Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 22, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Customs
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F.No.437/79/2014-Cus IV - dated
21-7-2014
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Cus (NT)
Appointment of Common Adjudicating Authority - Commissioner of Customs (Import), Jawaharlal Nehru Customs House, Nhava Sheva, Post-Uran, Dist: Raigad , Maharashtra
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F. No. 437/82/2014-Cus IV - dated
21-7-2014
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Cus (NT)
Appointment of Common Adjudicating Authority - M/s Cortel India, I-17, 1st Floor, Sector-9, NOIDA, Uttar Pradesh
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F. No. 437/81/2014-Cus IV - dated
21-7-2014
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Cus (NT)
Appointment of Common Adjudicating Authority - M/s Malhotra Electronics Pvt. Ltd., 11-C, Udyog Kendra, Greater NOIDA, U.P.
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F. No. 437/80/2014-Cus IV - dated
21-7-2014
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Cus (NT)
Appointment of Commissioner of Customs (Import & General), IGI Airport, New Delhi as a Common Adjudicating Authority
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54/2014 - dated
21-7-2014
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Cus (NT)
Seeks to Amend Notification No 61/94-Customs (N.T.), dated the 21st November, 1994.
VAT - Delhi
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F.5(54)/Policy/VAT/2013/PF/180-192 - dated
18-7-2014
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DVAT
Amendment in Sixth Schedule of Delhi VAT Act
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Application of section 10B(7) r.w. section 80IA(10) - AO concluded that by taking the services of employees of the sister concern, the assessee had shown more than ordinary profits - observations of AO are not correct - AT
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Section 44BB, being industry specific was a special provision and would, thus, override the provisions of Section 44DA(1) in respect of income which fall within the ambit of Section 44DA(1) but had arisen in respect of business carried on in connection with prospecting for, or extraction or production of mineral oils - HC
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Validity of reassessment - amendment to sections 44DA and 44BB by the Finance Act, 2010 w.e.f. 01.04.2011 are prospective - re-assessment by taking cognizance of the amendment as retrospective, do not stand - AT
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Deemed dividend u/s 2(22)(e) - Certain loans or advances were given by some companies to some other companies (concerns) of the same group and the assessee is having substantial shareholding in both - to be treated as deemed dividend - AT
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Levy of penalty for wrong claim of deduction u/s 80IB - Write off of debit balance additions were made since the advance given to a person which had no relation with sales - levy of penalty confirmed - AT
Customs
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Levy of anti-dumping duty beyond five years - retrospective amendment - the initiation of sunset review is valid and legal; however the levy of anti-dumping duty through the impugned notification of 23-01-2014 is without authority of law. - petitioner is entitled to get refund - HC
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Claim of duty drawback - condonation of delay in filing of supplementary claim - There was no reasonable cause which could justify condoning the delay and the reasons, which have been made out, have been found to be unjust and improper. - HC
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Validity of the finding the appellant guilty and imposing penalty of ₹ 15 lakhs on the basis of the retracted confessional statements of the co-accused - Decided against the assessee. - HC
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Suspension of the licence of the petitioner as custom broker - petitioner directed to surrender the licence when appeal is pending before the tribunal - order dated 19.02.2014 stayed - HC
FEMA
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Condonation of delay - delay of 179 days - where the statute bars appeal beyond sixty days, the Court cannot condone the delay and entertain the appeal filed beyond sixty days. - HC
Indian Laws
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Past Cenvat Credits - Last Chance? - Avail cenvat credit for the past period on or before 31.08.2014 - Article
Service Tax
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Denial of CENVAT Credit - Distribution of service tax through ISD - the credit, if taken wrongly, has to be recovered from the person who has taken credit. - AT
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SSP exemption - by using the promotional material provided by ICICI Bank Ltd., the Respondent cannot be treated as using the brand name of ICICI Bank Ltd. and providing their service under the brand name of ICICI Bank - AT
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Imposition of penalty - excess utilization of Credit credit - what has happened is only an accounting error by the appellant and that mistake has been rectified by them by paying the entire amount with interest - No penalty - AT
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The liability to remit service tax under Section 73 A(2) does not arise on the basis of a mere permission in an agreement that the liability to compensate/reimburse to service tax liability of the service provider, is on the service recipient. - AT
Central Excise
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Power of tribunal to grant stay beyond the total period of 365 days -on expiry of maximum period of 180 days the assessee / appellant is required to submit application for extension of stay each time and the Appellate Tribunal is required to consider the individual case and pass a speaking order, as stated hereinabove - HC
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Exemption under Notification No. 56/2002-CE dated 14/11/02 - Renumbering of khasra numbers - area based exemption - assessee, for none of his fault, should not be deprived of the benefit of the exemption notification - AT
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Rebate / refund of duty - there was no endorsement of the subject ARE-1 No.48 dated 10/2/2009 on the Shipping Bill by the Customs Authority of the Port of Export - rebate / refund denied - HC
Case Laws:
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Income Tax
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2014 (7) TMI 751
Application of section 10B(7) r.w. section 80IA(10) - claiming excess exemption by showing higher profit - AO concluded that by taking the services of employees of the sister concern, the assessee had shown more than ordinary profits. - Held that:- For applying the provisions of section 10B(7) r.w.s 80IA(10), AO has first to show that cost of hiring employees by the assessee had resulted into more than ordinary profit - This could happen only if the assessee had paid less than the market value to the sister concern on account of hired employees - There is no material on record to show that sister concern had hired the employees at less than market price because only in that case it could be said that the assessee had paid less than the market price - it cannot be said that assessee had produced more than the ordinary profit because of close connection with the sister concern or that it had declared more profit in order to claim more exemption thus, the order of the CIT(A) is set aside Decided in favour of Assessee.
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2014 (7) TMI 726
Revision u/s 263 continuity of subsequent proceeding when original order was set aside based on which order u/s 263 was passed - Held that:- The Tribunal had rightly held that the proceedings originating from the order passed u/s 263 of the Act including the assessment order made by the AO u/s 143(3) r/w section 263 of the Act had become non-est in the eyes of law thus, no substantial question arises for consideration Decided against Revenue.
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2014 (7) TMI 725
Interpretation of Article 8 of Indo-Belgium DTAA Income from inland Haulage Charges - Whether the tax treaty between India and Belgium includes within its Ambit the activity of Inland Transport of Cargo from various places within India Held that:- The Assessee collected Inland Haulage Charges from its customers in respect of transportation of goods from Inland Container Depots (ICDs) to the Port where the goods were loaded in the ships for international traffic - assessee had received Inland Haulage Charges from its clients and the same were included in receipts under the head permanent handling charges - Assessee claimed that Inland Haulage Charges are part of its shipping business and are in the nature of handling charges and are therefore covered by phrase any other amount of similar nature mentioned in the explanation to section 44B of the Act. Such charges were part of the shipping business of the Assessee, they were therefore eligible for DIT relief, was the submission of the Assessee - The decision in Director of Income-tax (International Taxation) Versus Balaji Shipping UK Ltd. [2012 (8) TMI 681 - BOMBAY HIGH COURT] followed no substantial question of law arises for consideration Decided against Revenue.
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2014 (7) TMI 724
Power of revision u/s 263 Deduction on depreciation in the value of investments Held that:- A method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the revenue on the view that he should have adopted a different method of keeping the accounts or on valuation - the assessee has maintained the accounts in terms of the RBI Regulations and he has shown it as investment - consistently for more than two decades it has been shown as stock-in-trade and depreciation is claimed and allowed - notwithstanding that in the balance-sheet , it is shown as investment, for the purpose of Income Tax Act, it is shown as stock-in-trade - the value of the stocks being closely connected with the stock market, at the end of the financial year, while valuing the assets, necessarily the bank has to take into consideration the market value of the shares - If the market value is less than the cost price, in law, they are entitled to deductions and it cannot be denied by the authorities under the pretext that it is shown as investment in the balance-sheet - THE KARNATAKA BANK LTD Versus ASSISTANT COMMISSIONER OF INCOME TAX MANGALORE [2013 (7) TMI 656 - KARNATAKA HIGH COURT] followed there was no infirmity in the order passed by the Tribunal no substantial question of law arises for consideration Decided against Revenue.
