Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 11, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
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Minister of State for Finance and Corporate Affairs calls for Efficient Management of Resources; Indian Cost Accounts Service (ICoAS) to play a Proactive Role in assisting the execution of Projects, Schemes and Operations of Government of India and role in GST implementation ; MOS (Finance &Corporate Affairs) inaugurated the Second Indian Cost Accounts Service Day yesterday
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RBI Reference Rate for US $
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Setting up of Technology Acquisition and Development Fund
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Functional SEZs
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Setting up of NICDA
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New forward looking Guidelines issued by Department of Expenditure, Ministry of Finance to improve the efficiency with which Public Funded Schemes and Projects are appraised and approved; In order to bring-in the concept of outcome evaluation to improve the delivery of public goods and services to the citizens
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Combined Annual Return for Central Excise and Service Tax assessees - Draft Circular
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THE TAXATION LAWS (AMENDMENT) BILL, 2016
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Application of principle of “unjust enrichment” in case of refund - Draft Circular
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Indirect Tax Collections up to July, 2016 indicate net revenue collections of ₹ 2,71,719 crore as compared to ₹ 209217 crore in the corresponding period last year and thereby registering an increase of 29.9% over the corresponding period; 34.9% of the Budget Estimates of indirect taxes for FY 2016-17 achieved till July 2016
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Direct Tax Collections upto July, 2016 indicate net revenue collections of ₹ 1.59 lakh crore; thus registering an increase of 24.01% over the corresponding period last year ; 18.82% of the Budget Estimates of direct taxes for FY 2016-17 achieved till July 2016 Refunds amounting to ₹ 64,181 crore have been issued during April-July, 2016, which is10.43% higher than the refunds issued during the corresponding period last year
Notifications
Highlights / Catch Notes
Income Tax
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Interest on NPA - interest on non performing assets is not taxable on accrual basis looking to the guidelines of the Reserve Bank of India - HC
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Levy of Penalty u/s. 271(1)(c) - assessee had acted on the advice of a professional and his advice was found not as per the provisions of the Act - No penalty - AT
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Share premium received - additions u/s 56 - how the conclusion was drawn that the share premium money was utilised for business purposes and not preserved for the purposes for which it was collected - No additions - AT
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LTCG in connection with the furniture and fixtures attached with the transfer of tenancy rights - Since agreement nowhere speaks about the transfer of furniture and fixture, claim of the assessee not admitted - AT
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Reopening of assessment - AO must have some tangible material having live link with the escapement of the income on the basis of which he can form a bonafide belief of escapement of income chargeable to tax - HC
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Taxability of income - deemed ownership - the income of the assessee is liable to be treated as under the head income from house property and accordingly the assessee would also to be entitled for the consequential benefit as per law. - AT
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Additional depreciation allowed u/s 32(1)(iia) is a one time benefit to encourage industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful - AT
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Tax perquisites - tax borne by employer is paid directly to the tax authority and there is no payment to the tax employee, the tax so borne is a non-monetary transaction and the same is exempted u/s 10(10CC) - AT
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Assessment u/s 153A r.w.s. 143(3) - the addition has to be deleted for the reason that, the same is not based on the assets founds in the locker of the assessee - AT
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Unexplained credit u/s 68 - peak credit theory - CIT(A) has rightly rejected the claim of the assessee of adopting peak theory for considering unexplained credit - AT
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Disallowance of purchases u/s 40(A)(3) - cash payment exceeding ₹ 20,000/- the genuineness of the transactions being free from vice of any device of evasion of tax is relevant consideration - No additions - AT
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Penalty u/s 271(1)(c) - assessment u/s 153A r.w.s. 153B/143(3) - surrender of income by assessee inclusive of out of pocket diary expenses was made in the year under appeal - No penalty - AT
Customs
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Period of limitation - violation of actual user condition - At the time of import, the importer only gives declaration. It is the actual use, which event takes place much after the import, from where it can be gathered as to where the import is made for the purpose for which it was done. As soon as the aforesaid information was gathered by DRI, show cause notice was issued. Therefore, the show cause notice had been issued within a reasonable period and it cannot be treated as time barred - SC
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Violation of actual user condition - crude palm oil which was imported was used for making edible products like refined oil/Vanaspati - If in the process 25% of fatty (palm) emerges as a by-product it cannot be said that first requirement of exemption notification is satisfied. - SC
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Warehousing - if a request is made seeking permission to re-export the goods imported, the same may be allowed, even if the permitted period for bonding has expired and demand notice has been issued or it has been decided to put the goods under auction. - HC
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Tribunal has no jurisdiction to entertain a baggage matter for which the appellant may choose to exercise its right of revision before the Revisionary Authority - AT
Corporate Law
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The Company having been struck off on the prayer of the Company itself and/or its directors, there can be no question of the Company being aggrieved by the striking off. - HC
Indian Laws
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THE TAXATION LAWS (AMENDMENT) BILL, 2016 - Further to amend Income Tax Act, 1961 and Custom Tariff
Service Tax
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To provide tour operator service, the vehicle should necessarily be tourist vehicles - No evidence found that the vehicles used by the respondents were the tourist vehicles - AT
Central Excise
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CBEC issued a Draft circular inviting suggestions on the issue of Application of principle of “unjust enrichment” in case of refund
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Whether the process of crushing of coal would amount to manufacturing activity - the activity could not be covered as a ‘manufacturing activity’ nor the crushed coal could be manufactured product - AAR
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The activity of loading of business software in the Hardware / Nucleus Device by the applicant will not constitute manufacture under the Central Excise Law - not liable to duty of excise - AAR
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Processing of secondary raw materials (steel scrap of difference and variable composition) into blended steel scrap is liable for payment of Central Excise duty - Though both (input and output) would fall under the category of scrap, but are completely different types of scraps - AAR
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Reversal of cenvat credit - Sub-Rule (3A) is only a procedure - Consequently, the argument of Revenue is that the appellants exercising option is mandatory and on its failure, the appellant has no other option but to accept and apply Rule 6(3)(i) and make payment of 5%/10% of the sale price of the exempted goods or exempted services is not acceptable - AT
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Cenvat credit - the rectified spirit which is not used for human consumption is nothing but ethyl alcohol and is finding place in tariff item no. 22072000 - credit allowed - AT
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Refund - Rule 5 of Cenvat Credit Rules 2004 - As regard the goods exported under bond, the appellant is entitled for the refund, however the refund related to the export made under claim of rebate is not admissible - AT
VAT
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Penultimate sale - export - The burden is entirely on the assessee to establish the link in transactions relating to sale or purchase of goods and the export; that the penultimate sale is inextricably connected with the export of goods by the exporter to the foreign buyer. - HC
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Input tax credit – preference of set off - local sale, inter-state sale and export - Assessing Authority cannot insist on the assessee adopting a particular method which would deny them the benefit of utilization of the balance available tax deferment in its entirety, and instead of paying tax. - HC
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Input Tax Credit - Tribunal was not justified in rejecting the claim of input tax credit merely on technicalities, when the dealer was able to show that the tax had been paid to the selling dealer and duly deposited with the State - HC
Case Laws:
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Income Tax
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2016 (8) TMI 377
