Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 2, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Addition in gross profit rate – Addition cannot be made on pure conjectures – In case Assessing Officer had doubts over book results counter verifications and other enquiries should be made - AT
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Addition u/s. 40A(2)(b) - e interest rate of 15% is not abnormal. It shows business expediency and hence does not warrant any disallowance as has been made by the AO - AT
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Treating royalty as capital expenditure - royalty is not being paid in a lumpsum, but is paid as percentage of sales made. - royalty is continuous process, it will be revenue expenditure. - AT
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Notional accrued interest on optionally fully convertible premium notes (OFCPNs) - it cannot be said that any income has accrued to he assessee on account of these OFCPNs - No additions - AT
Customs
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Redemption fine - Just because the goods are not available for confiscation, the Commissioner cannot say that the same are not liable for redemption fine - AT
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Import of a new Ferrari Car F430, Fi Coupe - The Settlement Commission has arrived at the factual finding that the car imported is a new car and applied the exemption Notification No. 21/2002-Cus., dated 1-2-2002 correctly. - HC
Corporate Law
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Scheme of amalgamation - jurisdiction of High Court of order investigation from a particular agency - it is for the Central Government to decide which authority would investigate. - HC
Service Tax
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Waiver of pre-deposit - Intellectual property right - Water Front Royalty - prima facie not taxable - stay granted - AT
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Commercial or Industrial construction - the transaction falls during the period 4.7.05 to 30.6.2006 (prior to introduction of the Explanation to Section 65(105)(zzq) - demand set aside. - AT
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Stay – export - money transfer service - Services provided to the Irish company falls within provisions of Export of Service Rules, 2005 - stay granted. - AT
Central Excise
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Penalty under Rule 13 of CENVAT Credit Rules, 2002 - Assessee did not utilise the credit and reversed immediately on receipt of the intimation about the error. - No penalty - HC
VAT
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Sale suppression - In the absence of enquiry, the mere ground that the sister concern had charged higher gross profit by itself could not be a legal ground for making addition. - HC
Case Laws:
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Income Tax
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2013 (7) TMI 41
Addition in gross profit rate – CIT deleted addition – Held that:- Assessing Officer made addition purely on adhoc basis without making any verification or without giving any cogent basis – Addition cannot be made on pure conjectures – In case Assessing Officer had doubts over book results counter verifications and other enquiries should be made – Assessing Officer not rejected books of account of assesse, therefore, estimation of gross profit by applying GP rate of 50% not justified – Appeal dismissed.
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2013 (7) TMI 40
Rectification of mistake - Cancellation of interest charged – Held that:- Assessing Officer made order u/s. 220(2) levying interest on outstanding demand tax – assessee claimed interest on seized material kept with Department and requested to adjust interest levied u/s. 220(2) against interest accrued on seized material – No appeal prescribed against order made u/s. 220(2) – As assessee is required to point out any mistake apparent from record but assessee failed to point out any mistake apparent from order – No infirmity in CIT’s order – Following the decision of Hariharnath Agrawal & Sons (HUF) vs. CIT [1996 (2) TMI 96 - ALLAHABAD High Court] and Shri Ganesh Enterprises (P) Ltd. vs. Union of India [1994 (5) TMI 20 - DELHI High Court] – Appeal dismissed. Quantum of interest charged – Assessing officer failed to consider relevant facs – Held that:- relief granted by CIT in other assessment year therefore for the assessment year 1998-99 liability for tax and interest would reduce – assessee entitled for relief in respect of interest levied u/s. 220(2) – Appeal allowed.
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2013 (7) TMI 39
Addition of unexplained income – CIT deleted addition – Held that:- As assessee declared short term capital gain/loss in respect of various scripts and PMS Schemes it clearly establishes that transaction was for sale of shares – Transaction fully reflected in computation of income – CIT rightly deleted addition – Appeal dismissed.
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2013 (7) TMI 38
Disallowance of interest and advances written off – CIT deleted disallowance – Held that:- CIT without going into details deleted disallowance on basis of assesse’s submission – Assessee led evidences that M/s. Sleek Sales became bad – Assessee could not produce any evidence – Issue set aside to Assessing Officer’s file and re-directed to allow liberty to assessee to file evidence and then decide issue – Appeal dismissed. Disallowance of interest on borrowed funds – CIT deleted disallowance – Held that:- Assessee could not prove that interest free advances are treating advances – Unsecured loan or trade advances, needs verification at Assessing Officer’s level – Appeal allowed. Disallowance of interest claimed on house building property – CIT deleted disallowance – Hels that:- assessee paid interest on loan borrowed for housing property – Once Assessee has income from house property disallowance of interest not restricted – But allowable on entire payment of interest – No infirmity in order of CIT – Appeal dismissed.
