Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 27, 2016
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
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Addition u/s 40A(2)(a) r.w.s 69C - whether the appellant has substantiated the plea that the visits made to foreign countries were for promotion of business? - appellant did not satisfy the requirements for claiming deductions, disallowance has to consequently follow. - HC
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Eligible to claim deduction under sec. 54F - For availing deduction under sec. 54F of the Act, the property though shown as residential on the record of the municipality but the test will be actual user of the premises by the assessee during the relevant period. - AT
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Donation paid to political party - deduction u/s 80GGC - All the documents indicate that JOGO party is unrecognized registered political party u/s 29A of the Representation of People Act, 1951. The contribution return in form No. 24A filed with Election Commission of India, indicate the name and address of donor details - Deduction allowed - AT
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CIT u/s 263 has simply directed the AO, without satisfying himself, to verify whether the bifurcation made by assessee was with a view to reduce tax or not. No infirmity for offering the tax on sale of brands as LTCG. There is no merit in CIT’s observation for treating the same as business income. - AT
Customs
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Validity of delivery of order by speed post – authorized mode of service – Whether the service of a copy of the order by Speed Post, would constitute valid service under Section 153(a) of the Customs Act, 1962, or not? - Held Yes - HC
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Housing' made of plastic is not eligible for exemption available to the 'connector's. However many of such small consignments have been cleared under claim for exemption. - levy of penalty confirmed, though reduced - AT
Service Tax
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Just because the Nepalese suppliers had billed the appellants separately for transportation from Nepal border to factory premises alongwith other expenses, they do not become the agents of the appellants - tappellants cannot be treated as recipients of GTA services in terms of Notification No. 35/04-S.T. – appellant not liable to pay service tax - AT
Central Excise
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Method of valuation - the food processor basic unit along with the accessories are to be assessed together as electric mechanical domestic appliance with self contained electric motor and are chargeable to duty on MRP basis. - AT
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Invokation of extended period of limitation - willful misstatement/ suppression of facts - something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso. - AT
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To take a view that the benefit of exemption can be extended only to those pipes which physically carry water and deny it to those which are used as Casing Pipes (which are also needed for delivery of water) would defeat very purpose of the Exemption Notification meant for giving the benefit to water treatment plants - AT
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Refund claim - period of limitation - In fact there is no time limit prescribed for issue of show-cause notice under Section 11B and thus it is open to Revenue to point out the short comings in the refund claim - AT
VAT
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Retrospective amendment - curtailment of the sales tax incentives by way of deferral – constitutional validity - impact on completed assessment - The amended provisions cannot be invoked and applied in the present factual controversy. - HC
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Demand of interest and penalty - bonafide belief - Nature of works contract civil contract or construction contract - appellant paid the tax on the basis of 12% later on - The authorities below have committed an error of law and when the tax imposed has already been paid by the appellant, the penalty and interest is therefore not required to be liable to be paid by the appellant. - HC
Case Laws:
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Income Tax
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2016 (8) TMI 916
Revision u/s 263 - applicability of provisos to Sec.2(15) of the IT Act and the failure on the part of the Assessing Officer to consider the same - Held that:- We have gone through the assessment order passed u/s.143(3) of the Act dated 28.02.2013. In this assessment order, AO admittedly not discussed anything about the proviso below to sec.2(15) of the Act and it is admitted fact that assessee is earning huge income from the Working Women’s Hostel, Rani Meyyammai Hostel and also running Kalayanamandapam and Auditorium. After insertion of First and Second proviso to sec.2(15) of the Act with effect from 01.04.2009, the AO has to look into whether the above activities carried by the assessee is in commercial nature or not. There is no whisper in the order of the AO on this isuse and had the AO examined applicability of amended provisions of the section 2(15) of the Act, he would have denied the exemption u/s.11 of the Act as the assessee’s object was of “General Public Utility” and the activities of the assessee were in the nature of trade, commerce or business In the present case, the issue relating to applicability of proviso to sec.2(15) of the Act, thereby its entitlement of exemption u/s.11 is not at all before the CIT(A) for the assessment year under consideration i.e. 2010-11. As rightly observed by the CIT(E) in para- 37, the proviso to sec.263(1) which provides that the powers of the Commissioner u/s.263 shall extend and shall always to have extended to such matters who had not been considered and decided in appeal. Being so, we do not find any infirmity in the order of CIT(E) and the same is confirmed on both legal as well as on merits. - Decided against assessee
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2016 (8) TMI 915
Agricultural land - no documentary evidence to prove that the agricultural land was in the name of the firm - Held that:- As rightly pointed out by the Ld. D.R. the assessee had sufficient time, atleast before the CIT(A), to prove that it owns agricultural lands and carried on agricultural activity in large scale which could have yielded more than ₹ 18 lakhs income. No evidence whatsoever was furnished either before the A.O. or CIT(A). Even before the Tribunal, no evidence whatsoever was produced. When A.O. pointed out mistakes in the Tak Patties etc., the assessee could have given proper explanation before CIT(A) with regard to mismatch of numbers in Tak patties and could have obtained proper explanation from commission agent about use of new Tak patty numbers for earlier period. No doubt, as rightly pointed out by the Ld. Counsel for the assessee and supported by the decision of the Apex Court in the case of Dhakeswari Cotton Mills and others (1954 (10) TMI 12 - SUPREME Court ), the A.O. is duty bound to give a proper opportunity of being heard. But it does not lessen the burden of the assessee to support its stand atleast before the First Appellate Authority. In the instant case, the Ld. CIT(A) categorically observed that even after 4 ½ years the assessee did not furnish even an iota of evidence to contradict the stand taken by the A.O. Though some additional evidence is sought to be produced before the Tribunal, the explanation for not filing the same before CIT(A) was not convincing. Even otherwise the evidence filed along with petition under Rule 29 of I.T. Rules is not sufficient to come to a conclusion that the assessee-firm might have earned agricultural income of such magnitude by farming dry land, that too in F.Y. 2007-08 when certificates of Tahsildars indicate that income would be less than what was declared by assessee. Under these circumstances, do not find any infirmity in the order passed by the CIT(A) and therefore, uphold the order of the CIT(A) and dismiss the appeal filed by the assessee-firm.
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2016 (8) TMI 914
Allowance of telescoping of debit entries (payments) against addition made on account of unexplained receipts (credits) - Held that:- CIT(A) has given a categorical finding that the debit side entry dated 09.03.2008 for ₹ 15 lacs is of similar narration being “cash amount transferred, Pradeep, Sanjay Goyal, cons by Ashishji.” Even name is mentioned i.e. Sanjay Goyal, Ashishji Goyal are also common. The said findings remain uncontroverted. In light of that, ld CIT(A) has rightly held that where the credit side cash entries have already been taxed then in that case the debit side cash entries have to be telescoped and he has accordingly given relief of ₹ 15 lacs. We accordingly donot see any infirmity in the order of ld CIT(A) in the said finding and the same is hereby confirmed. Hence, ground of Revenue is dismissed. Addition in the trading account - Held that:- CIT(A) has given a categorical finding of fact that both the transactions are of the same period and the determination of undisclosed income ₹ 81,73,000/- is based on P&L account and balance sheet of same period. It is not only the case that the profit of ₹ 81,73,000/- is reflected or detected by way of any independent source of any other undisclosed income. Therefore the income already detected and taxed in the same A.Y. should be given credit in as much as otherwise it will tantamount to double taxation. The said finding remains uncontroverted before us. Further, the Coordinate Bench in assessee’s appeal (supra) has questioned the very basis of the subject addition where it stated that without rejection of books of accounts, no such additions in the trading account only on the basis of retracted admission is justified. In light of above, we donot see a necessity to interfere with the findings of the ld CIT(A). Hence, ground of the Revenue is dismissed.
