Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 12, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
TMI Short Notes
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Income Tax:
Example illustrating the Rule of Residence for an Individual for the Assessment year 2015-16
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Income Tax:
Example:-During the previous year ending 31st March, 2013, X, a salaried employee received ₹ 10,67,000 as basic salary and ₹ 20,000 as arrears of bonus of the financial year 1992-93. During the previous year 1992-93, X has received ₹ 50,000 as salary. X deposits ₹ 1,500 (during 1992-93) and ₹ 10,000 (during 2012-13) in PPF.
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Income Tax:
Example:-The employer sells the following assets to the employees on 1st January 2015.
Car to Z for 2,10,000 (Cost: 6,96,000)
Computer to A for 24,270 (Cost: 1,17,000)
Fridge to B for 1,000 (Cost: 40,000)
All assets were purchased and put to use on 15th May 2012
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Income Tax:
Example:-. On 15th October 2014, the company gives its music system to Y for domestic use. Ownership is not transferred. Cost of the music system (in 2003) to the employer is ₹ 15,000
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Income Tax:
Example:-X owns car (1400cc). He uses it partly for official purposes and partly for private purposes. During the previous year 2014-15, he incurs a sum of ₹ 40,000 on running and maintenance of car. Besides, he has engaged a driver (salary ₹ 24,000). The employer reimburses the entire expenditure of ₹ 64,000. Log book of the car is not maintained.
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Income Tax:
Example:-X is employed by a company. He has been provided a car (1200cc) owned by employer, cost of the car is ₹ 4,26,000. The expenditure incurred by the company on maintenance of the car are – petrol: ₹ 46,000, driver: ₹ 36,000 and maintenance: ₹ 10,000. The car can be used by X partly for official purposes partly for personal purposes. A sum of ₹ 12,000 is recovered from X.
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Validity of Section 234E challenged - Fee for default in furnishing TDS return/statements - it cannot be held that Section 234E of the Income Tax Act, 1961 suffers from any vices for being declared to be ultra vires of the Constitution. - HC
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TDS liability on "wheeling charges" - whether it did not amount to "fees for technical services" within the meaning of Section 194J? - whether there is any 'rendering of any managerial, technical or consultancy services - Held NO - HC
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Bogus purchases - Merely because the assessee was being prosecuted for keeping the sugar beyond the permissible limit and was trading in the same by sale and purchase on as is where is basis and as per his own case on credit could not entitle the Assessing Officer to add the value of the sugar to his undisclosed income which was done on the basis of conjectures. - HC
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Entitlement to the benefit u/s 10B - the profit as per the tax audit report for the entire business activity is 6.14%, when the profit from actual manufacturing activity was 20.70%. - Adoption of turnover method to allocate profit cannot in the present facts be said to be perverse, in any manner. - HC
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Assessment completed under Section 143(3) r/w. Section 153A - rightly, the assessing officer rejected the belated retraction and proceeded to complete the assessment relying on the document seized and the two statements of the assessee himself. - HC
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Disallowance of exemption under S.11 - receipt of capitation fee - capitation fee having been received by Shri P.Lakshminarayana Reddy and not by the assessee society, the addition on account of capitation fee can be made only in the hands of Shri P.Lakshminarayana Reddy and not in the hands of the assessee society. - AT
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Loss incurred on account of forex derivative contracts - Revenue directed to set off of the losses incurred by the assessee on account of forex derivatives contracts against the business income of the assessee - AT
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Addition on net profit figure - In the case on hand the books of accounts have not been rejected. Under those circumstances substituting the book results with a random figures obtained from the document found i.e. P&L account in the CPU is incorrect. - AT
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Year of taxability of capital gains - taking possession alone in to consideration for levy of capital gains ignoring the date of agreement and terms of agreement is not according to law - AT
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TDS u/s 194J OR u/s 192 - remuneration to consultants - salary or professional fee - all technocrats and consultants are more than 60 years of age and are in post retirement/superannuation life cycle - then cannot be expected to work as regular employees unless there is an exceptional case - AT
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Determination of tax liability - It is a settled position of law that the Revenue cannot insist on recovering the tax on protective assessment of income - AT
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Unexplained deposits in the bank - sale of land - Affidavit of assessee is a self serving document, therefore, on the basis of affidavit, the additions made by the AO cannot be deleted - AT
Customs
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Refund of amount deposited during Investigation – Delay of 17 years in Adjudication – Commissionerate learnt about the subject show cause notice only on receipt of copy of this writ petition - show cause notice hereby quashed and respondents prohibited from passing any adjudication order in furtherance thereof - HC
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Classification of goods – Duty Exemption – Whether new seats that were imported for replacing existing seats were said to be for servicing, repair or maintenance of aircraft under Notification No. 12/2012-Cus - Held Yes - AAR
Central Excise
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Valuation of goods - transportation charges cannot be added to the assessable value as the same are charged by the appellant under separate contracts - AT
Case Laws:
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Income Tax
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2015 (8) TMI 379
Validity of Section 234E challenged - Fee for default in furnishing TDS return/statements - Whether it is ultra vires of Constitution of India and/or to declare by an appropriate writ that under the newly inserted Section 234E of the Act, fee could be levied only after affording the petitioners a reasonable opportunity and for consequential relief of quashing the intimations whereunder fee has been levied under Section 234E for late filing of TDS statements? - whether levy of fee under Section 234E for default in furnishing the statements is in the guise of penalty and there is no nexus to the services rendered by the department? - Held that:- A bare perusal of Section 244A of the Act would indicate that where refund of any amount becomes due to the assessee under the Act, such assessee would be entitled to receive in addition to the amount of refund of tax, simple interest at the rate of one-half percent for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which refund is granted as indicated in sub-section(1)(a) of the Act. A bare perusal of Section 271H which came to be inserted by Finance Act, 2012 with effect from 01.07.2012 would indicate it provides for levy of penalty for failure to furnish statements of tax deducted at source under Section 200(3) or under proviso to Section 206C or for furnishing incorrect information. As per sub-section (2), penalty will be not less than 10,000/- and it may extend upto '1,00,000/-. Section 273B indicates that no penalty shall be imposable on the person or the assessee for any failure referred to in the said provision if he proves that there was reasonable cause for such failure. Section 273B has also been amended by adding Section 271H and as already noticed under Section 271H(2)(k) penalty can be imposed for failure to furnish statement within prescribed time. However, by incorporating Section 271H in Section 273B, it would indicate that penalty need not be imposed under Section 271H if reasonable cause is shown. The contention of the assessee is that there is no similar provision in the impugned provision namely Section 234E and as such it takes away the valuable right of the assessee. The said contention does not hold water inasmuch as Section 119(2)(a) enables the Board to issue general or special orders in respect of any class of incomes or class of cases from time to time, which includes sub-section(1A) of Section 201 and as such no hardship would be caused to the assessees. As such contention raised in this regard cannot be accepted. The fee sought to be levied under Section 234E of the Income Tax Act, 1961 is not in the guise of a tax that is sought to be levied on the deductor. We also do not find the provisions of Section 234E as being onerous on the ground that the Section does not empower the Assessing Officer to condone the delay in late filing of the TDS return/statements, or that no appeal is provided for from an arbitrary order passed under Section 234E. It must be noted that a right of appeal is not a matter of right but is a creature of the statute, and if the Legislature deems it fit not to provide a remedy of appeal, so be it. Even in such a scenario it is not as if the aggrieved party is left remediless. Such aggrieved person can always approach this Court in its extra ordinary equitable jurisdiction under Article 226/227 of the Constitution of India, as the case may be. We therefore cannot agree with the argument of the Petitioners that simply because no remedy of appeal is provided for, the provisions of Section 234E are onerous. Similarly, on the same parity of reasoning, we find the argument regarding condonation of delay also to be wholly without any merit. See Mr Rashmikant Kundalia and another Versus Union of India and others [2015 (2) TMI 412 - BOMBAY HIGH COURT] . Thus, viewed from any angle it cannot be held that Section 234E of the Income Tax Act, 1961 suffers from any vices for being declared to be ultra vires of the Constitution. - Decided against assessee.