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2013 (7) TMI 37
Employees' contribution towards PF and ESI - late deposits - CIT(A) deleted the addition - Held that:- Though the payment was effected beyond the time prescribed in section 36(1)(va) but the same was duly paid by the appellant before due date of furnishing of the return disallowance made by the A.O u/s. 43B/36(1)(va) is deleted. See CIT v. Sabari Enterprises (2007 (7) TMI 169 - KARNATAKA HIGH COURT) CIT vs. Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT] and CIT v. AIMIL Limited [2009 (12) TMI 38 - DELHI HIGH COURT]. In favour of assessee. Profit on sale of car i.e. depreciating asset & temporary site shed - CIT(A) deleted the addition - Held that:- As both the assets sold by assessee form part of block of assets and were entitled to depreciation under the Act as stated by assessee the depreciation chart reveals that block of asset has not come to an end. It is very much available and once the respective block is not wiped out, the profit cannot be assessed on account of sale of asset. Also as that opening WDV far exceeds the full value of consideration received on sale for this asset. Hence, the profit cannot be brought to tax on capital gains. In favour of assessee.
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2013 (7) TMI 36
Addition u/s. 40A(2)(b) - CIT(A) deleted the addition - Held that:- The appellant had paid the interest in the previous year at the same rate which is not disputed by the revenue. AO has not shown any instances of diversion of funds u/s. 40A (2) to be unreasonable or excessive in the facts and circumstances of the case. The borrowing at higher rate of interest is business decision of the appellant and the expenses cannot be disallowed on the ground of payment of interest at differential rate to different depositors. It has been clarified that the surplus funds have been advanced to certain parties on short term basis recoverable on notice. The interest @ 15% has been paid on substantial deposits which were utilized by the appellant for long term business activities. Also the interest rate of 15% is not abnormal. It shows business expediency and hence does not warrant any disallowance as has been made by the AO - In favour of assessee. Disallowance of interest u/s. 36(1)(iii) - CIT(A) deleted the addition - Held that:- From the accounts submitted by the appellant it is found that the appellant had surplus fund in the banks from which advances have been made to the parties @ 9% on short term basis. The bank balance with the account maintained by the appellant with Bank of Baroda as on 31/3/2007 was Rs.35,99,633 and as on March, 2006 it was 37,39,423/-. The capital account of the appellant as on 31st March was Rs.41,85,914/- whereas the opening capital as on 1/4/2006 was Rs.33,91,470/-. Therefore, the appellant had enough funds at it's disposal for advancing loan to the above parties. Therefore, the appellant had advanced only surplus funds available with it which were advanced with a lower rate and earned income which otherwise would have remained idle. Thus AO is not justified in disallowing the interest, without any specific findings - In favour of assessee.
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2013 (7) TMI 35
Transfer pricing adjustment - TPO/AO held the position of the appellant company with regard to manufactured goods sold to the AEs is that of a 'contract manufacturer' - Transfer Pricing Adjustment to royalty - Held that:- Royalty payment on exports sales by the assessee to the AE's @ 8% at ₹ 266,81,794/- has been rightly paid the royalty paid is at arms length and no adjustment in this regard is called for. See Sona Okegawa Precision Forgings Ltd. Versus ACIT [2011 (12) TMI 174 - ITAT DELHI ] Treating royalty as capital expenditure - Held that:- The facts of the case and the terms of agreement clearly point out the fact that royalty is being paid as revenue expenditure and it cannot be termed that the same is paid for acquiring benefit of enduring nature. DRP has erred in linking the supply of know-how with setting up the business. Terms of the agreement clearly showed that know how was provided in the instant case to help in continued production of mobile handsets i.e. to help in manufacture of handsets. As per the details of royalty paid, it is clear that royalty is being paid at sales minus cost of sales i.e. the value addition taking place in the factory. Payment of royalty to SEC has nothing to do with setting up the business. Assessee is only getting a right to use of know how from SEC. The ownership of know-how is with SEC only. Furthermore, royalty is not being paid in a lumpsum, but is paid as percentage of sales made. Hence, since the royalty in the instant case is continuous process, it will be revenue expenditure. DRP has confused the royalty payment with payments made for hiring/ training of employees of SEC. Under the agreement, separate considerations has been provided for (a) royalty for right to use the know-how and (b) for imparting hiring / training. AO has made the disallowance of only royalty and not of hiring /training fee paid. Thus, revenue authorities have wrongly relied upon the provisions of section 32(1)(ii). The perusal of the agreement clearly states that assessee is not the owner of technical information / technology received by it from SEC. All the case laws relied upon by the assessee are germane and supports the case of the assessee. Depreciation on UPS - Held that:- UPS being a computer accessory / peripheral is entitled for depreciation @ 60% as decided in C.I.T. vs. BSES Yamuna Powers [2010 (8) TMI 58 - DELHI HIGH COURT] Disallowance of loss incurred in connection with Foreign Exchange Forward Covers - Held that:- As relying on C.I.T. vs. SurajmalNagarmull [1980 (9) TMI 69 - CALCUTTA High Court] & C.I.T. vs. BadridasGauridu (P) Ltd. [2003 (1) TMI 61 - BOMBAY High Court] assessee in this case is not a dealer in foreign exchange. The assessee was dealing in electronic products -mobile phones. The assessee had entered into hedging contracts in foreign exchange in the normal course of business. Hence, these transactions cannot be termed as speculative u/s. 43(5). Accordingly set aside the orders of the authorities below and decide the issue in favour of the assessee.
