Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 8, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Deduction u/s 40(b) - assessee was indirectly trying to bring in M/s Deloitte Haskins & Sells, Mumbai, another firm, which was already a participating firm, as its partner, circumventing the limit of maximum 20 members. - AO to pass fresh ordder - AT
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Unexplained credits - additions u/s 68 - onus to prove - When an explanation is called for from the assessee, he or she must take care to substantiate her explanation by such supporting evidence as may be in his or her power to produce. - additions confirmed - HC
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Whether realization of income-tax dues from the assesses under the Income Tax Act, 1961 will have priority over the secured debt in terms of the State Financial Corporations Act, 1951 - Held no - HC
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Income u/s 5(2) - Once the entire operations are confined to the purchase of goods in India for the purpose of export, the income derived therefrom shall not be deemed to accrue or arise in India and it shall not be deemed to be an income under Section 9 of the Act - HC
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Method of computing profit rate - assessee's past history was available and there was no material difference in the facts pertaining to the relevant assessment year and the past history year - additions deleted - HC
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Validity of notice u/s 158BD - Search operation done against petitioner's husband - The conditions precedent for invoking the provisions of section 158BD, are required to be satisfied before the provisions of the said Chapter are applied in relation to any person other than the person whose premises had been searched - HC
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Depreciation - nursing home is equipped to enable the sterilisation of surgical instruments and bandages to be carried on which cover 250 sq. ft. and that nursing home is also equipped with an operation theatre - depreciation should be allowed as plant and machinery - HC
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Agricultural land sold by the assessee is not a 'capital asset' since it is in rural area within the meaning of section 2(14)(iii), the impugned receipt cannot be brought to tax as capital gain by invoking section 54B. - AT
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Transfer pricing adjustment - when a quasi Judicial Authority like the DRP deals with lis u/s 144C then it is obligatory on its part to ascribe cogent and germane reasons as reasons are the heart and soul of the matter and facilitate the appreciation of the order when the order is called in question either before a superior forum or an Appellate forum. - AT
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Forward contract cancellation loss - whether be treated as business loss or speculation loss - the assessee was not a dealer in foreign exchange. - the export contracts entered into by the assessee for export in some cases failed. - allowed as business loss - AT
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Procedure and criteria for selection of scrutiny cases under compulsory manual during the financial-year 2013-2014
Customs
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Valuation of Goods - expenditure incurred by the importer if not a consideration between the buyer situated abroad and the importer - not required to be included in the assessable value. - AT
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Confiscation of goods – export of prohibited goods - stay application - even if the goods were prohibited the customs authorities as well as the appellants genuinely believed that the same was not prohibited - stay granted - AT
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Adjudication of Advance Bill of Entry - Commissioner can assessed the Advance Bill of Entry as prayed by the assesse in accordance with law - AT
Wealth-tax
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Nature of the asset - If the construction was partly completed or the building is under construction, in that case the exception engrafted in the definition of the words “urban land“ does not get attracted - In that event the urban land or undivided interest of the assesse continues to be open for taxation within the category of urban land - HC
Service Tax
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Service of manpower supply - cutting/harvesting of sugarcane and transportation of the same from the farmers' fields to the sugar factory – work are per tonnage of sugarcane supply, both for harvesting as well as transportation. - not taxable as manpower supply services - AT
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As per notification No. 17/2009-ST, specific category of services of service provided under section 65(105)(zzb) of the Finance Act, 1994 are only eligible for refund. The category of services claimed as refund by assessee is not eligible for refund - AT
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Nature of service rendered by foreign agent - import of service - Prima facie demand of tax under Business Support Service was sustainable – foreign agents were providing services to the assesse in relation to the assesse’s business and the different activities would be covered in inclusive portion of the definition - AT
