Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 8, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Sale of baggasses at lower rate than market rate to tis sister concern - No material to record finding that market price of baggasse was ₹ 18/- throughout the year - it cannot be said that the agreement was not genuine or that price was fixed to suppress the turn over of sale and the resultant profits - no addition - HC
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Credit of additional TDS - assessee did not file such certificates within prescribed period of two years but filed these before the assessment was completed - credit allowed - AT
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Transfer pricing adjustment - interest rate charged by the assessee in the international transactions was much higher than the LIBOR rates - interest charged in the loan transaction in question has to be held to be as at arm’s length - AT
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Entitlement to exemption u/s 11 - there is no change in the aims and objects of assessee in the impugned AY and the activities of assessee over the years remains the same, the proviso to section 2(15) cannot be applied to assessee to deny exemption u/s 11 - AT
Customs
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Valuation of goods - Enhancement in value of goods - even the second time, the adjudicating authority failed the requirement of passing a speaking order complying with the directions of the Commissioner (Appeals) - demand set aside - AT
Service Tax
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Guidelines regarding detailed scrutiny of Service Tax Returns (ST-3) w.e.f. 01/08/2015. - Circular
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Instructions regarding maintenance of Records in Electronic Form and authentication of records by Digital Signature–manner of verification-reg. - Order-Instruction
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Import of Commission agent service - Applicability of Section 66A - mere act of reimbursement per se would not justify the contention of Revenue that the same was having the character of the remuneration or commission for the purpose of Rule 6(8) of Service Tax Rules, 1994 - AT
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Valuation - Inclusion of warehousing charges and other reimbursables - mere act of reimbursement per se would not justify the contention of Revenue that the same was having the character of the remuneration or commission for the purpose of Rule 6(8) of Service Tax Rules, 1994 - not to be included - AT
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The appellant is entitled to avail, Cenvat credit for the insurance premium paid in respect of group insurance/insurance of employees including retired employees/mediclaim which are covered under the definition of ‘input services’ and have a nexus - AT
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Refund of accumulated Cenvat credit - documents are not in the name of the appellant - appellant has taken credit on the basis of invoices issued by ISD and therefore what is required to be examined while considering the refund claim was correctness of the ISD invoice whether it had the required details or not - AT
Central Excise
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Marketability of product - mixture of graphite and clay - there is no evidence whatsoever that the mixture of graphite and clay is at all marketable. - AT
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Exemption under Notification No. 63/95-CE dated 16.03.1995 - Goods supplied to defence - as is seen from the certificate, the person signing the same is holding the rank in pay scale higher than the Deputy Secretary to Government of India in which case even though the certificates were not signed by Deputy Secretary, the same should be accepted. - AT
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Denial of CENVAT Credit - Non maintenance of separate accounts - 100% EOU - goods supplied against ICB - the Review order passed by two senior Chief Commissioners is an absurd order passed with absolutely no application of mind and as such there is absolutely no merit in this appeal filed by the Revenue - AT
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Denial of CENVAT Credit - Bogus invoices - appellant produced documents that M/s. Annapurna was in existence during the material period as established by their invoices and the Central Excise monthly returns. So, the appellant has discharged their responsibility - CENVAT credit allowed- AT
VAT
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The VAT, at the rate prescribed in Section 4(7)(d) of APVAT, must be paid on the entire consideration, and not merely on the consideration reflected in the registered sale deed, to the Sub-Registrar at the time of registration or, in the very same month, along with the tax return, to the assessing authority. - HC
Case Laws:
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Income Tax
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2015 (7) TMI 216
Accrual of interest - Disallowance of interest not charged on debit balance? - Tribunal upholding the order of CIT (A) who deleted the disallowance - Held that:- The issue has been discussed by the ITAT in paragraph 49 and 50 in which it has given reasons for upholding the findings of CIT (A). The issue is also covered Inter party in CIT v. Dhampur Sugar Mills Ltd.[2005 (4) TMI 567 - ALLAHABAD HIGH COURT] - Decided in favour of the assessee. Addition on account of sale of baggasses at lower rate than market rate to tis sister concern - Tribunal upholding the order of CIT (A) who deleted the disallowance - Held that:- No material to record finding that market price of baggasse was ₹ 18/- throughout the year in the relevant financial year, to hold that the agreement between the appellant and M/s U.P. Straw & Agro Products Ltd. was not a genuine transaction. The agreement was not between the parties before the accounting year to ensure continuous supply of bagasses to sister concern. Any interruption in supply could have affected the manufacturing process of the purchaser company. The rates of sale given by the A.O. ranged between ₹ 12.41 to ₹ 18/- per qtl. in the financial year 1987-88. The bagasse is a byproduct of which prices fluctuate during the year. If there was agreement to the sister concern for bulk supply, which was entered into prior to the accounting year at ₹ 10/- per qtl., it cannot be said that the agreement was not genuine or that price was fixed to suppress the turn over of sale and the resultant profits. The findings recorded by ITAT and the circumstances in which the rate of ₹ 10/- per qtl. was found to be reasonable are essentially findings of fact, which do not call for interference by the Court - Decided in favour of assessee. Depreciation booked in the P/L account - Tribunal upholding the order of CIT (A), who directed the Assessing Officer not to disturb the depreciation booked in the P/L account while the depreciation on revalued of asset in not allowable for the purpose of computation of income u/s 115J - Held that:- The question is covered by the judgment of this Court in CIT, Bareilly v. Rampur Distillery and Chemicals Ltd. (2013 (1) TMI 59 - ALLAHABAD HIGH COURT ) wherein held that the Tribunal did not commit any error in law in allowing the depreciation on the revaluation reserve, which is a prescribed and statutory method of accounting, and by which the book profits do not get reduced, giving any added benefit to the companies including Minimum Alternate Tax (MAT) companies. - Decided in favour of the assessee
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2015 (7) TMI 215
Transfer pricing adjustment - Held that:- Respectfully following the order in assessee’s own case for the assessment year 2006-07 this issue relating to adjustment in Arm’s Length Price is set aside to the AO for fresh adjudication as in the preceding year wherein held assessee was entitled to select most appropriate method for a group of similar transactions. In doing so, he is free to choose difference methods for different business activities which in the present case are manufacturing physical trade & merchanting. Regarding additional evidence filed by the assessee in relation to documents from COVAT regarding import of oil, we find that assessee was prevented by sufficient cause for not filing these during assessment /DRP proceedings as the same were directed to be filed by DRP in assessee’s own case for assessment year 2007-08 & 2008-09 and DRP on the basis of these had not made any addition in these years. Therefore, we admit the additional evidence as these are documents to arrive at the correct conclusion. In view of all facts and circumstances of the case as explained above we deem it appropriate to remit back the whole issue relating to transfer pricing to the office of Assessing Officer who will re-adjudicate the issue keeping in view all facts and circumstances. - Decided in favour of assessee for statistical purposes. Disallowance u/s 40(a)(i) of the Act for discounting charges - Held that:- Since the facts involved for the year under consideration for this issue are similar to the facts involved in the preceding assessment year 2006-07 wherein held that the discounting charges are not in the nature of interest paid by the assessee. Rather after deducting discount, the assessee received net amount of bill of exchange accepted by the purchaser CFA not having any PE in India is not liable to tax in respect of such discount earned by it and hence the assessee is not under obligation to deduct tax at source u/s 195 of the Act. Accordingly, the same amount cannot be disallowed by invoking section 40(a)(i) of the Act. - Decided in favour of assessee. Addition on account of deemed dividend u/s 2(22)(e) - Held that:- As decided in assessee's for the assessment year 2006-07 Assessing Officer himself arrived at the conclusion that assessee was not a direct registered shareholder in the lender company, therefore, relying upon various judgments as relied upon by Ld AR the loan received by assessee cannot be treated as deemed dividend u/s 2(22)(e) of the Act.- Decided in favour of assessee. Credit of additional TDS disallowed - Held that:- A similar issue having identical facts was a subject matter of the assessee’s appeal in the assessment year 2006-07 wherein held The provisions of section 155(14) empowers the Assessing Officer to give credit for tax deduction certificates which could not be filed with the return of income provided they are filed within two years from the end of assessment year in which such income was assessable and further provided that such income from which tax was deducted was disclosed in the return of income filed by assessee for that relevant assessment year. The assessee in the present case did not file such certificates within prescribed period of two years but filed these before the assessment was completed on 26.8.2010. However, various provisions of Act suggest that tax payable will always be after giving credit of tax deducted at source from the income of assessee. Therefore, keeping in view the substantive justice, we direct the Assessing Officer to give credit for such additional TDS certificates provided the income from which such TDS was deducted formed part of income declared by assessee in the return of income. - Decided in favour of assessee for statistical purposes
