Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 18, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
Highlights / Catch Notes
Income Tax
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Penalty u/s 271D - violation of the provisions of section 269SS or not - treating the deposit/loan of ₹ 40,00,000/- as capital contribution of the member of AOP, for the AOP - transactions are genuine - no penalty - HC
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Share capital received from the various share-holders ought not to have been treated as business income. - SC
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Disallowance made u/s 40A(2)(b) deleted for the reason that the assessee has proved that the price paid is at arm’s length and not excessive or unreasonable and as the disallowance made on ad-hoc basis is arbitrary. - AT
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Allowability of interest expenditure - The assessee-company had failed to controvert the suspicion entertained by the AO with evidence. Therefore, assessee had failed to discharge the onus of proving that the borrowings were made only for business purpose - AT
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CIT(A) had rightly disallowed the deduction claimed U/s 43B of the Act for advance payment of VAT - this advance tax is not covered within the meaning of definition of ‘any sum payable’. - AT
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Excess stock found during the course of survey is income from business and profession and cannot be assessed U/s 69 - U/s 28(v) the interest, salary, bonus, commission and remuneration in the name of partner is assessed to tax as income from business and profession. - AT
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Net income determination - assessee has not maintained proper vouchers but spent it in cash - instead of disallowing 50% of cash expenditure, AO should have estimated the income - AO directed to determine the net income of the assessee at 20% of the gross receipts - AT
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Deduction u/s. 54 - construction of the house was not completed within the stipulated period - Advances paid for the purpose of purchase and/or acquisition of the aforesaid assets would certainly amount to utilization by the assessee of the capital gains made by him for the purpose of purchasing and/or acquiring the aforesaid assets - AT
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Penalty u/s. 271B - Failure to get accounts audited - assessee has filed the audit report before the AO during the course of penalty proceedings, got his accounts audited, paid the tax and filed the return of income much before the specified date - penalty cancelled - AT
Customs
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Classification - import of Phosphoric acid - full exemption under Notification No.265/92-CUS dated 27.08.1992 for the manufacture of fertilizers allowed - AT
Service Tax
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Service tax credit - When the ER-1 returns containing the details credit were filed regularly extended period demand cannot be raised later in case it was found that certain credits are not eligible to the assessee - AT
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Cenvat credit - the service tax credit on medical claim for employees of the appellant is available - AT
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Cenvat credit - eligibility - service tax paid on crushing charges to the job worker - there is no justifiable reasons for denial of part of credit of service tax availed by the appellants - AT
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Invokation of extended period of limitation - It is not tenable to contend that if the credit is taken on photocopies of the documents, extended period can automatically be invoked. - AT
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Cenvat credit - management consultancy service and consulting engineering service” provided by the Directors to their own company i.e. appellant - Whether the appellant has availed CENVAT credit on the basis of proper evidence for payment of tax - the appellant not having come out with clean hands, it is difficult to entertain the appeal on merit - AT
Central Excise
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Exemption - deemed export - respondent has not supplied the goods directly to SEZ Unit but has supplied the same to M/s. Shree Bajrang Alloys Ltd., who have further supplied the goods to SEZ Units - Benefit of Exemption allowed - AT
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Period of limitation - If audit could not take place then this inadmissible credit availed by the appellant could not be detected. Therefore, the extended period of limitation is rightly invoked - AT
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Valuation - physician samples - most of the pharmaceuticals manufacturers were adopting assessable value on the basis of cost data, we are of the view that no malafide intention can be attributed to the assessee so as to invoke the longer period of limitation - AT
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Cenvat credit - The rock bolts being used as fixtures in mining process are entitled for credit as they are covered by specific description of 'fixtures' under Rule 2(a)(A)(iv) of Cenvat Credit Rules, 2004 - credit allowed - AT
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Denial of cenvat credit - the credit entries were in the regular records, which were audited and the dispute arose thereafter only. Therefore, invoking extended period with an allegation of suppression of facts and willful mis-statement with an intend to evade payment of duty is not sustainable. - AT
VAT
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Taxability of works contract - the point at which these iron and steel products are taxable is the point of accretion, that is, the point of incorporation into the building or structure - Transaction cannot be taxed again - SC
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Reversal of Input tax credit (ITC) - assessment, pertaining to 'Invisible Loss' during manufacturing activity - revenue directed to redo the assessment in accordance with law. - HC
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Rate of Tax / VAT - classification of Crude Degummed Soyabean Oil - oil will remain oil if it retains its essential properties and merely because it has been subjected to certain processes would not convert it into a different substance - HC
Case Laws:
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Income Tax
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2016 (8) TMI 613
Share capital received from the various share-holders - nature of income - Held that:- We modify the order of the High Court [2011 (9) TMI 803 - Karnataka High Court] on account of share capital received from the various share-holders ought not to have been treated as business income. The High Court, therefore, in our considered view, fell into error in reversing the order of the Tribunal on the aforesaid issue. Short term capital gains with respect to property T1 and T2 and maintenance deposit - HC order confirmed
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2016 (8) TMI 612
Validity of notice issued under section 201(1)/201(1A) - Held that:- HC order [2015 (11) TMI 408 - DELHI HIGH COURT] confirmed. No new information has come and the impugned notice that was issued on January 20, 2015, was on the basis of the same information in respect of which the notice dated February 17, 2014, had been issued. Thus, those proceedings which had ended and attained finality with the passing of the order dated December 5, 2014, of this court in cannot now be sought to be revived through this methodology adopted by the Assessing Officer. Even otherwise, in so far as the financial year 2007-08 is concerned, the period for completing the assessment under section 201(1)/201(1A) has expired on March 31, 2015. We do not find any merit in this petition. The special leave petition is, accordingly, dismissed.
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2016 (8) TMI 611
Levy of penalty under Section 271(1)(c) - claim of depreciation - Held that:- Claims have been disclosed by the assessee by way of Notes No.4 and 7 to the Balance sheet and considering the authorities cited at the bar by the learned Counsel for the assessee, this Court is the opinion that this will not amount to concealment and therefore will not attract penalty. We are in complete agreement with the view taken by the CIT (A). Accordingly, Tax Appeal is allowed by answering the issue raised in this appeal in favour of the assessee
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2016 (8) TMI 610
Disallowance made on account of survey charges - Tribunal deleted addition - Held that:- We find that the impugned order of the Tribunal has deducted the disallowance on a finding of fact that the tax has already been offered on the same for the Assessment Year 1999-2000 on receiving it from the successful bidder. No substantial question of law. Deprecation on transactions relating to lease of assets - Held that:- Tribunal allowed the Respondent-Assessee's appeal by following the decision of the Apex Court in ICDS Ltd., v/s. CIT [2013 (1) TMI 344 - SUPREME COURT ]. - Decided against revenue Deprecation claimed on assets covered by sale and lease back agreements - Held that:- We find that the impugned order of the Tribunal restored the issue to the Assessing Officer to decide the nature of transactions on examination of the sale and lease agreement entered into by the Respondent-Assessee with its lessees. This remand was with a specific direction that the Assessing Officer would examine the sale and lease back transactions entered into by the Respondent-Assessee with the three parties and decide the issue afresh, keeping in view the decision of the Delhi High Court in CIT v/s. Cosmo Films Ltd. [2011 (7) TMI 32 - DELHI HIGH COURT] - Decided against revenue Allocation of expenses on estimate basis - Tribunal directing the AO to treat 50% of the expenses as capital and the remaining 50% expenditure as revenue expenditure - Held that:- The issue raised herein stands concluded against the Appellant-Revenue and in favour of the Respondent-Assessee in view of the decision of this Court in CIT v/s. Ogilvy and Mather Pvt. Ltd [2011 (9) TMI 1013 - BOMBAY HIGH COURT ] Deduction u/s. 80M - interest paid on borrowed funds related to purchase of shares would be deducted out of dividend income - Held that:- The issue raised herein is concluded against the Appellant-Revenue by the decision of this Court in CIT v/s. Emerald Co. Ltd.[2005 (9) TMI 50 - BOMBAY High Court ]. Moreover, we find that the impugned order itself records the fact that the Appellant-Revenue had before the Tribunal accepted the fact that the issue raised herein, stands concluded in favour of the Respondent-Assessee
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2016 (8) TMI 609
Penalty under section 271D - violation of the provisions of section 269SS or not - treating the deposit/loan of ₹ 40,00,000/- as capital contribution of the member of AOP, for the AOP - Held that:- We have perused the orders of the Commissioner (Appeals) as well as the Tribunal. In this case the transaction was found to be genuine. The Assessing Officer has not doubted the transaction. In that view of the matter, both the Commissioner (Appeals) and the Tribunal have rightly deleted the penalty. We do not find any infirmity in the orders passed by the Tribunal. We are, therefore, of the opinion, that the question referred to us is required to be answered in favour of the assessee and against the revenue. The appeal is dismissed accordingly. We answer the question in favour of the assessee and against the revenue.
