Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 17, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
News
Notifications
Income Tax
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68/2015 - dated
13-8-2015
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IT
Section 10(46) of the Income-tax Act, 1961 – Central Government notifies "Kerala Shops and Commercial Establishments Workers Welfare Fund Board", a Board established under the Kerala Shops and Commercial Establishments Workers’ Welfare Fund Act, 2006 (Act 24 of 2006) in respect of the certain specified income arising to the Board
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67/2015 - dated
13-8-2015
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IT
Section 10(46) of the Income-tax Act, 1961 – Central Government notifies "Kerala Abkari Workers Welfare Fund Board", established by the Government of Kerala, in respect of the certain specified income arising to the said Board
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65/2015 - dated
13-8-2015
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IT
Section 10(46) of the Income-tax Act, 1961 – Central Government notifies "Telangana State Electricity Regulatory Commission", a Commission constituted by the Government of Telangana in respect of the certain specified income arising to the said Commission
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64/2015 - dated
13-8-2015
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IT
Section 10(46) of the Income-tax Act, 1961 – Central Government notifies "Karnataka State Rural Livelihood Promotion Society", a body constituted by the Government of Karnataka in respect of the certain specified income arising to the said body
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63/2015 - dated
12-8-2015
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IT
Agreement between the Government of the Republic of India and the Government of the Republic of San Marino for the Exchange of Information with respect to taxes
Highlights / Catch Notes
Income Tax
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Depreciation on machinery purchased from Andhra Pradesh State Electricity Board - since the machinery was not purchased by the appellant, it never became the owner of the machinery and, therefore, could not claim any depreciation thereof. - SC
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Capital gain on transfer of aricultural land - apapeal by the assessee - Apex Court refuse to entertain the appeal and to decide the same on the merits on the ground of low tax effect - SC
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Deduction u/s 80IC - whether sales tax rebate to be included as profit derived from Industrial Undertaking and eligible as deduction u/s 80IC - Held No - HC
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Interest payment under Section 201(1A) - when the assessment qua the payee companies was completed and it was held that both the companies were not liable to pay any tax, the liability to pay interest upon the late payment of TDS by assessee would stop running - HC
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Whether claim for deduction under Section 35D allowed in respect of expenses incurred in connection with private placement of equity shares is amenable to rectification by the Assessing Officer under Section 154? - review petitions dismissed with cost - HC
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Treatment of the currency seized during the search and seizure operations conducted u/s 132 - Adjustment with advance tax liability - levy of interest u/s 234C - at the stage of Section 132(5) of the Act, such liability in respect of the Assessee’s income for the Previous Year 1990-91 could not be specified under clause (iii) of Section 132(5) - levy of interest confirmed - HC
Customs
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Settlement of case – True and full Disclosure – lack of co-operation on part of petitioners for settlement of their case, Commission has rightly held that it was fit case for sending it back to original authority for disposal in accordance with law - HC
Service Tax
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Denial of refund claim - deputation of employees to their own sister concern and recovering cost from them, would not amount to rendering of Manpower Recruitment or Supply Agency Service - AT
Central Excise
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Classification of goods - manufacture of nylon and leather belt, nylon and rubber belt and nylon and textile belt - Not only the products manufactured are wholly from the plastics, after the manufacture it lost its identity as plastic insofar as and has not known in the market any longer - SC
VAT
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Levy of tax on ‘deemed sale price’ – DVAT - subject of tax not goods or goods sold, but transaction of “sale of goods” – Addition of Explanation 2 was to permit levy of VAT on sale price of transaction which is yet to take place and to that extent such levy cannot be sustained in law - HC
Case Laws:
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Income Tax
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2015 (8) TMI 548
Entitlment to the benefit under Section 10A - two undertakings commenced in second and sixth floors of Golden Enclave situate in Software Technology Park - Held that:- In the background of the law, if we look at the facts of the case, the assessee set up an undertaking in the third floor of the Golden Enclave which is a software technology park. It was commenced prior to 1993. It is enjoying the benefit under Section 80HHE of the Act. It is not eligible for the benefit under Section 10A of the Act as it was commenced prior to 01.04.1994. Assessee wanted to expand the business. Therefore, a request was made to the authorities for permission to expand the business. Permission was granted. As an expansion, the assessee has set up one unit in Kadugodi and two units in the second floor of the same building on 16.11.1995 and sixth floor on 30.07.1996. The material on record discloses that for setting up these two undertakings nothing from the existing undertaking is made use of. Fresh machinery and plant were purchased, fresh employees were recruited and it was running as an independent unit. Because it is an undertaking belonging to the assessee, only single account is maintained by the assessee. In the light of the aforesaid undisputed facts, it cannot be said that the assessee is not entitled for the benefit under Section 10A of the Act in respect of these two newly established undertakings which it satisfies all the conditions stipulated in Subsection 2 of Section 10A of the Act. - Decided in favour of assessee.
