Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 23, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Validity of order u/s 127(1) and (2) – Power to transfer cases – no opportunity of hearing was provided and consequently the order of CIT cannot be sustained and is quashed- HC
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Penalty u/s 271(1)(c) - claiming revenue loss on sale of fixed assets – If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis, penalty to be levied - AT
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Claim of depreciation – Concept of block assets - assessee had not used the assets during the year under appeal - there is no evidence of use of assets - claim disallowed - AT
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Deduction u/s 43B – CIT (A) correctly allowed the payment on account of cane cess and bonus paid during the year by the assessee out of pre-existing liabilities - AT
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Assessee is having residence as well as office in the same premises and the lift is installed for the purpose and interest of his profession as well as non-professional - 50% of expenses disallowed - AT
Customs
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Conditions for provisionally release the goods, viz., electronic components - perishable goods - release of goods ordered subject to certain conditions - HC
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Suspension of licence as custom broker - opportunity grated to the petition to file an appeal before CESTAT, tribunal to consider the matter on merits of the case. - HC
Service Tax
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Revision of an order passed after remand back of the order by the Commissioner (appeal) to the adjudicating authority - action of revision is not correct as per law - AT
Central Excise
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Denial of refund claim - accumulated credit availed on input service - it is the appellants who have suffered the loss because of the delay in obtaining registration - refund allowed - AT
VAT
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Levy of Luxury Tax - charitable trust - running a Dharmashala incidental to its main activity of running a hospital - not liable to luxury tax - HC
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Eligibility to input tax credit - goods destroyed in flood - dealer shall be entitled to input tax credit on the goods destroyed in flood. However, subject to rider that if such dealer is compensated by the Insurance Company to that extent credit will not be allowed - HC
Case Laws:
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Income Tax
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2014 (7) TMI 772
Cancellation of registration u/s 12AA(3) – Activities of Trust as per object or not - Whether the activities of the trust are genuine or not and whether the activities are being carried out in accordance with the objects - Held that:- None of the objections and the grounds which have been taken by the DIT(E) in the order for cancelling the registration can be held to be sustainable, so as to hold that the activities of the trust are either not genuine or they are not being carried out in accordance with the objects within the scope of section 12AA(3) - nothing has been brought on record to show that the application of the income of the trust from year-to-year has not been made towards attainment of the objects i.e., for the charitable purposes - If no discrepancy has been found in the income and expenditure account and there is a proper application of income towards the objects in accordance with the provisions of section 11, then neither the charitable nature of the trust should be doubted nor it can be held that its activities are not genuine or are not in accordance with the objects for which registration was granted – order of DIT(E) is set aside and the registration granted to the assessee cannot be cancelled u/s 12AA(3) on the ground stated by the learned DIT(E) in the order – Decided in favour of Assessee.
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2014 (7) TMI 771
Written down value of block assets – reduction of receipt from insurance company as to the damages u/s 43(6)(c) - block assets (WDV), valued at ₹ 68,06,562/- were destroyed in a fire accident - the insurer paid a sum of ₹ 1,54,99,051/- They, however, deducted only a sum of ₹ 68,06,562/- in the process of working out the WDV, and accordingly, claimed deprecation, in accordance with the relevant provisions - CIT(A) accepted the contention of the assessee - Tribunal took the view, that the reduction in the WDV of the block assets must be equivalent to the value of the newly acquired item, being ₹ 1,38,03,407/- Held that:- The appellate authority took the correct view of the matter in permitting reduction in WDV only to the extent of ₹ 68,06,652/- representing the value of the deduction - Tribunal made an attempt to increase the amount to be deducted, corresponding to the item of machinery that was acquired at the relevant point of time - obviously, the exercise was referable to the last part of clause (B) of special clause (c) of Section 43 (6) of the Act - The expression, reduction does not exceed the WDV as so increased, appears to have been taken into account - It is nobody’s case that the reduction would offset the value in the increase of the WDV of the block assets - That occurred on account of acquiring of new items – there was no basis in the approach of the Tribunal – Decided in favor of assessee.
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2014 (7) TMI 770
Validity of order u/s 127(1) and (2) – Power to transfer cases – Transfer of jurisdiction to file return - Held that:- The authority was required to give a notice indicating the reasons for transferring the case from one area to another area – here, no notice was ever given to the assessee u/s Section 127 of the Act nor any opportunity of hearing was provided and that the notice did not contain any reason for transfer - relying upon Bansal Sharevests Services Ltd vs. Commissioner of Income Tax and another [2005 (4) TMI 24 - ALLAHABAD High Court] – as per the order passed u/s 127, no reasons have been recorded for transferring the case from Ghaziabad to New Delhi - no opportunity of hearing was provided and consequently the order of Commissioner of Income Tax dated 9.3.2006 passed u/s 127 (2) of the Act, cannot be sustained and is quashed – Thus, the DCIT, New Delhi, does not have any jurisdiction to issue a notice u/s 147 of the Act - Decided in favour of Assessee.
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2014 (7) TMI 769
Validity of order - Rejection of books of account – Held htat:- The business operation of the assessee is the same for the AY as compared with the previous AYs - profits estimated in the previous years is a safe guide for estimation of the profits for the AY for estimating the turnover since the business activity conducted by the assessee remains the same - the average gross profit rates comes to 9.62% - the average gross profit works out to 10.42% - the estimation of the gross profit at 10% by the AO was perfectly correct, which requires no interference - estimation of gross profits is a question of fact which normally should not be interfered unless the estimation is perverse and ill-logical and has no reasonable nexus with the business activity vis-a-vis the turnover of the assessee. The Tribunal is a last fact finding authority is required to give its own reason howsoever brief it may be - the reasoning given by the Tribunal though in brief was not cryptic, which could result in non-application of mind - the Tribunal applied its mind and thereafter, passed the order after considering the submissions of the parties – the Tribunal was justified in not remanding the matter - reasoning adopted by the AO was perfectly justified and in accordance with the average estimation of the gross profits after comparing it with the gross profit rates with the previous years - Decided against Assessee.
