Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 29, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Creditworthiness of amalgamating companies - it is not open to the revenue to go into the amalgamation reserve as per amalgamation scheme approved by Hon’ble Calcutta High Court - AT
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Transfer pricing adjustment – Indenting transactions - commission percentage from AE transactions should be benchmarked on the basis of commission rate from non-AE transactions under the ‘Indenting business’ - AT
Customs
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Warehoused goods - Delay in clearances of cargo cannot be held against the appellant as a willful act to invite damages when the custodian and the Customs also have the powers to auction the cargo if not cleared within the warehousing period. - AT
Service Tax
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Whether the amount recovered from the members who opt for membership (with land) towards cost of land and handed over to M/s. Amrutha Estates (according to appellants) has to be levied to service tax under ‘club or association service’ or not - matter remanded back with directions - AT
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Intellectual property rights for allowed user of its brand name - The minimum guarantee of profit per month given or assured by the agent to the appellant have been misunderstood as ‘Royalty' which is not the fact. - AT
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Just because ₹ 20 has been charged by GMB from M/s. UCL Ltd. under the head wharfage charges and GMB has paid service tax on the same under the category of port service, it cannot be said that the service rendered, if at all, by GMB was a port service. - AT
VAT
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Validity of assessment order - Limitation prescribed under section 39 is as to the “making“ of the assessment and not to “initiation“ thereof. The observation of the revisional authority that “made“ did not mean “completed“ or “signed“ can not be accepted. - HC
Case Laws:
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Income Tax
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2014 (7) TMI 965
Cancellation of penalty u/s 271B – No assessment proceedings pending –Failure to record satisfaction by AO - Held that:- The satisfaction as to the assessee having concealed the particulars of his income or furnished inaccurate particulars of such income is to be arrived at by the AO during the course of any proceedings under the Act, which would mean the assessment proceedings, without which, the jurisdiction to initiate the penalty proceedings is not conferred on the assessing authority by reference to clause (c) of sub-section (1) of section 271 of the Income-tax Act, 1961 - Following the decision in C.I.T. Vs. Ram Commercial Enterprises Ltd. [1998 (10) TMI 13 - DELHI High Court] - thus, no penalty is levied u/s 271B of the Act when AO failed to record its satisfaction in the assessment order pertaining to it – Decided against Revenue.
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2014 (7) TMI 964
Nature of transaction – STCG in investment and not trading – Held that:- The assessee has held 4 scrips for a period of more than 6 months during the year and 5 scrips have been held for 3 to 5 months, while the remaining have been sold within a period of 30 days – assessee had no intent of holding on to the shares - the Tribunal has failed to note is that mere treating the transaction separately in the books of account would not assist the assessee - If the Tribunal does not hold that the concurrent findings are perverse, then, all the more, this question is a substantial question of law. Insurance premium paid – Insurance policy covers the period of next financial year - Held that:- The Tribunal was of the view that there is no dispute regarding the allowability of keyman insurance - The disallowance was made by the AO only because the assessee took the insurance policy on the last date of the financial year - expenditure came during the financial year relevant to the assessment year - the insurance policy cover is extended to the next financial year does not mean that the premium paid during the year under consideration is not an allowable expenditure – Decided against Revenue.
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2014 (7) TMI 963
Application of section 145(3) – Correctness and completeness of accounts – Held that:- CIT(A) rightly was of the view that as per the observation of the AO in the assessment order, it is noted that no specific defect was detected by the AO in the books and there the assessee was maintaining books of account - the AO was satisfied about the correctness and completeness of books and method of accounting regularly employed by the assessee - The provisions of section 145(3) could be invoked if the AO is not satisfied about the correctness and completeness of the accounts and method of accounting followed - when the AO did not point out any specific defects in the books of account maintained by the assessee, the books cannot be rejected by invoking the provisions of section 145(3) of the Act - even after rejecting the books of account, the AO has not proceeded to estimate the income of the assessee and he has made disallowance out of various expenses debited by the assessee in the books of account - rejection of books of account is not proper and when the AO is making specific additions/disallowance, there is no impact on the assessable income of the assessee even if the books are not rejected and on this aspect, there was no reason to interfere in the order of CIT(A) – Decided against Revenue. Direct expenses disallowed – Details not furnished related to development of flats – Held that:- CIT(A) noted that the assessee had to incur major expenditure on infrastructural development such as leveling of land, landscaping, construction of roads, erection of street light polls, construction of overhead water tank etc. for 1st phase of the project - assessee furnished copy of bills and other details along with nature of work done in the paper book filed before him – the AO’s objection is that the assessee has not developed the flats because the assessee has sold plots in the present year - In the details of the expenses incurred by the assessee, reproduced by the CIT(A), it is not coming out that these expenses are not in relation to development of plots and the same are for construction of flats – AO is making a general observation that in absence of proper evidence in the shape of vouchers and details as well as name and complete address to whom this amount has been paid, the token disallowance of 10% is justified but the AO has not pointed out a single instance as to what details were asked for by him in remand proceedings, which has not been submitted by the assessee – order of the CIT(A) is upheld – Decided against Revenue. Apportionment of expenses on commission and brokerage to work-in- progress (WIP) in P&L A/c – Held that:- CIT(A) noted that the assessee has filed confirmation from certain brokers - assessee contended that in the profit & loss account, total sales is shown at the same figure of ₹ 50,04,22.750/- from which a discount of ₹ 10,86,85,300/- was reduced and in this manner, net sale income was considered in the P & L Account at ₹ 39,17,37,450/- but while furnishing the details of brokerage and commission, gross sales figure was shown because gross sale figure was the basis for making payment of commission and discount was allowed to the buyers for certain early payment etc. and this discount is not in dispute - it comes out that whatever sales was accounted for by the assessee, the commission expenditure claimed by the assessee is in respect of sale only and not in respect of sale which is not considered – there was no reason to interfere in the order of CIT(A) – Decided against