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2015 (8) TMI 378
TDS liability on "wheeling charges" - whether it did not amount to "fees for technical services" within the meaning of Section 194J? - whether there is any 'rendering of any managerial, technical or consultancy services (including the provision of services or technical or other personnel)' by PGCIL to DTL by virtue of the BPTA within the meaning of Section 194 J (1) read with Explanation 2 of Clause (vii) of sub-section (1) of Section 9 of the Act? - Held that:- Although the wheeling charges may be fixed by the CERC, that by itself is not a determinative factor. In the present case, DTL is seeking to characterize the wheeling charges as payment for use of PGCIL's equipment within the meaning of Section 194C of the Act. Interestingly, the CIT (A) in its order has accepted the plea that the job of DTL is to transport the electricity and it is therefore like carriage of goods. Despite accepting the above plea, the CIT (A) has simply concurred with the AO only because of "absence of sufficient legal precedent on the subject". Once it is accepted that all what PGCIL does is to transmit the electricity to DTL through the network without any human intervention, it cannot be characterized as a provision of technical services and sought to be brought within the fold of Section 194 J of the Act. By virtue of the BPTA agreement between DTL and PGCIL there is transportation of the electricity from PGCIL to DTL, through the equipment and network required statutorily to be maintained by PGCIL through its technical personnel using technical expertise. This, however, does not result in PGCIL providing technical services to DTL. Therefore the wheeling charges paid by DTL to PGCIL for such transportation of electricity cannot be characterized as fee for technical service. The ultimate conclusion of the ITAT holding that the "wheeling charges" paid by the Assessee, in the facts of this case, was deductable as it did not amount to "fees for technical services" within the meaning of Section 194J of the Act is therefore not erroneous. - Decided in favour of the Assessee.
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2015 (8) TMI 377
Addition under Section 43 (B) on account of delayed contribution of superannuation fund - CIT(A) deleted addition affirmed by the ITAT - Held that:- On account of the superannuation fund, the Court has been shown a copy of the Employees' Superannuation Scheme of the Respondent-Assessee. Clause 6 of Section-II is titled “Contributions and Annuities”. Clause (a) envisages the payment of contribution by the employer and not by the employee. Clause (d) clearly states that “the employer shall be liable to pay the total contributions under the Scheme and shall pay the entire contributions to the Trustees in one or more instalments as the case may be.” The remaining clauses of Section-II also envisage payment of expenses of scheme by only the employer. In other words, there is no question of employee's contribution under the Scheme in question. Consequently, the Court finds that there was no occasion to apply Section 43B of the Act to disallow the delayed contribution by the Assessee to the superannuation fund for the months of February and March 2001. The order of the CIT (A), as affirmed by the ITAT, does not call for any interference. The Court declines to frame a question in that regard. Expenditure incurred on purchase of machinery from foreign countries - revenue v/s capital expenditure - Disallowance of the expenditure on the purchase of Banbury mixers as “repair and maintenance” - Held that:- The said expenditure on the import of the two Banbury mixers is required to be treated as capital expenditure. It is further held that the ITAT and the CIT (A) were right in deleting the disallowance of the expenditure on the reduction gear forming part of the 3 Roll calendar to the extent of ₹ 41,23,890 as from the invoice produced by the Assessee, it is clear that the said imported item was part of the 3 roll calendar. Notional interest sought to be added by the AO on the ground that an interest free loan was given by the Assessee to its sister concern, Modi Stone Limited -ITAT deleted addition - Held that:- The sum of ₹ 2 crores was advanced to Modi Stone Limited on account of commercial expediency as the said company was declared sick by the BIFR by its order dated 15th April 1998. The Court finds that the decision of the ITAT on the above aspect is turned purely on facts. The view taken by the ITAT on facts was a plausible one. Consequently, the Court finds that no substantial question of law arises for determination as far as the said issue is concerned.
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2015 (8) TMI 376
Reopening of assessment - conversion of a portion of the interest into shares - Deduction claimed under section 43B - Held that:- When pursuant to a settlement the creditor agrees to convert a portion of interest into shares, it must be treated as an extinguishment of liability to pay interest to that extent. In essence there will be no further outstanding interest to that extent. Consequently, the situation where an interest payable on a loan is converted into shares in the name of the lender/creditor is different from the situation envisaged in Explanation 3C to Section 43B of the Act viz., conversion of interest into “a loan or borrowing”. In the latter instance, the liability continues, although in a different form. However, where the interest or a part thereof is converted into equity shares, the said interest amount for which the conversion is taking place is no longer a liability. The Court is of the view that the plea of the Assessee, which was accepted by the CIT (A) and the ITAT, that the said conversion of a portion of interest into shares should be taken to be “actual payment” within the meaning of Section 43B of the Act, merits acceptance. In any event, on the facts of the case discussed above, there was no justification in seeking to reopen the assessment under Section 147 of the Act on a mere change of opinion. - Decided in favour of assessee.
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2015 (8) TMI 375
Bogus purchases - ITAT deleted the addition concluding that the sugar purchased had been duly recorded in the books of accounts, which are duly audited; there is nothing on record to show that the purchases had been made outside the regular books of accounts - Held that:- Once the delivery of the sugar was taken over on as is where is basis at the godowns itself by taking the same on rent with the consent of the landlord and it has been noticed that the Manager's statement was recorded twice and he got confused as to the factum whether the same was lying vacant or in possession for the purpose other than specified which was wrongly interpreted by the Assessing Officer. It was rightly noticed that a letter had been written on 22.9.2009 by the assessee that the sugar had already been sold to various parties and a complete list of the parties had been given to the Deputy Commissioner/Deputy Magistrate on 1.10.2009. Once the said parties had confirmed the purchase which had been duly supported by the bills and they were regular traders and were unrelated to each other, therefore, the allegation made was held to be without any basis. The said findings pertaining to the goods lying at the spot and whether the purchases had been made on credit basis and thereafter sold are all questions of facts which are now being raised, which have been extensively dealt with in detail by the Tribunal. The findings have been recorded that the sellers and purchasers are all dealing in sugar and the purchases had been accounted for in the regular books of accounts maintained, duly audited and thus, there is nothing to show that the quantity of sugar had been purchased and sold outside the books. Merely because the assessee was being prosecuted for keeping the sugar beyond the permissible limit and was trading in the same by sale and purchase on as is where is basis and as per his own case on credit could not entitle the Assessing Officer to add the value of the sugar to his undisclosed income which was done on the basis of conjectures. The said finding has been rightly reversed by the Tribunal after going into the factual matrix of the case which in the facts and circumstances cannot be held to be perverse and no substantial question of law arises for consideration in our opinion. - Decided against revenue.
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2015 (8) TMI 374
Proceedings u/s 154 - AO disallowed the brought forward of unabsorbed depreciation allowance - CIT(A) directed the AO to allow the assessee's claim of adjusting unabsorbed depreciation for the AY 1999-2000 from the house property income - Held that:- Any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001. And once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. Thus, the finding of the Ld. CIT(A) is based on the decision of Hon'ble Gujarat High Court in the case of General Motors India P. Ltd (2012 (8) TMI 714 - GUJARAT HIGH COURT), and no contrary decision of any other High Court has been brought to our notice, hence such a finding of the CIT(A) is upheld. Further, as held by the High Court the unabsorbed depreciation becomes the current year depreciation, which can very well be set off against any source under any of the other heads of income during that year. - Decided against revenue. Disallowance of business loss - CIT(A) deleted disallowance - Held that:- As the provisions of the Act the assessee can set of business loss within eight years. As this business loss is within eight years, the appellant is eligible for the set off of the business loss - no infirmity in such an order of Ld. CIT(A). Even from the computation of income it is seen that under the head "profits and gains of business or profession", assessee has claimed brought forward business losses of AY 2004-05. The ground raised by the revenue that it has been claimed against "Income from House Property" is misconceived. - Decided against revenue.
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2015 (8) TMI 373
Assessment of undisclosed income - addition on the basis of noting on the loose papers recovered during search or on account of a statement recorded of the Respondent Assessee during the course of search - ITAT deleted addition - Held that:- There is no retraction as such by the company of its letter dated 1st September 2006 or of any of the other statements made subsequently. Further, the statement made by the Respondent Assessee on 12th September 2006 in response to Question No.3 which required him to give the details of the additional income of ₹ 7 crores was to the effect the said additional income was generated during the block period from undisclosed/or unaccounted dealings in various property transactions and that "the said income of ₹ 7 crores has been earned by me and Shri Mahesh Kumar Gupta (Director-Capital Power Systems Ltd.). The Respondent Assessee then proceeded to give the bifurcation of said income cannot be said to be a categorical admission by the Respondent Assessee that the above income had been earned by him in his individual capacity. The cumulative effect of the letter dated 1st September, 2006 and both the statements rendered them unreliable. There was no other corroborative material. In the circumstances, the course adopted by the CIT (A), and concurred with by the ITAT, to determine the undisclosed income on the basis of loose papers found during the search does not appear to be erroneous. - Decided against revenue.