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2015 (7) TMI 214
Transfer pricing adjustment - whether OP/OC margin is 15.01% and not 13.05%.? - Held that:- We admit the above ground of appeal raised by the appellant. Further on consideration of the facts, we direct the Assessing Officer to recompute the OP/OC by adopting the operating profit at ₹ 2,46,79,428/- and operating cost at ₹ 16,43,66,021/-. The additional ground is therefore, allowed for statistical purposes. Computing the net margin by considering foreign exchange gain/loss as non operating item - Held that:- Assessing Officer while computing the margin of the tax payer, has adopted the foreign exchange loss of ₹ 13,01,702/- as part of the operating cost; whereas while computing the margin of the comparables, he has treated foreign exchange gain/loss as non operating item which to our mind, is apparently contradictory and otherwise not in conformity with the aforesaid decision of the Tribunal. In light of the above, we direct the AO/TPO to treat the foreign exchange gain/loss as an operating item. As such, the ground raised by the appellant is allowed. Exclusion of M/s. Info Drive Software Limited as comparable taken by the TPO/TRP - Held that:- employee cost as per the financial statements of M/s. Info Drive Software Ltd. is ₹ 164.05 lacs whereas the total cost is 927.61 lacs (Page 617 of Paper Book). On the said basis, according to the appellant since the employee cost is 17.69% which is less than the filter of 25% applied by the TPO, therefore the same should be excluded. We therefore, direct the AO/TPO to verify the claim of the appellant as to the computation of percentage at 17.69% and if the said computation is correct then the said comparable of M/s. Info Drive Software Ltd. be excluded from the list of comparables. So far as objection raised by the learned DR as well as the DRP that this company has been taken as comparable at the time of filing TP study is not maintainable in light of the recent judgment of the Hon’ble Delhi High Court in the case of Chryscapital Investment Advisors (India) (P) Ltd. vs. DCIT [2015 (4) TMI 949 - DELHI HIGH COURT ] - Decided in favour of assessee for statistical purposes. Assessing Officer passed order under section 154 of the Act determining the adjustment at ₹ 2,13,67,552/- in terms of the directions of the DRP - Held that:- The contention of the appellant is that upper band margin based on the PLI of the appellant at 15.01% is 20.76% and since margin of the comparables is 19.87% is less than 20.76% therefore, no adjustment is warranted. We have allowed both the above claims of the tax payer subject to arithmetical verification by the TPO/AO. Having accepted the above claims, we therefore do not proceed to deal with the remaining grounds as these grounds have become academic in nature. In view of the above, adjustment made by the TPO/AO pursuant to the directions of DRP of ₹ 2,13,67,552/- is deleted subject to the arithmetical verification as directed above. - Decided in favour of assessee.
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2015 (7) TMI 213
Disallowance u/s 40A(3) - Held that:- In similar set of facts and circumstances, the Tribunal in the case of assessee’s group company M/s Westland Developers Pvt. Ltd. categorically held that the assessee submitted detailed reasons to demolish invocation of section 40A(3) of the Act and admittedly no expenses relatable to the addition have been claimed and the assessee has successfully demonstrated that the payments were reimbursement made by CWPPL, therefore, there was no occasion to invoke section 40A(3) of the Act. Therefore addition made by the AO and confirmed by the CIT(A) u/s 40A(3) of the Act is not found to be sustainable and we dismiss the same. - Decided in favour of assessee. Addition of of deemed dividend - CIT(A) delted addition - Held that:- In the present case, the AO could not bring any allegation against the assessee that the asessee is a shareholder/member of M/s Payor Companies, therefore, provisions of section 2(22)(e) of the Act cannot be invoked and the AO was not correct in making impugned addition and the same was rightly deleted by the CIT(A) following the decision of Hon’ble Jurisdictional High Court of Delhi in the case of CIT vs Ankitech (2011 (5) TMI 325 - DELHI HIGH COURT ).- Decided in favour of assessee. Addition on interest on PDCs paid out of books of account - CIT(A) deleted the addition - Held that:- From the order of the Tribunal in the case of Precision Infrastructure Pvt. Ltd. (2015 (2) TMI 105 - ITAT DELHI ), we note that the similar issue was decided in favour of the assessee wherein held as after examining the loose papers seized at the time of search at the assessee’s premises, it was noticed that interest is paid on the PDCs only during the period of extension of PDCs and, therefore, he directed the Assessing Officer to recompute the interest on PDCs at the time of extension of the PDCs. He has further observed that if it is not possible to work out the extension of PDCs in each case, then the Assessing Officer is directed to recompute interest on PDCs after six months from the date of issue of the PDCs. Therefore, the ground of appeal of the Revenue that the CIT(A) deleted the addition of ₹ 5,06,625/- made by the Assessing Officer on account of interest on PDCs is factually incorrect and contrary to the order of the CIT(A). The CIT(A) directed to recalculate the interest on PDCs and there was a sound logic for such direction. His direction is based on material found and seized at the time of search.- Decided in favour of assessee. Additional payment in violation of stamp duty - CIT(A) deleted the addition made by the Assessing Officer in view of the provisions of Section 37(1) - Held that:- The fact that the additional payments were warranted in order to avoid potential disputes amongst the claimants of the land holding which have been passed through to the land holders from generation to generation wherein there may be informal arrangements of ownership and or the payments were for commercial expediency to facilitate peaceful possession and registration of the land holding; where by the time Registry was made the landholders felt a higher payment was necessitated due to increase in value are issues which are not required to be addressed in the present proceedings - Decided in favour of assessee.
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2015 (7) TMI 212
Transfer pricing adjustment - whether DRP erred in holding that the size, turnover and brand of the company are deciding factors for treating a company as a comparable and accordingly erred in excluding M/s. Infosys Technologies Ltd.? - Held that:- The provisions of law pointed out by the ld. counsel for the assessee as well as the decisions referred to by the ld. counsel for the assessee clearly lay down the principle that the turnover filter is an important criteria in choosing the comparables. The assessee’s turnover is ₹ 47,46,66,638. It would therefore fall within the category of companies in the range of turnover between 1 crore and 200 crores. As relying on Genesis Integrating Systems (India) Pvt. Ltd. v. DCIT,[,2011 (8) TMI 952 - ITAT BANGALORE] Rule 10B(2) of the Rules which provides that uncontrolled transaction has to be compared with international transaction having regard to the factors set out therein. We uphold decision of the CIT(A), to exclude the companies I.E. Flextronics Software Systems Ltd.,IGate Global Solutions Ltd.,Mindtree Ltd.,Persistent Systems Ltd.,Sasken Communication Technologies Ltd., Tata Elxsi Ltd., Wipro Ltd. and Infosys Technologies Ltd.from the list of comparable companies on the basis of turnover and size. The AO is directed to compute the Arithmetic mean by excluding the aforesaid companies from the list of comparable. - Decided against revenue.
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2015 (7) TMI 211
Transfer pricing adjustment - determination of arm’s length price u/s. 92 in respect of an international transaction entered into by the assessee with its AE - whether determination of arm’s length price (ALP) u/s. 92 of the Act in respect of an international transaction entered into by the assessee with its AE? - Held that:- In the matter of determination of ALP in respect of a loan transaction, LIBOR rate of interest should be the interest rate applied for determining the ALP. See Four Soft Limited vs DCIT, [2011 (9) TMI 634 - ITAT HYDERABAD] and M/s Siva Industries & Holdings [2011 (5) TMI 451 - ITAT, CHENNAI ]. In the present case, it is not disputed by the Revenue that the interest rate charged by the assessee in the international transactions was much higher than the LIBOR rates. It is also not in dispute before us that the decisions rendered by the Chennai Bench of the Tribunal in the case of Siva Industries & Holdings Ltd. (supra) has not been overruled or any other contrary decision has been taken on the issue by any Benches of the Tribunal. In such circumstances, we are of the view that the stand taken by the AO for rejecting the plea of the assessee referred to above is unsustainable. In view of the above conclusions, we are of the view that the interest charged in the loan transaction in question has to be held to be as at arm’s length - Decided in favour of assessee.
