Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 7, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Invocation of section 145(3) - existence of infirmities and discrepancies in the accounts maintained by the assessee was a pre-requisite for invoking the provisions of Section 145 - HC
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Claim of deduction u/s 54 of the Act - Two flats acquired under different agreements though single kitchen and used as one single unit - exemption allowed - HC
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Interest subsidy received under the Technology Upgradation Fund Scheme – utilized for repayment of loans taken by the assessee to set up the new unit - held as capital in nature - AT
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No disallowance u/s 40(a)(i) can be made on the payment of interest paid to the head office / overseas branches as the same is not taxable, being payment to self on the ground of principles of mutuality and no TDS was required to be deducted - AT
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ESOP expenses u/s 37 of the Act - discount on issue of Employee Stock Option is an allowable deduction in computing the income under the head ‘Profit and gains of business or profession’ - AT
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Depreciation on aircrafts @ 40% - revenue has not been able to bring on record any of the cases wherein such aircraft has been considered by them eligible for depreciation under the head ‘Machinery and Plant’ - AT
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Block assessment - In the absence of existence of any cogent material which demonstrates the undisclosed income belonging to the person other than the searched person, the proceedings initiated u/s 158BD and consequent block assessment are invalid - AT
Customs
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Denial of refund claim of SAD - Invoices did not contain certificate stating no credit of additional duty of customs levied u/s 3(5) of Customs Act, 1975 shall be admissible - refund denied - AT
Service Tax
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Condonation of delay - mis-placement of the records in the office of the assessee cannot be a sufficient ground for condonation of delay. - AT
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Extension of stay granted - Waiver of pre deposit and stay of recovery are two different aspects - order of waiver is not subject to the provisions of Section 35C(2A) - AT
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Penalty u/s 76 & 78 - waiver of penalty u/s 80 - C&F Service - inclusion of reimbursements of expenses - there were divergent views on the issue - penalty waived - AT
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Demand is in respect of the amounts which were received as donations - Club & Association service - As the appellants had not co-operated with the adjudicating authority - it is a fit case to impose cost on the appellants - AT
Central Excise
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CENVAT Credit - assesee is paying 8% of the value of exempted goods - Cenvat credit cannot be disallowed if an assessee manufactures only exempted goods for a part of the year and for the balance year manufactures both exempted and dutiable goods - AT
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Waiver of pre deposit - cenvat credit - duty paying documents - supplementary invoice - payment of duty due to fraud, suppression of facts etc. - prima facie case is against the assessee - AT
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Classification of goods - Chocolate hub - product chocolate clubs would be properly classifiable under heading 1905.90 - AT
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Cenvat credit - timing of availing the balance 50% of credit on capital goods - the expressions “possession” and “use” had to be read together and once the goods are received, their actual installation and use may not be insisted upon. - AT
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Suo moto availing of credit - there was nothing wrong in taking of suo motu credit after getting favourable orders from CESTAT, when unjust enrichment is not applicable - AT
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CENVAT Credit - Nexus with manufacturing activity - denial of Cenvat credit in respect of the service availed for maintenance of lawn and green belt also not sustainable - AT
VAT
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Development of residential complexes - Matter remanded back to find out what is the object of the business of the revisionist, i.e. whether it is engaged in sale or in works contract - HC
Case Laws:
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Income Tax
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2014 (7) TMI 181
Transfer pricing adjustment – Selection of comparables - Accel Transmatic Ltd.- Held that:- The TPO has drawn conclusions on the basis of information obtained by issue of notice u/s.133(6) of the Act - This information which was not available in public domain could not have been used by the TPO, when the same is contrary to the annual report of this company as highlighted by the Assessee in its letter dated 21.06.2010 to the TPO – the company was developing software products and not purely or mainly software development service provider – thus, this company cannot be taken as comparable. Megasoft Ltd. – Infosys Technologies Ltd. - Held that:- The TPO has accepted the fact that the assessee is purely a software development service provider to its AE whereas Infosys is not a captive service provider like assessee - Infosys is engaged in diversified activities and also engaged in development of products consultancy and solution - That apart, the size, reputation and brand value of Infosys, in no way makes it comparable to a small captive service provider like assessee. Though the assessee has advanced detailed submissions for inclusion of the aforesaid companies, but, the DRP has simply brushed aside the same without considering in proper perspective - the assessee’s contention in respect of the companies requires reconsideration - so far as L&T Infotech Ltd. is concerned, this company is having a huge turnover of 790 crores and unlike the assessee it is not captive service provider - Therefore, the reasons for which Infosys Technologies Ltd cannot be treated as comparable to the assessee also equally applies to this company - except L&T Infotech Ltd., the comparability of the other companies selected by the assessee, but, rejected by the TPO is restored back to the file of the AO/TPO for fresh consideration. Exclusion of communication expenses – Held that:- The decision in CIT Vs. Gemplus Jewellery[ 2010 (6) TMI 65 - BOMBAY HIGH COURT] followed – a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover - Freight and insurance do not have an element of turnover - these two items would have to be excluded from the total turnover particularly in the absence of a legislative prescription to the contrary – thus, the AO is directed to exclude the communication expenses from export turnover as well as total turnover while computing deduction u/s 10A of the Act – Decided partly in favour of Assessee.
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2014 (7) TMI 180
Jurisdiction of the CIT in invoking powers u/s 263 of the Act – Held that:- The CIT has considered the assessment order passed u/s 143 of the Act to be erroneous and prejudicial to the interests of the revenue for non-consideration of certain issues as raised in the show cause notice issued u/s 263 of the Act - the assessee has not only explained queries raised by the AO, but, has also substantiated it with necessary documentary evidence - the AO have conducted necessary enquiry and completed the assessment after applying his mind to the facts and materials on record, assessment order passed cannot be considered to be erroneous and prejudicial to the interests of the revenue as the condition precedent for invoking jurisdiction u/s 263 is not satisfied – Relying upon Malabar Industrial Co. Ltd. Versus Commissioner of Income-Tax [2000 (2) TMI 10 - SUPREME Court] - the assessment order passed cannot be considered to be erroneous and prejudicial to the interests of the revenue for subjecting it to revisional proceeding u/s 263 of the Act. Grant of deduction u/s 80IA of the Act - Gain derived from sale of carbon remission reduction certificates – Part of business income or not – Held that:- The amount received on sale of CERCs being capital in nature – Following The Commissioner of Income Tax – IV, Hyderabad Versus M/s. My Home Power Ltd. [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] - it cannot be treated as income of the assessee in the first place - the assessee has treated it as revenue receipt, receipt being in the nature of capital cannot be treated as income - even if AO has allowed the deduction on the amount u/s 80IA treating it as revenue income, no prejudice was caused to the revenue - one of the condition for invoking jurisdiction u/s 263 was not satisfied. Claim of reimbursement of taxes from AP TRANSCO – Computation of book profit u/s 115JB of the Act – Held that:- The Tribunal in the case of the same assessee has directed the AO to delete the addition - it cannot also be considered for the purpose of computing book profit of the assessee u/s 115JB of the Act as it does not accrue as income of the assessee for the assessment year - the AO taking note of the order passed by the Tribunal on the issue has added the income on protective basis only - since the amount was not treated as income in the books of account the same also cannot be considered under the provisions of section 115JB, which is to be computed based on P&L A/c of the assessee company. Only because the view taken by the AO does not appear to be correct to the CIT, it cannot be said that such view is erroneous and prejudicial to the interests of the revenue - though the CIT has observed that the view taken by the AO is not correct, but, he himself has not expressed in detail why he considers it to be incorrect - on going through the provision contained u/s 43A and relying upon CIT Vs. Woodward Governor India P. Ltd. [2009 (4) TMI 4 - SUPREME COURT] – the view taken by the AO is not one of the possible view - the CIT was not justified in treating the assessment order to be erroneous and prejudicial to the interests of revenue – Decided in favour of Assessee.