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2014 (7) TMI 768
Prior period expenditure - accounting policy - increase in tariff - Deduction on power tariff – Accrual of liability – Held that:- All income and expenditure are accounted on accrual basis except for provision made for power tariff – assessee was equivocal in its stand, as to the liability - it is only when the actual accrual takes place, that allowance can be permitted, irrespective of the actual payment - Such accrual would take place by the department, only when the matter is settled amicably between the parties to the contract or the adjudication has reached finality –the Tribunal rightly disallowed the amount – Decided against Assessee.
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2014 (7) TMI 767
Addition u/s 69C of the Act – Liquor purchases - Difference in AIR information – Held that:- Once the assessee has discharged its initial onus of reconciling the purchases vis-ŕ-vis the bills in its book of account, then burden shifts on the Revenue to show that such an information is corroborated by cogent material on record that the assessee had made purchases from this party - If such material is not brought, then no adverse inference should be taken - the confirmation from the party has been received by the department - the confirmation was not available with the AO as well as CIT(A) – As regards the addition which is on account of difference in liquor purchase, once the assessee has reconciled all the purchases recorded in the books of account from the bills, then for making further addition the AO should have made out a preliminary inquiry from the vendors about the quantity of sale made by them to the assessee - thus, the matter is remitted back to the AO for verification of claim – Decided in favour of assessee. Loss of trading stock due to fire – Deduction for business loss of trading stock – Held that:- This is also prima facie borne out from the various evidences placed before us in the paper book - If it is a loss on account of stock-in-trade, then definitely it is on revenue account and has to be allowed as deduction while computing the profits u/s 28 of the Act - a claim cannot be made for the first time before the AO or before the CIT(A), as it tantamounts to revising of the return of income - the assessee has also brought on record that it has received the insurance claim on account of loss due to fire in the subsequent year and the same has been offered for the tax in the AY 2009-10 – the entire issue of claim of deduction of loss should be sent back to the file of the AO for examination of claim – decided in favour of Assessee.
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2014 (7) TMI 766
Penalty u/s 271(1)(c) of the Act – Concealment or furnishing of inaccurate particulars - Depreciation on purchase of cars – Held that:- The assessee is not in the business of sale and purchase of cars and therefore cars owned by it could not be part of its stock in trade - Cars were part of block of assets - any loss suffered or profit earned on sale of such cars cannot be treated as part of business activities - even if depreciation was not charged the nature of cars would not change from the part of block assets to the part of stock in trade - Revenue loss can be claimed only for business-activities carried out by an assessee – as the cars were part of block asset, so loss arising out of their sale has to be computed under appropriate head and not under the head revenue loss - The assessee has stated that it was a bonafide mistake - the claim made by the assessee about the loss was not a bonafide - Two views are not possible about the claim-only one view is possible - By claiming revenue loss on sale of fixed assets the assessee had filed inaccurate particulars of income - the order of the FAA does not suffer from any legal infirmity. The decision in COMMISSIONER OF INCOME TAX Versus ZOOM COMMUNICATION PVT LTD [2010 (5) TMI 34 - DELHI HIGH COURT] followed - Mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide - If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271(1)(c) would come into play and work to the dis-advantage of the assessee - If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, it would be difficult to say that he would still not be liable to penalty under section 271(1)(c) of the Act. The persons who make claims of this nature, actuated by a mala fide intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny - This would take away the deterrent effect, which these penalty provisions in the Act have - the assessee had made a claim that was wholly untenable and unsustainable - AO and the FAA had found that the assessee had failed to file any bonafide explanation – Decided against assessee.
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2014 (7) TMI 765
Nature of payment made for BSP link services rendered by ADP-GSI France – Requirement to deduct TDS on fees paid to technical services – Held that:- The payment made to ADP-GSI France for providing BSP link services to the Agents/Air lines was treated by the AO as in the nature of "fees for technical services" as per Article 13 of the treaty between India and France chargeable to tax in India @10% - As per Article 13(1), Royalty, fees for technical services and payments for lease of equipments arising in India and paid to resident of France may be taxed in France - royalty fees and payments may also be taxed in India at the maximum rate of 10% of the gross amount of such royalty, fees and payments – the contention of the assessee is accepted that there is nothing to show that the services provided by BSP link services provided by ADP-GSI France actually made available to the agents/Air lines any technical knowledge, experience, skill, know-how or processes so as to enable them to apply the technology – thus, there was no infirmity in the order of the CIT(A) holding that the payment made for BSP link services rendered by ADP-GSI France is not in the nature of fees for included services chargeable to tax in India – Decided against Revenue.