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2016 (8) TMI 913
Eligibility of deduction under S.80IA - A.O. denying deduction in respect of its wind mill projects installed in the earlier years and further in holding that the past losses have to be notionally adjusted even when they were adjusted against the other business income in earlier year - Held that:- As comsidered in assessee's own case in A.Y. 2008-09 the assessee who is eligible to claim deduction under S.80IA has been given an option to choose initial/first year from which it may desire to claim the deduction for ten consecutive years out of the slab of 15 or 20 years as prescribed under the above sub-section. The term ‘initial assessment year’ has been held to mean the first year opted to by the assessee for claiming deduction under S.80IA of the Act. Thus, it is clear that the initial assessment year is not the year of operation or commencement of business, as interpreted by the Assessing Officer, but it is the first year in which the assessee has opted to claim the deduction under S.80IA. In view of this clarification of the Board, which clinches the issue in favour of the assessee, and is binding on the Revenue authorities, we accept the contentions of the assessee in this behalf, and direct the Assessing Officer to allow the claim of the assessee, after verifying the records as to the initial assessment year in which the assessee for the first time has claimed the deduction under S.80IA of the Act, and consider the income of the assessee from the eligible unit from that year alone on a stand alone basis. - Decided in favour of assessee
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2016 (8) TMI 912
Penalty u/s 271(1)(c) - Addition on account of bad and doubtful debts claimed by the assessee u/s 36(1)(viia) - Held that:- In the instant case, the penalty has been levied for claiming deduction u/s 36(1)(viia) of the Act - Held that:- CIT(A) has given a categorical finding that it has not been shown how by making the claim in respect of Provision for bad and doubtful debts, the assessee has concealed or furnished inaccurate particulars of income. The appellant has explained that the claim was made for liability determined as per the RBI guidelines and auditors have concurred with the said claim of liability of the bank. Further, as there was substantial loss, there was no tax benefit to the assessee. The said explanation has not been shown to be false or malafide and all the relevant facts for computation of income have been disclosed by the appellant in the return of income. The same analogy and finding will apply in respect of contribution to the gratuity fund. We hereby confirm the findings of the ld CIT(A) deleting the penalty levied under section 271(1)(c) of the Act. - Decided in favour of assessee.
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2016 (8) TMI 911
Addition u/s 68 - Held that:- Assessee produced documents which were examined in detail. It is only after discussing the entire material in the light of the remand report of the Assessing Officer the CIT(A) has come to a definite conclusion that the Assessee has been able to sufficiently explain, to the satisfaction of the CIT(A), of the identity, genuineness and creditworthiness of the creditors. This is in respect of both the additions sought to be made by the AO under Section 68 of the Act, on account of alleged unexplained share application money as well as unsecured loans. The CIT(A) has also deleted the addition on the question of unexplained investment and returned a categorical finding that these investments have been sufficiently explained by the Assessee. The reasons for deletion of the addition in relation to the purchase of the plot have also been discussed in sufficient detail by the CIT (A). The above factual findings have been concurred with by the ITAT in a very detailed order again discussing the material available on record. The Court has not been persuaded by the learned counsel for the Revenue to view the above concurrent findings to be suffering from any perversity requiring any substantial question of law to be framed, as urged by the Revenue.
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2016 (8) TMI 910
Denial of claim of expenditure on pasupalan - Held that:- The expenditures claimed by the assessee are not unreasonable and deserves to be allowed. We, accordingly, direct the A.O. to allow the expenditure claimed by the assessee as per his computation of income. - Decided in favour of assessee. Addition on rental income from letting out of property for Bakery business.- Held that:- The stud farm belongs to the assessee, therefore, only the assessee has a right for any rental income from the usage of the premises and there is a strong presumption that Shri Harshadbhai Barot must be collecting rent on behalf of the assessee. Therefore, on preponderance of probabilities, we hold that the rental income belongs to the assessee and have been rightly taxed in his hands. We, confirm the findings of the First Appellate Authority.- Decided against assessee.
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2016 (8) TMI 909
Addition u/s 40A(2)(a) - whether the appellant has substantiated the plea that the visits made to foreign countries were for promotion of business? - Addition u/s 69C - Held that:- It is the categorical admission of the learned counsel for the appellant that no documents were produced, either, before the Original Authority or Appellate Authority, as the case may be, to prove that there was any business transactions or activity in the foreign countries, visited by the Directors of the appellant-Company, on the said aspect. Pilgrimage to Mecca and Medina is substantiated and finding on that aspect, has not been disputed. From the above materials, it could be safely concluded that the appellant has failed to discharge the burden to prove that the visit to the above countries was only for the business purpose. The said finding recorded by the appellate authority, the expenses incurred for pilgrimage, has not been disputed and no materials have been filed to contradict the same. When the appellant has failed to substantiate that the visit to Mecca and Medina by the Directors, in whose names, tickets were issued and spent money through their credit cards for the stay in hotels, SPA, etc., was for promotion of business, only it cannot be contended that both the original/appellate authorities have erred, in not properly adverting to the statutory provisions, under Sections 40A(2)(a) and 69C of the Income-Tax Act, 1961. On facts, when the appellant did not satisfy the requirements for claiming deductions, disallowance has to consequently follow. Thus, the disallowance under the head, “Business Promotion Charges”and under the head, “Foreign Travel Expenditure”, cannot be said to be said to be erroneous, both on law and facts. - Decided against assessee.
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2016 (8) TMI 908
Sale of land - liable to be taxed as business profit or capital gain - Held that:- It appears from the record that the entire plot of land was purchased way back in 1971 in the name of HUF. Thereafter, necessary permission under the Urban Land Ceiling Act for transferring the land was taken from the District Collector. It further appears that there was no sale of the land in the past except the sale of ½ portion of the said land in the year under appeal and the remaining ½ portion of land in the previous year. Both the parcels of land were sold to the same party. All throughout, the assessee was the owner of the land in question and no transfer of rights in favour of any third party ever took place until the ½ portion of said land was sold in the year preceeding the relevant year. Therefore, under no circumstances, the transaction could have been termed a business adventure. In our opinion, the Tribunal committed serious error in upholding the order of CIT(A) of declaring the transaction a business adventure since it is a capital gain. - Decided in favour of the assessee.
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2016 (8) TMI 907
Eligible to claim deduction under sec. 54F - nature of property - residential or commercial - Held that:- There is no dispute on fact that the property owned by the assessee was being used as his office during the relevant period but only dispute between the assessee and Revenue remained about the entitlement of deduction of sec. 54F of the Act on the basis of actual user of the property i.e. office use and not merely on the basis of the municipal showing the property meant for residential use or in the sale deed shown as residential type. For availing deduction under sec. 54F of the Act, the property though shown as residential on the record of the municipality but the test will be actual user of the premises by the assessee during the relevant period. In other words, it does not make difference whether the property has been shown as residential house on the record of the government authority but actual user thereof by the assessee will be considered while adjudicating upon the eligibility of deduction under sec. 54F of the Act claimed by the assessee. In the present case, for denial of the claimed deduction under sec. 54F of the Act, the Assessing Officer should not have considered the property as residential on the basis of municipal record ignoring the actual user thereof. The authorities below were thus not justified in denying and upholding the denial of the claimed benefit to the assessee by way of deduction under sec. 54F of the Act on the basis that the assessee was owning more than one residential house (i.e. inclusion of E-575A, GK-II, New Delhi) on the date of transfer of the original assets. We thus setting aside the orders of the authorities below in this regard direct the Assessing Officer to allow the claimed deduction under sec. 54F of the Act. - Decided in favour of assessee
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2016 (8) TMI 906
Reduction in Quantum of MAT Credit U/sec 115JAA - reduction on account of exclusion of Educational cess and surcharge - Held that:- The income tax includes surcharge and educational cess for giving the credit u/s.115JAA of the Act. No law contrary to the above said finding has been produced before us. Accordingly, we set aside the order passed by the CIT(A) on this issue and decide this issue in favour of the assessee and against the revenue and direct the Assessing Officer to allow the MAT credit against the tax liability of the assessee including of surcharge and educational cess. Accordingly, this issue is decided in favour of the assessee against the revenue. Disallowance of commission U/s.9 r.w.s.195 and section 40(a)(i) of the Act - Held that:- On perusal of the order passed by the Assessing Officer, it came into notice that the assessee has paid a sum of ₹ 50,90,141/- to various parties in foreign countries under the head professional services in addition to commission paid for export. The provision relating about the payment on professional fees is dealt by different section i.e. under the provision of section 9 r.w.s. and 195 of the Act but so far as the commission paid for export is concerned the same is required to be dealt with by the provision of the explanation 2 to clause (VII) of section 9 of the Act. In this regard we also support law settled in CEAT International S.A. Vs. CIT (1998 (11) TMI 111 - BOMBAY High Court ) and CIT Vs. Sara International Ltd. [2008 (3) TMI 686 - DELHI HIGH COURT] and CLSA Ltd. Vs. ITO (International Taxation) [2013 (1) TMI 796 - ITAT MUMBAI]. Since the expenditure has not been differentiated in professional services and commission paid for exports, therefore, we are of the view that the matter is required to be examined afresh at the end of Assessing Officer to decide the expenditure incurred for professional services and commission paid for exports in the light of the judgment mentioned above by giving an opportunity of being heard to the assessee accordingly this issue is decide in favour of the assessee against the revenue. Disallowance u/s 14A - Held that:- There should be a proximate relationship between the expenditure and the income which does not form part of the total income. In the case in hand the assessee has claimed that no expenditure has been incurred for earning the exempt income, therefore, it was incumbent on the AO to find out as to whether the assessee has incurred any expenditure in relation to income which does not form part of the total income and if so to quantify the expenditure of disallowance. The AO has not brought on record any fact or material to show that any expenditure has been incurred on the activity which has resulted into both taxable and non taxable income. Therefore, in our view when the assessee has prima facie brought out a case that no expenditure has been incurred for earning the exempt income the provisions of section 14A cannot be applied. Accordingly, we delete the addition disallowance made by AO u/.s14 A r.w. Rule 8D - Decided in favour of the assessee. Disallowance u/s.35 in respect of the capital expenditure on research and development - claim of the assessee was declined on the ground of that the assessee received the approval late and the assessee should claim the exemption by filing the revised return which the assessee had not done - Held that:- CIT(A) is of the view that no doubt the assessee received the approval late but the assessee can raise the claim by filing the revised return before the competent authority even at the stage of appeal which can be accepted therefore, allowed the claim of the assessee. Undoubtedly, the approval u/s.35(2AB) of the Act was not received well in time and after receipt of approval the assessee claimed the capital expenditure by filing the revised return. The CIT(A) has considered the claim of the assessee in accordance with law. Therefore, we are of the view that the CIT(A) has decided this issue judiciously and correctly which does not require to interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue.