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2014 (7) TMI 179
Addition u/s 69 of the Act - Increase of amount of bank account – Deposit of tuition fee – Held that:- The assessee is a teacher has been receiving monthly salary from the Sanskriti School in all the relevant assessment years - the assessee has been filing returns and has been consistently claiming in the said return certain income as her tuition fee income for the assessment years - the returns were filed by the assessee regularly every year u/s 139(1) and the veracity of the claim of the assessee in respect to her certain income as tuition fee income has not been questioned in any of the AY’s – the addition of the tuition income, as income from undisclosed source is not permissible in the eyes of law particularly even in the year, sum has been declared and assessed as tuition income - There is no material to show that ₹ 3,41,000/- is from a source other than the tuition income – the addition made by the AO and later on confirmed by the CIT(A) in respect of tuition fee income, which the assessee has been consistently claiming cannot be said to be her income from undisclosed source; and her claim in the regular return filed in respect to tuition income being accepted and taxed by the predecessor AO cannot be discarded in the absence of any specific incriminating materials to suggest otherwise – Decided in favour of Assessee. Addition u/s 69B of the Act – Payment made to M/s Shah Construction out of her savings bank account with HDFC bank – Held that:- The reasoning of the CIT(A) cannot be sustained for the simple reason that the assessee was in receipt of tuition income which was regularly reflected by her in her duly returned income filed u/s 139(1); and regularly brought to tax and has been as a fact taxed in the hands of the assessee; and moreover we find that the assessee/ appellant had sufficient disclosed income in her saving banks accounts to finance the construction - the amount of ₹ 3,90,000/- has been paid by cheque from HDFC Bank account on 21st December 2005; and M/s. Shah Construction has confirmed that it has received ₹ 3,90,000/- from assessee – thus, the addition is liable to be set aside – Decided in favour of Assessee. Addition u/s 69C of the Act – Held that:- The assessee has made an expenditure of ₹ 3.1,989/- for the AY - The tuition income of the assessee in regular return is ₹ 3,45,000 - The amount incurred for construction has been paid by the appellant by cheque for ₹ 3,90,000/- to Ms. Shah Construction and it has been confirmed by the receipt - the AO did not take into consideration, the fact of payment of ₹ 3,90,000/- to M/s. Shah Construction vide cheque No. 400185 dated 21st December, 2005 for the construction at Noida and though the AO has accepted that an amount was withdrawn by the assessee from the bank for the relevant AY - the AO has erroneously stated that ₹ 3,90,000/- was invested in the construction of house at Noida from cash in hand, whereas the assessee has made the said transaction through cheque bearing no. 400185 dated 21st December 2005 – thus, the addition sustained by the CIT(A) is to be set aside – Decided in favour of Assessee. Addition of interest income – Held that:- The assessee has shown income from other sources which include interest on FDR and as interest on saving bank - the total interest income as per the computation and also as per the capital account is shown – the AO has worked out the interest income as such there is a difference of ₹ 812 – thus, the deletion of addition of ₹ 10,200/- and add only ₹ 812/- is directed to the income of the assessee - Decided in favour of Assessee.
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2014 (7) TMI 178
Deduction u/s 80IB of the Act – Invocation of section 145(3) of the Act – Method of accounting – Held that:- AO can reject the accounts maintained by the assessee if he is not satisfied about their correctness or completeness - the Assessing Officer can reject the method of accounting followed by the assessee if the same is not in accordance with the provisions of subsections (1) and (2) of Section 145 - the AO is authorized to make assessment of total income of the assessee on the basis of “best judgment” and, at the same time, disregard the income declared in the return - the existence of infirmities and discrepancies in the accounts maintained by the assessee was a pre-requisite for invoking the provisions of Section 145 – the AO had merely doubted trading results declared by the assessee - There were no findings as to how the accounts maintained by the assessee were either incomplete or incorrect. The reason advanced was that in the relevant year the assessee was eligible for exemption u/s 80IB @ 100% of its profits, whereas, it was not so in the next AY 2004-05 - There appears to be an inherent fallacy in the reasoning because for the AY 2005-06 wherein the assessee was also not eligible for 100% exemption u/s 80IB, the G.P. rate declared was 8.48% - to say that higher G.P. rate declared in the relevant year at 8% was incorrect merely on the basis of low rate declared for the AY 2004-05, was merely based on conjectures and surmises - prima facie, the absence of any adverse remarks by the Special Auditor definitely supports the case of the assessee - The entire action of the AO appears to be based more on suspicion than on ground reality - the accounts of the assessee could have been got reinvestigated but the same could not have been rejected – the order of the Tribunal is upheld – Decided against Revenue.
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2014 (7) TMI 177
Stay application u/s 254(2A) - modification of stay order – Claim of deduction u/s 80IA of the Act - Held that:- petitioner has filed application for extension of stay before the Tribunal and the same is listed for hearing on 4 July 2014.The Tribunal would consider the petitioner's application for extension of stay granted earlier. At that point of time the Tribunal would consider all facts and circumstances of the case and decide the extension application for stay filed by the petitioner. At this stage besides modifying the impugned order dated 20 September 2013 doing away with the requirement of depositing ₹ 30 crores, no other order is passed.
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2014 (7) TMI 176
Stay application – Notice issued u/s 221(1) of the Act – Held that:- The petitioner has preferred an appeal before the first respondent and it is pending –the petitioner is directed to move the appellate authority for stay and necessary orders - Since the stay petition is pending before the appellate authority - second respondent is directed to give necessary notice to the petitioner and then pass orders on the stay petition - Till then it is directed that the respondents shall not take any coercive action.
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2014 (7) TMI 175
Expenses incurred on issuance of FCCBs – Held that:- The Tribunal was of the view that the expenditure incurred by the assessee on issue of the bonds was claimed to be deductible being revenue in nature and that was allowed after due verification/examination - the CIT could not have concluded on same material that the FCCBs, in real sense, were equity shares right from the beginning and that the conversion of bonds was only a routine technical compliance as per the Regulations and guidelines - the material does not indicate that conversion is automatic and that unless the option is exercised conversion or the consideration was not permissible - a possible view taken by the AO should not have been termed as prejudicial to the interest of the revenue – thus, no substantial question of law arises for consideration – Decided against Revenue.