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2013 (7) TMI 34
Expenditure incurred on repairs & maintenance - as per assessee cost of the civil work for the de- botttle-necking of De-hydro generation section of existing Capro Expansion Plant (CEP is revenue in nature - revenue v/s capital - Held that:- CIT(A) has decided this issue on this basis that it is not clear as to how excavation/earth removal was necessary for simply switching from one catalyst to another. He has also given a finding that in case, different equipment was required for utilizing the new catalyst, that is induction of new plant/machine for the purpose and in that situation, the expenditure will be capital expenditure. In spite of this clear finding of CIT(A), assessee could not establish that by way of excavation/earth removal, no new equipment was installed. Hence, no reason to interfere in the order of CIT(A)in confirming disallowance. Against assessee. Expenditure on the release of water and discharge of effluent and pollution control - revenue v/s capital - Held that:- To be considered as revenue expenditure, with the observation that their expenditure did not result in the creation of any specific asset - this is now covered in favour of the assessee by Tribunal's decision rendered in assessee's own case for A.Y. 2001-02 and 2005-06. Against revenue. Expenditure on acquiring fire fighting equipments and on safety measures - revenue v/s capital - Held that:- Tribunal in A.Y. 2000-01 also decided the issue on this basis that similar issue has arisen in the earlier assessment year and it was decided in favor of assessee and no appeal has been filed by Revenue. There is no discussion about the facts for A.Y. 2000-01 or A.Y. 2001-02. It is not clear as to whether in those years, the issue involved was regarding maintenance of fire fighting equipments or for replacing some parts of those equipments or whether full new equipments were acquired in those two years. Thus restore the matter back for a fresh decision. Disallowance u/s 14A towards interest and other expenses - Held that:- In two years 2004-05 and 2005-06, the Tribunal has confirmed the disallowance of 5 lacs in each year u/s 14A in respect of other expenses. Since no difference in facts could be pointed out by D.R. of the revenue, in the present year also, thus confirm the disallowance of Rs. 5 lacs u/s 14A in respect of other expenses and decline to interfere in the order of CIT(A) on this issue regarding deletion of balance expenditure. This ground of revenue is partly allowed. Disallowance on account of replacement - CIT(A) deleted the addition - Held that:- Clear finding is given by CIT (A) that these expenses pertained to water proofing, overhauling and renovation expenses. This finding of CIT (A) could not be controverted by D.R. of the revenue and hence, no infirmity in the order of CIT (A). Claim of assessee u/s. 80IA(4) by taking the price of electricity supplied by GEB - Held that:- If this captive power generation plant is not there, the assessee has to purchase power from GEB at the rate at which power is supplied by GEB to its consumer. Hence, this is also true that on account of this captive power generation plant of the assessee, to the extent power is generated by it, there is a saving of the assessee company on account of power expenses to the extent of power produced in units @ power supply rate of GEB. Hence, the income of this power generation plant to compute deduction allowable to the assessee u/s 80IA(4) has rightly been computed by taking the price of electricity supplied by GEB. Estimated gratuity provision made on the basis of actuarial valuation - Adjustment of book profit u/s 115JB - Held that:- In order to be eligible for reduction from book profit, the amount in question should be in respect in reserve/provision excluding a reserve created before the 1st April, 1997 otherwise than by way of debiting to the P & L account. No finding was given by the CIT (A) on this aspect. Hence, his order on this aspect cannot be sustained. This ground of the Revenue stands allowed for statistical purpose. Calculations of deduction u/s 80 IA - at Rs. 4.55 per unit as against correct purchase rate of power of Rs. 5.42 per unit on the basis of the cost of power purchased from GEB - Held that:- there is a column regarding payment of charges and after adding the same, the total rate has been worked out for each month separately which ranges between the 4.50 in March, 2006 to 4.736 in the month of April and June, 2005. Electricity duty is separately shown in next column @ 15 % but consequential amount has not been worked out in this chart. We, therefore, feel that on this issue also, a fresh decision is required because Ld. CIT (A) has not given any basis as to how he has determined the rate of power sold by GEB to the assessee at Rs. 4.55 per unit. In favour of assessee for statistical purposes.