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Service Tax on GTA under reverse charge - while Rule 2(l) and 2(p) cover two classes of persons, the recipient of GTA services, by virtue of the Explanation to Rule 2(p) of the CENVAT Credit Rules, as a provider of output service, was entitled to all benefits that a person providing input service would be entitled to in the matter of CENVAT credit adjustment - HC
Central Excise
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Recovery of duty from the successor of the defaulter - Though assets were sold, sale of assets by itself would not be transfer of business in whole or in part. - appellant is not successors in business or trade of Vaishnavi - AT
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Cenvat credit - fake invoices - Unbeleivable that huge quantity of winding wire of copper has been shown to be transported through passenger vehicle Tata Sumo in single day from Delhi to Jaipur - these activities had been fraudulently undertaken by the appellant - AT
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Period of filing of rebate claim under Section 11B - Even though certain documents filed along with the rebate claim application had been returned to the petitioner, it cannot be said that the rebate claim application had not been filed on 5-11-2007. - date of shipment was made only on 23-12-2008 - rebate allowed - HC
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Period of limitation of refund claim under section 11B of the Central Excise Act – Payment made herein is also deemed to be under protest and no limitation is applicable and the claim is maintainable and is rightly decided by the CESTAT - HC
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Remission of duty under Rule 21 of the Central Excise Rules, 2002 - In case of breakage/destruction of final product, remission can be claimed under Rule 21 of Central Excise Rules, 2002, but the remission is granted subject to condition of reversal of CENVAT credit availed on the inputs - CGOVT
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When any circular is issued clarifying the provision of any previous circular, the same is applicable retrospectively. - CGOVT
Case Laws:
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Income Tax
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2013 (8) TMI 222
Deduction u/s 40(b) - Partnership firm or association of persons - A.O. allowed deduction to assessee - CIT revised the order u/s 263, considered assessee as AOP and disallowed deduction - Held that:- Assessee was a renowned partnership firm and was well aware that number of partners cannot exceed 20. It is a well settled principle of law that what is permissible is tax planning, but not evasion. When an attempt is made by a concern to evade tax using subtle camouflages, bounden duty of the authorities is to find out the real intention. It is the duty of the Court in every case, where ingenuity is expended to avoid taxing and welfare legislations, to get behind the smoke screen and discover the true state of affairs - assessee was indirectly trying to bring in M/s Deloitte Haskins & Sells, Mumbai, another firm, which was already a participating firm, as its partner, circumventing the limit of maximum 20 members. It is also obvious that Assessing Officer despite having the amendment deed with him, had not gone into these aspects. Assessment order is a crisp one accepting the income returned by the assessee. Assessee has not been able to place any record to show that Assessing Officer had called for any details regarding the number of partners during the course of assessment. A crisp order by itself might not show that Assessing Officer had not applied his mind. But, when the circumstances show that despite availability of materials, is that Assessing Officer had not looked into such aspects nor applied his mind. Assessee had claimed substantial amount as remuneration to its partners under Section 40(b) of the Act and this was allowed as such without considering the crucial aspect of the legality of its claim of status as a firm. CIT went over board when he directed the Assessing Officer to modify the assessment order by treating the assessee as an AOP and disallow the claim of remuneration to its partners. The CIT ought have simply set aside the order of A.O. for consideration of issue afresh, since it was erroneous insofar as it was prejudicial to the interests of Revenue and to this extent, order of ld. CIT required modification - Decided partly in favour of assessee.
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2013 (8) TMI 197
Penalty u/s 272A(2)(k) - Quarterly TDS return delayed - CIT deleted penalty - Tribunal held that no evidence has been brought to show that there was any correspondence undertaken with the deductees for obtaining PAN numbers - Held that:- CIT(A) could not have, without any discussion as to whether the assessee had sufficient cause for not being able to file the returns within the prescribed time, deleted the penalty merely on the ground that the tax was already deducted. In his essence, this is all that CIT(A) had done in his appellate order - Tribunal also could have at least called for the documents on record before CIT(A) before holding whether there was any evidence with respect to the reason for the assessee's inability to file the returns in time - Case remitted back to CIT - Decided in favour of assessee.