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2014 (7) TMI 174
Reassessment u/s 148 of the Act – Bar of limitation – Held that:- The reasons recorded for issuing the notice specifically points out that commission paid to M/s.Bonas & Co.Ltd. (a foreign party) is not shown separately but added to the cost of purchase while commission paid on local purchase has been separately shown in the profit and loss account and not added to costs - there has been less than full and true disclosure of all material facts during the assessment proceedings for AY 2005-06 - This is for reason that if the commission paid to the foreign party was shown separately as in case of local purchase, the question of tax deduction at source would have become the subject matter of examination by the AO while assessing the Assessee's income during regular assessment. The particular reason for reopening of the Assessment has not been dealt with by the petitioner in its objection to the reasons for reopening the assessment for AY 2005-06 furnished - it cannot be concluded that the notice dated 29.3.2012 is without jurisdiction - there was failure on the part of the assessee to fully disclose all material facts necessary for assessment – the reopening of the assessment by notice dated 29.3.2012 as well as the order dated 25.10.2012 rejecting the objections need not be interfered – Decided against Assessee.
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2014 (7) TMI 173
Claim of deduction u/s 54 of the Act - Two flats acquired under different agreements though single kitchen and used as one single unit - Held that:- The Tribunal noted that the map of the general layout plan as well as internal layout plan in regard to flat Nos.103 and 104 indicate that there is only one common kitchen for both the flats - The flats were constructed in such a way that adjacent units or flats can be combined into one - the flats were converted into one unit and for the purpose of residence of the Assessee - the acquisition of the flats may have been done independently but eventually they are a single unit and house for the purpose of residence – Relying upon Income-tax Officer, Ward 19 (3) -4, Mumbai. Versus Ms. Sushila M. Jhaveri [2007 (4) TMI 289 - ITAT BOMBAY-I ] - so long as there is a residential unit or house, then the benefit or deduction cannot be denied - the unit was a single one - The flats were constructed in such a way that they could be combined into one unit – thus, no substantial question of law arises for consideration – Decided against Revenue.
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2014 (7) TMI 172
Interest subsidy received under the Technology Upgradation Fund Scheme – Revenue receipt or not – Held that:- The decision in Commissioner of Income-tax Versus Sham Lal Bansal [2011 (1) TMI 409 - PUNJAB AND HARYANA HIGH COURT] followed - interest subsidy received under TUF Scheme is capital in nature - assessee is engaged in manufacture and sale of woolen garments - It received subsidy for repayment of loan taken for building, plant and machinery under the Credit Linked Capital Subsidy Scheme under Technology Upgradation Fund Scheme (TUFS) of Ministry of Textiles, Government of India - the objective of the subsidy scheme was to enhance the technology apparatus of the assessee by assisting in acquiring machinery and further that the subsidy so received was utilized for repayment of loans taken by the assessee to set up the new unit, as was the intention of the subsidy. The purpose of scheme under which the subsidy is given id to sustain and prove the competitiveness and overall long term viability of the textile industry, the concerned Ministry of Textile adopted the TUFS scheme, envisaging technology upgradation of the industry - For determining whether subsidy payment was ‘revenue receipt’ or ‘capital receipt’, character of receipt in the hands of the assessee had to be determined with respect to the purpose for which subsidy is given by applying the purpose test - in order to sustain competitiveness in the domestic as well as international markets and overall long-term viability of the industry, the concerned Ministry adopted the TUFS scheme envisaging Technology Upgradation of the Industry - the subsidy received in this regard falls into capital field – Decided in favour of Assessee. Set off of unabsorbed depreciation - Unabsorbed business from 100% EOU – Held that:- CIT(A) rightly followed the decision of the Tribunal of the same assessee in the earlier assessment year, the business loss and depreciation loss in respect of the 100% EOU unit shall be set off against the profits of other units – Decided against Revenue.
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2014 (7) TMI 171
Payment of freight u/s 40A(3) – Cash payment towards truck transport charges - Expenses below limit – Held that:- The AO had made addition on the ground that the assessee had made payment on account of freight and cartage on different dates to the transporters - out of which the aggregate of sums of were paid in contravention of provisions of section 40A(3) of the Act as the payments made exceeded ₹ 20,000/- to a single person on a single date - each payment made to the transporter is a single payment' which does not exceed ₹ 20,000/- and as such, provision of section 40A(3) is not applicable - assessee has not been able to substantiate its claim for further relief in as much as relief allowable to the assessee has already been granted by the CIT(A) – there was no reasonable basis to give any further relief, as such – the order of the CIT(A) is upheld – Decided against Assessee.
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2014 (7) TMI 170
Treatment of income - Sale of shares as Business Income instead of Capital Gains – Held that:- The transactions entered into by the assessee cannot be treated to be transactions giving rise to income under the head “profit and gains from business or profession” - The shares have been shown under the head “investment” – revenue has accepted LTCG shown by the assessee in respect of similar transactions giving rise to income under the head capital gain - gain earned by the assessee from transactions of shares upon which assessee has earned gain of ₹ 2,08,775/- cannot be assessed as income under the head “profit and gains of business or profession ” – Decided in favour of Assessee.
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2014 (7) TMI 169
TDS on interest paid to Head Office/Overseas branches – Principle of mutuality - Disallowance u/s 40(a)(i) of the Act - Held that:- The decision in Sumitomo Mitsui Banking Corporation Versus Deputy Director of Income-tax, (IT), Rg. 2(1), Mumbai [2012 (4) TMI 80 - ITAT MUMBAI] followed - where any Indian branch of a foreign bank passing interest to its head office and other overseas branches of the said foreign bank on advance received by it, the interest is neither deductible in the hands of the Indian branch nor chargeable to tax in the hands of the head office and overseas branches, as all being single entity - In the domestic law, such an income cannot be taxed. The issue has been decided by the Special Bench, in favour of the assessee, by holding that interest paid to the head office of the assessee bank by its Indian Branch which constitutes its P.E. in India, is not deductible as expenditure under the domestic law being payment to self, the same is deductible while determining the profit to the P.E. which is taxable in India as per the provisions of article 7(2) and 7(3) because, it amounts to payment to self which is not taxable under the domestic law - Thus, the “principles of mutuality” were invoked for non–deduction of tax - no disallowance u/s 40(a)(i) can be made on the payment of interest paid to the head office / overseas branches as the same is not taxable, being payment to self on the ground of principles of mutuality and no TDS was required to be deducted – Decided in favour of Assessee.
