Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 30, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
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1,84,68,000 Accounts Opened in more than 70000 Camps Under Pradhan Mantri Jan-Dhan Yojana ; Banks to hold such Camps on Weekly Basis, from 8 am to 8 pm on all saturdays to Achieve the Target of Covering Unbanked Households well in Time
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others Palm Oil, Crude Palmolein, RBD Palmolein, Others Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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India Signs Loan Agreements with World Bank for IDA Assistance of US $ 107 Million for Second Mizoram State Roads Project
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Indias External Debt: A Status Report 2013-14 Released; Indias External Debt Stock Stood at US$ 440.6 Billion at end-March 2014, Increasing by US$ 31.2 Billion (7.6 per cent) Over the Level at end-March 2013
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Pradhan Mantri Jan-Dhan Yojana Launched by The Prime Minister; About 1.5 Crore Accounts are Expected to be Opened on the Day of the Launch ; Over 77,000 Camps Being Organized for this Purpose
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Levy of penalty u/s 271D/E Violation of provisions of section 269SS - 'journal entries' are outside the scope of the relevant penal provisions - completing the empty formalities of payments and repayments by issuing/receiving cheque to swap/squire up the transactions, is not the intention of the provisions of section 269SS - AT
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Damages for Breach of Contract considered as Speculation Loss non-performance of a contract - losses claimed by assessee are allowable losses - AT
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Set off of losses against income from STP units - the loss from other business activities should not be set off against profits derived from eligible industrial undertaking - AT
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Deemed dividend u/s 2(22)(e) When SFL is not engaged in the business of money lending, the transaction of the assessee by way of receiving loan from SFL has to be treated as deemed dividend in the hands of the present assessee - AT
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Reopening of assessment u/s 147 When all material facts were furnished by the assessee, even if the assessee erroneously claimed excess deduction u/s.10B, it would not be a case of failure to disclose fully and truly all materials facts - AT
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Entitlement to loss on revaluation of the closing stock - a claim which is not substantiated by proper documentation cannot be allowed to the assessee - AT
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Jurisdiction of CIT u/s 263 - revision - erroneous order - CIT wanted the AO to cause further enquiry and he had not stated what enquiry the AO has to do - revision is not proper - AT
Customs
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Port restriction - The reason for this restriction would be that expertise for examination of such goods would be available only at the major ports and not at the every port - import of goods at non-designated port liable for confiscation - AT
Service Tax
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Business Auxiliary Service - even if the service tax liability has been discharged by the recipient of the service, that cannot compensate for the payment required to be made by the appellant nor does it obliterate the liability to pay service tax by the appellant - AT
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Waiver of pre deposit - Adjustment of excess credit taken in subsequent year - Bar of limitation - , there is no evidence forthcoming from the records that the taking of credit was on account of any intention to evade service tax - stay granted - AT
Central Excise
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Appellant is claiming the benefit of notification No. 24/91 CE, after exhausting the exemption limit in terms of notification No. 1/93 CE, he would be entitled to benefit of notification No. 24/91-CE in respect of subsequent clearance - AT
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Valuation - 110% of the cost of manufacture under Rule 8 - Where a part of the goods are also being sold to independent buyers, the value at which the same are being sold has to be adopted as the assessable value - AT
VAT
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Waiver of pre-deposit - Interpretation of Section 18A(5) of the Central Sales Tax Act, 1956 - no pre-deposit is required to be made under Section 18A(5) of the Act for consideration of stay application - HC
Case Laws:
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Income Tax
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2014 (8) TMI 876
Revision of order u/s 263 order erroneous in so far as prejudicial to the interest of revenue - Tribunal decided in favor of assessee - Held that:- The assessee has shown availability of cash, but the same was never found - The explanation given by the assessee that cash was taken by the partners, who have spended, is not acceptable - The money belongs to the firm and it was not the money of the partners - The accounts were not completed at the time of survey - Vouchers regarding the various expenses were not available, so the books of accounts were likely to be rejected - the income has to be computed by applying a suitable net profit rate as decided in Saraya Engineering Works Vs. CIT [1986 (12) TMI 24 - ALLAHABAD High Court] - The matter needs deep investigation - The CIT had rightly passed an order u/s 263 of the Income Tax Act, where he had directed the AO to make a fresh assessment order - The Tribunal has set aside the order without examining the facts of the case the order passed by the Tribunal is set aside and the matter the order passed by the CIT u/s 263 is restored Decided in favour of revenue.
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2014 (8) TMI 875
Deduction u/s 80IB - Export incentives - Interest paid in Jajmau unit Held that:- As decided in assessees own case for the earlier assessment year, it has been held that the assessment by a higher authority may be possible even if the proceedings were initiated by a subordinate authority who is also having concurrent jurisdiction - assessment proceedings were initiated by the DCIT and the assessment was completed by the JCIT - maximum assessments are framed u/s 143(1) where the AO has issued the intimation after making a prima facie adjustment - Along with the intimation the AO either raises the demand or issues the refund but whenever case falls within the guidelines issued by CBDT, it is to be taken for scrutiny and the assessment is required to be completed u/s 143(3) of the Act and for completing the assessment u/s 143(3), the AO is required to issue a notice u/s 143(2) within a period prescribed u/s 143(2) of the Act - once the authority higher in rank has seized with the matter, the authority lower in rank forfeits its jurisdiction to proceed with the matter in any manner and to complete the remaining assessment. The object/basis for giving that finding, are that once the authority higher in rank seized with the matter pending before the subordinate authority for adjudication, the subordinate authority is ceased with the jurisdiction to proceed further in that matter - The reason for doing so is quite obvious as once the higher authority has started applying his mind to the issue in dispute, the subordinate authority cannot proceed with the matter - If it is not done, there would be chaos in the administration of justice - the DCIT has completed the one mode of assessment by issuing intimation u/s 143(1) of the Act and the CIT has initiated and completed the second mode of assessment - assessment by the higher authority may be possible even if the proceedings were initiated by the subordinate authority who is also having concurrent jurisdiction thus, the order of the CIT(A) is upheld Decided against assessee. Deduction u/s 80IB - duty drawback and DEPB benefits Held that:- Following the decision in Liberty India vs. CIT [2009 (8) TMI 63 - SUPREME COURT] - receipts by way of duty drawback and DEPB benefits do not form part of the net profits derived from the industrial undertaking the ground relating to interest debited to Banther unit is concerned, it was pointed out by the assessee that once the assessee is not entitled for deduction u/s 80IB of the Act, it would not make any difference even interest was allowed to be debited in the Banther unit. Non-deduction of TDS on payment of commission to Foreign Agent Held that:- Following the decision in CIT vs. M/s Model Exims [2013 (9) TMI 742 - ALLAHABAD HIGH COURT] - AO did not bring anything on record, which could demonstrate that non-resident agents were appointed as selling agents, designers or technical advisers - The payment of commission to foreign agents did not entitle such foreign agents to pay tax in India and thus the TDS was not liable to be deducted under Section 195 of the Act - CIT (A) has considered the admission in the reply of the assessee and has also perused the agreement from which he found that there was nothing, which could demonstrate that these agents were appointed as selling agents, designers or technical advisers for invoking the provisions of Section 9 (1) (vii) of the Act the order of the CIT(A) is upheld Decided against revenue.