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2015 (7) TMI 210
Disallowance of interest liability made under section 36(l)(iii) - interest paid for advances given for land proposed to be used for construction in the factory of the respondent- assessee firm - CIT(A) deleted the disallowance - Held that:- CIT(A) reached the conclusion after properly appreciating the facts governing the issue. The CIT(A) had come to the conclusion that there were enough internal accruals to make the above advances after considering the material on record. The view taken by the CIT(A) that when there is a mixture of borrowed funds and internal accruals, the presumption that the investments have been made out of internal accruals is supported by the decision of High Court of Calcutta in the case of Woolcombers of India Ltd. vs CIT,[1981 (2) TMI 36 - CALCUTTA High Court], Reliance Utilities and Powers Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY), S.A. Builders Ltd. vs. CIT (A) & Anr. (2006 (12) TMI 82 - SUPREME COURT ). - Decided against revenue. Interest paid into on unsecured loans borrowed from the relatives of the partners of respondent-assessee firm - disallowance on the ground that interest paid was excessive - CIT(A) deleted the addition - Held that:- AO had not brought any comparable rate of interest which is reasonable. No disallowance can be made based on mere suspicion. Therefore we are of the opinion that there is no basis to hold that payment of interest at 15% is excessive and accordingly we hereby confirm the order of the CIT(A) on this ground of appeal and therefore the ground of appeal filed by the revenue is dismissed.- Decided against revenue. Disallowance of keyman insurance policy - CIT(A) has allowed it after observing that there is no restriction under the Act that only the premium paid in respect of one person only to be allowed as deduction - Held that:- AO had not disputed the allowability of the premium paid for keyman insurance policy. He was of the only view that the premium paid in respect of only one person can be allowed. He had no dispute at all about allowability of the keyman insurance policy premium. Similarly the provisions of the Income Tax Act does not stipulates that the premium paid in respect of only one partner or director is alone allowable. In absence of such bar we are of the opinion that deduction should be allowed and therefore we uphold the order of the CIT(A) - Decided against revenue. Disallowance of commission - Held that:- The entire expenditure on commission paid to Mr. Karl Neuchel was genuine and incurred for the purpose of the business of the assesee, which is allowable as per the provision of section 37(1) of the Act. As agreeing with the contention of the appellant that stipulation in the contract regarding the commencement of the agreement w,e,f 1.1.2006 does not mean that athe appellant was debarred from making payment of commission for the earlier period when the services rendered by him are not disputed by the AO. Therefore, the addition made by the AO is deleted - Decided against revenue. Disallowance of building repair expenses - CIT(A) deleted the addition - Held that:- The finding of CIT(A) is based on the well settled principle of law that the expenditure not resulting in creation of asset should be allowed as a revenue expenditure as held by Supreme Court in the case of Empire Jute Company Ltd. Vs. CIT [1980 (5) TMI 1 - SUPREME Court] . Therefore the order of CIT(A) is in conformity with the well settled principle of law, hence we uphold the order of the CIT(A) in deleting the addition and this ground of appeal filed by the revenue is also dismissed.- Decided against revenue. Disallowance of the staff welfare expenses - Held that:- From the bills on record we notice that this expenditure relates to refreshment, tea, milk, Prasad provided to workers who were outside the factory and office. From these it is very clear that the vouchers are mostly not supported by bills but nevertheless it cannot b e said that the expenditure was not incurred. In the absence of any evidence on record brought by AO to say that the assessee has not incurred this expenditure, the disallowance of expenditure is not justified - Decided against revenue. Disallowance of Staff Welfare Expenses - Held that:- From the bills on record we notice that this expenditure relates to refreshment, tea, milk, Prasad provided to workers who were outside the factory and office. From these it is very clear that the vouchers are mostly not supported by bills but nevertheless it cannot b e said that the expenditure was not incurred. In the absence of any evidence on record brought by AO to say that the assessee has not incurred this expenditure, the disallowance of expenditure is not justified. No disallowance can be made on round some basis without pointing out the defects in the books of accounts. Hence we are of the considered opinion that the CIT(A) is not justified in confirm the disallowance to the extent of ₹ 50,000/- out of staff welfare expenses.- Decided against revenue.
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2015 (7) TMI 209
Entitlement to exemption u/s 11 - AO formed an opinion that the activities of assessee society are not in accordance with the aims and objects of the society as assessee is predominantly engaged in construction of temple, which is not amongst its objects - Held that:- As held by the coordinate bench in assessee’s own case in the preceding AYs, assessee is pursuing charitable activity in accordance with its aims and objects while constructing the Jagannadha Temple. In fact, the AO himself in assessment order has admitted that income/fund of assessee is utilized in construction of the temple. Further, the coordinate bench in the said order held, by letting out function hall assessee is not involved in commercial activity so as to disentitle it from claiming exemption u/s 11. Therefore, considered in the aforesaid perspective, there being no dispute to the fact that dominant object of assessee is charitable in nature, proviso to section 2(15) cannot be applied to deny exemption to assessee u/s 11 of the Act. In our view, AO without examining the issue in proper perspective has abruptly concluded that assessee is not entitled to exemption u/s 11 of the Act only because proviso to section 2(15) was introduced w.e.f. 01/04/09. In our view, proviso to section 2(15) of the Act will not apply automatically to every trust or institution irrespective of the fact, whether the dominant object of the trust or institution is charitable purpose or earning profit. When in the present case assessee is registered as charitable institution and there is no change in the aims and objects of assessee in the impugned AY and the activities of assessee over the years remains the same, the proviso to section 2(15) cannot be applied to assessee to deny exemption u/s 11 of the Act. - Decided in favour of assessee.
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2015 (7) TMI 208
Addition in respect of interest income - interest earned on the Central Government grant - Held that:- As relying on case of Sar Infracon Pvt. Ltd. [2014 (3) TMI 728 - GUJARAT HIGH COURT] and CIT Vs. Gujarat State Disaster Management Authority [2014 (2) TMI 789 - GUJARAT HIGH COURT ] in a situation when the assessee had received the grant from the Government of Gujarat as a nodal agency for constructing the houses for the Police Department and received interest on the temporary parking of funds on the instruction of the Government, therefore, the interest so earned being part of the grant should not be taxed as income in the hands of the assessee. The alleged interest income was earned with an overriding charge that the same should not be the income of the assessee but part of the grant. Hence, we hereby reverse the view of learned CIT(A) and allow this ground of the assessee. - Decided in favour of assessee.
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2015 (7) TMI 207
Addition in the Trading Account - books of accounts not rejected - Held that:- In the present case, it is an admitted fact that the AO worked out the figures of sales by adding the Gross Profit in the figure of the sales shown by the assessee. However, he had not rejected the books of accounts and also accepted all other components of the Trading Account i.e. the opening & closing stock and the purchases & Gross Profit. He only doubted the sales figure which was worked out by him by adding the Gross Profit separately in the sales disclosed by the assessee. It is an admitted fact that the sales value always includes the profit which cannot be added again for working out the figure of the sale. In our opinion the AO was not justified while adding the Gross Profit again in the sales already disclosed by the assessee and in making the impugned addition. In the present case, it is also noticed that the AO neither rejected the books of accounts by invoking the provisions of section 145(3) of the Act nor pointed out any inflated purchase or suppressed sales. He also did not doubt the method of accounting consistently followed by the assessee, therefore, the impugned addition made by the AO and sustained by the ld. CIT(A) was not justified. Accordingly, the same is deleted. - Decided in favour of assessee. Disallowance on account of TDS deducted from the supplies made - Held that:- In the present case, it appears that the assessee could not furnish the relevant details before the authorities below regarding the inclusion of the receipts amounting to ₹ 77,78,724/- in the total sales of ₹ 2,29,42,663/-. It also appears that the certificate issued by the East Central Railway, Hajipur relating to wrong deduction of the TDS was not considered by the AO as well as by the ld. CIT(A). We, therefore, deem it appropriate to remand this issue back to the file of the AO to be adjudicated afresh in accordance with law. We also direct the AO to verify as to whether the total receipts of ₹ 77,78,724/- from the Railway had been included by the assessee in the gross sales and the TDS was wrongly deducted, if the aforesaid facts as claimed by the assessee were found to be correct then no addition is called for. Accordingly, this issue is set aside to the file of the AO. - Decided in favour of assessee for statistical purposes. Disallowance out of interest paid to the partners - Held that:- In the present case, it appears that the assessee had not adjusted the amount of loss in the capital account of the partners, only on that basis, the AO considered that there was debit balance in the partners capital account. In the present case, it is also noticed that the assessee was having opening balance in the partners capital account at ₹ 22,08,021/- and even if loss amounting to ₹ 12,26,144/- was to be adjusted, there was no debit balance in the partners capital account. In the instant case, the assessee claimed that no interest was paid to anyone except to the bank from whom loan was raised for the business purposes. However, it appears that the said fact was not examined by the AO or by the ld. CIT(A). We, therefore, in the absence of clear facts on record, deem it appropriate to set aside this issue also fact to the file of the AO to be adjudicated afresh in accordance with law, after providing due and reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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2015 (7) TMI 206
Reopening of assessment - validity of the notices issued under Section 148 challenged - whether the Assessing Officer can invoke the provisions of section 150(1) of the Act to assume jurisdiction under Section 147 of the Act? - unexplained investment - Held that:- CIT (Appeals) has given a clear finding that the unexplained investment in the residential property fall in three years relevant to Assessment Years 2003-04 to 2005-06. The learned CIT (Appeals) has also rendered a finding that the addition to be made on account of unexplained investment in the said property may be divided among the three assessment years and had also held that the relevant portion of the unexplained investment i.e. ₹ 12,15,417 is taxable in Assessment Year 2005-06. In view of the above, we agree with the learned CIT (Appeals) that the facts of the assessee's case are distinguishable from the decisions cited by the assessee; that the learned CIT (Appeals) had rendered a clear ‘finding’ in the matter and that, therefore, in the facts and circumstances of the case on hand, the Assessing Officer has correctly assumed jurisdiction under Section 147 of the Act by invoking the provisions of section 150(1) of the Act. - Decided against assessee. As regards the additions made by the Assessing Officer towards unexplained investment of ₹ 1,15,710 for Assessment Year 2003-04 and of ₹ 5,13,517 for Assessment Year 2004-05, it is seen that the Assessing Officer has considered all the evidences produced by the assessee and allowed relief wherever the evidences produced and explanations put forth were found acceptable and has made additions only in respect of those amounts for which no evidence was produced. In the absence of any evidence to controvert the findings of the authorities below, the aforesaid additions made on account of unaccounted investments in the construction of the aforesaid residential building needs to be upheld. In view of the above factual matrix of the case, we concur with the learned CIT (Appeals) in upholding the additions made by the Assessing Officer in this regard. - Decided against assessee. Interest under Sections 234A, 234B and 234C is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld by the Hon'ble Apex Court in the case of Anjum H Ghaswala (2001 (10) TMI 4 - SUPREME Court) and we, therefore, uphold the action of the Assessing Officer in charging the said interest. - Decided against assessee.
