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TMI Tax Updates - e-Newsletter
August 28, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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TDS liability - time limit for making assessment u/s 201(1) - assessee “deemed to be in default” - Provisions of section 201(3) were amended and word six years were substituted by words four years with retrospective effect from 1April 2010. Survey action carried out in October 2010 and the amendment had come on statute before six months. So, the FAA, in our opinion has rightly interpreted the section and the time limit. - AT
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Revision u/s 263 by CIT(A) - it appears from record, the AO during the assessment proceedings has made enquiries on all these issues, though, it may not have been referred to in the assessment order. As it appears, in the garb of proceedings u/s 263 of the Act, the ld CIT in fact is undertaking an assessment proceeding himself - AO to re-consider the issues - AT
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TDS u/s 195 - opening of letters of credit for the purpose of completing the export obligation was an incident of export - The non resident agent did not provide technical services for the purpose of running of the business of the assessee in India - No TDS is required - AT
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Non-deduction of TDS towards payment of rent to the partners of the firm - There is no provision under the Act to suggest that the relationship between the two assessable entities will determine the applicability of Section.194-I - disallowance u/s 40(a)(ia) confirmed - AT
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Disallowance u/s 14A(2) r.w.r. 8D(2)(ii) - expenditure will have to be excluded from the expenses to be allocated under rule 8D(2)(ii) - entire transaction of borrowing and landing is completely a back to back transaction - Just because it is routed through the same bank account, it cannot be presumed that the money is out of the common funds - AT
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Penalty u/s.140A(3) r.w.s. 221 - assessee failed to pay self-assessment tax - levy of penalty by the u/s.221(1) is discretionary and not automatic. - for levy of penalty u/s. 221 such default must be wilful and not merely accidental. - AT
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Relinquishment of the share of assessee in the property comprising of land in favour of sisters who is co-owner - whether was a transfer within the meaning of section 2(47) and capital gain accruing on such transfer was exigible to capital gains tax u/s. 45? - Held Yes - AT
Customs
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Classification of Dry (Betel) nuts under CTH 08129090 or CTH 08028020 – it is found from test reports that sample of imported goods are not unsuitable for immediate consumption and therefore they would merit classification under CTH 080280 and not under CTH 0812. - AT
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Issuance of show cause notice – Commissioner could not have issued show cause notice as prior order of Commissioner had merged into order passed by revisionary authority and principles of res judicata applied - department is allowed to pursue other legal remedies - SC
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Claim over property – Right over attachment – There was no indication in Customs Act that property of defaulter which was put to auction can still be claimed by Customs Department after title passes to auction purchaser once it was held that it has no primacy for its dues - HC
Service Tax
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Denial of CENVAT Credit - Courier service and CHA service - jurisdictional Central Excise officer of the recipient of the service, cannot question the classification of the service of the service provider. - AT
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Air transportation services - Issue of round trip tickets - when the officer of the Revenue himself has dropped the proceedings in a subsequent case, the appellant should not be directed to deposit any amount - stay granted - AT
Central Excise
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CENVAT Credit - duty paying document - photo copy - specified copy of bill of entry and the invoices were misplaced after the receipt of the goods in the factory - credit allowed - HC
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Power of tribunal to extend the stay beyond the period of 365 days - Once the proviso to Section 35C(2A) of the Act has been omitted, the embargo upon the Tribunal to limit the stay order for a limited period has now been removed - Tribunal has the power to grant stay - HC
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Demand of interest on differential duty - interest liability would commence from the month succeeding the day on which the duty was due and payable in relation to the goods cleared. - interest is leviable even where differential duty was paid prior to the finalisation of the assessment - HC
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Disallowance of CENVAT Credit - Inclusion of storage tanks/vessels within the scope of capital goods - effect of notification dated 1.3.2001 - prospective or retrospective - the amendment is not clarificatory in nature and prospective in nature - HC
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Invocation of extended period of limitation - Unit of the respondent was audited during this period several times and there were physical inspections by the Department as well. Therefore, there could not be any case of suppression - SC
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Reversal of Cenvat Credit - Caustic Soda is manufactured by electrolytic method wherein mercury is used as cathode which after the use is procured and cleared - Credit is required to be reversed under Rule 3(4) - SC
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Benefit of SSI exemption - Use of brand name of others - no such case was set up in the show cause notice issued by the authorities and therefore, such a plea cannot be allowed to be used for the first time in the present appeal, more so, when it is a pure question of fact - SC
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Valuation of auto bulbs - MRP based value u/s 4A or transaction value u/s 4 - Section 4A in its wholesome form would not be applied in its entirety in cut and paste form. - SC
VAT
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Validity of Revisional notice issued by the Commissioner – Barred by Limitation – Doctrine of merger - notice was barred because order of assessment was sought to be revised and that was made prior to more than three years from issuance of notice dated 13.7.2009 - HC
Case Laws:
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Income Tax
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2015 (8) TMI 1064
Aggregate expenditure incurred during the year on replacement of various items of textile machinery - capital or revenue expenditure - Held that:- On identical facts, the Co-ordinate Bench of this Tribunal in the case of The Kumaran Mills Ltd. v. ACIT [2015 (8) TMI 1063 - ITAT CHENNAI] held that replacement of draw frames are capital expenditure not allowable as deduction under sec.37 . Also see CIT v. Srif Mangayarkarasi Spinning Mills (P) Ltd. (2009 (7) TMI 17 - SUPREME COURT) - Decided against assessee.
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2015 (8) TMI 1063
Expenditure incurred for the purpose of replacement of Draw Frame - textile machinery - capital or revenue expenditure - Held that:- Replacement of Draw Frame is a capital expenditure not allowable as deduction under sec.37 - See CIT v. Ramaraju Surgical Cotton Mills Ltd. [2007 (8) TMI 39 - SUPREME COURT OF INDIA] and CIT v. Srif Mangayarkarasi Spinning Mills (P) Ltd. (2009 (7) TMI 17 - SUPREME COURT). Also see CIT, Madurai v. Madura Coats [2011 (12) TMI 293 - MADRAS HIGH COURT] - Decided against assessee.
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2015 (8) TMI 1042
Payment made against the supply of materials included in composite contracts for executing Turn Key Projects - whether provisions under Section 194C would attract or not? - Held that:- Section 194C of the Act cannot be pressed into service to deduct tax at source. The whole object of introduction of that Section is to deduct tax in respect of payments made for works contract. No division is, therefore, permissible in respect of a contract for supply of materials for carrying out the work. It is in a case of distinct contracts. The contract for supply of material being a separate and distinct contract, no division is permissible under Section 194C of the Act. Section 194C has suffered an amendment also with effect from October 1, 2009 and the provision has been made very clear without any ambiguity.Thus, we can conclude safely that if a person executing the work, purchases the materials from a person other than the customer, the same would not fall within the definition of 'work' under Section 194C of the Act. - Decided against revenue. Payments made to Bellary Computers and IT Solutions, Bellary, towards Bill Management Services are fees for professional and technical services - whether comes within the purview of Section 194J or within the ambit of Section 194C - Held that:- The services rendered by the agencies engaged by the assessees at Hospet, Bellary and Raichur are not professional services, and, therefore, Section 194J is not attracted. The demand towards the alleged short deduction of tax deducted at source and interest, therefore, was improper. The contract was rightly held to be a service contract by the Tribunal and we, also, feel that it was a contract, which should be covered under Section 194C of the Act. - Decided against revenue.
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2015 (8) TMI 1041
Expenditure towards interest disallowed - assessee failed to establish the nexus between interest paid and income earned - FAA deleted part addition - Held that:- All the details were before the ld. Commissioner of Income Tax (Appeals) but instead of pin pointing any concrete diversion of interest bearing funds; ld. Commissioner of Income Tax (Appeals) only assumed that some funds might have been used by the assessee for some other purposes. The department has been consistently accepting the claim in earlier years and in subsequent years. It appears that in the beginning, assessee has more income under the head “income from other sources” as than the interest expenditure, but in Assessment Year 2006-07, 2007-08 and 2009-10, the interest expenditure was more than income, in spite of that loss under the head “income from other source” was allowed by the ld. Assessing Officer in scrutiny assessment. Thus considering the past history and stand of the revenue itself, we are of the view that ld. Assessing Officer has erred in making the disallowance. Ld. Commissioner of Income Tax (Appeals) also failed to appreciate that total expenditure is to be allowed which is incurred wholly and exclusively for earning income. It cannot be restricted in proportion of income. We allow the ground of appeal raised by assessee and consequently reject the ground raised by the revenue. The assessee is entitled to expenditure of ₹ 1,09,29,139/- claimed by him. - Decided in favour of assessee. Addition on account of long term capital gain - CIT(A)deleted addition - Held that:- Section 48 of the income tax act, 1961 provides that income chargeable under the head ‘capital gains, shall be computed by deducting from the full value of consideration received or accrued as a result of the transfer of the capital asset, the amounts namely (a) expenditure incurred wholly and exclusively in connection with such transfer (b) the cost of acquisition of the asset and the cost of any improvement thereof. The assessee while offering capital gain on sale of a plot of land had claimed cost of improvement for ₹ 10,84, 275/-. The Assessing Officer rejected the additional cost to the extent of ₹ 6 lacs. On appeal, ld. Commissioner of Income Tax (Appeals) allowed the claim of assessee on the ground that payment was made through account payee cheque for the construction made. The detail of material and other evidence were produced on the record. Contrary to this finding of fact recorded by the Commissioner of Income Tax (Appeals), nothing was pointed out to us during the course of hearing, therefore, we do not find any merit in this ground of appeal. - Decided against revenue.
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2015 (8) TMI 1040
TDS liability - time limit for making assessment u/s 201(1) - assessee “deemed to be in default” - Held that:- We have also perused the facts of the present case as well as the orders of ITAT in case of the appellant for AY. S.2006-07 to 2010-11 and we are satisfied that issues covered in those appeals are identical to the facts and issues of the present appeals wherein find that the FAA has not given any direct finding. He had given direction to the AO to find out the details of filing of quarterly statements for the year considerationand ‘to verify for his records as to whether the assessee had filed the necessary quarterly statements (or yearly TDS return)’. He further held that if the quarterly statement as required under section 201(3) had been filed with the due dates, the order passed by the AO was invalid and had to be annulled. He also mentioned that the assessee had not filed the TDS statements for the year under appeal as per law the case would be governed by the provisions of section 201(ii) of the Act and the impugned order passed would be treated valid. In our opinion, the order of the FAA does not suffer from any legal infirmity. Provisions of section 201(3) were amended and word six years were substituted by words four years with retrospective effect from 1April 2010. Survey action carried out in October 2010 and the amendment had come on statute before six months. So, the FAA, in our opinion has rightly interpreted the section and the time limit. Time limit depends upon the filing of quarterly/yearly statement. The FAA has emphasized the same point and has directed the AO to make verification, as stated earlier. In these circumstances, we are of the opinion that the order of the FAA does not suffer from any legal infirmity. - Decided against revenue.