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2014 (7) TMI 168
Rejection of books of accounts on account of estimated profits – Held that:- As it has also been decided in assessee’s own case for the earlier assessment year, the Form 3CEB filed before the AO was found to be not about the number of motorcycles produced by the assessee during the period - it was found to be concerning the royalty paid by the assessee company during the relevant quarter - the assessee had furnished a complete reconciliation before the AO, as also incorporated in the assessment order - This reconciliation had been arbitrarily rejected by the AO. Average sales of motorcycles – Held that:- The AO had not pointed out any error in respect of any sale - It was on the basis of this, that the CIT(A) observed that there was no justification for the AO to make an assumption that the sale price charged by the assessee during the year was lower than that in the preceding year - merely since the realization per motor cycle for the year under consideration was low as compared to that in the preceding year, this by itself cannot lead the AO to assume that the sale price charged by the assessee company was under-stated and the AO evidently erred in making such assumption - unless there is material evidence to disprove the contention of the assessee, the sale stated in the books of account needs must be accepted. Losses incurred by it as compared to the profits earned by other competitors – Held that:- Nothing has been brought to support this action of the AO - profit can only be made when there is ability to do so - The factors pointed out by the assessee for not being able to make sales, have not been refuted - in the presence of the factors, without a doubt, the losses suffered by the assessee cannot be said to be either bogus, or inflated - The AO did not prove otherwise - No discrepancy was pointed out in the books of account of the assessee company concerning the expenditure incurred and claimed by the assessee - Nothing was brought to establish that the assessee had been charging a sale price higher than that noted in the books of account – Decided against Revenue. Royalty payment to 100% subsidiary – Held that:- It cannot be said that any expenditure incurred wholly and exclusively for the purposes of business is an allowable expenditure - the payment is made to a 100% shareholding company of the payer - u/s 40A(2) of the Act, it is only the fair value of such expenditure, which is allowable – AO proceeded merely on assumptions, surmises and conjectures which, undeniably, can never substitute hard evidence, which is entirely absent here - Neither Section 40(a)(i) nor Section 2(22)(e) of the Act are applicable – the order of the CIT(A) is upheld - Decided against Revenue. Set off of brought forward business losses and unabsorbed depreciation – Held that:- When an assessee furnishes an explanation on a specific query, the same is treated as accepted unless some inconsistencies are found by the AO on its vetting or the assessee fails to substantiate the same on being called upon to do so - If the Officer does not dispute the correctness of the specific explanation tendered by the assessee, the same is considered as correct and binding of the AO - It is totally impermissible to dub the explanation given by the assessee as a cooked up story without any evidence to the contrary - even if it is presumed without agreeing that the AO was under some misconception qua the assessee’s explanation during the assessment proceedings, he could have verified the same when remand reports were called for - revenue has brought no material on record to demonstrate any fallacy in the explanation tendered on behalf of the assessee – Decided against Revenue.
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2014 (7) TMI 167
Penalty u/s 271(1)(c) of the Act – Intentional claim of expenses though not allowable – Held that:- The first basis on which the CIT(A) has deleted the penalty and has been upheld by the Tribunal cannot be justified – the material fact has not been rebutted by the revenue that in support of the claimed expenditure there was full disclosure of the expenditure and about its treatment for accounting purposes was made known to the AO by the assesee - The expenditure was related to cost of website maintenance - only there is a definition of short term capital asset in clause (42A) of section 2 which provides that short term capital asset means a capital asset held by an assessee for not more than 36 months immediately preceding the date of transfer - there is nothing on record to suggest that the explanation furnished by the assesee against the claimed expenditure was not bonafide - there was no reason to arrive at the conclusion by the AO that there was concealment of particulars of income or furnishing inaccurate particulars thereof in relation to the claimed expenditure on the part of the assessee to attract penal provision u/s 271(1)(c) of the Act - CIT(A) has rightly deleted the penalty. If the assesee is able to furnish bonafide reason for the claim or the claim made was a debatable issue in view of the provisions of the law in that case penalty u/s 271 (1)(c) is not leviable - Such precaution is being taken within the provision of the law keeping in mind that the action u/s 271(1)(c) of the Act is penal in nature - When an assesee establishes and shows that he had acted bonafidely and all facts and material were disclosed by him, penalty should not be imposed as per clause B to Explanation 1to section 271 (1)(c) of the Act - mere submission of a claim which is incorrect in law would not amount to giving inaccurate particulars of income, hence penalty for concealment cannot be levied on the same. There is no doubt on the genuineness of the claimed expenditure, the only question was the treatment given by the assesee to those expenditure which was a debatable issue and further that there was no allegation that the assesee had not disclosed full facts relating to the claimed expenditure as it was disallowed by the AO only on the basis of those disclosures – the order fo the CIT(A) is upheld – Decided against Revenue.
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2014 (7) TMI 166
Disallowance of damaged paper stock – Held that:- The AO disallowed the claim of loss observing that the assessee had given a general explanation that the paper was damaged in the rain - the purchase of the stock of paper was of the year 1996 and it was observed by the AO that by the year 2005, the paper otherwise would have become scrap - CIT(A) also was of the view that the assessee failed to prove his claim with any cogent and convincing evidence – there is no infirmity in the order while making the disallowance – Decided against Assessee. Diminution in value of shares held as stock in trade – Held that:- The shares were investments and not stock in trade - The assessee in subsequent years could not have claimed the said shares as stock in trade as per its own will - assessee after the finding of the Income Tax Authorities that the shares were investments, had not made any attempt or action to convert the shares into stock in trade - the shares are required to be held as investments only and the assessee is not entitled to claim any diminution in the value of the said shares treating the same as stock in trade – Decided against Assessee. Disallowance u/s 14A of the Act – Investments made for earning tax free income - Held that:- The decision in Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] followed - rule 8D of the Income Tax Rules is applicable for AY 2008-09 onwards - CIT(A) observed that the assessee had earned certain exempt income, the assessee had not appropriated any expenditure for earning the exempt income - the finding of the CIT(A) in directing the AO to make a reasonable disallowance after apportionment of the expenses out of the composite expenditure for earning taxable and tax free income is in accordance with the law and does not require any interference – Decided against Revenue.
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2014 (7) TMI 165
ESOP expenses u/s 37 of the Act - Sum debited to P&L account under ESOP –Reliance place on Circular No. 9 of 2007 dated 20.12.2007 - Chargeability of Fringe Benefit Tax on ESOP - Whether the assessees claim for deduction under the head ‘Employees Stock Option Cost (ESOP)’ is an allowable expenditure u/s 37 of the Act - Held that:- AO and CIT(A) has relied upon the circular issued by the CBDT NO. 9 of 2007, for refusal of the claim of the assessee - a perusal of the circular reveals that the subject it deals with is given as “Explanatory circular on Fringe Benefit Tax Arising on allotment or transfer of specified securities or sweat equity shares” – Relying upon Biocon Ltd. Vs. DCIT [2013 (8) TMI 629 - ITAT BANGALORE] - the discount on issue of Employee Stock Option is an allowable deduction in computing the income under the head ‘Profit and gains of business or profession’ - the liability to pay the discounted premium is incurred during the vesting period and the amount of such deduction is to be found out as per the terms of the ESOP scheme by considering the period and percentage of vesting during such period - AO directed to allow the expenditure – Decided in favour of Assessee.