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2015 (8) TMI 372
Disallowance of business expenditure claimed in respect of 'keyman insurance policy' - ITAT deleted the addition - AO by the order treated the entire sum of ₹ 2.10 crores as business income in the hands of the Assessee. He also treated the sum of ₹ 50 lakhs as capital gains - Held that:- The AO by the order dated 24th December 2009 treated the entire sum of ₹ 2.10 crores as business income in the hands of the Assessee. He also treated the sum of ₹ 50 lakhs as capital gains. - Decided against revenue.
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2015 (8) TMI 371
Entitlement to the benefit under Section 10B - Tribunal concluded that the order of the Assessing Officer needed to be restored to compute the eligible profit for the purpose of Section 10B of the Act on the basis of the ratio of turnover of sales - Held that:- Assessee had originally claimed benefit of Section 10B of the Act in its return in respect of its entire profit i.e. both trading as well as manufacturing activities. The Assessing Officer had called upon the appellant to furnish market rate of the purchases from its Associate Enterprises so as to determine whether or not the purchase price was reasonable. The appellant did not furnish the necessary information. However, it is also noticed by the Tribunal that the documents indicate that the profit of the appellant as per the tax audit report for the entire business activity is 6.14%, when the profit from actual manufacturing activity was 20.70%. It is a settled position that the claimant to a benefit of an exemption must establish its case for the exemption and the quantum of exemption it seeks by leading necessary evidence before the authorities. This the appellant failed to do. Reliance upon the decision of the Karnataka High Court in the case of Fusion Software Engg. (P) Ltd. (2011 (11) TMI 448 - KARNATAKA HIGH COURT), to our mind, is misplaced, as in the facts of that case, the exemption under Section 10A of the Act was denied in its entirety to the assessee therein merely because it had not maintained separate books of accounts. In the facts of the present case, exemption under Section 10B of the Act is not being denied to the assessee in its entirety. However, the profits earned are being allocated by application of turnover method i.e. percentage of total sales. It is indeed one of the methods of determining the profits to be allocated between two or more profit centres. Adoption of turnover method to allocate profit cannot in the present facts be said to be perverse, in any manner. - Decided against assesssee.
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2015 (8) TMI 370
Payment of the employees’ contribution towards Provident Fund and ESI beyond the due date - correctness of the order of the ITAT sustaining the decision of the CIT(A) that while computing the deduction under Section 80HHC amount of ₹ 58,41,674 should not be excluded from the eligible profits - Held that:- The net tax effect in relation to the two issues raised by the Revenue is only ₹ 4,81,080 which is far less than monetary limit set by the Central Board Direct Taxes, New Delhi by its Instruction No. 5/2014 dated 10th July 2014 for the filing of appeals by the Revenue.he Court is satisfied that in terms of the Instruction No.5/2014 of the CBDT, the Revenue ought not to have preferred the present appeal. - Decided against revenue.
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2015 (8) TMI 369
Disallowance of contribution to medical benefit scheme for the benefit of its retired employees - whether in the light of Section 40A(9) the Tribunal could not have allowed deduction under Section 37 of the Act? - Held that:- Section 40A which starts with the non obstante clause. Prior to its amendment by Finance Act 2011, as per sub section (9) introduced by Finance Act, 1984 with effect from 1.4.1980, deduction of only payments for the purposes and the extent provided was permitted. Assessee does not have a case that the contribution made by it to the pension fund is payment which is permitted under Section 36. If that be so, in view of Section 40A(9), the payment made by the assessee could not have been allowed to be deducted and its disallowance by the Assessing Officer, is perfectly in line with the statutory provisions. We may also add that since sub section 9 was added to Section 40A by Finance Act, 1984, the judgment of the Madras High Court in T.Stanes& Company Limited (1974 (8) TMI 14 - MADRAS High Court ) rendered in the context of assessment years 1959-1960 to 1964-1965 has no relevance in so far as the case of the assessee is concerned. - Decided in favour of revenue.
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2015 (8) TMI 368
Assessment completed under Section 143(3) r/w. Section 153A - additions relating to the difference in considerations paid on purchase of properties - Held that:- Admittedly the additions were made by the assessing officer placing reliance on the document seized (SJ-III) during the course of the search of another assessee by name Babu John and also the sworn statements given by the assessee on 24.10.2008 and 30.10.2008. In the statement dated 24.10.2008, the assessee had accepted the genuineness of the entries made in the above referred document. In the statement dated 30.10.2008, he had reiterated and confirmed the earlier statement of 24.10.2008. However it was only during the assessment proceedings that he gave a letter dated 15.02.2010 retracting from the earlier two statements. However, rightly, the assessing officer rejected the belated retraction and proceeded to complete the assessment relying on the document seized and the two statements of the assessee himself. Therefore, these additions made relying on this document and the statements, cannot be said to be illegal. The Tribunal's order shows that despite the above, the Tribunal has set aside some of the additions and remitted the matter to the assessing officer for re-consideration. In so far as the additions which were confirmed by the Tribunal are concerned, they are fully substantiated by the document and the statements relied on by the Department. We do not find any illegality nor do we find any question of law arising in these appeals for consideration. - Decided against assessee.
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2015 (8) TMI 367
Disallowance of exemption under S.11 - receipt of capitation fee - According to AO the charitable activity/educational institution was used by the assessee as an apparatus for selling education, and therefore, the activity of assessee society had no element of charity - CIT(A) allowed claim - assessee in the present case is a society, which is duly registered under S.12A - Held that:- Having regard to all the facts and circumstances of the case and keeping in view the decision Sree Educational Society (2015 (2) TMI 571 - ITAT HYDERABAD) we find ourselves in agreement with the learned CIT(A) that the capitation fee having been received by Shri P.Lakshminarayana Reddy and not by the assessee society, the addition on account of capitation fee can be made only in the hands of Shri P.Lakshminarayana Reddy and not in the hands of the assessee society. We also agree with the learned CIT(A) that neither the assessee society nor any of its officer bearers, being beneficiary of the capitation fee collected, there was no violation of any of the provisions of S.11, S.12 or S.13 of the Act, making the assessee society disentitled to exemption under S.11. As held by the learned CIT(A), the addition made by the Assessing Officer to the total income of the assessee on account of capitation fee thus was not sustainable, and the assessee was entitled for exemption under S.11, as claimed by it in the return of income.- Decided in favour of assessee. Unaccounted expenditure allegedly incurred by the assessee society - CIT(A) deleted addition - Held that:- As noted by the learned CIT(A), the relevant vouchers were found and seized from the residence of Shri P.Lakshminarayana Reddy and since the additional income of ₹ 18 cores declared by him was sufficient to cover the amount of ₹ 10 lakhs reflected in the said voucher, there was no justifiable reason for the Assessing Officer to make the addition of ₹ 10 lakhs again in the hands of the assessee society. At the time of haring before us, the Learned Departmental Representative has not been able to raise any material contention to dispute the basis adopted by the learned CIT(A) for giving relief to the assessee on this issue. We therefore, find no justifiable reason to interfere with the impugned order of the learned CIT(A) on this issue and upholding the same, - Decided against revenue.
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2015 (8) TMI 366
Loss incurred on account of forex derivative contracts - treated as speculative loss and thereby not allowing the assessee to set off the losses against its business income - Held that:- The assessee is an exporter of garments who has entered into forex derivative transactions through its bankers with a view to effectively hedge its foreign currency risk. Therefore, these forex derivative transactions have a close proximity or rather incidental to the export business of the assessee, which cannot be considered as speculative. Moreover in the case of the assessee foreign currency contracts cannot be treated as wagering contracts for the reasons discussed herein above. Section-43(5) of the Act is applicable to transactions in commodity or stocks and shares. If currency is treated as commodity, then according to Section 43(5) (a) of the Act, such transaction shall not be deemed to be speculative transaction. Further currency cannot be treated as stock or shares because inherently they have different characteristic. Further, in the case of the assessees, the foreign exchange exposure for the “relevant period” specified by “R.B.I” regulations is quiet substantial in order to justify the forex derivative transactions made by the assessee through Government recognized channel, otherwise the RBI would not have entertained these transactions and would have restrained the banks from entering into such transaction with its clients. Thus we direct the Revenue to set off of the losses incurred by the assessee on account of forex derivatives contracts against the business income of the assessee.- Decided in favour of assessee. Disallowance of the notional loss due to foreign currency fluctuation on the loan obtained for acquiring capital assets - Revenue has allowed to capitalize the actual loss resulting from repayment of loan during the relevant previous year and given the benefit of depreciation - Held that:- On reading Section 43A of the Act, it is abundantly clear that where the assessee has acquired an asset in any previous year from a country outside India for the purpose of his business or profession, any loss or gain arising out of the foreign currency fluctuation during any previous year after the acquisition of such asset shall be added or deducted from the actual cost of the asset on actual payment or repayment of foreign currency loan. In the case of the assessee, the actual loss on repayment of loan is ₹ 1,36,00,000/- and the Revenue has accordingly allowed the assessee to capitalize this amount and claim depreciation. Therefore, we do not find any infirmity in the order of the Ld. CIT (A). - Decided against assessee.