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2015 (8) TMI 1039
Revision u/s 263 by CIT(A) - earning of agricultural income from sale of bamboo sticks and and contribution to chits - Held that:- AO has not only conducted inquiry on the agricultural income as well as contribution to chits, but has also applied his mind to the information submitted by assessee. In these circumstances, assessment order cannot held to be erroneous and prejudicial to the interests of the Revenue, only because the CIT was of the opinion that some more inquiries should have been made by the AO. As held by the judicial authorities, the power u/s 263 cannot be extended to hold an order passed by the AO as erroneous and prejudicial to the interests of the Revenue due to inadequacy of inquiry. No reason to uphold the exercise of power u/s 263 of the Act as far as the issue relating to agricultural income and contribution to chits are concerned. - Decided in favour of assessee. Not showing an amount of ₹ 20.00 lakhs out of the income offered of ₹ 1.00 crores at the time of survey - Held that:- Exercise of power u/s 263 on this issue is valid. There is no dispute that in the statement recorded at the time of survey on 19.03.2010, assessee had offered to pay an amount of ₹ 30.00 lakhs as advance tax for A.Y under consideration. Further in the statement recorded u/s 131 of the Act on 23.03.2010, assessee again stated that he will offer additional income of ₹ 1.00crore and pay advance tax of ₹ 30.00 lakhs for A.Y under consideration. Thus, from the aforesaid statements, it is clear that the assessee consistently took the stand that he will offer an amount of ₹ 1.00 crore as his income for the A.Y under consideration for which the tax liability would be ₹ 30.00 lakhs. However, in the return filed for the impugned A.Y, assessee declared income of ₹ 80.00 lakhs. Therefore, not showing the additional income offered at the time of survey in the return of income filed ultimately should have triggered an inquiry by the AO. He should have made an effort to find out what are the reasons behind not declaring an amount of ₹ 20.00 lakhs out of the total amount of ₹ 1.00 crore declared at the time of survey. The AO could have accepted the income declared in the return after satisfying himself with the reasonableness of assessee’s explanation. There is nothing in record to show that the AO made any inquiry to find out why the assessee did not offer the amount declared at the time of survey as income in the return filed. That being the case, we do not find any infirmity in the order of the ld CIT in holding the assessment order to be erroneous and prejudicial to the interests of the Revenue on this issue. - Decided against assessee. As far as the other issues considered we are of the firm view that the direction of the ld CIT on these issues are in the nature of starting a roving and fishing inquiry which is not permissible as held by Hon’ble Bombay High Court in CIT vs.Gabriel India Ltd (1993 (4) TMI 55 - BOMBAY High Court ). In our view, ld CIT has no material before him to consider the assessment order to be erroneous and prejudicial to the interests of the Revenue on these issues. On perusal of the discussions made by the ld CIT, it appears that his actions are more like an AO in session of an assessment proceeding rather than a Revisional Authority exercising powers u/s 263. Power u/s 263 is to be exercised sparingly and in genuine cases where due to error committed by AO, there is loss to the Revenue. Moreover, it appears from record, the AO during the assessment proceedings has made enquiries on all these issues, though, it may not have been referred to in the assessment order. As it appears, in the garb of proceedings u/s 263 of the Act, the ld CIT in fact is undertaking an assessment proceeding himself. - Decided in favour of assessee.
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2015 (8) TMI 1038
Eligibility for claim of deduction u/s 10A on netting off exports receipts against import payments - Held that:- The export proceeds of ₹ 6,00,000 US $ should have been realized by the assessee before 29.3.2011 within one year from the date of export. The same was realized by the assessee on 18.3.2011, since the assessee imported from Evergreen Technology Ltd. goods to the value of ₹ 9,94,500 US $. In other words, within the period of one year from the date of export, the assessee is deemed to have realized the export proceeds and to have made payment to the foreign party equivalent to 3,94,500 US $. The assessee also applied to the competent authority i.e., Union Bank of India, authorised dealer of RBI, for giving a formal approval for net off of exports receivable against import payable. The competent authority did not reject the application for net off within the stipulated period of one year or till the passing of the assessment order by the AO. In such circumstances, it has been held in several decisions that the permission applied is deemed to have been allowed. It is in accordance with this Circular that the authorised dealer has granted the requisite permission to the assessee. CIT(A) is right upholding the assessees claim of net off of exports and import payments in the absence of permission from the Competent Authority before the due date (one year from the date of export) to bring in the export receipts. Also see case of Henna Jebart [2011 (7) TMI 526 - Allahabad High Court] and J.B. Boda & Co. Pvt. Ltd case [1996 (10) TMI 70 - SUPREME Court] - Decided against revenue. Admitting additional evidence - Held that:- The order of assessment was passed on 11.3.2013, whereas the permission of Union Bank of India, the authorised dealer, allowing net off is dated 13.8.2013. This document could not have been filed before the AO. In such circumstances, the provisions of Rule 46A(1)(b) or (c) will be applicable. Even otherwise, under the provisions of Rule 46A(4), the Commissioner had power to call for evidence necessary for adjudication of the appeal. Accordingly, no fault can be found with the order of CIT(Appeals) on the ground that additional evidence ought not to have been admitted.- Decided against revenue. Applicability of provisions of section 40(a)(ia) in respect of default in short deduction of tax - CIT(A) deleted disallowance - Held that:- As far as disallowance u/s. 40(a)(ia) of the Act is concerned, we are of the view that disallowance u/s 40(a)(ia) shall not be made merely because TDS has been deducted u/s 194C instead of Section 194J.Thus section 40(a)(ia) of the Act refers only to the duty to deduct tax and pay to government account. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default u/s 201 of the Act and no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act. The law has however been prospectively amended w.e.f. AY 2015-16. In view of the above legal position, we are of the view that no fault can be found with the order of the CIT(A) on this issue.- Decided against revenue. Revenue v/s capital expenditure - expenditure on purchase of UPS - Held that:- UPS cannot be claimed back by the assessee from the rural colleges in which it is installed as a part of the CET Rural Training Programme and as per the terms of agreement between the assessee and state of Karnataka. This was made very clear by the Director, Department of Pre-University Education, Govt. of Karnataka in its communication dated 7.10.2009. UPS, therefore, was not an apparatus with which the assessee carried on its business, but had been given to the rural colleges as a part and parcel of the services rendered by the assessee. It is on this basis that the CIT(Appeals) has treated the expenditure as revenue expenditure.- Decided against revenue.
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2015 (8) TMI 1037
Disallowance u/s.14A - assessee submitted that no disallowance is warranted since the interest free funds available with the assessee in the form of share capital, reserve and surplus, and the same were used for the purpose of investment in assets, the income from which shall not or does not form part of the total income - Held that:- Admittedly, in this case the assessee is having enough interest free funds in the form of share capital and reserve and surplus. The amount of investment made by the assessee is less than the interest free funds. Further, Rule 8D was introduced with effect from 24.03.2008, which was prospective in operation and cannot be regarded as being retrospective as held by Delhi High Court in the case of Maxopp Investment Ltd vs. CIT [2011 (11) TMI 267 - Delhi High Court]. However, incurring certain administrative expenses cannot be ruled out. Thus we direct the Assessing Officer to disallow 2% of exempt income as income expenditure towards earning that income - Decided partly in favour of assessee. Whether disallowance, if any, under section 14A should go to increase the profit derived from the eligible undertaking(s)/ unit(s) for purpose of sections 10A? - Held that:- This issue is squarely covered by the order of the Bombay High Court in the case of CIT vs. M/s. Gem Plus Jewellery India Ltd [2010 (6) TMI 65 - BOMBAY HIGH COURT], wherein it was held that the assessee was entitled to exemption u/s.10A with reference to addition or disallowance of various payments, as the plain consequence of the disallowance and add back made by the Assessing Officer is an increase in the business profits of the assessee and the same to be considered for the purpose of computation of deduction u/s.10A of the act. Adopting the similar principle, we are inclined to direct the Assessing Officer to consider the disallowance u/s. 14A r.w Rule 8D as part of business profit so as to compute deduction u/s.10A of the Act. - Decided partly in favour of assessee. Travelling expenses incurred in foreign currency - whether are to be reduced from total turnover also for the purpose of computation of deduction u/s.10A ? - Held that:- This issue is squarely covered by the order of in the case of ITO vs. SAK Soft Ltd, (2009 (3) TMI 243 - ITAT MADRAS-D) wherein it was held that for the purpose of applying the formula under-sub-section (4) of section 10B, the freight, telecom charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India are to be excluded both from the export turnover and from the total turnover, which are the numerator and the denominator respectively in the formula. - Decided in favour of the assessee.
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2015 (8) TMI 1036
Reopening of assessment under section 147 - disallowance of deduction under section 80-IA - Held that:- A perusal of reasons for reopening reproduced hereinabove show that nowhere it is alleged by the Revenue, that the assessment proceedings are initiated as the assessee has failed to disclose fully and truly all material facts necessary for its assessment. The two preconditions laid down by the Hon'ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. (2002 (4) TMI 37 - DELHI High Court) for exercising jurisdiction under section 147, that have been subsequently affirmed by the Hon'ble Supreme Court of India in the case of CIT vs. Kelvinator of India Ltd. reported as [2010 (1) TMI 11 - SUPREME COURT OF INDIA] are absent in the present case. One of the submissions of Ld. DR is that in assessment year 2002-03 assessment was made under section 143(1), therefore the Assessing Officer had no occasion to apply his mind on the return of income. The Hon'ble Delhi High Court in the case of CIT vs. Orient Craft Ltd. (2013 (1) TMI 177 - DELHI HIGH COURT) has erased the line of distinction between assessment made under section 143(1) and 143(3). Thus, the contention of the Ld. DR does not hold ground. A perusal of the original assessment orders passed under section 143(3) of the Act for the assessment years 2005-06 and 2006-07 shows that the Assessing Officer has clearly stated that the assessee has claimed deduction under Chapter VI-A of the Act. AO while drawing computation of total income has clearly mentioned, Income from windmill activity and has thereafter granted deduction under Chapter VI-A of the Act on windmill income. Once the Assessing Officer has applied his mind while passing the assessment order and has granted relief, there is no question of reviewing the same under the garb of reassessment proceedings. In the reasons for reopening nowhere it has been stated that the deduction claimed by the assessee under section 80-IA of the Act has come to the knowledge of the Assessing Officer after passing of assessment orders. In our considered view, it is clear case of change of opinion. Thus, AO has acted beyond his jurisdiction in initiating reassessment proceedings under section 147 of the Act. - Decided in favour of assessee.