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2014 (7) TMI 723
Taxability of income u/s 44BB or u/s 44DA - acquiring and processing three dimensional marine seismic data with respect to offshore block - appellant (assessee) opted to be taxed on presumptive basis under Section 44BB(1) of the Act at the rate of 10% of the gross revenue - AO rejected the contention of assessee and observed that the services provided by the assessee were technical in nature and its income from providing services fell within the definition of fees for technical services as defined by provisions of Section 9(1)(vii) of the Act, which was liable to be taxed under the provisions of Section 115A Held that:- Section 44BB(1) of the Act would not be applicable with respect to incomes which are included u/s 115A of the Act - in respect of income from technical services, section 44BB(1) of the Act would not be applicable unless the income falls within the scope of 44DA(1) of the Act, which could only be applied if an assessee being a foreign company, had a PE in India - the tax on income would be liable to be computed in accordance with section 44BB(1) of the Act Relying upon Geofizyka Torun Sp. zo. o.[ 2009 (12) TMI 4 - AUTHORITY FOR ADVANCE RULINGS[ - Section 44BB of the Act, being industry specific was a special provision and would, thus, override the provisions of Section 44DA(1) of the Act in respect of income which fall within the ambit of Section 44DA(1) of the Act but had arisen in respect of business carried on in connection with prospecting for, or extraction or production of mineral oils. The assessee is engaged in business for providing services in connection with prospecting for mineral oils, its income if it falls within the ambit of Section 44DA(1) of the Act would be taxable under Section 44BB(1) - the income falling within Section 115A(1)(b) of the Act which does not fall within the four corners of Section 44DA(1) of the Act would also not be taxable under Section 44BB(1) of the Act, for the reason that by virtue of proviso to Section 44BB(1) of the Act, the same is excluded - the AO would specifically have to determine as to whether the assessee had a PE in India during the relevant period and if so, whether the contracts entered into by the appellant with BG and RIL were effectively connected with the appellants PE in India Decided in favour of Assessee.
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2014 (7) TMI 722
Re-assessment of proceedings u/s 147 r.w section 148 - Based on the opinion of audit party - Held that:- Mere opinion of the audit party cannot form the basis for the AO to reopen the closed assessment that too beyond four years from the end of relevant assessment year The decision in COMMISSIONER OF INCOME TAX Versus SHILP GRAVURES LTD [2013 (11) TMI 581 - GUJARAT HIGH COURT] followed - If the reassessment proceedings are initiated merely and solely at the instance of the audit party and there was no independent application of mind by the AO with respect to subjective satisfaction for initiation of the reassessment proceedings, the notices cannot be sustained and the same deserves to be quashed and set aside Decided in favour of Assessee.
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2014 (7) TMI 721
Service of notice u/s 282 for scrutiny assessment u/s 143(2) Loss incurred because of drop in value of closing stock Held that:- The questionnaire/notice sent by the AO to the assessee which mentioned that the notice u/s 143(2) had been duly received by the assessee on 31.10.2001 was not controverted during the assessment proceedings - the conclusion of the CIT that the assessee had duly received the notice in question on 31.10.2001 cannot be faulted. - the contention that the petitioner cannot be precluded from raising the objection as to receipt of notice since Section 292BB of the Act was not in force during the relevant Assessment Year is also not acceptable. Best judgement assessment - whether arbitrary and unreasonable - assessee claimed drop in the value of the closing stock and shortage in stocks. - Held that:- Such losses were clearly an aberration and in absence of sufficient material could not be accepted by the Assessing Officer in a best judgment assessment, especially where there was no material to substantiate the loss as declared in the returns and the statement of accounts furnished along with it. The Assessing Officer, therefore, rejected the loss as returned by the assessee and in our view, rightly so. Increase in sundry creditors and unsecured loans Held that:- The AO also made additions on account of increase in sundry creditors and unsecured loans - assessee could easily obtain confirmation of outstanding balances from third parties, however, no confirmation was supplied to the AO - The scale of operations of the assessee during the year was not materially different from that in the preceding year, and in the circumstances a significant increase in the sundry creditors and unsecured loans was clearly unexplained and in the circumstances the Assessing Officer added the same u/s 68 of the Act - AO also added the increase in the account of the partners - The assessee attempted to explain the same by stating that the additions were from the funds withdrawn by the partners the individual accounts of the partners which could have substantiated claim were, apparently, not produced before the AO - the explanation was also not accepted thus, there was no infirmity in the order Decided against Assessee.
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2014 (7) TMI 720
Validity of reassessment - Reassessment on The Basis of Judgment in ONGC - Taxability of receipts u/s 44B Held that:- A reassessment can be undertaken when there is escapement of income by all - where the original assessment was completed u/s 143(3) and a period of four years has expired from the end of the relevant assessment year, the recourse to the provisions of section 147 can be taken only if the case falls under the first situation, namely, where the income escaped assessment because of the assessee not properly disclosing the particulars of his income - No reassessment in such an event is permissible where the assessee properly disclosed the particulars of his income, but the income escaped assessment with or without the failure on the part of the AO to examine the issue properly or some post assessment event. Where a period of four years has not expired from the end of the relevant assessment year and the reassessment is taken up after the original assessment u/s 143(3), the provisions of section 147 can be activated in the first two situations, the second circumstance of the third situation and the fourth situation - The embargo on reassessment in such an event is only in the first circumstance of the third situation, being the change of opinion simplicitor without reference to any unconsidered tangible material coming to the notice of the AO indicating escapement of income Relying upon COMMISSIONER OF INCOME-TAX AND ANOTHER Versus ONGC [2005 (12) TMI 46 - UTTARANCHAL HIGH COURT] - the revenue from services which are technical in nature in a business to which section 44BB applies, does not fall within the ambit of section 44BB(1) of the Act but is taxable under the provisions of either section 44D or section 115A. The AO did not venture to re-examine the assessment afresh de hors any fresh material, which would otherwise have made it a case of change of opinion ousting the jurisdiction of the AO to initiate proceedings u/s 147 - section 44BB applied by the assessee in the case of ONGC as agent of Foramer France, has been statutorily designated as a special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils - both sections 44BB and 44D have been categorized by the legislature as special provisions - income by way of royalty or fees for technical services earned by a foreign company in pursuance of an agreement made before 1.4.2003 is chargeable u/s 44D of the Act, now it needs to be considered as to whether the same thing would be applicable in the context of section 44DA also - the AO was not justified in initiating reassessment by relying on the judgment in the case of ONGC. It is prima facie applicable but not applicable on proper appreciation - the initiation of the present reassessment on the basis of the judgment in ONGC is not valid in law - the amendment to sections 44DA and 44BB by the Finance Act, 2010 w.e.f. 01.04.2011 are prospective, there can be no question of arguing or holding otherwise - the insertion of second proviso to section 44DA by the Finance Act, 2010 is applicable only from AY 2011-12 and not prior to that - the reasons recorded by the AO for initiating the re- assessment by taking cognizance of the amendment proposed by the Finance Bill, 2010 and holding it to be retrospective, do not stand. Neither the AO can later on improve his reasons or make out a different case from the one on which basis he initiated reassessment, nor is it permissible to argue that the reassessment be sustained on the ground other than that of the AO as mentioned in the reasons - applicability of the judgment in the case of ONGC and the retrospective application of the amendments brought out by the Finance Act, 2010 to section 44DA and section 44BB, are not relevant and hence do not support the initiation of reassessment thus, the initiation of re-assessment and the proceedings flowing there from is set aside Decided in favour of Assessee.
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2014 (7) TMI 719
Bad debts written off u/s 36(1)(viii) Held that:- It is the own prudence of the businessman while conducting the business to decide as to whether the debited amount has become non recoverable or not - If he is of the bonafide view that the debt has become bad and thus he has written off the same, even though, he continues to contest the suit/complaint for recovery of the said debt, it does not mean that his decision was not bonafide Relying upon Jethabhai Hirji and Jethabhai Ramdas vs. CIT [1977 (11) TMI 11 - BOMBAY High Court] - There may be so many reasons for a businessman which may require him to withdraw the criminal complaint against the debtor taking into consideration the associated facts and circumstances and his commercial prudence & wisdom - Mere withdrawing of a complaint does not in any manner prove that the assessee had received the payment or the debt had not become bad - The filing of a criminal complaint against the debtor is a fact which proves that the amount was not recoverable otherwise and the assessee in the normal course of business was not supposed to make rounds of the court for the recovery of the amount from the debtor - there was no infirmity in the order of the CIT(A) Decided against Revenue.
