Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 4, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Mere recalling an earlier order by ITAT, in exercise of the powers conferred on the tribunal under the proviso to Rule 25 of Income-Tax (Appellate Tribunal) Rules, 1963, would not amount to review of its original order.
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AO would have considerable latitude in issuing notice for re-opening if it is found that he had tangible material to form a belief that income chargeable to tax had escaped assessment, it would not be appropriate to strike down re-opening notice.
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Where money lending is a substantial part of the business of the company - loan obtained by shareholder is not deemed dividend u/s 2(22)(e)
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Interest free advances and loans given to directors & sister concerns for non business purposes - Assessee had interest free funds of its own basis which addition u/s 36(1)(iii) was deleted
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Assessee (tenant) incurred expenditure on renovation of premises, however assessee did not get any benefit of lower rent, therefore the entire expenditure cannot be allowed as revenue. - 75% of the expenditure is to be treated as capital and 25% as revenue
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Ad-hoc deduction allowed at 25% for purchase expenditure, as admittedly corresponding sales against these very purchases have been offered and accepted for tax
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Minute scrutiny made in original assessment. Without there being anything additional on record, it would therefore, not be permissible for the Assessing Officer to reopen the assessment on the very same material.
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It is by now well settled that reopening of an assessment cannot be resorted to for roving or fishing inquiry.
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In case of cash credit account or term loan accounts, there is no debtor-creditor relationship between the bank and the assessee, therefore power of recovery given under section 226(3)(i) is not applicable in such case
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Minor delay in filing the declaration u/s 206C(1A) would not defeat the very purpose of declaration - Addition made u/s 206C(1)deleted
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Assessee unable to substantiate the money deposited in his bank accounts - Addition u/s 68 confirmed - The benefit of "peak credit principle" not extended.
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Assessee a salaried employee made some investment in shares. Held, the assessee was in investment of shares not share trading - CBDT Circular no. 6/2016 dated February 29, 2016 and CBDT directive dated May 2, 2016 referred
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Product Development Expenditure incurred in the ordinary course of business for promoting existing brands, sustaining market and to push up the sales is Revenue expenditure
Customs
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Interest liability on the differential duty of the customs which was paid after 103 days from the date due to be paid to the national exchequer - since there is no violation of Section 47(2) and the provisions of Section 28AA and Section 28AB are not invoked, there is no interest laibility - AT
Service Tax
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Extended period of limitation - demand of service tax - Valuation - The Show Cause Notice does not even remotely bring out as to how it was a wilful act to evade service tax and the airline was aware that the same were includible in the assessable value - demand set aside - AT
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Rejection of Refund of cenvat credit without issuing show cause notice - export of services - wrong application of formula prescribed in the Notification No.5/2006-CE(NT) dt. 14/03/2006 - entire cliam of refund allowed - AT
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Classification of service - nature of contract - There is no whisper in the contracts for supply of manpower - The entire essence of contract is the execution of work detailed in the work schedules - No demand of service tax - AT
Central Excise
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Merely making some deposit during the course of investigation on persuasion of the departmental officers does not corroborate that the assessee has cleared the goods clandestinely - Entire demand set aside - AT
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Cash refund of unutilized cenvat credit - assessee entitled to get refund lying unutilized in their Cenvat credit account on the closure of their factory - AT
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Levy of Penalty - manual filing of returns - department has been accepting their manual returns and after 5 years, issued notice for imposing penalties for not filing returns by electronic mode, is improper and incorrect - AT
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Demand of duty on sugar syrup consumed captively for manufacture of exempted finished goods - test of marketability - what is relevant is the test of marketability and not the sugar contents in the syrup - there is no evident whatsoever of the test of marketability - no demand - AT
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Duty liability on samples drawn for testing within the factory premises - drawing of samples and removal of samples are two different events and it is only the latter that requires discharge of duty liability. - AT
VAT
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Benefit of sales tax exemption - sale price were same from the exempted and non-exempted units - Uniform pricing cannot be a ground to hold that the respondent was charging sales tax on a sale price of the goods manufactured in the exempt unit - SC
Case Laws:
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Income Tax
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2016 (7) TMI 71
Repairs and maintenance expenditure - revenue or capital - ITAT holding that the expenditure to the extent of 75% was capital in nature - Held that:- There is nothing on record to indicate that any benefit was obtained by the assessee in the revenue field for having expended the amount for repairs / renovation of the office premises. We find that the authorities on facts found that some of the expenditure incurred out of ₹ 31.32 lakhs was incurred for maintenance such as plastering etc. This allowing of 25% was on the basis of an estimate. Nothing has been shown to us that the estimation by the authorities on the basis of facts found was in any way arbitrary or perverse. Thus we find no merit in the above submission. In the view taken by us that the expenditure of 75% of ₹ 31.32 lacs i.e. ₹ 23.49 lakhs is on capital account, the submission to claim deduction on account of Section 30 of the Act made by the Appellant need not be examined. In the above view, the concurrent finding of fact by the Authorities under the Act that the expenditure incurred claiming to be the repairs and maintenance was in fact on account of renovation of the premises, leading to enduring benefit to the appellant assessee in as much as it enabled the appellant to accommodate larger number of employees and also facilitate its trading operations. This benefit would be available to it for a long period of time and thus, was capital in nature. It was in the above view that the Tribunal granted the benefit of depreciation to the extent the claim as revenue expenditure was disallowed. - Decided against the assessee.