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2013 (7) TMI 33
Payment of incentive to five staff members - CIT(A) deleted the addition in part - Held that:- The assessee has produced before the AO evidences of payment of incentives and also letter from "MML" being the principal, setting target for the assessee. Therefore, it could not be presumed that the assessee has not paid any incentive. As before the authorities below, the assessee has given evidence of payment of commission, but has not got confirmation from the persons to whom the payment was made, thus CIT(A) was justified in confirming the disallowance to the extent where the assessee failed to give confirmation letter. Therefore, this ground of the Revenue's appeal is dismissed. Jeep's transportation expenses - non deduction of TDS - AO has made disallowance of the payment made by the assessee to the drivers holding that such payment was made to "NAW" under the contract - CIT(A) deleted the addition - Held that:- "NAW" is an authorised transporter of "MML". It is not coming out of the order of the AO, whether, the assessee had made payment to "NAW", and such amount was credited to the account of "NAW". The AO has also not examined the claim of the assessee that Rs.4,000/- was inclusive of premium of freight charges and other expenses. The AO has made allowance on the presumption of contract between the assessee and "NAW" but no enquiry is made from "NAW" whether any payment for transportation of jeep was received by it under such contract. However, CIT(A) has categorically given a finding that the AO has not made any inquiry with the "NAW". Thus AO has only presumed that there were some contract between the assessee and the "NAW". However, no evidence to this fact was placed on record. CIT(A)'s order confirmed.
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2013 (7) TMI 32
Unexplained deposit with Shri Girish Ruparel - CIT(A) deleted the addition - Held that:- As assessee has not placed the assessment order of Shri Girish Ruparel on record & CIT(A) has also not given a finding that whether the amount of Rs.28.45 lakhs has been assessed in the hands of the Shri Girish Ruparel this issue be restored back to the file of the CIT(A) to verify whether the assessment has been framed in respect of addition of Rs.28.45 lakhs in the hands of Shri Girish Ruparel. If so, the deletion as made by the CIT(A) stands confirmed. Unexplained sub-brokerage - CIT(A) deleted the addition - Held that:- CIT(A) has decided this issue after considering the order of the CIT(A) passed in original assessment, wherein CIT(A) has deleted the disallowance on the basis of the report submitted to him. As CIT(A) has examined all the aspects of the matter, therefore, no reason to interfere arises. In favour of assessee. Addition on account of telephone expenses - 1/4th disallowed - CIT(A) deleted the addition - Held that:- Considering the objection of the AO that the assessee has not maintained any log book for telephone calls so as to identify the personal nature of the calls. It is possible that office telephone can be used for personal purposes. CIT(A) has not taken into account this fact, and therefore the order of the CIT(A) on this issue is set aside, and the addition made by the AO is hereby confirmed. Against assessee.
