Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 22, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Assessments under Section 153A - whatever was recovered during the search having been destroyed in a fire was not available with the AO when he framed the assessments - assessment is not sustainable - HC
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MAT - AO power to recast the profit and loss account - Subsection (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh enquiry in regard to the entries made in the books of account of the company - HC
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Filing misleading affidavits in Court cannot be taken lightly and may warrant stringent action. Before we proceed to take any action, we would want to know what steps/action is the revenue taking against such officers. - HC
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Share of the loss of the AOP claimed as business loss - joint venture - there is no provision for setting off of a member’s share of the losses of the AOP against his personal income - revision u/s 263 by the CIT is valid - HC
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Disallowance of interest - once the amounts were advanced to these ladies not in the course of business, the assessee was not entitled to claim any deduction of interest paid on the amount borrowed. - HC
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MAT - Assessment of book profit u/s.115JB as per original return instead of the revised one - assessee’s revised return seeking to re-compute its book profit deserves to be examined as per law - AT
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Estimation of profit - the profit should be estimated in this case at a little higher rate or a separate addition for creditors should have been made - considering the peculiarity of this case we estimate the profit at 11 per cent. - AT
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Charitable activity - scope of section 2(15) - - Whether the activity of conducting oneday matches, T-20 matches and Indian Premier League matches would amount to doing business or trade? - Held NO - AT
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Validity of assessment made u/s 153C - authorization letter does not contain names and address of the assessees - Panchnama also shows that search at residential premises nothing related to the assessee's in question was seized. - assessment against the assessee is invalid - AT
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Penalty proceedings u/s.271AAA - no penalty u/s.271AAA can be levied if the assessee has paid the tax and interest due thereon within the time limit provided in notice of demand u/s.156 and also well before the penalty proceedings were concluded. - AT
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Non deduction of tax at source u/s 195 - the payments made to the non-resident surveyors of countries with DTAAs having ‘make available’ clause or having MFN clause were not taxable as the non-resident surveyor did not make any technical know-how, etc. available to the assessee company. - AT
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Depreciation on the non-compete rights - the commercial right thus acquired by the assessee unambiguously falls in the category of an 'intangible asset' - AT
Customs
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Effective date of issue of notification - Revenue failed to prove that the same was published as on 3.8.2001 - Therefore impugned Notification was notified in official gazette to public only on 06.08.2001, duty becomes payable only from date it was notified in official gazette - HC
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Denial of Cross examination - Mis-declaration of import of goods - neither any speaking order was passed nor respondent was justified in not permitting petitioner to cross-examine above said eight witnesses - matter remanded back - HC
Service Tax
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Waiver of pre deposit - differential interest - It was taken note of by the Revenue that appellants grant loans to the borrowers and build portfolio of loan. These portfolios of loans are sold to other financial institutions by assigning the entire asset. - There is no logic in taking a view that in such a situation assignee is not liable to pay service tax - AT
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Penalty u/s 78 - appellants have not even registered with the department under service tax and not filing returns in spite of knowing fully well that the they had already collected the total amount from their clients - levy of penalty confirmed - AT
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Demand of service tax - Reverse charge mechanism - Import of services were being used for export of goods - Service tax if any payable under reverse charge is permissible to be availed as cenvat credit and that may be refundable under Notification No.41/2007 unless otherwise deniable by law - in view of revenue neutral situation, No demand can be made - AT
Central Excise
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Duty demand u/s 11A - Shortage of goods found - Clandestine removal of goods - Nothing was brought on record by the revenue, in any manner, to show that to manufacture such a large amount of 14,25,900 pieces, there was material which had been consumed - No evidence of purchase and sale - No Demand - HC
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Denial of SSI exemption - Dummy unit - During inspection of assessee's premises it was found that there was one shed and only two machines were found completely in non-working condition. No electric connection was found - demand confirmed - HC
VAT
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Input tax Credit - KVAT - When consumables were used in job work in respect of which no output tax was payable by assesse or used in manufacturing activity and when said manufactured goods were sold there was liability to pay output tax by assesse – Assesse was entitled to benefit of input tax rebate on total taxable turnover of his business - HC
Case Laws:
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Income Tax
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2015 (8) TMI 774
Scope of assessment under Section 153A - Tribunal sustained the finding of the CIT(A) that the addition made in respect of the share application money was beyond the scope of Section 153A - Held that:- We find considerable merit in the contention advanced on behalf of the Assessee. Concededly, the issue whether the additions made by the AO were beyond the scope of Section 153A had been decided by the CIT(A) in favour of the Assessee and the decision on the said issue had attained finality as the Revenue had not preferred any appeal with regard to the CIT(A)’s order. It is also relevant to note that by virtue of Section 253(2) of the Act, the Principal Commissioner or Commissioner may, if he objects to an order passed by the CIT(A) under Section 250 of the Act, direct the AO to prefer an appeal to the Tribunal. It is not disputed that no such directions to file an appeal against the CIT(A)’s order dated 21st January, 2014 were issued by the concerned Income Tax Authority. In the circumstances, there could be no dispute that the CIT(A)’s order in so far as it relates to the issue regarding the assessment being beyond the scope of Section 153A of the Act had attained finality, and thus, could not have been disturbed by the Tribunal. - Decided against revenue.
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2015 (8) TMI 773
Assessments under Section 153A - Did the ITAT fall into an error in deleting the additions made in the case of the Respondent Assessee for AYs 2004-05 and 2005-06 on the ground that no incriminating material was found during the search conducted in Assessee's premises on 12th September 2007, in respect of its claims? - Held that:- The Court is unable to appreciate on what basis the AO has in the assessment orders for the AYs in question proceeded to discuss the facts relating to the sale of land by the Assessee in the AY 2007-08 and conclude that the Assessee as an amalgamated company failed to comply with the requirements of Section 72-A (2) (b) (i) of the Act. The court enquired from Mr. Sahni whether there is any indication anywhere in the assessment orders that the information regarding the land of CML having been sold by the Assessee during the AY 2007-2008 was obtained as a result of any material gathered during the search or any information obtained during the search. Mr. Sahni candidly answered in the negative. The inescapable conclusion is that the AO proceeded to frame assessments under Section 153 A of the Act relying on some information not unearthed during the search. Further, whatever was recovered during the search having been destroyed in a fire was not available with the AO when he framed the assessments. Consequently, the assessment orders passed with reference to Section 153 A (1) of the Act were unsustainable in law. - Decided in favour of assessee.
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2015 (8) TMI 772
AO power to recast the profit and loss account - Whether ITAT was correct in holding that the AO has no power to recast the profit and loss account even when the same is, according to him, not correctly prepared in accordance with Schedule VI to the Companies Act, 1956 ? - Held that:- Issue stands settled by the decision of the Apex Court in Apollo Tyres Ltd. (2002 (5) TMI 5 - SUPREME Court ) wherein held Assessing Officer has to accept the authenticity of the accounts with reference to the provisions of the Companies Act, which obligate the company to maintain its accounts in a manner provided by that Act and the same to be scrutinized and certified by statutory auditors and approved by the company in general meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Subsection (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh enquiry in regard to the entries made in the books of account of the company. Also see Adbhut Trading (2011 (7) TMI 716 - Bombay High Court) - the question as proposed does not give rise to any substantial question of law. - Decided against revenue.
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2015 (8) TMI 771
Dismissal of revenue appeal for non removal of office objections - affidavit states that the revenue was not aware about the dismissal of the appeal and it was only on the direction of this Court on 10 June 2015 seeking the status of the appeal for the Assessment Year 2007-08 that he became aware of the dismissal. The affidavit states that there is nothing on record to indicate that his office was informed that the appeal for the Assessment Year 2007-08 was dismissed for non removal of office objections - Held that:- At page 9 of the present appeal memo in bold which the appellant has not even bothered to remove makes the following observations: "Remark: Please incorporate the present status of the appeals in assessee's own case for A.Y. 2006-07 and 2007-08." This appeal memo was authorized and signed by the Commissioner of Income Tax and also verified and declared by the Assistant Commissioner of Income Tax. The present appeal was filed on 17 May 2013 containing the above remarks in bold. The officers were fully aware that the appeal for the Assessment Year 2007-08 had been dismissed on 29 November 2012. Remedial measures could have been taken then i.e. at time of filing the present appeal in 2013. We had also recorded our observation that many appeals are being filed by the revenue in this Court which stand concluded by earlier decisions of the Tribunal from which no appeals have been filed by revenue. Thus appeals are filed to this Court mechanically, without due application of mind. It was in the aforesaid circumstances that we were constrained to direct that a senior officer of the revenue take notice of the facts recorded in our order dated 29 June 2015 and take steps to ensure that the law is equally applied in all cases, besides ensuring that the officers of the revenue concerned keep themselves engaged in the proceedings before the Court till such time as the Court finally disposes of the appeal or writ, as the case may be. Not only the Commissioner of Income Tax who signed the present appeal memo and the Assessing Officer who verified the appeal memo have been less than careful. However to compound matters, we find that the affidavit of Mr. Singh dated 29 June 2015 states that there is nothing on the record that revenue was aware of the dismissal of the appeal for the Assessment Year 2008-09 till 10 June 2015. This is a serious lapse as it is incorrect. As the remark in bold in the present appeal clearly shows that the revenue was aware of the appeal for the Assessment Year 2007-08. Filing misleading affidavits in Court cannot be taken lightly and may warrant stringent action. Before we proceed to take any action, we would want to know what steps/action is the revenue taking against such officers.