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2015 (8) TMI 365
Initiation of re-assessment proceedings - change of opinion - report of audit party - Held that:- Close look at the audit objection divulges that the audit party simply suggested that the interest of ₹ 2.54 crore was not actually paid, but, only transferred to a subsidiary company and the same should have been disallowed and this omission on the part of the AO resulted in over assessment of loss of ₹ 2.45 crore. This shows that the AO was simply informed about the fact which had escaped his attention during the course of assessment proceedings to the effect that a sum of ₹ 2.45 crore was not allowable u/s 43B of the Act which is nothing, but, a communication of law to the AO. We are not confronted with a situation in which the AO, after due consideration of the matter in the original assessment proceedings interpreted section 43B as allowing deduction for a sum of ₹ 2.45 crore in respect of interest not paid to the financial institutions, but, transferred to the assessee’s wholly owned subsidiary company, but, the audit party interpreted this provision in a different manner from the way in which it was interpreted by the AO and then suggested that the amount ought to have been charged to tax. The instant case is fully covered by the ratio of the judgment in the case of PVS Beedis Pvt. Ltd. ( 1997 (10) TMI 5 - SUPREME Court) read with the exception carved out by the Hon'ble Supreme Court in Indian & Eastern Newspapers Society (1979 (8) TMI 1 - SUPREME Court ) drawing a line of distinction between communication of law and interpretation of law. The argument of the ld. AR on this issue, being devoid of any merit, is hereby jettisoned. It is, therefore, held that the audit objection in the instant case constituted an `information’ about the escapement of income to the AO, thereby justifying the initiation of reassessment. - Decided against assessee. Deduction of interest u/s 43B - Transfer of interest liability - AR argued that when the assessee transferred all the assets and liabilities of its paper board unit to M/s RT Paper Board Ltd., and the liabilities also included interest payable to financial institutions at ₹ 2.45 crore, such transfer of interest liability should be considered as discharge of the interest obligation - Held that:- Two things are palpable from the prescription of Explanations 3C and 3D. First is that the interest payable to banks and other financial institutions can be allowed as deduction only ‘if such interest has been actually paid’ and second is that where such interest ‘has been converted into loan or borrowing/advance, (it) shall not be deemed to have been actually paid.’ In the light of the main provisions of section 43B read with Explanations 3C and 3D, it is crystal clear that deduction of interest u/s 43B cannot be allowed in the present case because such interest has not been actually paid by the assessee to the banks/financial institutions. - Decided against assessee.
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2015 (8) TMI 364
Addition on net profit figure - addition based on print out sheet, taken out from the CPU of the assessee company’s computer, found during the course of survey u/s 133A - Held that:- Just one figure in the print out taken from the CPU/hard disk i.e. Net profit figure, cannot be added to the income of the assessee for the following reasons. (1) There is no corroborative evidence to support this figure of Net Profit; (2) The other documents found in the CPU prove that this figure is wrong. All the transactions are accepted as correct. Then the question of not accepting the result of such transactions for assessing total income does not arise. (3) The G.P. rate arrived at by taking this figure of Net profit is absurd and abnormal. It is an improbable figure. (4) Only real income can be taxed and not hypothetical incomes; (5) The burden is on the revenue to prove that a particular figure is income and this burden is not discharged in the present case. (6) The stocks found during survey do not support the stock figure in the P&L account and balance sheet found in the CPU/print out. The reconciliations of all the purchases and sales are not found fault with by the A.O. When the quantitative details of opening stock, purchases, sales are accepted then the closing stock should b arrived at from the figures only. (7) There is no allegation of fabrication of books. The results derived from the books of accounts should form the basis of assessing total income. (8) Stray and random figures cannot from the basis of determining income when these are proved to be wrong figures. In the case on hand the books of accounts have not been rejected. Under those circumstances substituting the book results with a random figures obtained from the document found i.e. P&L account in the CPU is incorrect. There are a catena of judgements which lay down that when books of accounts are not rejected, the question of estimating income does not arise. Here the figure of profit cannot be replaced without rejecting the books of accounts. Thus we delete the impugned addition of ₹ 3,06,91,356/- made by the AO as confirmed by the First Appellate Authority. - Decided in favour of assessee.
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2015 (8) TMI 363
Year of taxability of capital gains - Revenue bringing to tax the capital gains on the reason that transfer has occurred during the year - whether there was no transfer of property as per Section 2(47) under Clause-5 and Clause-3(b) of the development agreement dt. 11-02-2004? - Held that:- There is no dispute with reference to the fact that the first agreement was dt. 11-02-2014 in which assessee was entitled to 50% of the constructed area. In case, the possession was given as per the contention of Revenue consequent to this agreement, certainly the capital gains was leviable in AY. 2004-05 itself, as the agreement entered has been fulfilled by giving possession if not immediately but after some time. Therefore, following the principles of jurisdictional High Court in the case of Potla Nageswara Rao Vs. DCIT [2014 (8) TMI 636 - ANDHRA PRADESH HIGH COURT ], which Ld.CIT(A) relied upon, the capital gains is certainly attracted on entering into development agreement, even if consideration was not received. In that way, assessee's contention that capital gains cannot be brought to tax in this assessment year( AY 2005- 06) is valid. Both AO and CIT(A) are not correct in contending that year of possession or the deemed possession is the year of capital gains, ignoring the year of agreements entered by assessee and the terms of agreement. If this logic of Revenue is accepted, then a situation may arise that parties try to incorporate a clause that possession was handed over much earlier to defeat the levy of capital gains. It also does not answer sale to existing tenant who is in possession of property from a longer period. Therefore taking possession alone in to consideration for levy of capital gains ignoring the date of agreement and terms of agreement is not according to law. - Decided in favour of assessee,
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2015 (8) TMI 362
Disallowance of interest - Held that:- The interest was paid by the assessee on the amount borrowed for the purposes of business so it was to be allowed u/s 36(1)(iii) of the Act and once it is established that the interest paid was for the business consideration than the deduction has to be allowed to the assessee while computing the income u/s 28 of the Act and no disallowance can be made merely on this basis that interest free advance had been given by the assessee. Moreover, the advance given in the present case was for purchase of Plant & Machinery and the partners were having interest free capital in the credit of their account. Thus the disallowance 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 of expenditure - Held that:- In the present case it is noticed that the AO pointed out some discrepancies in the vouchers maintained by the assessee for various expenses and the explanation given by the assessee was not found to be plausible, therefore, the assessee itself agreed for addition of ₹ 1,00,000/- out of various expenses. In the present case since the assessee agreed for the addition, we, therefore, do not see any valid ground to interfere with the findings given by the ld. CIT(A) on this issue. Accordingly we do not see any merit in this ground of the assessee’s appeal. - Decided against assessee.
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2015 (8) TMI 361
TDS u/s 194J OR u/s 192 - remuneration to consultants - re-characterisation of the arrangement between the company and consultants as employer-employee in place of consultant arrangement between the assessee entity and the said consultants - AO raised a demand being the difference in tax deductible u/s 192 and 194J on payments made to consultants - CIT(A) deleted demand - Held that:- AO re-characterised the relation between the assessee company and the consultant/technocrat and relation of employer and employee but we are unable to see any basis or allegation supporting this recharacterisation and action of the AO to treat the payments by the assessee company to these consultants/technocrats as salary instead of remuneration/consultation fee and expecting the assessee to deduct TDS u/s 192 of the Act instead of remuneration/consultation fee and expecting the assesse to deduct TDS u/s 192 of the Act instead of 194J of the Act. Per contra, from the explanation, details and evidence submitted by the assessee, we are satisfied that the payments made by the assessee company was not salary and the same was remuneration/consultation fee paid to the highly experienced technocrats/consultants which could not be engaged on full time basis as regular employees due to high remuneration and temporary requirement of the assessee company. We cannot ignore this fact that all technocrats and consultants are more than 60 years of age and are in post retirement/superannuation life cycle and we cannot expect them to work as regular employees unless there is an exceptional case. We may further note that the AO has not demolished this contention of the assessee that the said consultant/technocrat had filed their income tax return with the department which were also submitted before the AO and they have paid tax thereon, therefore, respectfully following the ratio laid down by the Hon’ble Supreme Court in the case of Hindustan Coca Cola (2007 (8) TMI 12 - SUPREME COURT OF INDIA ), there was no need of expecting the assessee deductee to again pay the tax on the said payment on account of short deduction of TDS, specially when the TDS deducted by the assessee company u/s 194J of the Act was on the higher side as deductible u/s 192 of the Act. - Decided against revenue.