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2014 (7) TMI 718
Disallowance us 14A r.w Rule 8D of the Act Indirect and administrative expenses Held that:- The AO has not considered the assessees case, recorded any dissatisfaction in terms of section 14A(2) the decision in Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - The initial onus in the matter though would only be on the assessee thus, the matter is to be remitted back to the file of the AO Decided in favour of Assessee. Partial disallowance of claim of expenses Insurance and depreciation on telephone and motor car towards personal use Held that:- The expenses obtained for that year brought to notice - to vary the percentage of the expenditure considered disallowable by the tribunal cannot be disregarded thus, it is restricted to 5%, as by the tribunal for the immediately preceding year Decided partly in favour of Assessee.
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2014 (7) TMI 717
Disallowance of expenditure u/s 37(1) of the Act Expenses incurred on advertisement, training, business promotion, architectural consultancy, land scraping, professional charges, printing and stationery, travelling and purchase of materials - Held that:- The assessee brought on record confirmation letter from Maytas Estate Pvt. Ltd. issued to the Maytas Properties Ltd. stating that Maytas Properties Ltd., whose name formerly was Maytas Estate Pvt. Ltd. neither bills are raised for the expenditure nor accounted for the same in their books of account - If there is no evidence with the department that there is a double claim of this expenditure one by Maytas Properties Pvt. Ltd. and another by Maytas Properties Ltd., the assessee company, revenue cannot disallow the expenditure because it is a clerical error in the bills produced by the assessee towards expenditure - If the expenditure is not claimed by Maytas Properties Pvt. Ltd. thus, it is fair to grant deduction towards business expenditure thus, the matter is remitted back to the AO to cause enquiry whether M/s Maytas Properties Pvt. Ltd. claimed any expenditure towards the impugned bills and if there is no double claim, the claim of the assessee has to be allowed Decided in favour of Assessee. Expenses incurred u/s 37(1) of the Act Supporting evidences not filed Short deduction of TDS Expenses not related to business Held that:- Assessee contended that the issue may be remitted back to the file of the AO as the requisite evidence available with the assessee - since the office of the assessee has been shifted to another premises, the required information was misplaced, now it is available, which is material for deciding this issue thus, the matter is remitted back to the AO for fresh consideration Decided in favour of Assessee. Reimbursement of service tax to sub-contractor Expenses on Misplaced pending bills Held that:- The reason for disallowing the expenditure is that the special auditor made an observation that no supporting evidence for these payments for establishing genuineness of the payment has been filed assessee contended that the payments were made through cheques and out of total payment of ₹ 1,75,70,005/-, the DRP accepted the payment of ₹ 26,72,773/- as genuine and there is no reason for disallowing of ₹ 1,48,97,232 - The payment has been by way of cheque and being so the expenditure is to be allowed thus, the AO is directed not to disallow the payments which are made by way of cheque and to disallow 10% of cash expenses and in respect of cash expenses there is every chance of inflating Decided partly in favour of Assessee. Landscaping charges paid to farmers Held that:- The reason for disallowance is regarding genuineness of expenditure - according to the lower authorities most of the payments are self-generated, which have high bill value and being so it was disallowed - Incurring of expenditure was not doubted by the Department, but, only quantum of expenditure is doubted - expenditure is wholly and exclusively laid out for the purpose of business thus, the entire expenditure cannot be disallowed - the bills are self-generated, there is no conclusive proof that 100% of the expenditure is genuine thus, the AO is directed to disallow 10% of cash expenditure incurred by the assessee and there could be no disallowance if the assessee incurred the expenditure by cheque Decided partly in favour of assessee. Notional interest applied on business advances @ 10.50% to group and other associates Held that:- Before disallowance of notional interest it is incumbent upon AO to establish that there is a nexus between the amount diverted and interest incurred by the assessee - Even if assessee has diverted interest bearing funds to the sister concern, then it is business decision taken by the assessee to make such an investment and even if it has resulted no income to the assessee, notional interest cannot be disallowed on the reason that assessee should have used its non-interest bearing funds for the purpose of business instead of using borrowed funds - AO cannot sit in the arm chair of businessman and decide what the assessee has to do to maximize its profit Relying upon SA BUILDERS LTD. Versus COMMISSIONER OF INCOME-TAX [2006 (12) TMI 82 - SUPREME COURT] Decided in favour of Assessee. Depreciation as asset bills not in the name of the MPL and drawn on MPPL Held that:- The assets are appearing in the balance sheet of the assessee company and there is only a mistake in the bill with regard to name of the company - the matter is remitted back to the AO and after verification, due depreciation, may be allowed Decided in favour of Assessee. Expenses incurred on a/c of M/s. Chourasya Construction u/s 37(1) of the Act Held that:- Assessee has fulfilled requirement of the provisions of section 37 of the IT Act - The claim of payment to subcontractor by the assessee is not disqualified for deduction under the Act - the expenditure is not a capital expenditure since the assessee did not acquire any capital asset and the payment is also not in the nature of personal expenditure and not brought any personal benefit to any employees or contractor of the assessee company - The expenditure incurred wholly and exclusively for the purpose of business Relying upon Sassoon J. David And Co. Pvt. Limited Versus Commissioner of Income-Tax, Bombay [1979 (5) TMI 3 - SUPREME Court] - the entire payment to sub- contractor shall not be disallowed as there is evidence on record for such payment - the assessee has produced payment details and it has been subjected to tax deduction Decided in favour of Assessee. Taxation ignoring revised estimates Held that:- Unless and until the department has proved that agreement executed by the assessee with M/s Maytas Infra Ltd., is collusive agreement, the agreement cannot be rejected as both are different assessees and it is to be followed in true spirit - the method followed by the AO is not correct Relying upon The Deputy CIT Central Circle) 6 Hyderabad Versus M/s. SP. Real Estate Developers Pvt. Ltd. [2014 (7) TMI 501 - ITAT HYDERABAD] - real income to be taxed and not notional income Decided in favour of Assessee. Statutory and consultancy charges Held that:- The assessee contended that it is a revenue expenditure or otherwise if the expenditure is reduced to that extent, proportionate income to be reduced from P&L Account as the income generated from that expenditure is offered to tax - If this income related to the expenditure has gone to the P&L A/c, the AO is directed to allow proportionate expenditure Decided partly in favour of Assessee. Disallowance u/s 40(a)(ia) of the Act Held that:- The decision in CIT vs. Rajinder Kumar [2013 (7) TMI 454 - DELHI HIGH COURT] followed - amendment to section 40(a)(ia) permits remittance of TDS to the Central Government account on or before the due date of filing return of income u/s. 139(1) of the Act is retrospective in nature thus, the AO is directed to see whether the recipient has paid tax or not on this payment and decide the issue in accordance with law - short deduction of TDS and remittance cannot be a reason for disallowance u/s 40(a)(ia) as decided in COMMISSIONER OF INCOME TAX, KOLKATA-XI Versus M/s SK. TEKRIWAL [2012 (12) TMI 873 - CALCUTTA HIGH COURT] - Decided partly in favour of Assessee. Addition u/s 92CA of the Act Held that:- The decision in M/s Vijai Electricals Ltd. Versus Addl. Commissioner of Income-tax [2013 (7) TMI 804 - ITAT HYDERABAD] - The amount is towards investment in share capital of the subsidiaries outside India as the transactions are not in the nature of transactions referred to section 92-B of the IT Act and the transfer pricing provisions are not applicable as there is no income thus, transaction cannot be considered u/s 92CA of the Act Decided in favour of Assessee. Payment made to contractors u/s 40(a)(ia) of the Act Held that:- The decision in COMMISSIONER OF INCOME TAX, KOLKATA-XI Versus M/s SK. TEKRIWAL [2012 (12) TMI 873 - CALCUTTA HIGH COURT] - the disallowance u/s 40(a)(ia) is not applicable in the case of short deduction of TDS - if there is a shortfall due to a difference of opinion, the tax payer may be treated as a defaulter u/s 201 but no disallowance can be mode u/s 40(a)(ia) thus, there was no infirmity in the order of the DRP Decided against Revenue.