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2014 (8) TMI 874
Addition of bogus purchases - bills and delivery challans conclusively not proved the transactions Held that:- CIT(A) has given a finding that the shortage has been worked out by the AO on the basis of various assumptions - on one hand AO has taxed additional income on account of excess stock as per Assessee's working and on the other hand held the stock found physically on the date of survey to be short in comparison to stock as per books which according to him are contradictory to each other - CIT(A) by a well-reasoned and detailed order has confirmed the purchases from Minakshi Enterprises to be bogus but the other addition made from two other parties were deleted for the reason that the 2 parties in their statement recorded u/s. 131 had confirmed the dispatch of goods as per the billing dates - Revenue has been brought any material to controvert the findings of CIT(A) the order of the CIT(A) is upheld Decided against Revenue. Addition of unexplained entry Held that:- CIT(A) has noted that Assessee's claim of calculation in sales or closing stock was not backed by any evidence and the claim that the raw material worth ₹ 11,65,591/- which represents value of investment in unaccounted raw material found at the time of survey was in quantity terms included in the sale or closing stock was also not substantiated by Assessee assessee has submitted that the letter filed by the Chartered Accountant on 27.12.2003 clarifying the issue has not been considered by the AO - the matter needs to be re-examined at the end of AO the matter is to be remitted back to the AO for fresh adjudication Decided in favour of Assessee. Payments made of interest and payment to contractors TDS deposited after the prescribed due date u/s. 194 A and 194C or not - Held that:- Assessee had deducted tax u/s. 194C from the payment made to Gujarat Perfect Engineers Ltd. and Varia Engineering Works and the TDS was deposited on 07.06.2005 and the return of income was filed by Assessee on 3.10.2005 and thus TDS was deposited before the filing of return - CIT vs. Praful Kantilal Shah [2014 (8) TMI 808 - GUJARAT HIGH COURT] - the amendment to Section 40(a)(ia) of the Income Tax Act brought out by Finance Act, 2010 with effect from 01.04.2010 was having retrospective effect - no disallowance u/s 40(a)(ia) is called for when the Assessee had deposited TDS before filing of return of income Decided in favour of Assessee. Bogus purchases - bills procured on payment of commission Held that:- CIT(A) has noted that in response to summons, M/s. Paresh Steel and Shree Bhagyalaxmi Steel had confirmed the dispatch of goods as per the billing dates - CIT(A) has noted that AO has held part of the purchases to be genuine and part of the purchases to be bogus which according to him is quite unusual - CIT(A) rightly held the purchases from Minaxi Enterprises to be bogus but the addition on account of purchases made from two other parties - the Revenue has not brought any material to controvert the findings of CIT(A) Decided against Revenue. Addition of unexplained entry Held that:- CIT(A) has noted that Assessee's claim of calculation in sales or closing stock was not backed by any evidence and the claim that the raw material which represents value of investment in unaccounted raw material found at the time of survey was in quantity terms included in the sale or closing stock was also not substantiated by Assessee - assessee submitted that the letter filed by the Chartered Accountant on 27.12.2003 clarifying the issue has not been considered by the AO thus, the matter is to be remitted back to the AO for fresh consideration Decided in favour of Assessee. Value of 12 LT panels Held that:- Assessee contended that the LT panels were manufactured for Sikkim Government and since they were defective it was considered as scrap and not included in stock - assessee could not produce any correspondence entered by it with Sikkim Government to demonstrate that the LT panels were scrapped on the basis of the letter from Sikkim Government - CIT(A) has also, while upholding the addition has noted that there were several inconsistencies in the Assessee's explanation and further Assessee had not produced any documentary evidence to support its contention the order of the CIT(A) is upheld Decided against Assessee.
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2014 (8) TMI 873
Penalty u/s 271(1)(c) - Undisclosed bank accounts Addition of peak credit Held that:- The six bank accounts with reference to which addition was made by the AO were not disclosed by the assessee in its return of income - The source of deposit in the bank accounts could not be explained by the assessee - the addition of peak balance in the bank accounts cannot be held as an addition made merely on estimate basis without relevant materials relying upon CIT Vs. Becharbhai P. Parmar [2012 (4) TMI 418 - GUJARAT HIGH COURT] - the disclosure of the other five undisclosed bank accounts by the assessee cannot be held as voluntary disclosure by the assessee it came up because the Department already detected one undisclosed bank account which contained transfer entries of the remaining five undisclosed bank accounts there was no reason to interfere with the orders Decided against Assessee.
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2014 (8) TMI 872
Levy of penalty u/s 271D/E Violation of provisions of section 269SS - Adjustments through journal entries - Business of land development and construction of real estate properties - Limitation of time Time barred penalty order us/ 271(1)(c) - Held that:- Since penalty proceedings for default in not having transactions through the bank as required u/s 269SS and 269T are not related to the assessment proceedings but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings u/s 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and clause (a) of sub-section (1) of section 275 cannot be attracted to such proceedings - penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made - Following the decision in ITO, Ward 24(1), New Delhi Versus Sh. Dinesh Jain [2014 (6) TMI 140 - ITAT DELHI] - it is the AO who applies mind during the assessment proceedings to the issues relating to the violation of section 269SS or 269T of the Act and therefore, the limitation should commence from the date of the Assessment Order. 'journal entries' are outside the scope of the relevant penal provisions - the provisions of clause (a) of section 275(1) of the Act would not apply and in alternative, the provisions of section 275(1)(c) only be attracted in the matters of penalties levied u/s 271D/271E of the Act - the limitation period would be counted from the date of assessment order with the AOs decision to make referral to his Addl. CIT, who is authorized to impose penalty - The orders of the penalty of this kind have to be explained considering the provisions of clause (c) of section 275(1) of the Act - these preliminary acts constitute "action for the imposition of penalty" - An action for imposition of penalty is always anterior in time to the "actual" imposition of penalty Decided in favour of Assessee. Applicability of provisions of section 273B - Reasonable Cause Held that:- The journal entries are hit by the relevant provisions of section 269SS of the Act - completing the "empty formalities" of payments and repayments by issuing/receiving cheque to swap/squire up the transactions, is not the intention of the provisions of section 269SS of the Act, when the transactions are otherwise bonafide or genuine - Such reasons of the assessee constitute 'reasonable cause' within the meaning of section 273B of the Act - all the reasons are, prima facie, commercial in nature and they cannot be described as non-business by any means - journal entries should enjoy equal immunity on par with account payee cheques or bank drafts - the provisions of section 269SS and 269T of the Act shall not be attracted where there is no involvement of the 'money' - though the assessee has violated the provisions of Section 269SS / 269T of the Act in respect of journal entries, the assessee has shown reasonable cause and the penalty imposed u/s 271D/E of the Act are not sustainable Decided in favour of Assessee.
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2014 (8) TMI 871
Transfer pricing adjustment - Selection of comparables Held that:- Although a detail submission was made on behalf of the assessee before the CIT(A) on the basis of FAR analysis to show that the selection of Ms. Vimta Labs as comparable is not Justified, the CIT(A) has not accepted the stand of the assessee on the issue without giving any cogent or convincing reasons relying upon M/s Adobe Systems India Private Limited, Versus Additional Commissioner of Income tax [2011 (1) TMI 933 - ITAT NEW DELHI] - exclusion of comparables showing supernormal profits as compared to other comparable is fully justified the order of the CIT(A) is remitted back to the AO for fresh consideration - the contentions of the assessee is accepted that this company cannot be treated as a comparable - among the ITES companies there is a hierarchy in terms of skill required to provide services - It ranges from providing routine services where no skills are required to providing services where highly professionalized skills are required - Depending on the skills required to perform ITES the comparability has to be done the company cannot be regarded as a comparable and deserves to be excluded from the list of comparables. Computation of the margin Rent for unutilized space as part of cost on which profit has to be earned Held that:- The operating margin of 12.42% on cost as calculated by TPO is not in line with the operating margin of 15.18% as calculated and submitted by the assessee - while calculating operational margin no adjustment for expenses of rent relatable to substantial portion of unused floor space has been carried out - The assessee has adjusted a sum of ₹ 33 lacs towards the unutilized floor space including 10893 square feet acquired in new block for future expansion - TPO/AO is directed to re-workout the TP adjustment as per the provisions after excluding the comparables Decided partly in favour of Assessee. Addition made u/s 10A Held that:- Following the decision in CIT v. Gem Plus Jewellery Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] - DRP though accepts such position but has decided the issue against the assessee only to give an opportunity to the department to pursue the same in higher forums - AO is directed to exclude the same from total turnover also Decided in favour of Assessee.