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2014 (7) TMI 164
Reopening of assessment u/s 147/148 of the Act – Prima facie reason – Held that:- Reopening has been done on the basis of specific information in possession of AO from DIT investigation, New Delhi – the AO had prima facie reason to believe that income had escaped assessment – Decided against Assessee. Addition u/s 68 of the Act – Share application money – Amount received from debtor – Held that:- CIT(A) was primarily swayed by the consideration that assessee had returned loss of ₹ 9,792/- but the details as furnished by assessee particularly the details of sundry debtors, needs to be examined - if assessee’s claim is found to be correct then no addition is called for in current assessment year – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for verification of assessee’s claim of realization of amount due from MKM Finsac Pvt. Ltd. – Decided in favour of Assessee.
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2014 (7) TMI 163
Depreciation on aircrafts @ 40% - revenue granted depreciation considering the same as plant and machinery - Held that:- The decision in SRC Aviation (P) Ltd. Versus Deputy Commissioner of Income-tax, Circle 9(1) [2011 (8) TMI 749 - ITAT DELHI] followed - no justification in observations of CIT that the aircraft of the assessee should not be described as ‘aeroplane’ simply for the reason that ‘aeroplane’ is a machine much bigger, heavier and powerful than an aircraft which travels in the air more than an aircraft - the aircraft owned by the assessee cannot be thrown out of the category of ‘aeroplane’ and the aircraft owned by the assessee cannot be considered only as ‘Plant and Machinery’ which is a term distinct to such type of aircraft - aircraft as ‘aeroplane’ and granting depreciation to the respective assessees @ 40% - revenue has not been able to bring on record any of the cases wherein such aircraft has been considered by them eligible for depreciation under the head ‘Machinery and Plant’ - the AO had granted the depreciation to the assessee @ 40% in accordance with the provisions of the Rule - grant of depreciation cannot be considered to be a claim not supported by law, as the department cannot straightaway show that such claim of depreciation was not in accordance with the law and, in such, circumstances, the powers u/s 263 could not be invoked – Decided against Revenue.
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2014 (7) TMI 162
Addition u/s 68 of the Act – Admission of additional evidence under Rule 46A of the Rules – Creditworthiness and genuineness of transactions not considered - Held that:- The initial statement of Shri Sudesh Joshi dated 30.12.2009 was in fact handed over to the assessee only during the appellate proceedings before the CIT(A), which was the sole basis of the impugned addition and the said Shri Sudesh Joshi has retracted his statement during remand proceeding - only the basis of a statement of a witness, which has been admittedly retracted and admittedly which has not been allowed to be cross-examined by the assessee, cannot be the sole basis on which the addition can be made - the authorities have not examined the credit-worthiness of Shri Sudesh Joshi in detail - His source of income for the earlier years, need to be brought out in detail and on record as to ascertain his taxable income; and effort should be made by the AO to verify his savings in his account before he lent the amount to the assesse - since this exercise has not been properly done, the order of the CIT(A) is set aside and the Ao is directed to examine the transaction of Shri Joshi with the assessee de novo, and find out the credit worthiness of Shri Joshi and genuineness of the transactions – Decided in favour of Assessee. Addition by estimation of profit @10% of sale – Held that:- The appellant company for the instant year declared an income of ₹ 1,17,784/- on the basis of audited financial statements - CIT(A) has observed in a very casual manner that books of account cannot be relied upon and rejected it - there was no specific reason spelt out by him, from which it can be concluded that books of account cannot be relied upon and for the said reason, it was necessary for estimation of income was necessary - the audited accounts cannot be rejected unless glaring inconsistency or violation of the Act was brought on record – the AO has not made any adverse observation about the correctness and completeness of the accounts made by the AO as envisaged by Section 145 and neither AO has observed that the assessee has not been following the accounting standard as notified and there is no finding by the AO that the assessee was not following the accounting method regularly and there are no adverse finding by him as to the income of the assessee as provided u/s 145(3) of the Act. Relying upon Sanjeev Woolen Mills Vs. CIT [2005 (11) TMI 26 - SUPREME Court] - the decision of the AO to reject the audited books of account is vitiated without him spelling out the cogent reasons for doing so and has failed to satisfy the requirement of Section 145(3) before doing so and therefore the said decision to reject the books of account cannot be countenanced in the aforesaid facts and circumstances. Ad-hoc disallowance of 10% of the sales – Held that:- Simply because the assessee has engaged in a monopoly business where there is no competitor, cannot be a ground to make an ad-hoc addition of 10% without any basis - The audited account with details of sales and sale tax assessment shows that the sales purchases and expenses as well the net profit is verified by the auditors and cannot be interfered by the AO on surmises, presumptions or doubts - as the rejection of books of account was held as bad in law, the exercise of best judgment assessment in this case is also vitiated – Decided partly in favour of Assessee.
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2014 (7) TMI 161
Block assessment u/s 158BD of the Act – Quantification of assessment – Held that:- The decision in Commissioner of Income Tax – III Versus M/s. Calcutta Knitwears, Ludhiana [2014 (4) TMI 33 - SUPREME COURT] followed - the requirement of satisfaction for initiation of proceedings u/s 158BD is essential, however there is no bar on the AO in respect of the stage of the proceedings during which the satisfaction is to be reached and recorded in respect of the person other than the searched person - the existence of cogent and demonstrative material is germane to the AOs satisfaction in concluding that the seized documents belong to a person other than the searched person is necessary for initiation of action u/s 158BD - the cardinal rule for initiation of proceedings u/s 158BD is the existence of cogent material which lead to detection of undisclosed income of the person other than the searched person. There is no mention of any particular document or material or any particular item of undisclosed income which was detected during the course of search in question or from the Books of Accounts or seized material – there is merit in the contention of the revenue that if the satisfaction is recorded or expressed by the AO in respect of the undisclosed income belonging to the person other than the searched person in the assessment order of the searched person passed u/s 158BC then the requirement of initiation of proceedings u/s 158BC will be regarded as satisfied - the AO has not made any addition of undisclosed income on account of such business conducting charge/rental income on the ground that the assessee has claimed expenses of only ₹ 15,000/- PM - when the AO has concluded in the assessment order that since the assessee has claimed only ₹ 15,000 PM on account of payment of rent and excess payment is not allowed - other than the rental charges neither the assessment order passed u/s 158BC nor the satisfaction recorded on 10.01.2003 disclosed any other undisclosed income detected by the AO from the Books of Accounts and other seized papers. At the time of recording satisfaction the AO should reach a clear conclusion that prima facie the material available establishes undisclosed income of third party - In the absence of existence of any cogent material which demonstrates the undisclosed income belonging to the person other than the searched person, the proceedings initiated u/s 158BD and consequent block assessment are invalid - it is clear that the AO has not brought out any record, Books of Accounts or seized material to demonstrate undisclosed income of the assessee - the initiation of the proceedings and consequential block assessment u/s 158BD are invalid and are quashed – Decided in favour of Assessee.