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2014 (7) TMI 764
Claim of depreciation – Concept of block assets - Held that:- AO and FAA had disallowed the claim of the assessee on the ground that assessee had not used the assets for business during the year – the decision in Dineshkumar Gulabchand Agarwal Versus Commissioner Of Income-Tax And Another [2003 (1) TMI 19 - BOMBAY High Court] followed - the assessee had argued that assets were ready for use and therefore depreciation was rightly claimed by him, even though he had not used the asset - the assessee was not entitled to claim depreciation if the asset was not used - for claiming depreciation, assessee must prove use of asset and in the case under consideration AO and the FAA had given a categorical finding that the assessee had not used the assets during the year under appeal - depreciation was allowed it must have been proved by the assessee that it had used the assets - there is no evidence of use of assets – assessee has not brought to our notice any judgment of the jurisdictional high court which had reversed the judgment of Dineshkumar Gulabchand Agrawal – Decided against Assessee. Penalty proceedings u/s 271(1)(c) of the Act – Held that:- The deduction/exemption was claimed u/s. 80IB and 10(38)of the Act - the assessee had not paid not STT tax and non-payment of said tax was within the knowledge of the assessee. Even then the assessee made a claim u/s. 10(38)of the Act - Such a claim cannot be termed an inadvertent mistake. Assessees are required to file return showing the correct taxable income and not to claim a deduction/exemption/rebate that is not due to them - If two views are possible for such a claim assessee can have benefit of existence of two possible views - It is a simple case of concealment of income and filing of inaccurate particular - the auditors had expressly made a note in notes to the accounts and determined the quantum of eligible 80IB deduction - AO had rightly levied penalty for the two amounts u/s. 271(1)(c)of the Act and the FAA was justified in confirming the same. In respect of penalty levied for claim of depreciation two views were possible about the claim at the time of filing of return of income - if the assets are ready for use depreciation can be claimed. FAA was justified in following the judgment of the jurisdictional high court while deciding the appeal filed by the assessee against the disallowance - the assessee had not produced any evidence of use of the assets - addition or disallowance of any amount should not result in automatic levy of penalty u/s 271(1)(c)of the Act - explanation of the assessee was bonafide and two views were possible about the claim - penalty levied for 80IB deduction and 10(38) exemption is confirmed, whereas penalty for disallowance of depreciation is set aside – Decided partly in favour of Assessee.
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2014 (7) TMI 763
Disallowance u/s 14A r.w. Rule 8D of the Rules – Held that:- The decision in M/s. IL & FS Financial Services Ltd. Versus Addl. Commissioner of Income Tax Circle–10(1), Mumbai [2014 (7) TMI 503 - ITAT MUMBAI] followed - The AO has worked out the disallowance u/s 14A as per rule 8D after taking interest cost and administrative cost - the assessee’s net worth and availability of funds is far more than investment which are capable of yielding exempt income - no interest cost should be attributed for working out the disallowance - If the assessee has huge funds which also consist of interest free funds, then resumption would be that investments have been made out of interest free funds, available with the assessee - interest cost cannot be made attributable - availability of interest free funds and investments which ore capable of yielding exempt income has not been examined properly either by the AO or by the CIT(A) – Relying upon The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - the AO is directed to re-examine the nexus of inter interest free funds and investment made – Decided partly in favour of Assessee. Addition on the ground of mismatch of ITS details – Held that:- FAA has already given substantial relief to the assessee on production of confirmations - assessee had not produced any evidence from remaining two parties - no evidence has been filed assessee was aware of the mismatch from the date of assessment but till date it has not been reconcile the remaining two items - matter should not be sent back to the AO - Had the assessee produced the same kind of evidence, it would have definitely remitted back the matter for verification – the order of the FAA is upheld – Decided against Assessee.
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2014 (7) TMI 762
Expenses incurred directly for phase 1 of project – Road Expenses - Whether there should be any allocation of road expenditure or not and whether the Commissioner (Appeals) is justified in allocating 19% of the road expenses on account of Phase–I and II – Held that:- The road expenditure cannot be allocated for Phase–II, for the reason that, firstly, for developing the plot and particularly the Phase–I, road was required to be constructed for getting access to the plot which was land locked - secondly, the road has been handed over to the municipal corporation of Mumbai for public use at large and not for assessee’s project alone that the assessee has received the TDRs - there cannot be any basis for allocation of road expenses to the Phase–II - The expenses has to be seen on a “matching principle” i.e., the cost incurred for the purpose of generating the revenue - If the “matching principle” is to be applied, then the entire road expenditure has to be allowed from the revenue receipts of the TDR disclosed in the year, because it has been shown against TDR receipts. A basis of allocation of expenses @ 19% as applied by the Commissioner (Appeals) seems to be quite reasonable and rational basis in the absence of other material or criteria for allocation for the purpose of making the allocation of the expenses between Phase–I and Phase–II - the disallowance of 19% on the road expenses should be restricted to net expenditure incurred by the assessee i.e., ₹ 1 crore and not ₹ 1,12,20,280, because the assessee got the reimbursement of ₹ 12,20,285 - the disallowance on account of road expenses should be restricted to ₹ 19 lakhs. Disallowance of loss on sale of TDR – Held that:- Disallowance of loss on account of TDR was not the subject matter of either the original assessment proceedings or the mandate of the Tribunal order - the reasons adopted by the CIT(A) that the sale of TDR to one Mr. Vijay M. Parkih is at lower cost is without any enquiry or any adverse material on record that the assessee has suppressed the sale made to this aprty - secondly, to hold that the payment of legal fee is not a necessary expenditure is again based on surmises that to be without any enquiry or based on some evidence - Even under the law, the Commissioner (Appeals) cannot disallow the loss in the round of proceedings, which is in pursuance of Tribunal’s order, issuing specific directions, which are only in relation to allocation of expenditure – CIT(A) could not have gone to disallow the entire loss in the TDR account, which was not the subject matter of earlier proceedings - already the road expenditure has been disallowed on the basis of proportionate allocation between Phase–I and Phase–II and such a road expense is a part of TDR - no separate disallowance under the head “TDR cost or expenditure” should be made - the disallowance of loss as made by the CIT(A) cannot be sustained and it is to be set aside – Decided partly in favour of Assessee.
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2014 (7) TMI 761
Non-deduction of TDS on overseas payment of agency commission – Disallowance u/s 40(a)(ia) of the Act – Held that:- Assessee is availing the services of non-resident agents for procuring export orders for which commission is paid - nonresident agents have no business connection nor they have any permanent establishment (PE) in India - non-resident agents are procuring orders for the assessee and are thus operating outside the Indian territory – The decision in Assistant Commissioner of Income-tax, Company Circle- II(1) Versus Farida Shoes (P.) Ltd. [2013 (11) TMI 907 - ITAT CHENNAI] - payments to non-residents for procuring export orders are not assessable to tax in India – also in GE Technology Cen. P. Ltd., Vs. CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] it has been held that if any sum is paid to the non-resident which is not chargeable to tax under the Act, the assessee is under no obligation to deduct tax at source u/s.195 in respect of payments - The obligation to deduct tax at source arises only where the sum is chargeable to tax in India – thus, there was no infirmity in the order passed by CIT(A) – Decided against Revenue.