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2014 (8) TMI 870
Transfer pricing adjustment selection of comparables Functionally different company - enormity of turnover employee cost filter Segmental turnover - Held that:- The company cannot be considered as comparable to the assessee due to various factors such as its size, turnover, brand value, scale of operation, diversified activities and owning of intangibles - the turnovers of Infosys Technologies Limited during the year under consideration are ₹ 13,149 crores as against ₹ 42 crores of the assessee - the assessee in the TP documentation, has selected Infosys Technologies Ltd. as comparable but that cannot prevent the assessee from objecting to the aforesaid company being selected as comparable, if there are valid reasons for doing so - considering the enormity of turnover of the company as well as other relevant factors, the company cannot be treated as comparable to the assessee in any manner - the company was functionally different from the assessee company as it was engaged in the services in the form of ACCEL IT and ACCEL animation services for 2D and 3D animation and therefore assessee's claim that this company was functionally different was accepted - It directed the Assessing Officer to exclude ACCEL Transmatic Ltd. from the final list of comparables for the purpose of determining TNMM margin - the Assessing Officer /TPO is directed to exclude this while computing ALP Decided in favor of assessee. Rejection of comparables Held that:- Proper case was not made out for inclusion of the comparables - once TPO and DRP forms that these comparables are not functionally similar to the assessee on the basis of various filters adopted by the TPO, it would be better if the matter is left like that rather than ordering fresh enquiry - these companies have related party transactions and therefore, may not justify on various filters adopted - When specific 133(6) notice was issued, that assessee has not to responded and therefore, TPO was not in a position to include the above case in the absence of segmental data - there was a specific finding that after enquiry being conducted, it was found that company was taken up by one Kelton Sector P. Ltd. and inspite of being called, the company was failed to produce its cash book ledger particulars of salary paid etc. - genuineness of the company and its activities are doubted the company has been rightly rejected as comparable - there is no need to consider any of the comparables, already rejected by the TPO/DRO Decided against Assessee. Risk Adjustment Held that:- the assessee reserves the right to conduct risk adjustment in future during the time of assessment - this issue is to be examined by the TPO afresh - Assessee admits that it is having a single customer risk, whereas, other comparable companies has market risk thus, the matter is to be remitted back to the TPO for fresh adjudication Decided in favour of assessee. Computation of deduction u/s 10A Communication charges registered from export turnover - Held that:- Following the decision in The Commissioner of Income Tax Versus M/s. Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] - communication charges etc., attributable to the delivery of the computer software outside India which are to be reduced from the export turnover should be reduced from the total turnover as well while computing the deduction under section 10A - the AO is directed to reduce the amount from the export turnover as well as total turnover while computing the deduction u/s 10A Decided in favour of assessee.
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2014 (8) TMI 869
Damages for Breach of Contract considered as Speculation Loss Transaction treated as speculative transaction u/s 43(5) - Held that:- Settlement of disputes allowing damages is termed as washed out contracts in international market - the orders for import were place with intention to take delivery as the assessee is in regular course of business - The amounts represents damages for breach of contract which does not fall within the purview of section 43(5) of the Act and the section is applicable only in case of settlement of contract where the payment is made without delivery of the goods - The provision of section 43(5) of the Act contemplates a transaction in which a contract for purchase of sale of any commodity is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity - It is not only actual non-delivery of goods but it must be coupled with settlement of contract in a transaction for which payment is made - If the payment is by way of damages and not by way of settlement of contract then the question of actually delivery or transfer of goods would be irrelevant - The amounts paid has been made by way of damages for non-performance of a contract and that non-performance of contract was for business expediency as well as to reduce further losses that was beyond the control of the assessee - the losses claimed by assessee are allowable losses Decided in favour of Assessee. Amount for allowance of damages Revenue was of the view that any transaction not settled by actual Delivery or transfer is to be treated as speculative transaction without excluding trade related transaction from the term "transaction" - Held that:- Factually revenue has not contested that this is a case of non-delivery of goods rather it is the case of breach of contract on account of delayed supply against sale contract, once this is the case, the amounts are for damages on account of breach of contract and it is allowable against the business income Decided against Revenue. Claim of discount allowed to customer - Price difference due to delayed supply to the parties specified u/s 40A(2)(b) of the Act Held that:- For invocation of provision of section 40A(2)(b) of the Act, the revenue has to come out, in view of the holding pattern of the three companies, how these are related parties in term of section 40A(2)(b) of the Act - neither Sree Vegetable Oil (P) Ltd. nor Swastik Refinery Pvt. Ltd. or vice versa the assessee company Ambo Agro Products Ltd. holds the beneficiary ownership to the extent of 20% mentioned in Explanation (b) to section 40A(2)(b) of the Act the addition cannot be sustained. Delayed payment of employees contribution to PF and ESI u/s 43B Deposit of employees contribution to PF and ESI and other statutory funds were covered by provisions of Sec. 36(i)(va) r. w.s. 2(24)(x) and vide See. 36(i)(va) of the Act - Held that:- Following the decision in CIT Vs. M/s. Vijay Shree Limited [2011 (9) TMI 30 - CALCUTTA HIGH COURT] - the amendment to the second proviso to the Sec. 43(B) of the Income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988 - the deletion of the amount paid by the Employees' contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act - the assessee has paid the PF & ESI before due date of filing of return u/s. 139(1) of the Act by the assessee Decided against Revenue. Transfer pricing adjustment u/s 92CA(3) Determination of Arm's Length price - Held that:- Both assessee as well as TPO has adopted CUP method for determining ALP and base rates for determining ALP used are MPOB published rates - the goods were supplied as per the contracts and at contracted price - The TPO has taken the price prevalent on the invoice date as against the contract date to compare it with the transaction price - This is not proper comparison because there is always a time gap between contract date and invoice date and prices fluctuate between these dates - Invoices are raised on the basis of accepted terms including rates as per the contracts entered earlier which are binding for all legal purposes - The CUP method as provided in Rule 10B(1)(a) suggests a comparison with price charged in a comparable uncontrolled transaction and it nowhere allows an assessing officer or TPO to make changes in the terms of contracts which were entered into with Associated Enterprise (AE) - The TPO has not considered the fact that transactions with non-AEs are also carried out by the assessee at contracted/invoiced rates notwithstanding the rates prevailing on the date of invoice. The assessee company has entered into contract of sale with its AE and after negotiations a contract price is agreed upon and invoice was raised - contract price is comparable to the market rate available on the day of contract - once the contract is entered into the goods are moved from export destination to import destination - there is a time gap between the contract date and the date of entry and because of this time gap between the contract date and entry date, there would be price fluctuation and the rates of other entities cannot be compared to the price reflected in the import invoices - there is no material to show that the price entered into between the parties on the date of contract was not comparable to similar transactions entered into on that date - price reflected in the sale contract entered into between the assessee and its AEs is very much comparable to the market rate prevailing on that date - there is no basis to disturb the price disclosed by assessee as the ALP for which the imports have been made - The adjustment made by TPO is not at all sustainable and DRP had rightly held so Decided against Revenue.