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2016 (8) TMI 905
Addition on account of cash credit under section 68 - Held that:- We find that assessee has not produced any document which could rebut the findings of the Tribunal in order dated 14/05/2010. The assessee has not produced any receipt of advance payments by the proposed buyers. It is seen from the page 31 of the paper book that the cash was deposited in the bank accounts from 03/09/2004 to 23/03/2005, i.e., for a period of almost sevenmonth. The assessee has not been able to explain before us why it did not deposit entire amount in bank accounts immediately after receipt from the proposed buyers. In view of the above facts and circumstances, the genuineness of the transaction is doubtful and the assessee has failed to discharge its onus with regard to the genuineness of the transaction. Further from the Income-tax return of Sh. Anuj Garg, who was the proposed buyer (Page 8 of the assessee’s paper book), it is seen that his total income in assessment year 2004-05 was only ₹ 1,48,185/-. Similarly, total income of Rajendra Kumar Garg (Page 10 of the assessee paper book ) was only ₹ 1,54,000/-. Further the total income of another proposed buyer Sh. Gaurav Gupta (page 11 of the assessee paper book) was merely ₹ 69,616/-. No evidence in support of income of Sh. Dinesh Gupta is filed in the paper book submitted by the assessee. No other documents evidencing the financial capacity of the proposed buyer to advance the money were submitted. Looking to the amounts of total income of the proposed buyers, the creditworthiness of the creditors is also not getting established. Thus the assessee has failed to discharge its onus in respect of the genuineness of the transaction as well as creditworthiness of the creditors and, therefore, in our opinion the Ld. Commissioner of Income-tax (Appeals) was not justified in deleting the addition made by the Assessing Officer under section 68 of the Act for the peak amounts of deposits in bank accounts, accordingly we set aside the order of the ld. Commissioner of Incometax (Appeals) and restore the order of the ld. Assessing Officer. - Decided against assessee
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2016 (8) TMI 904
Disallowance of deduction towards donation paid to political party u/s 80GGC - A.O. disallowed deduction for the reason that donation to JOGO party is not proved with necessary evidences- Held that:- The assessee has paid donation to JOGO party by way of cheques. The assessee has furnished cheque details for having paid the amount. The assessee also furnished details of political party along with confirmation letter issued by the JOGO party. On perusal OF details available in the paper book, we find that JOGO party is registered u/s 29A of the Representation of People Act, 1951 by the election Commission of India. The assessee has furnished letter issued by the Election Commission of India, notification published in the Gazette of India and Form No. 24A a return of contributions submitted to Election Commission of India in terms of sec. 29C of the Representation of People Act, 1951. All the documents indicate that JOGO party is unrecognized registered political party u/s 29A of the Representation of People Act, 1951. The contribution return in form No. 24A filed with Election Commission of India, indicate the name and address of donor details. Therefore, we are of the view that the A.O. was erred in disallowing deduction claimed u/s 80GGC of the Act. Hence, we set aside the CIT(A) order and direct the A.O. to delete the addition. - Decided in favour of assessee Addition of unexplained creditor’s - A.O. made additions towards sundry creditors for the reason that the assessee has failed to furnish confirmation letters - Held that:- A plain reading of section 68 of the Act, makes it clear that any sum found credited in the books of accounts of the assessee is not explained to the satisfaction of the A.O., then sum found credited shall be treated as income of the assessee of that previous year. In other words, addition can be made for fresh credits of the year and no addition can be made for the amounts brought forwarded from the previous year. In the present case on hand, on perusal of facts, we find that all creditors are brought forward from last years and paid during the current financial year. Therefore, we are of the view that the A.O. was erred in treated sundry creditors brought forward from last year as unexplained creditors. The CIT(A) after considering details filed by the assessee and also taken in to account remand report of the A.O. deleted addition made by the A.O. The facts remain same even before us. The revenue has failed to prove the findings of fact recorded by the CIT(A) is incorrect. Therefore, we upheld the CIT(A) order and delete the addition made by the A.O.- Decided in favour of assessee Addition towards unexplained cash credits into ICICI Bank account - Held that:- We find force in the arguments of the assessee for the reason that the assessee has not maintained any bank account with ICICI Bank and this fact was not disputed by the revenue. The assessee, on the other hand furnished copy of Axis bank account which was recorded in the regular books of accounts. On perusal of bank statement of Axis bank, we find that there are only two cash deposits of ₹ 1600 on 8-7- 2008 and ₹ 8900/- on 18-11-2008 for which sources has been explained. Therefore, we are of the view that the A.O. has made additions without any base. The CIT(A) after considering relevant details filed by the assessee and also taken into account remand report of A.O. deleted additions. The facts remain same even before us. The Revenue has failed to counter the contention of assessee that he does not operate any bank account with ICICI Bank. Therefore, we upheld the CIT(A) order and delete the addition made by the Assessing Officer.- Decided in favour of assessee Disallowance of expenditure - A.O. disallowed expenditure for the reason that the assessee has not explained the nature and source of income earned from the business - Held that:- We find force in the arguments of the assessee for the reason that the assessee is the proprietor of M/s India Battery Works and Labelle Slimming and Beauty Clinic. We further noticed that she had reported gross sales income of ₹ 49,31,376/- from trading activity and indirect income of ₹ 16,49,400/- from the business of India Battery Works and Labelle Slimming and Beauty Clinic. The assessee has proved that she had incurred expenditure being interest on loan and depreciation on motor car used for the purpose of business. Therefore, we are of the view that the A.O. was erred in disallowing expenditure incurred for the purpose of business. The CIT(A) rightly deleted the additions. We do not see any error or infirmity in the order of CIT(A). - Decided in favour of assessee
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2016 (8) TMI 903
Income from letting of property - income from business and not as income from house property - Held that:- In the present case, the asset is a commercial asset, has not been controverted by the Revenue. The property under consideration let out by the assessee is a commercial property, which can only be exploited commercially, the income earned therefore, on account of letting, deserves to be taxed as income from business and not as income from house property. If an assessee derived income form a commercial assets which is capable of being use as a commercial asset, then it is income from his business. Whether he uses that commercial asset himself for lets it out to somebody else to be used. The asset would not cease to be commercial asset simply because temporarily it was put out of use or it was let out to another person for his use. Thus it is concluded that as the property under consideration before us let out by the assessee being a commercial property, can only be exploited commercially and the income earned there from, on account of letting, deserves to be taxed as income from business. - Decided in favour of the assessee
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2016 (8) TMI 902
Penalty u/s. 271(1)(c) - whether assessee’s project is complete or not? - Held that:- In view of the order of the Third Member in assessee’s own case, it is clear that the issue is highly debatable whether assessee’s project is complete or not and this being the situation, we are of the view that the penalty is not leviable u/s. 271(1)(c) of the Act. Furthermore, the assessee has not furnished any inaccurate particulars of income for the reason that the assessee’s view that the project was not complete due to the ongoing litigation, whereas the AO was of the view that the project was completed during the year under consideration. He has computed the income based on all the facts and figures available in the Finance Statements of the assessee and accordingly this is not a case of furnishing of inaccurate particulars of income. In terms of the above, we confirm the order of the CIT(A) deleting the penalty. - Decided against revenue.