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2014 (7) TMI 760
Claim of deduction u/s 80HHC of the Act - Business of export of shrimps – Held that:- CIT(A) followed the decision in M/s.Avani Exports & Others Vs. CIT [2012 (7) TMI 190 - GUJARAT HIGH COURT] for deleting dis-allowance made u/s.80HHC - CIT(Appeals) has rightly placed reliance on the judgment of M/s.Avani Exports & Others Vs. CIT - So far as computation of deduction u/s.80HHC is concerned, it would be appropriate to remit the matter back to the AO for re-computation – Decided partly in favour of Revenue.
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2014 (7) TMI 759
Condonation of delay – Delay of 31 days – Held that:- The assessee has explained the sufficient reasons for not filing the appeal within time - while condoning the delay, the court should take a lenient view - the party has not acted in mala fide but the reasons explained are factually correct, then the court should be liberal in construing the sufficient cause and should lean in favour of such party - the delay of 31 days in filing the appeal before the Tribunal is condoned. Disallowance/ addition made – Held that:- Assessee has not provided any convincing reason for the assessee’s failure to provide the submission along with evidences to substantiate the grounds of appeal before the CIT(A), having due regard to the principle of natural justice, it will be just and proper to set aside the entire appeal back to the file of the CIT(A) for fresh adjudication after giving a reasonable opportunity of being heard to the assessee placing all the materials to substantiate his claim – Decided in favour of Assessee.
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2014 (7) TMI 758
Non-payment of interest liability on sugar development fund loan u/s 43B – Held that:- It is the Government of India which is the principal and that being so, its agent, IFCI, according to Section 182 of the Indian Contract Act, 1872, cannot be taken to be a person employed to do any act as such principal - the IFCI did not receive any interest - The interest was on the SDF loan taken from the Government of India - As per the terms and conditions of the SDF loan, the charge on the immovable and movable properties of the company operates as security, inter alia, for due payment by the company to the President of India for term loan together with interest, additional interest, liquidated damages and all other monies payable by the company to the President of India - the AO obviously went wrong in concluding that the SDF loan was from IFCI and not from the Government of India - CIT (A) has duly taken into consideration all these facts while rightly deleting the disallowance/addition – Decided against Revenue. Cane cess and bonus payable u/s 43B – Held that:- The assessee had paid ₹ 6 lacs towards cane cess payable and ₹ 18,59,947/- towards bonus liabilities - Both the liabilities pre-existed on the first day of the previous year - the assessee filed vouchers as evidence for payment of bonus and challans showing payment of cess - the entire amount is an allowable expenditure under the provisions of Section 43B of the Act, according to which, a deduction otherwise allowable under the Act shall, notwithstanding anything contained in any other provision of the Act, be allowed in computing the income referred to in Section 28 of the Act, of that previous year, in which such sum is actually paid by the assessee. In the Tax Audit Report of the assessee, both these amounts have duly been reported as allowable expenditure - CIT (A) correctly allowed the payment on account of cane cess and bonus paid during the year by the assessee out of pre-existing liabilities – Decided against Revenue. Income taxed twice – Held that:- The Profit & Loss Account, the depreciation chart, the computation of income and all the other connected documents were duly taken into consideration by the CIT (A) and it was on the basis of this documentary evidence, that the CIT (A) arrived at the opinion that the amount had been taxed twice - the AO was rightly directed to reduce this amount from the assessee’s business income – Decided against Revenue. Advances paid out of internal generation of funds – Held that:- The working capital created had also been deployed in inventories, debtors and liquid assets in an appropriate manner – assessee contended that the interest on the debit balance of the directors for the years ended 31.3.03 and 31.3.04, amounted to ₹ 19.34 lacs only – This was inclusive of the tentative impact of interest @ 6% per annum, of 9.6%, for the year ended 31.3.04 - even after setting off the debit impact of interest for the years ended 31.3.03 and 31.3.04, the assessee company had a benefit of more than ₹ 124 lacs – Relying upon Munjal Sales Corporation vs. CIT [2008 (2) TMI 19 - Supreme Court] - where opening balance of profit and loss account and the profits are sufficient to cover the loans given, such loan is to be treated as given out of the assessee’s own funds and no disallowance of the interest paid on borrowed funds for business, is called for – thus, the grievance of the assessee is justified – Decided in favour of Assessee.
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2014 (7) TMI 757
Condonation of delay – Delay of 599 days – Change of jurisdiction - Held that:- The Department did not file the appeals within due time in the case and cause shown by it does not conclusively show that same is reasonable or sufficient - it has been already decided in assessee's own case for the earlier assessment year that State cannot be put on the same footing as an individual because individual would be quick in taking the decision whereas Government machinery, there is impersonal mechanism through its officers or servants but position here is not the same as it was not a case of similar nature and no such plea has been raised nor any reason or material in this direction has been pleaded or filed and Department has just sought condonation of delay, cannot be held to be a sufficient or reasonable cause for not filing the appeal within stipulated time – thus, the application for condonation of delay having been rejected – Decided against Revenue.