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2014 (7) TMI 716
Allowability of deduction u/s 10B of the Act Approval for Ratification by Board not taken - The decision in ITO vs. M/s. Secunderabad Software Services P. Ltd. [2014 (7) TMI 546 - ITAT HYDERABAD] followed - the assessee as eligible for deduction under S.10B of the Act - the assessee have been registered with the STPI, is entitled for deduction under S.10B of the Act thus, there is no infirmity in the order of the CIT(A) Decided against Revenue.
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2014 (7) TMI 715
Transfer pricing adjustment Selection of comparables - Allsec Technologies Ltd. Held that:- Net profit margin realized from the BPO services segment is not separately reported by such company - the assessee proceeded to calculate the so called amount of net profit realised at 4.01% of the BPO segment by bifurcating operating income and operating expenses in the ratio of revenue from these segments - If such ratio of revenue of two segments is to be applied both to the operating income and operating expenses, that it would lead to the supposition that the net operating profit of both the segments are equal - If this presumption is brought to a logical conclusion then the very need to calculate the net profit realised from BPO segment comes to a naught - the result of the entity level have been taken into consideration in the garb of the net profit realised from the BPO segment - the exercise done by the assessee in considering this case as a comparable has frustrated the calculations. The turnover of CG-VAK from BPO services segment is only to the extent of ₹ 86 lac against the assessees whopping turnover of ₹ 59 crore - the turnover of ₹ 86 lac can be compared with that of ₹ 59 crore Relying upon CIT Versus Agnity India Technologies Pvt. Ltd. [2013 (7) TMI 696 - DELHI HIGH COURT] - a giant company cannot be compared with a captive unit, applies with full force to the instant case as well - the assessee is a giant company and BPO segment of CG-VAK is only a captive one - If a giant company cannot be considered as comparable to a small company, in the like manner, a small company cannot be equally compared with a giant company - the case of CG-VAK cannot be held to be comparable on the strength of its volume of business - the computation of net profit margin realised by the BPO unit of CG-VAK is not adequately workable and it is a captive unit vis-a-vis the assessee. R. Systems International Limited Held that:- The assessee has adopted the figures of the company for the calendar year ending 31.12.2008 - the assessee is closing its accounts as on 31.3.2009, naturally, the data of R. Systems does not pass the test laid down in sub-rule (4) of Rule 10B - R. Systems International Ltd. has been excluded by the TPO solely for the reason that its financial year is different without considering that the data for the financial year adopted by the assessee can be easily compiled from the audited statements of such company thus, the matter is remitted back to the TPO/AO for including R. Systems International Ltd. in the list of comparables by working out the figures relevant to the financial year ending 31.3.09 from the audited accounts of R. Systems International Ltd. Coral Hub Ltd. Held that:- Outsourcing charges constitute 90% of the total operating cost in this case the crucial factor, having a greater bearing on the profitability, makes it distinguishable from the assessee Relying upon Assistant Commissioner of Income-tax, Range - 10(1), Mumbai Versus Hapag Lloyd Global Services (P.) Ltd. [2013 (11) TMI 1314 - ITAT MUMBAI] - Vishal Information Technologies Ltd. cannot be considered as comparable because of the overwhelming outsourcing activity carried out by it thus, this case is required to be excluded from the list of comparables. Cosmic Global Limited Held that:- The case to incomparable on the alternative argument advanced by the assessee to the effect that total revenue of the Accounts BPO segment of Cosmic Global Limited is very low at ₹ 27.76 lacs - a captive unit cannot be compared with a giant case and thus excluded CG-VAK with turnover from Accounts BPO segment at ₹ 86.10 lacs - As the segmental revenue of BPO segment of Cosmic Global Limited at ₹ 27.76 lac is still on much lower side, the reasons given above would fully apply to hold Cosmic Global Limited as incomparable thus, the AO is directed to be excluded from the list of comparables. Genesys International Corporation Ltd. Held that:- The assessee is basically providing various services to the customers of its AEs in relation to human resources which are more or less centered around the employees of the prospective clients - there is a vast difference which make one quite distinct from the other - In view of such functional incomparability between the assessee and Genesys, this company cannot be treated as comparable. Non-grant of working capital adjustment Held that:- Working capital adjustment is ordinarily confined to inventory, trade receivables and trade payables - If a company carries on high trade receivables, it would mean that it is allowing its customers a relatively longer period to pay their amount which will result into higher interest cost and the resultant less profit - Similarly, by carrying high trade payables, a company benefits from a relatively longer period available to it to pay back its suppliers which lowers the interest cost and accelerates profits - To have a level playing field, it is sine qua non that the working capital adjustment should be carried out to bring two otherwise comparable cases at par with each other - the order of the TPO/AO is set aside for examining the assessees claim for grant of working capital adjustment on merits and thereafter, allow the same, if it is available. Reduction of amount of deduction u/s 10AA of the Act Held that:- In computing the total income of an assessee, a deduction of hundred percent of profits and gains `derived from the export of the eligible articles or things shall be granted for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the unit begins to manufacture, etc. - a narrow interpretation of the phrase derived from would have been applicable - the interest income which falls under Chapter IV-D of the Act, viz., Profits and gains of business or profession is eligible for deduction u/s 10AA of the Act - As the necessary details about the nature of interest income are not available on record, it would be expedient to set aside the order and remit the matter to the file of the AO. Reduction of communication expenses Expenses incurred in foreign currency from the computation of export turnover u/s 10AA of the Act Held that:- The assessee is a 100% exporter inasmuch as its export turnover as well as the total turnover before the reduction of telecommunication charges stood at ₹ 59.18 crore The decision in CIT vs. Genpact India [2011 (11) TMI 119 - DELHI HIGH COURT]- communication expenses should also be excluded from total turnover for the purposes of computation of deduction Decided partly in favour of Assessee.
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2014 (7) TMI 714
Deemed dividend u/s 2(22)(e) - loan and advance to another company for the benefit of shareholders Held that:- The assesse is a beneficial owner of more than 10% shares in the payer companies and further has substantial interest of more than 20% in the recipient companies - when a company gives loan or advance to any concern covered under the second category, the divided is deemed as income in the hands of the shareholder and not such concern - Position is similar for the third category as well - If the amount is given to a third person, which is for the benefit of the shareholder, the dividend is not deemed in the hands of such recipient but the shareholder - In all the three categories, it is the shareholder whose income is affected with the deemed dividend Relying upon COMMISSIONER OF INCOME TAX Versus ANKITECH PVT LTD. & OTHERS [2011 (5) TMI 325 - DELHI HIGH COURT] - Certain loans or advances were given by some companies to some other companies (concerns) of the same group and the assessee is having substantial shareholding in both the sets of the payer and the recipient companies - the case falls under the second category and the amount is deemed as dividend in the hands of the assessee shareholder. Whereas `payment by way of advance or loan is relevant in the first and second categories, the third category simply provides for `any payment, which may or may not be by way of advance or loan - Since the third category encompasses any payment by such companies on behalf or for the individual benefit of any such shareholder, there can also be payment falling under this category de hors advance or loan - As the amounts under consideration are advances or loans by one set of companies to another set and the Revenue has not made out a case that these were for the individual benefit of the assessee-shareholder, naturally, the case does not fall in the third category - Once a case falls under the second category, there is no further need to show that it should also falls in the third category - the sums of ₹ 28,17,430/- for the AY 2007-08 and ₹ 2,96,060/- for AY 2008-09 are deemed dividend of the assessee-shareholder under the second category of section 2(22)(e) of the Act and ex consequential the CIT(A) was fully justified in sustaining these additions Decided partly in favour of Assessee.
