Finance Act, 2009, it is contended that, this will take care of the whole situation, as the benefit is intended to be given in respect of the works which commenced prior to April 1, 2008 and remains partly unexecuted as on April 1, 2008, to be mulcted with tax liability as it existed prior to April 1, 2008 till the completion of the work or up to March 31, 2009. - Since it is a substantive provision and not a procedural one, it cannot have any retrospective application and the intention of the law makers cannot be widened by any "reading into" exercise, at the instance of this court to suit the convenience of the petitioners. This court finds that the reliance sought to be placed on the said provisions is quite out of context. Challenge raised against the constitutional validity of the provisos impugned in the writ petitions is devoid of any merit. There is no irregularity or illegality on the part of the respondents for having issued the impugned notices demanding higher rate of tax in respect of the works contracts entered into between the petitioners (contractors) and the prospective purchasers (awarders) based on any agreement executed on or after April 1, 2005. - Decided against assessee. 2014 (7) TMI 443 Levy of entry tax - U.P. Tax on Entry of Goods Into Local Areas Act, 2007 - whether "rail line scrap" which is an item of iron and steel is exempt from entry tax in view of amended notification dated January 15, 2009 or would fall within the clause (xvi) of section 14(iv) of the Central Sales Tax Act, 1956 as has been held by the Tribunal - Held that:- It is common acknowledge that "scrap" is something which is a waste and discarded material or a material which has been worn out or has been declared as useless - Generally, the person filling form 38 and making tax invoices are not technical persons, who may be able to make a distinction between scrap and defective/rejected material and the impact of mentioning it incorrectly. Therefore, the mere entry of the material in form 38/tax invoice as rails (defective/RE) would not be sufficient and conclusive to hold that the material was actually defective or rejected basis of iron steel and not a waste or a scrap material - rail line scrap has been sold in the first instance by the railway authorities and has been subsequently purchased by the dealer in question. The authorities below simply on the basis of the entries made in invoice and form 38 without any physical examination of the material have treated it to be a defective and a rejected material and not a scrap or a waste material - It is therefore, clear that anything which has been rendered useless and worn out or is a waste would be a scrap and it is different from material which is defective or rejected but the real test to distinguish between the two would only be by ascertaining the nature of the material in the hands of the party selling it, i.e., the railways in the present case - Impugned order is set aside - matter remanded back - Decided in favour of assessee.
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