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2016 (8) TMI 608
TP adjustment - AMP expenditure - Held that:- We are of the opinion that after the judgments of Maruti Suzuki [2015 (12) TMI 634 - DELHI HIGH COURT] and Bausch & Lomb (2015 (12) TMI 1332 - DELHI HIGH COURT) there is no scope of any other interpretation about the AMP expenditure. In the case under consideration, the AO/TPO has not brought anything on record that there existed and agreement, formal or informal, between the assessee and the AE to share/reimburse the AMP expenses incurred by the assessee in India. In absence of such an agreement the first and primary precondition of treating the transaction-in-question an IT remains unfulfilled. Conducting FAR analysis or adopting an appropriate method is the second stage of TP adjustments. The first thing is to find out whether the disputed transaction in is IT or not. Without crossing the first threshold second cannot be approached, as stated earlier. In the case under consideration, we are of the opinion that AMP expenditure is not an IT and therefore we are not inclined to restore back the issue to the file of the AO. Considering the facts and circumstances of the case under consideration, we are of the opinion that the FAA was not justified in upholding the order of the TPO. Therefore, reversing his order, we decide second ground in favour of the assessee. TP adjustment made in relation to purchase of Raw material from its AE.s - Held that:- Provision of section 92 are applicable to the IT only. Transactions entered in to by an assessee with the Non-AE.s are not governed by the provisions of Chapter X of the Act. So, there was no justification for applying the TP provisions to entire purchases. Thus we direct the AO/TPO to restrict the adjustment to the transactions entered into between the assessee and its AE.s only. ALP expenses computation - deducting the license income received from the third party manufacturers - Held that:- While the assessee had earned sub-license-fees from thirdparty manufacturers it had not paid any royalty/fee to its AE.s, that it resulted in additional operating revenue, that the assessee had not paid any royalty was a relevant factor to determine the ALP of the transaction, that the sub license fee earned by the assessee was from the same brands that were being promoted through the AMP expenses under consideration, that the sub license fee received by it were the net receipts in its hands, that it was in the nature of cost saving from the gross ALP expenses incurred by it. Therefore, in our opinion the FAA had rightly excluded the said amount for calculating the ALP expenses. We are not inclined to interfere with his order.
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2016 (8) TMI 607
Disallowance of expenses incurred under the head ‘subscription & donation’- Held that:- Disallowance was made by the Authorities Below due to non-production of evidence in support the expenditure claimed. The ld. AR has also not brought anything even before us in support of the aforesaid expenditure. Considering the facts and circumstances of the case, we find no reason to interfere in the order of Ld .CIT(A). - Decided against assessee Disallowance on account of carriage outward - Held that:- In the absence of supporting vouchers, we need to look other factors before making any disallowance like nature of business, history of the expense claimed in earlier years, audited financial year statement etc. In the instant case, assessee has produced all the documentary evidence in support of its expenditure except the aforesaid amount of ₹1,80,719/- which is just 1.18% of the total turnover of assessee business. At the same time, we cannot ignore that similar expenses were claimed in the earlier AY and this year, the expense claimed by assessee are in commensuration with earlier year expense. We find force in the argument raised by L’d AR that there was a slightly increase in the aforesaid expense and that too mainly increase in the fuel cost and other escalated cost. However, it is also important to note that the documentary evidence was not placed before the lower authorities. Now, in the interest of natural justice and fair play, we after considering the totality of the facts of the case as discussed above, not interested in sending back the matter to the AO to avoid further litigation. Therefore, in the interest of justice and fair play, we restrict the disallowance to the extent of ₹50,000/- for the year under consideration, as all the vouchers were not produced for verification during the appellate proceedings.Ground No. 2 is decided in favour of assessee in part. Addition made under head “Home Biri Labour” expenses - Held that:- There were many factors which have been ignored by L’d CIT(A) before enhancing the total income of assessee by disallowing the aforesaid expenses. We also further find that this expense has been claimed by assessee consistently for the last several years and no such disallowance was made by the Authorities Below. Considering the totality of the facts and circumstances, we are inclined to reverse the orders of Authorities Below. AO is directed accordingly. - Decided in favour of assessee
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2016 (8) TMI 606
Denial of benefit of provisions of DTAA between India and Singapore - capital gain arising to resident of Singapore - Held that:- The prima facie perusal of all the Articles suggest that capital gain arising to resident of Singapore may not be taxable in India. The assessee has furnished before us details of the capital gain showing that the entire amount of capital gain has been earned on account of sale of securities of mutual funds. Under these circumstances, we find it appropriate to send both the issues back to the file of the AO for their examination on merits. The AO shall give adequate opportunity of hearing to the assessee to submit requisite details and documentary evidences to demonstrate that assessee is eligible for the benefit of Article 13 of DTAA as has been claimed by him. Our observations on merits, with regard to prima facie applicability of the provisions of DTAA, were given just to enable us to dispose this appeal. But, AO is not bound by it and it should not have any bearing on the ultimate decision to be taken by the AO with regard to applicability of these provisions upon income of interest and short term capital gains. The AO shall decide this issue on merits afresh after taking into account all the facts and evidences on objective basis and after giving adequate opportunity of hearing to the assessee. The assessee shall extend requisite cooperation to the AO by submitting requisite details and documentary evidences as per law.
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2016 (8) TMI 605
Disallowance made u/s 40A(2)(b) - excessive or unreasonable expenditure - transactions with relative or associate concern - Held that:- In the case on hand the adhoc disallowance made by the A.O. in our view is arbitrary and without any basis. The A.O. has not given a finding as to what as per him, is the fair market value. Even if it is assumed that the payment made is excessive and unreasonable, such arbitrary and baseless, adhoc disallowances cannot be upheld. On this ground also the assessee has to succeed. Taking up the issue as to whether the assessee has discharged the burden of proof that lay on it that, the expenditure paid by it to its sister concern, is not excessive or unreasonable. In this case the assessee has filed Transfer Pricing Reports in both the cases justifying the price paid by it for the services obtained, after conducting a Transfer Pricing Study. The Revenue authorities have not uttered a whisper as to why the transfer pricing report is not acceptable. The methodology of determining the ALP has been laid down in the Act and has been made mandatory for international transactions with Associated Enterprises (A.E.). Simply saying that these provisions do not apply to a domestic company transactions with its A.Es. for this particular A.Y. does not suffice. When the assessee has chosen to use these transfer pricing provisions to demonstrate its claim that the expenditure in question is at arm’s length and that the same is not excessive or unreasonable, the revenue authorities are bound to rebut this claim of the assessee with reasons before coming to a conclusion to the contrary. When these transfer pricing reports submitted by the assessee are not rejected, we have to conclude that the assessee has discharged the burden of proof that lay on it on this issue. On this ground also the assessee succeeds. In both the cases the assesses have filed detailed alternative submissions in support of its contentions as to why the payment made to Amway is reasonable and commensurate with the nature of services provided by them and to demonstrate that the disallowance is bad in law. We allow the appeals of the assessees in both the cases by deleting the disallowance made u/s 40A(2)(b) of the Act for the reason that the assessee has proved that the price paid is at arm’s length and not excessive or unreasonable and as the disallowance made on ad-hoc basis is arbitrary. There is no evasion of tax also warranting invocation of S.40A(1) of the Act. Hence we delete the disallowance in both the cases to the extent confirmed by the Ld.CIT(A). - Decided in favour of assessee.