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2015 (8) TMI 360
Deduction u/s 80 IB - OEPB licenses utilized during the year for duty free import of raw materials - Focus market incentive - Held that:- Assessee’s claim for deduction under section 80IB in relation to incomes by way of DEPB investments and focus market incentives the decision of in the case of Liberty India vs. CIT, [2009 (8) TMI 63 - SUPREME COURT] covers the controversy in favour of the Revenue. Deduction under section 80IB in relation to sundry income the assessee fairly conceded that the said income has been rightly held to be “not derived from” the industrial undertaking and accordingly the denial of deductions under section 80IB of the Act is hereby affirmed. - Decided against assessee. Disallowance u/s 14A - Held that:- At the time of hearing the only plea set up by the appellant is that the suo-moto disallowance made by the assessee in its computation of income amounting to ₹ 19,64,974/- out of interest paid for purchase of investment and SEBI filing fees for open offer for investments in shares of M/s. Uniflex Cables Ltd. be reduced from the total disallowance worked out by the AO. Consequently, we set aside the matter to the file of AO, who shall allow appropriate relief to the assessee on this aspect. - Decided in favour of assessee by way of remand. Exemption u/s 54G denied - additional evidence submitted - Held that:- On the basis of the material submitted, the assessee does not intend to make out any new case, but the it merely seek to corroborate its earlier stand. Some of the additional evidences, for instance, confirmations from the transport contractor, engineering contractor, etc. are third party independent evidences and in our view it would be appropriate to consider the same for the purpose of adjudicating the assessee’s claim for deduction under section 54G of the Act. In our considered opinion, having regard to the facts and circumstances of the present case, the avowed object of Rule 29 of the Appellate Tribunal Rules would be sub-served if the additional evidences are admitted in order to appropriately adjudicate assessee’s claim for deduction under section 54G of the Act. We hold so. So however, since the aforesaid evidences/material was not before the lower authorities, it would be in the fitness of things that the issues relating to assessee’s claim for deduction under section 54G of the Act is restored back to the file of AO, who shall revisit the same as per law after taking into consideration the aforestated additional evidence - Decided in favour of assessee by way of remand.
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2015 (8) TMI 359
Disallowance of expenditure u/s 14A - disallowance of claim of loss as the entire expenditure was directly attributable to earning of exempt income - Held that:- In facts prevailing in the instant case, we are of the view that the assessee should be considered to have been set up its business on the date of its incorporation and hence the expenses incurred after that date should be allowed as revenue expenditure. The view taken by the tax authorities that the first MOU was entered in the succeeding year should be considered as date of setting up of business is not in accordance with the settled principles discussed above. Accordingly we set aside the order of Ld CIT(A). As noticed the assessing officer did not have occasion to examine the expenditure claim put forth by the assessee, since he had treated all the expenses as 'prior period expenditure'. Since we have reversed the view taken by the assessing officer, we are of the view that all the expenditure claimed by the assessee need to be examined at the end of the assessing officer. Accordingly, while holding that the assessee's business can be considered to have been set up on the date of incorporation and hence the expenditure incurred after that date is allowable as revenue expenditure in the facts and circumstances of this case, we restore the matter of examining the expenditure claim to the file of the assessing officer with the direction to examine them after affording necessary opportunity of being heard to the assessee and take appropriate decision in accordance with the law. In view of the above, we are unable to agree with the view of the tax authorities that all the expenses should be considered as having been incurred for earning the exempted dividend income. Accordingly, we reverse the order of Ld CIT(A) on that issue also and restore the same to the file of the AO, who directed to examine the applicability of the provisions of sec. 14A of the Act also afresh. - Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 358
Disallowance of local area expenditure - CIT(A) allowing of 50 per cent - Held that:- disallowance has been restricted to 50 per cent. on the basis of personal visit to the site by the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) has not raised any doubt over the expenditure incurred by the assessee on local area development. In the facts of the case, we are not inclined to interfere with the findings of the first appellate authority on this issue - Decided against revenue. Disallowance of business promotion expenses - CIT(A) allowing of 50 per cent - Held that:- While allowing 50 per cent. expenditure, the Commissioner of Income-tax (Appeals) has not given any reason. The contention of the assessee is that business promotion expenditure is towards incentives/gifts given to the representatives of customer companies to maintain cordial business relations. However, the assessee has not placed on record the details of the persons to whom such incentives were given. We do not find any reason in allowing even 50 per cent. of such expenditure in the absence of any document or any other evidence.- Decided against assessee. Disallowance of research and development expenses - CIT(A) allowing disallowance - Held that:-The assessee was able to establish before the Commissioner of Income-tax (Appeals) that M/s. Adwaith Textiles Ltd. suffered production loss and also the quality of yarn because of frequent interruption in production. The Commissioner of Income-tax (Appeals) in his order has categorically observed that the amount paid by the assessee to M/s. Adwaith Textiles Ltd. for using the mill floor facility has been assessed to tax in the relevant assessment years. The Revenue has not been able to controvert the findings of the Commissioner of Income-tax (Appeals). We do find any reason to interfere with the well reasoned findings of the first appellate authority in deleting the disallowance of research and development expenses. - Decided against revenue.
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2015 (8) TMI 357
Training services rendered - Whether AO/Ld. DRP has erred in applying tax rate of 15 per cent on ‘Fee for technical services’ (“FTS”) under Article 12 of the India-USA DTAA ignoring the fact that section 115A of the Act provides for beneficial tax rate of 10% (exclusive of surcharge/cess) on FTS? - Held that:- It is not in dispute that the fees for technical services was in pursuance to an agreement made after the first day of June, 2005. Thus, the provision of sub-section (BB) of Section 115A was applicable.Admittedly, in this case, the Assessing Officer has charged to tax the gross amount of fees for technical services. Moreover, as pointed out by the learned counsel, Article 12 of the DTAA would not be applicable if there is a PE in India. In view of the above, we are of the opinion that clause (BB) of Section 115A was applicable which provides for tax rate of 10% in respect of fees for technical services. This being a more beneficial provision than the Article 12 of DTAA, therefore, assessee had a right to claim the applicability of this provision of the Income-tax Act in view of the provision of Section 90(2) of the Income-tax Act. We, therefore, direct the Assessing Officer to apply Section 115A(BB) and tax the fees for technical services at the rate of 10%.- Decided in favour of assessee Disallowance of credit for tax deducted at source - Held that:- At the time of hearing before us, both the parties fairly admitted that let this matter be set aside to the file of the Assessing Officer and assessee be directed to produce evidence/certificates of the tax deducted at source and thereafter Assessing Officer would be directed to allow credit of the same after verification. We, therefore, set aside the issue raised by the assessee vide ground No.3 of its appeal and direct the assessee to produce necessary evidence/certificates in respect of tax deducted at source before the Assessing Officer. - Decided in favour of assessee for statistical purposes. Determining and levying income tax on income arising from installation and inspection activities - assessed in the impugned assessment order on protective basis - Held that:- After considering the arguments of both the sides, we agree with the contention of the learned counsel. It is a settled position of law that the Revenue cannot insist on recovering the tax on protective assessment of income. We, therefore, set aside this matter to the file of the Assessing Officer and direct him not to recover the tax on protective addition.- Decided in favour of assessee
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2015 (8) TMI 356
Unexplained deposits in the bank - sale of land - Held that:- Undisputedly the sale consideration declared in the sale deed was at ₹ 1,80,000/- and accordingly, the stamp duty was paid thereon on its registration. The assessee has jointly owned the agricultural land, therefore, the share was shown to be at ₹ 90,000/-. It is also an admitted fact that assessee has initially filed original return of income declaring the capital gains on the basis of the sale value of ₹ 90,000/- of his share. But when the substantial amount of cash deposits in the bank was noticed, the assesee has taken a different pleas. Initially it was contended that the source of deposits was from agricultural income and later on he took another stand that it was out of the sale consideration received on sale of agricultural land. In support thereof no evidence was filed. Though the AO has asked the assessee to furnish the confirmation letters of the buyers or any other evidence in support thereof. At the instance of the assessee the buyer was also examined by the AO and she has categorically denied the payment over and above the sale consideration declared for the sale deed. Copy of the statement is also filed before us. Except the affidavit of the assessee in support of his contention, no other evidence is available on the basis of which an inference can be drawn in favour of the assessee. Affidavit of assessee is a self serving document, therefore, on the basis of affidavit, the additions made by the AO cannot be deleted. We have also carefully examined the various judgments referred to by the assessee and we find that these judgments are rendered on computation of long term capital gains, but in those judgments there was no dispute with regard to sale consideration received by the assessee. We therefore held that Revenue authorities have rightly treated the cash deposits in the bank account of the assessee as unexplained cash deposits and made the addition of the same. Case of CIT vs. Intezar Ali distinguished [2013 (8) TMI 704 - ALLAHABAD HIGH COURT]. - Decided against assessee.