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2015 (8) TMI 525
Existence of substantial questions of law - whether deductions to be made under Section 80IB of the Income Tax Act, 1961 were allowable on facts? - Held that:- We find that as a matter of fact what assessee has argued before us is reiterated by the very Division Bench which heard and reserved judgment on 16.09.2010 (9) TMI 679 - GAUHATI HIGH COURT ]. By the review order dated 08.04.2013 [2013 (12) TMI 369 - GAUHATI HIGH COURT ], the Division Bench felt that it should not have gone into the matter at all given the fact that on an earlier occasion, before 16.09.2010, it had reserved judgment on whether substantial questions of law in fact exist at all or not. This being the case, in a lengthy order the very Division Bench has thought it fit to recall its own earlier judgment. In the above circumstances, we do not feel inclined to interfere with the impugned judgment in view of what has been recorded in the impugned judgment dated 08.04.2013 [2013 (12) TMI 369 - GAUHATI HIGH COURT] Whether transport subsidies were or were not available together with other incentives - Held that:- Insofar as the second question is concerned, we accept the submission of assesssee that High Courts being Courts of Record under Art. 215 of the Constitution of India, the power of review would in fact inhere in them. This was in fact so decided in a slightly different context while dealing with the power of review of writ petitions filed under Art.226 by a judgment reported Shivdeo Singh & Ors. Vs. State of Punjab and Ors. [1961 (2) TMI 65 - SUPREME COURT] wherein held that there is nothing in Art. 226 of the Constitution to preclude a High Court from exercising the power of review which inheres in every court of plenary jurisdiction to prevent miscarriage of justice or to correct grave and palpable errors committed by it. We are in respectful agreement with what is stated in the aforesaid judgment. Apart from what has been said by us, it is also clear that on a cursory reading of Section 260A (7), the said Section does not purport in any manner to curtail or restrict the application of the provisions of the Code of Civil Procedure. Section 260A(7) only states that all the provisions that would apply qua appeals in the Code of Civil Procedure would apply to appeals under Section 260A. That does not in any manner suggest either that the other provisions of the Code of Civil Procedure are necessarily excluded or that the High Court's inherent jurisdiction is in any manner affected.
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2015 (8) TMI 524
Entitlmnet to deduction under section 80M on the dividends - gross dividend or net dividend – Held that:- Deduction under section 80M has to be calculated with reference to the amount of interest computed in accordance with the provisions of the Act after deducting interest on monies borrowed for earning such income and not with reference to the full amount of dividend received by the assessee - Judgment of HC [2003 (4) TMI 49 - BOMBAY High Court] sustained as Tax effect is nominal and the matter is also very old - Decided in favour of assessee.
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2015 (8) TMI 523
Entitlement to deduction u/s 80HHC - Profits derived from export - assessee had exported tea and had received sale proceeds in foreign exchange - AO found that there was a loss from Kerala tea and only a small profit from Tamil Nadu tea. The net result of trading in tea was a loss. The business income included in the total income is actually the income from the other activities and income from services rendered. After setting off the losses from tea the deduction is not permissible as section 80AB is to be applied - HC allowed assessee claim of deduction - Held that:- As relying on case of Jeyar Consultant and Investment Pvt. Ltd. v. CIT reported in [2015 (4) TMI 195 - SUPREME COURT] wherein it is categorically held that to avail of the benefit of section 80HHC of the Income-tax Act there has to be positive income from the export business. The said judgment in our opinion squarely covers the present case. The order of the High Court [2003 (3) TMI 24 - KERALA High Court] is accordingly set aside and the order of the Assessing Officer is restored. - Decided against assessee.
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2015 (8) TMI 522
Maintainability of appeal - low tax effect - as decided by HC [2012 (3) TMI 417 - KARNATAKA HIGH COURT] in view of the Circular No. 3 of 2011 it is held to be retrospective in operation by this court and it is applicable to pending appeals this appeal is not maintainable on the ground of being less than the monetary limit - Held that:- Liberty is given to the Department to move the High Court pointing out that the Circular dated February 9, 2011, should not be applied ipso facto, particularly, when the matter has a cascading effect. There are cases under the Income-tax Act, 1961, in which a common principle may be involved in subsequent group of matters or large number of matters. In our view, in such cases if attention of the High Court is drawn, the High Court will not apply the Circular ipso facto. For that purpose, liberty is granted to the Department to move the High Court in six weeks' time from today. - Decided in favour of revenue by way or remand.
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2015 (8) TMI 521
Depreciation on machinery purchased from Andhra Pradesh State Electricity Board - Held that:- All the authorities below have found, as a fact, that there was no such purchase of machinery and the transaction in question is sham. On that basis, it was concluded that since the machinery was not purchased by the appellant, it never became the owner of the machinery and, therefore, could not claim any depreciation thereof. These are pure findings of facts recorded by the authorities below. No question of law arises. HC judgment upheld [2003 (9) TMI 36 - KARNATAKA High Court ] - Decided against assessee.
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2015 (8) TMI 520
Disallowance of legal claim of deduction u/s 80-P(2)(a)(iii) wherein the appellant having inadvertently claimed deduction only u/s 80-P(2)(d) - As decided by HC [2012 (5) TMI 180 - PUNJAB AND HARYANA HIGH COURT] since appellant-sugar mill is engaged in marketing of agricultural produce of its members, it is entitled for the exemption as provided under Section 80-P (2) (a) (iii) - Held that:- In view of the order passed in Morinda Co-operative Sugar Mills Ltd. v. CIT [2012 (9) TMI 847 - SUPREME COURT ] if an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word `manufacture' the matter is remanded to the file of the Commissioner of Income-tax (Appeals). Taxability of the extra money collected against levy of sugar in view of the incentive scheme of the Govt. – Held that:- Grant was not for the purpose of bringing into existence new assets but was for the purpose of making payment to the sugarcane growers thus same shall be treated as capital receipt - the assessee is entitled to raise the contention before the Commissioner that in so far as the second issue is concerned, it is covered in his favour by the decision of this court in CIT v. Ponni Sugars and Chemicals Ltd. [2008 - TMI - 30719 - SUPREME COURT] wherein held that the payment received by the assessee under the Scheme was not in the course of a trade but was of capital nature
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2015 (8) TMI 519
Capital gain on transfer of aricultural land - appeal decided in favour of revenue by HC [High Court Reference - 2003 (1) TMI 49 - KERALA High Court] - Held that:- The tax effect in the present case is ₹ 4,22,830. On this ground alone, we refuse to entertain the appeal and to decide the same on the merits. - Decided against assessee.