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2016 (8) TMI 901
Penalty levied u/s.271(1)(c) - undisclosed Short Term Capital Gain - Held that:- It is not in dispute moreover admitted by the assessee also that the assessee failed to show the sale account to the tune of ₹ 8 lakhs in his return. Undoubtedly, there is no explanation on record as to why the said amount of ₹ 8 lakhs was not reflected in the return of income resultantly the assessee did not show the Short Term Capital Gain to the tune of ₹ 8 lakhs. It is clear case wherein the assessee did not disclose an amount of ₹ 8 lakhs in his return. Making the statement before the tax authority nowhere justify the claim of the assessee because it is not a case of the recovery of unaccounted cash / other articles such as jeweler etc. In simple sense, the assessee did not show the said amount as income in his return which came into existence only after the search was conducted on the assessee. There is no cogent and convincing evidence on record to which it can be assumed that the learned CIT(A) has passed the order wrongly and illegally. No distinguishable facts to the finding of the learned CIT(A) has been produced on record. In view of the above said discussion we are of the view that the learned CIT(A) has passed the order judiciously and correctly - Decided against assessee
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2016 (8) TMI 900
LTCG - full value of consideration received on transfer of shares and its computation of LTCG - Held that:- A reading of clauses 2.1 & 2.2 of the Agreement dated 29.1.2010 between the parties, clearly shows that the liability of M/S.Khaitan & Co.Consulting Ltd., was not part of the consideration of sale of shares. It was an already existing liability in the books of the Assessee which was discharged by the Purchasers. The Purchasers took over that liability and M/S.Khaitan & Co.Consulting Ltd., acknowledged the Purchasers as their Creditor in so far as the sum of ₹ 4,97,25,928/- is concerned. On the facts of the present case, we are of the view that the sum of ₹ 4,97,25,928 cannot be attributed to consideration for sale of shares and the Assessee was justified in its claim that the said sum did not form part of the full value of consideration received on transfer of shares and its computation of LTCG was correct. We do not find any grounds to interfere with the decision of the CIT(A). - Decided against revenue Justification of holding the brokerage as expenditure of the company for sale of shares - Held that:- As we have already seen the sale of the property was sought to be achieved by sale of shares of M/S.Khaitan & Co.Consulting Ltd., which was held by the Assessee to the extent of 99.97%. The bill issued by the broker contained a description that it was sale of the property. In our view this description in the bill issued by the broker to whom commission was paid is insignificant. The fact remains and it is not disputed that Mr.Manish B.Thakkar, acted as an intermediary in the transaction and was paid brokerage. Capital gain declared by the Assessee arises out of the same transaction. In such circumstances, the claim of the Assessee for deduction could not have been refused by the AO. The CIT(A) in our view has rightly allowed the deduction claimed by the Assessee. We do not find any grounds to interfere with the order of the CIT(A).- Decided against revenue
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2016 (8) TMI 899
Addition u/s. 68 - unexplained / bogus cash credit and the unaccounted cash paid for obtaining the accommodation entries - Held that:- After going through all the evidences produced by the Assessee before the Ld. CIT(A), the Ld. CIT(A) has deleted the addition in dispute by holding that once the identity, creditworthiness of the share holders and genuineness of the transactions is proved by furnishing all particulars of the share applicants alongwith other documentary evidences, then the Assessee has discharged its onus and there cannot be any addition in the hands of the assessee company in the matter of share application money or share capital. - Decided in favour of assessee.
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2016 (8) TMI 898
Revision u/s. 263 - disallowance of STT u/s. 14A - Held that:- Profit on sale of F & O transaction is amounting to ₹ 22,62,70,605/- which is shown as a taxable income. Therefore the STT paid on the derivative transactions is allowable as an expenditure w.e.f. AY 09-10 as amended by the Finance Act, 2008. The STT paid on sale of shares of L & T, the company has made a loss on these shares at ₹ 14,37,81,950/- which was offset with the capital gains. Therefore if the same is to be considered for 14A disallowance, then it is to be reduced from the computation of the capital gain being direct expenditure for earning the capital gains. Therefore disallowance under this section is not prejudicial to the interest of revenue being no tax effect. Accordingly, there is no justification for the direction issued by CIT for disallowance of STT u/s. 14A. Disallowance interest - Held that:- We found that the assessee company has paid interest of ₹ 2,00,83,931/- which has been debited to P&L A/c. During this year the assessee has also received the interest on deposits from banks and others at ₹ 1,56,65,399/-. Net interest of ₹ 48,18,532/- is required to be considered for disallowance u/s. 14A. The same view was taken in ITAT Mumbai, in the case of Morgan Stanley India Securities Pvt Ltd Vis ACIT [2014 (1) TMI 1412 - ITAT MUMBAI]and ITAT Ahemdabad in the case ITO vs. Karnavati Petrochmem Pvt Ltd.[2014 (1) TMI 920 - ITAT AHMEDABAD ]. Thus the view taken by AO regarding netting of interest is a possible and legally tenable view which cannot be faulted by CIT. From the record, we also found that during the year the interest paid on the loans taken was for the purpose of business activities on bank overdraft limit. Interest was received on the deposits from the customers, from shareholders and directors and the bank commission is for other charges and not any expenditure was incurred for earning the exempted income. We also found that as per balance-sheet placed on record investment as on 31/3/09 is ₹ 15,91,91,128/-. However, the increase in investment is out of the fund received on sale of brand of ₹ 113 crores i.e. interest-free. No interest bearing funds has been invested for earning the exempted income. As the investment is made after the receipt of the sale proceeds of brand i.e. interest-free fund. The utilization of the interest-free fund is for investment. Therefore the interest bearing fund has not been utilized for making investments and the investments are made out of the interest-free fund available with the company by way of share capital and reserves & surplus which stood at ₹ 89.75 crores as on 31/3/09. If the company's funds are interest free more than the investments the question of disallowing interest u/s.14A does not arise. Accordingly there is no merit in CIT’s order directing disallowance of interest u/s. 14A. Treatment of amount received on sale of brands - Held that:- We had carefully gone through the terms of the agreement, whereas per clause (3), the company had during the year sold two of its brand groups Anafortan and Cefi for consideration of ₹ 115,88,77,800/-. This includes ₹ 91,00,000/- as know How Fee and ₹ 1,00,00,000/- towards Non Compete Fee. After adjusting ₹ 170,79,000/- for legal and professional services the balance of ₹ 112.26,98,800/- which was a receipt of Capital Nature was transferred to Reserve and Surplus A/c. The Non Compete Fees of ₹ 100,00,000/- and ₹ 91,00,000/- for Know How have been accounted and offered as business income. The brand "Anaforthan" and "Cefi" are the apparatus of the business, they are the tools of the business, and they are the capital asset of the company built over the period of time and in fact they are not stock-in-trade of company. The company does not deals in the brands as a traders The assessee has filed submission before the CIT to justify the value assigned towards trade-marks, knowhow fee and non-compete fee. It is also relevant to mention here that a similar nature of sale of brand was made by assessee in A.Y. 2000-01 wherein the assessee had treated the sale of brand as income from capital gain and the treatment given by assessee was upheld by the Hon'ble Tribunal in assessee's own case for A.Y. 2000-01 vide order dated 15.3.2007. Accordingly no fault can be found in AO’s order treating the sale proceeds of brand as capital receipts liable to tax as long term capital gains. No where CIT has pointed out as to how the treatment given by assessee was erroneous, i.e. not as per law and as a result of which prejudice was caused to revenue. The CIT has merely asked the Assessing Officer to look into the matter without pointing out any mistake or prejudice caused to revenue. He has simply directed the Assessing Officer, without satisfying himself, to verify whether the bifurcation made by assessee was with a view to reduce tax or not. No infirmity for offering the tax on sale of brands as LTCG. There is no merit in CIT’s observation for treating the same as business income. Claim of clinical support expenses - Held that:- Whatever the separate expenditure are incurred by the assessee was in relation to gather the data making aware of the product of the company and remaining in the market. From the order of CIT we observe that no where the CIT has pointed out as to