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2016 (8) TMI 604
Allowability of interest expenditure incurred on amount of borrowings from the Union bank of India - Held that:- Satisfaction of the first conditions viz., whether incurred wholly and exclusively for the purpose of earning income has to be examined in the light of the facts surrounding the present case. According to the assessee-company, money was borrowed from Union bank of India only for the purpose of purchasing the land from its sister concern viz., PEP for its business purpose. Therefore, borrowings were made only for the purpose of business. Therefore, it is clear that the borrowings were not made for the purpose of earning interest income in the form of loans advanced to directors of the company. The Hon’ble Supreme Court in the case of Vijay Laxmi Sugar Mills Ltd. Vs. CIT (1991 (8) TMI 1 - SUPREME Court ) had laid down that for allowance of an expenditure under the provisions of sec.57(iii), the expenditure should have been incurred for the purpose of earning such income. The Hon’ble Supreme Court also explained that the expenditure should have been incurred for the purpose of making or earning such income shows that the object of spending or the end or aim or the intention of such spending was for earning the interest income. In the light of legal provisions, the claim cannot be allowed under the provisions of sec.57(iii) of the Act. It is not only the excess of expenditure but entire interest expenditure incurred on borrowings made from Union bank of India is not allowable. Considering alternative submissions that interest expenditure should be allowed as deduction u/s 36(1)(iii) of the Act. One of the requirements for allowance of interest paid on capital borrowed is that the amount should be borrowed for the purpose of business. It is no doubt that the law is quite settled to the extent that the taxing authorities cannot question the necessity of the borrowing but the onus lies on the assessee to prove that the borrowings have been made for the purpose of business. The contention of the assessee that the borrowings were made for the purpose of purchasing land for its business purpose from its sister concern i.e. PEP was disbelieved by the AO. The fact that the payments were made to sister concern and the amounts were advanced even before verification of the title deeds of the assessee-company raises eye-brows about veracity of the claim. The assessee-company had failed to controvert the suspicion entertained by the AO with evidence. Therefore, assessee had failed to discharge the onus of proving that the borrowings were made only for business purpose. Therefore, the claim cannot even be allowed as a deduction u/s 36(1)(iii) of the Act. We make it clear that this deduction is not allowable not only in respect of excess of interest over the interest expenditure but also the entire interest expenditure incurred on the borrowings made from Union bank of India, as it forms part of the same subject matter of appeal. - Decided against assessee
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2016 (8) TMI 603
Disallowance u/s 14A - amount of expenditure directly relating to income which does not form part of total income - Held that:- We observe that assessee has voluntarily made disallowance of ₹ 65,753/- u/s 14A of the Act and to examine this fact we refer to the computation of income available at pages 21 to 24 of the paper book and find that assessee has made specific disallowance u/s 14A at ₹ 65,753/-. We further observe that before lower authorities assessee has submitted that disallowance u/s 14A of the Act has been made at ₹ 2,10,753/- which includes ₹ 65,753/- specifically made u/s 14A of the Act and remaining amount of ₹ 1,45,000/- was termed as an ad hoc disallowance. However, we are of the view that only ₹ 65,753/- can be treated as specific disallowance u/s 14A of the Act and we accept the same as the amount of expenditure directly relating to income which does not form part of the total income and there is no dispute to the same by both the lower authorities. Disallowance is called for towards interest expenditure - Held that:- As per audited profit and loss account for the year under appeal, the gross interest income earned by the assessee is shown at ₹ 1,60,47,758/- and expenditure under the head interest and financial charges have been claimed at ₹ 1,19,95,664/- therefore, the net interest income earned by the respondent during the financial year 2009-10 is at ₹ 40,52,094/-. There is no dispute from the side of Revenue to this fact that there is net interest income earned by the assessee during the year, thus with reference to part (ii) of Rule 8D(2) we are of the view that no disallowance is called for towards interest expenditure as the assessee has a net interest income during the year i.e. interest received is more than interest expenditure. Amount equal to 0.5% of the average of the value of investment, income from which does not form part of the total income - Held that:- Out of the categories investments in immovable property, movable property and partnership firm are certainly not eligible to form part of average investment for the purpose of Rule 8-D. As far as investment in share is concerned, assessee has submitted that these investments were made in equity shares of Kalupur Commercial Coop. Bank Ltd. is held since last year at ₹ 54,37,500/- and assessee earns taxable dividend income and, therefore, the same should not be considered for calculation of average investment. Now the only amount left is investment in mutual fund which stood at ₹ 6,00,48,057/- as on 31.3.2009 at Rs.NIL as on 31.3.2010. Therefore, the average investment for the purpose of calculation of disallowance in part (iii) of the method provided under Rule 8D(2) of IT Rules shall be 0.5% of ₹ 3,00,24,029 (6,00,48,057 + 0 2). This amount works out at ₹ 1,50,120/-. Now summarizing all the three parts of Rule 8D(2), we find that in part (i) ₹ 65,753/- is the amount of admissible expenditure voluntarily disclosed by assessee and accepted by us. So no disallowance is called for. In part (ii) we have observed above that no disallowance is called for on the interest expenditure and in part (iii) we observe that 0.5% of average investment will be calculated at ₹ 1,50,120/-. Therefore, we are of the view that a disallowance of ₹ 1,50,120/- in the case of assessee is sustainable on account of disallowance u/s 14A of the Act. - Decided partly in favour of revenue
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2016 (8) TMI 602
Addition made for depositing the employees contribution to PF and ESI beyond the prescribed time limit - Held that:- It is undisputed fact that the assessee had paid both the amounts before due date of return. The Hon’ble Jurisdictional High Court decision in the case of CIT Vs SBBJ (2014 (5) TMI 222 - RAJASTHAN HIGH COURT ) is squarely applicable, therefore, we uphold the order of the ld. CIT(A) in deleting the addition. - Decided against revenue. Disallowance U/s 14A of the Act read with Rule 8D - Held that:- It is undisputed fact that the investments in shares were made up to F.Y. 2005-06. During the year, no investment has been made by the assessee. The assessee had share capital of ₹ 3.14 crores and reserve and surplus of ₹ 4.57 crores. It is further found that investments made in subsidiary company not in the share of any other unrelated party. Therefore, the primary object of the investment was holding and controlling stake in the group concern and not earning any income out of investment. The ld Assessing Officer had not established any nexus between borrowed fund with investments made in shares on which dividend earned. The case laws relied by the ld. AR are squarely applicable, therefore, we uphold the order of the ld CIT(A)in deleting the addition. - Decided against revenue. Addition made on account of foreign exchange gain - Held that:- It is undisputed fact that the debtors was in dispute since F.Y. 2007-08 and 2008-09, there was a remark by the Auditor on account of foreign exchange gain in the audit report and clarified that amounting to ₹ 37,05,685/- had not been credited in the account of the assessee. The assessee has explained the reasons that it has not received this income. There is a dispute with the Brazilian party on account of quality of goods. The original bill amount was in dispute, therefore he has not shown this increase in foreign exchange gain. The interest income on sticky loans, which has calculated on the basis of hypothetical income not real income of the finance company. In this case also, the ld Assessing Officer has calculated this foreign exchange gain on notional basis, which was not real. The other case laws referred by the assessee are also squarely applicable on real income theory. Accordingly, we uphold the order of the ld CIT(A) in deleting the addition. - Decided against revenue. Addition U/s 43B - advance payment of VAT - Held that:- There is no dispute about the fact of the amount payments made and deduction claimed in computation of income at the time of filing of return but it is also undisputed fact that this is advance payment of VAT. Statutory liability is to be allowed on payment basis. The liability for which was incurred in the previous year will be allowed as deduction and the liability should be related to previous year. Wherein sales tax liability of last quarter could not be paid before closing date of the every year, therefore, this incentive was given U/s 43B of the Act by the Legislature. This issue has been considered by the Coordinate Bench of Hyderabad in the case of DCIT Vs CWC Wines Pvt. Ltd. (2003 (11) TMI 302 - ITAT HYDERABAD-A ) and held that advance payment is not deductible. Section 43 may not be understood as authorizing payment which have not become due but all the sum paid in advance. Therefore, we are of the considered view that the ld CIT(A) had rightly disallowed the deduction claimed U/s 43B of the Act for advance payment of VAT - Decided against assessee
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2016 (8) TMI 601