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2015 (8) TMI 518
Allowance of depreciation for the block period - Whether the Tribunal is right in law in upholding the disallowance of depreciation under section 158BC by considering it as undisclosed income for the assessment year 1995-96 even though the date of filing the return of income has not expired when search took place and no return was yet filed by the assessee also confirmed by High Court [2002 (9) TMI 12 - GUJARAT High Court] - Held that:- As appellant informs us that the appellant-company has already been wound up and, therefore, there is no body to pursue these appeals. These are accordingly dismissed on this ground alone.
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2015 (8) TMI 517
Legality of reassessment proceedings - ITAT held it to be illegal - non deduction of TDS on management service fee paid - Held that:- There was a failure by the AO to comply with the mandatory requirement of disposing of the objections of the Assessee to the reopening in terms of the law explained by the Supreme Court in G.K.N. Driveshafts (India) Ltd. (2002 (11) TMI 7 - SUPREME Court) as well as on account of the failure of the Revenue to challenge before the ITAT the order of the CIT (A) deleting on merits the disallowance made by the AO of the management service fee consequent upon reopening of the assessment, there appears to be no need to examine the issue projected by the Revenue in this appeal viz., the justification for re-opening the assessment under Section 147/148 of the Act. The ITAT relied essentially on the decision of this Court in Commissioner of Income Tax v. Orient Craft Ltd. (2013 (1) TMI 177 - DELHI HIGH COURT) and Commissioner of Income Tax v. Smt. Jyoti Devi (2008 (7) TMI 954 - RAJASTHAN HIGH COURT) to answer the issue in favour of the Assessee. - Decided against revenue.
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2015 (8) TMI 516
Deduction u/s 80IC - whether sales tax rebate to be included as profit derived from Industrial Undertaking and eligible as deduction u/s 80IC - Held that:- On a parity of reasoning and on an analysis of section 80- IC, it must be held that any industrial undertaking or enterprise would be entitled to deduction under sub-section (1) only to the extent of profits derived from such an industrial undertaking and not on account of any rebate or incentive made available to it by the Government. The words "derived from industrial undertaking" are distinct from the words "profits attributable to industrial undertaking". The sales tax rebate falls within the ambit of the latter expression and not the former. What has been held in Liberty India vs. Commissioner of Income Tax, (2009 (8) TMI 63 - SUPREME COURT ) in respect of the DEPB incentive applies equally to sales tax rebate in respect of section 80-IC. The sales tax rebate is an incentive which flows from the scheme framed by the Himachal Pradesh Government and is, therefore, not a profit derived from the business but is an ancillary profit of the business. Question answered in favour of the Revenue. The assessee is not entitled to the benefit of section 80- IC in respect of the sales tax rebate obtained by it. - Decided against assessee. Eligibility for interest on FDRs - Held that:- assessee had received interest on FDRs kept with the bank as margin money. He treated the same as income from other sources and not profit derived from industrial undertaking. Accordingly, he disallowed the deduction. The Tribunal remanded the issue to the Assessing Officer for fresh adjudication in accordance with law and by keeping in view a decision of this Court referred to therein. As the matter has been kept open, no question of law arises
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2015 (8) TMI 515
Interest payment under Section 201(1A) on late payment of TDS - Tribunal confirming the order passed by the CIT (A) directing the A.O. to recalculate the interest payment from the date of deduction of TDS to the date of assessment of payee or after the date of actual payment of TDS, whichever is earlier - Held that:- In our opinion, when the assessee company had to pay the tax on behalf of the payee companies and when the payee companies themselves had not to pay any tax, subsequent to such declaration with regard to payee companies, no interest can be leviable against the company since there would be no loss of revenue in whatsoever manner. In the present case, it has been held that when the assessment qua the payee companies was completed and it was held that both the companies were not liable to pay any tax, the liability to pay interest upon the late payment of TDS by assessee would stop running. In our opinion the case of Commissioner of Income Tax V. Anjum M.H.Ghaswalla & Ors. (2001 (10) TMI 4 - SUPREME Court) would not be applicable to the present case. - Decided in favour of assessee.
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2015 (8) TMI 514
Expenditure incurred on laying marble flooring - allowable as revenue expenditure/current repairs or capital expenditure - Held that:- In Comfort Living Hotels P. Ltd. v. Commissioner of Income Tax [2014 (3) TMI 585 - DELHI HIGH COURT ] it was held by this Court that the expenditure incurred on removing the walls to increase the sitting capacity of a bar in a hotel should be treated as revenue expenditure since it was incurred to enhance the business profit. The court is of the view in the facts of this case that the ITAT has rightly affirmed the order of the CIT (A) treating the cost of the marble used to replace the flooring as revenue expenditure. The question is, therefore, answered in the affirmative i.e. in favour of the Assessee
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2015 (8) TMI 513
Rectification of mistake - Whether claim for deduction under Section 35D allowed in respect of expenses incurred in connection with private placement of equity shares is amenable to rectification by the Assessing Officer under Section 154? - Whether Section 154(1A) of the Act is no bar to rectification by the Assessing Officer under Section 154 of the Act? - Held that:- This very issue was agitated by the revenue at the hearing of the appeal. In fact, the revenue's submission that the assessee is not entitled to the benefit of Section 35D(2)(c)(iv) of the Act on the ground that the same is available only where expenditure is incurred in connection with public issue and this is a private placement is recorded in paragraph No.3 of the order dated 15 June 2012. The above submission was considered in paragraph No.7 of the above order holding that it was a matter of opinion depending upon the exact nature of the issue. Moreover the issue was also debatable. Therefore outside the scope of rectification. A review is an exception to the general rule that once a Court passes an order it becomes functus officio. The review is generally permissible when new and important evidence not available when the matter was first heard or in case there is some glaring error/mistake apparent on the face of the record. In this case, it is neither. In fact almost one hour was taken in an attempt to show us that it was an error apparent on record. In fact, the contentions taken before us in support of the review as pointed out above are in direct conflict/opposed to the statement of facts mentioned by the Commissioner of Income Tax in the appeal memo filed against the order dated 21 May 2010 of the Tribunal which led to the order dated 15 June 2012 of this Court. We find that the review application seems to have been filed in a most casual manner without having examined the case of the revenue in its memo of appeal which incidentally is the case they came to the Court in respect of the second issue. The approach of the revenue in these review petitions is not understood. First, the appeal was originally argued by some other advocate and for the review petition the revenue decided to engage Mr.Chhotaray. Thereafter when the review petition was being argued for undue time, we pointed out that this is a review and rearguing the appeal is not permissible. The counsel insisted on making submissions for further 45 minutes in support of the review, oblivious of the large number of appeals filed by revenue themselves, involving far more important questions, awaiting disposal. - Decided against revenue.