how the treatment given by assessee was erroneous, i.e. not as per law and as a result of which prejudice was caused to revenue. The CIT has merely asked the Assessing Officer to look into the matter without pointing out any mistake or prejudice caused to revenue. He has simply directed the Assessing Officer, without satisfying himself, to verify whether the bifurcation made by assessee was with a view to reduce tax or not. From the record we found that the details with regard to clinical support expenses were verified by the AO in the original assessment proceedings. Since the AO was satisfied with the details furnished by assessee vide letter dated 15.12.2011, no addition was made by the Assessing Officer on account of clinical support expenses. Applicability of the provisions of section 94(7) and 94(8) on sale of shares/mutual funds - Held that:- Short Term Capital Loss incurred when units (and not shares) are purchased within 3 Months prior to the date on which additional units are allotted and subsequently are sold within 9 Months after the date while holding on to all or any of the additional units allotted, is not to be allowed to the extent of the market value of the additional units as on the date they are allotted. Units as referred to in the above section means units of a Mutual Fund as specified in section 10(23D) of the Act. However in the assessee's case, the assessee had purchased shares of L&T Ltd on which Bonus shares were received and which were sold subsequently. Therefore the provisions of Section 94(8) are not applicable as shares are purchased & sold. From the record we also found that during the course of original assessment proceedings, complete details were given to the Assessing Officer with regard to working of capital gains on sale of shares and units. On perusal of the said details, it can be seen that the assessee purchased units on 19.09.2008 and sold the same on 26.12.2008. The dividend on the said units was declared on 26.12.2008. Thought the units were sold within nine months from the date on which dividend has been received, since they were purchased more than three months prior to date of declaration of dividend, the provisions of S. 94(7) of the Act will not apply. With regard to CIT’s observation regarding loss incurred on sale of L & T shares, though the CIT agrees that the provision of section 94(8) will not apply to the shares. The assesse is free to carry out tax planning within the provisions of law. A similar argument was raised by the department before the Hon'ble Supreme Court in case of CIT vs. Walfort Shares and Stock brokers Ltd (2010 (7) TMI 15 - SUPREME COURT) wherein eld by Supreme Court that mere tax planning without any motive to avoid taxes is not a colourable device. No merit in CIT’s direction for applying provision of section 94(7) and 94(8) of the IT Act for disallowing loss incurred on L & T shares.
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Customs
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2016 (8) TMI 927
Condonation of delay - validity of delivery of order by speed post – authorized mode of service – Whether the service of a copy of the order by Speed Post, would constitute valid service under Section 153(a) of the Customs Act, 1962, or not? – Held that: - a person who seeks to send an article by Speed Post, does the same thing as a person who seeks to register an article does. But the transmission of the article is to be on a fast track in speed post services. There is also a tracking system provided by speed post. In other words, a registered post can be compared to an economy travel while a service through speed post can be compared to business class. Other than that, there is no distinction between two – speed post considered as valid mode of communication – appeal dismissed – decided against appellant.
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2016 (8) TMI 926
Imposition of penalty - Classification of imported goods - import of small quantity of housing by courier – connectors – housing made of plastics – bonafide mistake on the part of courier agency to avail exemption in small quantity of import of housing – immediate discharge of duty with interest on recognition – Held that: - ‘Housing' made of plastic is not eligible for exemption available to the 'connector's. However many of such small consignments have been cleared under claim for exemption. The appellant pleaded that it is a mistake on the part of courier to routinely claim of such exemption based on the description in the invoice. However, such claim of ineligible exemption has happened over a period in respect of many consignments. Even if it is agreed that the appellant missed to recognize wrong claim of exemption in their consignment, it is unacceptable that it can happen in respect of so many consignments – penalty reduced to ₹ 10,000 – decided partly in favor of appellant.
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2016 (8) TMI 925
Imposition of penalty - Classification of imported goods – medicaments – food supplements - filing of bill of entry as well as classification made by CHA – entire duty paid on declared goods – Held that: - The Appellant is mainly a CHA and the issue of classification is of complex nature. It cannot be said that the CHA should have information that the goods were 'Food Supplements' and not 'Medicaments'. It is for the Customs Department to classify the goods. Hence, no reason to sustain the penalty – appeal disposed off – decided in favor of appellant.
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2016 (8) TMI 924
Imposition of penalty - Section 112(b) of Customs Act, 1962 – rough diamonds – Kimberley Process Certificate – seizure – confiscation – Held that: - the appellants had brought the subject Rough Diamonds from Kenya illicitly and the same were recovered and seized from them - penalty imposable under section 112(b) of the customs act,1962. Quantum of penalty – Held that: - the subject Rough Diamonds should be valued by two experts, one chosen by the appellants and one by the Revenue from a panel of experts nominated by GJEPC and these experts should value the subject Rough Diamonds as per the value prevalent at the time of seizure of the subject rough diamonds. On the basis of the said value fixed by the experts, and the role of the appellants, the quantum of penalty should be re-quantified – matter remanded to original authority for quantification of penalty – application disposed off – decided partly in favor of appellant.
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Corporate Laws
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2016 (8) TMI 919
Winding up Petition - time barred petition - Held that:- Find considerable force that the claim made in the present Petition, Prima facie would appear to be barred by the law of limitation. It is not in dispute that the supplies of these machineries took place between the period of 10th June, 2008 to 25th February, 2009. Even, if where to go by the credit period mentioned in the third purchase order (being a period of 730 days), the Respondent Company was required to make payment by 24th February, 2011. The period of limitation of 3 years would start from this date. Admittedly, the present Company Petition has been lodged on 31st July, 2014. This would clearly be beyond the period of 3 years and, therefore, the claim on the face of it would appear to be time barred. Respondent Company has done an internal audit which would reflect that even under the third purchase order, as many as 37 machines were not working. It is also the case of the Respondent – Company, that there was a serious delay in supplying the machines, which has caused great loss to the Respondent Company by virtue of the fact that they lost the security deposit on premises that they had taken on leave and licence in which these machines where to be housed. Looking to all these factors, I do not think, that this is a case where the debt of the Petitioner is undisputed. To my mind, there is a bonafide dispute raised by the Respondent – Company. In these circumstances, thus have no hesitation in dismissing this Company Petition.
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2016 (8) TMI 918
Disclosing of price sensitive information belatedly - violation of the PIT Regulations - Contracts for supply of goods entered into by the Company with foreign enterprises - Held that:- Every contract for supply of goods manufactured by a company may not be a price sensitive information, however, in the facts of present case, the contracts to supply 65% of the yearly contracts received by the company, constituted price sensitive information which ought to have been disclosed. It is relevant to note that the penalty is imposed on the Company and the other Appellants after noticing that in the past too, SEBI has found that the Company had committed similar default for which the Company has been penalized. Since the violation is found to be repeated, the decision of the AO to penalize the Company and other Appellants cannot be faulted. Moreover, since the penalty is imposed jointly and severally, it is open for the Company to discharge the entire penalty. Given that the AO has considered the mitigating factors under Section 15-J of SEBI Act and thereafter imposed a penalty of ₹ 25 lac under Section 15-HB of SEBI Act (maximum penalty provided for under this Section is Rs.One crore), we do not find any merit in the contentions raised on behalf of the Appellants.