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2015 (7) TMI 205
Revision u/s 263 - as per CIT(A) order of AO was erroneous and prejudicial to the interests of the Revenue for the reason that after the introduction of section 80P(4) deduction was not available to co-operative banks - Held that:- The Hon’ble Karnataka High Court in the case of CIT Vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot, [2015 (1) TMI 821 - KARNATAKA HIGH COURT] has held that a credit co-operative society giving credit to its members is not hit by the provisions of Sec.80P(4) of the Act as it does not possess a licence from RBI to carry on business and is not a cooperative bank. The object of introducing Sec.80P(4) of the Act was not to exclude the benefit extended u/s.80P(1) to co-operative society carrying on the business of providing credit facilities to its members. Thus the assessee is entitled to deduction u/s. 80P(2)(a)(i) of the Act and set aside the order of the ld. CIT to this extent. - Decided in favour of assessee. Disallowance u/s. 40(a)(ia) - CIT has only directed the AO to examine whether the provisions can be applied or not. Admittedly, there was no enquiry by the AO on this aspect while concluding the original assessment, thereby rendering the order of the AO erroneous and prejudicial to the interests of the Revenue to this extent. We are therefore of the view that the order of the CIT insofar he directed the AO to make a fresh assessment in accordance with the law is correct and calls for no interference.- Decided against assessee.
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2015 (7) TMI 204
Penalty u/s.271C - non-deduction of tax at source from discount extended to its pre-paid distributors - assessee has moved the Stay Application for stay on realisation of the outstanding demand levied u/s.271C for the A.Yrs. 2007-08 to A.Y. 2012-13 being penalty for failure to deduct tax at source - Held that:- It is an admitted fact that the quantum appeals levying interest u/s.201(1) and 201(1A) are pending for disposal before the Tribunal. The Tribunal in assessee’s own case for A.Y. 2001-12 and 2012-13 in the quantum proceedings has already granted stay holding that assessee has made out a prima-facie case for grant of stay of outstanding demand. The Pune Bench of the Tribunal in the case of Idea Cellular Ltd.[2015 (7) TMI 191 - ITAT PUNE] under identical facts and circumstances has granted stay on realisation of demand raised u/s.271C of the I.T. Act. It is also an admitted fact that different high courts have taken different views on the applicability of provisions of section 194H of the Act to the transactions in question. While Hon’ble Karnataka High Court has decided the issue in favour of the assessee the Hon’ble Delhi High Court and Hon’ble Calcutta High Court have decided the issue against the assessee. The matter is now pending before the Hon’ble Supreme Court for adjudication. However, it is also a fact that the Jaipur Bench of the Tribunal in a recent decision in the case of M/s.Bharti Hexacom Ltd. Vs. ITO, TDS-2, Jaipur [2015 (7) TMI 175 - ITAT JAIPUR] has decided the issue in favour of the assessee holding that the sale of prepaid products from the company to the distributor is actually a sale of right to service and the provisions of section 194H of the Act do not apply. In the said decision the Tribunal has considered various decisions including the decisions of the Hon’ble Kerala High Court, Hon’ble Delhi High Court and Hon’ble Calcutta High Court who have decided the issue against the assessee. Therefore, we are of the considered view that the Ld. Counsel for the assessee has made out a prima-facie case in its favour so far as the realisation of the outstanding demand is concerned that too in a penalty proceeding. The Hon’ble Bombay High Court in the case of UTI Mutual Funds and UTI Trustees Company Pvt. Ltd. (2012 (3) TMI 333 - BOMBAY HIGH COURT ) has held that where a direct prima-facie case has been made out, calling upon the assessee to deposit would itself occasion undue hardship. We therefore allow the stay petitions filed by the assessee and grant stay on realisation of outstanding demand for the A.Yrs. 2007-08 till 2012-13 for a period of 180 days from today or the date of the order of the Tribunal in appeal, whichever is earlier. The request of the assessee for out of turn hearing of the appeals is also accepted and the appeals are fixed for hearing on 16-09-2015. Since the date of hearing is mentioned in this stay order, therefore, this itself will be construed as notice of hearing to both sides. - Decided in favour of assessee.
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2015 (7) TMI 203
Unaccounted purchases - Held that:- We have heard the rival contentions of both the parties and perused the material available on the record. Similar line of cases, this Bench has decided in the case of Shri Anuj Kumar Varshney Vs. I.T.O. and other cases [2015 (4) TMI 533 - ITAT JAIPUR] wherein 15% disallowances has been held reasonable on considering the detail discussion on facts and legal position on unverifiable purchases/bogus purchases. Accordingly, we also apply 15% disallowances on unverifiable purchases in this case also. The Assessing Officer is directed to recalculate the income as per above direction. - Decided partly in favour of assessee.
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2015 (7) TMI 202
Penalty u/s. 271(1)(c) - unexplained peak credit - Held that:- It is not in dispute that the undisclosed bank account which was detected by the department contains transfer entries to other 5 undisclosed bank accounts maintained by the assessee. In view of this fact the Tribunal concluded that the subsequent disclosure of the assessee of existence of the said 5 bank accounts cannot be held as voluntary. We do not find any error much less an apparent error in the above finding of the Tribunal. In the instant case it was not the issue that there was difference in the peak balance as disclosed by the assessee and the peak balance as estimated by the Department and only in respect of the difference the penalty was levied by the Department under Sec. 271(1)(c) of the Act. Thus, we find no error in the finding of the Tribunal in this respect. Decision of Shri Becharbhai P. Parmar (2012 (4) TMI 418 - GUJARAT HIGH COURT ) is applicable in the instant case wherein expressly stated about the provisions of Section 271(1)(c) of the Act. Additions made on the basis of estimation may be one of the grounds on which discretion not to impose penalty may be exercised. However, in the absence of any requirement to prove the concealment or furnishing of inaccurate particulars found in section 271(1)(c) of the Act cannot form the sole basis to delete penalty imposed by the Assessing Officer and confirmed by the Commissioner (Appeals). Thus the said decision squarely covers the case where penalty under section 271(1)(c) is levied. We therefore, do not find any error much less an apparent error in the order of the Tribunal in this respect.- Decided against assessee.