Determination of tax liability - Interest on non performing assets - whether non taxable on accrual basis looking to the guidelines of the Reserve Bank of India? - Held that:- While determining the tax liability of an assessee, two factors would come into play. Firstly, the recognition of income in terms of the recognised accounting principles and after such income is recognised, the computation thereof, in terms of the provisions of the Income Tax Act, 1961. Insofar as the computation of taxability is concerned, the same is solely governed by the provisions of the Income Tax Act and the accounting principles have no role to play. However, recognition of income stands on a different footing. Insofar as income recognition is concerned, it would be the RBI Directions which would prevail in view of the provisions of section 45Q of the RBI Act and section 145 would have no role to play. Hence, the Assessing Officer has to follow the RBI Directions. The Assessing Officer has thereafter entered into a discussion on the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, which provides for enforcement of security interest of banks and financial institutions and has observed that in the instant case, no material has been brought on record by the assessee to prove its efforts made in a bid to recover such debts which are classified as NPA and other categories. The Assessing Officer has also entered into a discussion as regards the quality of management, etc., without even examining as to whether or not there was any probability of interest being received on the NPAs. Commissioner (Appeals) has placed reliance upon the decision of the Supreme Court in the case of Southern Technologies Limited (2010 (1) TMI 5 - SUPREME COURT OF INDIA ) and held that there is no merit in the contention of the assessee that under commercial accounting, interest on NPAs cannot be charged. On the question of applicability of the CBDT Circular dated 9.10.1984, the Commissioner (Appeals) held that the same would not be applicable for the reason that the provisions of section 43D of the Act are clear and cannot be overridden through delegated legislation viz. circulars and notifications. The Commissioner (Appeals) was further of the opinion that the statutory provisions were brought on the Act much later than the said circular (which was issued in 1984) and therefore the said circular would not have any effect or binding force upon the Assessing Officer. The view adopted by the Assessing Officer and the Commissioner (Appeals) is clearly contrary to the view expressed by this court hereinabove. The Tribunal was therefore, wholly justified in setting aside the order passed by the Commissioner (Appeals) confirming the assessment order.Appellate Tribunal is right in law and on facts in holding that interest on non performing assets is not taxable on accrual basis looking to the guidelines of the Reserve Bank of India Decided in favour of the assessee and against the revenue
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2016 (8) TMI 376
Penalty levied u/s. 271(1)(c) - additional depreciation claimed u/s. 32 (ii) r. w. s. 32(iia) on the addition to the plant and machinery - Held that:- We find that the assessee had claimed additional depreciation at the rate of 20% though the plant and machinery was used only for period of six months, that during the assessment proceedings it submitted letter to the AO to reduce the additional depreciation, that the Chartered Accountant had, in the audit report, recommended the claim of depreciation at the rate of 20%. In our opinion, considering the clear facts and circumstances of the case, it is not a case of filing inaccurate particulars of income for considering the particulars of income. It was an inadvertent mistake. The assessee had acted on the advice of a professional and his advice was found not as per the provisions of the Act. Penalty levied u/s. 271(1)(c) to be deleted. - Decided in favour of assessee. Penalty with regard to disallowance of expenditure incurred on account of increase in share capital - Held that:- There is no ambiguity about the nature of the expenditue. The expenses incurred by the assessee for issuing shares on right basis cannot be treated as revenue expenditure. It is neither a debatable issue nor there are two opinions about the said expenditure. The assessee had made a patently wrong claim. There is a difference between a debatable claim and a wrong claim. In the first instance because of the divided judicial opinions the assessee can argue that it had opted for one of the opinions. But, as far as the second category is concerned nobody can argue that the claim is supported by judicial pronouncement. The claim made by the assessee, in the case under consideration, falls under the second category. We find that the assessee had not challenged the finding of fact given by the AO that it did not file any reply in response to the penalty notice. By not filing any reply to notice issued by the AO the assessee had indirectly admitted the charge leveled by him. However, considering the fact that it had agitated the issue before the FAA and he had decided the issue on merits, we want to hold that his order does not suffer from any legal infirmity. So, confirming the same, effective ground of CO is decided against the assessee.
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2016 (8) TMI 375
Share premium received - treating the receipt as a business receipt and thereby confirming the addition of share premium u/s. 56(1) of the Act to its total income - Held that:- While dealing with the assessment or appeals, under the provisions of the Income tax Act, the basic principle every officer of the department has to remember that he is the representing the Sovereign and his duty is to collect Due taxes only. For determining the Due taxes they should avoid bringing farfetched fancies and ideas. In the case under consideration they have done the same. Without understanding the basic philosophy of income they have referred to the provisions of CA, so that the amount in question can be taxed at any cost. It is not a fair or judicious approach to deal with the Subjects of the State. Even if the assessee had violated the provisions of CA, it will be penalised by the provisions of that Act. But, it would never turn a capital receipt in to revenue receipt or visa-versa. Neither the AO nor the FAA has proved that the share premium money was utilised by it for running its day today business. The assessee had proved that the opening and the closing balance of the share premium money account was same for the year under consideration. We find that the factual position assailed by the assessee was not proved incorrect by both the authorities. If there was no difference in the balances how the conclusion was drawn that the share premium money was utilised for business purposes and not preserved for the purposes for which it was collected. Without any evidence both the authorities held that the assessee had used the money for purposes other than the purposes for which it was collected. Therefore, in our opinion there was no foundation of the building that was built by them. We are not in position to validate such a classical factual blunder. Section 100 of the CA deals with reduction of share capital. In short, the stand taken by the FAA is not endorsable either legally nor factually. - Decided in favour of assessee.
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2016 (8) TMI 374
Disallowance of Long Term Capital Gain in connection with the furniture and fixtures attached with the transfer of tenancy rights - Held that:- The tenancy right has only been surrender in the property and there is no transfer of any kind of furniture and fixture in the lease deed. Transfer of furniture and fixture is not part and parcel of the agreement entered into by the appellant with the landlord. There is no bifurcation of the value of surrendering of furniture and fixture. Earlier the tenancy property was in possession of A.K. Industries in which assessee was a partner with his father. No doubt at this time the furniture and fixture if any was belonging to the partnership firm. The assessee has no right to claim the ownership of furniture and fixture of the partnership firm. Since agreement dated 12th May 2008 nowhere speaks about the transfer of furniture and fixture, therefore, in the said circumstances the claim of the assessee with regard to the furniture and fixture does not seem justifiable, therefore, CIT(A) has no doubt rightly confirmed the order passed by the Assessing Officer which does not require to be interfere with at this appellate stage. Hence, this issue is decided in favour of the revenue and against the assessee. Exemption u/s.54F - Held that:- The assessee has received consideration of ₹ 2,75,00,000/- on transfer of tenancy right and after claiming brokerage he received the net consideration to the tune of ₹ 2,71,50,000/-, out of which a sum of ₹ 30,00,000/- was invested in REC Bonds and amount of ₹ 1,07,58,450/- was invested in house property. The balance amount of ₹ 1,31,91,550/- remained unutilized was deposited in Capital Gain Saving Account Scheme which will be taxed after the expiry of three years after the date of transfer of Long Term Capital Asset i.e. on 17.05.2011 relevant to assessment year 2012-13 as per the provisions of sub section 4 of section 54F of the Act. The appellant paid the tax to the tune of ₹ 25,68,337/- on 29.08.2011. Consequently, the withdrawal of the money from his Capital Gain Deposit Saving Account nowhere attract the tax. No doubt in the said circumstances the CIT(A) has rightly decided these issues in favour of the assessee and against the revenue
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2016 (8) TMI 373
Addition on account of capital investment - Held that:- Whether these amounts formed part of ₹ 2.45 crores or not is a question of fact. The assessee has not adduced any evidence to establish the same. The manner in which the Assessing Officer has came to the figure of ₹ 2.45 crores cannot be held to be perverse or irrational. His refusal to deduct the amounts as claimed by the assessee from this amount cannot be said to be perverse or irrational either. The Tribunal indeed speculated by reducing the undisclosed investment at ₹ 1.50 crores and the addition of ₹ 55.01 lacs to about ₹ 34.65 lacs. However, the Tribunal speculated in favour of the assessee. The assessee can hardly be aggrieved by the speculation in his favour. No substantial question of law.- Decided against assessee Disallowance of interest under section 36(1)(iii) - amount advanced to the employees of the Appellant by terming the said advancement of money as not for business purposes? - Held that:- The assessee advanced amounts without interest to his sister concern and to the employees. It was found that there were no business transactions with the sister concern. Commercial expediency was not established. As far as the employees are concerned, a sum of ₹ 10 lacs is alleged to have been advanced to him. Only a credit entry in his account was found. The amount was advanced for the purpose of constructing a house. There was no evidence that the money was infact given for construction of a house. Relief as regards supply of goods to one of the sister concern was partly granted. Relief as regards other transactions warrants no interference. It was found as a matter of fact that there was no commercial expediency. - Decided against assessee
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2016 (8) TMI 372
GP estimation - rejection of books of accounts - Held that:- On the rejection of the books of accounts on the ground that an assessee had returned low gross profit percentage, it is open to the authorities to ascertain the correct GP rate. In such circumstances, the adoption of the GP rate instead of adding of ₹ 1.32 crores to the income of the assessee cannot be said to be perverse or irrational. The CIT(Appeals) had the GP rates of five assessees in respect of Phagwara and three in respect of Jalandhar. The GP rates of assessees of Phagwara ranged from 16.21% to 18.30% whereas the GP rates of three assesses at Jalandhar were 10.64%, 12.09% and 13.6%. The CIT (Appeals) adopted the GP rate of 25%. There is, however, nothing in the order to indicate why the GP rate of 25% was adopted. The average of GP rates of Phagwara and Jalandhar was also much less. The Tribunal on the other hand adopted the average GP rate of assessees at Jalandhar as the assessee in the case before us also carried on the business at Jalandhar. The Tribunal observed that the CIT (Appeals) had fixed the GP rate of 25% which was not based on any material or cogent reasoning. This finding of the Tribunal is based on facts which is neither perverse nor absurd.