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2015 (8) TMI 770
Under valuation of property - Whether Tribunal was correct in holding that AO has to form an opinion that the property is under valued before sending it to the valuation officer which had not been done in the facts of the present case when the assessee himself had raised no objection for referring to the Valuation Officer? - Held that:- What is to be primarily considered is that whether the valuation report was required in the facts of the present case or not. Admittedly, there was no valuation report of a registered Valuer submitted by the assessee with regard to the valuation of the three flats in question. It is correct that the Assessing Officer had wrongly sought the report under section 142-A of the Act, whereas it ought to have been called under section 55-A of the Act which provides for the Assessing Officer to be first of the opinion that the fair market value of the asset exceeds by more than 15% of the value of the asset as claimed by the assessee, for which reasons ought to have been recorded by the Assessing Officer. Assessing Officer has the power to call for a valuation report when he is of the opinion that the valuation of the asset given by the assessee is undervalued and technically such opinion has not been recorded by the Assessing Officer in the present case, though we answer the first question in favour of the assessee and against the Revenue, but we provide that in the facts and circumstances of the case, the matter may be reconsidered by the Assessing Officer and after recording reasons for forming an opinion with regard to calling for a valuation report as required under section 55-A of the Act, the Assessing Officer may proceed afresh in the matter, in accordance with law. - Decided in favour of assessee by way or remand. Transfer - Whether the Tribunal was correct in holding that only 8,434 sq.ft had been transferred by ignoring the development agreement which clearly stated that 12,377 sq.ft has been transferred to the builder and consequently recorded a perverse finding? - Held that:- The agreement and the memorandum of understanding, as had been entered into between the parties, was for 12,377 sq.ft. being the share of contribution of the assessee in the total land given for development to the developer. The Tribunal, without assigning any cogent reason in this regard, has come to the conclusion that the assessee had transferred only 8,434 sq.ft. of undivided interested in exchange of three flats measuring 9,747 sq.ft. along with 527 sq. ft. of undivided interest in the adjoining land. The findings recorded by the Assessing Officer as well as the appellate Commissioner in this regard have not been properly appreciated by the Tribunal. As such, we answer the second question in favour of the Revenue
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2015 (8) TMI 769
Share of the loss of the AOP claimed as business loss - setting off of the above loss of the joint venture against the profit of the Assessee as a business loss by the AO reversed by CIT(A) on the ground that the AO could have computed the loss of the AOP only after the AOP filed its own return - AO’s action was held to be without jurisdiction and prejudicial to the interest of the Revenue BY CIT(A) - The ITAT by its order reversed the order of the CIT (A) and held in favour of the Assessee - whether Tribunal was right in law in holding that the order passed by the Assessing Officer on 31.12.1990 in respect of the assessee was neither erroneous nor prejudicial to the interest of the Revenue? - Held that:- Under Section 86 of the Act it is provided that when the Assessee is a member of the AOP, income tax shall not be payable by the Assessee in respect of his share in the income of the AOP computable in the manner provided in Section 67 (A). Clause (b) of the first proviso to the above Section states that unless the AOP is chargeable to tax on its total income at the maximum marginal rate, the share of member computed in terms of Section 67 (A) shall form part of its total income. However, there is no corresponding provision for setting off of a member’s share of the losses of the AOP against his personal income. In the instant case the CIT (A) was right in reversing the decision of the AO to set off the Assessee's share of the loss of the joint venture against the profit of the Assessee as a business loss. The ITAT's order reversing the CIT (A) was, therefore, erroneous. The question referred is answered by holding that the ITAT erred in holding that the order passed by the AO was not prejudicial to the interests of the Revenue.
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2015 (8) TMI 768
Reopening of assessment - disallowance of depreciation claim - Held that:- This is not a case where the Revenue could successfully contend that the income chargeable to tax had escaped assessment due to the reason of failure on the part of the assessee to disclose truly and fully all material facts. Return that the petitioner filed runs into barely 3 or 4 pages. It was not as if that such claim of depreciation was tucked away somewhere in bulky voluminous return where the Assessing Officer could, with due diligence, have discovered such claim. The Revenue, therefore, cannot fall back on Explanation 1 of the Proviso of Section 147 of the Act also, in this respect. In fact claim of depreciation was examined by the Assessing Officer and partially disallowed with respect to other assets. The petitioner had never before the Assessing Officer contended that the asset was actually put to use in the objection that the petitioner raised to the reasons recorded by the Assessing Officer, no such contention was pressed in service. The documents, on the basis of which it is sought to be canvassed before us that there was, in fact, electricity generation during the relevant period, were not placed before the Assessing Officer either during the original assessment or in response to the notice of reopening. We would, therefore, also even otherwise not examine such factual aspect for the first time in this petition. Be that as it may, on the sole ground that for the reasons noted above, notice for reopening the assessment could not have been validly issued, we are inclined to allow this petition. Accordingly, impugned notice is quashed. Decided in favour of assessee.
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2015 (8) TMI 767
Depreciation and investment allowance on the plant and machinery - Whether the Tribunal justified directing AO to allow allowances when the Assessee had not carried out any manufacturing activity during the previous year relevant to the Assessment Year 1985-86? - whether Tribunal was justified in holding that the provisions of Sec. 37(3A) are not applicable to the expenses incurred on repairs and taxes of Motor Cars? - Held that:- It is an undisputed position that the disputed claim in the appeal is valued at ₹ 9.88 lacs therefore follows that the tax effect in the present appeal is less than ₹ 10 lacs. This Court in CIT Vs. Vijaya Kavekar [2013 (2) TMI 451 - Bombay High Court] while dealing with appeals filed by the revenue dismissed a pending appeal having low tax effect i.e. less than ₹ 10 lacs by pacing reliance upon Central Board of Direct Taxes (the 'CBDT') Instruction NO.3/2011. This Court held that the circular/instruction issued by CBDT would apply to pending appeals. The questions which arise for our consideration in the present appeal would not give rise to any cascading effect - Decided against revenue
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2015 (8) TMI 766
Disallowance of interest - whether alleged advances made by Appellant was in the course of and for the purpose of business especially when Appellant had adequate non-interest bearing funds during the relevant assessment years? - Held that:- From the material placed on record, it is not in dispute that the assessee advanced money to the ladies out of interest bearing funds. The case of the assessee is that those ladies were expected to enter into an agreement to purchase the land properties for the benefit of it. In fact that has been done, but no material is placed on record to show that the ladies entered into an agreement to purchase the lands as mentioned in the letter which they have given in those circumstances. The case of the assessee is not established and once the amounts were advanced to these ladies not in the course of business, the assessee was not entitled to claim any deduction of interest paid on the amount borrowed. That is precisely what the Tribunal has held and what the authorities have upheld. - Decided in favour of revenue.
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2015 (8) TMI 765
Undisclosed cash credits under section 68 - CIT(A) deleted part addition - Held that:- When the donors have given their permanent account numbers and their receipts would prove that the assessee has been able to prove the identity of the donors as well as proved that the donors have given donations towards corpus of the assessee-society and the donations have been utilised for the purpose of construction of the educational building. Therefore, the authorities below should not have made addition against the assessee. Therefore, we set aside the orders of the authorities below and delete the entire addition. - Decided in favour of assessee. Addition on account of alleged commission - unexplained expenditure under section 69C - Held that:- If the assessee has made any actual payment on account of commission to any person, the commission is stated to be given to some persons who have arranged the donations. Most of the donors have already confirmed giving of donations to the assessee and none of the donors have confirmed the version of the Assessing Officer if they have given donations to the assessee through commission agent, against commission payment. Therefore, the theory of commission agent arranging the donations is not proved through any reliable or cogent evidence. No material was also found during the course of search to support the findings of the authorities below if any commission is paid actually to the commission agent for arranging the donations. The assessee is a charitable society. Therefore, there was no need to make any payment by way of commission and even if any commission is paid, this would have been allowable deduction under section 37 of the Act. Therefore, in the absence of any specific material available on record, it is difficult to believe that any commission was paid by the assessee. No enquiries have been made from any recipient of the amount. The assessee was engaged only in construction of the building in the year under consideration. Therefore, there was no other source of income from where it could be stated that the assessee has earned undisclosed income or paid any commission. We have already decided major issue of unexplained donations above and have deleted the entire addition. Therefore, considering the totality of the facts and circumstances, we do not find any justification even to sustain part of the addition on account of alleged commission payment - Decided in favour of assessee. Taxing of the income of the assessee - income of the assessee society was exempt under section 10(23C)(vi) and section 12AA - Held that:- Learned counsel for the assessee stated that registration under section 12AA of the Act has already been cancelled, against which the assessee is in appeal. Therefore, this ground will not survive in favour of the assessee. On consideration of the above facts it is clear that once registration is cancelled under section 12AA(3) of the Act, the assessee would not get benefit of the same. Violation of aims and objects of the assessee-society - The assessee was at the stage of formation, i.e., construction of educational building and all corpus funds applied towards the construction of the college building and no specific findings of fact have been recorded against the assessee in this assessment year and whatever additions have been made by the Assessing Officer on account of donors' donation or commission payment, we have already deleted the addition and allowed the appeal of the assessee. Therefore, it is not the case of violation of any provisions of sections 11, 12 and 13 of the Act in this year. Therefore, the learned Commissioner of Income- tax (Appeals) was justified in allowing the appeal of the assessee on this issue. - Decided in favour of assessee. Addition on account of capitation fees from the students and addition being cash found in the residential premises of the chairman of the society - Held that:- No specific, reliable or cogent evidence was found during the course of search to prove that the assessee-society received any capitation fee or any cash belonged to the assessee-society. Therefore, both additions of ₹ 1.60 crores and ₹ 3,99,950 in the hands of the assessee- society are wholly unwarranted and are liable to be deleted. Since the Assessing Officer has failed to prove his case against the assessee on account of both additions, therefore, there is no question of violation of sections 11(3) and 13(3) of the Act in the case of the assessee. Considering the above discussion, we set aside the orders of the authorities below and delete the addition of ₹ 3,99,950 and ₹ 1.60 crores in the hands of the assessee. We also held that there is no violation of sections 11(3) and 13(3) of the Act in the case of the assessee. - Decided in favour of assessee. Cancel the registration under section 12AA - Held that:- There is no material available against the assessee-society at this stage to show that the assessee's activities are not genuine or have not been carried out in accordance with the objects of the trust. We may also note here that in the remaining assessment years 2005-06, 2006-07, 2007-08 and 2008-09, the Revenue Department did not find any adverse material against the assessee to prove that its activities are not genuine. There is no violation of sections 11, 12 and 13 of the Act. There is also no violation of conditions under section 80G of the Act. Therefore, considering the totality of the facts and circumstances, it is clear that the assessee-society has solely carried out the genuine educational activities and as such, there is no reason to cancel the registration under section 12AA of the Act or withdrawing the approval under section 80G of the Act.- Decided in favour of assessee.