Revenue. Business expenses added – Expenses properly vouched and supported – Held that:- The decision of CIT(A) is on the basis that the nature of expenses were charity and donation - But, sponsoring Kushti Dangal and making some payment to a club for sponsoring cultural events on the occasion of Baishakhi Mela, cannot be considered as charity and donation - It is not the objection that the business of the assessee was not being conducted at Rudrapur - Their objection is mainly that these expenses are in the nature of charity and donation - the expenses are not in the nature of charity and donation, this disallowance is not justified – Decided in favour of Assessee. Incentives paid to brokers – Complete disclosures made – Held that:- The disallowance was confirmed by CIT(A) merely on the basis that reply was not received from some payees - the disallowance was made by the AO to the extent of 30% for the reason that the assessee did not furnish bifurcation of incentive on sale of flats and advance booking of flats - The entire amount for which reply was received by the AO has been allowed by CIT(A) and the only basis for making the disallowance is that for the balance amount, no reply was received in reply to notice u/s 133(6) of the Act - making disallowance on the basis of the fact alone that some parties did reply, is not justified – Decided in favour of Assessee. Deduction u/s 80IB – Held that:- The assessee did not construct the residential units in the plots and these plots were sold after basic infrastructural development of the project - the plots were sold to the buyers and it was not the concern of the assessee whether the construction had to be carried out or not by the buyers - the assessee did not obtain completion certificate of construction of the housing project from the competent local authority as required in the explanation to section 80IB(10)(a) of the Act – there merit in the claim of the assessee that the assessee is eligible for deduction u/s 80IB(10) of the Act – Decided against Assessee.
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2014 (7) TMI 962
Creditworthiness of amalgamating companies - Investment in shares of amalgamating companies – Held that:- From the above provisions of section 394A of the Companies Act, 1956, it is clear the If the revenue wants to object to the proposed scheme of amalgamation, it has to do so in the course of proceedings before the High Court but before the final order is passed - Whenever such objections have been raised, these have been considered on merits by the concerned High Court and also incorporated the condition for safeguarding the interest of revenue in the very scheme - once a scheme of amalgamation is approved by High Court no authority should be allowed to tinker with the scheme - neither the official liquidator nor the Regional Director nor Central Government raised any objection to the scheme of amalgamation - the revenue has nothing to say at the time of approval of scheme by Hon’ble High Court – Relying upon Woodcraft Products Limited (In Re) [ 1977 (1) TMI 103 - HIGH COURT OF GUJARAT] - it is not open to the revenue to go into the amalgamation reserve as per amalgamation scheme approved by Hon’ble Calcutta High Court – Decided against Revenue. Colourabel device to evade tax – Whether the amalgamation itself is a colourable device to evade the tax by amalgamating companies or not – Held that:- No colourable device which the assessee has adopted in the scheme of amalgamation as sanctioned by High Court - The amalgamation reserve has properly been explained by the assessee by filing details of assets and liabilities in consequence to amalgamation - The Balance Sheet of transferor companies, wherein the assets and liabilities have been transferred to the transferee company i.e. the amalgamated company are on the record of the revenue and everything is explained before the AO - The AO could not pin point any defect in the issue of non-allotment of shares on amalgamation to the shareholders of amalgamating companies due to cross holding and due to that shares of the four companies inter se got cancelled - Following the decision in Union of India And Another Versus Azadi Bachao Andolan And Another [2003 (10) TMI 5 - SUPREME Court] - the revenue must have found out what is tangible in an objective manner but they failed to do so - assessee has completely disclosed the transaction in the amalgamation scheme presented before High Court, which was duly approved – Decided against Revenue. Balancing of charge on valuation of shares – Capital receipt or revenue receipt - Held that:- Shares held by the transferor companies between themselves inter se, it was more than 3/4th and therefore the provisions of section 2(1B) have not been violated - there is no bar to hold / acquire the shares after effective date of merger and before the merger orders are passed, by the Amalgamating Companies which in effect neutralized the cross holdings and cancelled the holdings inter se of the four companies - Following the decision in CIT Vs. Bharat Development Pvt, Ltd. [1980 (8) TMI 18 - DELHI High Court] - due to inter se holdings no shares were required to be issued to the shareholders of the amalgamating companies by the amalgamated company – Decided against Revenue.
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2014 (7) TMI 961
Business income treated as STCG and LTCG – Share transactions – Held that:- The assessee is maintaining two separate port folios, one in respect of trading and other in respect of investments - the assessee has paid STT but in respect to short term capital gain STT was not paid - investment in shares and mutual funds is out of assessee's own capital - The assessee is maintaining separate port folios for investment in shares and trading in shares - Following the decision in CIT Vs. Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT] - assessee is engaged in two different types of transactions namely, investment in shares and dealing in shares for the purposes of business and held that the delivery based transactions are to be treated as investment transactions and the profit received therefrom is to be treated as short term or long term capital gain depending on the period of holding of shares and that there ought to be uniformity in treatment and consistency in various years – the order of the CIT(A) is upheld – Decided against Revenue. Bad debts written off as business loss – Held that:- Loss which was incurred by assessee is a business loss or bad debt - The provision of section 28 read with section 4 of the Act imposes a charge on profit and gains of any business or profession carried on by the assessee - The business profit is to be computed in accordance with the provisions of section 30 to 43(c) and this section deals with deduction and allowances - The scheme of this provision is that profits and gains should be computed subject to certain express deduction and allowances and to certain express provisions of deductions - The list of allowances incurred in this section is not exhaustive or all allowances which can be made in ascertaining the profit of the business taxable u/s. 28 of the Act and an item of loss or expenditure incidental to business may be deducted in computing profits and gains of business or profession, even if it is not falling under any of these sections. Relying upon Badrinath Daga Vs. CIT [1958 (4) TMI 2 - SUPREME Court] - the assessee who was in the business of trading and investment in shares, had advanced a sum to a share broker with whom the assessee has regular dealings in earlier years and the advance made were during the course of assessee's business against which assessee had given shares, which are more than the value of the advance given as on that date - due to scam in the market there was a loss to the assessee which was directly connected to the assessee's business - it should have been allowed as business loss by the AO – Decided against Revenue.