Nature of income - Addition on account of excess stock found during the course of survey and admitted by the assessee as its undisclosed investment in stock - Held that:- It is undisputed fact that the books of account were not found during the course of survey and the admission was made by the partner of excess stock of ₹ 1.25 crores for gold and silver jewellery but he has not written this disclosure in the return itself. The ld Assessing Officer raised this issue during the assessment proceedings, which was replied by the assessee but he has not convinced with the assessee’s reply. Again this issue has been considered by the ld CIT(A) and who found that valuation of jewellery was made on the date of survey at the rate prevailing of survey but as per accounting policy it has to be valued on the basis of cost price or market price whichever is less, therefore, the assessee furnished revised valuation on the basis of average price of the gold and silver jewellery purchased. This calculation has been considered by the ld CIT(A) which was found justified to him, accordingly he deleted the addition. It is settled law that statement recorded during the course of survey has no evidentiary value as held by the Hon'ble Supreme Court in the case of COMMISSIONER OF INCOME-TAX Vs. S. KHADER KHAN SON [2013 (6) TMI 305 - SUPREME COURT ]. Non considering the excess stock surrendered in survey as part of book profit U/s 40(b) - Held that:-Assessing Officer can make certain adjustments in the book profit but change of income held is subject to be examined by the appellate authority but as the facts of the case are that the assessee’s books were not closed on the date of survey as such. The Coordinate Bench of Ahmadabad ITAT in the case of Chokshi Hiralal Maganlal vs. DCIT [2011 (1) TMI 125 - ITAT, AHMEDABAD ] has considered this issue where excess stock during the course of survey U/s 133A was found. The ld Assessing Officer considered this disclosure U/s 69 of the Act but the Coordinate Bench held that since the excess stock is a result of suppression of profit from business over the years and has not been kept identifiable separately but it is part of overall physical stock found, provisions of Section 69B cannot be invoked and assessee is entitled for higher remuneration on excess stock disclosed in the return to the partner U/s 40(b) of the Act. The other case laws relied by the assessee are also squarely applicable, therefore, we reverse the order of the ld CIT(A) and held that excess stock found during the course of survey is income from business and profession and cannot be assessed U/s 69 of the Act. It is also a fact that U/s 28(v) of the Act, the interest, salary, bonus, commission and remuneration in the name of partner is assessed to tax as income from business and profession. Therefore, we allow the assessee’s appeal on this ground. Addition on account of unexplained cash found during the course of survey - Held that:- We have heard the rival contentions of both the parties and perused the material available on the record. This issue required to be verified from the cash book prepared after date of survey by the assessee with reference to entries made in the cash book and accordingly, we set aside this issue to the Assessing Officer and direct to verify the cash available on the date of survey and take decision as per law.
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2016 (8) TMI 600
Disallowance of advertisement and professional charges u/s 40(a)(ia) - non dection of tds - Held that:- As relying on Merlyn Shipping & Transporters vs. ACIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM ] no disallowance can be made under the provisions of sec. 40(a)(ia) of the Act, for non compliance of TDS provisions, if expenditure incurred is paid within the financial year. In the present case on hand, the assessee claims that out of the total disallowance of ₹ 25,12,651/- and ₹ 12,90,386/- a sum of ₹ 22,56,980/- and ₹ 9,27,393/- respectively for the A.Y. 2008-09 and 2009-10 has been paid during the financial year before 31st March. Therefore, we set aside the issue to the file of the A.O. for the limited purpose of verification of paid and payable. In case the expenditure is paid during the same financial year within 31st march, then no disallowance can be made. In other words disallowance u/s 40(a)(ia) should be restricted to amounts remain payable at the end of the financial year. Disallowance of interest paid on unsecured loan under sec. 40(a)(ia) - Held that:- The present case on hand, the assessee claims that the recipient had included the interest income in their books of accounts and discharged the tax liability on such interest. The assessee further claims that the assessee was not held as an assessee in default under the provisions of sec. 40(a)(ia) of the Act. Though, assessee filed relevant details before the Bench, we have our own reservations, whether said information was made available to the Assessing Officer at the time of assessment. Therefore, we set aside the issue to the file of the A.O. for the limited purpose of verification, whether the recipient had accounted interest income and discharged his obligation by filing returns of income. In case, it is found that the recipient had considered the interest income in its books of accounts and discharged its obligation by filing return of income, then the A.O. is directed to delete the additions made towards interest paid on unsecured loans u/s 40(a)(ia) of the Act.
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2016 (8) TMI 599
Grant of recognition u/s 80G denied - assessee society is not maintaining the addresses of the donors - Held that:- The assessee society again applied for recognition u/s 80G of the Act in form no.10G dated 20.12.2011 filed on 1.2.2012. The Ld. Commissioner after considering the detailed submissions filed by the assessee, he has pointed out that in the Memorandum of Association of assessee society, winding up clause was missing. We find that this is not material to grant recognition u/s 80G of the Act. So far as the accumulation of income is concerned, we find that there is no accumulation, therefore, this objection is not correct. We find that the Ld. Commissioner rightly denied the recognition u/s 80G of the Act on the ground that the assessee society is not maintaining the addresses of the donors. Before us, the Ld. Counsel for the assessee has filed all the details of the donors. In view of the above, we find that it is appropriate to remit the matter back to the A.O. to consider the details of the donors, to pass an order de-novo, in accordance with law after being given a reasonable opportunity of being heard. In view of the above, we set aside the order passed by the Ld. Commissioner and direct him to consider the details filed by the assessee and pass orders in accordance with law. - Decided in favour of assessee for statistical purposes..
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2016 (8) TMI 598
Net income determination - assessee has not maintained proper vouchers but spent it in cash. - Held that:- As only in AY 2008-09, he had earned additional revenue compared to other years and as well as the net profit declared by the assessee and the same was accepted by the department in the preceding and following years are between 15% to 17%. Moreover, the assessee had to spend certain expenditure to earn this income. The Assessing Officer cannot wear shoes of the assessee and determine, how much he has to spend. The Assessee had earned the income and we are not aware of the difficulties in earning the income in this line of business. The prospective buyers need to be convinced and taken to the respective sites to convince them. Assessing Officer has not brought anything on record to controvert that these expenses have not met by the buyers or sellers. In absence of such evidence, we have to go with assessee’s claim. The assessee has not maintained proper vouchers but spent it in cash. The Assessing Officer has rejected the submissions of the assessee and disallowed 50% of advertisement and 50% on other expenditures. In our considered view, Assessing Officer should have estimated the income. The assessee was admitting the net income in the earlier year at 16.13% against the gross receipts of ₹ 16.88 lakhs and in subsequent year, it has admitted 14.80% on gross revenue of ₹ 17.71 lakhs. In the interest of justice, we direct the Assessing Officer to determine the net income of the assessee at 20% of the gross receipts. - Decided partly in favour of assessee
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2016 (8) TMI 597
Deduction u/s. 54 - whether the claim for the exemption u/s. 54 can be denied for the reason that the construction of the house was not completed within the stipulated period or for the reason that the construction of the house started prior to the transfer of the capital asset? - Held that:- Hon’ble Supreme Court in the case of Fibre Boards (P.) Ltd., vs. CIT [2015 (8) TMI 482 - SUPREME COURT ] under sub-section (1), the assessee is given a period of three years after the date on which the transfer takes place to purchase new machinery or plant and acquire building or land or construct building for the purpose of his business in the said area. If the High Court is right, the assessee has to purchase and/or acquire machinery, plant, land and building within the same assessment year in which the transfer takes place. Further, the High Court has missed the key words “not utilized” in sub-section (2) which would show that it is enough that the capital gain made by the assessee should only be “utilized” by him in the assessment year in question for all or any of the purposes aforesaid, that is towards purchase and acquisition of plant and machinery, and land and building. Advances paid for the purpose of purchase and/or acquisition of the aforesaid assets would certainly amount to utilization by the assessee of the capital gains made by him for the purpose of purchasing and/or acquiring the aforesaid assets - Decided in favour of assessee
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2016 (8) TMI 596
Revision u/s 263 - A.O. had failed to invoke section 40(a)(ia) of the Act on freight charges paid by the assessee to 20 vehicles without deducting tax at source - Held that:- The assessee has obtained Form 15-I from its transporters and filed the same before the Commissioner of Income tax. Copies of these forms were also produced before the A.O. during the original assessment proceedings. The A.O. has verified these forms and came to the conclusion that the assessee has not violated the provisions of section 194C of the Act. This is a possible view. We do not find any error in the order of the A.O. Thus, the order of the Ld. CIT on this issue is bad in law. There is no error in the order of the A.O. warranting revision under section 263 of the Act. Disallowance of loading and un-loading charges - Held that:- CIT has based his conclusions on surmises and conjectures. There is no material before the Ld. CIT to come to the conclusion that the claim of the assessee is not genuine. Such suspicion cannot be a ground for review. Hence, the same is quashed. Unmatched financial charges - Held that:- There is no finding of the Ld. CIT that there is an error in the assessment order much less prejudice to the revenue. The method of accounting adopted by the assessee is being followed year after year. There is no fault that could be found in this system of accounting. Under these circumstances, the revision is bad in law. Assessee appeal allowed.