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2015 (8) TMI 512
Treatment of the currency seized during the search and seizure operations conducted u/s 132 - Assessees claim that the amounts seized to be accounted for as payment of advance tax on the date of seizure and interest chargeable under Section 234A, 234B and 234C of the Act ought to be computed accordingly confirmed by Tribunal - according to the Revenue, it cannot be treated as payment of tax till the filing of the return by the Assessee surrendering the seized amount as payment of tax or a demand being raised pursuant to a regular assessment - Held that:- Section 132(5) of the Act serves to protect interest of the Revenue as well as the Assessee; whilst sufficient assets to meet the liability of the Assessee are retained in the custody of the Income Tax Authority, the concerned Authority is not permitted to retain assets in excess or what may be required to meet the Assessee’s liability. The words “retained in his custody” are key operative words which, clearly, indicate that the ITO retains the assets in his custody and the same are not appropriated towards payment of tax. Section 132(5) of the Act does not contemplate appropriation of assets towards any liability, whether existing or in future, but is limited to permitting the ITO to retain the seized assets to be applied as provided under the Act.The expression “existing liability” as used in Section 132(5) of the Act would mean a liability which has been determined and crystallized and, thus, is capable of being specified in an order under Section 132(5) of the Act. In absence of any return filed, any assessment made or any determinative process undertaken, the question of the ITO specifying a liability under clause (iii) of Section 132(5) of the Act does not arise. Thus, plainly, the reference to an “existing liability” as used in Section 132(5)(iii) of the Act would mean such liability that has already been determined and crystallized such demands outstanding in respect of prior years where assessment have been made for or any other liability that stands crystallized by any determinative process under the Act. In view of the aforesaid, the conclusion of the CIT(A) as well as the Tribunal that liability of the Assessee would stand discharged to the extent of cash seized from the date of the order under Section 132(5) of the Act is not sustainable as Section 132(5) of the Act does not deal with appropriation of the assets seized. Although it cannot be disputed that the Assessee had the liability to pay the advance tax, nonetheless, this liability could not have been determined by the AO prior to the assessment under the Act. Advance tax is, essentially, to be paid by an assessee on the amount of taxable income estimated by it. The AO can determine whether payment of advance tax paid fell short of the required amount only when an assessee’s income is assessed. Thus, at the stage of Section 132(5) of the Act, such liability in respect of the Assessee’s income for the Previous Year 1990-91 could not be specified under clause (iii) of Section 132(5) of the Act. - Decided in favour of the Revenue
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2015 (8) TMI 511
Benefit of Section 80IA - as per Tribunal the initial assessment year for the purpose of Section 80IA is the assessment year 1999-2000 - Held that:- In Section 80IA itself, the term 'initial assessment year' has been defined as the assessment year relevant to the previous year in which the hotel has started functioning its business. Admittedly, the hotel has started business in the previous year relevant to the assessment year 1999-2000. Therefore, even if the approval of the authority is with effect from 12.4.1999, the Tribunal could have decided the issue only in the light of the definition of the term 'initial assessment year' contained in Section 80IA. If that be so, the view taken by the Tribunal that the initial assessment year is 1999-2000 cannot be faulted. True, the assessee could have claimed the benefit of Section 80IA only after approval has been granted by the prescribed authority and that approval is only with effect from 12.4.1999. However, that does not enable the assessee or the Tribunal to postpone the initial assessment year which term is statutorily prescribed and fixed. On the other hand, if the prescribed authority had wrongly fixed the date of commencement of the business, it was for the assessee to get that error committed rectified in appropriate proceedings, which has not been done in this case. Appeal dismissed.
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2015 (8) TMI 510
Entitlement to claim deduction under section 80-IA - Held that:- The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee
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2015 (8) TMI 509
Undisclosed income - addition on the basis of dairy found during the search - Tribunal based on the oral and documentary evidence has come to the conclusion that the addition of the amount of the income of the assessee was illegal and upheld the order of the Commissioner of Income-tax (Appeals) with elaborate discussion with reference to the evidence - Held that:- The documents seized, i.e., GD-8 to GD-12 are admitted and belongs to Hazarimal Bajaj and not the assessee, therefore, such admission being evidenced has to be controverted by the Revenue on the basis of evidence found during the search. Not doing so, the addition for the name sake cannot be justified. Upon considering the order of the Appellate Tribunal, we do not find that there is any perversity in appreciating the materials on record and in coming to the conclusion. The only possible question, the Revenue could urge that the finding of the Appellate Tribunal is perverse and contrary to the evidence and material on record, however, such question would not arise in the light of the above observations extracted above made by the Tribunal in coming to the conclusion while upholding the order of the Commissioner of Income-tax (Appeals). - Decided against revenue.