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2014 (7) TMI 756
Expenses on tax free dividend income u/s 14A – Held that:- The AO has not brought anything on record which could suggest that certain expenditures have been incurred for earning the exempt income, directly or indirectly – following GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COUR] - disallowance of 2% of the dividend income would meet the ends of justice - the AO is directed to restrict the disallowance to 2% of the dividend income – Decided partly in favour of Revenue. Deletion of the estimated addition – Held that:- The assessee’s accounts are audited - The requisite details were filed before the AO - The AO has not pointed out any specific expenditure which according to him was not properly supported by bills/ vouchers nor there is any specific finding that any expenditure have been incurred not for the purpose of business - the addition has been made on ad hoc basis - there was no reason to interfere with the findings of the CIT(A) – Decided against Revenue. Credit for TDS u/s 199 – Held that:- Assessee has duly furnished before the AO a statement of reconciliation of gross amounts in the books of account alongwith the gross amounts as per TDS certificates which has been completely ignored by the AO - assessee has disclosed income in respect of TDS certificate as receipt during the year itself - similar claim of TDS was allowed in the earlier year - CIT(A) has examined the reconciliation statement and on his examination the CIT(A) has given a categorical finding that the assessee is entitled for the credit of the TDS – the order of the CIT(A) is confirmed – Decided against Revenue.
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2014 (7) TMI 755
Expenses on society development charges – Expenses to replace old lift of building – personal expenditure - Held that:- The assessee does not acquire any advantage in the capital account or any new asset for its professional purpose and the lift in question is not an apparatus of generating the professional income - it cannot be considered as an expenditure of capital nature as it does not create any new asset belonging to the assessee - CIT(A) have rightly considered this fact that the assessee is having residence as well as office in the same premises and the lift is installed for the purpose and interest of his profession as well as non-professional and family members personal convenience, therefore, the whole expenditure is not found to be incurred exclusive for the purpose of profession of the assessee. The view of the CIT(A) is upheld to the extent that 50% of the expenditure to be considered for professional purpose - since the expenditure in question does not create a new asset or bring any advantage in the capital account of the assessee, therefore, it cannot be treated as capital in nature - the expenditure has been incurred in the compelling circumstances to remove the inconvenience and hardship faced by the assessee in its professional work as well as non-professional life and the advantage of the said expenditure is to facilitate the assessee's professional activity to be carried out more efficiently and profitably - 50% of the total expenditure which is considered to be for the professional purpose is allowed as revenue expenditure – Decided partly in favour of Assessee.
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2014 (7) TMI 754
Lack of adequate opportunity – Cancellation of registration u/s 12A – Held that:- Activities carried out by the assessee in earlier years were continuing in the year - DIT-E has not brought on record any fact demonstrating the discontinuation of such activities - assessee was conducting exams and was supplying study material to students - These activities were held to be educational activities by the Tribunal on more than one occasions and the orders of the ITAT have become final - without bringing something positive on record to distinguish the facts of earlier year and current year, view has to be taken that assessee was in the field of education. Assessee is also carrying out similar kind of activities i.e. educational activities, proviso to section 2(15) is not applicable to it - there is reason as why to not to treat it as educational institution - issue of real surplus or deficit of the income and expenditure account has not been looked in to by the DIT-E, though he had considered various figures while deciding the issue against the assessee - In absence of a finding of fact that there was change the activities of the assessee during the year or that the assessee was not carrying out its activities as per the MOA, the views of the DIT-E cannot be accepted – Decided in favour of Assessee.
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2014 (7) TMI 753
Interest expenses disallowed u/s 36(1)(iii) – Held that:- The assessee was having interest-free funds far in excess of investments, it can be said that the investments are made out of interest-free funds - the AO was not justified in making additions and/or making disallowance u/s 36(1)(iii) of the IT Act – Relying upon CIT v. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - no error and/or illegality has been committed by the Tribunal in deleting the disallowance made by the AO u/s 36(1)(iii) of the IT Act – no substantial question of law arises for consideration – Decided against Revenue. Interest and other expenses incurred for exempted income u/s 14A – Held that:- The assessee was having sufficient profit and interest free funds in comparison to the investments and with respect to mutual fund transactions, no interest has been charged by the bank except security transaction tax and considering the above when the deductions u/s 14A of the IT Act was restricted to ₹ 64,909/-, it cannot be said that both CIT(A) and Tribunal have committed any error – Relying upon CIT v. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - the order of the Tribunal is upheld – Decided against Revenue.
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Customs
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2014 (7) TMI 778
Retracted statements - Acquittal from offences punishable under section 135 (1)(a)(i) and 135 (1)(b)(i) of the Customs Act, 1962 and Section 5 of the Imports and Exports (Control) Act, 1947 - carrying contraband gold in the vessel - said gold was smuggled into India from Sharjah - evidence of two witnesses i.e., the customs officer - Held that:- the statement under section 108 is admissible and it can be relied also. However, if at all it is retracted, then, weightage can be given to it only if there is corroboration on other material particulars, In the present case, as the panchas did not corroborate and the prosecution did not examine the other panch, that material evidence collapsed. The learned trial Judge has rightly observed that in the absence of the statements of these crew members, when the same were relevant u/w 108(b) of the Customs Act, it was the duty of the Prosecution to examine either the interpreter or the scribe and record their statements in order to confirm the veracity of the contents of the statements. The defence was successful in creating doubt in the mind that the vessel Rajendra Jyoti was not the only vessel berthed at the Hay Bunder during that period but nearly 25 vessels had arrived and, therefore, the possibility that any other person might have thrown the tin filled with gold bars in the sea could not have been overruled. - the trial Court has taken an evenly balanced view while assessing the evidence and, therefore, there is no need to disturb the finding of the trial Court. - Decided against the revenue.
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2014 (7) TMI 777
Onerous conditions for provisional release of confiscated goods - discrepancy in the quantity of the goods - goods imported by the petitioner are lying in the ware house of the respondents department since 2011 - Held that:- provision release allowed subject to condition that, The petitioner is directed to pay 100% tax on the value declared by them i.e., ₹ 76,64,324/- as against the value of ₹ 1,39,73,896/- determined by the department - For the differential in duty i.e., ₹ 43,80,981/- the petitioner is directed to furnish bank guarantee - petitioner is also directed to execute a bond for 100% of the value assessed by the department. Decided partly in favor of assessee.