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2016 (8) TMI 371
Late issuance of TDS certificate - late payment of tax deducted into the Government treasury - Held that:-Income Tax Appellate Tribunal was right in law in holding that late payment of tax deducted into the Government treasury is a reasonable cause for late issuance of TDS certificat. The view taken by the Tribunal is just and proper and it is not required to be interfered with. Therefore, the question posed for our consideration is answered in favour of the department and against the assessee.
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2016 (8) TMI 370
Transfer of cases - extent and manner of hearing and reasons - Held that:- Section 127 of the Act refers to suo motu jurisdiction, but it is settled law that such jurisdiction can be triggered either by an assessee or by the Revenue and the power is conferred to remedy any injustice and it is always open to bring to notice any error, illegality or injustice. On examining the impugned order, which was subject matter of the said case, it was held to be vitiated because of absence of hearing and recording of reasons. However, it was further held that no hard and fast rule can be laid down about the extent and manner of hearing and reasons to be recorded and all depends upon the facts and circumstances on each case. Therefore, the High Court of Bombay, though culled out the legal position, observed that there can be no hard and fast rule and the extent and manner of hearing and reasons depend on the facts and circumstances of each case. In respect of other submissions, which would have an impact on the assessment to be made, this Court refrains from making any reference to the same and this Court does not propose to go into the factual contentions raised by the petitioners and the averments set out in this regard in the counter affidavits. Ultimately, while upholding the validity of the impugned orders, this Court grants liberty to the respondent to proceed in accordance with law. The learned counsel for the petitioners submitted that the impugned notifications transferring the cases, after receipt of the objections, do not disclose as to why the objections raised by the petitioners did not find favour with the respondent. Under normal circumstances, this Court would have adjudicated this issue. But, by a lapse of time of more than 11 years, this Court is of the view that this question has become academic. That apart, the impugned proceedings are only notifications and these notifications are after an order, which came to be passed by the Authority concerned. Therefore, at this distance of time, this Court is not inclined to give any liberty to the petitioners to challenge the order, which had been passed by such Authority prior to the impugned notifications.
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2016 (8) TMI 369
Transfer of case of the petitioner-assessee from Kolkata to Trivandrum - Held that:- The petitioner did not have any business or residence at Kolkata at the relevant point of time which is under consideration. In fact, the petitioner had applied for transfer of his file from Kolkata on such ground. The authorities have acted on the basis of the fact that, the petitioner does not have a residence or any business at Kolkata. The only business that the petitioner was connected with at the relevant point of time, to the knowledge of the department, was located within the jurisdiction of the Assessing Officer at Trivandrum. Therefore, the assessment proceedings were transferred for the relevant years to such Officer at Trivandrum. The petitioner had in any event applied for transfer. The request for transfer made by the petitioner coupled with the fact that, the petitioner did not have any residence or business within the jurisdiction of the Assessing Officer at Kolkata, does not visit the action of the department with any illegalities so as to warrant an interference by a Writ Court.
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2016 (8) TMI 368
Reopening of assessment - claim of deduction under Section 10B - whether the assessee firm had not paid any interest to its partner on their capital? - Held that:- To summarize, the partnership deed was available on record, from which itself the Assessing Officer has recorded that there were provisions for payment of interest on capital and remuneration to the partners. The fact that no such payments were made during the year under consideration was also part of the record so disclosed by the assessee. The partners’ capital account was also part of the assessment proceedings. There was no failure on the part of assessee to disclose truly and fully all material facts. Even if the assessee’s claim of deduction under Section 10B of the Act was artificially inflated, it was well within the powers of the Assessing Officer to deny such claim while framing the assessment. The reopening of the assessment beyond the 4 years would not be permissible.- Decided in favour of assessee Penalty under Section 271D - failure to comply with the provisions of Section 269SS of the Act i.e. acceptance of loan or deposit otherwise than by account payee cheque or bank draft - Held that:- Second ground recorded by the Assessing Officer in the reasons, it has two elements. First is acceptance of loan without disclosing the mode of acceptance and second, the repayment of the said loan. Regarding acceptance of loan, the Assessing Officer refers to penalty under Section 271D of the Act which would be imposable for violation of provisions of Section 269SS of the Act. In this context, the Assessing Officer does not record that any income chargeable to tax had escaped assessment, the prime requirement for reopening the assessment but refers to possible penalty being imposed on the assessee. Regarding repayment of such loan though we recall that reference to the details of the cheque under which the repayment so made have been recorded, he desires to scrutinize the same further. It is held by series of judgments of this Court and other Courts that for mere scrutiny, reopening of the assessment would not be permissible. The reopening of assessment could be made if the Assessing Officer had formed a belief that income chargeable to tax had escaped assessment. In order to do so, the Assessing Officer must have some tangible material having live link with the escapement of the income on the basis of which he can form a bonafide belief of escapement of income chargeable to tax. Reopening cannot be resorted to for fishing or rowing inquiry on mere suspicion that income chargeable to tax may have escaped assessment. - Decided in favour of assessee
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2016 (8) TMI 367
Taxability of income - deemed ownership - AO of treating ‘Income from House Property’ earned in respect of three different properties as ‘Income from Other Sources’ on the ground that the assessee is not the owner of the said properties but the tenant of the said property - Held that:- In the present case, the appellant has entered into lease agreements in respect of the concerned properties for a period of not less than 12 years. The appellant has furnished copies of lease agreements and rent receipts in support of its claim. On perusal of the documents placed on record, as observed that the assessee though not an owner of the property but is a deemed owner of the property in view of the provisions of section 27(iiib) r.w.s269UA(f) of the I.T.Act, 1961 as the assessee is holding the aforesaid properties on lease for a period of more than 12 years. The department has dealt the matter of controversy in the assessee’s own case for the A.Y.2007-08. In view of the above said observations made by the CIT(A) in the assessee’s own case, the assessee’s income from the house property was found to be taxed under the head of income form house property. These findings were not challenged by the revenue meaning thereby the revenue has accepted this contention. No doubt in the said circumstances the income of the assessee is liable to be treated as under the head income from house property and accordingly the assessee would also to be entitled for the consequential benefit as per law. - Decided in favour of assessee
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2016 (8) TMI 366
Validity of order passed u/s 263 - whether the assessee was entitled or benefit of additional depreciation in the impugned order @30% u/s 32(1)(iia) - Held that:- As decided in the case of CIT vs Rittal India Pvt Ltd [2015 (1) TMI 1248 - KARNATAKA HIGH COURT ] that beneficial legislation, should be given liberal interpretation so as to benefit the assessee. In this case, the intention of the legislation is absolutely clear, that the assessee shall be allowed cel1ain additional benefit, which was restricted by the proviso to only half of the same being granted in one assessment year, if certain condition was not fulfilled. But, that, in our considered view, would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year. The Tribunal, has rightly held, that additional depreciation allowed under Section 32(1)(iia) of the Act is a one time benefit to encourage industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting additional allowance. We are in full agreement with such observations made by the Tribunal. Thus the view adopted by the ld.CIT is contrary to law and facts. The Assessing Officer had rightly allowed the benefit of additional depreciation in the year under consideration. Under these circumstances, the order passed by the ld.CIT is hereby quashed. - Decided in favour of assessee
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2016 (8) TMI 365