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2013 (7) TMI 31
Capital gain on sale of 330 Deep Discount Bonds series - Long term v/s short term - claim of deduction u/s.54EC - Held that:- As the period of holding has to be counted form the date of allotment in the present case when we count the period of holding from the date of allotment, the same is more than 12 months and, therefore, the resultant capital gain is taxable as LTCG and consequently, the assessee is entitled to the deduction u/s 54EC. In favour of assessee. Salary paid to the employee as company secretary disallowed - Held that:- This is an admitted position that as per the requirement of the Company's Act, any company having paid up capital of ₹ 25 lacs or more is compulsorily required to employ a qualified CS and, therefore, this cannot be said that the salary paid to the CS employed by the assessee to fulfill the requirement of the Companies Act is an expenditure to earn exempt income and, therefore, to be disallowed u/s 14A of the Income tax Act, 1961. In favour of assessee. Disallowance u/s 14A - Held that:- This interest expenditure was incurred mainly on the borrowings for repayment of loan which was availed for investment in DDBs of Nirma Ltd. Series A and, therefore, interest expenditure was incurred wholly and exclusively for the purpose of earning such income which is taxable and hence, rightly claimed. As neither CIT(A) nor D.R. could establish that this contention of the assessee is not factually correct disallowance deleted. In favour of assessee. Notional accrued interest on optionally fully convertible premium notes (OFCPNs) - Additions to income - Held that:- It is not the case of the A.O. that the assessee has sold or transferred these OFCPNs in the present year, thus in the absence of this, it cannot be said that any income has accrued to the assessee even if it is accepted that the market value of these OFCPNs till the last date of the present year is more than cost price i.e. issue price which can be issue price + proportionate accretion and the difference between the face value and issue price. As the nature of OFCPN is not that of FD and it is also not of the nature of DDB because of convertibility option and uncertainty about receipt of any extra amount over and above the issue price. Even on conversion, shares are to be allotted at par and not at a premium i.e. face value, thus it cannot be said that any income has accrued to he assessee on account of these OFCPNs of Nirma Industries Ltd. because no sale has taken place and there is no guaranteed income to the assessee even after five years in case the assessee opts for conversion into shares at par. Hence, this ground of the assessee is allowed. Disallowance on account of advances written off as the assessee is not engaged in the business of money lending - Held that:- Failure to understand when the A.O. himself is stating that the assessee has advanced an amount of ₹ 4 crores as deposit, how it can be said that the assessee is not engaged in the business of financing and money lending. The assessee has made available a copy of the certificate issued by RBI which is dated 20.03.1998 and as per this certificate, the assessee has been registered as NBFC Company. Thus no merit in the disallowance made by the A.O. In favour of assessee Interest u/s 234D - Held that:- This issue is now covered in favour of the assessee by the decision of Ekta Promoters [2008 (7) TMI 452 - ITAT DELHI-E].
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2013 (7) TMI 30
Reopening of notice - Non Service of notice u/s 148 & 143(2) - Asstt. Yr. 2001-02 - Held that:- As Department has accepted that the alleged 148 notice was served on Shri Ved Prakash who is neither employee nor an authorized agent of the assessee. The admitted service of notice on said Shri Ved Prakash is neither legal nor tenable in terms of the requirements of the section 282(1). As it is clear that mandatory requirements for proper assumption of jurisdiction u/s 148 by a valid service of notice u/s 148 on the assessee has not been fulfilled by the AO. Consequently as per the mandates of judgment of CIT Versus Rajesh Kumar sharma [2007 (8) TMI 322 - DELHI HIGH COURT] the impugned reassessment is illegal without jurisdiction and liable to be cancelled. Also Non issue of 143(2) notice within the stipulated period would make the consequent assessment invalid as decided in CIT Vs. Hotline International Pvt. [2007 (4) TMI 44 - HIGH COURT NEW DELHI] Reopening on unreliable material and non existence of live link on unreliable material - Held that:- The retrieval of contents and printouts of the pen drive being taken by illegal and unsafe process, without prescribed cyber forensic procedure make the evidence illegal, unreliable and having no evidentiary value. The reasons recorded for reopening on this basis of such pen drive and print out are not proper, therefore the reasons be quashed. The seizure memo of the pen drive by V.B. shows that the date of execution as 20.5.2007 whereas the statements of the two witnesses namely Shri Rakesh Kumar and Shri Gurcharan Singh ,DSP narrating the alleged story of seizure is dated 19.5.2007.i.e. one day in advance of the alleged search and seizure of pen drive. Thus the police search & recovery of pen drive itself suffers from fundamental defects which make the pen drive as not reliable evidence against assessee. The procedure followed as per the own version of the VB in the present case is a total infringement of relevant laws, negation of accepted norms and code of practices as laid down in the Evidence Act and the I.T. Act, 2000.The so called printouts are therefore unreliable and do not constitute admissible evidence in the eyes of law .The assessment made by the AO on the foundation of such non est material is devoid of any merit on legal and factual perspective and deserves to be quashed As it is evident that there is negative inflow and no fresh introduction of any undisclosed credit balance during the year in the print outs; rather the