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2015 (8) TMI 1035
Transfer pricing adjustment on account of international transactions - CIT(A) deleted the addition - Held that:- Both the assessee as well as the TPO/CIT(A) have adopted incorrect approach in determining the ALP under the CUP method. Whether the price of ADC-L-5 charged by the assessee from its AE was different because of different formulations/specifications given by the Italy party? - Held that:- When the mandate of Rule 10B is vivid which provides for, firstly, bringing the product sold to a non-AE at par with the product sold to AE by making adjustment due to the differences in the characteristics of the products sold and then to make adjustments on account of contractual terms and geographical location, etc., then, there can be no logic in determining the ALP under the method by breaching the express provision of Rule 10B. In our considered opinion, the view taken by the ld. CIT(A), which does not conform with the mandate of the Rule, cannot be sustained. Under such circumstances, we overturn the impugned order on this issue and send the matter back to the file of AO/TPO for a fresh determination of ALP of this transaction under the CUP method in accordance with our above directions/observations. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh proceedings. Polymerization Catalysts named DBH - AR before us in justifying the reasons for the price charged at ₹ 134/- per kg. from its AE, being the lowest price charged in comparison with all the uncontrolled transactions. Here again, the ld. AR put forward the same submissions that the specifications of this product sold to non-AEs were different from those sold to its AE. Neither any difference in such specifications was specifically pointed out nor the effect of such differences was brought to our notice. Here again, we find that neither the assessee brought on record any comparable uncontrolled transaction to justify the price charged from its AE nor the authorities below could justify their viewpoint in making or deleting the addition as per the parameters of Rule 10B. The position before us on this product is similar to ADC-L-5 discussed above. Following the view taken hereinabove, we set aside the impugned order on this score and send the matter to the file of AO/TPO for a fresh determination of the ALP of this transaction in accordance with our above guidelines. Blowing Agent named TSSC - Held that:- The assessee has not placed on record any effective comparable uncontrolled transaction to demonstrate that its international transactions with AE of the same product were at ALP. The TPO chose an altogether different product for making comparison under the CUP method, which is not legally sustainable because of the inherent differences in the quality of two products. The ld. CIT(A) also deleted the addition without making any comparison with a valid comparable uncontrolled transaction. Under such circumstances, we set aside the impugned order and remit the matter to the file of AO/TPO for a fresh determination of ALP of the sale of TSSC to its AE in accordance with our above observations. It goes without saying that the assessee will be allowed a reasonable opportunity of being heard in such fresh determination. Chemical Blowing Agent OBSH - Held that:- AR tried to justify the price charged from its AE at ALP by contending that such product sold to non-AEs was having different formulations and specifications, which resulted in a difference in the sale price. Neither such differences in the specifications were pointed out nor their effect on the price charged was specifically shown. The TPO too adopted ₹ 289/-, being one of the highest prices as the ALP. The ld. CIT(A) chose to delete the addition by accepting the assessee’s contentions which, in our considered opinion, do not properly justify the ALP. Under such circumstances, we find that neither the assessee nor the authorities below have dealt with the matter as per law. Following the view taken in respect of the product Blowing Agent ADC-L-5 above, we set aside the impugned order and remit the matter to the file of AO/TPO for fresh determination of the ALP of the instant transaction in conformity with our directions given hereinabove.
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2015 (8) TMI 1034
Disallowance made under section 80P(4) - non applicability to a co-operative bank other than a Primary Co-operative Agricultural and Rural Development Bank or Primary Agricultural Society - CIT(A) delted the disallowance - Held that:- No reason to interfere with the order of the learned Commissioner of Income-tax (Appeals). Obviously, the assessee is a co-operative society engaged in the business of providing credit facilities to its members. There is no dispute with reference to the transactions with the members, as the Assessing Officer has not considered that issue at all in the order. Therefore, the assessee being a co-operative society registered under the Andhra Pradesh Mutually Aided Co-operative Societies Act is eligible for deduction under section 80P(2)(a)(i) of the Act. Not only that, the assessee is also eligible for deduction under section 80P(2)(d) on the incomes received from other eligible co-operative societies/banks. Therefore, on the facts of the case, we do not see any reason to disallow the deduction under section 80P. The Revenue has raised the grounds that the provisions under section 80P(4) were applicable to the assessee. We do not see any reason to consider this ground as the restrictions brought out subsequently under section 80P(4) is applicable in the case of a co-operative bank not a co-operative society. - Decided against revenue.
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2015 (8) TMI 1033
Penalty u/s. 271(1)(c) - Disallowance made u/s. 40(a)(ia) - CIT(A) deleted penalty - Held that:- The Hon'ble Supreme Court of India in the case of GE India Technology Centre P. Ltd. Vs. CIT (2010 (9) TMI 7 - SUPREME COURT OF INDIA) has held that if the remittances are not assessable to tax under the provisions of Act, there is no question of deducting tax at source. The services were admittedly rendered outside India by the foreign entities. The said foreign entities were having no PE in India. Therefore, payment of sales commission were not assessable to tax in India. The issue in present appeal is squarely covered by the judgment of Faizan Shoes P. Ltd. (2014 (8) TMI 170 - MADRAS HIGH COURT) wherein similar circumstances has held, that disallowance on payment of sales commission without TDS to foreign parties for procuring export orders, u/s. 40(a)(i) is not sustainable. Hence, no penalty can be levied on such unsustainable disallowance. Deduction u/s. 80HHC - Held that:- The Hon'ble Supreme Court of India in the case of CIT Vs. Reliance Petro Products P. Ltd. (2010 (3) TMI 80 - SUPREME COURT) has held that a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing of inaccurate particulars. In the present case, the assessee is rather on a better footing. The assessee is eligible to claim deduction u/s. 80HHC on exports. The only shortcoming is that the assessee has not recovered the export proceeds on which the deduction has been claimed. The impugned order of the CIT (Appeals) in deleting the penalty levied u/s. 271(1)(c) on both the grounds is well reasoned and warrants no interference. Addition on account of Management Incentive Bonus (MIPB) and Leave Travel Assistance (LTA) - CIT(A) deleted the addition - Held that:- It is an admitted position that the assessee is following mercantile system of accounting and has been making provision for the aforesaid incentives. It has come on record that the incentives are paid to the assessee in the subsequent year, if they are not claimed by the employees in the year in which provision is made. The assessee has been consistently following this method of creating provision and making payments in respect of aforesaid incentives. The assessee has brought on record ledger extracts to show that the liability has been paid in the subsequent year, where not claimed in the year of creating provision. The Hon'ble Supreme Court of India in the case of Bharat Earth Movers Vs. CIT reported as [2000 (8) TMI 4 - SUPREME Court] has held that, “if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date” - Decided against revenue. Addition on account of Employees share of Contribution towards Provident Fund (PF) and ESIC on account of delay - CIT(A) deleted the addition - Held that:- This issue has already been settled by the Hon'ble Supreme Court of India in the case of Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT]. The Hon'ble jurisdictional High Court in the case of Hindustan Organics Chemicals Ltd. (2014 (7) TMI 477 - BOMBAY HIGH COURT) and in the case of CIT Vs. Ghatge Patil Transport Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT] following the law laid down by the Hon'ble Supreme Court of India has held that the assessee would be entitled to deduction on contribution to the employee welfare funds, if the amount has been credited on or before the due date of filing of the return. We do not find any infirmity in the impugned order in deleting the addition on this count - Decided against revenue. Disallowance of depreciation - AO disallowed the claim of depreciation to the tune of ₹ 16,99,760/- on the fixed asset for which the bills were not produced - CIT(A) deleted the addition - Held that:- CIT(Appeals) has admitted the contentions of assessee without verification of the bills/invoices in respect of newly acquired assets. The Assessing Officer has categorically observed in his order that the assessee has failed to produce bills in respect of assets amounting to ₹ 94,51,713/-. Whereas, the Commissioner of Income Tax (Appeals) in his order has reduced this amount to ₹ 15,95,990/- without recording the reasons. It is not clear from the order of the appellate authority, whether some more bills/invoices were furnished by the assessee before him. CIT (Appeals) has further erred in observing that the Assessing Officer has not brought on record that the assessee has inflated the purchase or has claimed excessive depreciation.We find that there is disparity between the bills produced by the assessee before the Assessing Officer and as recorded by the CIT (Appeals). In such circumstances, we deem it appropriate to remit this issue back to the Assessing Officer for reconsideration of the bills/invoices. - Decided in favour of assessee for statistical purpose.
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2015 (8) TMI 1032
Bogus capital share introduction - accommodation entries - CIT(A) proceeded to partly accept some of the claims of the assessee and partly rejected and also restored the issue back to the file of the AO for verification on facts.Held that:- As far as the statutory mandate is concerned, section 250(6) of the Income Tax Act which sets out the procedure which the CIT(A) in appeal is required to follow it is seen that the statute does not permit the Ld. CIT(A) to remand the issue to the AO. The statute contemplates that an enquiry may be required which he himself may enquire into or may direct the AO to inquire. CIT(A) instead of obtaining a Remand Report from the AO as per the statutory mandate in order to conclusively decide the issue instead restored the issue to the AO contrary to the statutory mandate. In view of this obvious statutory violation, the impugned order cannot be upheld. The issues raised are inter-linked and the finding arrived at it is seen is without considering the relevant material on record. Accordingly in view of the afore-mentioned factual position; legal mandate and considering the submissions of the parties before the Bench, we deem it appropriate to set aside the impugned order and restore the issues back to the file of the Ld. CIT(A) with the direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. - Decided in favour of revenue for statistical purposes.