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2016 (7) TMI 70
Addition under Section 68 - Held that:- The materials on record would suggest that admittedly, the assessee had maintained two bank accounts, not disclosed to the Revenue authorities. In such bank accounts, multiple cash deposits were made by the assessee from different places. The assessee initially explained that such deposits were made by his friends and he, in turn, would withdraw the amounts at Ankleshwar and handover the cash to the friends for a small commission. He, however, refused to supply details of such friends. Before the Tribunal, however, the assessee adopted the entirely novel theory of being engaged in the business of chemical and the deposits being part of his business transaction. First and foremost, this theory of the assessee's of the amounts belonging to his friends would be incongruent. If these amounts were established to be belonging to the friends of the assessee, for whom, he merely deposits the sums and withdraw at their requests for a small commission, the question of applicability of peak credit would not arise. When the assessee failed in his first attempt, he came up with the novel theory of the amounts being for the purpose of his chemical business. This theory probably was pressed in service to enable the assessee to seek the benefit of principle of peak credit. Before the Revenue authorities, this contention was not even raised. No material was produced regarding the same.Considering such circumstances, we do not find any error in the view of the Tribunal. - Decided against assessee
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2016 (7) TMI 69
Reopening of assessment - Return accepted u/s 143(1) without scrutiny - Validity of notice issued u/s 148 - Held that:- AO had considered the objections of the petitioner and disposed them of on the basis of material on record. The sole ground of the petitioner therefore, must fail. - AO would have considerable latitude in issuing notice for re-opening if it is found that he had tangible material to form a belief that income chargeable to tax had escaped assessment, it would not be appropriate on our part to strike down the notice.
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2016 (7) TMI 68
Non collection of TCS on sale of scrap - addition made u/s.206C(1) - interest charged u/s.206C(7) - ITAT delted the addition - Held that:- In terms of the explanation clause (aa) any person who purchases the goods in retail sale for personal consumption would not be included within the definition of term 'buyer'. It is therefore, that under sub section (1A) of section 206C, calculation of tax under subsection 1 would not be made, if the buyer furnishes to the person responsible for the tax a declaration in writing in prescribed form declaring that the goods in question are to be utilized for the purposes of manufacturing process or producing articles or things or for the purpose of generation of power and not for trading purposes. The declaration to be made in subsection (1A) of section 206C thus would enable the Revenue authorities to, as and when the need so arises make proper verifications. This subsection itself does not provide for any time limit within which, such declaration is to be made. The time limit, of course, would be found in Rule 37C of Income Tax Rules, 1962. The main thrust of subsection 1A of section 206C thus is to make a declaration as prescribed, upon which, the liability to collect tax at source under subsection (1) would not apply. When there was no dispute about such a declaration being filed in a prescribed format and there was no dispute about the genuineness of such declaration, mere minor delay in filing the said declaration would not defeat the very claim. The Tribunal therefore, viewed such delay liberally and in essence held that there was substantial compliance with the requirement of filing the declaration. - Decided against revenue
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2016 (7) TMI 67
Reopening of assessment - series of deposits in the accounts unexplained - Held that:- Reopening of an assessment cannot be resorted to for roving or fishing inquiry. The Assessing Officer must have some tangible material at his command to form a belief that income chargeable to tax has escaped assessment. In the present case, this requirement was not satisfied. The Assessing Officer made no effort to find out the assessee and to serve him at his permanent address given to the department which was also mentioned in his PAN card. Thus, the reasons were based on mere suspicion and unverified details. Reopening may not be permitted for mere verification purpose. If full and sincere efforts were made to trace the assessee by issuing notice for production of materials either in terms of powers under subsection (1) of section 131 or 133 of the Act, but such efforts failed for nonavailability or nonappearance of the assessee, a different situation may arise. However, on mere dropping of a letter at the address given in the bank account without any further effort to trace the assessee at his permanent address declaration by the Revenue authorities would not be sufficient to enable the Assessing Officer to jump to the conclusion that such entries remained unexplained and that therefore, there was valid reason to believe that income chargeable to tax has escaped assessment. The element of failure on part of the assessee to disclose truly and fully all material facts would also depend substantially on this very aspect. - Decided in favour of assessee
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2016 (7) TMI 66
Reopening of assessment - claim of capital loss - Held that:- Entire issue was thoroughly examined by the Assessing Officer during the original assessment proceedings. He had serious doubt about the assessee's claim of capital loss upon which he raised multiple queries. All these queries were explained by the assessee including pointing out the reasons for not exercising warrants. He placed heavy reliance on decision of Karnataka High Court in Dy. CIT v. BPL Sanyo Finance Ltd. [2008 (2) TMI 386 - KARNATAKA HIGH COURT] for justifying the claim. It was after such minute scrutiny that the Assessing Officer made no addition in the final order of assessment. Without there being anything additional on record, it would therefore, not be permissible for the Assessing Officer to reopen the assessment on the very same material. Additionally, we may recall that the notice was issued beyond a period of four years from the end of relevant assessment year. There is not even a hint from the reasons recorded that the assessee failed to disclose truly and fully all materials. Even on this ground, notice must fail.- Decided in favour of assessee
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2016 (7) TMI 65