opening debit balances have been used for the role over. In the absence of any fresh introduction of cash or credit, no addition as undisclosed income is exigible to income tax in A.Y. 2001-02 in the given facts and circumstances of the case for any alleged introduction of undisclosed income. AY 2002-03 - Held that:- Coming to the undisclosed income relatable to AY 2002-03, the debit opening balance for which no credit has been given amounting of ₹ 5,07,53,587/- is to be reduced from the peak credit balance. Accordingly no addition on the basis of the peak credit. AY 2003-04 - CIT(A) has sustained the addition of ₹ 89,500 towards extra consumption of fuel injector and has deleted unexplained deposits on the ground that the same was covered by the addition on account of extra consumption - Held that:- Perusal of the order of the Tribunal shows that the view of the CIT(A) that sale out of the books has been ploughed back in the form of deposits and the separate addition was the same could be deleted, has not been challenged by the revenue before the Tribunal. The effect of the finding of the CIT(A) is that it has been accepted that the sale out of the books of account has been deposited in the form of cash credit, the addition in respect thereof at ₹ 89,500 has been sustained, therefore, CIT(A) and the Tribunal has not deleted the addition made by the AO as an unexplained cash credit under section 68 as it was explained, but it has been deleted on the ground that the deposits were out of sale made out of the books of account and the addition to that extent has been sustained. No error in the view of the Tribunal. Addition on account of payment of US $ 20,000 in South Korea - AY 2007-08 - Held that:- AO without giving the Appellant any opportunity to cross-examine the alleged Mr. Young who has made the alleged statement made the addition. Such a conclusion having a direct impact on the liability of Appellant and conflicting with his consistent stand has been drawn without proper and reasonable opportunity to examine the said evidence(s) and to cross -examine the witnesses making such accusations. Thus the order suffers from violation of the principles of natural justice, not availability of relevant facts and non speaking order. The Learned Assessing Officer has merely and mechanically relied on the report/documents received from an external agency without conducting any independent enquiries, verifications and allowing the examination of material and cross examination and relevant evidence.
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Customs
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2013 (7) TMI 29
Redemption fine - assessee contested that goods has been provisionally released against the bond and bank guarantee furnished - Held that:- Just because the goods are not available for confiscation, the Commissioner cannot say that the same are not liable for confiscation, as in terms of judgment of Weston Components Ltd. vs. CC, New Delhi (2000 (1) TMI 45 - SUPREME COURT OF INDIA) redemption fine is imposable even after release of the goods and that mere fact that the goods were released on bond would not take away the power of the Customs authorities to levy redemption fine, if subsequent to release of the goods, the import was not found to be valid or there is any other irregularity which would render the goods liable for confiscation. Thus the Commissioner’s orders not imposing redemption fine is incorrect. Revenue’s appeal is allowed.
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2013 (7) TMI 28
Import of a new Ferrari Car F430, Fi Coupe - classification - order of the Settlement Commission - held that:- unless and until the order passed by the Settlement Commission is contrary to the provisions of the Act, the order cannot be interfered and further the Apex Court has held that on a question of fact, it is not open for the High Court as well as Supreme Court to interfere. In the instant case, the issue is whether the imported car is a new car or second-hand car. It is a question of fact. The Settlement Commission in Paragraphs 10.1 to 10.23 has considered the facts and circumstances of the case and arrived at the factual finding that the car imported is a new car and applied the exemption Notification No. 21/2002-Cus. correctly. The order passed by the Settlement Commission is in accordance with law and the writ petition filed by the Revenue in W.P. No. 4451 of 2010 is dismissed as devoid of merits. - Decided against the revenue.
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Corporate Laws
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2013 (7) TMI 48
Scheme of amalgamation recalled - Held that:- In the instant case, the scheme has not been put into effect. It is not the case of the State Trading Corporation of India that any time after the order dated 1st July 2011, the applicants have taken the requisite steps so as to give effect to and implement the scheme. Once there is nothing in the scheme or in the sections empowering the Court to grant or approve it not to recall an order, then, by exercise of inherent powers of this Court and in the facts peculiar to this case, the recall can be permitted. In facts peculiar to this case the applicants have approached this Court and pointed out that it is not possible to seek sanction or approval for the transfer of mining and prospecting licence and that the shareholders of both companies having decided not to give effect to or implement the scheme, but to continue the existence of both transferor companies, that the request as made can be granted. At the same time, it must be clarified that neither the sanction or approval in terms of the earlier order nor the recall by this order shall in any manner adversely affect or prejudice the claim of the State Trading Corporation of India nor shall if affect its right to seek winding up of the 1st transferor company or to take such proceedings against it as are permissible in law. Thus the order sanctioning the scheme is recalled and set aside.