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2015 (7) TMI 201
Penalty u/s 271D - violating the provisions of section 269SS - Held that:- The confirmation letter from the creditor has been produced. The assessee brought out the need for taking loan in cash by giving reason that financial loss would be incurred if the deal had not been concluded immediately and also the flat chosen by him could not be available later. The ld Counsel for the assessee explained as to what constituted reasonable cause and hence prayed for the penalty to be deleted. However, we also notice that there has been a long gap from the time of taking the cash loan i.e. 10.05.2009 and the Registration of the Sale Deed which was only on 5th day of February, 2010.We are of the opinion that the issue needs further verification by the AO as to whether the amount has been received by M/s. Progressive Hotels Ltd (Land owner) or M/s. Choice Infrastructure Projects (P) Ltd and call for the production of receipt from the vendors. The AO shall examine the entire issue after giving reasonable opportunity to the assessee and decide the issue in accordance with law. - Decided in favour of assessee for statistical purposes.
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2015 (7) TMI 200
Long term capital gain on sale of land - agricultural land in terms of section 2(14) - Held that:- The land sold by all the brothers situated in village- Sanjhaia, Tehsil- Sanganer, district- Jaipur. In case of assessee’s brother namely Shri Ram Sahay Sharma in A.Y. 2007-08 by the ITO ward 7(2), Jaipur order dated 25/03/2013 had not made any addition on account of long term capital gain. Further the ld CIT(A) as well as this Bench also allowed the appeal in case of Smt. Kamla Devi Sharma (2015 (7) TMI 195 - ITAT JAIPUR), who also sold her land at Sanjharia village to M/s Vatika Ltd. on 16/05/2006 and held that the agricultural land sold by the assessee is not capital assets as envisaged U/s 2(14) of the Act as same was sold to Vatika Ltd. within a short span of time. The other case laws relied by the assessee is also squarely applicable. Therefore, we hold that the land sold by all the assessees are agricultural land and beyond 8 KMs from the municipal limits. Accordingly, we allow this ground of all the appeals. Disallowance of relief U/s 54B and 54F - Held that:- As we have decided the land sold by these assessees as not capital assets as envisaged in Section 2(14) of the Act, we need not to express our views on these deductions as these deductions is based on capital assets envisaged in Section 2(14) of the Act. Penalty U/s 271(1)(c) - Held that:- Assessing Officer imposed penalty U/s 271(1)(c) of the Act, which has been confirmed by the ld CIT(A) in all the cases but as decided above, the land sold is not capital assets as envisaged in Section 2(14) of the Act and held agricultural land, which is not come under the purview of taxable income. No concealment of particulars of income or furnished inaccurate particulars of income is there. Therefore, we delete the penalty in all the cases. Thus, we allow the appeals in all the cases. - Decided in favour of assessee.
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2015 (7) TMI 199
Deduction u/s 80IB(10) - Held that:- Issue is now fully covered in favour of the assessee for grant of deduction u/s 80IB(10) of the IT Act because the assessee has acquired dominant right over the land and has developed the housing project by incurring all the expenses and taking all risks involved thereof. The crux of the matter would be that assessee has acquired the land in question and has developed the housing project at its own cost as per the requirement of section 80IB (10) of the IT Act. Therefore, we are of the view the assessee would be entitled for deduction u/s 80IB (10) of the IT Act As regards alternate contention of the assessee with regard to pro rata deduction, the issue is already decided in favour of the assessee in the case of M/s. Amaltas Associates (2011 (1) TMI 934 - ITAT, AHMEDABAD) by following the decision of ITAT Nagpur Bench in the case of AIR Developers (2008 (5) TMI 333 - ITAT NAGPUR), therefore, the authorities below should not have rejected the claim of the assessee at least on alternate contention that the assessee would be entitled for deduction u/s 80IB (10) of the IT Act on pro rata basis. However, we have held that the extension of the 4 units is not done by the assessee and that open area is not part of balcony/verandah, therefore, according to the submission of the assessee, the built up area of the assessee was within the prescribed limit, therefore, there is no need to give further finding with regard to alternate claim of the assessee. Considering the facts of the case in the light of the above decisions, we are of the view the issue is fully covered in favour of the assessee. We are of the view that assessee fulfilled the conditions and requirements of section 80IB (10) therefore, the claim of the assessee for deduction should not have been denied by the authorities below. We direct the AO to grant deduction to the assessee u/s 80IB (10) of the IT Act as claimed by the assessee. - Decided in favour of assessee.
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2015 (7) TMI 198
Registration given to it u/s 12A cancelled - Whether the Tribunal was correct in holding that the assessee is entitled to continue registration under Section 12A? - Held that:- A registration granted earlier under Section 12A of the Act can be cancelled under two circumstances; (a) If the activities of such trust or institution are not genuine, (b) The activities of trust or institution not being carried out in accordance with the object of the trust or institution. Only on those two conditions being satisfied, the registration granted under Section 12A of the Act could be cancelled by the authorities. It is not in dispute that there is no violation of the said two conditions by the assessee. The activities carried on by the assessee is a genuine one. As could be seen from the profits they have generated, the said profit is earned by carrying on the activities in accordance with the object of the trust. Therefore, the two conditions stipulated in subsection (3) of Section 12AA of the Act, which empowers the authority to cancel registration, do not exists in this case. The registration granted is cancelled in view of the amendment of first proviso to Section 2(15) of the Act. That is not a ground specified in the Statute for cancellation of the registration. In fact, sub-section(8) to Section 13 which is introduced by Financial Act, 2012 which came into effect from 1.4.2009 categorically provides that, nothing contained in Section 11 or Section 12 shall operate so as to exclude any income from the total income of the previous year or any receipt there of. If the provisions of the first proviso to Clause 15 of Section 2 becomes applicable in the case of such person in the said previous year, the Statute has protected the interest of revenue. Not withstanding the fact that the assessee is conferred registration under Section 12A of the Act, unless the assessee falls within Section 2(15) of the Act, excluding the first proviso, the assessee would not be entitled to the benefit of exemption from the tax. If the case of the assessee falls with first proviso to Section 2(15) of the Act, the benefit of registration which flow from Section 12A of the Act is not available. Anyhow, that is a matter to be considered by the Assessing Authority. But on that ground, registration cannot be cancelled, which is precisely the Tribunal has held. See Director of Incometax (Exemption) vs. Karnataka Industrial Area Development Board (Income-tax Appeal [2015 (7) TMI 169 - KARNATAKA HIGH COURT]. - Decided in favour of assessee.
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Customs
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2015 (7) TMI 223
Valuation of goods - Enhancement in value of goods - Held that:- in spite of clear directions of the Commissioner (Appeals) vide Order-in-Appeal dated 07.08.2008 the Order-in-Original dated 28.07.2009 was issued by disregarding those directions of the Commissioner (Appeals). Therefore, the Commissioner (Appeals) is right in observing that the said Order-in-Original dated 28.07.2009 is not sustainable as no details have been given regarding NIDB data, which has been referred to in the Order-in-Original (dated 28.07.2009). Further, the Order-in-Original mentioned that "I find merit in the contentions of the Department that the value of the goods "appeared to be low". There is no basis as how the adjudicating authority found merit in the contentions of the Department and in any case he (i.e., the adjudicating authority) only stated that the value "appeared very low". We may mention here that this case has travelled upto Commissioner (Appeals) twice and even the second time, the adjudicating authority failed the requirement of passing a speaking order complying with the directions of the Commissioner (Appeals) contained in Order-in-Appeal dated 07.08.2008. In these circumstances, we are of the view that the impugned Order-in-Appeal (which contained detailed analysis as to why the Order-in- Original dated 28.07.2009 is not sustainable) suffers from no such infirmity as to warrant our intervention - Decided against Revenue.
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2015 (7) TMI 222
Denial of refund claim - Bar of limitation - Held that:- refund claim of the Appellant has been rejected as time barred under Section 27 of the Customs Act, 1962 on the ground that the OIA passed by the First Appellate Authority was upheld by CESTAT. In this regard, it is relevant that the Hon'ble Delhi High Court in the case of CC, ICD, New Delhi Vs Chandra Prabhu International Ltd (2014 (3) TMI 640 - DELHI HIGH COURT) has held that the refund of anti dumping duty will be covered under the provisions of Section 9AA of the Customs Tariff Act and that the provisions of Section 9A(8) of the Customs Tariff Act has got only extremely restricted application. - refund claim cannot be rejected as time barred under Section 27 of Customs Act, 1962 in the absence of any Rules of limitation framed under Section 9AA(2)(i) of Customs Tariff Act. A reasonable period has to be considered as appropriate for filing refund claim. As other refund claims of anti dumping duty of the Appellant after issuing of corrigendum were sanctioned to the Appellant, it has to be held that the refund claim filed by the Appellant is not time barred, when anti dumping duty after issue of corrigendum dt.31.03.2011 to Notification No.30/2011-Cus, dt.14.07.2010, became without authority of law. - Decided in favour of assessee.