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2014 (7) TMI 960
Validity of reopening of assessment u/s 147 - Reason to believe – Held that:- The assessee relied upon various judgments, but, none of the judgments cited is rendering any help to the assessee - the issue on merit is admittedly covered against the assessee and thus it goes to show that the belief formed by the AO ssessing Officer regarding escapement of income is real and on the basis of tangible material –there was no reason to interfere in the order of CIT(A) – Decided against Assessee. Deduction u/s 80IB – Held that:- while deciding the appeal of the assessee it has been held that the assessee is not eligible for deduction u/s 80IB of the Act - the assessee is not eligible for such deduction u/s 80IB – Decided against Revenue.
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2014 (7) TMI 959
Reopening of assessment u/s 147 – Power to review by AO – Held that:- The AO reached the belief that there was escapement of income, on the basis of return filed by the assessee, after he accepted the return under section 143(1) without scrutiny, and nothing more - This was nothing but a review of the earlier proceedings and an abuse of power by the AO - There was nothing in the reasons recorded to show that any tangible material had come into the possession of the AO subsequent to the issue of the intimation - The notice reflected an arbitrary exercise of the power conferred u/s 147 of the Act - relying upon CIT-vs- Orient Craft Ltd. [2013 (1) TMI 177 - DELHI HIGH COURT] - reassessment proceedings initiated u/s. 147 of the Act by issuing notice u/s. 148 of the Act is set aside – Decided in favour of Assessee. Profit from sales of DEPB taxable u/s 28(iiib) instead of entire sale consideration of DEPB – Held that:- Only the net of sale consideration and face value of DEPB will be taxable under section 28(iiib) of the Act – Relying upon Avani Exports Vs. CIT [2012 (7) TMI 190 - GUJARAT HIGH COURT] - assessee is eligible for deduction u/s 80HHC of the Act irrespective of any restriction of the export turnover – Following the decision in Topman Exports Vs. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] - the face value of DEPB will fall under clause (iiib) of Section 28 of the Act and hence, the same is eligible for deduction u/s 80 HHC of the Act irrespective of any restriction of export turnover - the CIT(A) has rightly allowed the claim of the assessee – Decided against Revenue.
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2014 (7) TMI 958
Penalty u/s 271(1)(c) – Claim of interest – Inaccurate particulars furnished – Held that:- Interest amounts disallowed relate to borrowals from the bank towards working capital requirements of the assessee - assessee has explained the various difficulties that it had to encounter on account of the fact of hostile relationship between the assessee company and the banker, which prevented it from complying with the requirement of the AO - Following the decision in Income Tax Officer Versus M/s. Heman Fan Components P. Ltd., Hyderabad [2014 (7) TMI 298 - ITAT HYDERABAD] - there was a justifiable reason for the non-compliance from the assessee – there was no justification for the imposition of penalty u/s 271(1)(c) – Decided in favour of Assessee.
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2014 (7) TMI 957
Commission expenses – Onus to prove - Held that:- The onus to establish the expenditure as incurred for the purposes of business/profession is squarely on the assessee – Relying upon Lachminarayan Madan Lal vs. CIT [1972 (9) TMI 4 - SUPREME Court] - CIT(A)’s decision is based on incomplete enquiry by the AO u/s.133, has misled himself - It is only after the assessee has discharged the initial onus on him to establish the nature of the expenditure and its nexus with the assessee’s trade, that the verification by the AO shall assume significance - The inchoate nature of the verification process would be of no moment, and it would be wholly incorrect to say that the disallowance stood effected for that reason - The matter is wholly factual, and stands to be decided, in the final analysis, on the assessee having, or not so, discharged the burden of proof on it – thus, the restoration of the disallowance is ordered – Decided in favour of Revenue. Repairs and maintenance expenses – Held that:- The fact that the assessee established his business premises, commenced work without undertaking the repairs, and continued to do so for five years, itself, if at all, disproves the claim of it being in a shabby condition when let – there was the absence of the basic or primary material in the form of bill/s, voucher/s, to evidence the repair work; the rent deed, etc. -The expenditure remains, consequently, completely unproved – thus, the disallowance is restored – Decided in favour of Revenue.
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2014 (7) TMI 956
Interest expenses – Computation of book profits u/s 115JB - Held that:- Whether the interest liabilities constitutes ascertained one or not is also linked to the issue of rejection of books of accounts as the books of account is the basis for computation of book profits u/s 115JA of the Act - following the decision in M/s. Cascade Holdings Pvt. Ltd. Versus DCIT-CC-31, Mumbai [2014 (7) TMI 896 - ITAT MUMBAI] - the issue is to be remitted back to the CIT (A) for fresh adjudication – Decided in favour of assessee. Interest u/s 234A, 234B and 234C – Held that:- The issue relating to the deduction of interest expenditure is remitted to the CIT (A) for fresh adjudication – thus, the liability of the assessees u/s 234A, 234B and 234C depends upon the proposed adjudication of the CIT (A) in the set aside proceedings – Decided in favour of Assessee.