Recovery of the tax dues - notice u/s. 226(3) issued to the Allahabad Bank - notice of attachment of bank account - existence of debtor-creditor relationship - Held that:- Under clause (i) of sub section (3) of section 226, the Assessing Officer has power to issue notice requiring any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee to pay to the Assessing Officer forthwith upon the money becoming due or being held or within the specified time, so much of the money as is sufficient to pay the amount due by the assessee in respect of the arrears or the whole of the money when it is equal to or less than the amount of arrears. In other words, in the process of seeking coercive recovery, the Assessing Officer would have power to recover the same to the extent of the arrears of the assessee from any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee. This power is essentially in the nature of garnishee order requiring the debtor of the assessee to make direct payment to the Assessing Officer of the arrears of tax instead of paying over such amount to the assessee. In essence, therefore, this power would be available when there is person from whom money is due or may become due to the assessee or there is a person who holds or may subsequently hold for or on account of the assessee any money. In this case, admittedly, all the three bank accounts were in the nature of either the cash credit account or term loan account. In other words, the accounts were opened to enable the assessee to borrow the money from the bank for the purpose of its business. Any money, therefore, that the bank may make available to the assessee would necessarily be in the nature of a loan or a cash credit facility, in either case, would be in the nature of borrowing by the assessee from the bank. The bank and the assessee, therefore, do not have the debtor-creditor relationship. See K.M. ADAM Versus INCOME-TAX OFFICER, II ADDITIONAL II CIRCLE, MADRAS [1957 (10) TMI 32 - MADRAS HIGH COURT]. In the result, impugned notice of attachment is set aside - Decided in favour of assessee
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2016 (7) TMI 64
Power of ITAT to recall its order which was disposed of ex-parte - revenue raised the objections that the same shall be amount to review - Held that:- Proviso to Rule 25 provides that "provided that where an appeal has been disposed of as provided above and the respondent appears afterwards and satisfies the tribunal that there was sufficient cause for his non appearance when the appeal was called on for hearing, the tribunal shall make an order setting aside the ex-parte order and restore the appeal." In view of above, if sufficient cause is shown for non appearance, the tribunal is obligated to consider the same and make an order setting aside the ex-parte order, even if such an order is on merits. Mere recalling an earlier order, in exercise of the powers conferred on the tribunal under the proviso to Rule 25 of Income-Tax (Appellate Tribunal) Rules, 1963, would not amount to review of its original order. - Decided against the revenue.
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2016 (7) TMI 63
Disallowance of purchase expenditure - corresponding sales against these very purchases have been offered and accepted for tax - Held that:- This is not a case where purchases have accounted for and suppliers were not traceable or not available at the address given by the assessee. This is a case where the amount has been received back to the assessee from the suppliers of which expenditure on account of purchases accounted for in the books of account. Ends of justice would be met if we grant deduction at 25% for purchase expenditure, as admittedly corresponding sales against these very purchases have been offered and accepted for tax. Accordingly, we modify both the impugned orders and hold that the Tribunal has committed an error in disallowing the purchase expenditure and direct that deduction at 25% of the purchase expenditure may be allowed in both these cases. - Decided in favour of the assessee.
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2016 (7) TMI 62
Deemed dividend u/s 2(22) - Held that:- All that was required to be established by the assessee was that the money obtained by way of loan from M/s. DBPL was not hit by the mischief of Section 2(22)(e). In order to do so, the assessee relied on 2(22)(e)(ii) which provides as follows: “ (ii) any advance or loan made to a shareholder [or the said concern] by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company;” Mr. Bhowmick did not dispute that the findings, quoted above, do justify an inference that money lending is a substantial part of the business of M/s. DBPL. - Decided in favour of assessee
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2016 (7) TMI 61
Penalty levied under Section 271 (1)(c) - difference between the amount paid in advance as the net present value of the actual sales tax liability and the actual liability - Held that:- the Tribunal was justified in deleting the penalty levied under Section 271 (1)(c) on the amount being the difference between the amount paid in advance as the net present value of the actual sales tax liability and the actual liability, based on the fact that the Tribunal had deleted the quantum - Question not to be entertained Penalty levied under Section 271(1)(c) - claim under Section 80M disallowed - Held that:- Tribunal was justified deleting the penalty levied under Section 271(1)(c) on the disallowed claim under Section 80M on the basis of the fact that this quantum disallowance was deleted by the Hon'ble Tribunal - No substantial question of law.
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2016 (7) TMI 60
Addition u/s 36(1)(iii) on account of interest disallowed - interest free advances and loans were also given to directors and sister concerns which are for non business purposes - Held that:- In view of the fact that the issue is covered by the decision of the jurisdictional High Court in the case of Reliance Utilities [2009 (1) TMI 4 - BOMBAY HIGH COURT] giving clear finding that the assessee had interest free funds of its own .Tribunal was justified in deleting the addition - Decided in favour of assessee
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2016 (7) TMI 59
Product Development Expenses(PDE) - revenue or capital expenditure - Held that:- We find that while deciding the appeal for AY. 2007-08 [2015 (5) TMI 643 - ITAT MUMBAI ] the Tribunal had decided the issue in favour of the assessee held that the expenditure regularly incurred for sustaining the market and to push up the sales was not in the capital field but was essential and incurred in the ordinary course of business for promoting existing brands - Decided in favour of assessee Calculation of profit of Silvassa unit eligible for deduction u/s. 80 IB - allocation of various expenses debited to the advertisement and sales promotion - Held that:- The method adopted by the assessee for allocating the expenditure was more justifiable than the method adopted by the AO and confirmed by the FAA. So, we hold that there was no justification to recalculate the advertisement expenditure with regard sale of NABB products namely Frooty and Appy. Thus allocation in respect of Head Office corporate expenses and advertisement expenses made by the assessee are required to be accepted. - Decided in favour of assessee Treatment to the reusable artwork expenses - revenue or capital - Held that:- The Tribunal, while deciding the appeals for the AY. s. 1998-99, 2007-08 and 2008-09 had decided the issue in favour of the assessee held that as considering the average life span of such artwork, which was only less than six months, it could not be inferred that any capital apparatus had come into existence which could be the source of income generation for the assessee. The “artworks” was not capital expenditure - Decided in favour of assessee Disallowance of foreign travel expenditure - Held that:- Departmental authorities have not doubted genuineness of the incurring of expenditure. They have not brought anything to prove that the expenditure had element of personal use. It is the prerogative of an assessee to incur or not to incur an expenditure and to decide its business needs. Therefore, reversing the order of the FAA and following order of the Tribunal for the earlier AY. , we decide the third ground of appeal in favour of the assessee.