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2015 (8) TMI 764
Investment in share capital by the family members of the assessee - CIT(A) deleted part addition - Held that:- Assessing Officer is bound to follow the procedure prescribed for computing the undisclosed income for the block period. The CIT(A) found that the Assessing Officer has fully ignored the disclosure made by the respective family members under VDIS. He further found that the addition towards equity shares and share application money in the name of family members cannot be sustained. Accordingly, he deleted the addition to the extent of ₹ 1,99,64,950/-. The CIT(A) also failed to consider the provisions of section 158BB of the Act. The CIT(A) further found that the assessee could not satisfactorily explain the source of investment in the share application of M/s Diksaat Transworld Ltd. to the extent of ₹ 1,62,50,000/-. This Tribunal is of the considered opinion that in the absence of any seized material during the course of search operation, this amount of ₹ 1,62,50,000/- also cannot be treated as undisclosed income for the block period. At the best, it may be assessable in the regular assessment provided the time limit is available under the statutory provisions. This Tribunal is of the considered opinion that the total investment made by the assessee and his family members to the extent of ₹ 3,62,14,950/- was not supported by any of the search material, therefore, the same cannot be treated as undisclosed income for the block period. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the entire addition of ₹ 3,62,14,650/-. - Decided in favour of assessee. unexplained investment/deposit in City Union Bank - CIT(A) deleted part addition - Held that:- When the assessee has received ₹ 13,40,22,400/- from M/s Indian Telephone Industries Ltd. towards the contract awarded for taking photographs for preparing electoral identity cards, this Tribunal is of the considered opinion that the assessee might have deposited the money from the above said amount received from M/s Indian Telephone Industries Ltd. It is pertinent to note that no material was found during the course of search operation and what was available with the Assessing Officer is only the bank statement. The assessee has explained the receipt of ₹ 13,40,22,400/- from M/s Indian Telephone Industries Ltd. which was not disputed by the Assessing Officer. In the absence of any other material to indicate that the assessee has deposited the undisclosed money in the bank account, this Tribunal is of the considered opinion that the entire amount of ₹ 1,69,27,817/- was deposited from the business receipt of the assessee, in other words, the money received from M/s Telephone Industries Ltd. Moreover, as observed by the CIT(A), the amount withdrawn to the extent of ₹ 1,50,00,000/- is also available with the assessee for deposits. Therefore, this Tribunal is of the considered opinion that the CIT(A) ought to have deleted the entire addition instead of restricting the same to ₹ 19,77,817/-. According, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the entire addition of ₹ 1,69,27,817/-. - Decided in favour of assessee. Unexplained investment in M/s Dimka Petro Products Ltd - CIT(A) deleted addition - Held that:- From the order of the CIT(A) it appears that the dispute is with regard to land purchased by M/s Dimka Petro Products Ltd from M/s IDL Industries Ltd., Hyderabad. The assessee has not purchased any land. The payments were made by account payee cheques and demand draft. In fact, the payments were made from the accounts of the maintained at City Union Bank and Lakshmi Vilas Bank. The deposit made in the account was already considered and it was found that the same was made from the business receipt of the assessee. Therefore, the CIT(A) found that making a further addition with regard to payment made by the assessee to M/s IDL Industries Ltd would amount to double addition. Even the Assessing Officer has made addition only on the ground that the assessee has not maintained any proper accounts. The fact remains that the deposit made in the bank account was explained and the payments were made from the deposit made in the bank account by way of demand drafts and cheques. Therefore, this Tribunal is of the considered opinion that the CIT(A) has rightly deleted the addition of ₹ 85 lakhs. This Tribunal do not find any infirmity in the order of the lower authority. Accordingly, the same is confirmed.- Decided in favour of assessee. Unexplained interest payment -CIT(A) deleted addition - Held that:- It is not in dispute that the loan was borrowed through cheque and the payment of interest was also made through cheque. M/s Mansi Mercantile Co. debited the interest in the account of the assessee on 24.2.2001. The transaction was entered in the books of account by way of journal entry. Since the loan was received by way of cheque and the payment of interest to the extent of ₹ 1,08,000/- was also paid by way of cheque, this Tribunal is of the considered opinion that the payment of interest to the extent of ₹ 1,08,000/- cannot be treated as from undisclosed source of the assessee. Therefore, the CIT(A) has rightly deleted the addition.- Decided in favour of assessee. Unexplained investment made in M/s Karishma Investments - Held that:- This Tribunal is of the considered opinion that when admittedly ₹ 5 lakhs was paid from savings bank account of the assessee maintained with Central Bank of India, the CIT(A) ought to have deleted the same. In the absence of any other material to show that the assessee has earned the money from undisclosed source, this Tribunal is of the considered opinion that the CIT(A) ought to have deleted the entire addition of ₹ 15 lakhs. Accordingly, the order of the CIT(A) is set aside and the Assessing Officer is directed to delete the addition of ₹ 5 lakhs towards investment made by the assessee in M/s Karishma Investment.- Decided in favour of assessee. Cash payment to Shri Rakesh Sarin and transactions with S/Shri Thirunavukarasu and Karthikeyan and Jayaprakash - Held that:- This Tribunal is of the considered opinion that that the material found during the course of survey operation cannot be a basis for making addition for the block period consequent to the search u/s 132A of the Act. In other words, in view of section 158BB(1) of the Act, the Assessing Officer has to confine himself only to the material found during the course of search operation and he cannot make addition on the basis of material found during the course of survey operation. In view of the above, this Tribunal is of the considered opinion that the addition is unwarranted. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition of ₹ 28,36,000/- for the block period. It is not in dispute that payment of ₹ 5,10,000/- was found by the Revenue authorities during the course of survey operation in the office of M/s Diksaat Transworld Ltd. No material was found during the course of search operation. In view of section 158BB(1), the Assessing Officer has to compute the undisclosed income for the block period on the basis of the material found during the course of search operation and the information which is relatable to the material found during the course of search operation. Therefore, this Tribunal is of the considered opinion that the material found during the course of survey operation cannot be a basis for making any addition. In view of the above, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition of ₹ 5,10,000/-. - Decided in favour of assessee. Disallowance of production expenses - Held that:- This Tribunal is of the considered opinion that the investment of ₹ 53,17,300/- would have been made from the above said receipt. In the absence of any material to suggest that the assessee has earned any other income from any other sources, this Tribunal is of the considered opinion that making addition of ₹ 53,17,300/- is not called for. Apart from that, in view of the judgments of the Madras High Court in P. K. Ganeshwar (2008 (11) TMI 70 - MADRAS HIGH COURT ) and G. K. Senniappan (2006 (1) TMI 87 - MADRAS High Court ), in the absence of any material found during search operation, no addition can be made towards undisclosed income for the block period. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition of ₹ 53,17,300/-. Addition towards telecast rights - No doubt the Revenue authorities found payment of ₹ 3 lakhs during the course of search operation for obtaining telecast rights of two feature films ‘Mustafa’ and ‘Dr. Ambedkar’. While considering the investment made by the assessee in production of the feature film, this Tribunal found that the assessee invested the same from the business receipts of ₹ 13,40,22,400/- received from M/s Indian Telephone Industries. The CIT(A) has confirmed the addition only to the extent of ₹ 2,25,000/-. This Tribunal is of the considered opinion that the assessee might have invested out of the business receipts of ₹ 13,40,22,400/- from Indian Telephone Industries. Therefore, no addition is called for. Accordingly, the orders of the lower authorities are set aside and addition of ₹ 3 lakhs is deleted. - Decided in favour of assessee. Addition towards investment in the jewellery - Held that:- Admittedly, the Revenue authorities found two bills for purchase of jewellery to the extent of ₹ 1,35,000/-. The assessee claims that lot of jewellery was purchased during that period and he could not explain the source for purchasing jewellery to the extent of ₹ 1,35,000/-. Since the assessee himself admitted that he could not explain the source for purchase of jewellery to the extent of ₹ 1,35,000/-, for which receipt was found during search operation, this Tribunal do not find any infirmity in the orders of the lower authorities. Accordingly, the addition of ₹ 1,35,000/- towards purchase of jewellery is confirmed. - Decided against assessee. Purchase of industrial land at Ambattur - Held that:- no material was found during the course of search operation with regard to purchase of property at Ambattur. Section 158BB(1) of the Act clearly says that unless and until there is a material found during the course of search operation, there cannot be any undisclosed income for the block period. The Assessing Officer, on the basis of the information furnished during the course of assessment proceedings, made addition of ₹ 10,57,000/-. This Tribunal is of the considered opinion that the addition may be made in the regular course in the regular assessment. However, no addition could be made for the block period since it was not supported by any seized material found during the course of search operation. - Decided in favour of assessee. Investment in Kottivakkan property - Held that:- There cannot be any addition for the block period as undisclosed income in view of the language employed by the legislature in section 158BB(1) of the Act. Therefore, this Tribunal is of the considered opinion that the CIT(A) ought to have deleted the entire addition of ₹ 10,16,307/-. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the entire addition of ₹ 10,16,307/-. - Decided in favour of assessee. Investment made in the name of children - Held that:- Assessing Officer has to compute the undisclosed income on the basis of the material found during the course of search operation and the information which is relatable to the material found during the course of search operation. The Assessing Officer is not referring to any of the search material in the assessment order. It is also not the case of the Revenue that any material was found during the course of search operation. In those circumstances, this Tribunal is of the considered opinion that the same cannot be taken as undisclosed income for the block period. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition - Decided in favour of assessee. Unexplained expenditure - Held that:- Disallowance of 8% is very high, however, disallowance of 2% of the total claim of expenditure would meet the ends of justice. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to estimate the unexplained expenditure at 2% of the total expenditure claimed in M/s Rukmani Industries at ₹ 2,88,25,244/-. In other words, 2% of ₹ 2,88,25,244/- shall be treated as unexplained expenditure for the assessment year 2000-01. - Decided partly in favour of assessee. Unexplained cash credit u/s 69A - Held that:- The assessee admittedly deposited ₹ 13,08,000/- in two bank accounts. A sum of ₹ 2 lakhs was deposited in Canara Bank on 21.9.2002 and another sum of ₹ 10 lakhs on 2.1.2003. With regard to cash deposit of ₹ 2 lakhs on 21.9.2002, the CIT(A) found that the assessee deposited ₹ 99,500/- from sundry debtors collection of ₹ 46,100/-, out of realization of loans and advances and another sum of ₹ 3000/- from refund of deposits. The balance of ₹ 3,08,000/- was confirmed by the CIT(A). The assessee could not substantiate the deposit of ₹ 3,08,000/- in Canara Bank on 21.9.2002. Therefore, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the addition of ₹ 3,08,000/-. Now, coming to ₹ 10 lakhs, the CIT(A) found that the assessee has received a sum of ₹ 6,49,820/- in cash on sale of property on 11.12.2002. The CIT(A) found that the remaining balance or ₹ 3,50,180/- was not substantiated. The fact remains that the assessee’s wife Smt. D. Meenakshi also received a sum of ₹ 3,61,011/- on sale of the very same property on 11.12.2002 and Shri N. Pradeep Kumar has also received a sum of ₹ 9,89,169/-. The fact remains that the assessee, his wife Smt. D. Meenakshi and Shri N. Pradeep Kumar are joint holders of the property and they have totally received ₹ 20 lakhs on sale of the property. Even though the assessee appears to have received ₹ 6,49,820/- the possibility of making use of the money which was received by his wife and Shri Pradeep Kumar for making deposit in Canara Bank cannot be ruled out. When the assessee has established that the property was sold for ₹ 20 lakhs, this Tribunal is of the considered opinion that the amount might have been used for making deposit in Canara Bank on 2.1.2003. Therefore, this Tribunal is of the considered opinion that the CIT(A) ought to have deleted the entire addition of ₹ 10 lakhs - Decided partly in favour of assessee.