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Service Tax
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2016 (8) TMI 949
Rectification of mistake – penalty – demand barred by limitation - classification - online educational services – commercial training or coaching services - online information and data base access or retrieval services – malafide intention – Held that: - when the Revenue itself was not clear about the classification of the appellants activity and in fact proposed the classification, in the show cause notice under the category of "online information and data base access or retrieval service'. Inasmuch as the issue was not free from doubt and was not settled, any malafide cannot be attributed to the assessee, so as to invoke the longer period of limitation. Accordingly, the demand raised by invoking the extended period, is not justifiable - penalty not imposed – appeal allowed on point of limitation – rectification of mistake disposed off – decided in favor of appellant.
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2016 (8) TMI 948
Demand of tax, interest and penalty - classification – GTA service – cargo handling service – clearing and forwarding agent services – reverse charge mechanism – Held that: - mere movement or transportation of the goods from one place to another, under the direction of principal cannot be held to be 'clearing and forwarding service'. This was established in the case Videocon TV Manufacturer P. Ltd. vs. CCE, NOIDA 2013 (7) TMI 349 - CESTAT NEW DELHI. Thus, appellant not liable to pay – appeal allowed – decided in favor of appellant.
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2016 (8) TMI 947
Refund claim – 100% EOU - the notification number 41/2007-ST – terminal handling charges – bill of lading charges – inland haulage services – transportation of empty containers from the port area to the factory – Held that: - All these services have been the subject matter of the one or the other decisions of the Tribunal and stands covered by the said decisions by holding that they are all port services and as such being specified services are covered by the notification in question – refund allowed – lower authorities to re-quantify the amount. Courier services – cleaning services – Held that: - these services not covered by the said notification – refund denied. Appeal disposed off - decided in favor of appellant.
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2016 (8) TMI 946
Demand of tax and penalty – reverse charge mechanism – manufacture of grey fabrics – import of yarn from Nepal – separate invoice raised for expenses like transportation, clearance expenses etc – is appellant receiving GTA services from exporter? - Notification No. 35/04-S.T - Held that: - the contract of appellant with the Nepalese suppliers is for supply of yarn and not for providing any particular service. Transport of goods is an activity incidental to the supply of goods for which Nepalese suppliers has engaged transporters. Nepalese suppliers had not acted as the agents of the appellants for arranging transportation from Nepal border to the factory premises of the appellants. Just because the Nepalese suppliers had billed the appellants separately for transportation from Nepal border to factory premises alongwith other expenses, they do not become the agents of the appellants. In view of this, the appellants cannot be treated as recipients of GTA services in terms of Notification No. 35/04-S.T. – appellant not liable to pay service tax – appeal allowed – decided in favor of appellant.
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2016 (8) TMI 945
Rejection of rebate claims – delay in filing declaration to claim rebate – business auxiliary service - Rule 5 of Export of Service Rules, 2005 - notification No. 12/05-ST dated 11.4.05 – Held that: - mere late filing of declaration where the Government can verify it subsequently, cannot be a ground adopted for denial of the substantive benefit, if otherwise available to the assessee. Here, refund was rejected on preliminary ground itself, the documents were not examined and claim was not otherwise verified – matter remanded to original adjudicating authority for verification of appellant’s claim of rebate – appeal disposed off - decided in favor of appellant.
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2016 (8) TMI 944
Condonation of delay – rent out the bus stand to petty shops – tax collected by appellant but not paid – lack of knowledge on the part of office bearers – no intention of delay – applicability of service tax - Held that: - The appellant is a town panchayat and as per the table provided at page-6 of the paper book, it is seen that they have not reached the minimum threshold limit of ₹ 10.00 Lakhs during the relevant period to register for service tax for the period 2007 to 2012. Appellant not applicable for service tax – delay condoned - appeal allowed - decided in favor of appellant.
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2016 (8) TMI 943
Stay application for waiver of pre-deposit - Reconciliation of the taxable value – payroll processing for various financial institutes and banking companies – records for the period under dispute destroyed – remand matter to adjudicating authority for reconciliation of figures – Held that: - stay application dispensed with the consent of the Ld. AR.. Matter remanded to original authority for fresh adjudication – appeal taken up for hearing.
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Central Excise
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2016 (8) TMI 942
Whether the Tribunal is correct in holding that the respondent had correctly discharged the obligation under Rule 6(3) of the Cenvat Credit Rules, 2004 and whether the Tribunal is correct in deleting the mandatory penalty - Held that:- the order impugned in this appeal, has to be set aside and that the Tribunal should revisit and adjudge certain points for consideration. Both the learned counsel for the parties, have consented for the order impugned in Final Order No.41001/2014 dated 11.12.2014 passed by CESTAT, Chennai - 600 006 to be set aside and the matter be remanded for adjudication. - Appeal allowed by way of remand
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2016 (8) TMI 941
Benefit of excise duty - Notification No. 5/2006-CE and subsequent notifications - fabrication of RCC pipes and laying the pipes at various depths below the ground level as per the details in the agreement - goods have been fabricated not at the site of construction of the sewage system but at a different site - Held that:- in view of the decision of Tribunal in the case of Simplex Concrete Piles (India) Ltd. vs. CC&CE, Rajkot [2004 (6) TMI 129 - CESTAT, MUMBAI] wherein it was held that the CBEC Circular dated 18.05.1999 has been considered and the benefit of excise duty exemption for goods manufactured at site has been extended in a case where goods were manufactured for use in the construction of break waters of Veraval Port at a private plot at a site which was 1.5 km away from the said port, the appellant will be eligible for the benefit of excise duty under Notification No. 5/2006-CE and subsequent notifications which grant exemption for such goods manufactured at site. In such a view of the matter, we consider it not necessary to examine the valuation aspect of the pipes inasmuch as we hold that no excise duty liability arises on pipes. - Decided in favour of appellant
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2016 (8) TMI 940
Valuation - Demand of differential duty - appellant's paying duty on MRP basis only on the food processor basic unit whereas bundled food processor accessories into a separate packing with a separate MRP but paid duty on the accessories under the transaction value - whether the food processor basic units as well as accessories are to be assessed together under MRP - Held that:- accessories when packed separately, do not contain any electric motor. It is common knowledge that the accessories can function only in conjunction with the basic food processor unit, which contains the motor. These accessories are specifically designed to work with the food processor and cannot be used inter-changeably with any other machine. It is also obvious that the food processor basic unit is of no use to the customer without the accessories, which are essential for exploiting the entire function of the food processor. This leads us to the reasonable conclusion that the bifurcation of the complete food processor into basic unit and other essential parts described as optional accessories and packed in separate boxes and marked with separate MRPs and cleared in equal numbers, has been done with the purpose of wrongly claiming lower rates of excise duty under Section 4 for the accessories. Accordingly, the food processor basic unit along with the accessories are to be assessed together as electric mechanical domestic appliance with self contained electric motor and are chargeable to duty on MRP basis. Consequently, the demand for differential duty upheld. - Appeals disposed of
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2016 (8) TMI 939
Refund claim - Rule 5 of the Cenvat Credit Rules - availed cenvat credit of duty for payment of central excise duty on the finished products but are not in a position to utilize the same used in the manufacture of final products, which were cleared to a 100% EOU under CT-3 certificates - whether the clearances to 100% EOU (which is a deemed export) may be considered on par with export, which is export out of India - Held that:- an identical issue has been considered by several benches of this Tribunal as also the Hon’ble High Court of Gujarat. In the decision of the Hon’ble Gujarat High Court in the case of CCE Vs. Shilpa Copper Wire Industries [2008 (2) TMI 93 - CESTAT AHMEDABAD], held that the clearances to 100% EOU be considered on par with physical export for which refund of un-utilised cenvat credit is allowable. An identical view has been taken by the Tribunal in Elcomponics Sales Pvt. Ltd. [2011 (10) TMI 196 - CESTAT, NEW DELHI]. Therefore, in view of the same, the issue is no more res integra and stands decided in favour of the appellant. - Decided in favour of appellant
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2016 (8) TMI 938