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Customs
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2014 (7) TMI 184
Confiscation of goods - sugar for exportation - sub-standard quality - Whether the goods were liable for confiscation for violation of provisions of Section 113 (k) of the Customs Act, 1962 or not - Held that:- goods can be held liable for confiscation on account of any willful act, negligence or default of the exporter, his agent of employee. From the facts of this case, it is clear that the appellant has taken proper care before the exportation of the goods. In this circumstance, it cannot be held that the appellants have violated the provisions of Section 113 (k) of the Act. In these circumstances, I hold that the goods are not liable for confiscation and consequently redemption fine and penalty are not imposable - Decided in favour of assessee.
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2014 (7) TMI 183
Denial of refund claim of SAD - Non fulfilment of condition 2(b) of Notification No.102/07-Cus dt.14.7.2007 - Held that:- Invoices did not contain certificate stating no credit of additional duty of customs levied under sub-section (5) of section 3 of Customs Act, 1975 shall be admissible - There was no exception to this in the notification - if there is no such benefit available to the appellant, refund application should be rejected. - Following decision of State of Jharkhand and others vs. Ambay Cements and another [2004 (11) TMI 319 - SUPREME COURT OF INDIA] and Mihir Textile Ltd. Vs. CCE [1997 (4) TMI 75 - SUPREME COURT OF INDIA] - Decided against assessee.
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Corporate Laws
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2014 (7) TMI 182
Rejection of registration of transfer - loss of original transfer deeds - Non compliance of relevant documents - Held that:- only ground for refusal of transfer of shares in question in favour of the Petitioner that the signatures of the Respondent Nos. 3 and 4 do not match with the signatures available on the record of the Company. - It is to be noted that their Identity is not disputed, Furthermore, the Petitioner has filed sufficient documentary evidence to prove the title of the shares-in-questions which has not been controverted by the Respondent Company - respondent company to transfer the shares. Period of limitation in filing the petition - Held thata:- The Petitioner has stated that the Respondent No. 2 despite its letter dated 23/08/2011 did not act Upon the documents submitted to the Company by the Respondent Nos. 3 and 4 expressing their no objection for transfer of the shares-in-question in favour of the Petitioner, and therefore he was constrained to file the petition. In view of the above, in my opinion, the petition cannot be said as time barred. The said objection is therefore found untenable and is hereby rejected- Decided in favour of Petitioner.
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Service Tax
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2014 (7) TMI 202
Condonation of delay - subject appeal was misplaced by the clerk due to dislocation of office and transfer of assistants - Held that:- delay cannot be condoned for the reason that the appeal papers were misplaced by the clerk in the place of the applicant. The Honble High Court in the case of Shri Bhavani Castings Ltd. Vs. CCE, Visakhapatnam [2011 (4) TMI 1062 - ANDHRA PRADESH HIGH COURT] , held that the mis -placement of the records in the office of the assessee cannot be a sufficient ground for condonation of delay. In view of that, we do not find any reason for condoning the delay in filing the appeal - Condonation denied.
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2014 (7) TMI 201
Extension of stay granted - Waiver of pre deposit already granted - Held that:- A provisions of Section 35C(2A) enact a sunset period for operation of an order of stay granted and not for the vitality of an order of waiver of pre deposit. Pre deposit is a condition precedent for entertaining an appeal. This requirement is enjoined by Section 35F of the Central Excise Act, 1944. Pre deposit once order (or waived) will operate for the duration of the appeal and is not subject to sunset period. An order granting stay is however, as earlier noticed, is in exercise of inherent power of the Tribunal, not in exercise of a legislated grant of power. It is the stay granted in exercise of such inherent power that is subject to the sunset clause enacted in Section 35C(2A) of the 1944 Act. Even where no stay is granted by the Tribunal and mere waiver of pre deposit is ordered under Section 35F, such order of waiver of pre deposit would operate as stay all further proceedings for recovery of the adjudicated liability; since parameters for grant of stay and for waiver of pre deposit are in pari materia. Order dated 9.12.2011, granting waiver of pre deposit of penalty (on noticing that the assessed tax demand had been remitted), is a grant of waiver that would operate during pendency of this appeal and the order of waiver is not subject to the provisions of Section 35C(2A) of the 1944 Act. Since waiver of pre deposit was alone granted on 21.12.2011, the Respondent shall taken an appropriate decision in conformity with the law declared by the Kerala High Court in Ashoka Rubber Products [1989 (7) TMI 103 - HIGH COURT OF KERALA AT ERNAKULAM] - Decided in favour of Revenue.
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2014 (7) TMI 200
Erection, Commissioning or Installation services - failure to obtain registration - failure to file periodic returns and disclose gross consideration received - failure to remit the due tax - Neither in response to summons issued nor in response to the show cause notice, did the petitioner choose to furnish copies of the several work orders/agreements under which petitioner executed works entrusted to it by L & T Ltd. - Held that:- petitioner failed to cooperate and to meaningfully participate in the adjudication proceedings and thereby disabled rational analysis of all the work orders - no serious infirmity in the conclusion recorded by the adjudicating authority that the petitioner had provided ECIS to L & T Ltd., a taxable service under Section 65 (39a) read with Section 65(105)(zzd) of the Finance Act, 1994. Regarding the challenge on the point of jurisdiction of the Commissioner, Raipur - Held that:- in terms of Rule 4 of Service Tax Rules, 1994, the petitioner has opted neither for centralised registration nor for registration at different sites in different States where works were executed were in favour of L & T Ltd. Admittedly, the petitioner is a resident of Raipur, within the jurisdiction of the Raipur Commissionerate and operates within the domain of that Commissionerate. It is the petitioner who is service provider and not the site manager at the work sites in the various States. We find no warrant, prima facie, to conclude that the Commissioner, Raipur had no jurisdiction. No provision of any statute or of any notification which calls into question the exercise of jurisdiction by the Raipur Commissioner is brought to our notice. - no prima facie case in favour of the petitioner to warrant granting waiver of pre deposit in full - stay granted partly.
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2014 (7) TMI 199
Penalty u/s 76 & 78 - waiver of penalty u/s 80 - C&F Service - inclusion of reimbursements of expenses - Held that:- Tribunal in the case of Sri Bhagavathy Traders Vs. Commissioner of Central Excise, Cochin reported in [2011 (8) TMI 430 - CESTAT, BANGALORE] held that the service tax provider is to pay service tax on the gross amount. The prior to this decision there were divergent views on the issue. In these circumstances, we find merit in the contention of the appellant. In view of the penalties imposed under Section 76 & 78of the Finance Act are set aside - Decided in favour of assessee.
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2014 (7) TMI 198
Waiver of pre deposit - Demand of service tax - Sec. 65(105) - Construction activity - Held that:- Revenue is demanding service tax in view of the explanation to Sec. 65(105) dated 1.7.2010. before this section came into force, almost 75% of the construction was complete as per the books of accounts - liability as per the explanation is approximately ₹ 29 lakhs and the applicants had already paid more than ₹ 29 lakhs. Hence pre-deposit of the remaining dues is waived and recovery thereof is stayed during the pendency of the appeal. - Stay granted.