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2015 (8) TMI 763
Validity of Section 153A proceedings - Held that:- Initiation of impugned Section 153A proceedings in this set of four assessment years in absence of any incriminating material found in search conducted after finalization of regular assessments is not sustainable. We quote Delhi tribunal’s decision ACIT vs. PACL India Ltd.[2013 (10) TMI 520 - ITAT DELHI] and hold that assessments framed u/s.143(1) and 143(3) of the Act have to be treated at par in such cases. - Decided in favour of assessee. Disallowance of weighted deduction u/s. 35(2AB) in respect of clinical trial expenses - CIT(A) deleted the addition - Held that:- It is an admitted fact that assessee has incurred the amount in question on specified purposes only. We find that the hon’ble jurisdictional high court in case of CIT vs. Cadila Healthcare Ltd. [2013 (3) TMI 539 - GUJARAT HIGH COURT] takes into account explanation to Section 35(2AB)(1) introduced by the Finance Act, 2001 w. E. F. 01.04.2002 and holds that where an assessee company incurs expenses on clinical trials for developing its pharmaceutical products outside a lab facility approved by the prescribed authority (the DSIR), the impugned weighted deduction has to be granted as purpose of this beneficial provision is to encourage scientific research. The Revenue does not point out any distinction on facts and law. Nor does it highlight any factual infirmity in assessee’s claim that the impugned sum has not been incurred on clinical research. We reject the Revenue’s corresponding ground accordingly in A.Y. 2007-08. - Decided against revenue. Weighted deduction of ₹ 3,07,245/- disallowed in the course of assessment - Held that:- There is no dispute has actually incurred the impugned building repair and maintenance sum. The authorities below have invoke the impugned disallowance for want of DSIR approval. It is to be seen that a coordinate bench in ACIT vs. Torrent Pharmaceuticals Ltd. [2009 (11) TMI 819 - ITAT AHMEDABAD] dealt with an identical issue and held that when an Assessing Officer treats such a building repair and maintenance sum as revenue expenditure, the same is also allowable u/s.35(2AB) of the Act as well. The Revenue fails to quote any case law to the contrary. We accept corresponding ground in its Cross Objection accordingly. Its legal ground challenging initiation of Section 153A proceedings is dismissed as not pressed - Decided partly in favour of assessee. Assessment of book profit u/s.115JB as per original return instead of the revised one - Held that:- CIT(A) at the first instance holds that the assessee’s revised return was filed on 30.12.2009 i. E. on the date of framing of assessment itself. Thereafter, he observes that this revised return was given to the Assessing Officer on 31.12.2009 i.e. after framing of the assessment. There is no justification forthcoming that when revised return was filed on the former date, how it could be given to the Assessing Officer on the next date. Be that as it may, the fact remains that the assessee has sought to compute its book profit afresh. The said computation on merits is yet to be examined. We quote the case law of Goetze (India) Ltd. Vs. CIT [2006 (3) TMI 75 - SUPREME Court] and hold that entertaining such a plea in absence of a revised return does not bar any appellate authority from exercising its jurisdiction. This said case law clarifies that jurisdiction of appellate authority under the Act is not impinged upon. The Revenue does not point out any case law to the contrary. We observe in these facts that the assessee’s revised return seeking to re-compute its book profit deserves to be examined as per law. Its corresponding ground raised in this appeal is set aside to the file of Assessing Officer. - Decided in favour of assessee for statistical purposes
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2015 (8) TMI 762
Estimation of profit - whether net profit rate adopted is add-hoc and arbitrary and the rate applied i.e., 8.5 per cent. is on the higher side? - Held that:- Commissioner of Income-tax (Appeals) has made correct observations that if the assessee had earned so much of profit then some assets would have been found during the search. Further, even the Revenue's claim was that the assessee was not having any books of account. Therefore, in such a situation the only course left to the learned Commissioner of Income-tax (Appeals) was estimation of profit. However, at the same time we find that learned Commissioner of Income-tax (Appeals) has not given detailed reasons for not finding any merit in the finding of the Assessing Officer that the assessee has shown bogus creditors. We have already seen that in the case of Gulam Mohidheen, the amounts of ₹ 14,01,013, ₹ 13,28,813, ₹ 17,53,813 and ₹ 14,70,413 during year ending March 31, 1997, March 31, 1998, March 31, 1999 and March 31, 2000 respectively were shown as sundry creditors. First of all, it is not possible to believe that a labour contractor can extend continuous credit of such huge amounts regularly. Secondly, whatever cheques were issued later on were shown as receipts which is quite clear which means that this is a book entry for sundry creditors. Similarly, in the case of Shri Murari Lal, from the receipt side of the day book i.e., document Nos. 1 to 111 of Annexure A-6 it was found that amount was entered as cash. Therefore, in our opinion, the profit should be estimated in this case at a little higher rate or a separate addition for creditors should have been made. Since the Assessing Officer himself has not made separate addition for creditors, in our opinion, considering the peculiarity of this case we estimate the profit at 11 per cent. - Decided partly in favour of revenue.
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2015 (8) TMI 761
Registration granted under Section 12AA cancelled - claim of depreciation denied - Held that:- For assessment year 2008-09 when the assessee claims the cost of the capital expenditure as exemption under Section 11 of the Act, then the cost of the capital asset becomes NIL. Admittedly, depreciation under Section 32 of the Act has to be allowed only on written down value of the asset. When the written down value of the asset becomes NIL since the entire cost was allowed as application of income under Section 11 of the Act, this Tribunal is of the considered opinion that there cannot be any further claim for deduction under Section 32 of the Act. In view of the above, this Tribunal is of the considered opinion that the assessee is not eligible for deduction under Section 32 of the Act towards depreciation. However, it is made clear that the assessee is eligible for exemption under Section 11 of the Act for all the assessment years under consideration. - Decided against assessee. Now coming to assessment years 2009-10 and 2010-11, the claim of the assessee was rejected by the lower authorities on the ground that the registration under Section 12AA was cancelled and it was confirmed by this Tribunal. The lower authorities have also found that the assessee is engaged in business activity. As regards the cancellation of registration, now the Madras High Court has set aside the order of this Tribunal and restored the registration under Section 12AA of the Act. Therefore, as on today, the registration under Section 12AA is restored. - Decided in favour of assessee. Whether the activity of conducting oneday matches, T-20 matches and Indian Premier League matches would amount to doing business or trade? - Held that:- The material available on record shows that one-day matches, T-20 matches and Indian Premier League matches are all conducted by the BCCI and the assessee, being the host in the State of Tamil Nadu, is only providing its stadium. The assessee has also received funds from BCCI for meeting the expenditure, being the host. Therefore, this Tribunal is of the considered opinion that at any stretch of imagination, it cannot be said that the assessee is conducting any business activity. The assessee is also not providing any service to any trade, commerce or industry. In those circumstances, this Tribunal is of the considered opinion that proviso to Section 2(15) of the Act is not applicable to the assessee. In view of the above discussion, the assessee is eligible for exemption under Section 11 of the Act for all the assessment years under consideration. Accordingly, the orders of the lower authorities for assessment years 2009-10 and 2010- 11are set aside and the Assessing Officer is directed to grant exemption under Section 11 of the Act. The Assessing Officer is also directed to grant exemption under Section 11 of the Act for the assessment year 2008-09 also.- Decided in favour of assessee.
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2015 (8) TMI 760
Disallowance under Section 40(a)(ia) - whether tax has to be deducted on the amount paid by the assessee and not only the amount payable by the assessee? - Held that:- It is an admitted fact that the point of deduction of tax at source is at the time of payment or credit of the amount to the account of the payee. No provision of Income-tax Act requires the assessee to deduct tax at source in respect of the amount which was not paid. In other words, in respect of the amount which remains payable or to be credited, the Income-tax Act does not require deduction of tax. Therefore, if the assessee has not paid or credited any amount to the account, then there is no question of deduction of tax under any of the provision of the Income-tax Act. The contention of the assessee that the tax has to be deducted only on the amount remains payable on the last date of financial year and the deduction need not be made on the amount already paid, is contrary to provisions of Income-tax Act which requires deduction of tax. If the contention of the assessee is accepted, this Tribunal is of the considered opinion that the entire provisions of Income-tax Act which require the assessee to deduct tax would be meaningless. Section 40(a)(ia) would cover not only to the amounts which are payable as on 31st March of a particular year but also which are payable at any time during the year. Of course, as long as the other requirement of the said provision exist. In that context, in our opinion the decision of the Special Bench of the Tribunal in the case of M/s Merilyn Shipping & Transports vs ACIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM], does not lay down correct law. - Decided against assessee.
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2015 (8) TMI 759
Addition on proportionate notional interest on diversion of interest bearing loan amounts for non business purposes - CIT(A) deleted the addition - Held that:- Before the ld CIT(A) it has been clearly brought out with evidence that the investments were not made out of borrowed funds. The ld CIT(A) accepted these factual contention and in the absence of any contrary evidence we find no infirmity in the same. In any event the presumption as laid down in the case of Reliance Utilities and Power Ltd (2009 (1) TMI 4 - HIGH COURT BOMBAY) that when interest free funds as well as interest bearing funds are available the presumption would arise that interest free loans or investment would have been made out of interest free funds available with or generated by the company is squarely applicable in this case. Share in Kalra Hospital Pvt. Ltd. and Lara medicines Pvt. Ltd. were purchased in the earlier year and investment in SBL Plastics was made at the fag end of the year. The assessee has sufficient interest free funds to cover the investments. - Decided against revenue. Disallowance relating to 'Conversion Charges paid to MCD - revenue v/s capital expenditure - CIT(A) deleted the addition - Held that:- The assessee had paid amounts for one time conversion charges and for parking charges at the two outlets, the benefits of which might accrue to the assessee for indefinite period of time yet these were incurred to enable the profit making structures to work more efficiently leaving the source or the profit making structure untouched and moreover, the expenditure were in the nature of levies/taxes paid by an assessee to a government authority for making available the required infrastructure to run the business efficiently and effectively. Therefore, on the facts & circumstances of the case and following Judicial pronouncements, we do not find infirmity in the order of Ld. CIT(A). We are of the considered opinion that Ld. CIT(A) had rightly deleted the additions. See CIT Vs. J. K. Synthetics Ltd (2008 (12) TMI 21 - DELHI HIGH COURT) and Bikaner Gypsums Ltd. Vs. CIT (1990 (10) TMI 2 - SUPREME Court ) - Decided against revenue. Website development expenses - revenue v/s capital expenditure - CIT(A) deleted the addition - Held that:- The jurisdictional High Court in the case of Commissioner of Income-tax IV 3 Vs. India-visit. Com Private Limited (2008 (9) TMI 8 - DELHI HIGH COURT), held that the expenditure on website development is allowable as revenue expenditure. Respectfully following the view taken therein we uphold the order of the ld CIT(A) - Decided against revenue. Disallowances of claims of depreciation on medical equipments - CIT(A) deleted the addition - Held that:- Existence and use of these equipment cannot be denied as we have to ignore the statements recorded from the suppliers for the reason that no cross examination was provided to the assessee and the other evidence is in favour of the claim of the assessee.The existence of the asset is accepted by us, though the source of acquisition is under a cloud. The fact that the equipments have been used is proved by the receipt of substantial income on these equipment. Hence both the conditions for grant of depreciation have been fulfilled. Thus depreciation has to be granted on these assets. Thus we uphold the order of the ld CIT(A) and dismiss this ground of the revenue. - Decided against revenue.