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Corporate Laws
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2015 (7) TMI 220
Penalty under Section 15A(a) and Section 15C of the SEBI Act, 1992 - Failed to follow up or reset SEBI Complaints Redress System (SCORES) Login ID and Password - Failed to update the status of complaints in SCOREs within time - whether arguments like no investor loss and violation being not repetitive in nature have any impact on penalty amount imposed by SEBI - Held that:- The show cause notice was issued on January 21, 2013 and as on the date of the passing of the impugned order on January 07, 2014 there were three investor grievances which had remained to be redressed. This Tribunal in a number of cases has taken the view that the fact that no investor has suffered and that the violation is not repetitive cannot be a ground to escape penalty for the violations committed. It is not in dispute that the penalty imposable against the appellant under Section 15A(a) and Section 15C is ₹ 1 crore. However, taking into consideration all mitigating factors, the Adjudicating Officer of SEBI has imposed penalty of ₹ 1 lac as against the penalty of ₹ 1 crore imposable under the SEBI Act, which cannot be said to be unreasonable or excessive. - Decided against the appellants.
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2015 (7) TMI 219
Petition u/s 167 of the Companies Act, 1956 - Irregularity in holding Annual General Meetings - Held that:- In my opinion, this petition, on the face of it, is not maintainable as contended by the Ld. Counsel for the Respondents. The prayer as per clause (a) of the Petitioner clearly shows that the Petitioner has sought relief to the effect that the Annual General Meetings of the Respondent No. l Company shown as held for the Financial Years 2003-2004 to 2009-2010 be declared as invalid. Prayer clause (b) of the Petition reveals that the Petitioner has sought cancellation of various Resolutions purported to have been passed in the EOGM held on 20/12/2007, by which appointments of Mr. Shaunak H. Choksi (Respondent No. 2) as Managing Director and Mr. Himanshu Harshad Choksi (Respondent No. 3) as Whole-time Director, were made and their remunerations were fixed. It is, therefore, established that there is no default in holding the AGM as contemplated in Section 167 of the Act, The challenge as to validity of the AGMs, in my considered view, does not fall within the purview of the provisions contained in Section 167 of the Act as held in the cases (i) National Textile Corporation (U.P.) Ltd. [1998 (4) TMI 431 - HIGH COURT OF DELHI] and (ii) Gracy Thomas v. Four Square Estates P. Ltd. & Ors [2007 (10) TMI 608 - CALCUTTA HIGH COURT ]. - Petition dismissed.
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Service Tax
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2015 (7) TMI 234
Commission agent service - Applicability of Section 66A - whether the lower authorities are correct in holding that the commission agent service received by the appellant is covered under Section 66A for discharging the service tax liability by the recipient on reverse charge basis - Held that:- From the Rule 3(iii)(c), it is clear that the service of overseas agent received by the appellant has been provided from outside India and received by the appellant who is a recipient located in India and the service is used in relation to business or commerce i.e. export business. Therefore, in view of this undisputed position. Section 66A is clearly applicable and according to which the appellant was legally liable for payment of service tax for the period from 19.4.2006. In view of this, the lower authorities have correctly held that the service tax was payable after 19.4.2006 and rightly rejected the refund claim in respect of service tax paid for the period on or after 19.4.2006. I am, therefore, fully in agreement with the findings of the lower authorities. - Decided against assessee.
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2015 (7) TMI 233
Manpower Recruitment Agency - service rendered by the appellant of supplying models for advertising purposes and catering for TV serials/films - Held that:- Appellant is only supplying models for advertising of products or TV serials/films and to other modelling agency. If that be so, in our considered view, the definition of Manpower Recruitment Agency during the period 2001-02 and 2002-03 would not cover the services arendered by the appellant of supplying models. - impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.
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2015 (7) TMI 232
Valuation - Inclusion of warehousing charges and other reimbursables - Held that:- Issue of includibility of warehousing and other reimbursables in the value of C&F agent service has been a subject matter of several judicial pronouncements. In the case of K.D. Sales Corporation Vs. CCE, Belgaum [2006 (12) TMI 52 - CESTAT, BANGALORE], it was held that godown rent and clerk salary are not includible in the assessable value of C&F agent service. In the case of Nandini Warehousing Corporation Vs. CCE, Belgaum [2007 (4) TMI 139 - CESTAT, BANGALORE], it was held that godown rent, establishment expenses, incentives, STD call charges, are excludible from the assessable value of C&F agent service. - reimbursable expenses received by the assessee need not be added to the taxable value relating to clearing and forwarding agents service and that the receipt is for reimbursing expenditure incurred for the purpose and the mere act of reimbursement per se would not justify the contention of Revenue that the same was having the character of the remuneration or commission for the purpose of Rule 6(8) of Service Tax Rules, 1994 - Decision in the case of CCE, Chennai Vs. Sangamitra Services Agency [2013 (7) TMI 862 - MADRAS HIGH COURT] followed - Decided against Revenue.
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2015 (7) TMI 231
Denial of CENVAT Credit - insurance auxiliary services - Cenvat credit of Service Tax paid on premium paid to insurance companies for group insurance/insurance - Held that:- Karnataka High Court in the case of Millipore India Ltd. (2008 (11) TMI 97 - CESTAT, BANGALORE), wherein, after examining the CAS-4 Standards, the Hon’ble High Court accepted that all factors have to be taken into consideration while fixing the cost of the final products. The Hon’ble High Court further observed that the definition of ‘input services’ is too broad. Further it is not disputed in the facts of the case that the premium so paid in the present appeal has formed part of the cost of excisable goods on which Excise Duty has been paid on removal. Therefore, the appellant is entitled to avail, Cenvat credit for the insurance premium paid in respect of group insurance/insurance of employees including retired employees/mediclaim which are covered under the definition of ‘input services’ and have a nexus. - Decided in favour of assessee.
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2015 (7) TMI 221
Refund of accumulated Cenvat credit - documents are not in the name of the appellant - no nexus between input services and the final product - distribution of credit by the ISD - held that:- In the impugned orders other than saying that bills are not in the name of the appellant, there is no other observation at all. It is not even possible to conclude that documents are not in the name of the appellant in view of the clear finding that refund claim was not defective but had all the requirements fulfilled. In such a scenario, the observations that the bills are not in the name of the unit is not supported by facts. The appellant has taken credit on the basis of invoices issued by Input Service Distributor and on going through one of the invoices I find that the invoice appears to fulfill the requirement of the law. The bills give name of the Input Service Distributor, address and the details of credit passed on with the details of service providers and the credit in the annexure. In the absence of any consideration whatsoever other than a bland observation that bills are not in the name of the unit and in view of the submission that very same documents were used by the appellant for taking credit the obvious conclusion is that appellant has taken credit on the basis of invoices issued by ISD and therefore what is required to be examined while considering the refund claim was correctness of the ISD invoice whether it had the required details or not. - expenses like bank charges, CA services, CHA services, Cargo Services etc are required and can be considered in or in relation to manufacture and clearance of final products unless the contrary is proved which is not the case here. Under the circumstances, the matter in any case has to be remanded since the refund claim has to be considered afresh. - Decided in favour of assessee.
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Central Excise
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2015 (7) TMI 228
Marketability of product - mixture of graphite and clay - Held that:- there is no evidence whatsoever that the mixture of graphite and clay is at all marketable. - Decision in the case of Umesh Pencil Processors (2009 (10) TMI 603 - CESTAT, CHENNAI), followed - Decided in favour of assessee.
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2015 (7) TMI 227
Exemption under Notification No. 63/95-CE dated 16.03.1995 - Goods supplied to defence - Bar of limitation - Held that:- Apart from Notification No. 63/95-CE, there were other two notifications being Notification No. 10/97-CE dated 01.03.1997 and 06/2006-CE dated 01.03.2006, which required the certificates to be produced by the proper officer. Notification No. 10/97-CE dated 01.03.1997 required a certificate to be produced duly signed by Deputy Secretary of the concerned Ministry, whereas the certificates produced by the appellants are issued by CSIO and Aeronautic Development Agency, and cannot be held to be proper certificate. Similarly in term of Notification No. 06/2006, he submits that the benefit is available only when the goods manufactured by the manufacturer is supplied to M/s. HAL for servicing, repair or maintenance and not for further use in the manufacture of their product. As M/s. HAL has used it for further manufacture, he submits, that inasmuch as the conditions of the said notification have not been fulfilled, the benefit cannot be extended to the appellant. As regards Notification No. 10/97-CE dated 01.03.1997 is concerned, the Revenue's objection is that the certificate produced by the assessee in terms of the said notifications are not duly signed by the proper officer. However we find that certificates handed over to the appellant duly signed by CSIO or aeronautic development agency and based on which the appellant availed the benefit of notification. Even if the fact that they were not signed by the proper officer is admitted, no suppression or misdeclaration can be attributed to the assessee so as to invoke the longer period of limitation. Apart from that we find, as is seen from the certificate, the person signing the same is holding the rank in pay scale higher than the Deputy Secretary to Government of India in which case even though the certificates were not signed by Deputy Secretary, the same should be accepted. - demand cannot be held sustainable on the point of limitation itself. - Matter remanded back - Decided in favour of assessee.