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2014 (7) TMI 197
Demand is in respect of the amounts which were received as donations - Club & Association service - Held that:- Appellants had not bothered to file reply to the show-cause notices nor appeared before the adjudicating authority in spite of notices issued to them. The contentions of the appellants now raised before us were not before the adjudicating authority. Further in the impugned order, we find that certain amounts were received as ‘activity and maintenance charges'. As the appellants had not co-operated with the adjudicating authority, therefore, we find that it is a fit case to impose cost on the appellants - As the impugned order is passed ex-parte and the issue as per the appellants, is settled by the Hon'ble High Court of Gujarat in the case of Sports Club of Gujarat Ltd. [2013 (7) TMI 510 - GUJARAT HIGH COURT] - pre-deposit waived - matter remanded back - Decided in favour of assessee.
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Central Excise
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2014 (7) TMI 193
CENVAT Credit - Manufacture of exempted goods in partial year - assesee is paying 8% of the value of exempted goods - revenue seeks to reversal for the entire credit - Held that:- It may happen that on one day the appellant may manufacture only dutiable product and on the other they may only manufacture exempted product. Whether in such a scenario, the duty liability of the assessee is required to be assessed based upon day to day basis? The answer would be an emphatic ‘NO’. The periods cannot be segregated in that manner so as to finalize the assessee liability. Accordingly, there is no warrant to do so in terms of the Cenvat credit Rules. It seems that in the present case the amount of 8% was much lower than the amount of credit so availed, thus prompting the revenue to take a reverse stand than the one taken by them in routine i.e. to in 8% of the value of the final product, which in most of the cases is higher than the credit involved - Cenvat credit cannot be disallowed if an assessee manufactures only exempted goods for a part of the year and for the balance year manufactures both exempted and dutiable goods - Decided in favour of assessee.
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2014 (7) TMI 192
Denialof CENVAT Credit - Transfer of stock credit - As per Rule 57F (21) of the Central Excise Act, 1944 whether the respondents are entitled to transfer of stock of credit of the dissolved firm taken over by the respondent together with its assets and the liabilities of old firm - Held that:- stock of credit can be transferred - Commissioner (Appeals) has rightly allowed the transfer of CENVAT credit to the respondent - Following decision of Aar Aay Products [2002 (7) TMI 204 - CEGAT, NEW DELHI] and Dr. Reddy's Laboratories Ltd. [2005 (3) TMI 327 - CESTAT, CHENNAI]. - Decided against the revenue. Transfer of credit attributable to the issue of settlement of issue of under-valuation - Held that:- Credit cannot be transferred but there is no doubt that this credit is available in the books of dissolved firm and no provisions of Acts/Rules has been produced by the learned A.R., showing that if any credit available in the statutory records on account of settlement of the issue of under-valuation the credit is not transferable - Decided against Revenue.
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2014 (7) TMI 191
Waiver of pre deposit - cenvat credit - duty paying documents - supplementary invoice - payment of duty due to fraud, suppression of facts etc. - Held that:- M/s. Saint Gobain Glass India Pvt. Ltd. issued the invoice after initiation of the proceedings by the central excise authorities. The question is that whether the said invoice would cover under Rule 9(1)(b) of the Rules. Rule 9(1)(b) of the said Rule provides that a manufacturer may avail the credit on the basis of the supplementary invoice except where the additional amount of duty became recoverable from the manufacture on account of any non-levy or short-levy by reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of any provisions of the Excise Act or the Customs Act, 1962 or the rules made thereunder with intent to evade payment of duty. In the instant case, it is seen that M/s. Saint Gobain Glass India Pvt. Ltd. issued the invoice after initiation of the proceedings. In view of that, the applicant has failed to make out a prima facie case for waiver of entire amount of duty along with interest and penalty. - stay granted partly.
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2014 (7) TMI 190
Classification of goods - Chocolate hub - Classification under heading 1905.90 or under heading 1803.00 - Held that:- Chapter heading 1803 covers chocolate in any form heading 1905 covers biscuits. Whether or not containing cocoa. Admittedly, the goods in question are nothing but the biscuits covered by chocolate. As such, it can be safely concluded that the product in question is the preparation of biscuits and properly classifiable under chapter heading of biscuits. Inasmuch as it is not specifically covered by any preceding sub heading of chapter heading 1905, the same would be classifiable under heading 1905.90. We find that issue is covered by precedent decision of the Tribunal. In the case of Nestle (India) Ltd. vs. CCE Mumbai reported in [2000 (124) ELT 898 (Tri)], biscuits and waffles covered with chocolate were held classifiable under heading 19.05 irrespective of preparation of chocolate by weight or value. Similarly in the case of Little Star Foods Pvt Ltd. vs. CCE, Hyderabad waffles and wafers coated with chocolate were held as falling under chapter 1905 and preparation of chocolate was held as irrelevant. - appellants product chocolate clubs would be properly classifiable under heading 1905.90 - Decided in favour of assessee.
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2014 (7) TMI 189
Availment of balance 50% of Cenvat credit - timing of availing the balance credit on capital goods - Interpretation of provisions of Rule 4(2) of the Cenvat Credit Rules - Held that:- Revenue is not disputing the availability of the balance fifty per cent Cenvat credit to the appellant after the installation of the capital goods. It is only the question of timing of availment of credit. Admittedly the capital goods were received by the appellant and were under their possession. The said Rule 4(2)(b) uses the expression “possession and use of the manufacture of final products”. Revenue views are that the same should be put to actual use before the availing the credit. We find that the said disputed legal issue was the subject matter of Hon’ble Bombay High Court’s decision in the case of Commissioner of Central Excise, Raigad v. Ispat Industries Ltd. - [2013 (3) TMI 362 - BOMBAY HIGH COURT] vide which the Revenue’s appeal was rejected. In view of the above finding of the Hon’ble High Court the expressions “possession” and “use” had to be read together and once the goods are received, their actual installation and use may not be insisted upon. As the capital goods were admittedly received by the appellant and were ultimately installed and used in the manufacture of the final product, we are of the view that the appellant was entitled to avail the 50% of credit in the subsequent financial year 2001-2002 - Consequently, no interest is liable to be confirmed against them and no penalty is liable to be imposed - Decided in favour of assessee.