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2014 (7) TMI 776
Conditions for provisionally release the goods, viz., electronic components - perishable goods - Held that:- since the goods are perishable, the same cannot be retained by the respondents, indefinitely. At the same, the interest of the Department also is to be protected. It is the duty of the respondents to recover the tax, penalty and in the event of confiscation, recover the amount in lieu of confiscation proceedings. All these things should be taken care of. - release of goods ordered subject to certain conditions - decided partly in favor of assessee.
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2014 (7) TMI 775
Suspension of licence as custom broker - direction to surrender the original licence book and all customs ID cards - allegation that the petitioner firm has aided/abetted the importers in evasion of duty - Held that:- the petitioner shall prefer an appeal before the Appellate Authority as against the order dated 14.2.2014 passed by the respondent, within a period of three weeks from the date of receipt of a copy of this order. Till such time, the respondent shall not take any coercive steps for collection by the order dated 14.02.2014. - opportunity grated to the petition to file an appeal before CESTAT, tribunal to consider the matter on merits of the case.
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Corporate Laws
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2014 (7) TMI 774
Winding up petition - unable to pay debts - dispute with regard to the application and the allotment of shares - Held that:- In a petition seeking winding up of a company for its inability to pay its debt, what is to be seen is whether there is a debt and whether a plausible defence is raised by the respondent for the non payment of the debt and to the winding up petition. In case a plausible defence is raised which is neither sham nor moonshine, the company is not to be wound up in exercise of powers under section 433 and 434 of the Companies Act, 1956. The disputes raised in the present petition and by way of defence would be required to be settled before a civil court. Since the petitioner has already filed a suit of recovery of the same amount and the disputes and the rival contentions raised by the parties are being adjudicated upon in the civil court, the present petition would not be maintainable. - present petition not maintainable.
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Service Tax
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2014 (7) TMI 795
Demand of differential duty - Service provided before 10.09.2004 and payment for service received after 10.09.2004 - Held that:- Certificates from the service recipients now produced before the bench were not produced before the lower authorities. As the issue relates only to the period when the services were provided and the period when consideration of the services was received - Therefore, In the interest of justice, the matter is required to be remanded back to the adjudicating authority. Appellant should furnish all the required documents to the adjudicating authority to establish that periods when services were provided, were before the period when their activities were not liable to service tax - Decided in favour of assessee.
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2014 (7) TMI 794
Condonation of delay - demand of service tax - Mandap keeper service - Delay due to ill health of spouse of proprietor - Commissioner declined to invoke discretion - Held that:- Condonation of delay particularly in the circumstances pleaded by the appellant should be liberally considered. It is perverse for the learned appellate Commissioner to hold that care of a spouse and the need for her attention is not a relevant criterion. The discretion to condone the delay authorised to the appellate Commissioner is not the personal discretion of the Commissioner; it is the discretion of the law and should be examine appropriately as dictates of law require. The order is whimsical inviting invalidation and is accordingly set aside - Decided in favour of assessee.
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2014 (7) TMI 793
Valuation of goods - whether the materials supplied free of cost by the service recipient used in the construction would be included in the taxable value - Held that:- Following decision of Bhayana Buildings (P) Ltd. Vs. Commissioner of Service Tax, Delhi [2013 (9) TMI 294 - CESTAT NEW DELHI] - It is held that the value of goods and materials supplied free of cost by service recipient to the provider for incorporation in constructions would neither constitute non-monetary consideration to service provider nor form part of gross amount would be outside the taxable value - matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 792
Club or Association service - principal of mutuality - export promotion council - period from April 2008 to March 2009 - Held that:- Following decision of Federation of Indian Chambers of Commerce and Industry (FICCI) vs. C.S.T., Delhi [2014 (5) TMI 183 - CESTAT NEW DELHI] - Order passed by Commissioner (Appeals), New Delhi quashed - Decided in favour of assessee.
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2014 (7) TMI 791
Restoration of appeal - tribunal dismissed the appeal for non compliance of the pre-deposit, which was ordered by the CESTAT - CESTAT has extended the time once - Held that:- Considering the financial difficulties expressed and the submission of the learned counsel appearing for the appellant, we are of the view that the substantial questions of law raised above, can be answered infavour of the appellant by granting six weeks further time to deposit of demand with interest - on such deposit, the appeal shall be restored and dispose of the same in accordance with law.
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2014 (7) TMI 790
Denial of CENVAT Credit - Non production of invoices on which credit was availed - Invoices which were produced were not in the name of assessee - Partial amount allowed by Original authority - Held that:- original adjudicating authority had considered the invoices submitted and in fact had allowed more than ₹ 40,000 credit to the appellant. The balance was disallowed on specific ground that the invoices not being in the name of the assessee or proof of payments have not been produced - both these issues have not been contested nor rebutted either before Commissioner (Appeals) or before this court. Since the appellants have failed to rebut the findings of the original adjudicating authority, the appellant has no case on the merits. Further from the details of personal hearing and the history of the approach of the appellant, it becomes clear that they were not serious in prosecuting the appeal - Decided against assessee.
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2014 (7) TMI 789
Revision of an order passed after remand back of the order by the Commissioner (appeal) to the adjudicating authority - Valuation - Interior Decorator’s Service - abatement of cost of materials from the gross value - Notification No. 12/2003-S.T - appellate authority held that the assessee should adduce evidence in this behalf to the original authority so that the said authority could requantify the demand of service tax - Held that:- Order passed by the learned Commissioner (Appeals) was not challenged by the department. The appellate Commissioner clearly found a case in favour of the assessee and accordingly acceded to their claim for the benefit of Notification No. 12/2003-S.T. subject, of course, to proof of compliance with the conditions attached thereto. - The department had no grievance against this view. - It was this view which was translated into action by the Addl. Commissioner by requantifying the demand of Service Tax. By taking up the Addl. Commissioner’s order for revision under Section 84 of the Act, the learned Commissioner was virtually interfering with the Appellate Commissioner’s decision which had, by then, attained finality for want of challenge. - Decided in favour of assessee.