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2014 (7) TMI 713
Reassessment u/s 147 r.w 148 Reason to believe - Held that:- AO has referred to the information which he received from Directorate of Investigation and as regards the transactions entered into by the assessee with concerns which had made accommodation entries and that they were not genuine transaction - The reason to believe has been properly stated by the AO and there was material basis on which the notice was issued - there was prima-facie evidence before the AO to believe that income has escaped assessment - the order of CIT(A) is upheld Decided against Assessee. Addition u/s 68 of the Act Share application money received Held that:- The assessee has produced the documents to prove the identify, genuineness and credit worthiness of the share applicants - the decision in Commissioner of Income-tax Versus Gangeshwari Metal Pvt Ltd. [2013 (1) TMI 624 - DELHI HIGH COURT] relied upon - there was a lack of inquiry on the part of the AO once the assessee had furnished all the material the order of the CIT(A) cannot be upheld as the an addition cannot be sustained merely based on inferences drawn by circumstance Decided in favour of Assessee.
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2014 (7) TMI 712
Penalty u/s 271(1)(c) Taxation of trial run receipts Held that:- There is no concealment of the particulars of the income inasmuch as the assessee made complete disclosure - it cannot be a case of furnishing inaccurate particulars of income because the assessee entertained a bona fide view that the amount of trial run receipts is not chargeable to tax in the year of receipt on the strength of similar practice followed and not disturbed in the past - The sheer fact that in the final assessment, such bona fide view taken by the assessee was jettisoned by the Revenue cannot mean that the assessee either concealed the particulars of his income or furnished inaccurate particulars of such income Relying upon CIT Vs Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT]- mere making of a claim which is not sustainable in law by itself will not attract penalty under the section when the assessee furnishes all the necessary particulars in his return of income thus, no penalty is sustainable Decided in favour of Assessee. Levy of penalty for wrong claim of deduction u/s 80IB - Write off of debit balance additions were made since the advance given to a person which had no relation with sales - claim of deduction u/s 80IB out of such addition - Held that:- Once the amount of deduction u/s 80IB is deemed to have been already granted in computing the 'total income' for the purposes of Expl. 4(a), being the amount of addition representing concealment or furnishing of inaccurate particulars of income, then there can be no scope for inferring that the total income representing the amount of addition would be again eligible for deduction u/s 80-IB(8A), thereby reducing the total income to Nil - the amount of income representing such addition/disallowance would have assumed the character of 'gross total income' eligible for deductions under Chapter VI-A including sec. 80-IB(8A) of the Act - the legislature has chosen to treat the amount of such addition/disallowance as 'total income' in itself, there can be no logic in subjecting such income to further deductions under Chapter VI-A of the Act for computing the amount of tax sought to be evaded thus, the contention is rejected and the penalty is upheld Decided against Assessee.
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2014 (7) TMI 711
Power of Tribunal to review own order Held that:- The Appellate Tribunal does not have any power to review its own orders under the provisions of the Act - The decision in NH. Securities Ltd. Versus Dy. Commissioner of Income Tax [1992 (11) TMI 32 - BOMBAY High Court] followed - Failure of the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment - Tribunal cannot, in the exercise of its power of rectification, look into some other circumstances which would support or not support its conclusion Decided against Assessee.
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2014 (7) TMI 710
Re-computation of deduction u/s 10A Exclusion of expenses incurred in foreign exchange from export turnover and total turnover Held that:- AO was of the view that the assessee had incurred certain expenses in foreign currency and hence excluded the same from export turnover alone - The decision in Income-Tax Officer. Versus Sak Soft Limited [2009 (3) TMI 243 - ITAT MADRAS-D] followed - whatever is to be excluded from export turnover should also be excluded from total turnover for the purpose of sections 10A and 10B of the Act CIT(A) has rightly directed the AO to reduce the expenditure incurred in foreign exchange from total turnover as well for the purpose of calculation of deduction u/s. 10A of the Act the order of the CIT(A) is upheld Decided against Revenue.
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Customs
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2014 (7) TMI 732
Levy of anti-dumping duty beyond five years - retrospective amendment - Validity of anti-dumping duty extension proceedings under Section 9A of the Customs Tariff Act, 1975 ("CTA") - sunset review - Acrylonitrile Butadiene Rubber originating in, or exported from Korea RP - petitioners complain that in the present case, the notice proposing the review was published on 06-01-2014, after the expiration of the original notification. Thus, neither the review for continuing the duty, nor the levy during the pendency of inquiry was valid. - Held that:- If the court were to accept the petitioners' argument about the compelling nature of the requirement that for a sunset review to be valid, not only should it be shown to be initiated before the expiration of the period of the original notification, but also that the public notice in that regard should be shown to be issued and made available before the period, it would be doing violence to the statute. - the initiation took place on 22-12-2013; the notice was published in the Official Gazette on 31-12-2013 though it could be made available on 06-01-2014. Consequently the initiation of the sunset review was valid and proper. The petitioners' first challenge to the legality of the initiation therefore, fails. - Decided against the assessee. Legality of the levy pending sunset review - Held that:- the power under the second proviso to Section 9A(5), after expiry of the date of the original notification, is unavailable. - Where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all - The imperative nature of second proviso to Section 9A (5) leaves no room for doubt that in case the Central Government wishes to extend the levy during the sunset review period, it has to comply with the terms of that provision and do so, before expiration of the original period. Not having done so, its attempt to levy the duty through the later notification of 23-01-2014 is without authority of law; it is contrary to the terms of proviso to Section 9A (5).The attempt to recover any amounts as duty, therefore, violates Article 265 of the Constitution of India. - the initiation of sunset review is valid and legal; however the levy of anti-dumping duty through the impugned notification of 23-01-2014 is without authority of law. - petitioner is entitled to get refund - Decided in favor of assessee.
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2014 (7) TMI 731
Claim of duty drawback - condonation of delay in filing of supplementary claim - Rule 15 of the Custom, Excise Duties and Service Tax (drawback) Rules, 1995 - Held that:- the status of the drawback claim whether signed or under any query/deficiency, is always available in the EDI System and can be ascertained by the exporter or their authorized person from the counter at the service center. It further goes on to say that the designated bank also credits the drawback amount in the account of the exporter on the next day and informs the exporter by sending a fortnightly statement about the payment of drawback claims to them. Therefore, the onus of ascertaining the status of the drawback claim, whether sanctioned short or under any query/deficiency, so as to avoid any delay in filing the subsequent supplementary drawback claims, solely lies on the exporter himself. The bank is an agent of the petitioner and if the bank is at fault and no evidence has been brought on record by way of representation or otherwise to the Bank, then the respondents cannot be faulted with. The second ground is also of no substance for the reason that on one hand, the petitioner says that they were busy in various International Trade Fairs and obviously in so far as the present claim is concerned, it appears that they were not bothered at all or interested in obtaining the benefit which was due to them and for the lapses on the part of the petitioner itself, no one else can be blamed about it. The expression "sufficient cause" employed in Section 5 of the Indian Limitation Act, 1963 and similar other statutes is elastic enough to enable the courts to apply the law in a meaningful manner which sub serves the ends of justice. Although, no hard and fast rule can be laid down in dealing with the applications for condonation of delay, this Court has justifiably advocated adoption of a liberal approach in condoning the delay of short duration and a stricter approach where the delay is inordinate. There was no reasonable cause which could justify condoning the delay and the reasons, which have been made out, have been found to be unjust and improper. - Decided against the assessee.
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2014 (7) TMI 730
Validity of the finding the appellant guilty and imposing penalty of ₹ 15 lakhs on the basis of the retracted confessional statements of the co-accused - retracted statements were filed after two months from the date on which the accused were apprehended. - smuggling of contraband gold biscuits to India - Held that:- confession statement of co-accused can be treated as evidence, provided sufficient materials are available to corroborate such evidence. As far as retraction statement is concerned, it is for the person who claims that retraction has been made genuinely to prove that the statements were obtained under force, duress, coercion etc. Otherwise, the materials indicate that statements were given voluntarily. - When the statute permits such statements to be the basis of finding of guilt even as far as co-accused is concerned, there is no reason to depart from the said view. It is a question of appreciation of evidence. - appeal dismissed - Decided against the assessee.