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2013 (7) TMI 27
Scheme of amalgamation - jurisdiction of High Court of order investigation from a particular agency - duty and power of the high court while issuing directions - Held that:- Looking to the facts in full agreement with His Lordship, there would certainly be a justification to carry on investigation. If looking to the Income Tax Assessment order relied on by Mr. Mookherjee it would find, for the assessment year 2007-2008 the Company earned net profit for Rs.290/-. They suffered penalty. The total income that was assessed was Rs.3,400/- only and the company paid tax for Rs.1,046/-. Such an insignificant company proposed scheme of amalgamation involving crores through allotment of shares at a huge premium. However, His Lordship was perhaps not correct in either directing Director, Revenue Intelligence or the Reserve Bank of India. His Lordship was competent to issue direction under Section 237(a)(ii). His Lordship was right in sending the issue to the Ministry of Corporate Affairs being the appropriate authority of the Central Government. However, it is for the Central Government to decide which authority would investigate. Be that as it may, the report of SFIO would clearly show, despite being informed, the company did not appear. Hence, Mr. Mookherjee was not right in saying, opportunity was not given. There seems to be no irregularity. It is a fit and proper case for the Central Government to consider as to whether an investigation should be carried out by appropriate agency having authority in law followed by action that is permitted in law. Considering the backdrop, we do not feel it inclined to permit the appellant to proceed with the proposed scheme of amalgamation. Hence, the application for convening meeting of the shareholders treating the same as on the day’s list dismissed.
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Service Tax
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2013 (7) TMI 46
CENVAT credit – Rule 2(l) of Cenvat credit rules - Input Services – development and maintenance of garden - manpower engaged for maintaining the landscape around the factory premises - construction of compound wall - Held that:- services in relation to development and maintenance of garden around the factory premises has to be eligible for availing cenvat credit to fulfill a statutory condition of controlling environmental pollution. Similarly, manpower engaged for maintaining such landscape will also be eligible as input credit services. - Decision in [2010 (6) TMI 315 - CESTAT, AHMEDABAD] followed. Services used in construction of wall - Held that:- During the relevant period, construction services utilized for establishing the factory were eligible for cenvat credit. A compound wall around the factory is essential to demarcate the registered factory premises and also to save the manufactured goods from pilferage and potential clandestine removal. Such a compound wall has to be considered as essential element for the completion of factory and an activity in relation to manufacture of excisable good. - services utilized for construction will be eligible for cenvat credit - as decided in CCE, Pune-II vs. Raymond Zambaiti Pvt. Ltd. (2008 (8) TMI 777 - COMMISSIONER OF CENTRAL EXCISE (APPEALS), PUNE-II) – Decided in favor of assessee.
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2013 (7) TMI 45
Waiver of pre-deposit - Intellectual property right - Water Front Royalty - the measure of the amount is based upon the tonnage of the cargo handled at a particular Port. - Section 65 (55a) – Held that:- prima facie, the kind of charges which has been collected by the appellant for usage of Water Front as Water Front Royalty Charges will not be covered under the definition of Intellectual Property Rights. - Stay granted.
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2013 (7) TMI 44
Commercial or Industrial construction - Section 65 (25b) - Whether commercial or industrial construction Service provided on the property was a service provided "to any other person" (the prospective buyers) – new building intended for sale deemed to be a taxable service - Held that:- since admittedly the transaction in issue in the present appeal falls during the period 4.7.05 to 30.6.2006 (prior to introduction of the Explanation to Section 65(105)(zzq) and the service offered by the assessee in relation to the construction of commercial or industrial complex in respect of WTP cannot be said to be service provided or to be provided to another person, the transaction falls outside the purview of the taxable service. - as decided in Maharashtra Chamber of Housing Industry vs. UOI (2012 (1) TMI 98 - BOMBAY HIGH COURT)– demand set aside.
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2013 (7) TMI 43
Stay application - proof of services provided to SEZ - adjudication authority observed that the bills cannot be accepted as the same can be manipulated. Hence, in absence of any proof for providing services to Hi-Tech Engineering SEZ, the benefit of exemption denied – Held that:- the facts have to be gone through and verified by the original adjudicating authority on being agitated by the appellants who have now been given the copies of the contracts available with the department. – Appeal allowed.