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2016 (8) TMI 595
Penalty u/s.271B - Failure to get accounts audited - Held that:- In the instant case, no doubt the assessee has not furnished the audit report during the course of assessment proceedings but such failure has been explained by the Ld. Counsel for the assessee as due to non-appearance by the Authorised Representative of the assessee due to the marriage of his son and the illness of his younger brother. Considering the totality of the facts of the case and considering the fact that assessee has filed the audit report before the AO during the course of penalty proceedings, got his accounts audited, paid the tax and filed the return of income much before the specified date, therefore, we are of the considered opinion that it is not a fit case for levy of penalty u/s.271B of the I.T. Act. We therefore set aside the order of the CIT(A) and direct the AO to cancel the penalty levied u/s.271B Penalty u/s.271(1)(b) - CIT(A) confirmed the penalty on the ground that assessee could not file documentary evidence to prove the reasonable cause for non-compliances of notices - Held that:- Submission of the Ld. Counsel for the assessee that the advocate was busy in marriage function of his son till 30-11-2011 and thereafter from 05-12-2011 onwards he was busy with the treatment of his younger brother who was detected with brain cancer and subsequently he died in our opinion is a reasonable cause for non compliance to the statutory notices. No doubt the assessee should have filed documentary evidence such as marriage invitation card and medical prescriptions of the younger brother of the advocate to substantiate his case that there was a reasonable cause on the part of the assessee for non compliance to such statutory notices. However, taking a lenient view and considering the totality of the facts of the case and the submission of the Ld. Counsel for the assessee at the bar that the younger brother of the tax consultant expired subsequent to the operation, we are of the opinion that there was a reasonable cause on the part of the assessee for non compliance to such statutory notices. We accordingly set aside the order of the CIT(A) and direct the AO to cancel the penalty of ₹ 10,000/- levied u/s.271(1)(b) of the I.T. Act. - Decided in favour of assessee
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2016 (8) TMI 594
Disallowance u/s. 40A(2)(b) of electricity expense - Held that:- In so far as the observations of the authorities below that the electricity bill is in the name of M/s. Kirloskar Oil Engines Ltd. is concerned, we are of the view that the same are unwarranted. Since, the premises from where the assessee is carrying on its activities belong to M/s. Kirloskar Oil Engines Ltd. the electricity connection would obviously be in the name of M/s. Kirloskar Oil Engines Ltd. In view of the entirety of facts we do not find any reason to disallow the electricity expenditure claimed by the assessee Disallowance u/s. 14A - Held that:- The assessee has made investment of ₹ 2,04,527/- in M/s. Kirloskar Oil Engines Ltd. and other group concerns. The assessee has earned dividend of ₹ 3,56,000/-. The contention of the ld. AR of the assessee is that the assessee has not incurred any administrative expenditure on earning tax free income. It is not the case of the Revenue that the assessee has made investment from the interest bearing funds. We are of the considered view that the disallowance of ₹ 3,04,830/- made by the Commissioner of Income Tax (Appeals) is very much on the higher side. To meet the ends of justice disallowance of 5% of the exempt income earned would be fair and justified
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Customs
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2016 (8) TMI 640
Re-assessment of the bill of entry - granting exemption from payment of customs duty - import of goods for supply to the Indian Air Force - claim of refund - Held that:- without going into the merits of the contentions of the petitioner, the writ petition is disposed of with a direction to the second respondent to consider the petitioner's representation dated 6.5.2015 on merits and pass appropriate orders on merits and in accordance with law, after affording an opportunity of personal hearing to enable the petitioner to produce the original documents and clarify any issues that may arise while considering their representation. No costs.
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2016 (8) TMI 639
PIL - Unauthorized import of chemicals of raw materials used for manufacturing drugs of 170 consignments. - the petitioner utilized different proceedings to carry out the campaign against the authorities and officers to facilitate his own business of smuggling and this public interest litigation at the behest of such a person should never be entertained. Held that:- We are not inclined to entertain this public interest litigation filed by the petitioner, though we expect that the authorities would complete their task qua the consignments in question. We are also of the view that considering the antecedents of the petitioner and his endeavour to rake up an earlier issue to pressurise the concerned authorities to prevent action against him in future, no public interest litigation or any litigation affecting the larger interest other than the personal interest is to be entertained by this Court. - petition dismissed.
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2016 (8) TMI 638
Movement of betel nuts - the goods were seized by the Customs authorities on the suspicion that they were liable to be confiscated - Held that:- Nothing is brought to show that the Customs authorities could not have seized the goods from wherever they were seized in Kolkata or that the institute whereat the goods were tested could not have been approached for such purpose. No law or any official document has been produced either in support of the petitioner’s contention that the seizure was illegal or in support of the petitioner’s assertion that the test-house cannot be approached by the Customs authorities for any purpose whatsoever. The additional ground, equally laughable and fallacious, urged on behalf of the petitioner is that there is a rivalry between South Indian betel nut growers and the betel nut growers in the North-East such that any report of North-East betel nut sought from a test-house run by the cooperative of South- Indian betel nut growers would only be to the chagrin of the North-East betel nut growers. For the petitioner’s exercise of this present frivolity, the petitioner will immediately pay costs assessed at ₹ 50,000/- to the Customs authorities, which will abide by the final outcome of the proceedings that may be instituted against the petitioner upon the matters covered by the show-cause notice being decided by the Department as expeditiously as possible. - Decided against the petitioners.
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2016 (8) TMI 637
Classification - import of Phosphoric acid - full exemption under Notification No.265/92-CUS dated 27.08.1992 for the manufacture of fertilizers - Held that:- Appellant will demonstrate, with the help of few imports, before the Adjudicating authority that there was a difference in the Ullage Report quantity and quantity of cargo received in shore tank with respect to imports made after CBEC Circular dated 27.12.2002. If on examination/demonstration adjudicating authority finds it so then the same should be held to be applicable to the imports for the period prior to CBEC Circular dated 27.12.2002 also because it is not disputed that movement of cargo through pipeline under the supervision of independent surveyor has not changed during the periods prior/post CBEC Circular dated 27.12.2002. On the issue of excess quantity of nearly 2000 MT of Ammonia in the shore tank of the appellant it is observed that the same has been explained to be due to 2000 MT of Ammonia received from M/s.EID Parry (India) Ltd. which was a replacement of appellant s Ammonia quantity diverted from Haldia due to technical problems and stored in the tank of M/s. EID Parry. There is no evidence on record that appellant on any occasion has imported Ammonia in excess of Ullage report quantity which is unmanifested. Revenue thus cannot ask for duty on a quantity in excess of Ullage Report quantity/quantity declared in the Bills of entry based on presumptions in the absence of any evidence to that effect. Accordingly, the argument taken by the appellant that excess quantity of Ammonia represented 2000 MT received from M/s.EID Parry (India) Ltd. is acceptable and no duty can be demanded on that quantity. Decided in favor of appellant and against the revenue.