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2015 (8) TMI 355
Computation of capital gain - whether consideration received by the appellant be treated as capital gain and there is charge on the property by Mr. Laxman Pagare before the consideration is received from the sale of property and only actual income received be taxed as capital gain? - whether the assessee could only be charged to tax, on the income that has accrued to her? - Held that:- One basic fact that has been completely ignored by the Revenue authorities, while framing the assessment of the assessee was to ascertain the status of the return and assessments in the case of Mr. Geeta Choksi and Mr. Laxman A. Pagare. We find that the address of Laxman A. Pagare has been mentioned by the Commissioner of Income-tax (Appeals) in his order and which was also supplied to the Assessing Officer, but the Revenue authorities ignored to ascertain his assessment status. We cannot accept the submissions of the Departmental representative that the case be restored to the Assessing Officer to find out the details of assessment in the case of Mr. Laxman A. Pagare and/or Ms. Geeta Choksi. According to us, the Revenue authorities missed the bus long back. We also find from the APB, the assessment status of Ms. Geeta Choksi, recipient of the other 50 per cent. of 60 per cent., whose return of income was accepted by the Assessing Officer and in the subsequent year, on the same facts, assessment was framed under section 143(3) accepting the returned income. Under these factual circumstances, we are of the opinion that the Revenue authorities erred in adding back remaining 20 per cent. to equate the figure of 50 per cent. of gross sale proceeds. Not only, this was factually incorrect, because, the quantum had been the result of a legal document executed between the ladies and Laxman A. Pagare and more than that the other parties declared their share, which was accepted by the Department We, therefore, set aside the order of the Commissioner of Income-tax (Appeals) and direct the Assessing Officer to delete the addition, as made by him and compute the long-term capital gains as declared by the assessee. - Decided in favour of assessee.
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Customs
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2015 (8) TMI 387
Refund of amount deposited during Investigation – Delay in Adjudication – Pendency of Proceedings – Commissionerate learnt about the subject show cause notice only on receipt of copy of this writ petition. - Held that :- Petitioner claims quashing of proceedings and refund of amount on account of pendency of proceedings for 17 years – Affidavit filed on record indicated that as reorganization of Customs Commissionerate occurred year 1997, 2002 and 2014, records of case could not be located and traced – Though there are no period of limitation prescribed in statute to complete adjudication proceedings, but Law is that they have to be exercised within reasonable time – Petitioners cannot be faulted for having approached Court belatedly as contention of the Revenue – Explanation placed on affidavit does not inspire confidence – Department on going by settled legal principles, cannot pass adjudication order on show cause notice – Therefore show cause notice hereby quashed and respondents prohibited from passing any adjudication order in furtherance thereof – Liberty granted to petitioners to institute proceedings as permissible in law for recovery of sums deposited with accrued interest – Decided in favour of Petitioner.
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2015 (8) TMI 386
Processing of Refund – Refund claims was filed on 26th August, 2014, claiming refund in Indian rupees in sum specified therein, but refund applications was not processed – Held that :- Respondents request for adjournment by two weeks cannot be accepted – Instead request that refund applications would be processed expeditiously would save more delay and was detrimental to either parties' interests – Thus respondent processing of refund applications, as expeditiously as possible – Decided in favour of Petitioner.
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2015 (8) TMI 385
Waiver of pre-deposit of penalty - Appellant vide impugned order of high court in Alpha Future Airport Retail Pvt. Ltd. Versus Commissioner[2014 (9) TMI 402 - DELHI HIGH COURT] was directed to deposit sum against duty demand and interest - Appellants contention for waiver of pre-deposit of penalty was rejected - Application for review/recall was not allowed and same was dismissed - Supreme court, in instant appeal granted six weeks time to deposit amount as directed by high court.
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2015 (8) TMI 384
Valuation – Transaction value – Confiscation of goods – Tribunal in case of KANHAIYALAL & CO. Versus COMMISSIONER OF CUSTOMS [2003 (8) TMI 423 - CESTAT, MUMBAI] allowed appeal of assesse against enhancement of declared value from US $900 to US $1200 (CIF) – Supreme court considered that there was huge devaluation in foreign exchange, i.e., Lira of Turkey in comparison to foreign exchange, viz., US dollar, and this devaluation was more than 100 per cent – This impacted price at which goods were imported by respondent – Therefore no interfere with orders passed by CESTAT was required.
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2015 (8) TMI 383
Classification of Product – Eligibility for exemption – Whether applicant was eligible for benefit of exemption under Notification No. 72/2005-Customs – Held that:- when it comes to classification and distinction, classification of product was different and distinct classification was included in Notification No. 72/2005-Customs – Department agreed that benefit of Notification can be extended, if Tariff Classification of import product applicable in India was accepted – Thus, applicant was eligible for benefits of said Notification on insecticides which were classifiable under CTH 3808 – Decided in favour of Applicant.
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2015 (8) TMI 382
Classification of goods – Duty Exemption – Replacement of Seats – Applicant intends to import seats of aircraft for replacing existing seats to providing more comfortable flying experience to fliers; that seats requiring repairing due to wear and tear shall also be replaced – Whether new seats that were imported for replacing existing seats were said to be for servicing, repair or maintenance of aircraft under Notification No. 12/2012-Cus – Held that:- Supreme court opined in Collector of Customs, Bangalore vs. Maestro Motors Ltd. [2004 (12) TMI 86 - SUPREME COURT OF INDIA] that exemption notification is to be read strictly and interpreted in terms of its language – Notification show that all parts (other than rubber tubes) of aircraft of Heading 8802 were exempted from Customs duty including seats of aircraft – Approach of Revenue to apply General Rules for Interpretation for Import Tariff, even for interpretation of notification, was legally incorrect –There can be no doubt that seats were integral part of aeroplane – Rule 3 (33C) and Rule 60 of Aircraft Rules, 1937, maintenance inter-alia include replacement, modifications, repairs and servicing – Thus, new seats that were being imported for servicing, repair or maintenance of aircraft – Decided in favour of Assesse.
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Corporate Laws
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2015 (8) TMI 381
Fit and proper criteria for holding shares – By impugned order SEBI declared appellant not “fit and proper person” to acquire or hold any equity shares without any basis of its own but solely on order of Forward Market Commission disqualifying appellant from holding commodity shares – Held that:- order passed by FMC would have bearing on securities market, because both FMC and SEBI were regulating trades executed on respective exchanges – Fit and proper person criteria for person to acquire or hold shares of exchanges in commodity market is comparable with criteria framed by SEBI for securities market – Therefore, if person was declared by FMC to be not fit and proper person to acquire or hold commodity shares, then that person shall be deemed to be not fit to hold shares of exchanges operating under securities market – Order passed by one regulator would ipso facto have to be applied by another regulator, because, very object of imposing such stringent condition was to set high standards for exchanges operating in both financial markets – Impugned decision of SEBI holding appellant not ‘fit and proper person’ to hold shares of stock exchanges based on decision of FMC cannot be faulted – Appeal dismissed – Difference of opinion – Majority order – Decided against appellant.