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2015 (8) TMI 1031
Disallowance of expenses claimed under head Mining & Production/Processing - Held that:- As nothing was produced by the Ld. A.R to substantiate the claim of these expenses, therefore we have no other option but to confirm the addition. Accordingly, we hereby confirm the disallowance of expenditures made by the Ld. Assessing Officer towards mining and production/processing - Decided against assessee. Disallowance of the proportionate interest due to interest free loan advanced to sister concern U/s.36(1)(iii) - Held that:- addition made by the Ld. Assessing Officer is not sustainable because from the order of the Ld. CIT (A) it is clearly revealed that the assessee had ₹ 87.72 crores of Reserves & surplus and equity share capital of ₹ 10 crores aggregating to ₹ 97.72 crores as on 31.03.2010 being the assessee’s own interest free funds. In this situation, it is evident that ₹ 5,60,45,897/- advanced by the assessee to its sister concern and the investments made by the assessee company for ₹ 71,55,33,570/- aggregating to ₹ 77,15,79,467/- has flowed from the assessee’s own fund of ₹ 97.72 crores which does not bear any cost. Therefore, we hereby delete the addition made for ₹ 1,03,98,313/- made by the Ld.A.O toward the proportionate interest attributable to the interest free loan advanced by the assessee to its sister concern because the funds advanced by the assessee does not bear any cost as it is assessee’s own funds. - Decided in favour of assessee. Disallowance of expenditure by invoking the provisions of section 14A - Held that:- There is no merit for the Revenue to make addition of ₹ 3,11,34,630/- invoking the provisions of section 14A of the Act because the investment made of ₹ 71,55,33,570/-, bears no cost in the form of interest or whatsoever, since the funds by which the investment is made is assessee’s own funds. Further, these investments are made only with sister companies of the assessee and no cost can be attributed for the management of such funds. Therefore, we hereby delete the addition made by the Ld. Assessing Officer invoking the provisions of section 14A of the Act. - Decided in favour of assessee. Disallowance of depreciation - assessee had only submitted the depreciation schedule computed under the Companies Act and not under the Income Tax Act - Held that:- it is pertinent to mention that the Ld. Assessing Officer ought to have given the benefit of depreciation to the assessee as provided under the Income Tax Act instead of disallowing the entire claim of depreciation because the details of the items on which the depreciation is claimed is before him and normally rate of depreciation allowable as per the Income Tax Act is higher than the rate of depreciation prescribed under the Companies Act. Further to simplify the proceedings of the Revenue, we hereby direct the assessee also to furnish the schedule of depreciation computed as per the Income Tax Act before the Ld.Assessing Officer.- Decided in favour of assessee for statistical purposes. Computation of book profit U/s.115JB - MAT computation - giving effect to the disallowance of expenditure made invoking the provisions of the Section-14A and also the disallowance of expenditure under the normal provisions of the Act - Held that:- while computing the “Book Profit” of the company under the provisions of section 115JB of the Act; any disallowance made under the normal provisions of the Act also cannot be given effect to for arriving at the “Book Profit” for the purpose of Section 115JB of the Act. See M/s.Apollo Tyres Ltd. Vs. CIT reported in [2002 (5) TMI 5 - SUPREME Court] - Decided in favour of assessee. Not giving the benefit of exemption under Section-10B of the Act for the increase in profit arising out of the disallowance of expenditures - Held that:- From the order of the Ld. CIT (A) we find that he has held the appellant to be eligible for the benefit of Section-10B of the Act, therefore as discussed herein above we hereby hold that the assessee will be entitled for the benefit of Section 10B of the Act even for the increase in profit arising out of any disallowances of expenditure made by the Revenue. However we also make it clear that while computing the profit of the 100% export orientated Undertaking for the purpose of deduction under Section 10B of the Act, any disallowance based on any fiction of the provisions of the Act like Section 40(a)(ia) of the Act etc., cannot be given effect because Section 10B is also a provision with fiction and a provision with fiction cannot be superimposed on any other provision with fiction. However in this case this observation will not be relevant because we have held in the following paragraph with respect to payments made to foreign agents for services rendered outside India in foreign currency provisions of Section 40(a)(ia) of the Act cannot be invoked.- Decided in favour of assessee. Disallowance u/s 40(a)(ia) - non-deduction of tax towards commission paid to foreign agents outside India in foreign currency and for services rendered outside India - CIT(A) deleted addition - Held that:- This issue is squarely covered by the decision of CIT Vs. Fazian Shoes Pvt. Ltd. reported in (2014 (8) TMI 170 - MADRAS HIGH COURT ) wherein it is held that “on a reading of Section.9(1)9vii), commission paid by the assessee to the nonresident agents would not come under the term “fees for technical services”. For procuring orders for leather business from overseas buyers, wholesalers or retailers, as the case may be, the non-resident agent was paid 2.5%, commission on free on board basis. This was a commission simpliciter. What was the nature of technical services that the non-resident agents had provided abroad to the assessee was not clear from the order of the Assessing Officer. The opening of letters of credit for the purpose of completing the export obligation was an incident of export and, therefore, the non-resident agent was under an obligation to render such services to the assessee, for which commission was paid. The non resident agent did not provide technical services for the purpose of running of the business of the assessee in India. Therefore, the commission paid to the nonresident agents would not fall within the definition of ”fees for technical services” and the assessee was not liable to deduct tax at source on payment of commission - Decided in favour of assessee.
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2015 (8) TMI 1030
Assessment of lease rental income - whether there is no scope for assessee to revise the lease rental income in a return filed u/s 153A - Held that:- Section 153A empowers the AO to even reassess a particular income without the strict conditions attached u/s 147. Considered in the aforesaid context, it is to be held that proceeding initiated u/s 153A of the Act is for the benefit of the department, hence, assessee cannot take advantage of such proceeding. Applying the aforesaid principle to the facts of the present case, it is to be seen that in the original return of income, assessee has declared lease rental income at ₹ 15,30,000. Admittedly, assessee had not filed revised return voluntarily to rectify the mistake claimed to have been committed in the original return. Only when the department issued notice u/s 153A of the Act consequent to search operation, assessee in the return filed in response to such notice had reduced lease rental income from ₹ 15,30,000 to ₹ 2,29,500. In our view, in the return filed u/s 153A of the Act, assessee cannot revise the income in respect of an item of income which has already been declared in the original return of income at a higher figure and which has also been processed u/s 143(1). This is simply for the reason that proceeding initiated u/s 153A is for assessing undisclosed income unearthed as a result of search operation along with other income, which have escaped assessment. In case of CIT Vs. M/s Sun Engg. Works P. Ltd. (1992 (9) TMI 1 - SUPREME Court ), the Hon’ble Supreme Court while holding that the provision of section 147 is for the benefit of department and not for the benefit of assessee, also held that a particular claim of assessee, if already has been considered at the time of original assessment, or assessee has not raised that claim either in the original return of income or during the original assessment proceeding, he cannot raise the same in the return filed in response to notice issued u/s 148. The principle laid down clearly applies to proceeding initiated u/s 153A of the Act., as AO has been empowered u/s 153A to also reassess the income of assessee for the preceding six AYs. In the aforesaid view of the matter, we hold that assessee having already declared lease rental income at ₹ 15,30,000, in the original return of income, she cannot revise it to ₹ 2,29,500 in return filed in response to notice issued u/s 153A of the Act as assessee cannot turn the proceeding u/s 153A to her advantage. In the aforesaid view of the matter, we uphold the order of ld. CIT(A) in so far as AY 2008-09 is concerned. - Decided against assessee. As far as AY 2009-10 is concerned AR has stated before us that society has never shown the lease rental at ₹ 15,30,000 for AY 2009-10, rather, there is an entry in the books of society reversing the excess rent of ₹ 13,05,000 shown in the name of assessee for AY 2008-09. Thus, it was submitted by AO on an incorrect appreciation of fact, AO has added an amount of ₹ 13,00,500. After considering the submissions of AR and perusing the materials on record, we are of the view that assessee’s contention for AY 2009-10 requires examination. Though, AO has alleged that society in its books of account has shown lease rental at ₹ 15,30,000, however, the ledger account of assessee in the books of account of society, a copy of which has been submitted before us, does indicate that it is only a reversal entry of excess rent paid. Therefore, considering the fact that in AY 2009-10, lease rental income shown by assessee in return matches with the TDS certificate issued by the deductor, we direct AO to examine the issue afresh and decide it accordingly after due opportunity of being heard to assessee - Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 1029
Non-deduction of TDS for payment of product designing charges outside India for services rendered outside India - Held that:- The services rendered by the non-resident agent can at best be called as a service for completion of the export commitment and would not fall within the definition of “fees for technical services”, we are the firm view that Section 9 of the Act is not applicable to the case on hand and consequently, Section 195 of the Act does not come into play. In view of the above finding, the decision of the Supreme Court in Transmission Corporation of A.P. Ltd. case, [1999 (8) TMI 2 - SUPREME Court ] relied upon by the learned Standing Counsel for the Revenue is not applicable to the facts of the present case. - Decided in favour of assessee. Non-deduction of TDS towards payment of rent to the partners of the firm - Held that:- Section 194-I of the Act provides that tax has to be deducted at source on payment of rent by an assessee who is not an individual or a HUF at the specified rate. In this case, the assessee is a firm assessable under the provisions of the Act and therefore bound to deduct tax at source on payment of rent to its partners who are individuals and distinct assessable entities as held by the Ld. Assessing Officer. It is pertinent to mention that the provisions of “TDS” represent an alternative and more efficient tax collection mechanism for the Government. Neither provisions of TDS is a separate charge nor levy in addition to income tax under the Act. Non-compliance of the provisions of TDS will result in disallowance u/s 40(a)(ia) of the Act, rising of demand U/s.201(1) of the Act, charging of interest U/s.201(1A) of the Act and levy of penalty U/s.271C of the Act. There is no provision under the Act to suggest that the relationship between the two assessable entities will determine the applicability of Section.194-I of the Act. Therefore, we hereby set aside the order of the Ld. CIT (A) and confirm the order of AO on this issue. - Decided in favour of revenue.
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2015 (8) TMI 1028
Rate of gross profit(GP)in respect of textile business and iron & steel business - AO Rejected the books of account and adopted the G.P. rate @20% in respect of textile business and 10% in respect of Iron and Steel business - FAA reduced the GP to 15.20 % in case of textile business and @ 3% for iron and steel business - Held that:- Identical issue has been adjudicated by the Tribunal,while deciding the appeal for the AY.2007-08 [2013 (4) TMI 724 - ITAT MUMBAI]. Respectfully,following the order of previous year we direct the AO to compute the income of the assessee by adopting GP rate of 15% and 5% respectively for the textile business and for the iron and steel business. - Decided partly in favour of assessee. Addition made u/s.41(1) - Held that:- Addition was made by the AO u/s.41(1)of the Act,that the AO had held that the creditors were not available on given addresses,that the FAA had called for a remand report from the AO with regard to the claim made by the assessee about payment made to the creditors in subsequent years,that in the remand report the AO had not mentioned anything about on the spot inquiry by the inspector,that there was change in office of the FAA,that the new FAA passed the order where he mentioned about the inquiry conducted by the inspector,that the ledger accounts of the parties show that the assessee had paid the money to the creditors in subsequent years.Once the payment to the creditors is proved by necessary documentary evidences there is no justification for sustaining the order of the FAA.Therefore,reversing his order,we decide grounds in favour of the assessee. Ad-hoc disallowance of expenditure - Held that:- AO had made a disallowance of 20%of the expenses incurred under five heads.Out of the five heads four are related with motor car and telephone.We agree that element of personal use of car and telephone cannot be ruled out. However,to meet the end of justice disallowance is restricted to 10% for the four items i.e. except the welfare expenses. - Decided partly in favour of assessee.