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2014 (7) TMI 188
Suo moto availing of credit after getting a favorable decision - revenue contended that assessee should have filed a refund application - earlier cenvat credit was denied on the ground that credit is not admissible - Held that:- It is not a situation where any duty was paid on the finished goods by debiting duty from RG-23 part-II account of the appellant and refund of such duty paid was claimed by appellant where department may be anxious to apply the doctrine of unjust enrichment. In that situation taking of suo motu credit on getting a favourable order could be objected by the Revenue. In the present facts of the case that is not the situation and by getting a favourable order appellant has become entitled to Cenvat credit on which there will not be any unjust enrichment. Therefore, it is not correct on the part of the adjudicating authority or the first appellate authority to hold that appellant should have restored to refund provisions, as doctrine of unjust enrichment is not attracted in this case. - there was nothing wrong in taking of suo motu credit after getting favourable orders from CESTAT, when unjust enrichment is not applicable - Following decision of Shyam Textile Mills v. Union of India [2004 (6) TMI 590 - GUJARAT HIGH COURT] - Decided in favour of assessee.
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2014 (7) TMI 187
Duty demand - Clandestine removal of goods - denial of the benefit of Notification No.75/87-CE - Held that:- Commissioner has considered the appellant s plea of duplication and has come to a finding that Annexure D to show cause notice arrived at 630 out of 1060 entries. However, we find that the said annexure D refers to 1312 ACs. As such, we really fail to understand the above observation of the adjudicating authority. Accordingly, we deem it fit to set aside the impugned order and remand the matter to the adjudicating authority for arriving at a finding of quantum of air conditioners alleged to have been removed by the assessee, without payment of duty and to assess their duty liability accordingly. - Decided in favour of assessee.
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2014 (7) TMI 186
Valuation of goods - Determination of assessable value of the oils which are being supplied by the appellant to other oil marketing companies - Held that:- Tribunal in the case of Hindustan Petroleum Corpn. Ltd. v. CCE [2005 (2) TMI 357 - CESTAT, BANGALORE] has held in favour of the assessee. Revenue’s appeal filed against the assessee was dismissed by the Hon’ble Supreme Court as reported in [2006 (1) TMI 592 - Supreme Court of India]. Another decision, which is in the same appellants case is Indian Oil Corpn. Ltd. v. CCE, Goa [2008 (4) TMI 632 - CESTAT, MUMBAI] - as there are decisions in the appellants own case as also in other cases which stand confirmed by the Hon’ble Supreme Court, we deem it fit to follow the same - Decided in favour of assessee.
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2014 (7) TMI 185
CENVAT Credit - Nexus with manufacturing activity - whether during the period from March 2007 to March 2010, they were eligible for Cenvat credit of service tax paid in respect of outdoor catering service for providing canteen facility to the workers in the factory, manpower supply service for maintenance of lawns and green belt around the factory and for maintaining cycle stand for the workers - Held that:- Number of workers in the appellant s factory is more than 250 and the charges for providing canteen facility are not recovered from the workers. The appellant in terms of the provisions of Section 46 of the Factories Act are required to provide canteen facility to the workers for which they have availed the outdoor catering service and hence this service has to be treated as service availed in or in relation to manufacture of final product. As regards, the service of manpower supply for maintaining green belt and lawn, the same has been availed to comply with the directions of Rajasthan State Pollution Control Board under their letter dated 8th January 2008 under which while permitting the discharge of Industrial/Domestic effluents from the factory, the Pollution Control Board has put a condition that 33% of the total area of the factory premises shall be covered by the tree plantation. Since, without maintaining the green belt around the factory, the manufacturing operations would not be allowed, I am of the view the services for maintenance of lawn and green belt have to be treated as services used in or in relation to manufacture of final product or in other words this service has nexus with the manufacture of final product and, hence, would be eligible for Cenvat credit. I find that same view has been taken by the Tribunal in the case of CCE, Bhavnagar vs. Nirma Ltd. reported in [2010 (6) TMI 315 - CESTAT, AHMEDABAD] and in the case of JBM Auto System Pvt. Ltd. vs. CCE, Chennai reported in [2011 (7) TMI 412 - CESTAT, CHENNAI]. In view of this, denial of Cenvat credit in respect of the service availed for maintenance of lawn and green belt also not sustainable - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (7) TMI 196
Development of residential complexes - Works contract - Whether the activities, with which the revisionist is involved, would attract or not attract the provisions of the Uttarakhand VAT Act, 2005 - Revenue contends that land, upon which, such residential complexes would be constructed belongs to it; it has obtained necessary sanction to construct thereon and that it proposes to sell the constructed area - Held that:- No sooner a sale is effected, the provisions of the Act will become applicable and, accordingly, tax will be levied. Sale has been defined in Sub Section (40) of Section 2 of the Act, which clearly mentions that sale means any transfer of property in goods. Sale of goods being a sine qua non for application of the Act, as clarified in Sub Section (55) of Section 2 of the Act, such sale will include an agreement for carrying out construction of immovable property or commissioning of any immovable property. In other words, a person agreeing with another person to make a construction for a valuable consideration will be selling the construction made by him as goods covered by the Act, but a person, if he sells an immovable property after the same has been constructed, he will not be selling goods attracting the provisions of the Uttarakhand VAT Act, 2005. Matter remanded back to find out what is the object of the business of the revisionist, i.e. whether it is engaged in sale of immovable properties in the form of flats, apartments, etc. or it is undertaking construction of flats, apartments, etc. on behalf of others - Decided in favour of assessee.
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2014 (7) TMI 195
Waiver of pre deposit - VATO held that the assessee claimed input tax credit (ITC) on goods purchased by it but had reduced the credit which was claimed after receiving the credit notes from the sellers and cash discount from the selling dealer - Held that:- As is evident from the previous discussion, the assessee has questioned the liability; its appeal on the substantive addition is pending before the VAT Tribunal. Admittedly, it has also deposited 40% of the disputed amount. In the circumstances, further requirement to deposit 20% of the penalty amount would not be warranted as it would place undue restriction on the appellant’s right to be heard in appeal. The direction to deposit 20% of the penalty amount made in the impugned order is hereby set aside - Decided in favour of assessee.
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2014 (7) TMI 194
Levy of penalty u/s TNGST - non refund of excess collected to buyers - levy of penalty on the ground of unjust enrichment - Held that:- Therefore, when on the one hand the collection of excess tax was on the specific direction of the Special Commissioner of Commercial Taxes and such excess collection after having been noted was ordered to be refunded was not actually refunded to the revision petitioner, it runs beyond ones comprehension as to whether even in those circum stances, the revision petitioner can be held to have had unjust enrichment of the moneys of its buyers. On the other hand, it will have to be stated that so long as the amount lies with the Department, it would be the responsibility of the Department to implement the order of the refund and only thereafter can expect the concerned assessee to ensure further refund of such amount to the actual buyers. There was no ground made out for imposing penalty under section 22(2) of the Act, on the ground of unjust enrichment on the part of the revision petitioner. - Decided in favor of assessee. Regarding penalty on account of certain omission between return and books of accounts - Held that:- When factual findings relating to the omissions came to be noticed by the assessing authority based on the books of accounts maintained by the revision petitioner and the returns submitted by it, the ultimate conclusion relating to such omissions would be nothing, but deliberate suppression made by the revision petitioner. When once such a conclusion is inevitable, the levy of penalty under section 12(3)(b) of the Act, would become imperative. - Decided against the assessee.
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