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2016 (7) TMI 58
Sale of equity shares - short term gain OR business income - Held that:- It is undisputed fact that the assessee had disclosed these transactions as investment in the return during the year under consideration. It is also a fact that the assessee was in investment in shares from 2000-01 to till date and in all the years, he has disclosed short term/long term capital gain on account of investment in shares which has been accepted by the department. AO as well as ld CIT(A) has considered the various decisions on which they came to conclusion that these transactions are business transactions but latest circular issued by the CBDT No. 6/2016 dated 29/2/2016 and F.No. 225/12/2016/ITA.II dated 02/5/2016 have set a guidelines to assess the share trading income under the head investment or trading. The assessee is a salaried person. He has income from interest and income from other sources. The share trading is not a main business of the assessee but he made investment in part time individually with his own fund without any assistance of the man power or office, which itself shows that the intention of the assessee was to invest in shares to get gain from it on the basis of period of holding. Accordingly, he has disclosed short term capital gain in the return. After considering both sides, we have considered view that the assessee was in investment of shares not share trading. - Decided in favour of assessee
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2016 (7) TMI 57
Disallowance of 20% of the claim of expenditure not fully supported by vouchers - Held that:- Though, the AO does say that the expenditure was not fully supported, he has not pointed out even a single specific instance. His conclusion that there were some personal elements in the claim of expenditure is also not supported by any specific findings. We find the disallowance to have been made purely on surmises. Such disallowance stands deleted. - Decided in favour of assessee. Adoption of cost of the shed - capital gain computation - Held that:- As per the assessee this valuation report was obtained by the purchaser for raising a loan. Even if we accept the contention of the assessee that there was indeed a building in the plot, it is a fact that the balance sheet of the assessee did not reflect the cost of the building. On the other hand, it is an admitted position, that the HUF of which the assessee is the Karta had filed its return showing the cost of the shed in its balance sheet. The said HUF was also assessed to tax. When all these are seen together, in our opinion, it is clear that the building was owned by HUF, whereas the land was owned by the assessee. In such a situation, for computing the capital gains the assessee could not have deducted the cost of construction, since the construction did not belong to the assessee. Nevertheless, we find that the ld., CIT(A) in all fairness, had directed the AO to give the benefit of the cost of shed, as shown by the HUF in its balance sheet, while computing the capital gains of the assesee. As already mentioned by us, we cannot accept the pleading of the assessee that the building belonged to him, but not to HUF. - Decided against assessee Agricultural income not accepted but considered under the head "Income from other sources” - Held that:- It might be true that that assessee was having 8 acres of agricultural land wherein Coffee was cultivated. However, mere ownership of agricultural property would not transform itself into income. The claim of assessee was that it had earned an agricultural income of ₹ 4,85,000/- from 8 acres of Coffee plantation. Assessee was not able to produce any evidence except for a certificate from the Revenue Inspector, Srimangala Hobli which gave details of crops grown. Assessee did not show anything to prove the sale of agricultural produce or receipts there from. In such situation, we cannot fault the ld. AO for following the NABARD guidelines. As per such guidelines income from a Coffee plantation would be in the range of ₹ 1000/- to 26,000/- from the 5th year to 9th year. The AO had taken an average of ₹ 12,000/- and estimated the agricultural income at ₹ 96,000/-. The average of ₹ 26.000/-and ₹ 1,000/- would be ₹ 13,500/- and not ₹ 12,000/-. Accordingly, income from 8 acres can be fairly estimated at ₹ 1,08,000/- therefore, we direct the addition to be restricted to ₹ 3,77,000/-. - Decided in favour of assessee in part
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2016 (7) TMI 56
Penalty levied u/s 271(1)(c) - excessive claim u/s 10A - Held that:- As in quantum proceedings, the respondent assessee had succeeded and the Tribunal by an order [2012 (6) TMI 622 - ITAT PUNE ] set aside the disallowance on account of partial denial of deduction under Section 10A of the Act while restoring it to the Assessing Officer for fresh consideration. Also it is an admitted position between the parties that the appeals filed by the Revenue against the above ITAT order in quantum proceedings [2014 (9) TMI 1060 - BOMBAY HIGH COURT] were dismissed by the order of HC the penalty proceedings at this stage are unsustainable - Decided in favour of assessee
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2016 (7) TMI 55
Penalty u/s 158BFA (2) - Held that:- The levy of penalty u/s.158BFA(2) in the context of the facts discussed above is not justified. The facts are on record. The appellant makes certain claims about deductions, exemptions and inclusions in the declared undisclosed income. These claims are to be processed in the course of assessment proceedings resulting in acceptance and rejection of claims. The rejection of claim does not make it mandatory to levy penalty in every case of such rejection. On a proper consideration of the facts of the case, the order of penalty deserves to be cancelled. - Decided in favour of assessee
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2016 (7) TMI 54
Applicability of transfer pricing provisions - 100% EOU working under STP scheme - whether the transfer pricing provisions cannot be invoked in this case even though admittedly there is no, and there cannot be any, tax avoidance motive in such a situation. - Held that:- the issue is covered against the assessee by the Special Bench decision in the case of AZTEC SOFTWARE AND TECHNOLOGY SERVICES LTD [2007 (7) TMI 50 - ITAT BANGALORE] , yet he prays for constitution for an even larger bench of seven or more Members. Once the issue is covered by a binding judicial precedents, we see no reasons to take any other view of the matter than the view taken by the biding judicial precedents. - preliminary objection raised by the learned counsel rejected - Matter will be heard on merit - Decided against the assessee.