Income earned from the sale and purchase of shares - Assessed as Short term capital gains or as business income - Held that:- Lending and borrowing being business of assessee and the assessee having surplus borrowed funds having invested in the share transaction would not change the status of the assessee from an investor to a trader in relation to share transactions carried out by it. There is not repetitive transaction and even the assessee from the income earned from the shares has invested the same in property. The major part of the funds of the assessee being invested either in mutual fund or in the property; over all activity of the assessee suggest that the funds have been used by the assessee for investment purposes only. We do not found any justification on the part of the lower authorities in treating the assessee as a trader in relation to the share transaction when in the earlier as well as in subsequent year, the assessee has been treated as investor in the shares. We accordingly direct the AO to treat the income of the assessee from share transaction as capital gains and not as business income of the assessee. Disallowance made u/s 14A r.w. Rule 8D - disallowance of expenditure incurred for the purpose of earning the tax exempt income - Held that:- The Hon’ble Delhi High Court in the case of “Chem Investments vs. CIT” (2015 (9) TMI 238 - DELHI HIGH COURT) has held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year and that the expression ‘does not form part of the total income’, in section 14A of the Act envisages that there should be an actual receipt of income which is not included in the total income during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income Disallowance u/s 14A is restricted to the dividend income earned of ₹ 46,260/- only.- Decided partly in favour of assessee
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2016 (8) TMI 364
Taxability of income in India - overseas income i.e. interest income, dividend income and capital gain - Held that:- In CIT vs. P.V.A.I. Kulandagan Chettiar [2004 (5) TMI 8 - SUPREME Court] Hon’ble Supreme Court held that the assessee not having permanent establishment in India are Not assessable in India. Thus CIT(A) was justified in applying the provision of Indo-US Tax Treaty The fact that income was derived outside India is not disputed by AO, thus the same is not taxable in India. Hence we confirm the findings of the CIT(A) and dismissing this ground of appeal raised by Revenue. - Decided in favour of assessee Granting exemption u/s. 10(10CC) in respect of tax on perquisite provided by Siemens AG - Held that:- The CIT(A) while considering the ratio and the case of special bench in case of RBF Rig Corporation LLC (supra) held that tax borne by employer is paid directly to the tax authority and there is no payment to the tax employee, the tax so borne is a non-monetary transaction and the same is exempted u/s 10(10CC) of the Act, and further relied upon the judgment of Delhi High Court in case of Balmukund Acharya in [2008 (12) TMI 88 - BOMBAY HIGH COURT ] and held that ground/claim raised before the AO was maintainable and allowed the benefit of section 10(10CC). It is well settled law that assessee is entitled to raise not only additional legal submission before the appellate authorities, but also entitled to raise additional claim before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. We have seen that Ld CIT(A) properly appreciated the provision of section 10(10CC) and accepted the claim of assessee which was denied by the AO on wrong premises, hence, we do not find any merit in this ground raised by the Revenue and the same is dismissed.- Decided in favour of assessee Disallowance of expenses paid to the broker in US for managing the portfolio - Held that:- This ground is directly linked with the ground No.1 raised in the present appeal which we have already decided against the Revenue and in favour of assessee holding that the foreign income to the assessee is not taxable in India. Hence the expenses relating to earning to the foreign income does not require any adjudication. Hence, this ground of appeal is also having no merit and the same is dismissed.- Decided in favour of assessee
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2016 (8) TMI 363
Repairs and maintenance of building - construction activity - revenue or capital expenditure - Held that:- The Main reason for the disallowances by the Ld. assessing officer is that the assessee has incurred expenditure on MS plate’s sheets and angles. Merely the assessee has used a particular material it cannot be said that the assessee has used it for the purpose of construction of a building without recording a specific finding about the nature of extension or construction work carried out. It is also important to note that detail of expenditure selected by the Ld. AO then saying that it is a capital expenditure in nature without noting that it does not include any cement or labour expenditure. AO also did not brought on record that whether the assessee has constructed any new shed. In absence of any finding by the Ld. assessing officer that assessee has extended its already existing building such kind of expenditure cannot be held to be capital in nature. The ratio laid down by the Hon’ble Delhi high court in CIT versus TS TECH SUN India Ltd (2012 (7) TMI 313 - DELHI HIGH COURT) squarely covered the issue in favour of the assessee wherein on the identical facts and circumstances Hon’ble high court has held that no extra capacity or space was created in the factory by repairing the roof and floor and therefore no advantage of enduring nature was obtained by the assessee. Therefore respectfully following the decision of Hon’ble Delhi high court, we reverse the finding of the lower authorities that the expenditure is capital in nature. In view of this, we hold that the expenditure incurred by the assessee is revenue in nature and there is no benefit of enduring nature obtained by the assessee.- Decided in favour of assessee.
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2016 (8) TMI 362
Nature of assessment - seizure operation u/s 132 - whether, the order ostensibly passed u/s 143(3) of the Act, should be considered as that which is actually passed u/s 153C/u/s 153A r.w.s. 143(3)? - Held that:- The impugned order passed by the A.O. was only u/s 153A r.w.s. 143(3) of the Act or 143C of the Act. As the search in the case of the assessee had taken place on 10th April, 2006, the A.Y. of search is 2007-08 and not the impugned A.Y. 2006-07. During the impugned A.Y. 2006-07, the assessment may have been framed u/s 153C of the Act, if it is an offshoot of the search at the residence of the family of the assessee on 22nd March, 2006. If it is presumed that the order was passed u/s 153C, then it has to be struck down on the ground that, the requisites of S.153C are not fulfilled. Alternatively if it is presumed that the assessment passed u/s 153A of the Act, as a consequence to a search on the locker of the assessee on 10th April, 2006, the additions made in the assessment have to be deleted for the reason that, the same are not based on any incriminating material or assets seized during the search. As in the case of Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT ) wherein it is laid down that no addition can be made in the assessment being framed u/s 153A, when there is no incriminating material or assets seized during the course of search. The appeals of the assessee have to be allowed for the reason that the assessment cannot be taken as an assessment passed u/s 143(3) of the Act per se and also for the reason that if the assessment has taken as passed u/s 153C r.w.s. 143(3) of the Act, then it has to be struck down on the ground that the requisite procedures laid down in the Section are not followed or in the alternative if it is taken as assessment passed u/s 153A r.w.s. 143(3) of the Act, the addition has to be deleted for the reason that, the same is not based on the assets founds in the locker of the assessee. - Decided in favour of assessee
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2016 (8) TMI 361
Disallowance of the provisions directly debited in the balance sheet - method of accounting adopted - CIT(A) allowed the claim - Held that:- It is notable that the ld. CIT(A) after considering the recognized system of accounting followed consistently by the assessee and accepted by department in previous years and keeping in view the rule of consistency as envisaged by Hon’ble Apex Court in the case of CIT vs. Realest Builder & Services Ltd., (2008 (5) TMI 6 - SUPREME COURT ), has rightly observed that the Assessing Officer cannot reject the method adopted by assessee and also cannot apply a different method of accounting in a subsequent year unless he is able to demonstrate that there is under-estimation of profits by giving facts and figures in that regard. In the instant case no such facts and figures have been assigned by the Assessing Officer to discard the findings reached by the ld. CIT(A). Moreover, the treatment of the assessee with regard to accounting of income and expenses from the business of Fleet Management Services is in accordance with the accepted accounting method as laid down in AS-9 issued by the Institute of Chartered Accountants of India. The ld. DR could not rebut the contention of the assessee that the buffer account created is in the nature of amount received on account of services to be rendered over the period of lease in respect of the leased cars and any income or loss in this regard arises only at the time of determination, i.e., at the end of the tenure of the contract, and till such time the assessee holds the amount with an obligation to render the services during the tenure of the contract. In presence of these facts, we do not find any good reason to interfere with the order of the ld. CIT(A). - Decided in favour of assessee.