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2014 (7) TMI 788
Demand of service tax - erection, commissioning or installation services - Held that:- Circular of the Board which provides that laying of electric cables upto distribution point of residential or commercial localities/complex is not a taxable service under the category of ‘erection, commissioning or installation’. As such at this stage, appellant has a good prima facie case in its favour so as to allow the stay petition unconditionally - stay granted.
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2014 (7) TMI 787
Waiver of pre deposit - Benefit of concessional rate of service tax @ 2% available under the Works Contract Rules - Availment of option required under sub-rule (3) of Rule 3 - Held that:- though the Applicant claimed to have exercised their option on 12-7-2007, but on a prima facie view, the option would be considered to have been exercised from the date of receipt of the said option by the Department. Thus, prima facie, the Applicant are required to pay service tax without the benefit of Works Contract Rules, till the said option was exercised i.e., on 10-9-2007, when it was received by the Department relating to the ongoing projects. Gross amount received in the month of August, was ₹1,93,77,870 and the amount of service tax payable on the same worked out to be ₹20,51,672 - for the month of September, 2007, there are no details in the Notice of the amount received as on 10-9-2007 and the corresponding service tax short paid. No financial hardship was pleaded - Conditional stay granted.
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Central Excise
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2014 (7) TMI 781
Condonation of delay in filing an appeal before tribunal - sufficient cause - Whether the Tribunal was correct in holding that the death of the daughter of the Director of the appellant Company and that the fact of the concerned employee of the appellant Company left the job during the relevant period is not relevant or admissible reasons for condonation of delay is just and proper - delay of 196 days - Held that:- the reasons adduced in the application seeking condonation of delay of 196 days in filing the appeal are proper and sufficient cause has also been made out by the appellant for condoning the delay and therefore, the CESTAT was not right in rejecting the said application. - CESTAT directed to number the appeal and dispose of the same in accordance with law - decided in favor of assesssee.
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2014 (7) TMI 780
Duty demand - Penalty u/s 11AC - CIT confirmed duty - Tribunal deleted duty and penalty - Whether Customs Excise & Service Tax Appellate Tribunal committed an error in fact and in law in reversing the order of CIT(Appeals) confirming the demand for wrongfully availed Cenvat credit of ₹ 1,07,07,142/- on the ground that the issue is revenue neutral - Held that:- there is no material to even, prima facie, suggest that there was any fraud, 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 - Decided against Revenue.
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2014 (7) TMI 779
Denial of refund claim - accumulated credit availed on input service - Notification No.5/2006-CE (NT) dated 14.3.2004 issued under Rule 5 of CENVAT Credit Rules, 2004 - appellant is manufacturing exempted goods - appellant filed the refund claim under Rule 5 of the CENVAT Credit Rules, 2004 - Held that:- Since the appellant is availing full exemption and not even registered and the exempted goods were not exported under bond, refund has been denied - In fact, it is the appellants who have suffered the loss because of the delay in obtaining registration and not exporting the goods under bond, even though appellant had taken a decision to avail cenvat credit and indicated the same at the time of removal. It is strange to note that Central Excise Officers have certified the availment of cenvat credit even though the appellant was not registered and they had not made any verification whatsoever with regard to availment of cenvat credit - Following decision of WELL KNOWN POLYESTERS LTD. Versus COMMISSIONER OF C. EX., VAPI [2011 (1) TMI 664 - CESTAT, AHMEDABAD] - rejection of refund claim on the grounds enunciated are not sustainable - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (7) TMI 786
Detention of goods - respondent No. 4 appeared before the first respondent and requested to release the goods bringing to his notice that the petitioner is a registered dealer and that the transactions in question are duly recorded in the books of accounts and the goods were being carried accompanied by all necessary documents - first respondent insisted upon payment of tax at five per cent. of the value of goods together with two times penalty alleging that the consignments were not covered by proper documents. As the goods are subject to natural decay, the petitioner was constrained to pay the tax and penalty as demanded and got the goods released - Assessee seek a declaration that the action of respondents 1 to 3 in collecting the tax and penalty is arbitrary, illegal and without jurisdiction - whether the assessing authorities and the officers of the vigilance wing at the time of inspection of the vehicles have power to resort to spot collection of the tax and compounding fee without passing any order as to the tax liability. Held that:- it is not open to respondents 1 and 3 to arrive at a conclusion as to the petitioner's tax liability immediately after interception of the vehicles in question. The contention of respondents that the writ petitioner is a stranger to the transaction is untenable since the petitioner is the registered dealer and the burden is on the petitioner to prove that the transaction in question is not an inter-State sale and that the transaction is not liable to be taxed in terms of section 6A of the Central Sales Tax Act. Such liability can be determined only after complying the procedure prescribed under the Act and till such determination is made collection of tax and penalty is undisputedly without authority of law. Merely because respondent No. 4 paid the tax, it is not open to respondents Nos. 1 to 3 to contend that the petitioner is a stranger to the transaction, particularly in view of the admitted fact that respondent No. 4 is none other than the consignee. - The further contention advanced on behalf of the respondents that the tax and penalty was paid voluntarily by respondent No. 4 does not appear to be credible and is not at all convincing in the facts and circumstances noticed above and therefore we are unable to accept the said plea - respondents 1 to 3 and 5 are directed to refund to the petitioner the amounts collected while releasing the vehicles in question, together with interest at six per cent per annum within eight (8) weeks - Decided in favour of assessee.