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2016 (7) TMI 53
If gain on account of purchase and sale of shares is in the nature of business income, then, the interest paid by the respondent-assessee for borrowing funds for its business has necessarily to be allowed
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Customs
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2016 (7) TMI 88
Interest liability on the differential duty of the customs which was paid after 103 days from the date due to be paid to the national exchequer - violation of Section 47(2) or not - Respondents are arguing that under the provisions of Section 28AA of Customs Act they have the time of three months to make the payment of differential duty and the liability of interest can accrue only after the expiry of said three months prescribed in Section 28AA of the Customs Act and the department's demand for interest for the said delayed payment is therefore without any basis. Held that:- The goods were cleared or the out of charge order was made on 23-11-2000. It is after this that a letter was issued demanding enhanced duty. The appellants paid the differential duty on 10-03-2001. It is to be noted that the assessed duty stands discharged by respondents on 20-11-2000 itself. Thus there was no delay in paying duty assessed in terms of Section 47(1) of the Act. The reliance on the judgments in Ajantha Tubes Ltd. case [2006 (9) TMI 381 - CESTAT, NEW DELHI] by my learned brother, Member(T) in my opinion is misplaced as the provisions of Section 28AA and Section 28AB are not invoked. On appreciation of facts, it is clear that there is no violation of Section 47(2) of the Act. The liability to pay interest cannot be assumed. - Decided against the revenue.
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Service Tax
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2016 (7) TMI 92
Valuation - transportation of passengers by air service - inclusion of fuel and insurance surcharge as well as on passenger service fee and airport tax - suppression of facts - extended period of limitation - Held that:- it is clear that the airlines association has taken up the issue of fuel and insurance surcharge with the CBEC which issued the clarification. In the circumstances, it is totally untenable to even allege suppression/ wilful mis-statement with regard to service tax demand pertaining to fuel surcharge. We have perused the Show Cause Notice also and find that the allegation of wilful suppression of taxable value has been made essentially on the ground that the appellant did not include the fuel surcharge, PSF and airport taxes in the assessable value and failed to file correct ST-3 returns (meaning that the assessable value shown in the ST-3 returns did not include the PSF and airport taxes and fuel and insurance surcharge). The Show Cause Notice does not even remotely bring out as to how it was a wilful act to evade service tax and the airline was aware that the same were includible in the assessable value. Mere omission to give correct information is not suppression of facts unless it was deliberate and that an incorrect statement cannot always be equated with wilful mis-statement. Thus, the ingredients required for imposing penalty under Section 78 ibid are conspicuously absent in this case. Demand pertaining to passenger service fee and airport taxes is set aside and the penalty under Section 78 ibid is also set aside. - Decided partly in favor of asessee.
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2016 (7) TMI 91
Rejection of Refund of cenvat credit without issuing show cause notice - export of services - wrong application of formula prescribed in the Notification No.5/2006-CE(NT) dt. 14/03/2006. - further since there was DTA services provided by other units of the appellant, the original authority observed that CENVAT credit eligible for refund has to be restricted proportionately - principles of natural justice - Held that:- Admittedly, no show-cause notice was issued to the appellant specifying the grounds on which the refund claim is proposed to be rejected. No personal hearing was given at the stage of original adjudication. Thus appellant has been totally deprived of knowing the allegations or putting forward, a defence against the grounds for rejection of refund. Thus there has been in a way application of the formula twice over. Similar issue was considered by Tribunal in the case of CST, Mumbai-I Vs. Global Markets Centre (P) Ltd. [2015 (2) TMI 271 - CESTAT MUMBAI]. The Tribunal observed that the formula used the word total CENVAT credit taken on input services . Therefore the inadmissible part of input services cannot be deducted before applying the formula. In the absence of show-cause notice, the rejection of ₹ 4,41,981/- is unsustainable. For the reasons discussed in earlier paragraphs, the impugned order to the extent of rejecting the refund claim of ₹ 4,41,981/- is also set aside. The appellant is eligible for refund of ₹ 57,58,829/- as claimed in the refund application. - Decided in favor of assessee.