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2014 (8) TMI 868
Transfer pricing adjustment Adjustment of capacity utilization - Held that:- Although the factors might have contributed to the loss of the assessee company, it could not be arrived at with any degree of certainty that the transfer price of the international transaction have contributed towards the loss of the assessee company in the absence of any details furnished by the assessee company regarding the price at which the final product was sold by the AE - The claim of the assessee qua the benefit of ±5% adjustment as per second proviso to section 92C(2) of the Act was allowed by the CIT(A) - Following the order in Amdocs Business Services (P) Ltd V/s DCIT [2012 (12) TMI 482 - ITAT PUNE] - the statutory provisions as they stand on the first day of April of the assessment year must apply to the assessment of the year and the modification of the provisions during the pendency of assessment would not generally prejudice the rights of the assessee. Therefore, we find no justification in the action of the lower authorities in disentitling the assessee the benefit of +/-5% while computing ALP in terms of erstwhile proviso to sec 92C(2) - It has already been decided in earlier cases that assessee while allowing the benefit of ±5% to the assessee as per the erstwhile proviso to 92C of the Act the order of the CIT(A) allowing the benefit of ±5% adjustment to the assessee while computing the TP adjustment is upheld Decided against Revenue. Claim of adjustment on capacity utilization Held that:- Following the order in Dy. Commissioner of Income Tax Rg. 8(2) Versus M/s Petro Araldite P. Ltd. [2013 (8) TMI 403 - ITAT MUMBAI] - The issue of difference in capacity utilisation generally comes in the case of manufacturing concern and like any other business undertaking, the manufacturing concern has mainly two types of overheads i.e. fixed overheads and variable overheads - The variable overheads vary in proportion to the sales and they therefore do not have any effect on the profit margin as a result of difference in capacity utilization - The fixed overheads, on the other hand, do not vary with the volume of sales and since they remain by and large static irrespective of level of capacity utilization, the profit margin gets affected as a result of difference in capacity utilization on this count - the difference in capacity utilization materially affects the profit margin and if there is a difference in the level of capacity utilization of the assessee and the level of capacity utilization of the comparable companies, adjustment is required to be made to the profit margin of the comparables on account of difference in capacity utilization as per clause (e)(iii) of sub-rule (1) of Rule 10-B of the Income Tax Rules, 1962 the matter is to be remitted back to the AO relating the issue to adjustment on account of capacity utilization in the case of assessee Decided in favour of assessee.
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2014 (8) TMI 867
Deduction u/s 10A for GE-GDC STP Unit setting of new unit or expansion of existing unit - Held that:- even if a new unit was established by the assessee company as expansion of its existing unit, substantial fresh capital having been invested in the said unit and it was capable of doing business of its own, independent of the old unit, the same was eligible to be treated as a newly established undertaking; and that therefore, the CIT (A) was not correct in holding that both the units were liable to be treated as one unit for the purpose of computing deduction u/s 10A of the Act the order of the CIT(A) is upheld Decided against Revenue. Set off of losses against income from STP units Unabsorbed losses and depreciation - Held that:- The matter has already been decided in assessees own case for the earlier assessment year, the Tribunal has held that as per Section 10A (1) of the Act, any profits and gains derived from an industrial undertaking, to which this Section applies, shall not be included in the total income of the assessee - the profits of the eligible industrial undertaking did not form part of the total income at all - it did not enter the computation provision - what was to be computed was the profits of the eligible industrial undertaking and not the resultant business income after set off of loss in other activities - the loss from other business activities should not be set off against profits derived from eligible industrial undertaking - the action of the CIT (A) is upheld in directing the AO to re-compute the total income of the assessee after allowing the set off of the losses arising out of the STP units of the assessee against the income of its non-STP undertakings and to allow carry forward of unabsorbed losses and depreciation Decided against Revenue. Travelling expenses allowed Held that:- The matter has already been decided in assessees own case for the earlier assessment year, the Tribunal has held that the observations of the AO with regard to the assessee not having produced the relevant documentary evidence in the shape of bills/vouchers concerning the travelling expenses claimed, have been found by the CIT (A) to be incorrect The finding of the CIT (A) has not been successfully refuted by the department - The deductible expenditure incurred for the purpose of business does not require the presence of a receipt on the credit side to justify deduction of an expense - expenditure wholly and exclusively for the purpose of business cannot be disallowed merely because the assessee's income or the turnover would be very much reduced - the AO has not brought any material or evidence on record to show and establish that the travelling expenses incurred by the assessee during the year have not been expended for the purpose of assessee's business or have not been incurred in the course of carrying of any business activity of the assessee Decided against Revenue. Treatment of miscellaneous income Eligibility for deduction u/s 10A Held that:- The matter has already been decided in assessees own case for the earlier assessment year, the Tribunal has held that the amount received by the assessee towards notice period was to be treated as income derived from the eligible undertaking and that deduction u/s 10A of the Act shall be allowed accordingly - the amount received by the assessee towards notice period is to be treated as income derived from the eligible undertaking and deduction u/s 10A of the Act is to be allowed accordingly Decided against Revenue. Transfer pricing adjustment u/s 92CA(3) Software development and related services with AE - Held that:- The assessee is right in contending that since the profit of each of the STP units of the assessee company cannot be evaluated separately and independently of one another, they cannot be segregated and the approach of the TPO in considering the result of each STP unit, on a standalone basis, for the purpose of determining the ALP relating to the assessee's international transactions, was incorrect - The action of the CIT(A) in accepting this contention of the assessee is upheld CIT(A) has rightly concluded that the benchmarking of the transactions should be based on the aggregation at the entity level and not at the unit level Decided against Revenue.
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2014 (8) TMI 866
Deemed dividend u/s 2(22)(e) Closely held company or not - substantial interest - nature of transaction, loan or otherwise Held that:- The assessee was holding 15% shares in SFL besides being one of the directors of the company - the assessee has beneficial interest in SFL as required u/s 2(22)(e) of the Act - Though the loan has been squared up during the year along with the interest but these facts are not relevant to decide whether the provisions of section 2(22)(e) can be invoked on a loan given by the company to the shareholder. As per this Schedule to the balance sheet, SFL (the company) has obtained secured loan from Bank of Baroda against hypothecation of stock on hire - stock on hire is shown separately and loan and advances are shown separately, which means stock on hire is not loans and advances. In fact, stock on hire is owned by SFL and only then, SFL can hypothecate the same to Bank and Bank had accepted stock on hire under hypothecation to Bank. - These facts go to show that in the present case, hire purchase transaction conducted by SFL is not in the nature of loan, but SFL is owning assets given on hire by it and therefore, as per the judgment of the Hon'ble Apex Court rendered in the case of Sundaram Finance Ltd. vs. State of Kerala and Other (1965 (11) TMI 123 - SUPREME COURT OF INDIA), these hire purchase transactions cannot be regarded as loan transaction, particularly when SFL is also claiming and showing assets given on hire as its own assets and such claim of the assessee is accepted by Bank of Baroda. When SFL is not engaged in the business of money lending, the transaction of the assessee by way of receiving loan of ₹ 21.02 lakhs from SFL has to be treated as deemed dividend in the hands of the present assessee Decided against Assessee. Interest paid on loan obtained from persons u/s 40A(2)(b) Held that:- The AO has allowed rate of interest @14% and the balance interest was disallowed - even the bank interest rate was more than 14% and the assessee has obtained the loan @15% without furnishing any security it should be allowed keeping in view the commercial expediencies - the interest paid at 15% is allowed to the persons covered u/s 40A(2)(b) of the Act Decided in favour of assessee. House hold expenses Held that:- The assessee family comprised of himself, wife and two sons studying in good school of Bareilly - AO has estimated the house hold expenses at ₹ 10,000/- per month and made the addition of ₹ 42,000/- as the assessee has declared house hold expenses at ₹ 78,000/ - Keeping in view the standard of living of the assessee, ₹ 78,000/- cannot be sufficient to meet the house hold expenses Decided against Assessee.