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2016 (8) TMI 360
Reopening of assessment - reasons to believe - excessive claim of the assessee - depreciation set-off - Held that:- The reasons recorded by the Assessing Officer clearly speak for the under assessment of tax hence, the conditions laid above stand fulfilled in so far as re-assessment proceedings are concerned. In the present case, on framing the assessment order of Maheswari Sugars Ltd. for the assessment year 2006-07 vide order dated 25.03.2008, it came to the knowledge of the Assessing Officer that the depreciation pertaining to the assessment years 2002-03 to 2004-05 amounting to ₹.6,98,05,670/- was already set off out of total brought forward loss amounting to ₹.23,73,98,026/- and the balance amount of ₹.16,10,19,160/- could be carried forward for set off against the assessee’s current income. As per Explanation 2 of Section 147 it is very clear that due to excessive claim of the assessee, the income chargeable to tax had escaped assessment. The assessee has not produced anything before the Commissioner of Income Tax (Appeals) to show as to how this fact was fully and truly disclosed before the assessing authority and that there was not failure on the part of assessee. Hence, the Commissioner of Income Tax (Appeals) wrongly cancelled the assessment order. It is fully covered by the provisions of Explanation 1 to Section 147 of the Income Tax Act It is possible that with due diligence the Assessing Officer would have ascertained this fat at the time of original assessment also, but in view of the Explanation (1) it does not mean that there was no default on the part of the assessee. Hence, reopening u/s.147 is held to be valid. - Decided against assessee.
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2016 (8) TMI 359
Liability for paying FBT - Held that:- Assessee is covered under the under the provisions of Chapter XII-H of the I.T. Act and is liable for paying FBT. Accordingly, no interference is called for in the order of ld. CIT(A) and assessee’s appeal is dismissed.
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2016 (8) TMI 358
Unexplained credit - peak credit theory - Held that:- When the assessee is engaged in parallel business activity, some closing stock may remain in hand and similarly some debtors may also be pending for recovery, thus in such circumstances peak of the bank account will not reflect the true income because on the date of peak credit some withdrawals and some sales are outside the peak credit. In our view, the Ld. Commissioner of Income-tax (Appeals) has rightly rejected the claim of the assessee of adopting peak theory for considering unexplained credit. We do not find any infirmity in the finding of the Ld. Commissioner of Income-tax (Appeals) on the issue in dispute, and accordingly the ground of the appeal is dismissed. - Decided against assessee.
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2016 (8) TMI 357
Penalty u/s.271(1)(c) - assessment u/s 153A - income surrendered during the course of search - Held that:- Categorical finding has been recorded by CIT(A) to the effect that assessee has fulfilled all the conditions stipulated in Explanation 5 to Section 271(1)(c) for availing immunity for levy of penalty. The assessee has also paid taxes on this income before filing of return. The detailed finding recorded by CIT(A) and the conclusion drawn by him is supported by the decision of Hon’ble Madras High Court in the case of SDV Chandru [2003 (12) TMI 40 - MADRAS High Court ].Accordingly we do not find any reason to interfere in the order of CIT(A) deleting the penalty levied with respect to income surrendered during the course of search With respect to the penalty levied with reference to lose papers 1 to 65 Annexure-A/4, we found that it was explained by the assessee before the AO that certain portion of the seized material could not be copied out as it should be on the photocopies obtained due to the fact that the impugned figures were written in pencil on which transparent cello tape was fixed so that the figures written in pencil cannot be tampered in the original documents those were seized. This fact of poor photocopying of the pencil written portion of the documents and therefore poor and illegible copied matter was not properly appreciated by the Ld. Assessing Officer and he levied penalty on the difference of ₹ 73,96,500/-. We also found that assessee otherwise arrived at unaccounted income of ₹ 51,54,000/- from the same seized material which was clearly legible after copying it and accordingly offered the same for taxation. The contention of assessee that this amount was unintentional and it had no intention to conceal the income before the Revenue. This contention of the assessee was not properly appreciated by the lower authorities. Similar addition of ₹ 25,93,263/- was made on the ground of unaccounted cash payment which was recorded to the tune of ₹ 41,43,263/- out of which assessee has surrendered only ₹ 15,50,000/-. The assessee has explained that it was due to mistake of Accountant as the entry was not properly appreciated by the lower authorities and they have also levied penalty with respect to these difference. In the interest of justice and fairplay we restore the penalty levied with reference to addition of ₹ 73,96,500/- and ₹ 25,93,263/- back to the file of AO for deciding afresh after giving due opportunity to the assessee. - Decided in favour of assessee for statistical purposes.
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2016 (8) TMI 356
Disallowance of purchases u/s 40(A)(3) - cash payment exceeding ₹ 20,000/- - Held that:- It is pertinent to note that the primary object of enacting section 40A(3) were two folds, firstly, putting a check on trading transactions with a mind to evade the liability to tax on income earned out of such transaction and, secondly, to inculcate the banking habits amongst the business community. Apparently, this provision was directly related to curb the evasion of tax and inculcating the banking habits. Therefore, the consequence, which were to be fallen on account of non-observation of Section 40A(3) must have nexus to the failure of such object. Therefore, the genuineness of the transactions being free from vice of any device of evasion of tax is relevant consideration. With regard to the purpose of bringing the provisions of section there is no doubt about the identity of the party. The ld. AR has directly deposited the cash in the account of the companies and has produced the sales bills of the company. The AO has also verified the transactions from the companies by issuing notice under Section 133(6) of the Act. So in the instant case there is no evasion of tax by claiming the bogus expenditure in cash. - Decided in favour of assessee.
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2016 (8) TMI 355
Penalty u/s 271(1)(c) - assessment u/s 153A r.w.s. 153B/143(3) - surrender of income by assessee - Held that:- It is undisputed fact that the assessee in his return of income has declared undisclosed income as was declared during the course of search under section 132(4) of the Act. As per Explanation-5 to section 271(1)(c) of the Act, immunity is provided to the assessee against levying of penalty subject to fulfillment of certain conditions. One of the conditions is that the undisclosed income is required to be incorporated into the return of income to be furnished before expiry of time specified in section 139(1) of the Act and also specify in the statement, manner in which such income has been derived and pay the tax together with interest, if any, in respect of such undisclosed income. We find that ld. CIT (A) has given a finding of fact that while filing the return, an amount of ₹ 78,50,000/- was declared in the year under appeal. Similarly, the amount of ₹ 13,00,000/- out of pocket diary expenses which was part of the total surrender of ₹ 1.40 crores made in the course of statement under section 132(4) was also declared in the year under appeal. Hence the total surrender in the year in hands of the appellant, amounted to ₹ 91,50,000/- which was accepted by the AO in the order passed under section 153A/143(3) of the Act. This fact is not controverted by the revenue by placing any other material on record. - Decided in favour of assessee
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Customs
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2016 (8) TMI 397
Period of limitation - violation of actual user condition - Import of crude palm oil (non-edible grade) - not used in the manufacture of Industrial Fatty Acid but for manufacturing the refined edible oil - entitlement to avail benefit - Notification No. 21/2002-Cus dated 01.03.2002 read with Notification No. 66/2004-Cus dated 09.07.2004 - Held that:- crude palm oil which was imported was used for making edible products like refined oil/Vanaspati. In the process of said manufacture, 25% of fatty (palm) was produced and 75% was oil which was edible. Thus, when the main manufacturing activity relates to edible product which is 75%. If in the process 25% of fatty (palm) emerges as a by-product it cannot be said that first requirement of exemption notification is satisfied. Even if Industrial Fatty Acid is to be treated as separate manufacturing activity and it is non-edible, the same is only to the extent of 25%. That, according to us, would not satisfy the requirement of the exemption notification in question. Fatty Acid Distillate is characterised by high free fatty acid which cannot be 25%. So the by-product is rightly discarded by the Commissioner as not coming within the nomenclature of PFAD. Contrary reasons which are given by the Tribunal, thus, do not appeal to this Court. In this view of the matter, reliance on subsequent notification of 2006 is of no relevance. Period of limitation - impugned notification time barred - Held that:- the question has to be decided keeping in view the facts of each case and to examine whether the period in question is reasonable or not. In the instant case, it is found that it is only through intelligence collected by DRI, Gandhidharn Regional Unit that it came to be revealed that the assessee had imported crude palm oil but it had no facility in manufacturing soap/Industrial Fatty Acid and was using the said imported crude palm oil for making edible products like refined oil/Vanaspati. At the time of import, the importer only gives declaration. It is the actual use, which event takes place much after the import, from where it can be gathered as to where the import is made for the purpose for which it was done. As soon as the aforesaid information was gathered by DRI, show cause notice was issued. Therefore, the show cause notice had been issued within a reasonable period and it cannot be treated as time barred. - Decided in favour of Revenue
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2016 (8) TMI 396
Warehousing – application to be declared as sick company - inability to clear the warehoused goods – re-export of imported goods – warehouse license extended – demand of duty and interest on warehoused goods – detention of remaining goods for recovery of duty and interest by respondents – auction of goods by respondents – application before respondent to grant opportunity to export goods – Circular dated 14.01.2003. Held that: - if a request is made seeking permission to re-export the goods imported, the same may be allowed, even if the permitted period for bonding has expired and demand notice has been issued or it has been decided to put the goods under auction. However, while doing so, it is necessary to extend the period of warehousing under Section 61 of the Customs Act, to enable the importer to export the goods within the permitted period of warehousing. Appellant is permitted to make a representation to the respondents seeking permission to re-export the goods lying in the balance containers – time limit for clearance granted is one year – appeal allowed – decided in favor of appellant.