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2016 (7) TMI 90
Classification of service - nature of contract - material handling contract versus manpower, recruitment or supply agency service - Held that:- On bare perusal of the work order/work schedule, it is seen that it does not state that particular number of labour/employees should be recruited. The payment is fixed according to the work executed and not according to the number of persons employed. As per the agreement, the respondents are to execute the activities described in work schedule in the premises. The payment is paid as per completion of the work and not according to the labour employed. There is no whisper in the contracts for supply of manpower to Hindustan Zinc Ltd. The entire essence of contract is the execution of work detailed in the work schedules. Therefore, the view of the Commissioner (Appeals) that it is lumpsum work, which would not fall under the category of providing of manpower supply service does not call for any interference. - No demand - decided against the revenue.
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2016 (7) TMI 89
Construction services - Levy of service tax on works contract prior ot 1.6.2007 - inclusion of value of free supplies - eligibility of Composition Scheme - abatement of 67% - Held that:- construction of hospitals for charitable organization (e.g. B.L. Kapoor Hospital) is covered within the scope of the scope of commercial construction and hence liable to S.T. under C.I.C.S.. Matter remanded back for de novo adjudication as the demand/interest/penalties will have to be re-determined.
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Central Excise
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2016 (7) TMI 87
Clandestine removal of goods - third parties made statement that he is purchasing the goods from the assessee and produced certain challans/katcha slips of the receipt of the goods. - Held that:- On perusal of the katcha slips/challnas, I find that these challanas / katcha slips have been issued by M/s Jagan Nath Chanan Ram and the name of receiver or to whom these have been issued has not been mentioned anywhere. In that circumstance, it cannot be said that the assessee has issued thes katcha slips/challnas unless and until the genuineness of these katch slips/challans is verified. With regard to the statement of the assessee recorded during the course of investigation, I find that the statement has also been altered and the assessee in his statement separately has said that he is selling the goods against the invoices on payment of duty. Merely making some deposit during the course of investigation on persuasion of the departmental officers does not corroborate that the assessee has cleared the goods clandestinely - Entire demand set aside - Decided in favor of assessee.
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2016 (7) TMI 86
Grey fabric manufactured to the job worker - whether is required to be treated as intermediate products so as to invoke provision of Rule 16(B) - Held that:- In the case of M/s. Valentino Syntex Pvt. Ltd. Vs. CCE Jaipur [2008 (2) TMI 806 - CESTAT, NEW DELHI ] while considering an identical issue, it was held that the grey fabric manufactured by the assessee out of duty paid yarn and cleared to the job worker for further processing and subsequently received and cleared on payment of duty are required to be extended the benefit of Rule 16(B) of Central Excise Rules by considering the same as intermediate goods. Also as the permission granted by the Commissioner in terms of Rule 16 (B) on 17.12.04 has not been withdrawn by him and was still in existence, Revenue cannot take a stand against the said permission. The duty paid by the job worker was available as credit to the appellant who was in a position to utilise the same for payment of duty on the final product. Inasmuch as the appellant has admittedly paid the duty on the grey fabrics which have come back to them from the job worker, we fully agree with the learned advocate that entire exercise was only a paper exercise leading to a revenue neutral position.- Decided in favour of assessee
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2016 (7) TMI 85
Excise duty on waste and scrap - Revenue's allegation that the scrap has arisen during the manufacture of final product and stand clandestinely removed by the appellant is primarily based upon the said statement by the authorised signatory - Held that:- Having gone through the said statement, we find that the same is not categorical statement accepting dutiable waste and iron scrap cleared clandestinely under the said recovered slip. He has nowhere clearly admitted that the same is generated during the course of manufacture of the final product and stands cleared by them clandestinely. The said statement, as per the settled law cannot be made the sole basis for confirming the allegations of clandestine removal. The Revenue has not made any further investigation to find out as to when the said goods were cleared and to whom it was cleared. There is nothing on record to show that who is the ultimate buyer of the same. In the absence of such an evidence to corroborate the Revenue’s stand, upholding of the same is not called for. Also the appellant has taken a stand that the dutiable waste generated in their factory stands cleared on payment of duty by way of issuing of invoices. No efforts have been made by the Revenue to find out the quantum cleared by the appellant on payment of duty and to make any suggestion or allegation that the scrap generated was excess in quantity then the duty paid by them. In such a scenario, we find no merit in the Revenues stand. - Decided in favour of assessee
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2016 (7) TMI 84
Raw materials/inputs found in excess at the time of search - confiscation and consequently redemption fine and penalty - Held that:- As the issue has been settled that the inputs found in excess are not liable for confiscation, therefore, hold that the inputs are not liable for confiscation. As the appellant was not maintaining proper account of their inputs, therefore, the penalty is imposable in view of the decision of this Tribunal in the case of Unimark Remedies Ltd. (2005 (6) TMI 197 - CESTAT, MUMBAI ). In the circumstances, impose penalty of ₹ 5,000/- (Rupees Five Thousand) on the appellant for non accounting of raw materials in the statutory records. With regard to the imposition of penalty on the partner Shri Naresh Joshi, hold that as penalty on the main appellant i.e.M/s Mahadev Steel Industries has already been imposed, therefore, no penalty is warranted on Shri Naresh Joshi.
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2016 (7) TMI 83
Cash refund - duty remained unutilized in their cenvat credit account at the time of closure of the factory under Rule 5 of Cenvat Credit Rules, 2004 - Held that:- The appellant is entitled to claim cash refund of unutilized amount of credit lying in their cenvat credit account at the time of closure of their factory on 31.10.2010 under Rule 5 of Cenvat Credit Rules, 2004 as relying on case of Union of India vs. Slovak Trading Co. Pvt. Ltd. (2006 (7) TMI 9 - KARNATAKA HIGH COURT ) wherein held that the respondent is entitled to get refund lying unutilized in their Cenvat credit account on the closure of their factory - Decided in favour of assessee .