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2014 (8) TMI 865
Reopening of assessment u/s 147 Change of opinion - Period of limitation - Realization of export proceeds and of processing charges Computation of deduction u/s 10B Held that:- The reasons are totally silent with regard to any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year - From the reasons recorded it is also apparent the assessment is sought to be reopened on the ground that while computing the deduction u/s. 10B, the export proceeds not realized before the specified date were not deducted from the export turnover and processing charges were not included in the total turnover and hence there was reason to believe that income chargeable to tax has escaped assessment for the assessment years under consideration - There is nothing on record of assessment order to indicate that the proceedings u/s.147 were sought to be reopened by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration - All the material facts i.e. unrealized convertible foreign exchange before the specified date, non-inclusion of processing charges in the total turnover were duly disclosed by the assessee in the computation of deduction u/s.10B, Form No.56G filed with the original return of income and from the same material facts, the Assessing Officer in the present order worked out the excess claim u/s.10B - The details of foreign exchange realization and the processing charges were very much available on record at the time of passing the original assessment order and also at the time of passing the reassessment order. When all material facts were furnished by the assessee, even if the assessee erroneously claimed excess deduction u/s.10B, it would not be a case of failure to disclose fully and truly all materials facts unless certain additional information has come to the notice of the AO subsequent to passing of original assessment order - There is nothing on record to suggest that any new material had come on record on the date of recording the reasons, if no new information had been received by the AO - So it could not be inferred that there is failure on the part of the assessee to disclose material facts - the condition precedent for a valid exercise of the power to reopen the assessment, after a lapse of four years from end of the relevant Assessment Year, is mistake in the present case - An exceptional power has been conferred upon the Revenue to reopen an assessment after a lapse of four years. Under the proviso to section 147, where an assessment has been made u/s.143(3), no action shall be taken under that section after expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by the reason of failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year - This is a jurisdictional requirement which must be fulfilled when the assessment has sought to be reopened beyond four years - The existence of jurisdictional condition must be indicated in the reasons which are furnished to the assessee - The fulfillment of the condition is a pre-requisite and if it is absent, an assessment cannot be reopened beyond four years - The AO cannot improve upon the reasons for reopening assessment or bridge the lacunae later - If reasons disclosed do not indicate fulfillment of jurisdictional requirement, the reopening is invalid - the AO was not legally justified to reopen the assessment u/s.147 of Act on the basis of reasons recorded after expiry of four years under the relevant assessment year the notice issued u/s.148 of Act for assessment years was bad in law and rightly quashed by CIT(A) - the assessment order passed on the basis of invalid reopening of assessment stands rightly annulled Decided against Revenue.
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2014 (8) TMI 864
Reopening of assessment u/s 147 Held that:- In the absence of any earlier assessment by assessing officer u/s 143(3) it cannot be held that assessing officer exercised any opinion on the facts of the case as the return of the assessee was simply processed u/s 143(1) - the belief of the AO for reopening of the assessment is on the basis of new and independent information i.e. return and record and scrutiny assessment verification for the next year i.e. A.Y. 2007-08 it could not be held that the reassessment is by way of change of opinion or there was no new material - the validity of reassessment proceedings is upheld Decided against Assessee. Entitlement to loss on revaluation of the closing stock Held that:- As per the proper method of accounting the assessee will always prepare separate list of items in respect of obsolete, non moving shortages, damaged goods, unserviceable inventories and thereafter a consolidation will be prepared - This is minimum, which could have been done by the assessee to justify its claim, in the absence of even minimum details of reduction in the value of stock, the assessees burden to justify the decrease, revaluation of the stock is not discharged - the claim of revaluation of stock was not subject to any accepted commercial accounting standard or practices but was left to the sole discretion of the management to claim it as and when it liked - a claim which is not substantiated by proper documentation cannot be allowed to the assessee Decided against Assessee. Entitlement for deduction on previous years sale discount Salary and rent disallowed u/s 40(a)(ia) - Held that:- The contention of the assessee is accepted that assessee has produced no evidence or convincing argument to come to a view that the liability for discount of earlier years sales crystallized in this year - In the absence of discharge of such a burden to prove crystallization of liability there was no infirmity in the order of CIT(A) - the law mandates the expenditure should be allowed in the year in which it is allowable in accordance with law subject to the prescribed payment Decided against assessee. Imposition of penalty u/s 271(1)(c) Held that:- The books of accounts which were rejected by the AO have been upheld to be proper by CIT(A), a finding which is not challenged by the revenue - any inference drawn by AO on the basis of falsehood or unreliability of the books of A/Cs has no significance in the penalty proceedings - every confirmation of quantum addition cannot result in imposition of concealment penalty - upholding of books of A/Cs of the assessee C.A having certified the damage of the goods by flood though with a rider that the claim will be made depending on the management decision - the damage in the flood cannot be rejected out rightly or held to be a false claim. Claim of discount on earlier year sale Held that:- The assessee failed to demonstrate that the factum of actual crystallization of liability in this year, the disallowance has been sustained as pertains to earlier year - had the assessee claimed the amount in preceding year in all fairness it would have been allowed - The year of allowability may be a relevant factor in deciding the quantum appeal, but it cannot be a decisive factor to impose concealment penalty - when the assessee disclosed all the particulars along with the return of income - the relevant particulars were filed with the return, further information was given in assessment proceedings, assessees books of A/Cs have been upheld to be correct following the decision in COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] - assessee have filed all the relevant details along with the return of income, the penalty imposed on the assessee is deleted Decided in favour of Assessee.
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2014 (8) TMI 863
Transfer pricing adjustments - Adjustment in the operating margin of CDR unit Held that:- The TPO has computed the profit margin of the CDR unit, which was rendering the services not only to the associated concerns outside India but also to the other units of the Assessee company, by taking the revenue received from the export of services to the associated concerns and without taking any revenue into consideration in respect of the services rendered by the CDR unit of the Assessee to the other unit in Goa - the TPO has considered the total operating costs of the CDR unit which has been incurred by the unit not only in respect of services rendered to the associated concerns outside India but also in respect of services rendered to the unit in India and on that basis the operating profit was worked out. While computing the true profit of a particular division, it is necessary that the value should be assigned in respect of services received by the other unit and it should be taken as part of the revenue of that particular unit - the TPO has taken the total operating cost of the CDR unit which consists of the cost not only in respect of the services rendered to the associated enterprises but also in respect of the services rendered to the Goa plant by the CDR unit - since the total cost of the CDR unit has been taken, the notional revenue in respect of Goa plant should also be considered while computing the net operating profit - no addition in respect of IT-enabled engineering services can be made Decided against Assessee. Adjustment of 12.31% of marketing expenses Held that:- CIT(A) rightly was of the view that total marketing expenses, including those incurred in the company's European and Indian offices adopted - the TPO had netted off the Dubai office expenditure against the Dubai office income, without considering the ratio of total marketing expenses to total non-AE export sales as directed by the CIT(A) - no interference is called for in the order of CIT(A) - CIT(A) has rightly directed the AO to allow adjustment of 12.31% of the marketing expenses after verifying the correctness of the data submitted by the Assessee for allowing relief- Decided against Revenue. Deletion of the addition Held that:- The purchase of the components and spares from the AEs constituted an insignificant 3% of the purchases - the Assessee has made purchases to the extent of more than ₹ 3 crores and in respect of other products, if taken together, the average price paid for imports are much lower than the average price of the local vendors - there is no inconsistency or illegality in the finding of the CIT(A) Decided against Revenue. Claim of Depreciation on Goodwill Held that:- Following the decision in CIT v. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] - goodwill is an asset under explanation 3(b) to Sec. 32(1) Decided against Revenue.