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2016 (8) TMI 616
Benefit of Notification No. 22/2002-Cus dated 01.03.2002 – exemption from payment of duty on fulfillment of conditions – Held that: - with regard to the shortage quantity, the duty demand was confirmed on the ground of non-fulfillment of the conditions mentioned in the exemption Notification. It is found from the available records that end use Certificate has not been produced within the stipulated time frame and no extension has been sought for by the importer. Thus, the condition of the notification has not been fulfilled by the appellant, for which, the duty liability is required to be discharged. Valuation – heavy melted scrap of iron and steel – concessional rate of duty - Differential duty - difference in calculation of the rate of duty by the department as well as the importer – Held that: - amount to be re-quantified – matter remanded to the Original Authority for quantification of the correct duty liability. Appeal dismissed – decided against appellant.
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Corporate Laws
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2016 (8) TMI 615
Scheme of Amalgamation allowed. All the Transferor Companies shall be dissolved without being wound up. There are no investigation proceedings pending against them under Sections 235 to 251 of the Act. The Scheme of Amalgamation shall be binding on the Petitioner- Transferor and Transferee Companies, their respective Shareholders, Creditors and all concerned. Let formal order of sanction of the Scheme of Amalgamation be drawn in accordance with law and its certified copy be filed with the Registrar of Companies within 30 days from the date of receipt thereof. A notice of the order be published in ‘Financial Express’ (English) and ‘Punjab Kesri’ (Hindi), both Punjab Edition and in the Official Gazette of Government of Punjab. Any person interested shall be at liberty to apply to the Court for any direction(s) as per law.
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Service Tax
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2016 (8) TMI 632
Invokation of extended period of limitation - period involved is April 2009 to September 2010 and SCN issued on 12.3.2014 - Service tax credit - service tax paid on transit insurance premium w.r.t. transport of goods from the factory gate to the buyer's premises - credits were reflected in all their records and statutory returns filed with the Department and was found to be ineligible upon scrutiny by the officers of audit - Held that:- the allegation of fraud, suppression, willful misstatement with intend to evade payment of duty has to have some positive act on the part of the appellant to sustain the same. Para 4 of the show cause notice made allegation to this effect without any elaboration of evidence or basis. The Tribunal in CCE, Jaipur - I vs. Pushp Enterprises [2010 (11) TMI 835 - CESTAT, NEW DELHI] held to the effect that when the ER-1 returns containing the details credit were filed regularly extended period demand cannot be raised later in case it was found that certain credits are not eligible to the assessee. Therefore, by considering the same, the impugned order cannot be sustained on the questions of time bar. - Decided in favour of appellant
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2016 (8) TMI 631
Cenvat credit - GTA services used for transportation of pet coke and other services received by the appellant in their power plant situated within the factory - part of the power generated is being cleared to their sister units - Held that:- it is found that an identical issue has come up for decision by the Tribunal in Hindustan Zinc Limited vs. CCE & ST, Jaipur - II [2016 (6) TMI 402 - CESTAT NEW DELHI] which was held after examining the decision of the Hon’ble Supreme Court in Maruti Suzuki Ltd. vs. CCE, Delhi III [2009 (8) TMI 14 - SUPREME COURT ] and Tribunal’s decision in Doshion Ltd. vs. CCE, Ahmedabad [2012 (10) TMI 952 - CESTAT AHMEDABAD] as affirmed by Hon’ble Gujarat High Court in CCE vs. Doshion Ltd. [2016 (2) TMI 183 - GUJARAT HIGH COURT] that the appellants are eligible for input service credit in full. In such situation it was also observed that the electricity generated is being used for manufacture of excisable goods by various units of the appellant and there is no allegation regarding sale of such electricity to any outside party for other purposes. As such denial of credit to the appellants will not be justifiable. - Decided in favour of appellant
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2016 (8) TMI 630
Cenvat credit - service tax paid on medi-claim insurance for the employees - Held that:- the issue is no more res integra and has been settled in favour of the assessee in various decisions of the Tribunal as well as High Courts. By considering the Tribunal’s decision in Kelly Services India Private Limited Vs. CCE [2015 (10) TMI 2228 - CESTAT NEW DELHI] and in Cholayil (P) Ltd. [2013 (6) TMI 367 - CESTAT BANGALORE]. Also the Hon'ble Karnataka High Court's decision in CST Vs. Team Lease Services Pvt. Ltd [2014 (4) TMI 948 - KARNATAKA HIGH COURT] and in Stanzen Toyotetsu India (P) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT] and various other decisions, the service tax credit on medical claim for employees of the appellant is available. - Decided in favour of appellant
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2016 (8) TMI 629
Full service tax credit - eligibility - service tax paid on crushing charges to the job worker - Held that:- there is no allegation that the services are not availed by the appellant. The denial of a part of credit is only on the ground that the quantity of crushed ore received by the appellants is less than the quantity of lump ore on which the crushing charges were paid. As pointed out by the appellant, the very same issue has been decided by the Tribunal’s various decisions. One such decision, is on the same set of facts. Therefore, by considering the same i.e. Indian Steel and Power Pvt. Ltd. Versus CCE, Raipur [2015 (12) TMI 1491 - CESTAT NEW DELHI], there is no justifiable reasons for denial of part of credit of service tax availed by the appellants. - Decided in favour of appellant
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2016 (8) TMI 628
Invokation of extended period of limitation - period involved is from July, 2005 to September, 2008 and show cause notice issued on 25.07.2011 - Cenvat credit - professional charges for engineering of plant, GTA services, credits based on photocopies and debit notes, etc. - During this period, the appellants are registered with the Department and were filing regular returns reflecting the various credits taken by them and the records maintained reflected all the transactions as is evident from the audit scrutiny much later - Held that:- there is no allegation that the appellant has availed credit on any manipulated document or without payment of service tax. It is not tenable to contend that if the credit is taken on photocopies of the documents, extended period can automatically be invoked. As I find no detailed examination or finding by the lower authorities for invoking extended period, the demand is liable to be set aside on the ground of time bar alone. - Decided in favour of appellant
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2016 (8) TMI 627
Cenvat credit - management consultancy service and consulting engineering service provided by the Directors to their own company i.e. appellant - Whether the appellant has availed CENVAT credit on the basis of proper evidence for payment of tax - no evidence available before the authority to satisfy that the service provider was as mentioned in the invoice - Held that:- it appears that the transactions were between related persons. In absence of evidence, authorities could not appreciate the claim of the appellant. The appellate authority in his order has examined what that was the substance of the transaction. Also he has recorded that the service provider in this case was the Directors of the company and they were paid. Appellant could not satisfy what was the ability of the Directors to provide the questioned service. Neither their technical qualification was brought to record nor the scope and ambit of the service provided is visible therefrom. The only contention of appellant was that three services were provided by the directors of the company. Therefore, in absence of proper evidence on record to satisfy aforesaid requirement and the appellant not having come out with clean hands, it is difficult to entertain the appeal on merit. - Decided against the appellant
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Central Excise
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2016 (8) TMI 626
Cenvat credit - inputs work in progress and finished goods lying in stock under Notification No. 15/2009 dated 07.07.2009 by making the payment of duty at the rate of 8% - Held that:- it is found that in this case, the Notification No. 15/2009 ibid came into effect on 07.07.2009, on the said day the respondent were entitled to avail the benefit of said Notification, although the respondent did not intimate to the department for availing the benefit of said Notification, but merely non-intimation to the department does not taken away right of the respondent to avail the said Notification. There are two parallel notifications are available to the respondent. Moreover by availing the benefit of Notification No. 15/2009 dated 07.07.2009, the respondent were paying duty on their goods and clearing the same which was accepted by the Revenue. In these circumstances, the benefit of the Notification No. 15/2009 dated 07.07.2009 cannot be denied w.e.f. 07.07.2009. As per two parallel notifications are available to the respondent, therefore the respondent can choose any notification which is beneficial to him, the same view was taken in the Apex Court in the case of M/s Share Medical Care Vs. UOI [2007 (2) TMI 2 - SUPREME COURT OF INDIA]. - Decided against the Revenue
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2016 (8) TMI 625
Exemption Notification No. 42/2001 CE(NT) dated 26/6/001 read with notification no. 43/2001-CE (NT) dated 26/6/2001 - benefit of availment - respondent has not supplied the goods directly to SEZ Unit but has supplied the same to M/s. Shree Bajrang Alloys Ltd., who have further supplied the goods to SEZ Units - Whether the clearance of goods to SEZ, amounts to manufacture or not - Held that:- there are two earlier decisions of the Tribunal involving the same assessee, i.e., M/s. Shree Bajrang Mettalics and Power Limited, supplying the goods to M/s. Shree Bajrang Alloys Ltd., who were further clearing the same to SEZ Unit. In both the said decisions, it stands held that the benefit of the notification stands rightly availed by M/s. Shree Bajrang Metallics and Power Ltd. reported in [2012 (12) TMI 99 - CESTAT, NEW DELHI] and [2014 (2) TMI 166 - CESTAT NEW DELHI]. Therefore, asmuch as the issue is covered, no reasons found to take a different view. - Decided against the Revenue
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2016 (8) TMI 624