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2015 (7) TMI 226
CENVAT Credit - whether the appellant is entitled to Cenvat Credit in respect of furnace oil used in the manufacture of goods on job work basis and cleared without payment of duty under notification No. 214/86-CE dated 25/3/1986 - Held that:- Since the present appeal has attained finality in assessee's own previous case [2010 (3) TMI 1056 - CESTAT MUMBAI] - Appellant is entitled for re-credit of amount reversed by them in respect of furnace oil subject to verification of the said amount by adjudicating authority. The adjudicating authority shall ensure the correct amount of re-credit to the appellant. The appeal is allowed by way of remand only for a limited purpose i.e. verification of amount - matter remanded back - Decided in favour of assessee.
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2015 (7) TMI 225
Denial of CENVAT Credit - Exemption under notification no. 6/06-CE dated 1/03/2006 - Non maintenance of separate accounts - Held that:- When the goods manufactured into India have been supplied against international competitive bidding, the same would be eligible for full duty exemption under notification no. 6/06-CE, if the same satisfy the condition prescribed in the notification that the same goods, if imported into India are fully exempt from customs duty as well as additional customs duty. In terms of Clause (vii) of Rule 6(6), the provisions of sub rule (1) (2), (3) and (4) are not applicable in respect of such goods. - Rule 6 of the cenvat credit Rules is in respect of the goods manufactured in India and this rule, in general, contains provisions regarding denial of cenvat credit in respect of inputs/ input services which have gone into the manufacture of exempted final products or exempted output services. Sub rule 6 of Rule 6 enumerates the situations in which the cenvat credit would be available in respect of inputs/Input services even if the same have been used in or in relation to manufacture of final product which have been cleared at nil rate of duty or have been cleared without payment of duty like clearances for export under bond, supplies 100% EOU/SEZ units etc. There is nothing in this sub rule form which it can be inferred that clause-(vii) is applicable to the goods imported into India. In our view, the Review order passed by two senior Chief Commissioners is an absurd order passed with absolutely no application of mind and as such there is absolutely no merit in this appeal filed by the Revenue. - decided against Revenue.
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2015 (7) TMI 224
Denial of CENVAT Credit - Bogus invoices - Invoices issued without actual receipt of goods - Held that:- On perusal of the Compilation of documents, showing correlation of the goods received from M/s. Annapurna and return of semi-finished goods, I find that the appellant had produced copy of invoices of M/s. Annapurna along with transport documents and Bills of labour charges paid to the job workers - The job worker issued Bills for labour charges alongwith delivery challans issued from time to time. It is particularly noted that purity check result of the goods by electrolysis method was recorded in the printed form of the appellant. These evidences were not refuted by the lower authorities. I find that the charge of availment of cenvat credit on the basis of invoices without receipt of the goods was on the basis of statements of various persons. The appellant refuted the charges particularly by showing various evidences of receipt of goods, Lorry Receipt, Purity Check report, Payment of Labour Bills and other details, which were not disputed by the lower authorities. Cenvat credit cannot be denied on the ground of non-receipt of inputs when the Tribunal found that department is not able to prove that any alternative raw material was received and used in the final products. The Tribunal has also noted that the findings of the Commissioner established that RT-12 returns have been assessed finally by the Range Officer which contains all the documents including the invoices under dispute on the basis of which the modvat credit has been availed and utilised and that payments of the purchase of inputs have been made through cheque/ demand draft. In the present case, I find that appellant had produced several evidence in respect of receipt of inputs and the same were not disputed and the officers proceeded merely on the basis of statements and in this situation, denial of cenvat credit cannot be sustained. - appellant produced documents that M/s. Annapurna was in existence during the material period as established by their invoices and the Central Excise monthly returns. So, the appellant has discharged their responsibility and therefore, CENVAT credit availed on the basis of invoices of M/s. Annapurna cannot be denied. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (7) TMI 230
Denial of the benefit of composition under Section 4(7)(d) of the A.P. VAT Act - completed apartment - consideration & independent works contract - post-sale completion of works contract - semi-finished apartment - work contract executed prior to execution of sale deed - Held that:- Section 4(7)(d) uses the words residential apartments, houses, buildings or commercial complexes. Rule 17(4) relates to treatment of Apartment Builders and Developers under composition. An apartment builder can only be a person who builds a completed apartment and not a semi-finished structure. The words residential apartment, house or commercial complex can only mean a completed building, and not a semi-finished structure. Only those dealers engaged in the construction of a residential apartment, house, building, commercial complex etc from its commencement till its completion, and in the sale of such buildings, are entitled for the benefit of composition under Section 4(7)(d) of the Act. The purchaser of the residential apartment, house/building etc, is the same person with whom the developer enters into the initial agreement, executes a registered deed for the sale of a semi-finished structure, and thereafter enters into a finishing agreement for completion of the semi-finished structure into a residential apartment, house, building etc. The artificial severance of the identity of the person who purchases the residential apartment/flat from a developer, firstly as a prospective buyer before execution of a sale deed, and thereafter as the owner of semi-finished structure, does not find support from a plain and literal construction of Section 4(7)(d). Where the literal reading of a fiscal statute produces an intelligible result, clearly there is no ground for reading in words or changing words according to what may be the supposed intention of the legislature. Registered deed executed for the sale of a semi-finished structure, and the finishing/completion agreement entered into thereafter to make the semi-finished structure a fully built residential apartment fit for occupation, are both integrally connected with the initial agreement entered into between the developer and the prospective buyer, and is not independent thereof. The scope of the work specified in the initial agreement is split into two. While the land component and a portion of the executed work are, ordinarily, reflected in the registered sale deed, the construction still remaining to be completed, in terms of the initial agreement, is specified in the finishing/completion agreement. The finishing agreement forms an integral part of the initial agreement. The total turnover, liable to tax under Section 4(7)(d), is the consideration reflected in the initial agreement which is later split up between the consideration reflected in the sale deed and the consideration receivable as specified in the finishing agreement. The liability of the dealer, to pay tax by way of composition under Section 4(7)(d) of the Act, is on the total consideration received, towards the composite value of the land and building, from the commencement of construction of the residential apartment, house, building etc., till its completion, and not merely on the consideration received for the construction of a semi-finished structure. - A construction which would make the provisions more effective and workable must be adopted, if possible without doing too much violence to the language used. An intention to produce an unreasonable result is not to be imputed to a statute. The pre-requisite, for being extended the benefit of composition under Section 4(7)(d), is for an application to be submitted in Form VAT 250 before commencement of construction. Section 4(7)(d) makes the benefit of composition thereunder subject to such conditions as may be prescribed. Section 2(24) of the Act defines prescribed to mean prescribed by Rules made under the Act. Rule 17(4)(b) of the Rules requires the dealer, exercising option under Section 4(7)(d), to notify the prescribed authority, on Form VAT 250, of his intention to avail composition for all works specified in Rule 17(4)(a). The requirement of notifying the authority in Form VAT 250 is stipulated in Rule 17(4)(b), to which the option under Section 4(7)(d) is subject to. Form VAT 250 requires, among others, the value of the contract to be mentioned therein. The value of the contract is the consideration reflected in the initial agreement between the developer and the prospective buyer. As Form VAT 250 forms part of Rule 17(4)(b), to which Section 4(7)(d) is explicitly made subject to, the submission urged on behalf of the revenue, that the Form cannot govern the provisions of the Act, does not merit acceptance. Consequently one of the benefits of composition, of not being required to maintain records, would no longer be available. Just like separate records being maintained as aforementioned, the consideration received/receivable for the construction and sale of the apartment would also have to be divided into three distinct parts for it is only the consideration received/receivable from a prospective buyer, for the construction made between the initial agreement and execution of a registered sale deed, which, according to the revenue, would alone fall within the ambit of Section 4(7)(d). The benefit which accrues to the State in prescribing a scheme for composition, i.e., reduction of the burden of tax administration, would also cease, as a result. Such a convoluted construction of Section 4(7)(d) does not merit acceptance. The requirement is for the dealer to be engaged both in construction and sale of the specified buildings. The