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2014 (7) TMI 955
Repair expenses disallowed – Amount paid to society as compensation – Held that:- Assessee has not claimed the expenditure during the AY under consideration and the mere fact that the payment has been made during the AY under consideration cannot be the basis for disallowing the same - the AO is directed to delete the expenditure already allowed in the earlier AY and further verify the quantum of expenditure incurred during the year - the AO is directed to decide in accordance with law, the allowability of the expenditure incurred during the year after providing reasonable opportunity of being heard to the assessee – Decided partly in favour of Assessee. The expenditure is a reimbursement of cost incurred by the society and there is no income element which requires deduction of tax at source - the payment has not been paid as damages for breach of any agreement/infraction of law which is clear from the reading MOU - the authorities are not justified in making/confirming the disallowance – Decided in favour of Assessee. License fees treated as business income – Held that:- The rent has been received for the office premises which are owned by the assessee - even if house property is held as stock in trade, the rental income has to be assessed as income from house property as the assessee is owner of the house property and the house property is not used by the assessee for his own purpose - the AO is directed to verify whether the premises rented out to Reliance Life Insurance Ltd is different from the premises involved in the AY 2005-06 and the same is not forming part of the business centre and accordingly tax the rent as income from house property- Decide d in favour of Assessee. Notional interest on debit balance – Held that:- CIT(A) has wrongly recorded that the assessee has not filed fund flow statement whereas the assessee filed the same providing source of withdrawals supported by bank statements for the claim of the assessee that no interest bearing funds are used for making payments to partners – thus, the matter is remanded back to the Ao for fresh adjudication – Decided in favour of Assessee.
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2014 (7) TMI 954
Unexplained expenditures - additions u/s 69C - unproved liabilities – books maintained on mercantile basis - Admission of additional ground – Addition made on cash found at premises – Held that:- It has nowhere explained the basis of the payment in such an odd sum, much below the amount that was required to be paid as per the agreement itself - the assessee could rightly claim the expenditure qua payment for the current year, there is no basis for booking expenditure on the basis of accrual, and which has thus been claimed in excess - there is further no question of liability ceasing during the current year in-as-much as no liability in its respect had accrued in the first place - the disallowance/addition in respect of the unproved expense/liability for ₹ 17.50 lacs outstanding in the name of Ab as on 31.03.2001 is confirmed - where the assessee accepts the assessment of this income for the current year, he shall, on moving the Revenue, be allowed, upon verification, consequential relief for A.Y. 2004-05 - even in the case of non-acceptance by the assessee, the Revenue cannot, impending the resolution of the dispute, collect tax twice, so that the demand for one year shall have to be kept in abeyance. AB may have never agreed for being paid any compensation for the Asthma campaign for which his pictures were being sought - there is as such no basis to hold that a liability to AB had ever accrued during the year, and ceased to do so at a later point in time - There is no merit in the charge of the income having been subject to tax on cash basis who admittedly was not paid any amount - the payment having been made, source of which is unexplained - the addition u/s 69C would also arise - The argument, though valid, would yet give rise to a single adjustment and not two in-as-much as there has been a single payment against a single liability - the liability is reflected in the accounts, its stands discharged prior to March, 2001, so that the source of payment remained unexplained - irrespective of the response from RM, there shall arise only a single adjustment to the assessee's returned income on account of liability toward and payment to RM, for the current year – Decided against Assessee.
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2014 (7) TMI 953
Reopening of assessment u/s 148 – Addition of STCG made – Power of review - Held that:- The legislature has not conferred power on the AO to review its own order - the power u/s 147 cannot be used to review the order when nothing new had happened and no new material or information has come on record or received by the AO between the date of assessment order sought to be re-opened and the date of formation of opinion - following the decision in CIT v. Kelvinator of India Ltd. [2002 (4) TMI 37 - DELHI High Court] – thus, the re-opening is bad in law and consequently the re-assessment is quashed – Decided in favour of Assessee.
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2014 (7) TMI 952
Penalty u/s 271(1)(c) – Held that:- Assessee rightly contended that if an assessee offers an explanation, which is not found to be false, he can save himself - from penalty even if he were not able to substantiate his case as long as the explanation of the assessee is bonafide and as long as he places all the relevant facts material to computation of his total income irrespective of the fact that the same explanation was not accepted for the purpose of assessment –Relying upon ACIT vs. Malhotra Mukesh Satpal [2006 (5) TMI 168 - ITAT PUNE-A] - The explanation of the assessee has nowhere been alleged to be false or short - penalty ought not to be levied on the assessee, even if the additions have been confirmed in quantum proceedings - assessee is found to have made out the case in light of the decisions relied upon - this is not a fit case for imposition of penalty as none of the ingredients incorporated in the relevant provisions have been fulfilled by the AO before arriving at the conclusion to impose the penalty – Decided in favour of Assessee.
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2014 (7) TMI 951
Admission of additional ground - Provision for Warranty – Held that:- The Tribunal has the jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on tax liability of the assessee notwithstanding the fact that it was not raised before the CIT(A) - Following the decision in M/s. Rotork Controls India (P) Ltd. Versus Commissioner of Income Tax, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] - as the assessee did not make claim for deduction of provision for warranty and claimed it on actual basis, the addition ground of the assessee for allowing deduction deserves to be admitted. Transfer pricing adjustment - Advertisement, marketing and sales promotion expenses - Held that:- The AMP expenses refer only to advertisement, marketing and publicity and the selling expenses which are specific to sales cannot be considered within the ambit of AMP expenses - the expenses for the promotion of sales are to be considered within the purview of AMP expenses, whereas the expenses in connection with the sales which are simply sales specific, are outside the scope of AMP expenses - Following the decision in LG Electronics Pvt. Ltd. vs. ACIT [2013 (6) TMI 217 - ITAT DELHI] - when the assessee is claiming deduction in the computation of total income for the amount used during the year only and the balance amount of provision is carried forward, it is natural that the carried forward amount of the provision which would become brought forward balance in the subsequent year would become relevant for claiming deduction towards the amount used during the year - the AO should keep in mind that this amount of provision should not lead to double deduction, firstly at the time of creation of provision in the current year and then at the time of actual use of the amount in subsequent years - the AO would examine the claim for deduction of provision for warranties, only to the extent for which no deduction has been claimed on actual basis in the year or subsequent years out of provision – Decided in favour of Assessee.