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2015 (8) TMI 508
Estimation of sales - Tribunal held that the assessments, on estimation, were not permissible, on the face of the material, which was found during the search, and statement made by the assessee - Whether ITAT was justified in approving finding of the CIT (Appeals) for reaching to conclusion about estimate of sales from ₹ 7,59,000 to ₹ 5 lakhs only ? - Held that:- After the seizure on October 10, 1990, the chartered accountant of the assessee had sent a clarification on December 8, 1990, with regard to the surrender that the entire surrendered amount of ₹ 9,32,107 was coupled with the statement that the amount may be verified from the credits entered in the diaries. The chartered accountant clarified the statement, with an observation that the surrendered amount must be subject to the verification of the credits entered in the diaries and thereby reducing the amount surrendered to that extent. He had further explained that the amount worked out was on the peak investment, for which working had been done by arranging transactions entered in the diaries in historical sequence in a details statement. The statement included both the unexplained and surplus resulted from such transactions. The total unexplained investment, according to the chartered accountant, worked out to ₹ 6,13,080 as against ₹ 9,32,107 arrived by merely roughly adding the sums mentioned in diaries irrespective of it being a debit entry or credit entry. Further, surplus of cash according to working statement, comes to ₹ 1,52,407. Thus no force in the submission of Revenue that the surrender was unconditional, without any explanation, or that, the assessee had agreed, at that time to add the entire surrendered amount to his income. He had clearly mentioned that the amount surrendered, as reflected in the red and blue diaries, should be accounted, subject to the verification of credits entered in the diaries, and thereby, reducing the amount of surrender, to that extent. No error in the findings of the Tribunal, that the statements made during search, must be correlated with the records, which are found, and if there is any ambiguity, the explanation given by the assessee should be taken into consideration, before making the assessment. The legal position with regard to the undisclosed income from the diaries, does not need any elaboration, however, if the material found during the search, does not tally with the statement records, and that the statement is made subject to the material, which has been seized, a conscious effort should be made to consider the effect of the statement and to make an appropriate assessment by correlating the statements with due material. - Decided against revenue.
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2015 (8) TMI 507
Deduction under section 80HHC denied - AO disallowed the said claim on the ground that the STC had declared loss, they had not earned any profit out of such exports. Secondly, on the ground that the deduction under section 80HHC of the Act is permissible only when the realisation is in foreign exchange - ITAT allowed claim - Held that:- To attract the said provision, the supporting manufacturer who sells the goods or merchandise to the export house or trading house, the export house and trading house has to issue a certificate under the proviso to sub- section (1) of section 80HHC of the Act. If these two conditions are fulfilled, then the supporting manufacturer is entitled to the deduction as contemplated under section 80HHC of the Act to an extent as mentioned in section 80HHC(1B) of the Act. It is immaterial whether in the process, export house or trading house sells the goods to any foreign country or earns profit or realises any foreign exchange. In order to attract section 80HHC(1A) of the Act after purchase of goods or merchandise from the supporting manufacturer, the said goods has to be exported out of India. Once such export is established, a certificate under the proviso to sub-section (1) is issued by the export house or trading house and when they are not claiming the benefit under section 80HHC, the assessee would be entitled to the benefit of deduction as prescribed under section 80HHC(1A) of the Act. Even the circulars relied on do support the case of the assessee. - Decided in favour of assessee. Whether Tribunal was right in concluding that the assessee has apparently complied with the statutory requirements provided in section 80HHC(1A) for claiming the deduction, even though the requisite certificate duly signed by an accountant as defined in the Explanation below sub-section (2) of section 288 of the Income-tax Act, 1961, has not been filed along with the R/I? - Held that:- This court had an occasion to consider this question in the case of ITO v. Mandira D. Vakharia [2000 (11) TMI 48 - KARNATAKA High Court] where it has been held that even though the requisite certificate duly signed by an accountant as defined in sub-section (2) of section 88 of the Act is not produced along with the return, if it is produced even in the course of proceedings, it has to be taken note of and given the benefit. Therefore, the Tribunal was justified in granting the relief to the assessee relying upon the certificate produced in the course of the proceedings. - Decided in favour of the assessee.
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2015 (8) TMI 506
Delay in proceedings initiated in terms of section 158BD - Held that:- CIT (A) and Tribunal were justified in arriving at a finding that the proceedings initiated in terms of section 158BD are vitiated by enormous and unexplained delay. The search conducted in two cases on August 24, 1998, concluded on October 23, 1998. The intimation issued under this provision is of October 4, 2005. The Tribunal applied the judgment of Manish Maheshwari v. Asst. CIT reported in [2007 (2) TMI 148 - SUPREME COURT OF INDIA] to conclude that a notice issued after lapse of unreasonable time would result in annulment of the proceedings. We do not think that such finding of fact can be termed as perverse or vitiated by any error of law apparent on the face of the record, enabling us to entertain this appeal. - Decided against revenue.
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Customs
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2015 (8) TMI 532
Jurisdiction of Magistrate to remand – Petitioner was produced before Magistrate for remand however refused to remand accused stating that when Magistrate, Alandur was having jurisdiction to conduct Trial and had jurisdiction over area of occurrence, then said court alone was competent to remand accused – Held that:- Section 57 of CrPC prohibits detention in police custody of accused beyond 24 hours without producing him before Judicial Magistrate – Officer arresting accused has to produce accused to Judicial Magistrate nearest to place of arrest and not Magistrate nearest to place of commission of offence, irrespective of fact whether that Magistrate has jurisdiction to try offence or not – Keeping in mind that Judicial remand was only safeguard against frivolour arrests and illegal detention Judicial Magistrates should undertake this responsibility of receiving remand papers and accused, whenever they were presented – therefore Magistrate ought not to have refused to remand accused to custody –If Magistrate was of opinion that trial will be before Magistrate, Alandur, then it was open for him to direct Jail Authorities to cause production of accused on expiry of 15 day period before Judicial Magistrate, Alandur – Magistrate directed to adhere to law laid down – Petition closed.