8%/10% reversal of Cenvat Credit - value of electricity - provision of Rule 6(3)(b) - assessee had reversed Cenvat Credit on duty involved in respect of inputs used in the generation of electricity and the lower appellate authority granted relief to the assessee - Held that:- the issue stands covered by the earlier decision of the Tribunal in the case of CCE, Raipur Versus M/s Godawari Power And Ispat Ltd. [2016 (2) TMI 863 - CESTAT NEW DELHI]. Therefore, by following the same the present appeal of the Revenue is rejected. - Decided against the Revenue
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2016 (8) TMI 623
Period of limitation - Whether the show cause notice is barred by limitation or not - show cause notice issued by invoking the extended period of limitation and only defence taken by the appellant that due to inadvertent mistake, they could not reverse the credit of AED - Held that:- the appellant has taken the credit of CVD and AED at the time of procurement of inputs. The appellant is required to reverse the credit of CVD as well as AED at the time of clearance of inputs as such but the appellant has not reversed the credit of AED. No satisfactory explanation has been given by the appellant. Moreover, the appellant admitted their liability that they have availed credit inadvertently and reversed the same only on pointing out by the Audit. If audit could not take place then this inadmissible credit availed by the appellant could not be detected. Therefore, the extended period of limitation is rightly invoked and the amount of AED reversed by the appellant is confirmed and appropriated. Whether the interest is payable by the appellant for intervening period or not - Held that:- as already observed that the appellant has not utilized the credit pertaining to AED during the intervening period, therefore, the appellant is not required to pay interest for the intervening period in view of the decision of Hon'ble Karnataka High Court in the case of Bill Forge Pvt.Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT]. Whether the appellant is required to be penalized or not - Held that:- as the extended period of limitation is invokable, I hold that the penalty is impossible on the appellant. I also find that as the appellant already reversed the credit before issuance of cause notice, in that circumstance, the penalty is reduced to 25% of the inadmissible credit availed by them. Therefore, the penalty is reduced to 25% of the amount of duty involved. - Appeal disposed of
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2016 (8) TMI 622
Valuation - physician samples meant to be distributed free of cost - cleared by adopting assessable value based upon the costing structure but the Revenue opined on the basis of the pro rata cost of the regular samples - Held that:- in view of the foregoing and in the absence of any positive evidence to show that the adoption of value of physician samples on the basis of cost structure was with any malafide intention and appreciating the fact that during the relevant period the said legal issue was answered by the higher authority in favour of the assessee and by appreciating that most of the pharmaceuticals manufacturers were adopting assessable value on the basis of cost data, we are of the view that no malafide intention can be attributed to the assessee so as to invoke the longer period of limitation. - Decided against the Revenue
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2016 (8) TMI 621
Confiscation in lieu of redemption fine and imposition of penalty - Rule 25 of the Central Excise Rules, 2002 - Seizure of branded, packed automobile parts - appellants were buying various auto parts from different places, affixed their brand and MRP, after packing these parts and thereafter sold in the market - neither registered with the Department nor were discharging Central Excise duty on these items. Held that:- the admitted facts of the case are that the appellants are liable for Central Excise duty on the repacked auto components cleared by them. Goods seized by the officers were of such nature in packed condition with MRP and are as such liable for Central Excise duty. This is not being contested. Regarding raw materials valued, I find that the provisions of Rule 25 will not apply. There is no reference to the in process material or raw material in the said provision. As held by the Tribunal in Anchal Prints Pvt. Ltd. vs. CCE, Surat – I [2007 (10) TMI 532 - CESTAT, AHMEDABAD] the seizure and confiscation of such goods are not sustainable. Quantum of fine and penalty - Immediately on being pointed out by the Department, they have taken registration and discharged duty liability on clearance of these goods - not fully aware of the application of provisions of deemed manufacture for their products - Held that:- the seizure and confiscation of raw materials are held to the untenable and also considering the fact of overall duty liability, the redemption fine imposed can be reduced to ₹ 10 lakhs and the penalty accordingly may be reduced to ₹ 5 lakhs in the facts and circumstance of the case. Cenvat credit - inputs - Held that:- this issue has not been the subject matter or proceedings before the Original Authority. Based on the plea made by the appellant, the Appellate Authority gave a finding regarding inadmissibility of such credit as the appellants were not registered with the Department at the time of detection of the case. I find that the Tribunal has held that credit may be available even in case of unregistered unit – Well Known Polyesters Ltd. vs. CCE, Vapi [2011 (1) TMI 664 - CESTAT, AHMEDABAD]. The entitlement of appellant for the credit will be subject to verification of documents and the applicable provisions of law. - Appeal disposed of
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2016 (8) TMI 620
Cenvat credit - availment of second 50% of credit on various capital goods - non-maintainance of proper records and non-production of relevant documents in support of these credits - Held that:- out of 242 invoices, 210 original documents were produced. For the remaining, photocopies of the documents were produced. These documents in original alongwith the register/records relating to capital goods were taken over by the officers of Central Excise Intelligence in October 2009 in connection with certain investigations. It is seen from the Annexure to the seizure Panchnama dated 20/8/2009, the various connected documents relevant to the disputed credit were taken over by the officers. Even otherwise, I find no justification for the denial of credit as the first portion of 50% credit on various capital goods, components and spare parts have been duly allowed with no objection whatsoever by the Revenue. There is no allegation of diversion of any goods on which these credits have been availed. There is no allegation regarding non-availability of any goods on which credit has been taken. In the absence of such allegation, no justification found in denying the second half of credit on the reasons stated in the impugned order. - Decided in favour of assessee
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2016 (8) TMI 619
Cenvat credit - rock bolt used as support for the mining walls - appellants are engaged in the manufacture and clearance of dutiable zinc/lead ore concentrates - cleared to their own smelters for further manufacture of metals - Held that:- considering the admitted fact that rock bolts are used as fixtures in the process of mining of ores the denial of credit on such rock bolts is legally not sustainable. The Original Authorities finding that rock bolts are not used in the manufacture of zinc is completely out of context and has no relevance to find their eligibility for credit. The rock bolts being used as fixtures in mining process are entitled for credit as they are covered by specific description of 'fixtures' under Rule 2(a)(A)(iv) of Cenvat Credit Rules, 2004. - Decided in favour of assessee
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2016 (8) TMI 618
Cenvat credit - sleepers, RLS Rails used for construction of railway sidings, which were further used for providing the services - Held that:- in the light of the declaration of law by the Gujarat High Court in the case of Mudra Ports & Special Economic Zone Limited vs. CCE & Cus. [2015 (5) TMI 663 - GUJARAT HIGH COURT], such use of various inputs that is railway material for the construction of railway siding has to be held as cenvatable inputs. As such, we are of of the view that no error is found in the order passed by the Commissioner while allowing the cenvat credit. - Decided against the Revenue
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2016 (8) TMI 617
Invokation of extended period of limitation - Cenvat credit - Service tax paid for repair and maintenance of tailing dam road at the mines area - appellant have created tailing dam facility for proper disposal of hazardous waste known as “Tailing” - Held that:- the credit availed by the appellants were recorded in their accounts and are reflected in their statutory returns. This particular credit not separately shown in their returns could not be the reason for invoking suppression as there is no provision to show individual credits in the returns filed with the Department. Further, the bonafide belief of the appellant to the effect that the repair work of the said road is connected to the overall mandatory requirement of the waste disposal, which is eligible for credit, cannot be discounted. As admitted, the credit entries were in the regular records, which were audited and the dispute arose thereafter only. Therefore, invoking extended period with an allegation of suppression of facts and willful mis-statement with an intend to evade payment of duty is not sustainable. - Decided in favour of assessee
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CST, VAT & Sales Tax
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2016 (8) TMI 636
Works contract - inter-state sale - the point at which iron & steel products are taxable - the point of incorporation into the building or structure or otherwise - Iron and Steel products are used in the execution of works contracts for reinforcement of cement, the iron and steel products becoming part of pillars, beams, roofs, etc. which are all parts of the ultimate immovable structure that is the building or other structure to be constructed. - Held that:- commercial goods without change of their identity as such, are merely subject to some processing or finishing, or are merely joined together, and therefore remain commercially the same goods which cannot be taxed again, given the rigor of Section 15 of the Central Sales Tax Act. - Decision in the case of State of Tamil Nadu Versus Pyare Lal Malhotra [1976 (1) TMI 151 - SUPREME COURT OF INDIA] followed. - Decided against the revenue. Works contract - claim of exemption on iron and steel goods used therein - inter-state sale - Held that:- the High Court’s judgment is correct and does not need to be interfered with inasmuch as the iron and steel goods, after being purchased, are used in the manufacture of other goods, namely, doors, window frames, grills, etc. which in turn are used in the execution of works contracts and are therefore not exempt from tax. - Decided against the assessee.