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2014 (7) TMI 729
Suspension of the licence of the petitioner as custom broker - petitioner directed to surrender the licence when appeal is pending before the tribunal - allegation that the petitioner firm has aided/abetted the importers in evasion of duty - Held that:- the alleged incident took place during the year 2011 for which action has been proposed during 2013. The respondent has issued a show cause notice on 23.10.2013 in which it was proposed to impose penalty. The petitioner submitted his explanation on 18.11.2013 and thereafter, the licence of the petitioner was suspended on 06.01.2014. Thereafter, by the impugned order dated 19.02.2014, the suspension was ordered to continue. With the above facts, at this stage, this Court cannot go in to the question as to whether the impugned order has been validly passed or not especially when the petitioner has filed an appeal before the appellate authority, which alone is competent to go in to the question as to the validity of the order dated 19.02.2014. Therefore, without going into the validity of the impugned order dated 19.02.2014, especially when the statutory appeal filed by the petitioner is pending before the Appellate Tribunal, this Court is of the view that the impugned order dated 19.02.2014 shall be stayed till such time the appellate Tribunal take up the appeal and decide the appeal on its own merits. - Decided in favor of petitioner.
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Corporate Laws
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2014 (7) TMI 728
Winding up petition - publication of advertisement - unable to pay dues to the creditors - Held that:- the learned Single Judge rightly observed that there was no reason why advertisement should be deferred, more so as the Appellant Company had not availed of the opportunity granted to it by the Division Bench to move an application for deferment of the advertisement of the petition. Even otherwise, there did not appear to be any special circumstances which would warrant deferment or suspension of the publication of advertisement. The petition was filed as far back as in the year 2005 and the Appellant Company had sufficient opportunity to settle the claims of the Respondents. Deferment of publication of advertisement to enable the Appellant to pay to the Respondent the admitted dues was thus no longer warranted, and as a matter of fact publication was immediately called for. - no merit in the present appeal which appears to us to be only an attempt to protract the proceedings. - Decided against the company.
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FEMA
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2014 (7) TMI 727
Condonation of delay - delay of 179 days - it is submitted that, collective decision was required to be taken in the government departments at various levels, therefore, valuable time was consumed - Held that:- under Section 35 of FEMA, appeal against the decision or order of the Appellate Tribunal would lie before the High Court provided the appeal is filed within a period of 60 days, extendable by a further period not exceeding 60 days if the High Court is satisfied that sufficient cause prevented the filing of the appeal within the prescribed period. To put it simply, any appeal filed before the High Court under Section 35 of FEMA beyond 120 days would be time barred. Interpreting similar provisions contained in the Central Excise Act, 1944, the Apex Court in the case of M/s. Singh Enterprises v CCE [2007 (12) TMI 11 - SUPREME COURT] held that where the statute bars appeal beyond sixty days, the Court cannot condone the delay and entertain the appeal filed beyond sixty days. - application for condonation of delay dismissed - decided against the revenue.
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Service Tax
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2014 (7) TMI 752
Intellectual property rights transfer of technical knowhow for manufacture of automobile parts - payment of royalty each year Held that:- This is a case involving transfer of technical knowhow for manufacture of automobile parts. The knowhow transferred was designs, engineering, data, manufacturing and process data, basic machinery and facility lay outs, testing and quality control data, production and testing equipment data including software, drawings, documents and materials relating to the products to be manufactured. So the knowhow by its very nature was not of a type which could be transferred on a continuous basis and was transferred as a onetime activity which happened in the year 2002. No proof that there was continuous transfer of technology during the relevant period namely, has been adduced by Revenue though Revenue is able to demonstrate continued payment of consideration for technology transferred based on the sales turnover of the goods manufactured using the technology already transferred. Whether tax is payable for consideration received after 10-09-2004 when the taxable event took place before 10-09-2004, the date when the activity became taxable Held that:- Service tax being on the service rendered the liability has to be determined with reference to the time when activity took place and not with reference to the time when payment is taking place. This is the principle decided Tribunal in the case of Mundipharma Pvt. Ltd vs. CCE-[2009 (4) TMI 113 - CESTAT, NEW DELHI] with reference to the same service Decided in favour of assessee.
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2014 (7) TMI 750
Denial of CENVAT Credit - Distribution of service tax through ISD - Trading services - Held that:- it is the appellant manufacturer who has taken the credit and therefore, the recovery of wrongly taken credit has to be effected from him. The distribution of service tax through ISD is only a facility provided under the Rules and does not deal with recovery. Therefore, the credit, if taken wrongly, has to be recovered from the person who has taken credit. Whether trading could be considered as an exempted service prior to 1-4-2011 in view of the explanation inserted in Rule 2(e) of CCR, 2004, and if credit is not admissible, what is the methodology that should be adopted for quantification of ineligible input service tax attributable to trading activities - Held that:- categorically that prior to 01/04/2011 trading cannot be considered as an exempted service. In the said decision, it was held categorically that apportionment of input service tax credit on common input services used for trading activity and manufacturing activity could be done based on the ratio of their respective turnover. In view of this decision, we are of the considered view that the demand for reversal of input service tax credit in the present case adopting the ratio of the turnover of trading activity and manufacturing activity, in the impugned order, cannot be faulted. Waiver of pre deposit - Held that:- when there is no prima facie case and financial hardship is not pleaded, the interest of revenue need to be protected - Conditional stay granted.
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2014 (7) TMI 749
Denial of request of rectification of mistake - recovery of service tax, interest and penalty - construction of commercial and residential complex - assessee was informed that, in the absence of any appeal filed against the Joint Commissioner's Order-in-Original No. 18/2008 dated 26.3.2008 within the time limit of 90 days from the date of receipt of the order prescribed under the Statute and in the absence of any modification of the said order, amounts confirmed as payable therein are liable to be paid by you. - Held that:- the appellant had not disputed any of the issues as stated by the Additional Commissioner in his letter dt. 8.12.2011. So, it is evident that the appellant had not filed appeal against Order-in-Original dated 26.2.2008. - Therefore there is no reason to interfere with the order of Commissioner (Appeals) - Decided against assessee.
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2014 (7) TMI 748
Valuation of the services - maintenance & repair service; erection, commissioning & installation service - service tax paid on 15% value of services and VAT is paid on rest 85% - Held that:- adjudicating authority while deciding the issue, has not considered the submissions made by the appellant and has held that the contracted value has been artificially bifurcated into the material portion and the service portion. It is observed from the clause 25 of the representative contract dt.06.11.2009 entered into between the appellant and M/s Tej Complex, Ahmedabad, that 15% of the contract value represent erection, commissioning and installation services on which VAT / Sales Tax is not paid by the appellant. As per Rule 2A(ii) of the Service Tax (Determination of Value) Rules 2006, the actual value of transfer of property in goods involved in execution of the works contract is not to be taken into consideration while discharging Service Tax liability under the works contract services. It is the claim of the appellant that VAT/ Sales Tax was paid on the actual material value of the material sold, as per audit account furnished to the adjudicating authority and on examination of the records, it seems to be so. However, this matter whether VAT/ Sales Tax has been paid on the actual materials sold to the service recipient is required to be gone into detail by the adjudicating authority - Matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 747
Tribunal's power to grant Stay beyond 365 days - matter referred to Larger Bench - Tribunal had earlier concluded that CESTAT had no jurisdiction to extend operation of a stay beyond the period of 365 days of the initial grant, in view of provisions of the 3rd proviso to Section 35C(2A) of the Central Excise Act, 1944 - Held that:- prima-facie case warranting reconsideration of the conclusion recorded in in appeals preferred by M/s Rajasthan State Industrial Development & Investment Corporation Limited [2014 (7) TMI 621 - CESTAT NEW DELHI], in the light, of the fact that the language of the third proviso to Section 35C(2A) of the 1944 Act the third proviso to Section 254(2A) of the Income Tax Act, 1961, is distinct and this distinction has a bearing on the interpretation of the 3rd proviso to Section 35C(2A) of the 1944 Act. Since we discern a strong prima-facie case in support of the proposition that the Tribunal has the power to grant extension of stay beyond the period of 365 days from the initial grant of stay (wherever the delay in disposal of an appeal is not on account on any fault of the assessee), inter-alia , in the light of the decision of the Bombay High Court in Narang Overseas (P) Ltd., (2007 (7) TMI 5 - HIGH COURT, BOMBAY), we direct the respondents in the application/appeal not to take any coercive steps for realisation of the assessed liabilities, till disposal of the issue referred hereby to the Larger Bench.