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2014 (8) TMI 862
Jurisdiction of CIT u/s 263 - revision - erroneous order - nature of receipt of compensation - revenue or capital receipt Held that:- The scheme of the IT Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue - If due to erroneous order of the assessing officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue relying upon Malabar Industries Co. Ltd., Vs. CIT [2000 (2) TMI 10 - SUPREME Court] while making assessment on assessee, the ITO acts in a quasi-judicial capacity - An assessment order is amenable to appeal by the assessee and to revision by the Commissioner under Sections 263 and 264 - the AO carried on the enquiry and came to the conclusion that the addition is not warranted - even the Commissioner considered the position that the AO made enquiries, elicited replies and thereafter passed the assessment order. The grievance of the CIT was that the AO should have made further enquiries rather than accepting the explanation of the assessee - it cannot be said that it is a case of "lack of enquiry" - the CIT is not clear as to what treatment is to be given with reference to the issue - He wanted the AO to cause further enquiry and he had not stated what enquiry the AO has to do - It is not clear from the order of the CIT whether the receipt of ₹ 20 crores is to be treated as revenue receipt or as capital receipt - No doubt, in certain cases it may not be possible to come to a definite finding and, therefore, it is not necessary that in all cases, the CIT is bound to express a final view. But the least that was expected is to record the finding that the order sought to be revised is erroneous and prejudicial to the interests of the revenue - When the AO held that the amount paid to M/s. LECC vide agreement dated 5.5.2006 for purchase of land is a capital expenditure and consequent to non-acting on the MOU the assessee got refunded the ₹ 20 crores from M/s. Walden Properties Pvt. Ltd. which cannot be said to be a revenue receipt - assumption of jurisdiction u/s. 263 of the Act by the CIT itself is not proper and the view taken by the AO is one of the possible views and there is no material before the CIT to vary with the opinion of the AO and ask for fresh inquiry - assumption of jurisdiction by the CIT is bad in law Decided in favour of Assessee.
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Customs
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2014 (8) TMI 880
Provisional assessment - Finalization attained later on - Interest demand - Whether interest shall be levied on the differential duty in respect of provisional assessments made before 13.07.2006 but finalised on 18.07.2011. - Held that:- There is no dispute of the fact about the import and the date of provisional assessment as well as date of finalisation thereof. Provisional assessments were completed on 18.02.2005 and finalisation thereof was made on 18.07.2011. Sub section 18(3) of Customs of the Act authorising recovery of interest came to the statute book on 13.07.2006. Rule of interpretation guides to hold that when subsection (3) was not in force on the date of filing of Bills of entry nor existing even on the date of finalisation of provisional assessments, but was enacted on 13.07.06, that shall have no application to the case of the appellant for the reason that it is, by now, well settled that the statutory amendments, either creating fresh liability hitherto not existing or extinguishing accrued rights would be considered prospective unless statute either specifically or by necessary implication gives such provision retrospective effect. Honble High Court of Gujarat in the case of CC(preventive) v. Goyal Traders reported in [2011 (8) TMI 720 - Gujarat High Court] held that liability to pay interest created by statute shall have prospective application for which Revenues contentions are devoid of merit and the impugned order has no basis - Decided in favour of assessee.
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2014 (8) TMI 879
Duty demand - Bar of limitation - According to the Revenue, the date of presentation of bill of entry is the date from which limitation will be counted. Assessee controverts the same saying that the date on which the assessment was completed that shall be the date to count limitation - Held that:- Appellant is correct to say that the demand raised on a particular date may aggrieve him and that date gives rise to the cause of action against the consequence of assessment - In the absence of records of the lower authorities today before us, the matter is remanded to the Commissioner (Appeals) to call for the bill of entry and examine the date on which assessment was completed and the date on which assessment order was served on the assessee. Limitation shall be calculated from the date of service. If there was delay, delay may be condoned on the basis of facts and circumstances of the case - Matter remanded back - Decided in favour of assessee.
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2014 (8) TMI 878
Disposal of representation - appeal to Commissioner (Appeals) under section 128 - Held that:- Once representation was made to learned Commissioner, he was required to pass an order against that. But he failed to do so. The representation was disposed by Assistant Commissioner. Appeal was therefore rightly filed before Commissioner (Appeals). Accordingly, the impugned order is set aside and both the appeals are remanded to the Commissioner (Appeals) to dispose the matter on merits of the case. It should always be remembered that an authority who he hears a matter, that authority should only pass the order following the ratio laid down in the case of Gullapalli Nageshwari Rao v. Andhra Pradesh State Road Transport Corporation [1959 (8) TMI 42 - Supreme Court of India] Decided in favour of assessee.
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2014 (8) TMI 877
Port restriction - Import of secondary/defective HR Steel Strips/Coil falling under heading 7209.90 free of duty under Notification No.52/2003-CUS dated 31/03/03 at ICD Ludhiana - contravention of the provisions of the ITC (HS) (Licensing Note No.4 of Chapter 72) - Revenue contends that Import of Secondary/Defective Steel items i.e. HR Coils, HR Sheets, CR Coils/ Sheets etc. shall be allowed only through the Customs Sea Ports at Mumbai, Chennai or Kolkata and the imports of these consignments shall be accompanied by pre-shipment inspection certificates regarding description of the material, quality, chemical analysis of the material, visual inspection, thickness and width of the material - Held that:- The reason for this restriction would be that expertise for examination of such goods would be available only at the major ports and not at the every port. The import of the goods, in question, at ICD, Ludhiana, notwithstanding the fact that the procurement certificates issued by the Superintendent permitted their import at this ICD, is contrary to the ITC provisions. Therefore, I am of the view the goods have been correctly confiscated. However, looking to the circumstances of the case, the penalty on the appellant under Section 112 (a) of the Customs Act, 1962 is waived and the redemption fine is reduced to ₹ 1,00,000 - Order modified.
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Service Tax
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2014 (8) TMI 896
Waiver of pre deposit - CENVAT Credit - Availment on SIM cards - credit has been denied on the ground that SIM Cards are capital goods classifiable under Chapter CETH 85 - Held that:- appellants purchase the SIM Cards, load the software and thereafter sell it through the dealers and after sale to a customer, the SIM Card is activated and the process of provision of Telecommunication service commences. That being the position, the claim of the appellant that SIM Card is an input for them and is used for providing the output service on a prima facie basis seems to be justifiable. Therefore I consider that the appellant has made out a prima facie case in respect of the amount of ₹ 3,25,168/- and therefore the requirement of pre-deposit of this amount has to be waived. Demand of interest on reversal of cenvat credit - Held that:- From the reading of Section 75 there is no requirement of determination of the amount to be demanded for demanding interest. In any case in this case there is no dispute as regards the amount of credit wrongly taken and it is a fact that by the time department found out about wrong availment, the appellant had become eligible for the credit from 1-4-2008. That being the position, the a claim that duty should have been quantified and demanded (in this case wrongly availed credit) becomes only a technical formality and there is no clear requirement under Section 75 that such a technical formality should be completed for demanding any interest. If this claim is allowed, the provisions of Rule 14 which requires interest to be paid where credit has been wrongly availed becomes meaningless and no interpretation can be given to the law which will defeat the purpose of any of the provisions of the law. appellant has not been able to make out a case for complete waiver - Partial stay granted.
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2014 (8) TMI 891
Construction of residential complex service - failure to obtain registration, file return or remit service tax due on the consideration received by way of advances for sale of residential apartments constructed as part of the complex - Held that:- In the case of Maharashtra Chamber of Housing Industry vs. UOI [2012 (1) TMI 98 - BOMBAY HIGH COURT] it was observed that, the explanation inserted vide Finance Act, 2010 with effect from 1.7.2010, requires to be construed as prospective; and prior to introduction of the Explanation, constructions on ones own properties by a builder /developer for the purpose of sale thereafter would not tantamount to rendition of this taxable and would therefore be beyond the reach of levy and collection of service tax under construction of residential complex service.- the impugned order, of the Commissioner (Appeals) is seen to be impeccable, warranting no interference - Decided against Revenue.