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2014 (7) TMI 950
Penalty u/s 271(1)(c) - Interest expenses disallowed u/s 14A – Concealment and suppression of income - Held that:- CIT(A) found that both the Explanation 1(A) and Explanation 1(B) to section 271(1)(c) stood attracted in the case - there was no nexus between the interest paid and her professional income, the assessee's claim was a deliberate attempt to suppress her professional income, and her case was without any explanation, attracting Explanation 1(A). In-as-much as the assessee had been unable to substantiate her explanation that the loan to the company was given with intent to earn interest, Explanation 1(B) would stand attracted - following the decision in CIT vs. Zoom Communication (P.) Ltd. [2010 (5) TMI 34 - DELHI HIGH COURT] - levy of penalty is upheld – Decided against Assessee.
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2014 (7) TMI 949
Reopening of assessment u/s 147 – Expenses on purchase of software – Principle of consistency - Held that:- CIT (A) has simply affirmed the reassessment order without deciding the issue in its right perspective by only saying that objection of the assessee was raised before the AO which is not valid in law and has not considered the issue properly - Following the decision in M/s. Chroma Print, C/o. Shri TN. Seetharaman, Advocate Versus The Assistant Commissioner of Income Tax, Circle-II [2012 (8) TMI 520 - ITAT, CHENNAI] – also in ALF Firm Vs. CIT [1991 (2) TMI 1 - SUPREME Court] it has been held that reassessement cannot be based on bare or mere change of opinion - In order to maintain consistency in the decision making process and to avoid conflicting orders, the entire appeal should go back to the CIT(A) - both the issues in appeal have overlapping effect, they cannot be decided independently by two different authorities – matter is remitted back to the CIT(A) to pass order on the issue of re-opening of assessment – Decided in favour of Assessee.
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2014 (7) TMI 948
Transfer pricing adjustment – Indenting transactions - Held that:- The ‘Indenting transactions’ are different from ‘Trading transactions’ in terms of functional differences, risks undertaken and assets employed, and hence both cannot be considered as uniform - Following the decision in Sumitomo Corporation India P. Ltd. Versus Deputy Commissioner of Income-tax [2013 (12) TMI 594 - ITAT DELHI] - commission earned by the assessee from its AEs under the ‘Indenting segment’ was required to be benchmarked on the basis of commission earned by the assessee from non-AEs under ‘Indenting segment’ - the commission percentage from AE transactions should be benchmarked on the basis of commission rate from non-AE transactions under the ‘Indenting business’ - the commission percentage on the basis of FOB value of goods from transactions with non-AEs be computed and taken as arm’s length rate of commission for the purposes of the transactions with AEs under the ‘Indenting business’ segment - the rates of commission are not emanating from the orders – thus, the matter is remitted back to the AO/TPO to find out the rate of commission income on FOB value of the transactions with non-AEs under the ‘Indenting business’ segment – Decided partly in favour of Assessee.
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2014 (7) TMI 947
Penalty u/s 271(1)(c) – Inaccurate particulars furnished – Held that:- The assessee has offered gain arising out of bonus shares as capital gain and paid tax on the same, assessee rightly contended that he has waited for more time to transfer the bonus shares there would have been a long term capital gain which was exempt at that point of time - there was no reason for the assessee to evade tax - the authorities below were not justified in imposing the penalty - the penalty notice was issued by the AO is also defective in view of CIT vs. Whiteford India Ltd. [2014 (2) TMI 541 - GUJARAT HIGH COURT] – Decided in favour of Assessee.
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2014 (7) TMI 946
Jurisdiction of CIT u/s 263 - revision of order - principle of merger - Levy of interest – Held that:- Assessee has advanced funds to the said Satyam Computers Services Ltd. - assessee has not advanced the funds on interest basis and subsequently, it filed recovery of principal amount with interest at 18% by filing a suit in City Civil Court, Hyderabad - the amount of interest can be brought to tax in the year in which the City Civil Court considered and decided the liability to repay the amounts of advance and interest and also rate of interest on which, advance should be repaid - the question of bringing to tax interest on different amounts as directed by the CIT does not arise - when the very basis of levy is subject matter of appeal, the CIT could not have invoke the jurisdiction u/s 263 in opining that higher amount should have been considered for levy of interest - there is no basis for CIT invoking jurisdiction u/s 263 - thus, the order of the CIT is set aside – Decided in favour of Assessee.
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Customs
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2014 (7) TMI 967
Proceeding against the CHA - maintainability of revenue - revenue appeal - allegation of involvement in evasion of Customs duty on the import of electrical and electronic goods of foreign origin - Held that:- CHALR, 1984 did not provide for filing of an appeal by the department against an order passed by the Commissioner under the said Regulations. Only a CHA aggrieved by any decision or order could appeal to the Tribunal in terms of sub-regulation (8) of Regulation 23. Section 129D under which the present appeal has been filed enables the Committee of Chief Commissioners to file an appeal against an order passed by the Commissioner under the Customs Act. - Further, Section 129A of the Customs Act provides that only a decision or order passed by the Commissioner of Customs as an adjudicating authority is appealable before the Tribunal. - appeal is not maintainable before this Tribunal - appeal dismissed - decided against the revenue.