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2015 (8) TMI 380
Scheme of Amalgamation – Dispensing convening of meetings of equity shareholders, secured and unsecured creditors to consider and approve, proposed Scheme of Amalgamation under Section 391(1) of Companies Act, 1956 – Held that:- board of directors of transferor and transferee companies in their separate meetings unanimously approved proposed Scheme of Amalgamation – Equity shareholders and unsecured creditor of transferor and transferee companies have given their consents/no objections in writing to proposed Scheme of Amalgamation and were found in order – Application stands allowed – Decided in favour of applicants
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Service Tax
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2015 (8) TMI 401
Demand of service tax - Reverse charge mechanism - Import of taxable service - Held that:- issue involved in this case is no longer res integra in the light of the judgement of the Supreme Court in the case of Indian National Shipowners Assn Vs. Union of India [2008 (12) TMI 41 - BOMBAY HIGH COURT], wherein it has been held that the reverse the mechanism became operative only from 18.04.2006 when Section 66A was introduced in the finance act 1994. As the period involved in this case is prior to 18.04.2006, Revenues appeal is not sustainable - Decided against Revenue.
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2015 (8) TMI 400
Demand of service tax - services were rendered by a foreign Company situated abroad - Held that:- The Hon'ble Gujarat High Court in the case of Commissioner of Service Tax vs. Unimark Remedies Limited - [2014 (5) TMI 459 - GUJARAT HIGH COURT ] held that liability of service tax from the service recipient, provided by the foreign company utilising in India, was introduced by Section 66A of Finance Act, 1994 with effect from 18.4.2006. - No reason to interfere the order of Commissioner (Appeals) - Decided against Revenue.
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2015 (8) TMI 399
Denial of refund claim - Reverse Charge mechanism - commission paid to the foreign based agents - Held that:- judgement of the Supreme Court in the case of Indian National Shipowners Association (2009 (12) TMI 850 - SUPREME COURT OF INDIA), holding that reverse charge mechanism became operation only with effect from 18.4.2006 when Section 66A was introduced in the Finance Act, 1994 the issue is no longer res integra and has been decided in favour of the respondent. - infirmity in the impugned order in appeal - Decided against Revenue.
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2015 (8) TMI 398
Erection, Commissioning or Installation service - Exemption under Notification No.45/2010-ST dated 20.7.2010 - Held that:- Notification No.45/2010-ST dated 20.7.2010 was issued by the Central Government in exercise of powers passed under Section 11C of the Central Excise Act, 1944 read with Section 83 of the Finance Act, whereby taxable services relating to transmission and distribution of electricity provided by a service provider to a service receiver for the period upto 21.6.2010 was exempted from service tax. - appellant is not liable to collection of service tax in terms of Notification No.45/2010-ST on the entirety of the demand confirmed by the order impugned, except demand of service tax, interest and penalty on the tax components of ₹ 23,562/- and ₹ 34,437 - Decided partly in favour of assessee.
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2015 (8) TMI 397
Denial of refund claim - Port services - Notification No. 41/2007-ST, dated 06.10.2007 - Held that:- in the schedule to Notification No. 41/2007-st, port services classified under Section 65 (105) (zn) ibid are mentioned. It implies that if the service provider has actually paid service tax under Section65 (105) (zn)ibid, the said notification exempts the same by way of refund if it is received by an exporter and used for export of goods. It is not open to the service recipient to question the classification of the service received by it as the issue of classification is only between the service provider and the jurisdictional service tax authorities and so as per the said Notification the condition is sufficiently fulfilled for granting the refund of such service tax. It is seen that the only reason for Revenue to file appeal was that in the case of velji P Sons (2007 (8) TMI 35 - CESTAT, AHMEDABAD) CESTAT held the activities of handling, stevedoring, loading, unloading, etc. provided in the port area as not falling under Port services. However, the said judgement no longer represents good law in the light of the CESTAT Larger Bench decision in the case of Western Agencies Pvt. Ltd. Vs. CCE, Chennai [2011 (3) TMI 528 - CESTAT, CHENNAI (LB)] - Decided against Revenue.
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Central Excise
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2015 (8) TMI 404
Demand of interest - whether the excise duty was in fact deposited late and therefore interest would be charged - Held that:- Section 11A of the Act permits the Central Excise Officer to recover duty not levied or not paid or short levied or short paid or erroneously refunded. It can be done within one year from the relevant date by serving show cause notice on the person chargeable with the duty. It is not necessary to state in detail the procedure prescribed therein. For our purposes it is sufficient to mention that Section 11AA of the Act provides that where a person chargeable with duty determined under Section 11A fails to pay such duty within three months from the date of such determination, he is liable to pay interest on the delayed period which is at the rate not below 18% and not exceeding 36% p.a. as for the time being fixed by the Central Government by Notification in the Official Gazette. Utilization of Cenvat Credit for delayed payment of duty - Held that:- Appellant paid the duty on clearing each consignment. Substantial portion of the duty, i.e., to the tune of ₹ 7 crores was paid in account current through PLA. However, for payment of small portion of a duty which was in the neighbourhood of ₹ 31 lakhs, the appellant utilised Cenvat Credit Account. It is this payment from Cenvat Credit which has become the bone of contention. The respondent communicated to the appellant that duty through Cenvat during this period, when facility under Rule 173G was withdrawn, is not permissible. Without demur, the appellant complied with the demand of the respondent by paying this portion of duty also through account current. However, this happened in May, 2002. The respondent now took the position that the custom duty of ₹ 31 lakhs was paid belatedly. As it was paid only in May, 2002, on this delayed payment, appellant was liable to pay interest @ 24% p.a. from the period from 19.12.2000 to 20.05.2002. Order-in-Original dated 13.06.2002 passed by the Commissioner affirming the demand in show cause notice has been confirmed by the Tribunal. It is imperative to point out that even the Department accepted the opinion of the High Courts. For this reason, judgments rendered by the High Courts were not challenged and instead to remedy the situation, Rule 8 of the Central Excise Rules, 2002 itself is amended by inserting sub-rule 3A vide Notification No.17/05-C.E. (N.T.) dated 31.03.2005 w.e.f. 01.04.2005. This Rule now specifically provides that in case of default in making payment of duty, the assessee shall be required to pay excise duty for each consignment by debit to the account current and not by utilising Cenvat Credit. This also lends credence to our view which we have taken in respect of unamended provision that was applicable at the relevant time. - Impugned order is set aside - Decided in favour of assessee.
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2015 (8) TMI 403
Valuation of goods - Inclusion of cost of returnable gunny bags used for packing the excisable goods - whether the price of the gunny bags should be included in the assessable value of the soda ash for the purpose of levy of excise under the Act - Dissenting Judgment. As per Justice Dipak Misra:- letters spell out an arrangement between the assessee and the buyers. The tribunal has not accepted the stand of the appellant on the ground that it is not an arrangement and on that basis has remanded the matter to the adjudicating authority for computation of the actual amount of duty payable by the appellant. Once the existence arrangement and choice to return the packing material for reuse are established for the period in question in view of the second decision in Triveni Glass Limited (2005 (2) TMI 130 - SUPREME COURT OF INDIA), the packing cost would not be included. If the assessee succeeds in establishing the choice mentioned in the documents which I have accepted to be an arrangement, and is prevalent during the relevant period i.e. 1981 to 1985, the appellant shall be given the benefit. If he fails to establish the same, the adjudicating authority shall look into the consideration the actual return as has been directed in [2014 (9) TMI 149 - SUPREME COURT] - Decided in favour of assessee. As per Justice V. Gopala Gowda:- appellant has already charged for the value of the gunny bags from the customers by adding the same to the cost of soda ash. The fact that some of the customers of the appellant have returned the gunny bags out of several ones already sold between the period of 1971 to 1988, does not entitle it to get the benefit of exclusion of the cost of all the gunny bags which were not even returned to the appellant. - burden to prove that the value of the gunny bags is not inclusive and not excisable with the value of the soda ash, lies on the appellant and it has miserably failed to do so as is clear from the facts and circumstances of the case that the soda ash are sold in bulk in the gunny bags at the factory gate to the wholesale market and such packing is indispensible for the transport and preservation of soda ash. - appellant has also failed to establish an arrangement as per Section 4(4)(d)(i) of the Act. Mere suggestion of the same in the above dated letters, regarding the return of used gunny bags to the appellants by the buyers does not establish the terms and conditions that are prerequisites for establishing an arrangement of return of the gunny bags to the appellant. - appellant is bound to include the cost of the gunny bags that are provided by it in the overall value of the soda ash as per the provisions of the Act. - Therefore, the tribunal has rightly rejected the claim of the appellant so far as the exclusion of the cost of packing material with the value of soda ash is concerned and hence, it is liable to pay the tax liability for the same - Decided against assessee.