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2014 (7) TMI 785
Writ petition - Call for records - Violation of principle of natural justice - Held that:- assessee has a right to have the material which the revenue has relied upon to arrive at a prima-facie opinion that proceedings should be further proceeded. The question, therefore, of an assessee being entitled to have the copies of the documents being relied upon by the revenue, particularly when the said documents have been seized from its possession, has to be answered in affirmative. - The test of reasonableness and the principles of natural justice also require that if assessee is put to notice he must know about the material being relied upon by the revenue to give an effective reply. There cannot be any doubt whatsoever that principles of natural justice have to be followed and the petitioner is entitled for supply of copies of documents being relied upon by the revenue or at least an inspection thereof - However, the apprehension being expressed by the revenue regarding manipulation in books of account by the petitioner after getting the documents seized also cannot be said to be without any basis. - A reasonable and pragmatic solution to the problem, in our view, is to direct the petitioner to produce the account books and other relevant documents before the authority who may verify the same or obtain copies thereof as he may deem fit and thereafter supply the copy of the documents being relied upon by the revenue. The petitioner after receiving the copies of the documents may file its reply to the notice and thereafter the proceeding may be undertaken in accordance with law - Decided in favour of assessee.
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2014 (7) TMI 784
Levy of Luxury Tax - charitable trust - running a Dharmashala incidental to its main activity of running a hospital - Tribunal levied tax under the provisions of the Madhya Pradesh Hotel Tatha Vas Grihon Me Vilas Vastuon, Par Kar Adhiniyam, 1988 - Held that:- It is not agreeable with the contention put forth by the respondents/State that activity of the Dharmashala are collectively incidental and ancillary sales and so also has already stated above the incidence of tax would arise only when under sections 3 and 4 of the Act the charging or levy of tax is attracted. For the purpose of imposing the charge, the Parliament has enacted detailed provisions in order to compute the tax liability and deviating from the provisions is not permissible. The transaction to which the provisions of the Luxury Tax Act must be applied and encompassed for determining the charge this inference flows from the general arrangement of the provisions of the Act and that which is natural has to be concluded otherwise non-mention would mean it was not intended to fall within the charging section. Title of the Act says that it is called the Luxury Tax Act of 1988 and was intended to levy tax on luxuries provided in hotels and lodging houses in the State of Madhya Pradesh and thus, the "business" of the present institution-Choithram Charitable Trust would not be amenable to luxury tax and was thus outside its purview. We have no hesitation in holding that both the impugned orders, as already stated above are contrary to the provisions of the Act and, therefore, they are hereby set aside - Decided in favour of assessee.
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2014 (7) TMI 783
Eligibility to input tax credit - goods destroyed in flood - Compensation already granted by Insurance company - no Out Put Tax liability is created for the same goods - whether on the goods destroyed in flood, a dealer shall be entitled to input tax credit or not - Held that- due to the act of God, the flood and the entire goods being destroyed, it was impossible for the respondent - dealer to comply with the conditions for availing input tax credit on the goods destroyed in flood i.e. it was impossible for the respondent - dealer to sell, resell or to use the same in manufacture of goods. When it was impossible for the respondent - dealer to comply with all the conditions stipulated for input tax credit due to act of God and it was beyond the control of the respondent - dealer to fulfil the conditions for availment of the input tax credit due to the act of God - in the present case, the flood, which can be said to be valid excuse for not fulfilling the conditions stipulated for availing input tax credit on the goods destroyed in flood and therefore, interpreting the provisions for availing input tax credit, it is hereby held that the respondent herein - dealer shall be entitled to input tax credit on the goods destroyed in flood. However, subject to rider that if such dealer is compensated by the Insurance Company with respect to loss sustained i.e. with respect to the goods destroyed, the same can be given credit, meaning thereby, to that extent the respondent - dealer shall not be entitled to input tax credit, otherwise, it will be giving a double benefit to the respondent - dealer. - as such no error has been committed by the learned tribunal in allowing the appeal preferred by the respondent - dealer and holding that the respondent herein - dealer shall be entitled to input tax credit on the goods destroyed in flood. No question of law much less substantial question of law arises - Decided against Revenue.
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2014 (7) TMI 782
Waiver of pre-deposit - validity of interim order - assessee (respondent) has admittedly remitted 50 per cent as per the direction earlier - revenue contended that, that no further enquiry is necessary in the writ petitions and the same may be disposed of leaving it open to the third respondent-appellate authority to decide the petitioner's appeals in accordance with law. - held that:- The validity of the impugned orders in the present case cannot be tested in the light of the well-settled principles reiterated in the above decisions since the statute itself restricted the discretion conferred on respondents 2 and 3. At any rate, as already expressed above, the orders dated August 17, 2013 and September 3, 2013 in our considered opinion cannot be held to be non-speaking orders. Therefore, the contention of the petitioners that the said orders are illegal and arbitrary is untenable and the same do not warrant interference by this court on any ground whatsoever. - order of respondent No. 2 dated September 3, 2013 granting stay of collection of 50 per cent. of disputed tax shall continue till the appeals are disposed of by respondent No. 3 following due process of law.
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Indian Laws
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2014 (7) TMI 773
Compensation against the Motor Accidents - accident by the departmental drivers - The present stand taken by the learned Assistant Solicitor General for the appellant is that the appellant as well as the 2nd respondent herein were in the lawful exercise of a sovereign function as they were in search of drug pedallers involved in Narcotic Substances. It is argued that as the 2nd respondent was the department driver, who was on official duty and was driving the vehicle as a part of his duty, the State has no vicarious liability in the matter as the duty was in discharge of sovereign functions. - Held that:- There is little scope for the said argument. The appellant, who is the first respondent, was sued in his capacity as the registered owner of the vehicle. Admittedly, the vehicle was not covered by an insurance policy. Therefore, it is the duty of the registered owner of the vehicle to compensate the persons who sustain injuries in the accident caused by the said vehicle. The liability in the present matter on the State is not merely a vicarious liability in some wrongs committed by an official of the State, whereas the claim as such was on account of the injuries caused to the two third parties on account of the rash and negligent driving of a government official and the liability cast upon the State herein is in the form of a liability on the part of the registered owner of the motor vehicle involved in the accident.
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