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2016 (8) TMI 395
Cross examination of witnesses - Seizure – inspection – SCN – imposition of penalty – request for cross examination of witnesses - Held that: - each case to be decided on the merit of the facts. While adjudicating the show cause notices, if the respondent propose to rely any of those statements, the petitioners should be given fair opportunity, because the show cause notices appear to be solely based upon the statements recorded from those three persons – petitioner to reply to SCN – opportunity of personal hearing if respondent proposes to rely upon the statements – writ petition allowed.
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2016 (8) TMI 394
Cost recovery charges in respect of the Customs Officers deployed at the CFS – waiver – exemption from payment by a specific order or a circular or instructions issued by the Ministry of Finance - conditions stipulated in Clauses 2.8 and 2.10 of the Customs Manual to claim exemption – application recommended and forwarded by 6th respondent – subsequent representations made – no consideration - matter still pending. - Held that: - From a perusal of Clauses 2.8 and 2.10 of the Customs Manual, it is seen that the cost recovery charges to be paid by the ICD/CFS may be waiver subject to fulfillment of conditions laid down. The regulations issued the expression 'may' and it cannot be stated to be mandatory. In any event, an exemption notification has to be strictly construed and a person claiming exemption has to fulfill all parameters and thereafter, it is for the authority to consider the plea of exemption . Direction to the 2nd respondent to consider the petitioner's application/representation dated 29.03.2016 claiming exemption/waiver of cost recovery charges and pass orders on merits and in accordance with law within a period of eight weeks from the date of receipt of a copy of this order – writ petition dismissed.
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2016 (8) TMI 393
Appeal – goods imported/exported as baggage - maintainability - section 129A(1) read with section 129DD – Held that: - section 129DD confers jurisdiction on the Revisionary Authority to hear the appeal of the baggage cases. Also proviso to section 129A states this section not applicable for cases where any goods imported/exported as baggage. Section 123 of the Customs Act has brought gold into the purview of law as notified goods which is restricted and requires the burden of proof to be discharged by the importer of the gold. The gold appearing in that section also covers the gold appearing in Annexure I to Baggage Rules, 1998. Revenue has also brought out that there is a Baggage Regulation made which is Customs Baggage Declaration Regulations, 2013 to deal with baggage cases. Tribunal has no jurisdiction to entertain a baggage matter for which the appellant may choose to exercise its right of revision before the Revisionary Authority – appeal dismissed.
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2016 (8) TMI 378
Refund - maintainability - fee for filing appeal - Held that: - no fee required to be paid for filing the appeal related to refund matter. decided in case Glyph International ltd. Vs. Commissioner of Central Excise & Service Tax 2013 (8) TMI 17 - CESTAT NEW DELHI - appeal admitted - regular hearing.
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Corporate Laws
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2016 (8) TMI 392
Scheme of arrangement between Composite Scheme of Arrangement - Held that:- The observations made by the Regional Director having been addressed and the Official Liquidator having opined that the affairs of the petitioner company have not been conducted in the manner prejudicial to the interest of its members or to the public interest, in the opinion of this court it does not appear to be any impediment to the grant of sanction to the Scheme of Arrangement, in as much as from the material on record and on perusal of the Scheme, the scheme appears to be fair and reasonable and is not violative of any of public policy. The arrangement under the proposed scheme appears to be in the interest of the companies and its members and creditors and, therefore deserves to be sanctioned. Accordingly, the Scheme as proposed by the petitioner companies is hereby sanctioned. The same shall be binding upon all the equity shareholders, preference shareholders, secured creditors, unsecured creditors of the petitioner Companies and all other agencies, departments and authorities of the Central, State and any other local authorities. It is ordered that as required under section 396A of the Companies Act, 1956, the transferor companies shall not dispose of or destroy their books of accounts and other connected papers without the prior consent of the Central Government and shall preserve the same. The petition is disposed of accordingly. So far as the cost to be paid to the Central Government Counsel is concerned, the same is quantified at ₹ 7,500/- per petition. The same may be paid to the Counsel appearing for the Central Government. The Official Liquidator shall be paid cost of ₹ 7,500/- per petition.The Petitioner Companies are further directed to lodge a copy of this order, the schedules of immovable assets pertaining to the Transferor Companies as on the date of this order and the Scheme duly authenticated by the Registrar, High Court of Gujarat, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, if any, on the same within 60 days from the date of the order.
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2016 (8) TMI 391
Restoration of company name struck off - Held that:- A company, or any member or creditor as felt aggrieved by the Company having been struck off the Register, the Court might, on an application made by the Company, member or creditor, before expiry of 20 years from the date of publication in the official Gazette of the notice of striking off, the Court might pass orders and/or directions for placing the Company in the same position as nearly as may be, as if the name of the ‘Company’ had not been struck off, provided the Court was satisfied that the Company was, at the time of striking off, carrying on business, or any operation or otherwise satisfied that it was just that the Company be restored to the Register. In view of the assertion made by the erstwhile directors of the Company, including Viswanath Agarwal, in their affidavits and indemnity bonds in support of their prayer for striking off the name of the Company from the Register, the Court could not have been satisfied that the Company was carrying on business or was in operation. The directors including the applicant under Section 560(6) had asserted to the contrary. The Order dated 13th November, 2014 does not disclose the reasons for arriving at the finding that it was just that the Company be restored to the Register. In any case, an application could have been filed under Section 560(6) only if a Company, or any member or creditor felt aggrieved by the Company having been struck off. The Company having been struck off on the prayer of the Company itself and/or its directors, there can be no question of the Company being aggrieved by the striking off. Viswanath Agarwal who had himself prayed for striking off also could not be aggrieved by the striking off. The appeal is dismissed and the judgment and the order under appeal is affirmed
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Service Tax
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2016 (8) TMI 403
Seeking quash of impugned order - invalid and contrary to settled legal principles - Service Tax Commissionerate on the same transaction proposed to demand service tax, whereas, the first respondent treated the same transaction as trading and an exempted service and has demanded an amount under Rule 6(3) of CENVAT Credit Rules - both Commissionerate are taking contrary stands - Held that:- the petitioner cannot maintain this Writ Petition to quash the impugned order, which is only a Show-Cause Notice. Furthermore, the effect of the earlier proceedings which were initiated pursuant to the audit paras and reply given by the petitioner, the reversal of appropriate input tax done by them and the claim for revision effected by them and the impact of those proceedings on the impugned Show-Cause Notice is also a factual issue. That apart, the action initiated by the petitioner based on audit paras has not attained finality pursuant to the petitioner's claim for refund. A Show-Cause Notice has been issued to the petitioner on 23.09.2014, by the Assistant Commissioner of Central Excise, A B Division, Chennai I Commissionerate. Therefore, such issue cannot be taken to have attained finality and more particularly, when the petitioner has given a reply to the Show-Cause Notice. In such circumstances, this Court would not be justified in interdicting the proceedings at the stage of Show-Cause Notice. Period of limitation - Section 11A(7) of the Central Excise Act - Held that:- in any event if the petitioner submits his reply raising all objections, both, factual and legal, the first respondent shall consider the issue as to whether the impugned proceedings is barred by limitation, as first among the several other issues and thereafter take up the other issues for adjudication and pass an order on all issues. - Decided against the petitioner
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2016 (8) TMI 402
Tour operator service – demand - tourist vehicle – service provided during the period April, 2001 to March, 2006 - amendment in definition of tourist vehicle by Finance Act, 2004 – definition post 2004 taken into consideration – Held that: - The issue for the period after 05.02.2004 is to be decided. The case law relied upon by learned departmental representative is before the amendment of definition of tour operator in the Finance Act, 2004. Therefore, the said case law does not squarely cover the period after 05.02.2004. To provide tour operator service, the vehicle should necessarily be tourist vehicles - No evidence found that the vehicles used by the respondents were the tourist vehicles – appeal dismissed – decided against Revenue.