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2014 (7) TMI 746
Small service provider Exemption under notification no.6/05-ST - providing the services under the brand name/trade mark of ICICI Bank Ltd. - Held that:- Just by providing the Business Auxiliary Service to ICICI Bank Ltd. by using the promotional material provided by ICICI Bank Ltd., the Respondent cannot be treated as using the brand name of ICICI Bank Ltd. and providing their service under the brand name of ICICI Bank. In fact the Respondent are not the Franchise of ICICI Bank Ltd. in the sense that they are providing financial services by using the business model and brand name of ICICI Bank. It is not the case of the department that the respondent for using the brand name or trade name of ICICI Bank Ltd. were paying some amount to the bank. On the contrary, it is the ICICI Bank which is paying to the respondent for providing the marketing services. The respondent, therefore, cannot be treated using the brand name of ICICI Bank Ltd. - No infirmity in impugned order - Decided against Revenue.
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2014 (7) TMI 745
Imposition of penalty - Credit utilized before making payment to vendors - Validity of Commissioner's order - Held that:- Commissioners order does not have one column which is very important and which has been the cause of the wrong conclusion by the Commissioner. This is the opening balance in respect of each month. Because of not taking opening balance into account, the CENVAT credit available at the end of each month for utilization has become incorrect and as a result in that particular month which is examined by the Commissioner, there is excess utilization of credit vis-a-vis availability. There was no excess utilization at all during the relevant period. Under these circumstances what has happened is only an accounting error by the appellant and that mistake has been rectified by them by paying the entire amount with interest and correcting their account suitably. Such being the position, since the entire amount has been paid before issue of show-cause notice and initiation of proceedings, the appellant need not be visited with penalty also. - penalty can be waived by invoking provisions of Section 80 of Finance Act 1994 also. - Decided in favour of assessee.
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2014 (7) TMI 744
Commercial or Industrial Construction Service - Works contract service for Delhi Jal Board - Tax imposed on the basis of agreement which states that "if payable is extra, it must be inferred that the appellant had collected the amount of service tax" - Held that:- The conditions precedent for ordering any person to remit (an amount collected as service tax, which is not required to be so collected), is a finding of fact that the person had in fact collected an amount towards service tax even though no service tax liability arises under the transaction qua which such collection is made. This finding of fact must be recorded by the Revenue. The liability to remit service tax under Section 73 A(2) does not arise on the basis of a mere permission in an agreement that the liability to compensate/reimburse to service tax liability of the service provider, is on the service recipient. Sub-section (3) of Section 73(A) requires a notice to be issued to show cause why the amount, as specified in the notice, in respect of a liability arising under Section 1 and 2, should not be paid by the Noticee to the credit the Central Government. - The show cause notice in this case failed to allege that the appellant had collected service tax of ₹ 41,18,665/- from the Delhi Jal Board - Impugned order unsustainable - Decided in favour of assessee.
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Central Excise
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2014 (7) TMI 739
Personal penalty on employee / Director for availing inadmissible Cenvat Credit by the company - Rule 26 of the Central Excise Rules, 2002 - tribunal set aside the penalty - Held that:- when all the penalties on the company have been deleted by observing that there is no material to even prima facie suggest that there was any fraud or collusion or willful misstatement or suppression of facts or controversy of the provisions of the Act or the Rules on the part of the assessee with intent to evade payment of duty, personal penalties are not justified. - Decided in favor of appellant.s
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2014 (7) TMI 738
Power of tribunal to grant stay beyond the total period of 365 days - extension of stay granted earlier - extension order should be speaking or not - Held that:-in case and having satisfied that delay in not disposing of the appeal within 365 days (total) from the date of grant of initial stay is not attributable to the appellant / assessee in whose favour stay has been granted and that the Appellate Tribunal is satisfied that such appellant / assessee has fully cooperated in early disposal of the appeal and/or has not indulged into any delay tactics and/or has not taken any undue advantage, the learned Appellate Tribunal may, by passing a speaking order as observed hereinabove, extend stay even beyond the total period of 365 days from the date of grant of initial stay. However, as observed by the Honble Supreme Court in the case of Kumar Cotton Mills Pvt. Ltd (2005 (1) TMI 114 - SUPREME COURT OF INDIA), it should not be construed that any latitude is given to the Appellate Tribunal to extend the period of stay except on good cause and if the Appellate Tribunal is satisfied that the matter could not be heard and disposed of by reason of the fault of the Appellate Tribunal for the reasons not attributable to the assessee. It also may not be construed that the Appellate Tribunal can extend stay indefinitely. It also may not be construed that the Appellate Tribunal can extend stay indefinitely. On expiry of every 180 days the concerned assessee / appellant is required to submit an appropriate application before the learned Appellate Tribunal to extend the stay granted earlier and the Appellate Tribunal may extend the stay for a further period but not beyond 180 days at a stretch and on arriving at the subjective satisfaction, as stated hereinabove, the Appellate Tribunal may extend the stay even beyond 365 days from the date of grant of initial stay and even thereafter. - Thus, on expiry of maximum period of 180 days the assessee / appellant is required to submit application for extension of stay each time and the Appellate Tribunal is required to consider the individual case and pass a speaking order, as stated hereinabove. - Decided partly in favor of revenue.
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2014 (7) TMI 737
Concessional rate of duty under Notification No.23/2003-CE dated 31.3.2003 - Violation of condition of notification - Non achievement of the positive Net Foreign Exchange - Held that:- The NFE calculations for the corresponding year were enclosed as relied upon document along with the show-cause notice issued to the appellant and, therefore, the appellant cannot take plea that they did not know that they had not achieved positive NFE during the year 2003-04 and 2004-05. amendment to the Foreign Trade Policy for computation of NFE on 5 years block basis came only in 2008 and prior to that, NFE was required to be calculated on a year-to-year basis. In the present case, the demand pertains to the year 2003-04 and 2004-05 - The condition of the notification is that the appellant should have achieved positive NFE. It is for the appellant to prove achievement of positive NFE before claiming the benefit of exemption. In the present case, the appellant has not fulfilled this condition - appellant has not made out a prima facie case grant of stay - stay granted partly.
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2014 (7) TMI 736
Exemption under Notification No. 56/2002-CE dated 14/11/02 - Renumbering of khasra numbers - area based exemption - Held that:- exemption is available to the goods other than the goods specified in Annexure I to the notification and which are cleared from the units located in the Industrial Growth Centres, Industrial Infrastructure Development Centres or Export Promotion Industrial Parks or Industrial Estates or Industrial Areas or Commercial Estates or Scheme Areas as the case may be, specified in Annexure II to this notification. There is no dispute that the goods being manufactured by the appellant are covered by this exemption. The renumbering of Khasra numbers is done by the Tehsil authorities, while the exemption notification, in question, has been issued by the Central Government. The Khasra numbers of which the industrial areas comprise have obviously been mentioned on the basis of the information furnished by the District authorities. If the local authorities have renumbered the Khasra number of which the industrial area or industrial estates comprises, the Central Government would amend the exemption notification only when the information in this regard is furnished by the State Government or the Jurisdictional Central Excise Authorities take initiative to inform the Central Board of Excise and Customs in this regard and in this process there would always be a time lap. But it does not mean that in the intervening period between the renumbering of Khasra number and correction of Khasra numbers in the exemption notification, the assessee, for none of his fault, should be deprived of the benefit of the exemption notification when his unit continues to be located at the same plot of land in the same industrial area/ industrial estate etc. notified in the exemption notification - Decided in favour of assessee.
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2014 (7) TMI 735
Rebate / refund of duty - there was no endorsement of the subject ARE-1 No.48 dated 10/2/2009 on the Shipping Bill by the Customs Authority of the Port of Export - thus, it was found that the petitioner had not exported the goods - Held that:- petitioner did not submit the original copy of the ARE-1 duly certified by the Customs Authority and Invoice (duplicate copy of transport, in original). It was also found that the even Division Office did not receive duplicate of the said ARE-1 in original duly authorised by Customs Authority of the Port of Export - Even in the triplicate of ARE-1, there was no endorsement certified by the Customs Authority with respect to Shipping Bill No.7074421. When all the authorities below have concurrently found that the petitioner had not exported the goods of ARE-1 No.48 dated 10/2/2009 under Shipping Bill No.7074421 for which they claimed rebate, we are of the opinion that as such no error has been committed by any of the authorities below. - there is no reason to interfere with the same in exercise of the power under Article 226/227 of the Constitution of India. - petition rejected - Decided against the assessee.