Demand in terms of Notification No. 22/03-CE dated 31.03.2003 - Invokation of extended period of limitation - willful misstatement/ suppression of facts - waste and scrap arisen in the course of production processing or in connection therewith - Held that:- the appellant had all along held that it considered the impugned waste and scrap as not subject to duty. Further the SCN itself concedes that the Revenue was not confirmed whether such waste and scrap was out of indigenous or imported material and therefore, it is to be treated as generated imported material on which higher rate of duty is applicable but this observation is unsustainable as the onus to establish that such waste and scrap was generated out of the imported raw material is clearly on Revenue. Also in view of the decision of Hon'ble Apex court in the case of Uniworth Textiles Ltd. [2013 (1) TMI 616 - SUPREME COURT], the Supreme Court held that mere non-payment to duty is not equivalent to collusion or willful misstatement or suppression of facts. The main body of the Section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or wilful mis-statement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso. Hence, the demand is unsustainable and extended period of limitation is not invokable. - Decided in favour of appellant
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2016 (8) TMI 937
CENVAT credit - capital goods and services received by them during the period 01/04/2005 to 28th of February 2006, during which period their final products were exempted from payment of Central excise duty - Held that:- there is no doubt that at the time of receipt of capital goods, the final products of the appellant were chargeable to nil rate of duty and therefore these capital goods fall within the purview of sub rule 4 of rule 6 and hence not entitled to Cenvat credit. The only argument advanced by the appellant is that the credit has been taken in the same financial year in which their final products became dutiable. We find that this is not a valid reason to permit such credits. - Decided against the appellant
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2016 (8) TMI 936
Demand and imposition of penalty - Confiscation of goods seized - diversion of 1022 pieces of compressors procured by M/s. Thermoking at concessional rate of duty - clandestine removal of gas compressor to M/s. Flevel International and consequent manufacture of air conditioner by the said M/s. Flevel International - Held that:- there is no need for assessing the evidentiary value of all the facts placed on record by the revenue inasmuch as the same very facts and evidences stand scrutinized by the Hon’ble Delhi High Court and have been held to be insufficient to uphold the charges. The allegations in the present proceedings is in respect of same number of gas compressors i.e. 1022 procured by the assessee under Chapter X Procedure and alleged diversion which were the subject matter of the earlier proceedings. As such, in terms of Hon’ble Delhi High Court decision in the earlier proceedings, the allegation of diversion of 1022 pieces of gas compressor and the consequent demand of duty along with imposition of penalty cannot be upheld. Consequently, the confiscation of the seized goods is required to be set aside. Clubbing of clearances - units related to each other - Held that:- the issue stand decided in the same appellants case vide the earlier order of the Tribunal wherein both the Members agreed that the allegations of clubbing of clearances cannot be upheld. Reference is made to the decision reported in [2014 (2) TMI 1094 - CESTAT NEW DELHI (LB)]. we also note that the Revenue's appeal against the said order of the Tribunal before the Hon’ble Delhi High Court stand dismissed. As such, as the issue stand decided in the same assesssee's case, we find no reasons to interfere in the impugned order of the Commissioner on this ground. - Decided in favour of appellant
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2016 (8) TMI 935
Demand of differential duty - fertilizers cleared by them by availing the notification no. 6/02-CE dated 01/03/2002 and Notification No. 4/06-CE dated 1/3/2006 during the period 2001-2002 to 2005-2006 but some part of the fertilizers were lost in transit and were not used as fertilizers - Held that:- the notification grants exemption to all goods other than those which are not to be used as fertilizer, i.e., exemption is provided in the negative way. The literal meaning of the notification would indicate that if there is unambiguous intention at the time of clearance of the goods not to use them as fertilizer, the exemption shall not be available to such goods. In other words, if goods are clearly intended to be used as fertilizers at the time of clearance the exemption would be available. Since, in this case, there was no such intention of not using the goods as fertilizerand goods were cleared with clear intention to be used a fertilizer then mere fact that certain quantity of urea was not used as fertilizer due to loss in transportation, re-bagging and standardization, it would not mean that such urea was not intended to be used as fertilizer. Further, I find that there is no indication in the notification that urea should be actually used as fertilizer for benefit of said notification. The department contention that impugned goods must be actually used as fertilizer is not correct. The benefit of notification to urea for use in fertilizer has to be decided at the time of clearance of the goods itself from the factory. In my view actual use of urea as fertilizer is not envisaged in the impugned notification. Since there is all the intention at the time of clearance that urea to be used as fertilizer and there is no intention that urea will not be used as fertilizers, hence the benefit of exemption to urea will apply to all quantity of urea even if some quantity of urea is subsequently destroyed or lost due to transportation, re-bagging and standardization. - Decided against the Revenue
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2016 (8) TMI 934
SSI Notification No. 08/2002 dated 1/3/2002 - entitlement for benefit - manufacture of goods bearing the brand name Blue Heaven - Revenue aleged that he brand name with which goods have been cleared by the appellant does not belong to them but of another person - Held that:- it is found that the brand name Blue Heaven is linked throughout with G.C. Laboratories and there is no doubt about it. There is no allegation whatsoever that the brand name belongs to some other person. The registration of the brand name was changed by the Registrar of Trademarks only to reflect the change in proprietor of M/s. G.C. Laboratories. Hence, the brand name Blue Heaven is in the name of Shri Gurnam Singh, Sole Proprietor of M/s. G.C. Laboratories as per the order of trademark registry dated 22/12/2006, which is on the basis of the request dated 23/07/2001. Under such circumstances, the brand name Blue Heaven is to be considered as continuously belonging to M/s. G.C. Laboratories. Therefore, the goods cleared by the appellant bearing the brand name Blue Heaven will be throughout entitled to the benefit of the SSI Notification. - Decided in favour of appellant
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2016 (8) TMI 933
Notification No. 6/2002-CE dated 1/3/2002 - entitlement for benefit - M.S. Pipes cleared to various sites of the department of PHED for drinking water on the basis of certificate issued by the Collector and the District Magistrate of the other respective districts - whether the pipes which are admittedly used as Casing Pipes will be covered under the category needed for delivery of water from its source to the plant, even though these are not used for carrying the water itself - Held that:- the wording of the notification is to be interpreted in such a way as not to frustrate the purpose of the notification. The CBEC Circular has clarified that exemption will be available on pipes required for obtaining untreated water from its source to the plant. This clarification fairly covers the issue on hand and the benefit cannot be denied. To take a view that the benefit can be extended only to those pipes which physically carry water and deny it to those which are used as Casing Pipes (which are also needed for delivery of water) would defeat very purpose of the Exemption Notification meant for giving the benefit to water treatment plants. - Decided in favour of appellant
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2016 (8) TMI 932
Demand and imposition of penalties - Clandestine clearance of goods - shortages of final product detected by the officers at the time of their visit - documents recovered from the residential premises of one Shri Vinod Kumar Gupta relate to raw material received and dispatch of finished goods - Held that:- the Revenue has not produced any evidence or not has even alleged that there was enhancement in the production capacity subsequent to fixation of APC. In such a scenario, the rejection of the stand is on a flimsy ground. In the absence of capacity of production of such a huge quantity of goods, their clearance is virtually impossible. Where the production capacity was fixed by the Commissioner prior to the period in question and it is not the Revenue's stand that subsequent to the fixation of ACP, the appellants have added any further machinery in their factory so as to enhance their production capacity. The Chartered Accountant's certificate clearly establish that no capital expenditure stand made by the assessee subsequently. Even the assumptive observations made by Commissioner may lead to enhancement in the production capacity to a little extent but same cannot lead to enhancement of the capacity to such a huge quantum which is almost four times the capacity fixed by the Commissioner. In the present case the entire case of the Revenue is based upon uncorroborated unverified entries in the documents recovered from the premises of third person as also upon the statements of some of the concerned persons, which depositions are also not very clear leading one to believe that the appellant was indulging in clandestine activities. A cumulative reading of the statements leads us to believe that same stand given in the context of trading activity of the assessee. As the Revenue has miserably failed to establish the manufacture of such huge quantity of the appellants final product and has not adduced any positive and sufficient tangible evidence for the clearance of the final product from the appellants factory to the customer's premises, we find no justification to uphold the impugned order of Commissioner. Accordingly, confirmation of demand and imposition of penalty on M/s. CIL is set aside. Consequently, the penalties upon other appellants, who are Managing Directors or Directors of the said company, or the raw material supplier or the alleged buyers of their final product and other employees of the company are also set aside. - Decided in favour of appellant with consequential relief