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2014 (7) TMI 966
Warehoused goods - deterioration/damage to the cargo - Abatement of duty on damaged or deteriorated goods u/s 22(1)(c) - Held that:- abatement is admissible subject to the satisfaction of the Assistant Commissioner/Deputy Commissioner that the damage has not occurred in the accident due to any willful act, negligence of default of the owner or his employee or agent. Delay in clearances of cargo cannot be held against the appellant as a willful act to invite damages when the custodian and the Customs also have the powers to auction the cargo if not cleared within the warehousing period. - Since other appeals are pending before the first appellate authority, matter remanded back for decision as per the provisions of law - Decided in favor of assessee.
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Service Tax
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2014 (7) TMI 981
Transport of goods from one airport to another - benefit of Notification No.29/2005-St - transport of export cargo from the airport to airport - Held that:- notification talks about providing of the services in relation to transportation of goods while in the case in hand the issue regarding transportation of goods between two air ports and rendered to another agency i.e. FedEx or as the case may be. Since the issue requires deeper consideration and needs to be appreciated from various documents on record, we find that the appellant has to be put to some condition for hearing and disposing the appeal on merit - appellant has not made out a prima facie strong case for complete waiver of the amounts involved - stay granted partly.
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2014 (7) TMI 980
Cargo Handling Service - Service in respect of amounts collected for Barge operations, collection of Ocean Freight, Air Freight, Transportation charges etc. - Non consideration of submissions of assessee - Held that:- Commissioner has left the analytical work to analyse the case of the department, the ground taken in the show-cause notice, reply submitted by the assessee and basis for the conclusion, to the Tribunal - request made by the learned counsel that the matter be remanded at this stage for fresh decision with a direction to record all the submissions, consider them vis-a-vis facts as emerging from the records, apply precedent decisions, if any, cited by the assessee or available to the Commissioner etc. and pass a well reasoned order whereby it would be possible for the appellate authority to consider whether the basis for reaching a conclusion adopted by the original authority is sound and whether the demand can be confirmed or not - Matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 979
Stay application - Waiver of pre deposit - Held that:- Appellant requested for keeping matter pending till similar petition gets decided - There is no logic for such request - appellant directed for 50% amount as pre deposit - Conditional stay granted.
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2014 (7) TMI 978
Club or association service - Whether the amount recovered from the members who opt for membership (with land) towards cost of land and handed over to M/s. Amrutha Estates (according to appellants) has to be levied to service tax under ‘club or association service’ or not - Held that:- If the actual amount reflected in the sale deed is less than what is shown as transferred to the sister company by the appellant, as submitted by the learned AR, it would amount to collection of membership fee in the name of land which would be inappropriate and incorrect in view of the fact that appellants have no grievance about paying service tax for membership fee during the relevant period. That being the situation, in our opinion, it would be in the interest of justice and fairness to require the appellants to produce the sale deeds. It would be sufficient if the appellants give all the names of members with land who have been provided membership (with land). The Commissioner can select approximately 10% or below at random and in respect of those members if the appellants produce sale deeds and the relevant extracts of books of accounts so that Commissioner can verify and satisfy himself with the amount shown as collected for sale of land and transferred to the sister company is actually equal to the amount reflected in the sale deed - in case appellant is not able to produce a few sale deeds in respect of selected members, Commissioner may select some other name at random - Matter remanded back.
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2014 (7) TMI 977
Waiver of penalty u/s 80 - penalty u/s 77 - penalty under Section 76 & 78 were waived already - Assessee already paid tax but amount was not appropriated - Held that:- merely because the Commissioner did not appropriate the amount, it cannot be said that the amount has not been realized by the Government or has not gone into consolidated fund of Government of India - if an assessee is able to show that he has paid the amount into Government treasury and produces copies of the challans and in the absence of a finding to the contrary taking a view that challans are forged or bogus or refund has been claimed subsequently and received, in such cases we have to take a view that assessee has paid the amount whether it is appropriated by the adjudicating authority or not - what is required to be shown is that the amount has been paid and just because an appropriation has not been made and an officer fails to do this, we cannot take a view against the assessee especially in the absence of an appeal filed by the Revenue - Decided in favour of assessee.
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2014 (7) TMI 976
Validity of revision order - Violation of provision of Section 84 (4) - Held that:- If an issue is pending in appeal, the revisional jurisdiction under Section 84 could not be exercised. Since the appellant had preferred an appeal against the entirety of the adjudication order dated 22.2.2007 which included imposition of penalties thereunder as well and the issue regarding validity of imposition of penalty was equally the subject matter of appellate proceedings pending before the appellate Commissioner since 25.5.2007, the date on which the appeal preferred to that authority had culminated in the order dated 29.8.2007 dismissing the appeal, the initiation of revisional proceedings is unsustainable. - Following decision of Union of India vs. Inani Carriers [2008 (11) TMI 79 - RAJASTHAN HIGH COURT] and C.C.E. vs. Shiva Builders [2011 (4) TMI 34 - HIGH COURT OF PUNJAB AND HARYANA] - Decided in favour of assessee.
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2014 (7) TMI 975
Cargo handling service - providing manpower services - Assessee contends that lifting, stacking and loading of sugar bags’ were done by the persons who were on the pay roll of the Appellant - Held that:- essentially the present demand is for services use for transporting goods within the factory and also for manpower supplied for manual assistance at various points of loading system using conveyer system though there may be a small part of the service which may be in the nature of manual loading of cargo into railway wagons or trucks which may come within the meaning of ‘Cargo Handling Service.’ In the facts of the case the service’, rendered by Appellants cannot be considered as Cargo Handling service in view of the decisions in the case of S.B. Construction Co. [2006 (8) TMI 28 - HIGH COURT OF JUDICATURE FOR RAJASTHAN (JODHPUR)] and Modi Construction Company - [2008 (6) TMI 22 - CESTAT, KOLKATA ]. There is nothing in the Show Cause Notice to even suggest that there was a positive act on their part to suppress or wilfully misstate any facts to evade service tax. Indeed, as is evident from the various judicial pronouncements, there had been confusion regarding what is cargo handling or even as to what is cargo. In the wake of the appellant’s belief that their activity was not cargo handling, their not taking service tax registration or not filing return is understandable. In these circumstances, it is difficult to sustain the allegation of suppression or wilful mis-statement of facts with intent to evade service tax - Decided in favour of assessee.