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2013 (7) TMI 42
Stay application – Demand of service tax - export - money transfer service - services rendered to prospective customers or manufacturers in India – Held that:- The ratio of the Larger Bench in Paul Merchants Ltd. [2012 (12) TMI 424 - CESTAT, DELHI (LB)] is applicable to the facts in the present case, as the services were provided by the petitioner to the overseas company M/s. GECAS, Ireland. - Services provided to the Irish company falls within provisions of Export of Service Rules, 2005 - exempt from the charge to service tax – as decided in Vodafone Essar Cellular Ltd. vs. CCE, Pune-III, ( 2013 (6) TMI 366 - CESTAT MUMBAI) – Stay granted.
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Central Excise
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2013 (7) TMI 25
Refund of duty on the reprocessed goods - Period of limitation- Submission of documents within stipulated period - process of goods have been completed and presentation of accounts only after six months of return of goods to the factory, ignoring the stipulation of completion of process and submission of accounts within six months under sub-rule (3) of Rule 173L of the erstwhile Central Excise Rules, 1944? - Held that:- Plain reading of Rule 173L(3) reveals that the same specifies the time limit only for processing and for rendering the accounts before the authority concerned and not for clearance of the goods. That being the factual and legal position, the reason for rejection of the claim by the lower authorities has no legal basis, as rightly decided by the Tribunal.
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2013 (7) TMI 24
Penalty imposed under Rule 13 of CENVAT Credit Rules, 2002 - offence by retaining wrongful CENVAT credit for a period of six months - Held that:- Assessee did not utilise the credit and reversed immediately on receipt of the intimation about the error. In the circumstances, in the absence of any other material to show the intent to cause wrongful gain as required under Section 11A of the Central Excise Act, the levy of penalty was cancelled. Setting aside Penalty imposed - when the question of "imposition of penalty equivalent to the amount of duty evaded under Section 11AC of the Central Excise Act, whether maximum or not and of discretion to impose lesser amounts" - Held that:- Application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable, the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A as it has been observed in UNION OF INDIA v. RAJASTHAN SPINNING & WEAVING MILLS [2009 (5) TMI 15 - SUPREME COURT OF INDIA]. - Decided in favor of assessee.
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CST, VAT & Sales Tax
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2013 (7) TMI 47
Sale suppression - Whether the tribunal discussed the issue in detail rather than reproducing the D3 inspection report proposal inspite of the fact that the Appellate Tribunal is the final fact finding authority? - Held that:- As seen from the order of assessment, the addition of Rs.8,05,303/- came for consideration only on account of the Inspection Wing Official noting huge Gross Profit difference between the first sale and the second sale. It is no doubt true that the sister concern had effected second sales making high gross profit. Whatever be the merits or demerits on the higher profit, as rightly observed by the First Appellate Authority, for the purpose of assessment under Section 12-A of the Act, the AO has to cause enquiry by following the procedures prescribed under Rule 18-C of the Rules. In the absence of any such enquiry, the mere ground that the sister concern had charged higher gross profit by itself could not be a legal ground for making addition. Thus no hesitation in accepting the case of the assessee that a mere difference in profit between the second sale and the first sale would lead to a statutory best judgment under Section 12-A of the Act. In favour of assessee.
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2013 (7) TMI 26
Exemption under Notification dated 31.03.1995 issued under U.P. Trade Tax Act - the said notification dated 31.3.1995 provides that the units from whom the applicant has purchased the raw material, namely, iron and steel were granted exemption for a period of 12 years, 10 years or 8 years or till the exemption entitlement gets exhausted, whichever is earlier- the claim of the applicant for granting the benefit of adjustment of 2% tax in respect of the Iron and Steel purchased from the units holding eligibility certificate was maintainable- Held that – denying the benefit of adjustment of 2% tax in respect of the Iron and Steel purchased from the units holding eligibility certificate is absolutely wrong and contrary to the judgment of the Apex Court in Punjab and others etc. etc. Vs. Perfect Synthetics etc. [2008 (3) TMI 454 - SUPREME COURT OF INDIA]. It is not in dispute that while dismissing the above second appeals, the Tribunal has not considered the judgment rendered by the Apex Court in Usha Martin Industries (1997 (8) TMI 77 - SUPREME COURT OF INDIA). Therefore, interest of justice would be suffice, if the matter is remitted back to the Tribunal to decide it afresh after taking into consideration the above judgments. - Matter remanded back.
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