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Central Excise
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2016 (8) TMI 390
Whether the process of crushing of coal would amount to manufacturing activity - Held that:- by considering the language of the section, the activity of crushing the coal would not be covered in the definition of ‘manufacture’. All that the applicant would be doing, would be crushing the coal of different size. However, it is well understood that even after crushing the coal, the coal will not lose its character nor it will be a new product. Therefore, the activity could not be covered as a ‘manufacturing activity’ nor the crushed coal could be manufactured product. - Decided in favour of assessee
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2016 (8) TMI 389
Liability of duty - processing of secondary raw materials (steel scrap of difference and variable composition) into blended steel scrap - Held that:- the input is unprocessed steel scrap and output is blended steel scrap. The blended steel scrap is produced with required chemical composition by mixing various Low manganese and High manganese scraps and is fit to be used as raw material in the manufacture of various products of steel. Further, blended steel scrap is not put to the same use to which the unprocessed steel scrap is put and vice versa. Therefore, input i.e. unprocessed steel scrap is distinct from output i.e. blended steel scrap. Though both (input and output) would fall under the category of scrap, but are completely different types of scraps. Further, processing of unprocessed stainless steel scrap into blended stainless steel scrap would result into input (unprocessed stainless steel) losing its identity and new commodity i.e. blended stainless steel scrap coming in existence. Therefore, when said unprocessed steel scrap undergoes above process, a new product saleable in the market, which is having a distinct identity and use, comes into existence and is known in the commercial market by a different name. Further, blended steel scrap possesses higher utility than the unprocessed scrap steel. Therefore, applicant’s contention that the production of blended steel scrap by processing unprocessed scrap steel amounts to manufacture under the Central Excise Act, 1944, is correct followed by the judgment of AAR in the case of ELG India Private Limited Vs. CCE, Chandigarh [2013 (8) TMI 537 - AUTHORITY FOR ADVANCE RULINGS]. Classification - “blended metal scrap” - whether to be classifiable under Chapter 72044900 of the CETA, 1985 - Held that:- classification of “blended metal scrap” under Chapter 72044900 of the Central Excise Tariff Act, 1985 has rightly not been opposed by the Revenue. It is noticed that blended metal scrap is covered under Chapter Head No. 72044900 in the First Schedule – “Others – Ferrous waste and scrap” under the Central Excise Tariff Act, 1985.
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2016 (8) TMI 388
Whether the activity of loading of business software in the Nucleus Device by the applicant constitutes manufacture under the Central Excise Law - Held that:- we are in agreement with the applicant that up-loading of software into the Nucleus Device, which is already embedded with the basic input output system to perform primary functions will not result in new and different article having a distinct name, character or use. Further, the original commodity i e, Nucleus Devise proposed to be imported, will not cease to exist on up-loading of software into the Nucleus Device and would also continue to serve its functions. We are also in agreement with the applicant that Chapter Note 10 or any other Note to Chapter 85 is not applicable in the present case to consider the activity of up-loading of business software in the Nucleus Device as deemed manufacture. If the intention of the legislature was to treat up-loading of software into devices like Nucleus Device, as manufacture, Note(s) to Chapter 85 would have included goods of heading 8517, deeming such activity to be manufacture. Therefore, the activity of loading of business software in the Nucleus Device by the applicant will not constitute manufacture under the Central Excise Law. - Decided in favour of applicant
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2016 (8) TMI 387
Reversal of cenvat credit - Rule 6(3) read with Rule 6(3A) of CENVAT Credit Rules (CCR), 2004 - clearance of two cranes at nil rate of duty - availed benefit of Notification No.33/2005-C.E. dated 8.9.2005 as amended vide Notification No.38/2005-C.E dated 30.12.2005 - not maintained separate books of accounts and also did not exercise the option as provided in Rule 6(3) read with Rule 6(3A) of the CCR, 2004. Held that:- admittedly there is no intimation given by the appellant informing the exercise of his option. The argument of the Department is that when the appellant has not intimated his option in writing then the appellant is bound to pay the duty amount calculating under the first option. According to me, this argument is devoid of merit, because the said Rule does not say anywhere that on failure to intimate, the manufacturer/service provider would lose his right to avail second option of reversing the proportionate credit. Sub-Rule (3A) is only a procedure contemplated for application of Rule 6(3). Consequently, the argument of Revenue is that the appellants exercising option is mandatory and on its failure, the appellant has no other option but to accept and apply Rule 6(3)(i) and make payment of 5%/10% of the sale price of the exempted goods or exempted services is not acceptable, because the Rule does not lay down any such restriction and this has been held in various judgments. It has been held in one judgment that the condition in Rule 6(3A) to intimate the Department is only a procedural one and that such procedural lapse is condonable and denial of substantive right on such procedural failure is unjustified. Therefore, the demand raised by the Revenue is not legal and proper. Moreover, the demand raised by the Revenue is also hit by limitation as the appellant reversed the pro-rata credit with interest on 31.7.2010 itself and communicated to the Department whereas the show-cause was issued only on 13.3.2012 which is beyond the period of one year and the allegation of the Department regarding suppression of fact is also not tenable because the appellant has disclosed these facts in their periodical ER1 returns filed by them. Therefore, the impugned order is not sustainable on merit as well as on limitation and therefore, set aside. - Decided in favour of assessee
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2016 (8) TMI 386
Cenvat credit - Recovery - wrong availment on rectified spirit - Whether ethyl alcohol and rectified spirit are two different commodities or one and the same commodity - Held that:- the ISI specifications had divided ethyl alcohol into several kinds of alcohol. Beverages and industrial alcohols were clearly and differently treated. Rectified spirit for industrial process was defined as spirit purified by distillation having a strength of not less than 95% by volume of ethyl alcohol. Therefore, it is very clear from the observation of Hon'ble Supreme Court that ethyl alcohol and rectification spirit are one and the same. Hence,the rectified spirit which is not used for human consumption is nothing but ethyl alcohol and is finding place in tariff item no. 22072000. - Decided in favour of appellant with consequential relief
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2016 (8) TMI 385
Refund - Rule 5 of Cenvat Credit Rules 2004 read with Notification No. 4&5/2006-CE(NT) dated 14.3.200 - Export of goods partly under claim of rebate/partly under bond or UT-1 - Held that:- in view of the clear provision of Rule 5 read with the Notification issued thereunder, the refund is admissible only on the goods exported under bond and to the extent of duty paid on the input which is used in the export goods. In the show cause notice as well as in the adjudication order it is clearly mentioned that 85% to 90% of the exports were made under bond/undertaking and under claim of rebate. However, the adjudicating authority as well as the Commissioner (Appeals) rejected the claim treating the entire export under claim of rebate, which is not correct. As regard the goods exported under bond, the appellant is entitled for the refund, however the refund related to the export made under claim of rebate is not admissible. - Appeal disposed of by way of remand
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2016 (8) TMI 384
Whether the Tribunal failed to appreciate the law that the omission of Section 3A of the Central Excise Act, 1944 is an Amendment to the Central Excise Act, 1944 and is saved by Section 6A of the General Clauses Act, 1897 - Held that:- by applying the decision of Hon'ble Supreme Court in the case of M/s.Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise & Anr. [2015 (11) TMI 1172 - SUPREME COURT], upholding compounded levy scheme, striking down the notification as invalid and inoperative, should be treated as a nullity. Therefore, the answer is affirmative and requires to be adjudicated afresh, by the Tribunal. - Matter remanded back
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2016 (8) TMI 383