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2015 (8) TMI 393
Denial of CENVAT Credit - Credit availed on invalid documents - Whether Respondent has taken CENVAT Credit on the basis of valid documents under Rule 9 of CCR and Rule 4A of the Service Tax Rules - Held that:- Debit note could also belong to the category of Invoice where all the prescribed details are available. As per World Book Dictionary also, an invoice means a list of goods sent to a purchaser often showing such other information as price, amounts etc. Similarly, a Bill means a statement of money owned for work done or things supplied. Accordingly, a debit note having all the prescribed details could be an invoice or bill. It is not brought out by Revenue as to what are the standard elements of an Invoice or Bill or Challan which are lacking in the debit notes issued to Respondent s Head Office. - Respondent has taken credit on the basis of ISD invoices issued by Respondents HQ and not on the basis of debit notes of the Sales Commission agents. As ISD invoices on the basis of which credit was taken are the prescribed documents, therefore, credit was correctly taken by the Respondent. Accordingly, there is no reason to interfere with the orders passed by the First Appellate Authority. - Decided against Revenue.
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2015 (8) TMI 392
Valuation of goods - whether cost of transportation from the palce of removal to the place of delivery is required to be added to the assessable value or not under Section 4 of the Central Excise Act, 1944 - Held that:- The ratio laid down by the Apex court in the case of CCE, Noida vs. Accurate Meters Ltd. (2009 (3) TMI 1 - SUPREME COURT) is squarely applicable to the present proceedings and it has to be held that transportation charges cannot be added to the assessable value as the same are charged by the appellant under separate contracts. - Decided against Revenue.
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2015 (8) TMI 391
Denial of CENVAT Credit - Capital goods - Held that:- Availment of Cenvat Credit in respect of Steel items, in question, and their use has been declared for ER-1 Return, it was the responsibility of Jurisdictional Assistant Officer to immediate verify their claim and as such it cannot be said that the appellant did not disclose the availment of Cenvat Credit in respect of the inputs in question of their use. Therefore, the appellant have a case in their favour on limitation and have disclosed the usage of the items in question for fabrication of storage tank. - Imougned order is set aside - Decided in favour of assessee.
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2015 (8) TMI 390
Clandestine removal of goods - Availment of inadmissible CENVAT Credit - Held that:- Goods have been cleared on the strength of 38 gate passes clandestinely without payment of duty. Obviously, these goods were not to be recorded in the receipt units that they have received the goods without recovery of invoices in their unit. Therefore, these arguments have no force. Further, I find that it is admitted by the Managing Director as well as other officials that they have cleared goods on the strength of 38 gate passes to their other units. It means that gate passes are meant for their internal movement of goods as appellant have not supplied for any other movement in their factory is covered by gate passes and no gate pass has been produced by the appellant for verification. In these circumstances, the claim of appellant is not sustainable. - Decided against the assessee. For denial of input service Credit on construction services of residential colony I find that there are divergent views of two High Courts i.e. the Hon'ble High Court of Bombay and High Court of Andhra Pradesh. Therefore, there is no decision of jurisdictional High Court available before me. Therefore, I am examining issue independently. As residential colony have no nexus with the manufacturing activity of the appellant. Therefore, I hold appellant is not entitled to avail input service credit on construction services of residential colony - Decided against the assessee. Extended period of limitation - Levy of penalty - Held that:- For imposition of penalty on wrong availment of input service credit on the- services I hold that issue was in dispute. Therefore,penalty is not imposable on the appellant - Following the precedent decision in the case of Orissa Bridge & Construction Corpn. Ltd. (2008 (8) TMI 585 - SUPREME COURT OF INDIA) I hold that facts of this case are similar to the facts of the said case and that extended period of limitation is not invokable - Decided partly in favour of assessee.
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2015 (8) TMI 389
Clandestine removal of goods - Non accounting of goods in RG-1 register - Held that:- Quantity alleged to have cleared during a particular month based on certain seized documents may not have been manufactured during that month and therefore for the purpose determining power consumption for production of one MT TMT bar/MS bar, this quantity cannot be treated as the quantity produced during that month. Moreover, neither any experiment has been conducted for ascertaining the actual power consumption nor there is any evidence of unaccounted purchase of MS scrap or evidence of clandestine clearance of the finished goods. The only evidence of clandestine clearance of finished goods is in the form of seized documents including computer printouts and shortage of finished goods and duty involved in respect of demand ₹ 1,40,93,563/- based on the same has already been paid. Out of total duty demand of ₹ 11,36,37,891/- while duty demand of ₹ 1,40,93,563/- appears to be sustainable, the balance duty demand ₹ 9,89,44,328/- does not appear to be sustainable. Accordingly, we hold that the amount of ₹ 1,40,93,563/- already paid by the appellant is sufficient for hearing of these appeals. Hence the requirement of pre-deposit of balance amount of duty, interest and penalty by the appellant company and the requirement of pre-deposit of penalty by the other appellants is waived for hearing of their appeals and recovery thereof is stayed - Stay granted.
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2015 (8) TMI 388
Denial of SSI Exemption - Use of third party brand name - Held that:- The duty demand for the period from October 1994 to December 1994 is ₹ 3,78,241/- and the remaining amount of ₹ 62,897/- out of the total duty demand of ₹ 4,41,138/- pertains to January-March 1994 period and both the demands are on the basis of denial of SSI exemption in respect of the goods bearing the brand name Blue Dot on the ground that the brand name Blue Dot does not belong to appellant and it belongs to M/s. Standard Sulphonators (P) Ltd. However, it is seen that the show cause notice for October 1994 to December 1994 for demand of the duty of ₹ 3,78,241/- which in the present case which has been adjudicated by the Assistant Commissioner vide Order-in-Original dated 12-5-1998, had also been adjudicated by the Joint Commissioner vide Order-in-Original dated 31-8-2001 along with another show cause notice for an amount of ₹ 5,34,274/- for the period from July to September 1994, the appeal against the Joint Commissioner’s order dated 31-8-2001 had been filed to the Commissioner (Appeals) and the Commissioner (Appeals) vide Order-in-Appeal dated 28-6-2004 had set aside the order. By the order dated 28-6-2004 of the Commissioner (Appeals), the appeal filed by the appellant had been allowed and in that order it has been held that it is the appellant who is the owner of the brand name. No appeal has been filed by the Department against this order. Moreover, in terms of the observations of the Commissioner (Appeals) in the impugned order, the appellant is the assignee of the brand name, in question, on transfer from M/s. Standard Sulphonators (P) Ltd. and if this is so, they would be eligible for the SSI exemption. In view of this, the impugned order is not sustainable. The same is set aside - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (8) TMI 396
Seizure of goods - Default in payment of VAT - Held that:- Assessment order is passed on 31/3/2015 however, the appeal has been preferred by the petitioner on 27/5/2015 i.e. within period of 60 days provided under the Act. It is also pertinent to note that goods are already released pursuant to the order passed by this Court. It is pertinent to note that the authority had seized the goods before expiry of period of limitation prescribed under section 73(4) of the Act. Therefore, in our view, the authority could not have seized the goods under the provisions of section 68 and 69 of the Act. Therefore, we accept the petition. The order passed by the respondent no. 3 dated 26/5/2015 is hereby quashed and set aside. - Decided in favour of assessee.
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2015 (8) TMI 395
Detention of goods - Learned counsel for the State submitted that the bank guarantee having been furnished, the vehicles and the goods detained shall be released immediately - Held that:- In terms of undertaking given by learned counsel for the State that the vehicles and goods in question shall be released to the petitioner forthwith. However, considering the fact that there is no justification available for detention of goods from 26.5.2015 onwards after the petitioner had furnished the bank guarantees to the tune of 30% of the value of the goods shown in the invoices in terms of Section 51(6) of the Punjab VAT Act 2005, the petitioner shall be entitled to costs - Decided in favour of assessee.
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2015 (8) TMI 394
Violation of statutory provisions - Availability of alternate remedy - Held that:- Admittedly, there are statutory remedies provided under the KVAT Act against an order of assessment such as Ext.P7. Such statutory alternative remedies can be bypassed and orders of assessment can be challenged before this Court only in exceptional cases, such as cases where natural justice is violated or fundamental rights are violated and in cases where the statutory provisions on the basis of which the assessment orders are passed are under challenge. In so far as this case is concerned, we are not satisfied that even if the submission made by the learned counsel for the appellant is considered at its face value, the case of the appellant will not come without any of the aforesaid circumstances. In such a situation, the learned Judge was eminently justified in taking the view that the remedy available to the appellant is before the statutory authorities. - No ground to interfere with the judgment under challenge - Decided against assessee.
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