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2014 (8) TMI 890
Business Auxiliary Service - Export of services - services provided to overseas entity - conducting seminars / presentations / International talk tours / meetings / conferences for dermatologists, retailers and hospitals to educate them about the efficacy of pharmaceutical products - Held that:- appellants plea is that since the BAS provided falls within the ambit of Rule 3 (3) of the Export of Service Rules, 2005 and the consideration for rendition of the service was received in convertible foreign exchange activity, the same is excluded from liability to tax. The primary authority rejected this contention and confirmed service tax demand of ₹ 44,64,810/- apart from interest and penalties under Sections 77 and 78 of the Act, for the whole of the period in issue - assessee is entitled to exempt from the tax for the services provided after 27.2.2010 and directed re-computation of the demand and penalty under Section 78 accordingly - Following decision of Paul Merchants Ltd. vs. C.C.E. , Chandigarh reported in [2012 (12) TMI 424 - CESTAT, DELHI (LB)], decided in favour of assessee.
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2014 (8) TMI 889
Business Auxiliary Service - corporate agent for procuring or soliciting insurance business - it is contended that the service tax liability has been discharged by Oriental Insurance Co. Ltd. on reverse charge basis and, therefore, the appellant is not liable to pay service tax - Held that:- It is seen that the appellant is only canvassing/promoting business of insurance company and, therefore, the said activity, prima facie, comes within the purview of Business Auxiliary Services' and the liability to pay service tax is on the service provider and not on the recipient of service. Therefore, even if the service tax liability has been discharged by the recipient of the service, that cannot compensate for the payment required to be made by the appellant nor does it obliterate the liability to pay service tax by the appellant. Therefore, the appellant has not made out a prima facie case for grant of stay - Partial stay granted.
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2014 (8) TMI 888
Change in the classification - Execution of electrical, interior and minor civil works - Erection, Commissioning & Installation Service - Held that:- Adjudicating authority changed the classification of the service without giving any opportunity to the appellant to defend the case. In view of that, we set aside the impugned order and remand the matter to the adjudicating authority to decide afresh after considering the submission of the appellant. It is made clear that the appellant have not disputed the demand of tax in respect of Sl. Nos. 2, 3 and 4 mentioned in the above Table. The adjudicating authority shall also examine the deposit made by the appellant in respect of Sl. Nos. 2, 3 and 4. Needless to say that the appellant shall be given a reasonable opportunity of hearing before passing the order - Decided in favour of assessee.
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2014 (8) TMI 887
Manpower supply services - extended period of limitation - appellate authority has confirmed the service tax demand of ₹ 2,70,249/- in respect of "manpower supply services" rendered during June to September, 2005 and set aside the demand pertaining to the said service for the period prior to 01/06/2005 - Held that:- Service tax in India prior to 2012 was selective in scope of levy and all activities were not taxed, but only taxable services as defined in law were liable to tax. Even when "Airport service" was introduced, a service which was not a taxable service, was not liable to service tax under the "Airport Service" if the said service performed outside the airport or civil enclave was not taxable. A Circular issued by the CBE & C in this regard clarifies this position - if any activity is not taxable service as defined in law, even if it is rendered within the airport, it would not be taxable. That is why the renting of immovable property in an Airport prior to 01.06.2007 was not taxable under the "Airport Services" since "renting of immovable property" was not a taxable service. Similarly, there are other services performed in the Airport, such as Porterage Services, Escort services, Wheelchair Services and so on. It is not, the case of the Revenue that they are collecting Service Tax on these services rendered in the Airport as these are not taxable services otherwise. On the same logic, supply of manpower services cannot be taxed prior to 01.06.2005 under the category of Airport Services - operation of order of commissioner not stayed.
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2014 (8) TMI 886
Waiver of pre deposit - Adjustment of excess credit taken in subsequent year - Bar of limitation - Held that:- Though the CENVAT Credit Rules do not provide for adjustment of excess credit taken in a given year, against the short credit taken during the subsequent year, in the facts of the case before us, it is evident that the appellant had taken excess credit of ₹ 1.01 crores in 2008-09 as against short credit availed of ₹ 1.11 crore during 2009-10. The mistake has occurred only due to rounding off of the percentages of the credit to the nearest decimal. Thus, there is no evidence forthcoming from the records that the taking of credit was on account of any intention to evade service tax. The show cause notice has been issued invoking the extended period of time. Therefore, the appellant has made out a prima facie case on account of time-bar. Accordingly, we grant unconditional waiver from pre-deposit of the dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal. - Stay granted.
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Central Excise
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2014 (8) TMI 885
Concessional rate of duty provided under notification No. 24/91-CE dated 25.7.91 - Assesee filed classification list claiming the effective rate of duties in terms of notification No. 1/93-CE dated 28.2.93 - Held that:- After enjoying the benefit of notification No. 1/93 up to clearance of ₹ 50 lakhs, the assessee chooses to avail of the benefit of Notification No. 5/94-CE in respect of goods cleared subsequently. However, the dispute in that case was in respect of availment of both the notifications in respect of same consignment. The facts in the present case are different. The appellant had initially availed the benefit of notification No.1/93-CE up to the value of ₹ 75 lakh. Thereafter the clearances beyond the said clearance of ₹ 75 lakhs are sought to be cleared in terms of notification No. 24/91 CE. We find that said issue was the subject matter of the Tribunals decision in the case of Mamta Cement Co. vs. Commissioner of Central Excise, New Delhi [1999 (7) TMI 302 - CEGAT, NEW DELHI]. It stand held that when there are more than one notifications on the same issue, the assessee is entitled to avail the benefit of either one and the option lies with him. The Tribunal held that after exhausting the limit of clearance provided in terms of notification No. 1/93 CE, he was entitled to benefit of notification No. 5/94, in respect of subsequent clearances. appellant is claiming the benefit of notification No. 24/91 CE, after exhausting the exemption limit in terms of notification No. 1/93 CE, he would be entitled to benefit of notification No. 24/91-CE in respect of subsequent clearance - Decided in favour of assessee.
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2014 (8) TMI 884
Valuation of the Poly Propylene Multi Filament Yarn, consumed captively in the manufacture of Narrow Woven Fabrics - Held that:- Revenue entertained a view that the said yarn should be assessed to duty in terms of provisions of Rule 8 of the Central Excise (Valuation) Rules, which provided the 110% of the cost of manufacture. The appellants stand is that in as much as they are also selling the yarn to the other independent buyers, and there is no dispute about the value adopted for payment of duty in such cases, the same assessable value should be adopted for the purpose of captively consumed yarn. - provisions of Rule 8 of Central Excise (Valuation) Rules, 2000 would be applicable only when the entire production of a particular commodity is captively consumed. Where a part of the goods are also being sold to independent buyers, the value at which the same are being sold has to be adopted as the assessable value for payment of duty on the captively consumed items - Following decision of Ispat Industries Ltd. vs. CCE, Raigad reported in [2007 (2) TMI 5 - CESTAT, MUMBAI] - Decided in favour of assessee.
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2014 (8) TMI 883
Denial of cenvat credit - Rent-a-cab operator Service and Outdoor Catering Services - Held that:- credit of Outdoor Catering (Canteen) Services is concerned, appellant has reversed a credit if ₹ 1,34,529 - In view of the order in the case of M/s Baroda Textile and [2014 (8) TMI 399 - CESTAT AHMEDABAD], appellant has made out a case for waiver of the remaining amounts. It is accordingly ordered that there will be a stay on the recoveries of the remaining amounts till the disposal of this appeal - Stay granted.