Reversal of Cenvat credit - Contravention of Rule 6(1) & 6(2) of CENVAT Credit Rules 2004 - clearance of upholstery furniture to SEZ developer after availing credit on inputs and without payment of duty, in the nature of export - non-maintainance of separate accounts of receipt, consumption and inventory of inputs - Held that:- in the light of the decisions by the Tribunal and the Hon’ble High Court of A.P in the case of Sujana Metal Products Ltd [2015 (3) TMI 781 - ANDHRA PRADESH HIGH COURT] and also the decisions of Hon’ble Chhattisgarh High Court in the case of UOI Vs Steel Authority of India Ltd [2013 (5) TMI 460 - CHATTISGARH HIGH COURT] and Hon’ble High Court of Karnataka in the case of CCE Vs Fosroc Chemicals (India) Pvt Ltd [2014 (9) TMI 633 - KARNATAKA HIGH COURT], the amendment to Rule 6(6) to include SEZ developer with effect from 31.12.2008 has retrospective effect from 2004 onwards and therefore no reversal of credit in respect of inputs used in the manufacture of goods supplied to SEZ developer is required under law. - Decided in favour of appellant
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2016 (8) TMI 382
Validity of impugned order - Violation of principle of natural justice - Order passed in the absence of appellants - absence of relied upon and resumed documents (RUD) - Held that:- the impugned order stand passed in the absence of the appellants as such without observing as to who is at fault, the assessee or the Revenue, we deem it fit to set aside the impugned order and remand all the matters to the original Adjudicating Authority for de-novo consideration. Needless to say that the appellant would be provided with the production/dispatch register, delivery challan and delivery advices. - Appeal disposed of by way of remand
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2016 (8) TMI 381
Cenvat credit - Whether the appellants are eligible for taking Cenvat credit of 100% on Capital goods in the first year itself - Held that:- since the appellants have taken 100% Cenvat credit in the first year itself, whereas in terms of Rule 4(2) of Cenvat Credit Rules, 2004, they were required to avail 50% of the credit in the first year and balance 50% in the subsequent financial year (s). However, the fact that they availed the entire 100% credit in the first year will not make balance 50% as non-available to the appellant. In the case law relied upon by the Ld. Advocate, CCE Vs. Indian Oil Corporation Ltd., the Hon’ble Gujarat High Court has dealt the issue in favour of the appellant assessee. It interpreted Rule 4(2) of CCR, 2004, that it is not necessary that the capital goods be put to actual use for the manufacture of final product, only such goods should be in possession and use of the manufacturer of a final product. Rule envisages availability of Cenvat credit to a manufacturer on receipt of capital goods once the goods are received and as long as such goods are in possession and use of the manufacturer of final product. Appeal allowed by way of remand
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2016 (8) TMI 380
Valuation - Clearance of goods on job work basis - no evidence provided that the goods cleared on job work basis are not the same as the goods cleared otherwise - Appellant paid duty in terms of the decision of Hon'ble Apex Court in the case of Ujagar Prints Ltd. Vs. Union of India & others [1989 (1) TMI 124 - SUPREME COURT OF INDIA] - Held that:- valuation is not an exact science. Some amount of guess work exists in valuation. Therefore, different methods are prescribed by Valuation Rules. These rules are prescribed in order to find out the actual realization which realization constitutes the basis of assessable value. At the same time one must keep in mind that different methods prescribed have to converge to a common valuation. Thus the correct method of ascertainment of value would be the method prescribed by the Hon'ble Apex Court in the case of Ujagar Prints Ltd. In view of the above the assessment done by the appellants is correct and as per law. - Decided in favour of assessee
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2016 (8) TMI 379
Existence of two SCNs - Invokation of extended period of limitation - Demand of differential duty - non-inclusion of warranty charges in the assessable value of goods - Held that:- it is pertinent to see that the Two SCNs cannot be issued on the same issue and by invoking the extended period in both SCNs and second SCN becomes infructuous. There is no provision to confirm the demand in both SCNs. He cannot rely on both the SCNs one for confirming the demand and the other SCN for imposing personal penalties. - Appeal allowed by way of remand
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CST, VAT & Sales Tax
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2016 (8) TMI 401
Order of assessment – Tamil Nadu Value Added Tax Act, 2006 - industrial valves – iron and steel castings – local sale, inter-state sale and export – input tax credit – preference of set off – section 18 of TNVAT Act - Held that: - when there is no specific Rule providing the manner in which the petitioner had to be assessed to tax, which is not open to the Assessing Authority to contend that the particular mode should be adopted or that the procedure adopted by the assessee is not rational and that the Assessing Authority cannot insist on the assessee adopting a particular method which would deny them the benefit of utilization of the balance available tax deferment in its entirety, and instead of paying tax. No procedure has been prescribed with regard to the method of preference of Set-off of input tax credit. Therefore, the procedure adopted is favorable to the assessee, more particularly, in the light of the object behind the VAT regime – matter remanded – appeal set aside.
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2016 (8) TMI 400
Sandalwood – restricted item - Penultimate sale - export of sandal wood flakes, chips/dust - Section 5(3) of the CST Act - whether an assessee (local manufacturer) is eligible to get exemption under sub-section (3) of Section 5 of the Central Sales Tax Act, 1956, if the penultimate sale effected in favour of the exporter is inextricably connected with the export of goods outside the territory of India. Held that: - The Apex Court made it clear that the test to be applied is, to see whether there is an inseverable link between the local sale or purchase and export and if it is found that it is inextricably linked together, then a claim under Section 5(3) for exemption from State sales tax would be justified and under such circumstance, the “same goods theory” will be having no application - entirely different commodities having different uses, which could never be regarded as the same goods, to have extended the benefit of Section 5(3) of the CST Act – manufacturing process involved for conversion of sandalwood (ineligible for export) to sandalwood flakes, chips, dust (eligible for export) – benefit of exemption not available. Burden of proof – Held that: - The burden is entirely on the assessee to establish the link in transactions relating to sale or purchase of goods and the export; that the penultimate sale is inextricably connected with the export of goods by the exporter to the foreign buyer. The appellants have not substantiated the position to tilt the balance in their favour. Appeal dismissed – decided against appellant.
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2016 (8) TMI 399
Writ of prohibition – reassessment – independence of judgement – Held that: - the Assessing Officer cannot be solely guided by the proposals given by the Inspecting Officers, but has to independently apply his mind and discharge duties enshrined on the Assessing Officer under the provisions of the Act, otherwise it would amount to abdication of the statutory duties – reasonable opportunity of being heard to the petitioner – writ petition disposed off – matter remanded.
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2016 (8) TMI 398
Input Tax Credit - Tribunal rejecting the claim of Input Tax Credit merely on the grounds of technicalities - Held that:- In the case in hand, the selling dealer is a manufacturing unit covered under the provisions of the 1944 Act. For sale of the goods to the appellant, it had issued Invoice-cum-Excise Gate Pass. This is so provided under the Central Excise Rules, 1944. It contains all material particulars, such as name, address and registration number of the selling and buying dealer, printed invoice number, date, description, quantity and rate of goods, excise duty charged, sale tax charged along with rate thereof, the date and time of removal of goods from the factory, as is specifically required under the 1944 Act and the Rules. The only discrepancy, on the basis of which input tax credit is sought to be denied to the appellant is that the invoice did not contain the words “Input Tax Credit is available to a person against this copy”. The opinion expressed by the authorities is that it is a mandatory condition, which cannot be ignored. Mere non-mentioning thereof is fatal. In our view, the opinion expressed is contrary to the law laid down by this court as these type of technical defects in the invoices cannot be fatal for grant of input tax credit to the claimant. The claim of the appellant had been rejected only on the ground that the invoice did not contain the words “Input Tax Credit is available to a person against this copy”. The input tax credit available to a person and the genuineness of the transaction otherwise had not been examined by the authorities to record a finding that the tax, credit of which was being sought by the appellant, had in fact been paid by him to the selling dealer at the time of purchase of goods. Accordingly, question is answered in negative while holding that the Tribunal was not justified in rejecting the claim of input tax credit merely on technicalities, when the dealer was able to show that the tax had been paid to the selling dealer and duly deposited with the State. Provisions of Rule 54 of the Rules are not mandatory, in case the claimant/dealer is able to prove from other evidence that the transaction and the claim is genuine.
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