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2016 (8) TMI 635
Demand of VAT - reversal of Input tax credit (ITC) - assessment, pertaining to 'Invisible Loss' during manufacturing activity - Held that:- matters are remanded to the respondent for fresh consideration, who shall cause inspection of the petitioner's Factory and ascertain the manufacturing process, and during the course of such inspection, the petitioner is directed to furnish details of the manufacturing process, and thereafter, the respondent shall ascertain as to the quantum of manufacturing loss and issue necessary supplementary show cause notices to the petitioner, and after considering the objections filed, and after affording opportunity of personal hearing, the respondent is directed to redo the assessment in accordance with law.
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2016 (8) TMI 634
Rate of Tax / VAT - classification of Crude Degummed Soyabean Oil - entry 185 (ii) of Schedule (ii) Part A of GVAT - Held that:- oil will remain oil if it retains its essential properties and merely because it has been subjected to certain processes would not convert it into a different substance - any oil, which can be used for human consumption, shall be treated to be edible oil and since the product in question is essentially “Oil”, in our view, the same will fall under Entry 185 (ii)-Edible Oil. Accordingly, it is held that “Crude Degummed Soyabean Oil” is covered by Entry 185 (ii) of Schedule (ii) Part A of the Act and the Tribunal has committed an error in holding that it is covered by entry 185 (i) of the said Schedule. “Crude Degummed Soyabean Oil” is covered by Entry 185 (ii) of Schedule (ii) Part A of the Act and the Tribunal has committed an error in holding that it is covered by entry 185 (i) of the said Schedule. Accordingly, the question posed for our consideration is answered in favour of the assessee and against the department.
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2016 (8) TMI 633
Claim of benefit of concessional rate of tax under Section 3(3) of the TNGST Act - inter-state sale or not - The LAB sold by the petitioner was used as a raw material in the manufacture of Acid Slurry and such manufacturing activity took place within the State of Tamil Nadu. What was stock transferred to Mangalore by HLL was not LAB, but a commercially different product namely, Acid Slurry. Held that:- The Revenue does not dispute the fact that the delivery of LAB was effected within the State of Tamil Nadu and what moves out from the factory of the job worker is only Acid Slurry and not LAB. Thus, it cannot be disputed that there was manufacturing activity inside the State of Tamil Nadu in as much as the product sold namely LAB was converted into Acid Slurry at Ranipet in the factory of the job worker. Thus, sofar as the manufacturing activity done by the job worker, the product which emerges upon manufacture namely Acid Slurry is infact, a final product in such process though in the chain of manufacturing activities, it may be an intermediary product. The contention of the respondent that payment of tax by HLL at 1% under Section 3(4) of the TNGST Act is irrelevant cannot be countenanced. This is a very relevant factor, which goes to show that the HLL is a manufacturer. To bring a transaction with the scope of Section 3 of the CST Act, essentially there should be sale of goods and transport of these goods from one state to another as a result of, or as an integral part of sale. When the sale and the interstate movement of the goods are not interconnected, as there is no contractual obligation or other obligation to take the goods to another state or when there is no evidence that the transport of the goods to the other state was caused by the contract of the sale, there could be no interstate sale. In terms of the purchase order, dated 15.06.2000, the petitioner was directed to effect the supplies as per the specifications and subject to the approval of the buyer and the material to be delivered to their job worker at Ranipet. Thus, the contract of sale was completed upon delivery of the goods at Ranipet within the state of Tamil Nadu. The seller namely, the petitioner had no contractual or other obligation to take the goods to another State nor there is any evidence produced by the Revenue in this regard. Thus, when the transaction done by the petitioner is factually not disputed and the transaction/sale concluded within the State at Ranipet, which is an additional place of business of HLL, undoubtedly, the transaction is a intrastate sale and the petitioner is entitled to avail concessional rate of tax on submission of form-XVII declaration. Writ Petition is allowed and the impugned orders are quashed and the first respondent is directed to accept the form-XVII, issued by HLL, on the sale of delivery of LAB to the job worker's factory at Ranipet and complete the assessment for the relevant year in accordance with law. - Decided against the revenue.
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Indian Laws
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2016 (8) TMI 614
Infringement of Copyright - Decree of permanent injunction - Held that:- The Court is satisfied that the Plaintiff has been able to prove the infringement by the Defendant of the R3 of the members of the Plaintiff Society in the performances as recorded in the CDs prepared by the Plaintiff’s Investigator. The playing of songs by the Defendant in its restaurant without payment of royalty to the Plaintiff is a violation of the R3 of the performers who are members of the Plaintiff. The exploitation of the performances of the members of the Plaintiff by the Defendant by playing the said performances in its bar and restaurant without obtaining the Performer’s Rights Clearance Certificate thus constitutes an infringement of the R3 of the members of the Plaintiff Society. In that view of the matter, the suit is decreed and a decree of permanent injunction is issued restraining the Defendant, its officers, servants, agents and representatives and all others acting for and on its behalf from communicating to the public the Plaintiffs repertoire comprising of Performer's performances of all its members and that of the members of its sister societies which it is authorized to administer in India, without paying royalties to and obtaining a clearance from the Plaintiff Society or doing any other act infringing the Plaintiffs Performer's rights through any medium including but not limited to radio stations, TV and usage by mobile companies and violating the Right to Receive Royalties (the R3) and their Performer's Rights. A decree is issued requiring the Defendant to render to the Plaintiff the accounts of all the monies earned by it from the performance of the repertoire comprising the performances of the Performers who are members of the Plaintiff. In the absence of any substantive evidence in that regard in the present proceedings, the prayer of the Plaintiff requiring the Defendant to pay damages is declined. However, the right of the Plaintiff to institute separate proceedings in future in that regard against the Defendant, after rendition of accounts by the Defendant in terms of para 18 above, in accordance with law is reserved. The suit is decreed in the above terms with costs of ₹ 20,000 which will be paid by the Defendant to the Plaintiff within four weeks.
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