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2014 (7) TMI 974
Intellectual property rights for allowed user of its brand name - manufacture of ‘country liquor; from spirit on job work basis - Held that:- on appreciation of the clauses of agreement with the evidence on record, it is evident that no ‘Intellectual Property Service' have been given by the appellant. The arrangement/agreement between the appellant and M/s Talreja Trade are for ensuring maximum production and sale of C.L. so as to maximize profits for both the parties. The minimum guarantee of profit per month given or assured by the agent to the appellant have been misunderstood as ‘Royalty' which is not the fact. The ground of limitation is also allowed in favour of the appellant. - Decided in favour of assessee.
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2014 (7) TMI 973
Waiver of pre deposit - Business Auxiliary Service - realization of money due - book adjustment by the client would amount to receipt of consideration or not - there was opening dues from AASL to IAL amounting to ₹ 134.53 crores. By Mar 2007 this amount increased to ₹ 306.75 crores. This is the reason why the appellant is contesting that they have not realised the monies due from AASL - Held that:- explanation in section 67 of Finance Act, 1994 defining value of taxable services inserted with effect from 18-4-2006 - There is no such clear provision for period prior to 18-4-2006. But when money is deducted by one person from amounts due to another in the hands of the former and such adjustments are agreed upon, it is to be considered that payment has been made by the latter to the former. In the instant case IAL was receiving payments through the mechanism of deduction from amounts due to AAIL in the hands of IAL. The fact that the operations of AAIL resulted in loss and the losses were absorbed by IAL cannot negate the fact that at the time of rendering the services consideration thereon was received. So we are not in prima facie, agreement with the argument that IAL had not received payment for services rendered. Considering the fact that the appellant is a national carrier under the ownership of Government of India presently facing serious financial difficulties and in view of the overall appreciation of the issues involved as analyzed above - unconditional stay granted.
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2014 (7) TMI 972
Port service - wharfage charges - under-valuation - receipt of additional consideration - Non inclusion of amount which was to be granted as rebate to M/s. UCL for discharge of service tax liability and the amount received by them as lease rent for waterfront charges and lee way facility given to M/s. UCL - Invocation of extended period of limitation - Penalty u/s 76, 77 & 78 - Held that:- Neither of the two conditions for being a port service is being fulfilled. Except for the ownership of the waterfront, GMB had no role to play. The entire port with infrastructure was built by M/s. UCL Ltd. and would be owned and operated also by M/s. UCL Ltd. under BOOT scheme. Thus, no service of whatsoever nature has been rendered by GMB, which may fall under the category of port service. No service has been rendered by them in relation to a vessel or goods. Just because ₹ 20 has been charged by GMB from M/s. UCL Ltd. under the head wharfage charges and GMB has paid service tax on the same under the category of port service, it cannot be said that the service rendered, if at all, by GMB was a port service. There is no estoppel against the law - except for the ownership of waterfront, GMB does not own anything. The port and the infrastructure thereon vests in M/s. UCL Ltd. and this is permissible under Indian Law as there can be two owners, one for the waterfront and another for port and infrastructure thereon. The law in India is that land can belong to one and building thereon can be of other person as compared to law in U.K. wherein building vests in the owner of the land - in the absence of any port service having been rendered by GMB, the question of charging differential service tax under the category of port service does not arise at all. The show-cause notice has not invoked any other head for taxing the service, if any. Renting of immovable property - allowing the user of waterfront for construction of port and infrastructural facility - Held that:- it can reasonably be concluded that allowing the user of the water front by M/s. GMB to M/s. UCL Ltd. was allowing the use of immovable property by GMB to M/s. UCL Ltd., and hence, ₹ 20 charged by GMB to M/s. UCL Ltd. at the most was on account of renting of immovable property. Just because the said charge were linked to the number of ships, it will not convert the same into port charges because basis of quantification or measurement is not relevant while deciding on the nature of the charges. Valuation - Held that:- Even if it is assumed that the grant of licence to use waterfront is a port service, appropriate tax on the "gross amount" actually charged by GMB for such service has already been discharged. - Applying the definitions of "gross amount charged" and "money" to the present case, it is evident that the only amount received by GMB is the amount equivalent to 20 per cent. of the usual wharfage charges, as the remainder 80 per cent. was rebate or a discount offered by GMB. - It is not in dispute that the remainder amount which was offered as rebate was not paid back to GMB either as "deduction from account" or "credit note" or "debit note" or by book adjustment. Even if the capital expenditure incurred for development of waterfront is regarded as "construction", the next logical question that will arise is whether the entirety of such construction is liable to be included in the value. - it is the absence of such a machinery provision itself sufficient indication that the Legislature did not intend to tax that transaction. The Revenue's case is even otherwise illogical and absurd as it seeks to assess the services rendered by GMB with reference to the normal wharfage charges which it recovers from users at the full-fledged ports developed and operated by GMB, such as the Kandla Port. This is clearly illogical as in the present case the service rendered by GMB was limited and confined to the grant of licence to use the waterfront for which it charged a limited amount (20 per cent. of the usual wharfage). Considering the limited nature of the service rendered, GMB could only charge a limited consideration. This amount, which happens to be 20 per cent. of the usual wharfage charge, is the amount actually paid and in the absence of any book adjustment or deduction from the account constitutes the "gross amount" actually charged for the service - any amount collected after April 1, 2008 by Gujarat Maritime Board, can be considered as statutory levy only and service tax liability thereon may not arise - impugned order is unsustainable and is liable to be set aside - Decided in favour of assessee.