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2015 (8) TMI 758
Validity of assessment made u/s 153C - Held that:- Assessments u/s 153A and 153C have been framed in pursuance to search made. Thereafter no search relating to the assessees was made, only prohibitory orders have been revoked. We also note that in the authorization letter names and address of the assessees 'in question have not been mentioned but in Panchnama drawn in pursuance to the execution of the said authorization letter names of all these asses sees have been mentioned. Panchnama also shows that search at residential premises nothing related to the assessee's in question was seized. We thus find substance in the contention of the Ld. AR fully concur with him that assessments in question are barred by time limit/and as such are being quashed as invalid. We uphold the contention of assessee and allow this ground of assessee.
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2015 (8) TMI 757
Undisclosed investment - Held that:- AO in the present proceedings had incorrectly proceeded to re-consider the issues which already stood concluded by the Co-ordinate Bench. It is trite law that in the remand proceedings, the AO cannot travel beyond the directions given in the remand. Accordingly on a consideration of the same, we are of the view that the following finding of the CIT(A on facts deserves to be upheld which warrants the dismissal of the appeal of the Revenue:- “With regard to the issue of addition made on account of investment made in FDR, since the Hon’ble ITAT in para 5 of their order dated 06.06.2008 have clearly given a finding that the FDR’s worth ₹ 2,10,818 the investment in which were made prior to the block period and FDR of ₹ 4,99,304 not in the appellant’s name should be left out of the consideration of block assessment, the AO is therefore directed to scrupulously follow the direction of the Hon’ble Tribunal.” - Decided in favour of assessee.
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2015 (8) TMI 756
Penalty proceedings u/s.271AAA - delay in payment of tax - assessment proceedings after search and seizure - CIT(A) deleted penalty - Held that:- Although the assessee has not paid an amount of ₹ 40,99,998/- before filing of the return of income, however, the fact remains that the demand of ₹ 49,64,700/- raised by the AO for A.Y. 2010-11 vide order dated 29-12-2011 passed u/s.143(3) has been paid on 22-03-2012 which is much before 28-06- 2012, i.e., the date of penalty order passed u/s.271AAA for the year under appeal. Therefore, respectfully following the decision of the Kolkata Bench of the Tribunal in the case of Pioneer Marbles and Interiors Pvt. Ltd. (2012 (2) TMI 261 - ITAT, KOLKATA ) to hold no penalty u/s.271AAA can be levied if the assessee has paid the tax and interest due thereon within the time limit provided in notice of demand u/s.156 and also well before the penalty proceedings were concluded. we hold that no penalty u/s.271AAA is leviable in the instant case. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed. - Decided in favour of assessee.
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2015 (8) TMI 755
Transfer pricing adjustment - selection of comparable - Held that:- M/s Eicher Motors - CIT(A) has held a tractor manufacturer as comparable with a harvester combine manufacturer. Whereas a harvester combine is a machine that harvests green crops by combining three separate operations, namely, reaping, threshing and winnowing, a tractor is a vehicle used for drawing or pulling. Further, a combine is several times dearer than a tractor. It can be observed that the functions of both, along with their respective price tags, are entirely different from each other. It is beyond our comprehension as to how a manufacturer of a tractor can be considered as comparable with the manufacturer of harvester combine. Simply because both the machines fall in the overall category of ‘Agricultural equipments’, it does not mean that they become comparable to each other. If one accepts such a logic as applied by the ld. CIT(A), then the manufacturer of other agricultural equipments, such as tillers, would also become comparable with a manufacturer of tractor or harvester combine and vice versa, which proposition is absolutely absurd. In view of the inherent differences in the characteristics, usage and price of harvester combine and tractors, we are unable to countenance the view taken by the ld. CIT(A) in treating M/s Eicher Motors as a good comparable. The impugned order on this score is overturned and the view of the TPO is restored. M/s Force Motors - facts and circumstances of M/s Force Motors are mutatis mutandis similar to those of M/s Eicher Motors. This company, initially considered as comparable by the assessee, was also excluded by the TPO on the same reasoning as given for M/s Eicher Motors and the ld. CIT(A) also upheld the inclusion of this company in the list of comparables by following the same reasoning as given by him for M/s Eicher Motors. In view of our above discussion made in the context of M/s Eicher Motors, we hold that M/s Force Motors cannot be considered as a good comparable. The impugned order on this score is reversed. Capacity adjustment in respect of certain items of expenses - CIT(A) allowing the claim which was denied by the TPO - Held that:- The authorities below have adjusted the operating costs of the assessee in allowing the capacity adjustment. As against that, the correct course of action provided under the law is to adjust the operating costs of the comparable and their resultant operating profit. There is hardly need to accentuate that there can be no estoppel against the law. Once the law enjoins for doing a particular thing in a particular manner alone, it is not open to anyone to adopt a contrary or different approach. As the authorities below have adopted a course of action in allowing adjustment, which is not in consonance with law, we cannot approve the same. The impugned order is set aside and the matter is restored to the file of the TPO/AO for giving effect to the amount of idle capacity adjustment in the operating profit of the comparables and not the assessee. How to compute capacity utilization adjustment under TNMM - Held that:- both the TPO as well as the ld. CIT(A) have proceeded on a wrong premise not only by allowing capacity utilization adjustment in the assessee’s profit, which is contrary to the legal position as discussed above, but also by considering all the comparables as one unit with the average percentage of their respective capacity utilizations. It is further observed that in the calculation of such capacity utilization adjustment, the ld. CIT(A) has considered four companies as comparable, which view has been modified by us supra inasmuch as we have held that M/s Eicher Motors and M/s. Force Motors are incomparable. Naturally, they would also go out of reckoning in the computation of idle capacity utilization adjustment. In the absence of the availability of financials of all the comparable companies, it is not possible at our end to work out the amount of capacity adjustment in the manner discussed above. Ergo, we set aside the impugned order and direct the TPO/AO to work out the amount of capacity utilization adjustment afresh in terms of our above observations. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh proceedings. Addition on account of capitalization of Software expenses - CIT(A) deleted the addition - Held that:- First item is anti-virus software subscription for which a sum of ₹ 1,49,611/- was paid by the assessee. On being called upon to produce the bill for this software subscription, the ld. AR expressed his inability as the same was not readily available. The extent of deductibility of this amount depends upon the period for which this subscription and from the date on which it was paid. If it is given for a period of more than one year, then naturally, the amount relatable to the period beyond the first year, would not be admissible for deduction during the year in question. If the amount is paid for one year, then the subscription period covered during the year will be deductible and the remaining amount will qualify for deduction in the succeeding year. In the absence of the availability of the date and the period of subscription period, we set aside the impugned order on this issue and send the matter to the AO for deciding it in conformity with our above observations. Website charges - we find that the creation of website is an advantage which facilities carrying on business more efficiently and profitably leaving fixed capital untouched. The Hon’ble Supreme Court in Empire Jute Company Limited VS. CIT (1980 (5) TMI 1 - SUPREME Court) has held that such expenses should be considered as revenue in nature. Also see Addl. CIT Vs. Avendus Advisors Pvt. Ltd. (2011 (2) TMI 1368 - ITAT MUMBAI). Price of modem - The same is a capital expenditure eligible for depreciation @ 60% as applicable to computer. Our view is fortified by the judgment of the Hon’ble Delhi High Court in CIT vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] and that of DCIT VS. Datacraft India Ltd. (2010 (7) TMI 642 - ITAT, MUMBAI) . Addition on account of deferred revenue expenditure - CIT(A) deleted the addition - Held that:- The factual matrix of this ground is that the assessee capitalized certain sum for development of a new product called TAF60. Till 30.9.2003, a sum of ₹ 156 lac was capitalized and treated as capital work-in-progress. A further sum of ₹ 28.32 lac was incurred on its development between 1.10.2003 to 31.3.2004. The assessee capitalized the entire sum and claimed deduction @ 25% of the same in the earlier years and in the year in question. The AO treated this amount as capital expenditure and did not allow any deduction. The ld. CIT(A) accepted the assessee’s claim. Similar issue came up for consideration before the Tribunal in the assessee’s own case for the AY 2007-08 decided in the assessee’s favour. Thus we uphold the impugned order in allowing deduction for a sum of ₹ 37.03 lac, which has been admittedly claimed on the same percentage of 25% as for the year dealt with by the tribunal. Addition of ₹ 2 lac on account of disallowance of Miscellaneous expenses - non-availability of certain details - CIT(A) delted addition - Held that:- We are satisfied with the decision of the ld. CIT(A) in deleting this ad hoc addition made by the AO. If the AO was not satisfied with the justification of some expenses, he ought to have specifically pointed out such expenses rather than making an ad hoc disallowance of ₹ 2 lac. We, therefore, approve the view taken by the ld. CIT(A) on this score.
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2015 (8) TMI 754
Deduction u/s. 54EC - amount invested in REC bond in subsequent financial year - AO has taken a view that the assessee can be invested upto ₹ 50 Lac. out of capital gain only and if the assessee has invested in two difference assessment years within six months, then he is not entitled for deduction u/s. 54EC - CIT(A) allowed claim - Held that:- The issue in controversy is covered by the decision of ITO Vs. Ms. Rania Faleiro reported in ( 2013 (11) TMI 518 - ITAT MUMBAI ). Amendment will come into force from A.Y. 2015-16 onwards and the amendment has been made in Sec. 54EC of the Act wherein it is amended that investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. We find that this amendment is not applicable in this assessment year i.e. A.Y. 2008-09, therefore, ld. CIT(A) is justified in passing the impugned order. Decided against revenue.
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2015 (8) TMI 753
Disallowance u/s 40(a)(ia) - non deduction of TDS on commission and service charges - Held that:- As relying on case of Rajeev Kumar Agarwal vs. ACIT [2014 (6) TMI 79 - ITAT AGRA] once it is proved that the deductee has paid taxes on the commission received from the assessee, the assessee shall be deemed to have deducted and paid taxes of such sum on the date of furnishing the return of income. In the light of this proposition, we are of the view that no disallowance under section 40(a)(ia) of the Act can be made if it is established that the deductee has paid tax on the commission received and for its verification the matter has to be restored back to the file of the Assessing Officer. We accordingly set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer for making necessary verification and if it is established that the deductees have made payment of tax on the commission received, no disallowance under section 40(a)(ia) of the Act shall be made - Decided in favour of revenue for statistical purposes.