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2015 (8) TMI 1027
Disallowance under section 14A of the Act r/w Rule 8D - CIT(A) deleted the disallowance - Held that:- CIT(A) has mentioned in his order that during the year under consideration, the assessee has not invested its borrowed funds in respect of the shares which are held as investment. The learned CIT(A) has relied upon the judgment of the Hon'ble Jurisdictional High Court in CIT v/s Reliance Utilities and Power Ltd(2009 (1) TMI 4 - HIGH COURT BOMBAY ) wherein it was held that if there were funds available, both interest free and over draft and/or loans taken, then a presumption would arise that investment would be out of interest free funds generated, or available with the bank. Relying on this judgment of the Hon'ble Jurisdictional High Court, the learned CIT(A) has given a factual finding that the assessee had sufficient funds of its own to meet the investment and no borrowed funds were diverted for the purpose of making investment. This factual finding has not been rebutted before us by the learned Departmental Representative. Therefore, we are of the view that no interference is called for in the order of the learned CIT(A) in deleting the disallowance of interest made by the Assessing Officer in the assessment order. - Decided in favour of assessee Disallowance of proportionate expenses - Held that:- It has been argued by the learned Counsel that the disallowance needs to be worked out again, for the reason that no disallowance under section 14A can be made on the strategic investments made in the subsidiaries. The second contention of the learned Counsel is that no disallowance under section 14A, can be made with respect to the shares held as stock–in–trade. It is seen that though these contentions were not raised by the assessee before the authorities below, undisputedly, in many cases, these contentions have been accepted by the various Benches of the Tribunal. Therefore, respectfully following the cases laws cited above, we set aside the order passed by the learned CIT(A) and restore the issue to the file of the A.O. for verification of the facts as narrated by the learned Counsel and to then accordingly adjudicate this issue afresh. Needless to say that the assessee should also be given adequate opportunity of hearing to put forth all the details and evidences as may be considered appropriate by the assessee in support of its contentions - Decided in favour of assessee for statistical purposes. Addition to the book profits under section 115JB with respect to the disallowance made by the Assessing Officer under section 14A - Held that:- It is seen that this ground has not been adjudicated by the learned CIT(A) in the appeal order. Therefore, in all fairness and to meet the ends of justice, we set aside the impugned order passed by the learned Commissioner (Appeals) and remit this issue to the file of the learned CIT(A) for adjudication of this issue afresh after giving adequate opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 1026
Disallowance u/s 14A(2) r.w.r. 8D(2)(ii) - CIT(A) delted addition - Held that:- As find that in the case of Morgan Stanley India Securities Ltd Vs ACIT (2014 (1) TMI 1412 - ITAT MUMBAI) a co-ordinate bench of this Tribunal has held that for the purpose of disallowance under section 14A what is to be taken into account is net amount debited in the profit and loss account and not the gross interest debited to the profit and loss account. Same was the view of another coordinate bench in the case of DCIT Vs Trade Investments Ltd (2012 (3) TMI 421 - ITAT KOLKATA). Viewed thus, the action of the CIT(A) was fully justified in taking into account only the net figure which was nil in this case. The interest expenditure will have to be excluded from the expenses to be allocated under rule 8D(2)(ii) for the reason that the interest expenditure is no way relatable to exempt income. The entire borrowing by the assesse, as we have seen on the facts of this case, has been passed on the AIDL and entire interest on this borrowing has been received from the AIDL. It is completely a back to back transaction and the material on record clearly demonstrates that. Just because it is routed through the same bank account, it cannot be presumed that the money is out of the common funds. Such a presumption, as has been strenuously argued before us by the learned Departmental Representative, will be contrary to the clearly established facts on record. For this reason also, and in the light of the coordinate bench decision in the case of Champion Commercial Co Ltd (2012 (10) TMI 24 - ITAT, KOLKATA), the relief granted by the CIT(A) was quite justified.
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2015 (8) TMI 1025
Non-deduction of TDS u/s 194C - DR pointed out that the assessee entered into job works with various companies for the purpose of purchasing the required spare parts for manufacturing passenger cars - Held that:- . Since the agreement does not clarify whether the goods purchased by the assessee is one of contract for sale or works contract, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. The CIT(A) has already observed after referring to clause 5.1 of the agreement that this clause is made for works contract. However, he failed to point out what is the other clause which enables the assessee to purchase the goods on contract for sale. The CIT(A) has made a general observation that the agreement is a comprehensive one which provides for purchase of goods under a contract also. As already observed, there is no clause in the agreement brought to the notice of the Bench which would suggest any contract for sale of goods. Therefore, this Tribunal is of the considered opinion that giving one more opportunity to the assessee to place the material facts before the Assessing Officer would promote the cause of justice. - Decided in favour of assessee for statistical purposes. Reopening of assessment - exclusion of processing charges and disallowance of deduction u/s 80HHC on export incentive - Held that:- Proviso to sec. 147 is very clear that after expiry of fours from the end of the relevant assessment year, the Assessing Officer cannot reopen the assessment which was completed u/s 143(3) of the Act unless there was negligence on the part of the assessee in disclosing fully and truly all material facts relevant for completing the assessment. In this case, the assessee has disclosed all material facts relevant for completing the assessment and the assessment was reopened by the Assessing Officer only on the basis of the retrospective amendment made by the Parliament in the year 2005. As already observed, the assessee is not expected to anticipate the retrospective amendment that may be made by the Parliament in future. Therefore, the reopening of assessment u/s 147 is bad in law. Accordingly, the consequential assessment made by the Assessing Officer cannot stand in the eye of law. - Decided in favour of assessee.
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2015 (8) TMI 1024
Non deduction of TDS u/s 194-I - nature of lease agreement - AO found the assessee as assessee in default under Section 201(1) and levied penal interest under Section 201(1A) - period of limitation for issuing order u/s 201(3) - Held that:- The date of filing of the statement for all practical purposes has to be taken as 18th August, 2011. If the date of filing of statement is taken as 18.08.2011, then the impugned order is within the period of time limit as provided under Section 201(3) of the Act. Therefore, this Tribunal is of the considered opinion that the order passed by the Assessing Officer under Section 201(1) of the Act is not barred by limitation. Since copy of the lease agreement between the assessee and Tamil Nadu Industrial Development Corporation is not available before us, we are unable to express our opinion on the nature of transaction whether, it was an advance payment of rent or cost of acquisition of the land could be decided after going through the so15 called lease deed executed by the assessee and TIDCO. Moreover, the matter needs to be re-examined in the light of the provisions of Section 2(47) read with Explanation (i) to Section 194-I of the Act. This Tribunal is of the considered opinion that the nature of the transaction could be ascertained only after going through the lease agreement said to be executed by the assessee and Tamil Nadu Industrial Development Corporation. Accordingly, the orders of the lower authorities are set aside. The entire issue is remitted back to the file of the Assessing Officer. - Decided in favour of assessee for statistical purposes
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2015 (8) TMI 1023
Penalty u/s.140A(3) r.w.s. 221 - assessee failed to pay self-assessment tax - CIT(A) deleted the addition admitting additional evidences - Held that:- In the instant case it is an undisputed fact that the assessee did not appear before the Assessing Officer despite repeated opportunities given by him. This act of assessee by ignoring the Assessing Officer is highly deplorable. However, considering the mishaps in the family caused due to the death of his parents within a very short span and the subsequent illness of his wife as stated before the CIT(A) and not controverted by the Revenue we are taking a liberal view of this action on the part of the assessee in not appearing before the Assessing Officer. However, it is also an admitted fact that the assessee before the CIT(A) has appeared and brought to his notice the chronology of events, i.e. the attachment of the accounts by the Assessing Officer and the sale of shares by the Assessing Officer held by the assessee in his demat accounts. From the various bank accounts produced by the assessee we also find that there is negligible or insufficient balances. Therefore, we find merit in the submission of the Ld. Counsel It has been held in various judicial decisions that levy of penalty by the Assessing Officer u/s.221(1) is discretionary and not automatic. Further, for levy of penalty u/s.221 such default must be wilful and not merely accidental. In the instant case, the assessee has proved beyond doubt that the default by him in not paying the self-assessment tax is not wilful and it was beyond his control as there was no sufficient money available with him to pay the self-assessment tax especially when the income is mainly from short term and long term capital gain. CIT(A) has not contravened any of the provisions by admitting any additional evidence. Further, it is the settled proposition of law that the powers of the CIT(A) are coterminous with that of the Assessing Officer. Since in the instant case the various documents produced before the CIT(A) were already before the Assessing Officer in the quantum proceedings, therefore, these documents in our opinion cannot per se be called as additional evidence. Therefore, the ground raised by the Revenue on this issue is dismissed. Thus the assessee has proved that the default was for good and sufficient reasons. Therefore, in view of the second proviso to section 221(1) this is not a fit case for levy of penalty u/s.140A(3) r.w.s. 221 of the I.T. Act. Accordingly, the order of the CIT(A) cancelling the penalty is upheld - Decided in favour of assessee.
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2015 (8) TMI 1022
Addition of Labour charges paid by way of cheques - CIT(A) restricted addition to 10% of the expenses - Held that:- The assessee itself has offered a sum of ₹ 2.00 crores to cover up deficiencies in respect of both cash and cheque payments. Hence the AO was not right in presuming that the above said offer would cover only cash payments. We have already noticed that the Ld CIT(A) also did not agree with the view taken by the AO that the entire cash expenses, which are not supported by primary evidences, should be disallowed. Under these set of facts, we are of the view that the present dispute should be settled by making some estimates. The dispute relating to disallowance of part of labour expenses would meet the ends of justice, if we restrict the disallowance to ₹ 2.00 crores (being the amount offered by the assessee) plus 10% of the labour expenses incurred by way of cheque. We order accordingly. The decision rendered by the Ld CIT(A) on this issue would stand modified accordingly. - Decided partly in favour of assessee. Disallowance of Repairs and Maintenance expenses - CIT(A) deleted the addition - Held that:- The assessee has incurred the expenses towards purchase of concrete silo. The Ld CIT(A) noticed that it formed part of “ready mix concrete plant” having no independent functioning. Before us, the Ld A.R submitted that the said part is required to be replaced frequently. Accordingly, the Ld CIT(A) held that the same is revenue expenditure. On consideration of the above facts, we do not find any infirmity in the order of Ld CIT(A) on this issue. - Decided in favour of assessee.
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2015 (8) TMI 1021
Relinquishment of the share of assessee in the property comprising of land in favour of sisters who is co-owner - whether was a transfer within the meaning of section 2(47) and capital gain accruing on such transfer was exigible to capital gains tax u/s. 45 ? - Held that:- The assessee transferred her share of right title and interest over the property in favour of other co-owners of the property. This was clearly a transfer. If the assessee had sold her share of property to third party, it would have certainly been exigible to capital gains tax. The fact that the transferee is another co-sharer of the property will not make any difference. We are therefore of the view that in the facts and circumstances of the present case, there was a transfer of capital asset and therefore capital gain on such transfer was rightly brought to tax by the revenue authorities. We do not find any grounds to interfere with the order of CIT(Appeals). - Decided against assessee.