mere fact that the word selling is used after the word construction does not mean that Section 4(7)(d) is applicable only to those dealers who are engaged in construction prior to the sale of the building, and not thereafter. The person who enters into the initial agreement with the developer for the purchase of the apartment/building proposed to be constructed (otherwise called the prospective buyer) is the same person in whose favour a registered sale deed is executed for conveyance of a semi-finished structure, and is also the very same person with whom the completion/finishing agreement is entered into by the developer thereafter. As the option for composition under Section 4(7)(d) can be exercised only by those dealers who construct and sell residential apartments, houses, commercial complexes, buildings, and not semi-finished structures, the option can neither be curtailed only till the stage of execution and registration of a sale deed, nor can the construction made subsequent thereto be excluded from its ambit. The entire construction, as specified in the initial agreement entered into between the developer and the prospective buyer, would fall within the ambit of Section 4(7)(d), and not merely that part of the construction undertaken prior to execution of a registered sale deed for a semi-finished structure. The residential apartments, houses, buildings and commercial complexes, referred to in Section 4(7)(d), can only mean fully constructed apartments, houses, buildings or commercial complexes, and not a semi-finished structure. As stipulated in Rule 17(4)(e), the liability to pay tax under Section 4(7)(d) is in the month in which the sale of such property is concluded or registered. The VAT dealer is required to declare the tax due in his monthly return, for the month in which the sale of the property is concluded and registered; and to pay the tax due either directly to the assessing authority or to the Sub-Registrar. The month, in which the sale of the property is concluded and registered, is the month in which the entire tax due is required to be paid which, as noted hereinabove, is at 4%/5% of 25% of the consideration received or receivable. As tax is required to be paid even on the consideration not yet received, it is evident that the liability to pay tax, on composition under Section 4(7)(d), is also on the consideration receivable on the construction to be continued and completed, in terms of the initial agreement, after conclusion and registration of the sale of the semi-finished structure. The VAT, at the rate prescribed in Section 4(7)(d), must be paid on the entire consideration, and not merely on the consideration reflected in the registered sale deed, to the Sub-Registrar at the time of registration or, in the very same month, along with the tax return, to the assessing authority. The entire tax liability is required to be discharged in the month in which the sale of a semi-finished structure is concluded and registered, and tax should be paid, at that stage itself, for the total consideration received or receivable for the land and buildings which would include the consideration which the developer has not yet received for the post-sale construction to be undertaken by him. The consideration still due, as referred to in the finishing/completion agreement, is the consideration stipulated in the initial agreement minus the consideration already received and reflected in the registered sale deed. It matters little, therefore, whether the right of the purchaser to sue for any defect in construction, post-execution of the sale deed, is referable to the completion agreement or to the initial agreement. If dealers engaged in the construction and sale of residential apartments, houses, buildings or commercial complexes exercise the option, and comply with the conditions stipulated in Section 4(7)(d) and Rule 17(4), they cannot be denied the benefit of composition thereunder for the construction made by them, for the very same person, after execution of a registered deed for the sale of a semi- finished structure. Denial of the benefits of the composition scheme under Section 4(7)(d) to such dealers, for the post-sale construction made in terms of the initial agreement, is illegal and is contrary to the provisions of the AP VAT Act and the Rules made thereunder. The impugned assessment orders must therefore be, and are accordingly, set aside. - matter remanded back - Decided in favour of assessee.
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2015 (7) TMI 229
Classification of contract - Whether the works contract entered into between the revisionist Company and a customer is a sale contract or a works contract - Held that:- If the appellant, having a strong prima-facie case, is directed to deposit an amount of assessment so made or penalty so levied it would cause undue hardship to him though there may be no financial strains on the appellant running in a good financial condition. Even otherwise where two views are possible dispensation of deposit should be allowed to the assessee - Since the assessing authority has made the assessment relying exclusively on the earlier judgment of the Supreme Court in State of Andhra Pradesh Vs. M/S Kone Elevator, [2005 (2) TMI 519 - SUPREME COURT OF INDIA] which has now been overruled by the Constitution Bench of the Supreme Court in Kone Elevator India Pvt. Ltd. Vs. State of Tamil Nadu [2014 (5) TMI 265 - SUPREME COURT], the revisionist is entitled to complete stay of the demand amount - Decision in the case of Pennar Industries Limited Versus State of Andhra Pradesh and Others [2009 (2) TMI 457 - SUPREME COURT OF INDIA ] and Benara Valves Ltd. Versus Commissioner of Central Excise and Another[2006 (11) TMI 6 - SUPREME COURT OF INDIA] followed - The impugned order dated 19.06.2015 passed by the Tribunal is modified and a direction is issued to the Appellate Authority to decide the appeal of the revisionist expeditiously in accordance with law within a period of two months from the date of receipt of the certified copy of this order. - Decided in favour of assessee.
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Wealth tax
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2015 (7) TMI 217
Rectification of mistake - Held that:- prima facie there is a mistake in the order passed by the Tribunal. Therefore, the said common order of the Tribunal [2012 (4) TMI 151 - ITAT CHENNAI ] is recalled and again reinstated in the rolls of the Tribunal for fresh hearing and disposal - Decided in favour of Revenue.
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Indian Laws
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2015 (7) TMI 218
Court for jurisdiction - Trial on security personnel - Trial to be done in Security Force Court or Criminal Court - Held that:- Criminal Court and the Security Force Court each have jurisdiction for trial of the offence which the accused persons are alleged to have committed. In such a contingency Section 80 of the Act has conferred discretion on the Director General or the Inspector General or the Deputy Inspector General of the Force within whose Command the accused person is serving, to decide before which court the proceeding shall be instituted. Section 141 of the Act confers power on the Central Government to make rules for the purpose of carrying into effect the provisions of the Act. It is relevant here to state that the Central Government in exercise of the powers under Section 141 (1) and (2) of the Act has made the Border Security Force Rules, 1969, hereinafter referred to as “the Rules”. Chapter VI of the Rules is in relation to choice of jurisdiction between Security Force Court and criminal court. Rules made to give effect to the provisions of the Act has to be consistent with it and if a rule goes beyond what the Act contemplates or is in conflict thereof, the rule must yield to the Act. It is emphasized that Section 80 of the Act confers discretion on the Officer within whose Command the accused person is serving the choice between Criminal Court and Security Force Court without any rider, whereas Rule 41 of the Rules specifies grounds for exercise of discretion. Accordingly, it is submitted that this rule must yield to Section 80 of the Act. - One of the most common mode adopted by the legislature conferring rule making power is first to provide in general terms i.e., for carrying into effect the provisions of the Act, and then to say that in particular, and without prejudice to the generality of the foregoing power, rules may provide for number of enumerated matters. Section 141 of the Act, with which we are concerned in the present appeal, confers on the Central Government the power to make rules is of such a nature. Rule 41 of the Rules has been made to give effect to the provisions of the Act. In our opinion, it has not gone beyond what the Act has contemplated or is any way in conflict thereof. Hence, this has to be treated as if the same is contained in the Act. Wide discretion has been given to the specified officer under Section 80 of the Act to make a choice between a Criminal Court and a Security Force Court but Rule 41 made for the purposes of carrying into effect the provision of the Act had laid down guidelines for exercise of that discretion. Thus, in our opinion, Rule 41 has neither gone beyond what the Act has contemplated nor it has supplanted it in any way and, therefore, the Commanding Officer has to bear in mind the guidelines laid for the exercise of discretion. The Commanding Officer, thus, has exercised his power under Section 80 of the Act and excepting to say that the said power has been exercised in his discretion, there is not even a whisper as to why said discretion has been exercised for trial of the accused persons by a Security Force Court. The Commanding Officer has nowhere stated that the trial of the accused by Security Force Court is necessary in the interest of discipline of the Force. Once a statutory guideline has been issued for giving effect to the provisions of the Act, in our opinion, the exercise of discretion without adherence to those guidelines shall render the decision vulnerable. In our opinion, the Commanding Officer has exercised his power ignorant of the restriction placed on him under the Rules. Having found that the Commanding Officer’s decision is illegal, the order passed by the learned Chief Judicial Magistrate as affirmed by the High Court based on that cannot be allowed to stand. - Decided in favour of appellant.
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