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2015 (8) TMI 752
Disallowance under section 43B - electricity duty payable under section 3(1) of the Electricity Duty Act, 1963 and supply surcharge payable to the Government - CIT(A) deleted the addition - Held that:- This issue was decided by the jurisdictional High Court in the assessee's own case reported in Kerala State Electricity Board v. Dy. CIT [2010 (11) TMI 127 - Kerala High Court] the provisions of section 43B is applicable to the electricity duty payable to the Government. Accordingly, the disallowance made by the Assessing Officer is justified to the extent towards electricity duty payable to the Government and to that extent the order of the Commissioner of Income-tax (Appeals) is reversed and that of the Assessing Officer restores. With regard to electricity surcharge collected from the consumers, the same is levied in terms of Kerala State Electricity Surcharge (Levy and Collection) Act, 1989, which provides for levy and collection of surcharge on high tension and extra high tension supplies of energy by the Kerala State Electricity Board. The surcharge is collected from the special category of consumers in terms of section 3 of the above Act and stands on the same footing as under section 4(1) of the Kerala State Electricity Duty Act, 1963. Therefore, the provisions of section 43B is not applicable to the assessee's case in terms of the order of the jurisdictional High Court cited supra. Being so, in our opinion, the disallowance of electricity supply surcharge is not warranted and accordingly, the order of the CIT(Appeals) on the issue of deletion of electricity surcharge is confirmed. - Decided partly in favour of assessee. Application of section 115JB so as to tax book profit - Held that:- The Electricity Board or bodies similar to it, which are totally owned by the Government, either State or Central, have no share holders. Profit, if at all, made would be for the benefit of the entire body politic of the State. Therefore, the enquiry as to the mischief sought to be remedied by the amendment becomes irrelevant. There fore, the fiction fixed under section 115JB cannot be pressed into service against the Electricity Board while making the assessment of the tax payable under the Income-tax Act - Decided against revenue.
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2015 (8) TMI 751
Non deduction of tax at source u/s 195 - survey fee paid to the non-residence surveyors - CIT(A) held that the said payment did not constitute either FTS or FIS in terms of the respective DTAAs and therefore, the assessee was not required to deduct tax at source - Held that:- As in the assessee’s own case for assessment year 2006-07 conclude that the payments made to the non-resident surveyors of countries with DTAAs having ‘make available’ clause or having MFN clause were not taxable as the non-resident surveyor did not make any technical know-how, etc. available to the assessee company. In coming to such conclusion, the Tribunal also referred to similar findings of the Dispute Resolution Panel (DRP) in assessee’s own case for assessment year 2008-09. Therefore, so far as the payments made to nonresident surveyors of countries with DTAAs having ‘make available’ clause in the Article on ‘Fees for technical services’, the Tribunal deleted the disallowance u/s 40(a)(ia) of the Act. Ostensibly, for the reason that there was no requirement to deduct tax at source on such payments. In so far as the present Grounds of Appeal for assessment year 2005-06 are concerned, the same relate to the payments made to surveyors in UK, Netherland, Singapore which are countries with whom there are DTAAs and their Article on ‘Fees for technical services’ have a ‘make available’ clause. Therefore, we find no error in the part of the CIT(A) in allowing the relief to the assessee. - Decided in favour of assessee.
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2015 (8) TMI 750
Depreciation on the non-compete rights - Held that:- No merit in the action of lower authorities declining the claim of depreciation on non-compete payment made for acquiring non-compete right which is an intangible asset eligible for claim for depreciation u/s 32(1)(ii) of the Act. See Commissioner of Income-tax, Bangalore Versus Ingersoll Rand International Ind. Ltd. [2013 (11) TMI 1057 - MADRAS HIGH COURT ] wherein held the commercial right comes into existence whenever the assessee makes payment for non-compete fee - that right which the assessee acquires on payment of non-compete fee confers in him a commercial or a business right which is held to be similar in nature to know-how, patents, copyrights, trademarks, licences, franchises - Therefore the commercial right thus acquired by the assessee unambiguously falls in the category of an 'intangible asset'. - Decided in favour of assessee.
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Customs
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2015 (8) TMI 782
Determination of Rate of duty - Effective date of issue of notification - Notification dated 3.8.2001, published date is 6.8.2001 - Valuation of Goods – Retrospective effect of Notification – Deputy Commissioner assessed goods imported by petitioner on basis of value declared however after issuance of Notification, fixing value at US$ 372 per metric ton for RBD Palmolein edible oil, petitioner was asked to pay differential duty calculated on basis of said notification Held that:- In the case of Param Industries Ltd., Vs. Union of India [2002 (9) TMI 115 - HIGH COURT OF KARNATAKA], it was observed that, no records have been produced to show the exact date on which notification was published in the Gazette. Annexure-R1 would only reveal that the notification was forwarded to the Manager, Government of India Press to publish the same in the Official Gazette and there is no record further to show that pursuant to the said letter Gazette notification was published on 3-8-2001 itself. But on a perusal, it is clear from Annexure-R1 that the date 6-8-2001 has been overwritten as 3-8-2001 and that apart in the letter sent to the Government of India Press on 3-8-2001 the said overwriting has not been attested or explained in the affidavit. Therefore impugned Notification was notified in official gazette to public only on 06.08.2001, duty becomes payable only from date it was notified in official gazette – Hence, impugned demand set aside – Petition allowed –Decided in favour of Assesse.
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2015 (8) TMI 781
Denial of Cross examination - Mis-declaration of import of goods - Principle of Natural Justice – Petitioner made representation requesting Assistant Director of Directorate of Revenue Intelligence to provisionally release goods after drawal of samples and weighment of goods, however there was no reply from respondent – Request of petitioner to cross-examine eight persons was also not granted – Held that:- rules of natural justice require that party must be given opportunity to adduce all relevant evidence upon which he relies by giving opportunity of cross-examining witnesses examined by that party –In present case, neither any speaking order was passed nor respondent was justified in not permitting petitioner to cross-examine above said eight witnesses –Thus, petitioner was not given fair opportunity to defend their case – Accordingly, impugned order set aside – Petition allowed – Decided in favour of Petitioner.
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2015 (8) TMI 780
Recovery of Refund – Whether Tribunal was correct in law in allowing appeal of respondent, on ground that show cause notice issued for recovery of refund subsequent to order of Commissioner (Appeals) was barred by limitation – Held that:- as per decision of this Court in case of Commissioner of Central Excise & Customs v. Stovec Industries Ltd., reported in 2013 (1) TMI 72 - GUJARAT HIGH COURT held that in view of instruction dated 17-8-2011, tax appeal involving amount below ₹ 10 lakh was not maintainable and this instruction also applies to pending appeal – Amount in current case being less than ₹ 10.00 Lakh appeal hereby dismissed – Answered in favour of assesse.
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2015 (8) TMI 779
Extended period of Limitation – Payment of differential duty – Respondent while invoking extended period of limitation issued show cause notice alleging under-valuation of car and payment of differential duty – Vide impugned order CESTAT order payment of differential duty – Held that:- declared value at which car was imported and upon which duty was paid by appellant was $ 64,700 – Report of independent chartered engineer, indicated value of car at $ 63,000, prima facie appears to be based on application of different price matrix –Considering circumstances, extended limitation period on ground of mis-declaration assuming that appellant did indulge in such activity, may not be alleged by Revenue – Having regard to such circumstances, in interest of justice direction contained in impugned order requires to be partially modified – Differential duty reduced – Decided in partly in favour of Appellant.
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2015 (8) TMI 778
Condonation of Delay – Impugned order of CESTAT rejected application on grounds that appellant receiving orders belatedly, did not absolve him of limitation prescribed – Whether CESTAT was right in rejecting application seeking condonation of delay – Held that:- having complied with adjudicating authority’s order, denial of right to appeal would undoubtedly prejudice assesse – This being important factor which cannot be overlooked Court of opinion that larger interest of justice lies in condoning delay – Tribunal to decide appeal on its merits – Appeal allowed – Decided in favour of Appellant.
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2015 (8) TMI 777
Release of Containers – Sale by de-stuffed Carge – Petitioner seeking direction upon respondents to release 202 containers, by allowing container field stations to de-stuff cargo from containers and bring same for sale without insisting for any payment against him – Held that;- petitioner submitted representation to second respondent and would be satisfied if decision was taken by second respondent on petitioner’s representation as containers were lying in container field stations from 2008 onwards – Direction issued to second respondent to consider petitioner’s representation and pass orders on merits and in accordance with law – Petition disposed of – Decided in favour of Petitioner.
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Corporate Laws
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2015 (8) TMI 776
Violation of continual disclosures – Vide impugned order monetary penalty was imposed for violation of Regulations 30(2) and 30(3) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 – Held that:- appellants were required to make relevant disclosures under provisions of SAST Regulations, 2011 within seven working days from end of each financial year to concerned Stock Exchange as well as to target company – Appellants admittedly failed to do so and were liable to pay penalty as there was delay of 147 days in making mandatory disclosures – Obligation to make disclosures was mandatory irrespective of declaration under Regulation 8(2) – When there was no plausible explanation for violation, impugned order was liable to be upheld – Principle of proportionality would come to rescue only when penalty imposed by SEBI was highly disproportionate – Appeal dismissed – Decided against Appellant.
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Service Tax
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2015 (8) TMI 800
Wrongful availment of CENVAT Credit - Excess balance of service tax - Held that:- Appellant has claimed Cenvat credit of ₹ 17,66,710/- on debit notes. Further, the amount was not included in the closing balance in ST-3 returns for the month September, 2008 due to clerical error. On perusal of the debit notes it is seen that some of these debit notes do not bear the service tax registration number. Learned Counsel for the appellant asserted that service tax as per these debit notes have been paid and that they are able to establish the same. In such circumstances I am of the view that the matter has to be remanded to the adjudicating authority to verify these debit notes. - Decided in favour of assessee.
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2015 (8) TMI 799
Business Auxiliary Service - Penalty u/s 76 - Exemption under Notification No.13/2003-ST, dated 20.06.2003 - Held that:- Activities undertaken was neither a promotion or marketing or sale of goods belonging to the client, i.e., M/s. Singh Traders nor it was promotion or marketing of the service provided by the client. Indeed, the activity was not captured under any of the limbs of the definition of BAS given under Section 65 (19) ibid during the relevant period - Thus, if the agreement is not considered, then there is no evidence of the nature of service rendered by the appellant and if it is considered the nature of service rendered by the appellant does not fall under BAS. So any which way, the impugned demand component pertaining to the activity done by the appellant for M/s. Singh Traders is not sustainable. In the absence of contract, there will be no basis for the primary adjudicating authority or the Commissioner (Appeals) to even ascertain as to what was the nature of service rendered in which case as reasoned in the preceding para (para - 5) the demand pertaining to the service rendered to M/s. Punjab Chemical Agency would not be sustainable. - appellant was essentially working as a commission agent and as per Notification No.13/2003-ST, dated 20.06.2003, BAS provided by a commission agent was exempted from the levy of service tax - the service rendered to M/s. Punjab Chemical Agency was clearly exempted under the said Notification - Decided in favour of assessee.