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2015 (8) TMI 1020
Validity of assessment framed u/s 153A/153C r.w.s. 144 - non affording reasonable opportunity to the appellant - Held that:- In the present case it is an admitted fact that the assessee was in the Police custody and the notice was sent to him through the Superintendent, Central Jail, Ambala. The assessee requested for adjournment for the reason that he was unable to represent the proceedings because he was in the Police custody and was unable to come out. It is also noticed that the AO framed the assessment ex-parte by stating that the special Audit Report u/s 142(2A) of the Act was served upon the assessee on 21.06.2010 in the Central Jail, Jaipur and Ambala, So, it is clear that the special Audit Report which was obtained by the AO at the back of the assessee and another notices were served to the assessee when he was lodged in the Jail either at Jaipur or at Ambala. It, therefore, clear that the personal hearing was not afforded to the assessee. Moreover, it is not clear as to whether the assessee being in Jail was in a position to contact any legal person who was convergent with the Income Tax matters. It is well settled that nobody should be condemned unheard as per the maxim “audi alteram partem”. We thus set aside the impugned order and deem it appropriate to remand the case back to the file of the AO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. We also direct the assessee to cooperate and not to seek unwarranted or unreasonable adjournments. - Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 1019
Disallowance of exemption u/s. 54 - assessee did not produce any purchase agreement with regard to investment in the residential flat at Thane - Held that:- Section 54 of the Act speaks about investment of capital gains arising from transfer of a long term capital asset within a specified time. As per s/s. 2 to Sec.54 if such proceeds / capital gains, if not invested /utilized for purchase of new asset, within specific time then such proceeds will have to be deposited in a specified bank account and has to be utilized in any scheme which the Central Govt. notifies and proof of such shall be accompanied with the return. There is no requirement in the Act that necessarily the assessee has to produce the agreement more specifically when the letter of allotment along with proof of payment/investment was duly produced before the concerned authorities. See Smt. Jyothi K. Mehta case [2011 (1) TMI 551 - KARNATAKA HIGH COURT] To our mind to attract Sec.54 and Sec.54EC of the Act what is material is the investment of sale consideration in acquiring the new property or investment of the amount in bonds set out in sec.54EC is to be seen and once the sale consideration is invested in any of these manner the assessee would be entitled to the benefit conferred under this provision - Decided in favour of assessee.
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2015 (8) TMI 1018
Income from inland transportation of cargo within India - whether was covered under Article 8(2)(b)(ii) and 8(2)(c) of the tax treaty between India and Belgium and therefore not liable for tax in India? - Held that:- The issue arising in these appeals stand covered in favour of the respondent-assessee and against the revenue by the decision of this court rendered in the matter of Director of Income Tax v. Balaji Shipping UK Ltd. [2012 (8) TMI 681 - BOMBAY HIGH COURT] wherein held that income from utilizing slot hire facilities as availing of in these cases would fall within Article 9(1) for slot hires have a closer nexus, connection and relationship to the actual operation of ships - Decided in favour of assessee.
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2015 (8) TMI 1017
Eligibility of deduction u/s 80IB(10) - profit derived from sale of unutilized FSI - whether not being the element of profits derived from the business activity of development and construction of the housing project - CIT(A) allowed deduction - Held that:- As decided in assessee's own case for A.Y:2007-08 [2010 (8) TMI 928 - ITAT AHMEDABAD] concluded that the respective assssees had dominant control over the projects and developed the land at their own risk and costs and therefore, were eligible for deduction u/s 80IB(10) of the Act. See M/s. Sahkti Corporation case [2008 (11) TMI 436 - ITAT AHMEDABAD ] and M/s. Radhe Developers [2007 (6) TMI 316 - ITAT AHMEDABAD ] - Decided against revenue. Addition u/s. 40(a)(ia) - disallowance of payment to contractors - TDS not deposited within the time prescribed - CIT(A) deleted disallowance - Held that:- The provision of Section 40(a)(ia) has wrongly been invoked in the case of the assessee, therefore, the disallowance of expenditure was wrongly made as the amended provisions of section 40(a)(ia) are to be due date of filing of the return and thus no disallowance should be made. We hereby affirm the view taken by learned CIT(A). This ground of the Revenue is hereby dismissed. - Decided against revenue.
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Customs
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2015 (8) TMI 1069
Classification of Dry (Betel) nuts under CTH 08129090 or CTH 08028020 – Mis-declaration of Goods – Imposition of redemption fine, duty and penalty – Appellant filed Bill of Entry claiming classification of Dry (Betel) nuts under ITC HS Code 08129090 however as goods were dry betel nuts in split condition, department sought to classify under tariff sub-heading 08028020 – Commissioner vide impugned order confirmed differential duty, redemption fine and penalty – Held that:- product was declared as ‘Safe Food’ on basis of food safety parameters tested under its rules and regulations – Court find from test reports that sample of imported goods are not unsuitable for immediate consumption and therefore they would merit classification under CTH 080280 and not under CTH 0812. Classification was dependent on fact for unsuitability of goods for immediate consumption and on this fact importer misdeclared, as test reports have indicated – Classification of imported betel nut was sought for by Appellant under CTH 0812 which has essential criteria that State in which goods are imported are unsuitable for immediate consumption – It was obviously mis-declaration on part of importer – Goods therefore liable for confiscation – Once imported goods are found to be classifiable under CTH 0802 8020, their import is not allowable if their CIF value is below ₹ 75 per kg. as provided in DGFT Notification – In view of facts and circumstances of case, court of opinion that as goods are classifiable under CTH 0802 8020 duty @ 100% BCD and 4% Additional duty was leviable – Thus, order of adjudicating Commissioner modified to extent of reduction in amount of redemption fine whereas duty and imposition of penalty confirmed – Decided against assesse.
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2015 (8) TMI 1067
Valuation of imported goods – Respondent filed Bills of Entry in respect of imported goods declaring value at US$ 305 PMT – Department was not happy with aforesaid valuation and thus issued show cause notice stating that value should be US$ 450 PMT – This demand under show cause notice was confirmed, against which respondent filed appeal which has been allowed – Held that:- appellant could not place any material to rebut observations of Tribunal in impugned order reported in - In absence of any documents or material showing value of import as claimed by Department, at that time, Department was not justified in demanding value of imported goods at US$ 450 PMT –Tribunal was justified – Decided against revenue.
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2015 (8) TMI 1065
Classification of glass beads (cone shape) – Appellants claimed classification of glass beads (cone shape) under chapter sub-heading No. 7018 10 20 of Customs Tariff – However, authorities classified same under chapter sub-heading No. 7018 10 90 which attracts higher rate of duty – Held that:- In case of Art Beads Pvt. Ltd. [2013 (9) TMI 463 - CESTAT MUMBAI] tribunal concluded that glass chatons without holes can be classified as glass beads only, after taking into account ISI specifications for glass beads – In view of said decisions classification claimed by appellant is correct with consequential relief if any to appellant – Decided in favour Appellant.
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2015 (8) TMI 1048
Benefit of Concessional rate of duty – Serial No. 89 of List 10 of Notification No. 11/97-Cus - Assesse had purchased 12 sets of second hand embroidery machines and 12 Jacquard Control Device Reading System – Appellant wanted to take benefit of concessional rate of duty in terms of Serial No. 89 of List 10 of Notification No. 11/97-Cus which mentions "Computerised embroidery machine" – Tribunal affirmed view of Commissioner denying benefit of notification – Held that:- Tribunal held that old mechanical embroidery machines and Jacquard Control Devices System, were not independent and complete by themselves and were incomplete or unfinished articles –Jacquard Control Devices System were installed on textile machines after importation and customs clearance at premises of appellant and only thereafter, said machines have become computerised textile machines – Tribunal was conscious of fact that there can be situation where particular machine is brought in unassembled form and in such case, it can still be considered as computerised if ingredients thereof are satisfied – However, on facts of present case, it has come to conclusion that even this aspect is not satisfied – Thus, no merit found in appeal – Decided against assesse.
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2015 (8) TMI 1047
Issuance of show cause notice – Re-opening of assessment order – Appellant issued show cause notice in which certain frauds were alleged against respondent and on that basis previous order of assessment was reopened – Tribunal vide impugned order allowed appeal against said reopening of assessment order on ground that Commissioner could not have issued show cause notice as prior order of Commissioner had merged into order passed by revisionary authority and principles of res judicata applied. Held that:- Even if certain material came to the notice of the Commissioner, which became the basis for the show cause notice, the only proper course was to challenge the said order of the Joint Secretary by taking out other proceedings, as admissible in law. - It would be open to appellant to invoke principles of Section 14 of Limitation Act insofar as limitation is concerned as the matter is kept pending in various judicial fora, including this court. - No infirmity in order of tribunal – Decided against Revenue.
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2015 (8) TMI 1046
Mis-declaration of Goods - Imposition of Fine and penalty - Tribunal vide impugned order reported in [2004 (7) TMI 147 - CESTAT, NEW DELHI] held that amounts of fine and penalty imposed for mis-declaration of goods, was not justified - Supreme court, from reading of impugned order that Tribunal has based its decision on opinion which was rendered by experts, that too, at instance of Revenue - In such circumstances, it is found that Tribunal has not committed any error - Appeals accordingly dismissed.
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2015 (8) TMI 1045
Smuggling of goods - Quashing of criminal proceedings - Vide impugned order of high court reported in [2014 (2) TMI 643 - ALLAHABAD HIGH COURT] court set aside order by which non-bailable warrant was issued against applicant but refused to quash proceeding and directed appellant to appear before magistrate - Supreme court not inclined to interfere with impugned order passed by High Court under Section 482, Cr.P.C. refusing to quash criminal proceedings against petitioner on basis of complaint under Customs Act - Special leave petition dismissed.
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2015 (8) TMI 1044
Claim over property – Right over attachment – Customs Department alleged evasion of Duty and initiated proceedings against Respondent-2 – Apparently, respondent defaulted upon its contractual liabilities with banks which led to sale of respondent-2 assets – Meanwhile Customs Department had issued attachment notice – Vide impugned order, as attachment notice was never served either on auction purchaser or borrower therefore, it was not possible to sustain that liability fastened on auction purchaser to pay Customs dues – Held that:- evident that Customs Department was not aggrieved by ruling of DRAT that it could not be treated as secured creditor to lay claim over immovable property –There was no indication in Customs Act that property of defaulter which was put to auction can still be claimed by Customs Department after title passes to auction purchaser once it was held that it has no primacy for its dues – Therefore there was no merit in proceedings – Decided against Appellant.