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2016 (7) TMI 82
Penalty imposed on the misc. provisions of Rule 27 of CER 2002 and Rule 15 (A) of CCR, 2004 - manual filing of returns and accepted by the department - Held that:- The appellant has a valid point in their argument that the department has been accepting their manual returns and after 5 years, issued notice for imposing penalties for not filing returns by electronic mode While electronic filing will facilitate easy monitoring and proper record keeping, it was expected when the scheme was introduced, the assessee be guided by the Department for complying with the new requirement. The appellants have been filing manual returns. It is an admitted fact that the main monthly returns used for assessment has been filed by them electronically. Further, when the scheme of E-filing was introduced in respect of other returns in 2011/2012, no penalty can be imposed for the period prior to that for cases to failure to file electronically. Also take note that no irregularity or short payment of duty is connected to any of these returns. Considering the above factual and legal position, find that while there is an admitted violation on the part of the appellant regarding mode of filing these returns, it will be proper and justifiable to restrict the penalties to ₹ 5,000/- each in terms of Rule 27 of Central Excise Rules, 2002 and Rule 15(A) of Cenvat Credit Rules, 2004. The appeal is disposed of in the above terms.
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2016 (7) TMI 81
Eligibility to the benefit of Notification No. 8/2003-CE dated 01.3.2003 - Held that:- The condition (iii) of Para 2 of the said Notification is very specific and the reason/cause behind its non-fulfilment, in our opinion, is irrelevant. Accordingly, we do not see any reason to interfere with the findings of the learned Commissioner (Appeals) confirming the duty and setting aside the penalty imposed as the appellant have simultaneously availed the exemption under Notification No. 08/2003-CE as well as CENVAT credit scheme which is not permissible as rightly held by the lower authority. The plea of appellant that they have not availed credit of duty paid on inputs up to 29.10.2006 used in the manufacture of any specified/ non-specified goods is not acceptable as the appellant himself committed that they have utilised the credit during transitional period. Further, the appellant has not put on record that they have maintained a separate stock which remains unutilised up to the aggregate value of first clearance of Rs. One crore during the financial year 2006-07 as argued. - Decided against assessee
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2016 (7) TMI 80
Demand of duty on sugar syrup consumed captively for manufacture of exempted finished goods - test of marketability - Held that:- We find that the test report clearly states that the samples contained less than 65% sugar. The test report does not indicate the date on which the test was conducted or if the samples are deteriorated or not. In view of that the basic ground on which the Commissioner (Appeals) has based his order are found to be misplaced. We find that the Circular No. 780/13/2004-CX dated 12/03/2004 rightly points out that what is relevant is the test of marketability and not the sugar contents in the syrup. We find that there is no evident whatsoever of the test of marketability in the proceedings anywhere. - Decided in favour of assessee
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2016 (7) TMI 79
Denial of Cenvat credit on Tour Operators Service used for bringing staff to the factory - Held that:- This Tribunal in the assessee s own case for the prior period has allowed the assessee s appeal. Also find that the adjudicating authority in his findings has discussed the entire issue in detail and discussed the interpretation of the term activities relating to business and held that the input services availed by the appellant assessee for tour operator s service on which cenvat credit has been claimed is in relation to the manufacture of the final products. By respectfully following the ratio laid down by the Hon’ble High Court of Bombay in the case of CCE, Nagpur Vs. Ultratech Cement Ltd. Reported in (2010 (10) TMI 13 - BOMBAY HIGH COURT ) and the decision of this Tribunal, the impugned order is set aside. - Decided in favour of assessee
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2016 (7) TMI 78
Duty liability on samples drawn for testing within the factory premises - Revenue contented that the Supplementary Instructions of the Central Board of Excise and Customs has laid down procedure for drawal and accounting of samples for testing which apparently insists upon payment of excise duty - FAA set aside the duty demand - Held that:- Samples that are retained in the factory of production for prescribed periods as well as those that are subject to test within the factory are not, in effect, removed from the factory and it would appear that these should not be liable to excise duty at that stage. It would appear that the adjudicating authority has been over-zealous in interpreting the treatment to be accorded to removals to be applicable to all samples whether retained in the factory or taken outside. We have no doubt in our minds that drawing of samples and removal of samples are two different events and it is only the latter that requires discharge of duty liability. Samples that are drawn and retained are, by and large, reintroduced subsequently in the production process and thus metamorphosised as finished goods that are removed on payment of duty. Even if the samples were to lose their identity and characteristics during the testing, the cost of such samples would, in the normal course, be absorbed in the cost of production of finished goods that would ultimately be charged to duty. There is, therefore, no logic in concluding that there is loss of revenue on account of drawal of samples to the extent that such samples are retained or tested within the factory of production. - Decided against revenue
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CST, VAT & Sales Tax
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2016 (7) TMI 77
Validity of revised assessment order - the appellant preferred the Writ Petition by alleging that the first respondent being influenced by the report or direction of his higher officials or the enforcement wing officials, without applying his independent mind, made the revised assessment and passed the impugned order. - TNVAT - Held that:- where there is a mechanism for redressal by way of filing an appeal before the appellate authority, especially, in the case of assessment and re-assessment of tax, imposition of penalty and for obtaining relief in respect of any improper order passed by the revenue authority, the assessee could not be permitted to abandon the machinery and invoke the jurisdiction of High Court under Article 226 of the Constitution of India. The assessee can very well approach the appellate authority and raise all the grounds urged before this Hon'ble Court. - The Writ Appeal fails and the same is dismissed - Decided against the assessee.