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2015 (8) TMI 798
Business Auxiliary Service - small service exemption - Brand name - Distributors of Amway - wilful misstatement or suppression of facts - Invocation of extended period of limitation - Held that:- Marketing or sale promotion of branded products by a person/ commission agent does not amount to providing branded service by him and hence, marketing or sales promotion of a branded product does not come under the exclusion category as mentioned in the proviso to notification no.6/05-ST - Decision in the case of Mr. Charanjeet Singh Khanuja And Others Versus CST, Indore/Lucknow/Jaipur/Ludhiana And Others [2015 (6) TMI 585 - CESTAT NEW DELHI] followed - matter remanded back - Decided in favour of assessee.
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2015 (8) TMI 797
Waiver of pre deposit - demand of service tax on differential interest - It was taken note of by the Revenue that appellants grant loans to the borrowers and build portfolio of loan. These portfolios of loans are sold to other financial institutions by assigning the entire asset. - As per this deed, SKS has two roles namely the 'Assignor' and the 'Servicer' and HDFC is the 'Assignee'. - Microfinance lending activities Held that:- when the assignee appoints a different person as a servicer if service tax is payable, question arises why there should be a difference if the assignee himself acts as a servicer. We do not find any logic in taking a view that in such a situation assignee is not liable to pay tax. In the normal course when a loan is assigned, the consideration is paid by the assignee and that is the end. In this case the assignor collects the principal and interest and since they have received a loan from the bank equal to the amount or more than the amount of portfolio transferred, the assignee or the servicer pays the principal and the interest charged by the bank to the bank. In case where the servicer is a different person, the appellant will be simply paying back the loan with interest charged by the bank and will have nothing to do with the rural women who have received the loan. - appellant does not have a prima facie case on merit - Partial stay granted.
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2015 (8) TMI 796
Penalty u/s 77 & 78 - assessee neither obtained registration for providing taxable services during the initial period nor remitted the service tax on commercial or industrial construction service and w.e.f. 01.06.2007 on works contract service - Held that:- assessee had provided the taxable services of CICS or WCS during 2006-2007 to 2010-2011 but failed to obtain registration and remit any service tax, till 10.03.2010 - The remittances should be considered in the context of the fact that the assessee obtained registration for rendition of CICS on 26.06.2009 and for WCS on 30.03.2010. Clearly therefore and certainly from 26.03.2009, the appellant must be presumed to have knowledge of being the provider of taxable services liable to remit service tax on the consideration received therefor. The failure of the assessee to remit service tax even immediately after obtaining service tax registration for CICS on 26.03.2009 therefore leads to the clear presumption of conscious knowledge of the liability to tax and of the failure to remit the tax with an intent to evade the same, in violation of the provisions of the Act. Even prior to 26.03.2009, on a plain reading of the provisions of Section 65(25b) of the Act the assessee cannot claim to have been under any doubt as to having provided the specified taxable service. The unambiguous provisions of Section 65(25b); the fact of the assessee having obtained registration for rendition of CICS on 26.06.2009 but failing to remit any tax till 10.03.2009 and that too in instalments and at the assessee's own convenience, without any justification pleaded for failure to remit the service tax and interest due immediately after 26.06.2009, leads to but one inference, namely that the assessee had consciously failed to obtain registration, file returns or remit the service tax due. - in view of the provisions of sub-section (4) imposition of penalties under Sections 77 and 78 cannot be avoided. The impugned order passed by the Commissioner (Appeals) is therefore unsustainable. - Decided in favour of Revenue.
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2015 (8) TMI 795
Penalty u/s 78 - Construction of Residential Complexes service - Failure to register under service tax - Held that:- It is the case where the appellants have already paid the entire demand along with interest and the same was appropriated in the OIO. The appellant contended that they have paid the entire duty and the interest before issue of show cause notice and pleaded for waiver of penalty. It is not the case of the appellants that they have voluntarily paid the service tax on their own. - since the appellants have not even registered with the department under service tax and not filing returns in spite of knowing fully well that the they had already collected the total amount from their clients. The appellants therefore failed to obtain registration and but for the detection by the Department theycould not have discharged service tax. The appellants cannot plead for innocence for invoking Section 80. There are number of Tribunals and High Courts decisions where Section 78 penalty/under Section 11AC penalty were upheld, where there is a deliberate suppression of the facts proved with an intention to evade service tax. No justification on the appellant's plea for waiver of penalty imposed under Section 78 - Decision in the case of Kedia Business Centre Vs. CCE, Mumbai [2009 (3) TMI 85 - CESTAT MUMBAI] followed - Decided against assessee.
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2015 (8) TMI 794
Demand of service tax - Reverse charge mechanism - Import of services were being used for export of goods - whether appellant-assessees are eligible to the benefit of exemption of service tax under Business Auxiliary Service under Notification No.14/2004-ST dt. 10.9.2004 and whether assessees are liable for penalty as contended by Revenue - Held that:- The lower authorities denied the exemption merely on the ground that the said services are not used for textile processing. On careful reading of the above notification, it is evident that service tax was exempted during the relevant period for the services provided under Business Auxiliary Service if it relates to agriculture, printing, textile processing or education. The appellants are Textile manufacturer and exporters - The exemption of service tax under BAS was allowed in relation to four industries namely agriculture, printing, textile processing and education. Therefore, the appellant being textile industry, it is covered under the category "textile processing" in the notification. Appellants being the exporter of textile made ups as per the Foreign Trade Policy are not expected to export the taxes. Appellants pleaded that there was no suppression of facts with deliberate intention to evade payment of service tax. As payment of service tax by the recipients was under dispute for a long period till that was settled by the decision of Apex Court in the case of UOI Vs Indian National Ship Owners Association - [2010 (12) TMI 12 - Supreme Court of India] there was no deliberate intention to make suppression of facts. - Service tax if any payable under reverse charge is permissible to be availed as cenvat credit and that may be refundable under Notification No.41/2007 unless otherwise deniable by law. The provision made in Central Excise Rules and Cenvat Credit Rules ensures that tax is not added to the cost of export so that Indian exporter can compete with overseas market. service tax demanded entitles the appellants to the credit thereof and claim refund thereof under 41/2007 since it is stated by appellants that they have no other liability for which the exercise may become revenue-neutral. - Decided in favour of assessee.
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Central Excise
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2015 (8) TMI 790
Duty demand u/s 11A - Shortage of goods found - Clandestine removal of goods - Held that:- Specific defence had been taken by the manufacturer that no effort had been made to segregate the nuts and bolts into various sizes and to find the shortage by comparing the same with the recorded balance and there was huge stock of 91 lacs pieces of various sizes of nuts and bolts and it was impossible for the Department to come to a conclusive factual finding that there was shortage of 14,25,900 pieces of particular size and if they were all mixed together. The onus would lie upon the Department to undertake the said exercise which was not possible in such a short period due to the large number of inventory which was there at the site. Nothing was brought on record, in any manner, to show that to manufacture such a large amount of 14,25,900 pieces, there was material which had been consumed since neither any relevant record had been shown to show that electricity had been consumed or labour had been utilized to manufacture the said quantity. Neither the fact of purchase of raw material from the vendors or the sale to the consumers was brought on record. In the absence of any corroborative evidence, the levy of such a huge demand was, thus, totally arbitrary and has been rightly set aside. - Decided against Revenue.
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2015 (8) TMI 789
Denial of SSI exemption - Dummy unit - During inspection of assessee's premises it was found that there was one shed and only two machines were found completely in non-working condition. No electric connection was found nor any material or finished goods could be located - Facility created only to avail SSI exemption - Held that:- Machineries, which were also examined in the presence of panch-witnesses, were not found in working condition. There was nothing to indicate that the labourers were engaged in carrying out the job work. It was a claim of one of the partners that directly from Suman Plywood Pvt. Ltd., the finished goods were being sent. The benefit of SSI exemption was claimed by a letter along with a declaration and that was explaining the process of plywood, however, on noticing that the partners were not the signatories, all these documents were held to be in the realm of ambiguity. There were many questions that the Tribunal found unanswered and many of the actions did not appeal to the reasoned mind. - both the adjudicating authority in order-in-original and the Tribunal have extensively dealt with the issues on the basis of entire gamut of facts which were presented before them. The Tribunal confirmed the view of the original adjudicating authority and set aside the reasonings of the Commissioner (Appeals). At the cost of reiteration, we hold that no illegality is found in such conclusion nor is there any perversity made out from the record, giving rise to any question of law. - Decided against assessee.
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2015 (8) TMI 788
Validity of Tribunal's order - Violation of principle of natural justice - Opportunity of hearing not granted - Held that:- Tribunal does not consider the decisions of the Supreme Court, based on which the Original Authority as well as the Commissioner (Appeals) have held in favour of the assessee and there is no discussion on merits on the decision rendered by the lower authorities. The Tribunal, the final fact finding Authority, should go into the merits of the case of the assessee/appellant and render a finding, if not inclined to accept, which legal plea is in favour of the appellant before lower Authorities. - opportunity as sought for by the appellant should have been granted by the Tribunal to enable them to put forward its case. The plea of prejudice is apparent and the counsel has shown bona fides for his absence. - matter remanded back - Decided in favour of assesssee.
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2015 (8) TMI 787
Condonation of delay - Power of Commissioner to condone delay beyond the period of 60days - Tribunal also dismissed the appeal as barred by limitation - Violation of Art. 265 - Held that:- by a subsequent exercise which may have been favourable to the petitioner, we cannot term the earlier exercise, as unconstitutional or illegal. More so, when the duty of excise is sought to be recovered based on a show cause-cum-demand notice. If we are to scrutinize the correctness of the impugned Order-in-Original, we have to go into disputed questions of fact. All this is impermissible once the appeals to challenge this order have been dismissed. Thus, the Central Excise duty has been levied, assessed and recovered in terms of the law. That its assessment and recovery in the peculiar facts of the petitioner is questioned and challenged does not mean that the mandate of Article 265 of the Constitution of India, is violated. In the facts and circumstances peculiar to this case the direction imposing penalty deserves to be quashed and set aside. There was a clear legal issue and with regard to the power of the Commissioner to condone the delay beyond the stipulated period. Hence, no deliberate or intentional act can be attributed to the petitioner assessee. Further, considering its financial position, this Court had protected the petitioner by grant of interim relief. Therefore, we direct that the interest on duty amount shall be payable from the date of the demand till its deposit in pursuance of the order passed by this Court dated 18th October, 2006. No interest shall be payable from the date of deposit of the duty amount, till the disposal of this writ petition by the order passed - Penalty imposed if also set aside - Decided partly in favour of assessee.