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2015 (8) TMI 531
Settlement of case – True and full Disclosure – Petitioner challenges order passed by respondent-1 by which, applications seeking immunity by way of settlement of disputes, came to be dismissed on ground of failure of petitioners to make full and true disclosure of duty liability under Section 127(B)(1) – Held that:- fundamental requirement of application under Section 127-B was full true and candid disclosure by applicant of liability to pay duty which was not disclosed before proper officer – Significantly, these include particulars of dutiable goods in respect of which applicant admits short levy, on account of mis-declaration or undervaluation – Petitioners accepted only 11.89% of total liability demanded by department based on documentary evidence – Petitioners were admittedly given sufficient opportunities to come up with true and full disclosure of their liability, however, right from inception, petitioners have been dodging matter without participating in settlement proceedings – Petitioners have not failed to make true and full disclosure of their duty liability in their applications, but have also failed to provide required co-operation to Bench to settle case in true spirit of settlement –Therefore, considering facts and circumstances of case and more particularly, lack of co-operation on part of petitioners for settlement of their case, Commission has rightly held that it was fit case for sending it back to original authority for disposal in accordance with law –Decided against petitioner.
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2015 (8) TMI 530
Valuation of goods - DEPB benefits - Tribunal in impugned order reported in [2014 (12) TMI 812 - CESTAT MUMBAI] held that FOB value as declared by assesse was not actual transaction value/FOB value but were highly inflated for claiming DEPB benefits or for bringing in illegally obtained foreign exchange - Aggrieved by said order of tribunal assesse appealed before Supreme Court which was also dismissed.
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2015 (8) TMI 529
By impugned order reported in 2014 (9) TMI 400 - Madras High Court, high court arrived at the conclusion that in facts and circumstances of case conclusion of Tribunal that goods imported were Mulberries Silk Grade IV A which did not attract Anti-dumping duties and issuance of show cause notice after period prescribed was not legally sustainable as there was no intention on part of importer to evade duty was held incorrect - Petition was filed challenging said order of high court - Supreme court decided that there were no reasons to entertain petition thus, dismissed.
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Corporate Laws
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2015 (8) TMI 528
Restraining from Accessing securities – Several complaints from investors regarding non receipt of “Composite Application Forms” for subscribing to rights issue of company and several other discrepancies were noticed by which access to security was stayed – Held that:- Since appellant No.1 had floated rights issue, it was primary responsibility of appellant No.1, to ensure that CAFs were dispatched in manner specified under regulation 54(1) of ICDR Regulations, 2009 – Since appellant No.1 failed to discharge that responsibility, appellant cannot escape from liability – Admittedly advertisement was issued and verified by appellant No.1 therefore appellant no. 1 was liable for error in advertisement – Further 2 out of 4 cheques of appellant No.2 aggregating to ₹ 23.75 crore bounced despite knowing fully well that funds were insufficient – SEBI was empowered under Section 11(4) of SEBI Act, 1992 to restrain persons found violating regulations framed by SEBI – Appeal dismissed – Decided against appellant.
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2015 (8) TMI 527
Scheme of Amalgamation – Dispensing convening of meetings of equity shareholders, secured and unsecured creditors to consider and approve, proposed Scheme of Amalgamation under Sections 391 to 394 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, secured 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 545
Denial of refund claim - Business Support Service or manpower recruitment service - Service tax paid mistakenly on an amount which was collected by them from their sister concern for deputing manpower - Held that:- appellant has deputed their own employees to their sister concern and based on accounting entries of recovery of cost of such employees, under mis-understanding of law paid the service tax liability under Business Support Service. The adjudicating authority as well as the first appellate authority have held that the service tax liability does not arise under Business Support Service and Revenue has not filed any appeal against such order. As regards the findings of the adjudicating authority that the service tax payable would be under the category of Management Consultancy Service, the same has been rejected by the first appellate authority. Be that as it may, we find that this Tribunal in the case of Sugar Daurala Sugar Works (2014 (6) TMI 274 - CESTAT NEW DELHI) Daurala Organics (2009 (3) TMI 99 - CESTAT NEW DELHI) have categorically held that deputation of employees to their own sister concern would not fall under the category of Management Consultancy Service. Classification was not sought to be made by the show-cause notice nor by the adjudicating authority, secondly, assessee could not have addressed himself the classification of the services, unless the first appellate authority has issued a show-cause notice to the appellant to that effect. From the records it transpires that the first appellate authority has not issued show-cause notice to the appellant for reclassification of the service to the Manpower Recruitment or Supply Agency Service. On this legal issue itself, the impugned order is liable to be set aside. - deputation of employees to their own sister concern and recovering cost from them, would not amount to rendering of Manpower Recruitment or Supply Agency Service. The said view has been upheld by the Hon’ble High Court as reported in [2014 (4) TMI 132 - GUJARAT HIGH COURT]. - service tax paid by the appellant is not liable to be taxed under any category of the services as has been sought to be done so by the lower authorities - Decided in favour of assessee.
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2015 (8) TMI 544
Exemption under Notification No.45/2010 dated 20.7.2010 - erection, commissioning or installation services and works contract services - Held that:- It is Assessee's contention that after 22.6.2010, it needs to be verified whether the appellant are eligible to the Notification No.32/2010-ST dated 22.6.2010 for rendering services relating to distribution of electricity. Both sides agree that for this limited purpose to ascertain the eligibility to the benefit of exemption Notification No.32/2010 dated 22.6.2010 for the period from 22.6.2010 till September, 2010, in the event the service related to distribution of electricity for the said period, it needs to be verified/scrutinized by the adjudicating authority. - Matter remanded back - Decided in favour of assessee.