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2016 (7) TMI 76
Benefit of sales tax exemption in respect of tea packets - sale price were same from the exempted and non-exempted units - It was noticed by the said authority that sale of tea packets by the respondent-company from the Dharwad unit which had the benefit of exemption and the units manufacturing tea outside Dharwad unit which did not have the benefit of exemption were similarly priced. Two invoices – one from Dharwad unit and one from non-Dharwad unit – were taken note of and found that the ultimate sale price in both cases is ₹ 118 (the non-Dharwad tea had a sales tax component of ₹ 12.27, whereas the Dharwad tea had no sales tax component). Held that:- The respondent is entitled and can fix a uniform price meant for whole of India. The uniform market price does not differ in spite of differences in sales-tax payable at the end point, i.e., at the point of sale. This is a matter of business policy and cannot be taken exception to. The respondent has also explained that uniform market retail price at all India level ensures that the goods from one State do not flow to the other State, thereby distorting sales. It avoids and prevents shortages of goods in lower tax area. Uniform pricing cannot be a ground to hold that the respondent was charging sales tax on a sale price of the goods manufactured in the exempt unit. Cost of production in different units of the respondent assessee can vary. Cost of production has various components and is computed with reference to revenue expenditure, rate of return on the capital expenditure, etc. These are complex commercial and business considerations which cannot be decided with reference to a single factor, i.e., the uniform market retail price. A market retail price stating that it is inclusive of all taxes could be the starting point, but would not prove and establish that the sales-tax has been collected. In the case at hand, when the respondent was not liable to pay tax and had not passed on the tax liability, we do not think, sale consideration received should be bifurcated and divided on the basis of any assumption that the sale price received must have included the tax. This fiction has no application in the present case. - Revenue appeal dismissed with a cost of Rs. one lac.
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2016 (7) TMI 75
Status of assessee - whether it is hospital as defined in Section 2(d)(e) or a hotel as defined in Section 2(e) of the Kerala Tax on Luxuries Act, 1976 - Held that:- The term 'hotel' has defined in Section 2(e) of the Act - It was in the light of the aforesaid definition of the term 'hotel' that the case of the petitioner was appreciated by this Court in the judgment in Kairali Ayurvedic Health Resort Pvt. Ltd. [2013 (2) TMI 776 - KERALA HIGH COURT] In that judgment, this Court has made reference to the order of the Tribunal impugned therein, wherein the facilities provided by the petitioner have been noticed. The correctness of these factual findings or the existence of the facilities noted in the judgment are not disputed by the petitioner. It is, therefore, obvious that that the predominant activity that is carried on in the establishment is not running of an ayurvidic care centre to call it as a hospital as defined in Section 2(d)(e) of the Act and on the other hand, this is a case where an ayurvedic centre is also functioning in the hotel of the petitioner. If that be so, the factual finding of the Tribunal that the petitioner's establishment is a hotel as defined in Section 2(e) of the Act cannot be said to be erroneous for any reason. - Decided against the petitioners.
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2016 (7) TMI 74
Validity of assessment order - petitioner submitted that the rules of natural justice have not been followed while deciding the case - valuation - rejection of return - Held that:- on two grounds (i) vagueness of the notice, and (ii) violation of the rules of natural justice, we without going into the merits of the case, quash the impugned order. The assessing officer shall be at liberty to issue fresh notice in which he should clearly spell out the reasons why he feels that the return is a false return and why he feels that the documents filed by the assessee cannot be relied upon. - Decided in favor of assessee.
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2016 (7) TMI 73
Deletion of penalty u/s 78 - Deviation of Vehicle with goods in transit from National Highway to any road/route leading to city/town / village or any other place within the territory of the State of Rajasthan - Held that:- the goods in vehicle in issue owned by the assessee were in transit from Delhi to Mandasur in Madhya Pradesh and not intended to be clandestinely delivered in Rajasthan. The view taken by the Appellate Authority and the Tax Board is a possible view on the evidence on record and cannot be termed perverse - there is no good ground to invoke the revision jurisdiction of this Court which is confined to questions of law under Section 86 of the Act of 1994. - Decided against the revenue.
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Indian Laws
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2016 (7) TMI 72
Compassionate appointment of assessee's son rejected - non-speaking order - scheme to provide employment under compassionate category - application for giving employment to her son - Held that:- While rejecting the application, the authority has not indicated any reason much less justifiable reason. It is not sufficient to mention that the case of the petitioner would not come under the scheme. The department should point out the actual reasons for rejecting the application. In fact, an attempt was made by the respondents to improve the case by giving certain particulars in the counter statement. However, the impugned order does not contain any such reasons. The first respondent has clearly admitted in his counteraffidavit that the retirement was on medical ground. This aspect was not considered while rejecting the application. Therefore, of the view that the issue requires fresh consideration by the second respondent. In the result, the impugned memorandum dated 18 October, 2011, is set aside. The second respondent is directed to consider the application submitted by the petitioner for compassionate appointment to her son on merits and in accordance with the relevant Scheme. While considering the application, necessarily, the second respondent should also consider the admission given in the counteraffidavit filed by the first respondent to the effect that the retirement was on medical ground.
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