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2016 (8) TMI 931
Enhancement of penalty - includability - penalty paid by the dealers of M/s.Skoda Auto India Pvt. Ltd. in the assessable value - Held that:- it is found that there is no evidence to show that the penalty amount received by the M/s.Skoda Auto India Pvt. Ltd. is in connection with the sale of goods by them to dealers. Therefore, the same cannot be included in the assessable value. The appeal filed by M/s.Skoda Auto India Pvt. Ltd. is therefore allowed and the demand is set aside. Since the demand itself is set aside there is no question of imposing penalty. - Decided against the Revenue
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2016 (8) TMI 930
Refund claim - period of limitation - Held that:- it was open to the appellant to opt for provisional assessment if he was unable to determine the assessable value at the time of clearances from the factory. If he has not opted for the same, the only recourse open to him is to file a refund claim under Section 11B. The show-cause notice issued under Section 11B are in the nature of communication of the objection. In fact there is no time limit prescribed for issue of show-cause notice under Section 11B and thus it is open to Revenue to point out the short comings in the refund claim. - Decided against the appellant
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2016 (8) TMI 929
Reversal of amount equal to 10% or 5% on the value of exempted goods - Rule 6 of the Cenvat Credit Rules, 2004 - clearance of bagasse, press mud and boiler ash and compost etc. - Held that:- the issue is squarely covered by the decision of Tribunal in the case of Balrampur Chini Mills Ltd. [2004 (11) TMI 567 - CESTAT NEW DELHI] (which has been affirmed by the Hon’ble Apex Court). In view of the same, the demand is set aside. Reversal of credit - HR sheets used for fabrication of biogas digester tank, which is exempted capital goods under Notification No.06/2006 dated 01/03/2006 - Held that:- it is seen that biogas tank is a part of biogas plant and Biogas plant is covered under Notification No.6/2006, therefore, parts of biogas plant are also covered. In view of the above, it is apparent that biogas storage tank is examined under Notification No.6/2006 and is exempted under Notification No.67/95. Therefore by relying on the decision of Tribunal in the case of KCP Ltd., the appeal is allowed. - Decided in favour of appellant
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2016 (8) TMI 928
Whether the appellant was acting as a job worker for its sister unit and doing the job work of converting Iron Ore into iron and ore concentrate slurry and returning the goods to the sister unit (Principal manufacturer) was required to pay duty thereon - Held that:- as far as the duty liability of a job worker in terms of Rule 57(F)(4) of Central Excise Rules, 1944 is concerned, it is settled upto the level of Supreme Court that the job worker was not required to pay duty. The language in both the Rules i.e. Rule 4(5)(a) and Rule 57(F)(4) gives no scope to infer that if the job worker was not required to pay duty in terms of Rule 57(F)(4) it could be required to pay duty in terms of Rule 4(5)(a) because the conditions of Rule 57(F)(4) were stringent compared to the conditions of Rule 4(5)(a) inasmuch as Rule 57(F)(4) categorically required the principal manufacturer to use the goods received from the job worker for further use in the manufacture of the final product or removing after payment of duty for home consumption or removing the same without payment of duty for export while Rule 4(5)(a) does not say so expressly though it is implicit therein. Thus, we are of the view that for the purpose of dutibility at the hands of the job worker, the provisions of Rule 57(F)(4) are essentially parimateria the Provisions of Rule 4(5)(a) of the Cenvat Credit Rules. - Decided in favour of appellant
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CST, VAT & Sales Tax
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2016 (8) TMI 923
Validity of the judgement dated 16.01.2007 - Trade Tax, Saharanpur under Rule 41(6) of the U.P. Trade Tax Rules – imposition of purchase tax along with interest - benefit of exemption Notification dated 29.08.2003 issued under Section 4B(1)(a-1) of the Uttar Pradesh Trade Tax Act, 1948 - Section 3D(1) of the Act – purchase of wheat – supply to flour mills for grinding process – Held that: - in order to avail the benefit of the Notification and evade payment of purchase tax, a particular supplier may set up a middle man or an agent who will be the first purchaser and who will claim exemption under the said Notification and will supply wheat to flour mill beyond its assessed grinding capacity and the excess quantity of wheat which the flour mill will receive is only by way of supply and not by way of purchase. If a dealer sets up any middle man or an agent who purchases the goods,then such middle man or agent becomes the first purchaser and in that event he would not be in a position to get the benefit of the special relief provided under Section 4B of the Act. Therefore, Notification dated 29.08.2003 should have been read as it is and on that basis the High Court was supposed to examine as to whether the appellant satisfied the conditions of Section 4B of the Act read with the aforesaid Notification dated 29.08.2003 or not. The benefit is extended to a dealer and for availing this benefit it is not necessary that he has to be a manufacturer. Here, the appellant satisfies all the conditions and is also the first purchaser - appellant entitled to the benefit of Section 4B(1)(a-1) as well as Notification dated 29.08.2003 – appeal disposed off - decided in favor of appellant.
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2016 (8) TMI 922
Retrospective amendment - curtailment of the sales tax incentives by way of deferral – constitutional validity - impact on completed assessment - section 41D of the Bombay Sales Tax Act, 1959 - the Maharashtra Tax Laws (Levy and Amendment) Act, 1995 - Rule 31AAA of the Bombay Sales Tax Rules, 1959 – manufacture and sale of jelly filled telephone cables. Held that: - the scheme will remain in operation for a period of five years from 1st April, 1983 to 31st March, 1988. Consistent with the objectives of the scheme, however, the Government may, at any time, make any amendments to the scheme. Any larger question much less about the legality and validity of the provisions need not be considered. The petition must succeed without examining the issue as to whether section 41D and Rule 31AAA can be held to be unconstitutional and ultra vires Articles 14 and 265 of the Constitution of India. The amended provisions cannot be invoked and applied in the present factual controversy. Decided in favor of petitioner / asseessee.
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2016 (8) TMI 921
Quash of Order of Attachment – bank account – residential bungalow – offices and commercial establishments – stock of goods lying in godowns – cars and other personal belongings – section 45 of Gujarat Value Added Tax, 2003 – demand of tax, interest and penalty - possession of unaccounted stock of goods in undeclared godowns - investigation – Held that: - The department, undoubtedly, has powers under section 45 of the VAT Act to pass an order of provisional attachment to protect the interest of revenue during the pendency of any proceedings of assessment or reassessment of turnover, escaping the assessment, if the Commissioner is of the opinion that in order to do so, it is necessary to attach any property belonging to the dealer. However, being an order in the nature of attachment before judgment, which undoubtedly would have harsh consequences on a dealer, the powers have to be exercised sparingly and with due care. The court has already given relief to petitioners. Interim directions confirmed contained in order dated 6.5.2016 and made absolute subject to minor modifications and safeguards – petition disposed off – decided against petitioners subject to some modifications.
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2016 (8) TMI 920
Demand of interest and penalty - Nature of works contract civil contract or construction contract - GVAT - contract of coating pipes - eligibility of composition scheme under section 55A of the act - tax rate is 2% or 12% - Held that: - appellant has fairly conceded that looking to the fact that the respondent has passed the assessment order on the basis of material available with it, they were required to pay the tax on the basis of 12% and that has been paid by the appellant since the opinion of the expert was turned out. Activity of coating pipe is civil works and it was under bona fide opinion and following the advise, it has believed to be construction activity. The authorities below have committed an error of law and when the tax imposed has already been paid by the appellant, the penalty and interest is therefore not required to be liable to be paid by the appellant. Interest and penalty if paid, shall be refunded to appellant – appeal disposed off – decided in favor of appellant.
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Indian Laws
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2016 (8) TMI 917
Entitlement to award of the Motor Accidents Claims Tribunal, Kolkata - whether the High Court was justified in setting aside the award only on the ground that the Tribunal did not have the territorial jurisdiction? - Held that:- The provision in question, in the present case, is a benevolent provision for the victims of accidents of negligent driving. The provision for territorial jurisdiction has to be interpreted consistent with the object of facilitating remedies for the victims of accidents. Hyper technical approach in such matters can hardly be appreciated. There is no bar to a claim petition being filed at a place where the insurance company, which is the main contesting parties in such cases, has its business. In such cases, there is no prejudice to any party. There is no failure of justice. Moreover, in view of categorical decision of this Court in Mantoo Sarkar (2008 (12) TMI 719 - SUPREME COURT OF INDIA ), contrary view taken by the High Court cannot be sustained. The High Court failed to notice the provision of Section 21 CPC. Accordingly, we allow this appeal, set aside the impugned judgment of the High Court and restore the award of the Tribunal.
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