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2014 (7) TMI 734
Confiscation of goods - Availment of SSI Exemption - Seizure of goods on the basis that same were not accounted in C.E. Records - Department contends that the clearances of the appellant were far in excess of the threshold limit for SSI exemption - Held that:- Confiscation of the goods seized from the premises of M/s Shree Ganesh Plywood and M/s Ply Care would be sustainable only if the allegation of duty evasion against M/s Shree Ganesh Plywood by wrongly availing the SSI exemption and grossly under reporting the value of the goods manufactured and cleared by them is upheld. If this allegation is not upheld and it is found that the value of clearances of M/s Shree Ganesh Plywood were well within the SSI exemption, they would neither be required to take Central Excise registration nor would be required to maintain the statutory records. Thus, the issue involved in these appeals is linked with the facts and issues involved in the show cause notice dated 09/05/2012 issued to M/s Shree Ganesh Plywood and both the matters should have been adjudicated together. When the allegation of wrong availment of SSI exemption by under reporting the value of the goods manufactured and cleared is yet to be adjudicated, M/s Shree Ganesh Plywood cannot be accused of not obtaining Central Excise registration and not maintaining the RG-1 register and other statutory Central Excise records - Matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 733
Penalty u/s 11AC and 11AB - Held that:- Commissioner (Appeals) set aside the demand of interest and penalty on the ground that the respondent paid the duty before issue of the show-cause notice. The Supreme Court in the case of Union of India Vs Rajasthan Spinning and Weaving Mills reported in [2009 (5) TMI 15 - SUPREME COURT OF INDIA] held that penalty under Section 11AC of the Act cannot be set aside merely on the ground that duty was paid before issue of the show-cause notice. On perusal of the impugned order, I find that the main contention of the respondent was that they have paid the duty before the issue of the show-cause notice and, therefore, penalty is not sustainable. It is seen that the respondent had not contested penalty and interest on merit. As the respondent had not contested penalty and interest on merit and in view of the decision of the Hon'ble Supreme Court, the imposition of penalty and demand of interest is sustainable. - Decided in favour of Revenue.
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CST, VAT & Sales Tax
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2014 (7) TMI 743
Waiver of pre-deposit - Additional Commissioner has granted stay upto 60% of the disputed tax. The applicant not being satisfied with the said order of the Additional Commissioner (Appeals) preferred Second Appeal before the Commercial Tax Tribunal, Lucknow and the same was partly allowed thereby staying 80% of the disputed tax - Held that:- Court should not grant interim relief/stay of the recovery merely by asking of a party. - It has to maintain a balance between the rights of an individual and the State so far as the recovery of sovereign dues is concerned. While considering the application for stay/ waiver of a pre-deposit, as required under the law, the Court must apply its mind as to whether the appellant has a strong prima facie case on merit. In case, it is covered by the judgment of a Court/ Tribunal binding upon the Appellate Authority, it should apply its mind as to whether in view of the said judgment, the appellant is likely to succeed on merit, if an appellant have strong prima facie case, is asked to deposit the amount of assessment so made or penalty so levied, it would cause undue hardship to him, though there may be financial restrain on the appellant running in a good financial condition. Trade Tax Revision is being disposed of by modifying the impugned order dated 28.04.2014 to the extent that if the revisionist deposits 10% of the total demanded tax within a period of one month, the 90% of the demanded tax shall be kept in abeyance till disposal of the appeal. The revisionist is further directed to furnish security of the stayed amount within one month to the satisfaction of the Assessing Authority - Decided partly in favour of assessee.
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2014 (7) TMI 742
Imposition of sales tax on the undisclosed turnover - inclusion in turnover on the basis of additions made in the Income Tax - Held that:- Revisional authority held that the net income of ₹ 8,00,000 offered by the assessee to the income-tax authorities is the result of suppression of food and drinks and it is an undisclosed sale of food and drinks. Therefore, the question of any estimation would not arise. - in the facts of this case, the profit from the unaccounted sales is admitted by the assessee as aforesaid and she had income only from hotel business and therefore that was made the basis for levying tax under the Act. - in view the facts of the case, the decision in the case of P.C. Ittymathew & Sons v. Deputy Commissioner of Sales Tax (Law) [2000 (2) TMI 744 - SUPREME COURT OF INDIA] distinguished. In the balance sheet of the assessee, the aforesaid amounts were reflected, which did not find a place in the monthly returns filed by the assessee under the Act. The said entries are not disputed and in the light of the aforesaid admission, it is not a case of estimation of the suppressed turnover. It is a case of calculation of tax payable on the admitted turnover, which the revisional authority could very well do while exercising this power under section 63A of the Act. - when the revisional authority passes an order revising the assessment order, a right of first appeal is taken away. In the absence of any express provision in section 63A prohibiting the revisional authority from passing an order reframing the assessment, it cannot be said that a right of appeal is taken away. In fact against the order passed by the revisional authority statute provides for an appeal before the Karnataka Appellate Tribunal, which the assessee has exercised in the instant case - Decided against assessee.
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2014 (7) TMI 741
Validity of amendments to rule 41G of the Karnataka Entertainments Tax Rules - Declaration of Notification dated November 8, 2006 as being arbitrary, discriminatory, illegal, ultra vires and without authority of law; to quash annexure D dated February 15, 2010 passed by the second respon dent authority - declaration of amendment of section 4D carried out by Karnataka Act No. 5 of 2005 denying, inter alia, the MSOs the right to seek compounding of tax under section 4D as arbitrary, unreasonable and violative of articles 14, 19(1) (g) and article 300A of the Constitution and also to declare rule 41G as unconstitutional, illegal, without authority of law and having no rationale or nexus to the Scheme and scope of sections 4D and 4E of the Karnataka Entertainments Tax Act, by virtue of amend ment by Karnataka Act No. 5 of 2006 - Distinction between Sections 4C, 4D and 18(3A) of the KET Act - Held that:- The distinction made is only to see that large number of operators would pay based on the number of connections and giving a sort of concession to small operators asking them to pay composition tax at the fixed rate for various places in the State of Karnataka. In any way, this fixation of the slab at different places in respect of small-scale operators who have less than 500 connections is to encourage the trade/profession among the small cable operators. So far as multi-system operators are concerned, as their area of operation is big and they earn more income, it has decided to impose tax based on the number of connections at the rate of ₹ 15 or ₹ 20 per connection if the number of connections is more than 500 depending upon the area, which cannot be said to be arbitrary or illegal or in violation of article 14 of the Constitution. In that view of the matter, the challenge made to the amendment brought into the Act and Rules are not maintainable. - Decided against Petitioner.
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2014 (7) TMI 740
Disallowance of rebate under the Haryana General Sales Tax Act - Assessee contends that packaging material such as corrugated boxes, etc., and other material for packing of crockery is purchased after payment of sales tax and as this packing material is exigible to tax at the first stage of sale in terms of section 18 of the Act, it is entitled to rebate under rule 24(3) of the Haryana General Sales Tax Rules, 1975 - thus, the assessee is entitled to rebate - Whether the manufacturer is entitled to rebate of sales tax paid on purchase of material used for packing of crockery manufactured by it under provisions of the Act - Held that:- crockery items manufactured by the petitioner need to be packed in durable packing to ensure that they withstand and survive the rigours of transportation. It is also not in dispute that polythene bags, tissue papers and corrugated boxes, etc., are purchased by the petitioner after paying sales tax for packing of its products. Section 15A deals with "reduction or refund of tax in certain cases". The last two lines of this Explanation have been underlined to emphasize the significance thereof. There does not remain any doubt that packing material used for packing of manufactured goods has also been included in the term the goods used in manufacture on the same terms as raw material, processing material, fuel or lubricants which are actually used in the manufacturing of goods. - After going through the Explanation (appended to section 15A of the Act) which became available for benefit of the dealer retrospectively, there does not remain any dispute that adjustment, on the purchase made by the petitioner against payment of tax at the first stage, is very much available retrospectively from May 27, 1971. The Tribunal did not have the benefit of the amendment. The State has not contested the amendment of section 15A of the Act - Decided in favour of assessee.
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