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Central Excise
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2014 (7) TMI 985
Benefit of Exemption notification to the product Playing Cards - Notification No.02/2011-CE - Rate of duty 5% (now 6%) - playing cards are Sports goods or not - Held that:- The plain interpretation of said notification would indicate that the appellant is eligible to avail the said benefit of notification if his product falls under Chapter 95. In the case in hand, there is no dispute that the appellant’s product Playing Cards is classifiable under Chapter 95 and more specifically under Chapter sub-heading No.95.04. The issue of the benefit of exemption claimed under notification in respect of playing cards as sports goods has been settled by the Tribunal in Esbee Playing Card Co (1996 (12) TMI 147 - CEGAT, NEW DELHI) - benefit of exemption allowed - Decided in favor of assessee.
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2014 (7) TMI 984
Reversal of cenvat credit - capital goods cleared as such to their sister unit - duty paid on the transaction value, which is less than the depreciated value - scope of the term 'as such' - Held that:- there is merit in the Revenue’s appeal and the respondents are liable to pay the differential duty as confirmed by the adjudicating authority on the depreciated value of the used capital goods cleared as such to their sister unit. Levy of penalty - held that:- Revenue has not put forth any valid grounds on the suppression of facts. - penalty waived - demand of duty and interest confirmed - Decided partly in favor of revenue.
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2014 (7) TMI 983
Demand of interest - whether appellants herein are required to be saddled with the interest under the provisions of un-amended Section 11AB before 11.05.2001 of the erstwhile Central Excise Act, 1944. - Held that:- the demands which are arising for the clearances prior to 11.5.2001, the interest under section 11AB shall be payable w.e.f. 11.05.2001 if the payments have been made on or after 11.5.2001 and for the clearances effected from 11.05.2001 the interest under section 11AB shall be paid from the date of duty payable on such clearances and we hold accordingly.
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2014 (7) TMI 982
Suppression of facts - extended period of limitation - Cenvat Credit - capital goods - goods falling under chapter 84 - doors, false ceiling, compactor for document keeping, sheets for roofing, flooring for finished goods storage area, tube light fittings, etc. - The issue of admissibility of Cenvat Credit on certain items and support structures was the subject matter of litigations between the manufacturers and the department. Conflicting views were being expressed by various courts as claimed by the appellant before the first appellate authority. The issue on admissibility of such items was finally decided by the Larger Bench in the case of M/s. Vandana Global Limited Vs. CCE, Raipur (2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)). In the realm of conflicting interpretations given by various benches of CESTAT and other courts, it cannot be held that there was any suppression / misstatement on the part of the appellant with intention to evade any duty. - extended period cannot be invoked. - Decided in favor of assessee.
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CST, VAT & Sales Tax
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2014 (7) TMI 971
Writ of Certiorarified Mandamus - Call for records - Violation of principle of natural justice - Held that:- Irrespective of the submissions made by either counsel, without going into the merits of the matter, based on the circulars dated 29.06.1999 and 28.02.2001, issued by the Commissioner of Commercial Taxes, Chennai, petitioner is directed to pay 10% of the tax within four weeks from the date of receipt of a copy of this order. On such payment, the respondent is directed to consider the representation of the petitioner dated 03.05.2014 on re-submission together with the Form-C and Form-H declaration forms and re- open the assessment and receive the declaration forms and pass orders in accordance with law, within a period of four weeks thereafter - Decided against assessee.
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2014 (7) TMI 970
Denial of Input tax credit - Violation of section 18(1) of the Act of 2003 - Tax Board decided in favour of assessee - Held that:- Tax Board, by the impugned judgment and order, has recorded a categorical finding that the respondent-assessee has not violated section 18(1) of the Act of 2003 and input-tax credit has been rightly allowed to the assessee. The learned Tax Board has also concluded in clear and unequivocal terms that the assessee has already paid the requisite tax on the purchase price. The finding of the learned Tax Board is also clear and unequivocal that the assessee-trader has reduced the purchase by minimising the trade discount. The learned Tax Board has also examined the newly added section 18(3A) of the Act of 2003 which was enforced with effect from March 9, 2011 and concluded that the learned first appellate authority has not properly thrashed out the matter in the light of prevailing law on the subject, i.e., anterior to March 9, 2011 - there is no infirmity much less legal infirmity in the impugned order passed by the learned Tax Board and consequently no interference is warranted. Accordingly, Decided against Revenue.
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2014 (7) TMI 969
Levy of tax, penalty & Interest - Held that:- Tax Board has rightly distinguished between an escaping of assessment and error of judgment by the assessing authority and held that the remedy for an error of judgment by the assessing authority lay in filing a revision petition under section 15(1) of the Act of 1954 before the Commissioner and not by way of resorting to section 12 of the Act of 1954 for recovering escaped tax. In the facts of the case, it is admitted that there was full disclosure by the assessee including profit accrued. Yet profit accrued was not taxed owing to an error of judgment by the assessing officer - no substantial question of law is made out for entertaining the present revision petition - Decided against assessee.
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2014 (7) TMI 968
Validity of assessment order - Bar of limitation - Held that:- Limitation prescribed under section 39 is as to the "making" of the assessment and not to "initiation" thereof. The observation of the revisional authority that "made" did not mean "completed" or "signed" can not be accepted. The same is contrary to the plain meaning of the expres sion "made" - section 18(1) provides for limitation for initiating the reassessment while section 19(2) prescribes limitation for completing the assessment. In the present case, it is clear that completion of reassessment, i.e., passing of the order of reassessment is beyond the limitation prescribed under section 19(2) - Decided in favour of assessee.
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