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2015 (8) TMI 543
Demand of service tax - Commission agent service - Reverse charge mechanism - Held that:- For the demand of service tax liability under reverse charge mechanism from 01.04.2003 to 18.04.2006 the adjudicating authority is correct in dropping the demands as during the relevant period provisions of Section 66A of the Finance Act, 1994 were not in statute. Provisions of taxing an amount paid by an assessee in India under reverse charge mechanism was brought into statute from 18.04.2006. This law is settled by the Hon’ble High Court of Bombay in Indian National Ship Owners Association [2008 (12) TMI 41 - BOMBAY HIGH COURT] and upheld by the Hon’ble Apex Court in [2009 (12) TMI 850 - SUPREME COURT OF INDIA]. Accordingly, we hold that the impugned order to the extent it drops the proceedings initiated against respondent-assessee upto 18.04.2006 is correct and legal and does not require any interference. In respect of demand post 18.04.2006 the provisions of Section 66A would be applicable in this case and the respondent-assessee is liable to discharge appropriate service tax liability on the amount paid by them as commission to agents appointed abroad for procuring export orders. We uphold that portion of the order which confirms the demand of service tax from 18.04.2006 to 31.3.2007. Since we uphold the demands of service tax liability, the interest liability under Section 75 of the Finance Act, 1994 would also requires to be discharged - However, penalty is set aside - Decided partly in favour of asessee.
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2015 (8) TMI 542
Benefit of abatement of 75% - whether the appellant as a recipient of GTA services is eligible for exemption under Notification No.32/2004-ST dated 03.12.2004 without fulfilling the conditions mentioned therein - absence of any declaration from the transport contractors regarding non-availment of CENVAT Credit and also that the declarations were not in respect of the units where the credit was availed - Held that:- On perusal of the declaration forms which were produced by learned Counsel we find that the said declaration clearly indicates that the transport contractors had not availed CENVAT Credit or benefit of Notification 12/2003-ST and the said declarations also covers the period which is in dispute in these appeals. We also find that the declarations are on the specific depots of the appellant either Silvasa at Navi Mumbai or Haybunder Road. Though Haybunder Road is not specifically mentioned, it can be seen from the certificates that the location is mentioned as Lube Plant I and Lube Plant II - Declarations which were produced before us covers the period in question and the impugned orders which denied the benefit of Notification No.32/2004 are incorrect. - Impugned order is set aside - Decided in favour of assessee.
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2015 (8) TMI 541
Waiver of pre deposit - Subsequent deposit of tax - Held that:- Commissioner (Appeals) dismissed the appeal on the ground of default in making pre-deposit. We find that the appellant had subsequently deposited the entire amount of service tax, which in our opinion is sufficient to hear their appeal. Consequently, we remand the matter to the Ld. Commissioner (Appeal) for deciding the issue afresh, on merit, without insisting for any pre-deposit - Decided in favour of assessee.
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2015 (8) TMI 540
Delay in filing of appeal before commissioner (appeals) - Bar of limitation - Held that:- Appellant for the first time has raised an issue before this forum that certified copy of the order in addition to original copy of the order is necessary for the purpose of filing an appeal. However, this plea was not taken before the ld. Commisisoner(Appeals) and therefore he had no occasion to record his findings on this issue. Accordingly I am of the opinion that the case requires to be remitted back to the ld. Commissioner(Appeals) for his findings on the plea taken now by the Appellant and therefore the Commissioner(Appeals)s order is set aside - Decided in favour of assessee.
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Central Excise
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2015 (8) TMI 537
Waiver of pre dpeosit - Exemption under the Notification No. 89/95-C.E. - Supreme Court dismissed the appeal filed by the assessee against the decision of High Court [2014 (9) TMI 527 - Madras High Court], however, granted another three weeks’ time from today to the petitioner to comply with the orders and directions issued by the High Court. High Court in the impugned order held that With regard to the nature of manufacturing activity carried on by the appellant and the process viz., refining process, they get refined vegetable oil as the main product and soap stock as a by-product, which was further converted as acid oil and soap sludge and whether these products would clarify as “waste” and entitled for exemption under Notification No. 89/95-C.E. are questions of fact, which the appellant/assessee has to establish before the CESTAT and the CESTAT, would go into the said aspects and render a final finding. reason given by the CESTAT cannot be faulted with. However, taking note of the fact that the status of the assessee as Small Scale Industry and such fact is not in dispute, the appellant is hereby directed to make pre-deposit of ₹ 5,00,000.
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2015 (8) TMI 536
Duty evasion - Clandestine removal of goods - Reversal of MODVAT Credit - Supreme Court after condoning the delay dismissed the appeal filed by the assessee against the decision of High Court [2014 (10) TMI 720 - ALLAHABAD HIGH COURT]; wherein Tribunal held that Appellant has manufactured and removed the goods without payment of duty as per the details given in the order of authorities below. The circumstances goes long way coupled with other materials are sufficient to prove that there had been unaccounted production and removal of the goods in clandestine manner by the appellant during the period in question without payment of duty.
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2015 (8) TMI 535
Claim of Interest on refund - Tribunal has not dealt with the same at all in its order [2004 (7) TMI 131 - CESTAT, NEW DELHI]. - Held that:- contention is specifically noted in the impugned judgment but there is no finding on the same by the Tribunal. Likewise, the Commissioner had also not dealt with this aspect. - Matter remanded back - Decided in favour of assessee.
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2015 (8) TMI 534
Denial of refund claim - Payment made under protest - Unjust enrichment - Held that:- payment in question for which refund was sought was made under protest and also that the assessee had not passed on the burden of Excise duty, so paid, to the ultimate consumers. On these facts the question of unjust enrichment in the present case does not arise - Decision of HC [2004 (3) TMI 83] sustained - Decided against Revenue.