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2015 (8) TMI 1043
Appeal against Acquittal – Evidence on record – Respondent was intercepted at departure hall and cannabis weighing 53.5 Kgs were recovered from him – Trial Court on analysis of evidence acquitted Respondent under Sections 21(c), 23 and 28 of NDPS Act – Whether grounds on which respondent was acquitted were justified – Held that:- Petitioner was unable to explain how address of panch witness was not traceable, raising serious doubts on whether recovery and seizure took place in presence of said panch witnesses – Having recorded that seizure of contraband took place in their presence, failure to produce them as witnesses would result in adverse inference being drawn against prosecution –Evidence of PW-1 was indeed riddled with inconsistencies which were not sufficiently explained by prosecution – It also appeared that Respondent was able to establish that his statement recorded under Section 67 of NDPS Act was not voluntary – Thus, trial Court was justified in granting Respondent benefit of doubt and acquitting from charges – Decided against Revenue.
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Service Tax
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2015 (8) TMI 1074
Condonation of delay - delay in appeal before the Commissioner (appeals) - whether the case would fall under any of the clarifications made in Answer no.3 by larger bench in the case of Panoli Intermediate (India) Pvt. Ltd. [2015 (7) TMI 303 - GUJARAT HIGH COURT] wherein court has held that in specified circumstances, only, the delay can be condoned - Levy of penalty u/s 78 - Held that:- Unless M/s.Dosti Fabricators was raided and relevant documents were found out by the respondent, there would be non-payment of huge of service tax, which the petitioners are liable to pay. Therefore, in our opinion, the case is covered u/s.78 of the Finance Act. - Therefore, the case would not fall under any of the clarifications made in Answer no.3 by larger bench warranting condonation of delay in filing the appeal - Decided against the assessee.
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2015 (8) TMI 1073
Denial of CENVAT Credit - Courier service and CHA service - Rule 2 (l) of CENVAT Credit Rules 2004 - Held that:- Service tax paid by the service provider under some different services (i.e. other than CHA), cannot be considered to be paid under CHA service. It is stated that the service provider wrongly paid the Service Tax under CHA, which would be covered under the category of taxable services as Business Auxiliary Service. We are unable to accept the contention of the Revenue for the reason that it is well settled that the jurisdictional Central Excise officer of the recipient of the service, cannot question the classification of the service of the service provider. It has further been stated that the Respondent had not fulfilled the condition specified in the schedule to the notification. Regarding the denial of refund on Courier service, it is stated that by the Revenue in their grounds of appeal that invoices submitted by the Respondent (issued by service provider) does not specify the Import Export Code (IEC), number of exporters, export invoice number, nature of courier. We find that the schedule to the exemption notification provides that the receipt issued by the courier agency specify the importer-exporter (IEC) code number of the exporter, export invoice number, nature of courier, destination of courier including name and address of the recipient of the courier. - Commissioner (Appeals) observed that the Respondent has submitted the copies of all shipping bills, ARE-1. The Revenue had not mentioned the non-fulfillment of the specific conditions in their grounds of appeal. So, we do not find any force in the appeals filed by the Revenue. - No reason to interfere the order of Commissioner (Appeals) - Decided against Revenue.
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2015 (8) TMI 1072
Waiver of pre deposit - Service tax paid by principal-contractor - Double taxation - Held that:- in catena of judgments, the Tribunal has taken a view that where the principal contractor has deposited the entire service tax, the demand against the sub-contractor would not be sustainable. In view of the above, we grant dispensation from the pre-deposit of tax, interest and penalty and allow the stay petition unconditionally. - Stay granted.
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2015 (8) TMI 1071
Air transportation services - Issue of round trip tickets - Held that:- Such activity would not call for confirmation of any service tax inasmuch as, air journey has originated from Maldives and not in India. By taking the decision in assessee's subsequent case into consideration, we are of the view that when the officer of the Revenue himself has dropped the proceedings in a subsequent case, the appellant should not be directed to deposit any amount. - Stay granted.
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2015 (8) TMI 1070
Waiver of pre deposit - Renting of immovable property - Held that:- on the very same issue the CSITA had approached the Hon'ble High Court and Hon'ble High Court of Karnataka had taken the view that proceedings should not have been initiated in this case. In view of the decision of the Hon'ble High Court, we consider that in this case also the requirement of pre-deposit has to be waived and stay against recovery has to be granted - Stay granted.
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2015 (8) TMI 1068
Denial of refund claim - Unutilized CENVAT Credit - Export of service - Embroidery Software development - rejection of refund claim that classification of the output services are not as per the ST-3 - Held that:- at the stage of claiming credit, the same was not disputed on account of use of these input services in provision of Embroidery Software Service. Once credit is not objected at availment stage, it is not permissible for the Revenue to challenge the same at the stage of processing refund under Rule 5 of Cenvat Credit Rules. - The entire refund claim in dispute is accordingly held allowable for both the periods - Decided in favour of assessee.
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Central Excise
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2015 (8) TMI 1075
Challenge to stay order - Held that:- provisions of Section 35-C(2A) have been held to be mandatory by this Court and, therefore, in any case the Tribunal can grant an interim order which can travel beyond 365 days which is the maximum limit fixed under Section 35-C(2A) of the Central Excise Act, 1944 - interim order granted by the Tribunal shall not contine beyond 365 days from the date it has been passed. We further clarify that, having regard to the interest of revenue, the Tribunal may make an attempt to decide the appeal at the earliest possible, preferably within six months - Decision in the case of Commissioner of Central Excise v. M/s Barco Electronics Systems Ltd. [2015 (5) TMI 27 - ALLAHABAD HIGH COURT] followed - Decided in favour of Revenue.
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2015 (8) TMI 1066
Valuation of goods - Rental charges - Held that:- Tribunal has set aside the impugned order and remanded three appeals arising out of four OIAs all dated 30.01.2004. - Tribunal order dated 20.02.2007 and also considering the Civil Appeal filed by the Revenue against Kolkata Tribunal Bench Order dated 20.01.2004 is admitted by the Apex Court still pending the present appeals whichever left out needs to be remanded to the LAA as all these appeals are arising out of common OIA. Accordingly, we set aside the impugned orders and remand the cases to the Commissioner (Appeals) with a direction to decide the case in denovo along with four appeals already remanded in the Tribunal s order - Matter remanded back - Decided in favour of Revenue.
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2015 (8) TMI 1062
SSI Exemption - on search goods with the Brand name of others found - whether assessee is manufacturing the goods under the brand name of others - Exemption under Notification No.13/92 CE dated 14.05.1992 - tribunal had concluded that, there was no tangible evidence on record to prove the manufacture of the aforesaid branded goods by the respondents in their factory premises. It is pointed out that the goods which were recovered and seized from the two premises, belonging to the respondents, were hardly of ₹ 1,30,000/-. From that it could not be established that the respondents were manufacturing these goods i.e. under the brand names 'National', 'Omega' and 'Philips' etc. Held that:- The declaration as relied upon by the revenue, nowhere mentions that the respondents are producing goods under the brand names 'National', 'Omega' and 'Philips' etc. On the contrary, it is very categorically stated in the declaration that the respondents are affixing the brand name 'Sunrise' on all their goods - decision of tribunal sustained - Decided against Revenue.
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2015 (8) TMI 1057
CENVAT Credit - duty paying document - photo copy of the original invoice/triplicate copy of bill of entry - Whether on the facts and circumstances, the modvat credit can be taken on the basis of the photo-stat copy of BOE - Held that:- there is no allegation in the show cause notice that the goods in question were not received under the cover of the relevant documents and that the goods were duty paid. The Assistant Commissioner Central Excise Division-III, NOIDA has also not disputed the duty paid character of the goods and the fact that these were received in the factory for intended purpose under the cover of relevant documents. The case of the department is that the triplicate copy of bill of entry as required under Clause (c) of Sub Rule (3) of Rule 57G could not be subsequently produced by the assessee for defacement. - Since the triplicate copy of the bill of entry was misplaced and, as such, the assessee obtained from the bank the exchange control copy of the relevant bill of entry and filed the same along with various other documents. He also executed an indemnity in favour of the Central Excise department to the extent of Modvat Credit availed. The said authenticated exchange control copy of the bill of entry obtained by the assessee from the bank could have been easily verified by the authorities. It is not the case of the appellant that the said document was not verifiable. No credit under Sub Rule (2) shall be taken by the manufacturer, unless the inputs are received in the factory under the cover of any of the specified documents. In the present set of facts it is undisputed that the inputs were received in the factory under the cover of a triplicate copy of the bill of entry which was subsequently misplaced. The Tribunal in order [2004 (2) TMI 256 - CESTAT, NEW DELHI] has recorded a finding of fact that the specified copy of bill of entry and the invoices were misplaced after the receipt of the goods in the factory. - no merit in the present appeal - Decided against Revenue.
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2015 (8) TMI 1056
Power of tribubal to extend the stay beyond the period of 365 days - whether the Tribunal is vested with the power to extend the stay order beyond the specified maximum time limit prescribed in Section 35-C(2-A) of the Central Excise Act - Held that:- if the Tribunal would not dispose of the appeal within 365 days under the first, second and third proviso of Section 35C (2A) of the Act which was not attributable to the assessee, it would not mean that the Tribunal was divested with its incidental powers in not extending the interim order. The three proviso, in our view, cannot be read as mandatory in nature. - Section 35 C (2A) gave a mandate to the Tribunal to decide the appeal within three years "where it was possible to do so". These words indicate the intention of the legislation, namely, that the appeal should be decided as far as possible within three years and therefore, the provision is not conclusive to be determined as mandatory in nature. The provisos to Section 35C (2A) of the Act has no relevance to the pre-deposit of amount under Section 35F of the Act. Once the proviso to Section 35C(2A) of the Act has been omitted, the embargo upon the Tribunal to limit the stay order for a limited period has now been removed. Consequently, the incidental power of the Tribunal to grant interim relief pending disposal of the appeals is now not confined to a limited period. - Tribunal has the power to grant stay as incidental or ancillary to the appellate jurisdiction as held by the Supreme Court in Income Tax Officer, Cannanore vs. M.K.Mohammad Kunhi. [1968 (9) TMI 5 - SUPREME Court], which was in relation to the scope and power of the Appellate Tribunal under the Income Tax Act. In our view, the same principle of law will govern the power of the Tribunal under the Central Excise Act. - no substantial question of law arises for consideration. - Decided against Revenue.