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2015 (8) TMI 786
Valuation of goods - Inclusion of value of moulds and dies supplied free of cost - whether the value of moulds and dies supplied free of cost by customer is to be included in the assessable value of the goods manufactured by the assessee by making use of such moulds and dies Supreme Court declined to interfere with the order passed by the Tribunal [2003 (6) TMI 129 - CESTAT, NEW DELHI]; wherein Tribunal held that there was no difficulty in apportioning the cost of moulds and the Commissioner has done the job on the basis of the costs and amortised quantities made available by the assessee.
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2015 (8) TMI 785
Denial of SSI Exemption - Use of third party brand name - Held that:- Tribunal [2003 (4) TMI 145 - CEGAT, NEW DELHI] has, as a matter of fact, found that the brand name (Sundar) used by the respondent was his own brand name and it was not the brand name of M/s. S.R. & S. as contended by the Revenue. It is pure finding of fact recorded by the Tribunal - Decided against Revenue.
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2015 (8) TMI 784
Valuation - Job work - Production cost - Supreme Court dismissed the appeal filed by the assessee due to nominal tax effect. The appeal was filed against the order of Tribunal [2003 (9) TMI 650 - CESTAT, BANGALORE], wherein Tribunal held that one cannot approve the reductions for any of the reasons as arrived at. Of the costs of electricity, from the actuals. Since all costs have to be included in the costs incurred in the manufacturing of the product the electricity costs as actuals has to be added.
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2015 (8) TMI 783
Valuation of goods - Scope of the explanation added to exemption notification - exclusion of value of exempted goods - whether the appellants are required to add the value of clearances of intermediate products, which are captively consumed while manufacturing the final products, namely, carton boxes to claim the benefit of the Notification No. 67/95, dated 16-3-1995 - Held that:- Notification No. 6/2002, dated 1-3-2002 and particularly the explanation contained therein was clarificatory in nature and the said explanation would enure to the benefit of the respondent - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (8) TMI 793
Denial of Input tax credit – Appellant claimed Input Tax Credit on alleged purchases made however AO denied Credit on ground that registration certificate dealer was cancelled ab initio as it was found that said dealer indulged into billing activities only – Tribunal disallowed input tax credit of tax paid on purchases without verifying genuineness of transactions –Held that:- it was not in dispute that when Assessing Officer passed order disallowing Input Tax Credit claimed by appellant, appellant was not served with copy of order by which dealers registration was cancelled ab initio – In case of Shree Bhairav Metal Corporation [2015 (6) TMI 624 - GUJARAT HIGH COURT] current court dealing with similar case remanded matter to AO to consider matter / claim of concerned dealer of Input Tax Credit, afresh – Impugned order passed by Tribunal denying Input Tax Credit claimed by appellant on alleged purchases made by appellant hereby quashed and set aside – Matter remitted to consider claim after giving opportunity to appellant afresh in accordance with law – Decided in favour or Assesse.
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2015 (8) TMI 792
Net tax payable – Rebate on Input tax out of job work receipts to the assessee – Tribunal held that Authority erred in forming opinion that restrictions provided in Section 11 of Karnataka Value Added Tax Act, 2003 were applicable and assesse was not entitled for claim of input tax deduction in full as assesse has used major portion of raw-materials and consumables in processing of other goods – Whether tax payable on consumables can be taken into consideration in arriving at net tax payable – Held that:- Benefit of input tax rebate was available when goods which has suffered input tax were used in course of business of dealer – By virtue of Section 10(2), if dealer had paid input tax on consumables which were used in course of his business, though he was not liable to pay any output tax, still in taxable turnover of said business, he was entitled to claim deduction of this input tax, however, subject to restriction specified in Sections 11, 12, 13, 14, 17 and 18 – When consumables were used in job work in respect of which no output tax was payable by assesse or used in manufacturing activity and when said manufactured goods were sold there was liability to pay output tax by assesse – Assesse was entitled to benefit of input tax rebate on total taxable turnover of his business – Tribunal rightly extended benefit of tax rebate. If goods which suffered input tax was despatched outside State or used as input in manufacturing, processing or packing of other taxable goods despatched to place outside State, then, input tax shall not be deducted in calculating net tax – Benefit of deduction of input tax was available only when assesse has paid output tax within State – Therefore, finding of Tribunal that assesse was entitled to benefit of deduction of input tax irrespective of goods being sold within State or outside State was not correct – Decided partially against revenue.
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2015 (8) TMI 791
Levy of Surcharge – manufacture and sale of tractors and three wheelers - Industrial unit holding exemption from tax – Tribunal held that even when appellant was exempted unit as per entitlement certificate, still every year tax has to be calculated on taxable turnover and then it has to be exempted within exemption entitlement – Further that surcharge was leviable on tax payable and shall also be added to amount of tax for which exemption entitlement was there – Held that:- Section 5(1C) of PGST Act provides for levy and collection of surcharge on taxable turnover of dealer payable by him under Act – For purposes of determining "taxable turnover", deductions as admissible under section 5(2) of PGST Act and rule 29 of Rules, 1949 were to be allowed – In absence of any specific provision which confers any right on assesse whereby surcharge on taxable turnover would not be reduced from its exemption limit in case of exempted unit, assesse was not entitled to claim such benefit – Thus, tax and surcharge payable every year on taxable turnover would form part of its exemption entitlement – Tribunal noticed that assesse had failed to file any list to show that there was sale of three-wheelers and therefore as per section 5(1C) of PGST Act, no such surcharge was leviable – There was no material to show that finding recorded by Tribunal was perverse or erroneous – Appeal dismissed – Decided against Assesse.
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Indian Laws
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2015 (8) TMI 775
Challenge the permission granted by the Collector, Bhuj, to sell certain parcels of agricultural land situated in district Kutch, which were said to have been purchased earlier by the respondent No.4 herein, one Indigold Refinery Limited of Mumbai, for industrial purpose in favour of respondent No.5 i.e. one Alumina Refinery Limited, Navi Mumbai, as being impermissible under the provisions of the Gujarat Tenancy and Agricultural Lands (Vidarbha Region and Kutch Areas) Act, 1958 - Held that:- land is supposed to have been purchased in 2003 at a price of ₹ 70 lakhs, it is said to have been sold at ₹ 1.20 crores in 19.1.2010. It is very clear that even before the letter of 16.6.2009 proposing to sell the land to respondent No.5, in December 2008 itself respondent No.4 had written to the Collector that they were no more interested in putting up the industrial project, and therefore they wanted to dispose off the piece of land to their prospective clients. That being the position, it was mandatory for the Collector at that stage itself to act under sub-Section 5 of Section 89A to issue notice, conduct the necessary enquiry, determine the compensation and pass the order vesting the land in the State Government. It is very clear that Collector has done nothing of the kind. In any case he should have taken the necessary steps in accordance with law at least after receiving the letter dated 16.6.2009. Inspite of the Secretaries repeating their advice, the Minister of Revenue Smt. Anandiben Patel has insisted on treating this case as a special case for which she has recorded no justifiable reasons whatsoever, and orders were issued accordingly. Under Section 89A(3), the Government is the appellate authority where the Collector does not grant a certificate for purchase of bonafide industrial purpose. Thus what has happened, thereby is that the powers of the statutory authority have been exercised by the Government which is an appellate authority. - The Government must defend its action on the basis of the order that it has passed, and it cannot improve its stand by filing subsequent affidavits as laid down by this Court long back in Commissioner of Police, Bombay vs. Gordhandas Bhanji reported in [1951 (11) TMI 17 - SUPREME COURT]. There is nothing in the statutory scheme to suggest that a second sale, inter se parties, after the failure of a purchaser to set up an industry is permissible. In such an event, the statute requires an enquiry to be conducted by the collector. If he is satisfied that there is a failure to set up the industry, the compensation to be paid to the purchaser is determined. After this stage the land vests in the Government. It is thus clear that the condition No 4 in the permission obtained by Respondent No. 4 is bad in law, not having its basis in any statutory provision. Even assuming that the Collector had that power to lay down such a condition, the authority to permit the sale as per the said condition had to be exercised by him in the manner contemplated under Section 89 A (5) viz. after holding the enquiry as prescribed. Here the enquiry itself was dispensed with. Rule 45(b) of the Bombay Tenancy and Agricultural Lands Rules, 1959 also cannot be pressed into service for the reason that, neither under Section 89 nor under Section 89A, a sale inter- se parties is contemplated or permitted. It is for the protection and preservation of the agricultural land that the bar against conversion is created under Section 89. Thereafter, as an exception, only a bonafide use for industrial purpose is permissible under section 89A. Ownership of respondent No.4 was subject to the conditions of utilization for bonafide industrial purpose, and it was clear on record that respondent No.4 had failed to utilize the land for bonafide industrial purpose. The reliance on Sections 7 and 10 of the Transfer of Property Act is also misconceived in the present case, since the Tenancy Act is a welfare enactment, enacted for the protection of the agriculturists. It is a special statute and the sale of agricultural land permitted under this statue will have to be held as governed by the conditions prescribed under the statute itself. The special provisions made in the Tenancy Act will therefore prevail over those in the Transfer of Property Act to that extent. Secretaries had given advice in accordance with the statute and yet the Minister has given a direction to act contrary thereto and permitted the sale which is clearly in breach of the statute. - land which was purchased by respondent No.4 for ₹ 70 lakhs is permitted by the Government of Gujarat to be sold directly to respondent No.5 at ₹ 1.20 crores to set up an industry which could not have been done legally. It is undoubtedly not a case of loss of hundreds of crores as claimed by the appellants, but certainly a positive case of a loss of a few crores by the public exchequer by not going for public auction of the concerned property. It is true that in a given case the state may invite an entrepreneur and give an offer. However, in the instant case, the sale of the land for industrial purpose is controlled by the statutory provisions, and the State was bound to act as per the requirements of the statute. The minister’s direction as seen from the record clearly indicates an arbitrary exercise of power. The orders passed by the Government cannot therefore be sustained. State could have acquired the land, and then either by auction or by considering the merit of the proposal of respondent No.5 allotted it to respondent No.5. Assuming that the application of the Respondent No 5 was for a bona-fide purpose, the same had to be examined by the industrial commissioner, to begin with, and thereafter it should have gone to the collector. After the property vests in the Government, even if there were other bidders to the property, the collector could have considered the merits and the bona-fides of the application of Respondent No. 5, and nothing would have prevented him from following the course which is permissible under the law. It is not merely the end but the means which are of equal importance, particularly if they are enshrined in the legislative scheme. - The Ministers are not expected to act in this manner and therefore, this particular route through the corridors of the Ministry, contrary to the statute, cannot be approved. The present case is clearly one of dereliction of his duties by the Collector and dictation by the Minister, showing nothing but arrogance of power. Impugned judgment and order passed by the High Court is set- aside - sale of the concerned land by Indigold to Alumina is held to be bad in law. The land involved in the present case is held to have vested in the State of Gujarat free from all encumbrances, and the amount of ₹ 1.20 crores paid by Alumina to Indigold is treated as full payment towards the compensation payable by the State to Indigold. - Decided partly in favour of assessee.
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