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2015 (8) TMI 533
Classification of goods - manufacture of nylon and leather belt, nylon and rubber belt and nylon and textile belt - Held that:- tribunal rightly classified under Chapter Heading 4201.90 and 4010.00 and 5908.00 respectively. It is misconceived on the part of the appellant argued that simply because of plastic was one of the inputs it would still retain its characteristics as plastic and should have been classified under Heading 3926.90. - Not only the products manufactured are wholly from the plastics, after the manufacture it lost its identity as plastic insofar as and has not known in the market any longer - Decision of tribunal [2000 (6) TMI 301 - CEGAT, MUMBAI] sustained - appellant should be extended the benefit of the Modvat credit, in this connection, if the assessee is entitled to such Modvat credit otherwise, the same shall be given to him. - Decided against Assessee.
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CST, VAT & Sales Tax
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2015 (8) TMI 539
Levy of tax on ‘deemed sale price’ – Constitutional validity – Explanation 2, Section 2(1)(zd) – Prior to amendment to Explanation to Section 2 (1) (zd) input tax liability was included in sale price and passed on to purchaser – However by explanation 2 VAT was to be levied on price charged for sale which was yet to take place – sale and purchase of petroleum products - It was assailed by petitioners that it was contrary to statutory provisions, concept of VAT and completely deprives dealers of claiming any input tax credit – Whether Explanation 2 added to Section 2 (i) (zd) was constitutionally sustainable inasmuch as it seeks to levy VAT on 'deemed' sale price. Held that:- subject of tax not goods or goods sold, but transaction of “sale of goods” – Addition of Explanation 2 was to permit levy of VAT on sale price of transaction which is yet to take place and to that extent such levy cannot be sustained in law – It was not on price of actual completed sale but price of sale which is yet to take place – Law prohibits taxing of transaction which is not completed sale – Expression 'sale' within meaning of Section 3 was confined to actual sale that has taken place and it was only price of that sale that can legitimately constitute measure for levy of tax. As explained in State of Rajasthan v. Rajasthan Chemists Association [2006 (7) TMI 17 - SUPREME COURT OF INDIA] this cannot be overridden by devising measure of tax which relates to event which has not come into existence – Devise adopted was beyond legislative competence of legislature with reference to Entry 48 in List II to Constitution – Therefore, Explanation 2 hereby struck down as being ultra vires to Constitution –Consequently, omission in Form DVAT-16 of relevant column to enable dealer to claim input credit was also declared to be unsustainable in law – Petition allowed – Decided in favour of Assesse.
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2015 (8) TMI 538
Validity of order - opportunity of being heard no provided - Violation of principle of natural justice -Violation of mandatory conditions mentioned under Section 22(4) of the Tamil Nadu Value Added Tax, 2006 - Held that:- Court finds no justification whatsoever to accept the impugned order, since the contention made by the learned counsel for the petitioner that there has been violation of mandatory conditions mentioned under Section 22(4) of the 2006 Act deserves acceptance, as there was no proper reply from the respondent. - Therefore, on the short ground that there has been violation of principles of natural justice by not affording an opportunity of personal hearing to the petitioner as provided under Section 22(4) of the 2006 Act, the impugned order dated 13.02.2015 is set aside and the matter is remitted back to the respondent for fresh consideration on merits and in accordance with law. - Decided in favour of assessee.
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Indian Laws
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2015 (8) TMI 546
Jurisdiction of ESI Court - exemption under Employees State Insurance Act, 1948 - Held that:- Employees Insurance Court is a tribunal specially constituted for the purpose of deciding any controversy that may arise on the matters enumerated in Section 75 of the Act. A reading of Section 75 of the Act would show that the ESI Court has full jurisdiction to decide all the matters arising between the employer and the Corporation under the Act. Section 75 of the Act sets out the matters to be decided by the ESI Court. As per Section 75(1)(g) of the Act, ESI Court is empowered to decide any matter which is in dispute between the employer and the Corporation in respect of any contribution or benefit or other dues payable or recoverable under the Act or any other matter required to be or which may be decided by the ESI Court under the Act and such question or dispute subject to the provisions of sub-section (2-A) shall be decided by the ESI Court in accordance with the provisions of the Act. - ESI Court did not have the jurisdiction to consider the question of grant of exemption, order passed by the ESI Court granting exemption and consequently setting aside the demand notices is non-est. The High Court, in our view, rightly set aside the order of ESI Court and the impugned judgment does not suffer from any infirmity warranting interference. - Decided against appellant.
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2015 (8) TMI 526
Constitutional Validity of use of Aadhaar card – Right to Privacy – Respondent while relying upon decision of Supreme court in M.P. Sharma & Others v. Satish Chandra & Others [1954 (3) TMI 1 - SUPREME COURT OF INDIA] and Kharak Singh v. State of U.P. & Others [1962 (12) TMI 67 - SUPREME COURT OF INDIA] contended that legal position regarding existence of fundamental right to privacy is doubtful – Therefore such matters were required to be heard and decided by larger bench of at least five Judges as these matters throw up for debate important questions, in view of mandate contained under Article 145(3) of Constitution – Whether there is any “right to privacy” guaranteed under our Constitution – Held that:- Current court is of opinion that institutional integrity and judicial discipline require that pronouncement made by larger Benches cannot be ignored by smaller Benches without appropriately explaining reasons for not following pronouncements made by such larger Benches – Therefore, to give quietus to kind of controversy raised once for all, it is better that ratio decidendi of M.P. Sharma case and Kharak Singh was scrutinized and jurisprudential correctness of decisions where right to privacy was either asserted or referred be examined and authoritatively decided by Bench of appropriate strength - Matters referred before court of Chief Justice of India for appropriate orders. Till matter is finally decided by larger Bench, UOI directed to give wide publicity in electronic and print media that it was not mandatory for citizen to obtain Aadhaar card – Information obtained by UID Authority shall not be used for any other purpose, except for purpose of criminal investigation.
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