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2014 (8) TMI 882
Manufacture of sugar syrup - captive consumption in manufacturing of final product - marketability - Held that:- In an identical matter involving dutiability of sugar syrup, in the case of Shiv Shakti Processed Foods Vs. Commissioner of Central Excise, Pune -I, this Tribunal vide [2014 (7) TMI 395 - CESTAT MUMBAI] remanded the matter back to the adjudicating authority to consider the issue of marketability of sugar syrup and thereafter, consider the dutiability thereon relying on the decision of this Tribunal in the case of Ambaji Foods (India) PVt. Ltd. Vs. Commissioner of Central, Kanpur reported in [2010 (8) TMI 714 - CESTAT, NEW DELHI]. In the present case also, the adjudicating authority has not considered and given any finding as to the marketability of the sugar syrup and merely concluded that since sugar syrup is manufacture in the factory, the same is dutiable. There are a number of decisions Hon'ble Apex Court, wherein it has been held that mere inclusion of a product in the Heading does not determine its exigibility unless it is shown that the product emerging at the intermediate stage is marketable. Therefore, in the present case also following the earlier decision, we remand the matter back to the adjudicating authority for consideration whether sugar syrup is marketable or not and thereafter, pass a speaking order as to the duty liability of the appellant. - Decided in favour of assessee.
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2014 (8) TMI 881
Waiver of predeposit of cenvat credit - written off of inputs / stock - shortage in stock - Held that:- Demand has been confirmed on the ground that even though the credit had been availed on the inputs, but the same were not used in or in relation to the manufacture of finished goods. It is the submission of the ld. Advocate for the Applicant that the inputs were not removed from the factory and were lying inside the factory premises even if the same were written off from their books of accounts. Therefore, no cenvat credit is required to be reversed. It is the case of the Department that the applicant could not justify through evidences that even after writing off the inputs from their books of accounts, the same are still usable and available inthe factory. I find that the case rests onappreciation of evidences adduced by both sides. Prima-facie, the show-cause notice dated 4th May, 2007, had been issued relating to shortage of stock of inputs noticed in the premises of the Applicant. - stay granted partly.
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CST, VAT & Sales Tax
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2014 (8) TMI 895
Rate of tax - Whether even otherwise, where two views are possible in respect of the tyres and tubes of tractor on which the additional tax of one percent or three per cent was to be levied and in view of the fact that tyres and tubes of tractors were not excluded from the description of the goods mentioned at serial no.1 of Schedule II of VAT Act and other interpretation that tractor has not been mentioned at serial no.5 while cycle, cycle rickshaw have been mentioned, the view in favour of dealer has to be accepted - Held that:- Tractor tyres and tubes are nowhere mentioned in any of the clauses of Section 14 of the Central Sales Tax Act,1956. It must be borne in mind that these are taxing statutes and have to be interpreted very strictly and the intention of Legislature is to be culled out from what is stated in the statute and not on mere presumption of what the legislature intended to say but did not say. Clause (xiv) of Section 14 of the Act, 1956 only mentions wheels, tyres, axles and wheels sets. Tractor tyres are not mentioned therein. Mere mention of 'Tyres' in clause (xiv) cannot lead to the inference that tractor tyres and tubes are also 'included'. The word 'Tyres' follows the word 'wheels' and is succeeded by the words 'axels and wheel sets'. The doctrine of 'ejusdem generis' provides that the word or words succeeding any word must partake of the same meaning or context or flavour as the word immediately proceeding it. So far as clause (a) of subsection 2 of Section 3-A is concerned Scheduled-II is specifically omitted therefrom which means that goods mentioned in Entry 125 of Scheduled-II will also be subject to levy of additional tax as goods "other than declared goods in view of Entry I to the Notification dated 31.3.2011 - from a composite analysis of the various statutory provisions as well as the Notification dated 31.3.2011 and Notification dated 7.9.2012 it is seen that the only Entry under which Tractor tyres and tubes can be subjected to additional tax is Entry 1 of the Notification dated 31.3.2011 and such additional tax will be paid at 1% and not 3% under Entry 5 - Decided in favour of assessee.
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2014 (8) TMI 894
Issuance of Form C - Issue of writ of mandamus - Imposition of tax liability at enhanced rate - Held that:- When an Act provides a mechanism for payment at concessional rate of tax, a registered dealer would be entitled to avail this facility provided Form-C is given to him by the purchaser. Rule 8 of the Central Sales Tax Rules as applicable in the State of U.P. provides that Form-C can be issued by the department to a registered dealer. We find that the stand of the State that the Managing Director, PVVNL is only registered under the U.P. Trade Tax Act and is not registered under the Central Sales Tax Act has not been denied by the petitioner. Since the contract was entered between the petitioner and the Managing Director of PVVNL, Form-C could only be issued by the said Managing Director of PVVNL. The trade tax department was justified in restraining the Executive Engineer from issuing Form-C to the petitioner, who had nothing to do with the execution of the contract Under the contract, the petitioner was entitled to receive Form-C from the purchaser, namely, from the Managing Director of PVVNL. The said respondent was obliged to issue Form-C to the petitioner to enable the petitioner avail concessional rate of tax in his assessment proceedings. Since the petitioner did not receive Form-C from PVVNL the petitioner became liable to pay tax at a higher rate. We are of the opinion that the petitioner is entitled to recover the differential rate of tax etc. from PVVNL as per the contract. However, the writ jurisdiction is not the appropriate proceedings for recovery of the tax. We find that there is a contract between the petitioner and PVVNL in which there is a clause relating to arbitration for settlement of a dispute. We, are accordingly, of the opinion that no mandamus could be issued to PVVNL-respondent no.5 for issuance of Form-C. - Decided against assessee.
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2014 (8) TMI 893
Waiver of pre-deposit - Interpretation of Section 18A(5) of the Central Sales Tax Act, 1956 - Tribunal has directed the petitioner to deposit 1/3rd of the disputed tax and to produce proof of deposit - Held that:- Section 18A(5) of the Act empowers the Tribunal to pass an order of Stay subject to such terms and conditions as it thinks fit, and such order may, inter alia, indicate the portion of tax as assessed, to be deposited prior to admission of the appeal. A bare reading of the said provision makes, it makes clear that the word used "such order" means an order of stay in which the tribunal may put such terms and conditions as it thinks fit and may indicate the portion of tax as assessed to be deposited prior to admission of the appeal. Therefore, in my view, no pre-deposit is required to be made under Section 18A(5) of the Act for consideration of stay application. - order set aside - matter remanded back for reconsideration.
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2014 (8) TMI 892
Penalty under Section 10-A of the Central Sales Tax Act - petitioner had purchased machineries at concessional rate of tax by using Form-C when the petitioner does not have any liability of tax and was only involved in the execution of job work - Contravention of Section 10A - Non admission of any tax liability on the work done by it for NCL - Held that:- The impugned order indicates the reason for imposition of penalty, namely, that since the petitioner has not admitted any tax liability on the execution of the works contract, hence the petitioner has contravened the provisions of Section 10-A of the Act. Such reasoning is patently perverse and does not come within the parameters of imposition of penalty under clause (b), (c) and (d) of Section 10 of the Act. The learned standing counsel, however, submitted that penalty has been imposed under clause (d) of Section 10 of the Act, which stipulates that if a person after purchasing any goods for any of the purposes specified in clause (b), (c) or (d) of sub-Section (3) or sub-Section (6) of Section 8 fails without any reasonable excuse to make any use of goods for any such purpose in which case penalty under Section 10-A of the Act could be imposed. From a perusal of the counter affidavit that nothing has been indicated that the equipment so purchased was not in consonance with the declaration given in Form-B nor it has been disclosed that the equipments so purchased are not being used by the petitioner. Imposition of penalty was wholly illegal and without any basis. The reasoning mentioned in the impugned order is in gross violation of the provisions of Section 10-A of the Act. Consequently, the impugned orders imposing penalty cannot be sustained - Decided in favour of assessee.
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