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2015 (8) TMI 1055
Demand of interest on differential duty - Whether the appellant is liable to pay interest on differential duty even though the differential duty, if any, was paid, prior to the date of the passing of the final assessment order - Held that:- The provision of law comprised there-under nowhere specifies such Rules shall restrict the levy of interest for the period consequent to the finalisation of the assessment, rather it specifies that the Rules may provide for interest on the differential amount of duty becoming payable consequent upon the finalisation of assessment. The expression "becoming payable" would obviously relate to the date on which the duty was required to be paid. Considering the provisions of Section 4 of the said Act, the duty becomes payable at the time of the removal of the goods consequent to the manufacture thereof. The expression "becomes payable" under Section 37(2)(ibb) would relate to the date on which the duty was payable i.e. at the time of clearance of the goods in terms of the said Act. Merely because the differential amount of duty is ascertained consequent to the finalisation of assessment, the due date for payment of such amount never changes nor is extended. It would always relate to the date of removal of the goods thereof. It is only the quantification of the differential amount of duty is ascertained consequent to the finalisation of assessment, and that too merely because the assessee was not able to ascertain the exact quantum of duty in the absence of sufficient material to finalize the valuation of the goods at the time of clearance of goods. The due date for payment of duty is statutorily fixed being the date of removal of the goods consequent to the manufacture thereof and the same cannot be changed. Further, Rule 7(4) clearly provides that the assessee shall be liable to pay interest on any amount payable to the Central Government consequent to an order being passed for finalisation of assessment under sub-rule (3) at the rate specified by the Central Government by a Notification issued under Section 11AA or Section 11AB of the said Act from the first day of the month succeeding the month for which such amount is determined till the date of payment thereof. The provisions therefore, specifically states that the interest liability will commence from the month succeeding the month "for" which such amount is determined. The expression "for" refers to the month for which the amount is determined pursuant to finalisation of assessment. Apparently, it discloses that the interest liability would commence from the month succeeding the day on which the duty was due and payable in relation to the goods cleared. - interest is leviable even where differential duty was paid prior to the finalisation of the assessment in view of Rule 7(4) of the Rules of 2002. With great respect, we disagree with the decisions of the Bombay High Court in the case of Ispat Industries Ltd. (2010 (10) TMI 178 - BOMBAY HIGH COURT) and in the case of CEAT Ltd. (2015 (2) TMI 794 - BOMBAY HIGH COURT). - Decided against assessee.
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2015 (8) TMI 1054
Disallowance of CENVAT Credit - Inclusion of storage tanks/vessels within the scope of capital goods - effect of notification dated 1.3.2001 - prospective or retrospective - Held that:- it is not possible to agree with Mr. Murthy that the amendments or changes brought about after 1st March, 2001 are only clarificatory in nature. If the period of dispute is 1997-98 and at that time the capital goods of the appellant were not mentioned with the heading numbers in the Table column (2), then, it is not possible to infer that storage tanks and storage vessels being integral or essential part of the manufacturing plant were always included. The reference to them may not be found in column (2), but since they were used in the factory of the manufacturer and being the integral part of the plant, they always intended to be included. If that was the position, then, there was no need for a specific amendment or change. These submissions cannot be accepted for obvious reason. Decision of Karnataka High Court in the case of Doodhganga Krishna Sahakari Sakkare Karkhane Niyamit 2012 (9) TMI 709 - KARNATAKA HIGH COURT distinguished for the reason that, when it completely omits from consideration the important aspects of this Rule, which we have noted above, the specific purpose of the amendments to Rule 57Q noted by us in the foregoing paragraphs, then, all this would enable us not to agree with the judgment of the Karnataka High Court and to this limited extent. - Decided against assessee.
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2015 (8) TMI 1053
Demand of tax - misstatement and suppression of facts - Invocation of extended period of limitation - Held that:- demand for the aforesaid period was time barred as the Department had not taken any action for more than five years - Unit of the respondent was audited during this period several times and there were physical inspections by the Department as well. Therefore, there could not be any case of suppression. - Decided against Revenue.
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2015 (8) TMI 1052
Denial of refund claim - Reversal of Cenvat Credit - Duty paid under protest - Caustic Soda is manufactured by electrolytic method wherein mercury is used as cathode which after the use is procured and cleared - Held that:- mercury was cleared by the appellant herein as mercury only. Thus, on this basis, it is clear that the provisions of Rule 3(4) of the CENVAT Credit Rules, 2001, become applicable and duty would be paid. - No merit in appeal - Decided against assessee.
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2015 (8) TMI 1051
Benefit of SSI exemption - Use of brand name of others - Notification No. 16/97-C.E., dated 1-4-1997, 8/98-C.E., dated 2-6-1998 and 8/99, dated 28-2-1999, from 1-4-1999 - Respondent is using symbol/monogram on packing material in which finished products are packed - Held that:- Revenue, has submitted that the case of the Revenue is that in order to avail the benefit of the aforesaid Notification and to claim the SSI exemption, the Sanghi Group of Companies floated the respondent-company and allowed it to use the said mark/monogram. To put it otherwise, the submission is that it is a camouflage adopted by the respondent to wrongly avail the benefit. However, we find that no such case was set up in the show cause notice issued by the authorities and therefore, such a plea cannot be allowed to be used for the first time in the present appeal, more so, when it is a pure question of fact. Keeping in view the aforesaid, particularly going by the allegations made in the show cause notice, insofar as the present case is concerned, the Revenue cannot succeed. - Decided against Revenue.
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2015 (8) TMI 1050
Denial of exemption claim - Exemption under Notification dated 23-7-1996 - Imposition of penalty - Held that:- Goods in question sold by the appellant on retail price, namely, the foot wear, was at less than ₹ 75/- per pair. However, we find that the said Notification also imposed a specific condition to the effect that the goods are to be consumed within the factory for their production. In the instant case the goods were sent to the other factories for production. Therefore that condition is clearly not satisfied. However, insofar as penalty imposed upon the appellant is concerned, we are inclined to set aside the same simply on the ground that the appellant has its own factory where the goods in question viz. the inputs are used for manufacture of footwear. However, for a brief period during which there was some labour problems in the appellant’s own factory, the production was outsourced and exemption claimed for that period under bona fide belief. - Decided partly in favour of assessee.
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2015 (8) TMI 1049
Valuation of auto bulbs - MRP based value u/s 4A or transaction value u/s 4 - the bulbs sold by the respondent are sold to the industrial units at a retail price less than ₹ 20 per bulb, the CESTAT has concluded that the goods would fall under Entry 8539.10. It is not in dispute that the bulbs are sold in the packaged form. - However, retail sale price (RSP) was not mentioned - Held that:- there was no necessity to mention this retail price on the bulbs sold in the packaged form in view of Rule 34 of The Standards of Weights and Measures (Packaged Commodities) Rules, 1977, which gives an exemption in respect of certain packages and would include the category of goods sold by the respondents. - Section 4A in its wholesome form would not be applied in its entirety in cut and paste form. The relevant portion of the said Section, in view of Note 7A incorporates the meaning of ‘retail sale price’ which alone would apply. - Decision in the case of Jayanti Food Processing (P) Ltd. v. Commissioner of Central Excise, Rajasthan [2007 (8) TMI 3 - Supreme Court] distinguished - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (8) TMI 1061
Calculation of Cumulative Quantum of Benefits – Assessing Officer worked out Cumulative Quantum of Benefits as per Rule 31AA of Bombay Sales Tax Rules,1959 – Assessment order resulted in refund – Applicant being not satisfied with working of cumulative quantum of benefits preferred appeal which was dismissed – Held that:- Appellate Authority found that there is no documentary evidence to support argument that calculation is erroneous and incorrect – Bare perusal of Rule 31AA would denote as to how calculation of CQB has to be made – Rule 31AA(2)(e) refers to sum equal to amount of tax which would have been payable to Government on any sales of products manufactured by said dealer in eligible unit and specified in Eligibility Certificate granted to him by implementing agency. Tribunal concluded that this assessment and covered by clause (e) cannot be made in case of applicant simply because applicant is not required to pay any tax to Government – Assessment could not have been made as all invoices would indicate that sale price was not to include component of sales tax – Tax element could not have been, therefore, forming part of price and as depicted in invoices – Tribunal has correctly come to conclusion that sale effected by dealer is not liable for payment of sales tax – Therefore, calculation of CQB as made in applicant's case is not required to be altered or changed, such reason could not have been termed as perverse or vitiated – Decided in favour of Revenue.
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2015 (8) TMI 1060
Validity of Revisional notice issued by the Commissioner – Barred by Limitation – Doctrine of merger - Original Assessment order was passed as on 12.1.2006 - Addl. Commissioner passed the revision order passed on 28.8.2006 – period of 3 years to be computed from the date of order order or first revision order - Revenue contended that revision was not barred by limitation as assessment order and revision order was merged by applying principle of merger. Held that:- As per section 57, Commissioner may on his own motion, call for and examine record of any order (including an order passed in appeal) – Proviso mandates that no notice shall be served by Commissioner after expiry of three years from date of communication of order which is sought to be revised and no order in revision shall be made by him after expiry of five years of said date – Principle of merger was clearly inapplicable – Though, it is true that order was scrutinized by Additional Commissioner but he formed opinion that there is impropriety allegedly committed in allowing G-I form – Principle could have been applied provided assessment order made originally had merged in revisional order after noticing that revisional order also deals with such exemption issue – Thus, notice was barred because order of assessment was sought to be revised and that was made prior to more than three years from issuance of notice dated 13.7.2009 – No perversity on part of Tribunal nor order passed can be termed as erroneous in law – Decided against revenue.
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2015 (8) TMI 1059
Revenue Recovery Proceeding – Applicability of Section 22(4) of Kerala GST Act, 1963 – Revenue recovery proceedings were initiated against respondent for recovery of amount towards sales tax dues of society for assessment years 1981-82 to 1991-92 – Respondent challenged recovery proceedings and by impugned judgment, single Judge allowed petition – Held that:- Admittedly, section 22(4) was incorporated in statute only with effect from April 1, 1999 which is long after relevant assessment years and even after resignation of respondent from service of society – Provision in of section 22(4), in absence of any thing indicating that same is retrospective, can also be prospective – If that be so, this provision may not have any impact in so far as the assessment years in question are concerned – Thus, Judge was fully justified in allowing petition – Decided against revenue.
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2015 (8) TMI 1058
Failure to furnish Declaration form ST 18A – Levy of penalty – Vehicle carrying goods was checked and it was found that other documents were there but declaration form ST 18A was not found, and therefore, there was contravention of section 78(2) of Rajasthan Sales Tax Act, 1994 – Assessing authority after issuing show-cause notice levied penalty against which respondent-assessee had filed appeal, which was allowed – Held that:- not disputed that when vehicle was checked, person-in charge of goods had produced all necessary documents – It appears that respondent had also produced declaration form ST 18A, along with his reply – It was not case of petitioner that any of said documents were found to be false or bogus in inquiry – Neither it is case of non-compliance by not carrying documents nor false or forged documents or declaration is submitted as has been noticed in case of State of Rajasthan v. D. P. Metals [2001 (10) TMI 881 - SUPREME COURT OF INDIA] –Therefore, penalty under section of Act could not be levied – Thus, findings arrived at by appellate authority, could not be said to be erroneous – Decided against Revisionist.
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