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2013 (8) TMI 196
Unexplained credits - additions u/s 68 - onus to prove - Held that:- the assessee, by merely furnishing a list, did not discharge her burden. Acceding to the contention of the learned counsel would amount to laying down a rule that it is for the Revenue to find out whether the assessee has or may have an explanation to offer. When an explanation is called for from the assessee, he or she must take care to substantiate her explanation by such supporting evidence as may be in his or her power to produce. Who are the buyers; how or in what circumstances did they advance the sum of Rs. 4,74,681/- and who are the sellers ? How and in what circumstances did the sum of Rs. 42,78,717/- become payable to them was in the special knowledge of the assessee. It was, therefore, her obligation to disclose cogent evidence in that regard. She claims to be a commission agent. The column 5 of GTI-1 provides for deduction of commission. Therefore it should not have been difficult for the assessee to disclose the relevant evidence about the transactions allegedly made by the assessee on behalf of suppliers of fish or the trawler owners. Her failure to do so even prima facie amounts to no explanation at all. Following decision of Hindusthan Tea Trading Co. Ltd. v. Commissioner of Income-Tax [2003 (3) TMI 53 - CALCUTTA High Court], Collector of Customs v. D. Bhoormal [1974 (4) TMI 33 - SUPREME COURT OF INDIA] and CIT. v. Mohanakala [2007 (5) TMI 192 - SUPREME Court] - Decided in favour of Revenue.
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2013 (8) TMI 195
Secured debts - Whether realization of income-tax dues from the assesses under the Income Tax Act, 1961 will have priority over the secured debt in terms of the State Financial Corporations Act, 1951 - overriding charge - Held that:- Regard being had to the provisions of the State Financial Corporations Act, it is clear that a first charge on the property is created clearly giving priority to the dues of the said statutory authority over all other charges on the property, on the basis of the mortgage, since the Income Tax Act, 1961 does not provide for a priority to the statutory charge over all other charges including mortgage under the 'SFC Act' - Following decision of State Bank of Bikaner and Jaipur Vs. National Iron and Steel Rolling Corpn. [1994 (12) TMI 72 - SUPREME Court] - Decided in favour of petitioner.
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2013 (8) TMI 194
Income u/s 5(2) - Income deemed to accrue or arisen in India u/s 9 - Part of business done in India - CIT upheld imposition of tax - Tribunal held that assessee purchases the goods for the purpose of exports, hence not liable to tax - Held that:- assessee is not carrying any business in India. They have established a liaison office. The object of establishing the said office is to identify the manufacturers, give them the technical know-how and see that they manufacture goods according to their specification which would be sold to their affiliates. The person who purchases the goods pays the money to the manufacturer, in the said income, the assessee has no right - The buyer who is a non-resident may in turn pay some consideration to the assessee outside India, the contract between the assessee and the buyer if at all is entered outside India. Therefore, even if any income arises or accrues to the assessee, it is outside India. As the orders are placed by the assessee with the manufacturer and the goods are manufactured according to their specification which is the requirement of the buyer and even if it is held, though the goods are supplied to the buyer, it is deemed to be supplied to the assessee, the whole object of this transaction is to purchase goods for the purpose of export. Once the entire operations are confined to the purchase of goods in India for the purpose of export, the income derived therefrom shall not be deemed to accrue or arise in India and it shall not be deemed to be an income under Section 9 of the Act - Following decision of Commissioner of Income-Tax, Punjab v. R.D. Agarwal and Company [1964 (10) TMI 9 - SUPREME Court]. The activities of the assessee in assisting the Indian manufacturer to manufacture the goods according to their specification is to see that the said goods manufactured has an international market, therefore, it could be exported. In the process, the assessee is not earning any income in India. If at all he is earning income outside India under a contract which is entered outside India, no part of their income could be taxed in India either under Section 5 or Section 9 of the Act. - Decided against the Revenue
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2013 (8) TMI 193
Method of computing profit rate - A.O. used comparable method of accounting - CIT upheld the method of accounting but reduced the amount of addition - Tribunal deleted disallowance - Held that:- The CIT(A) has given cogent reason for not endorsing the approach of the AO in making assessment with reference to the case of another assessee after finding it to be not a directly comparable case and hence, not a safe guide more particularly, when assessee's past history was available and there was no material difference in the facts pertaining to the relevant assessment year and the past history year. The CIT(A), even while accepting past history as the relevant basis for assessment, proceeded to retain a part of the addition without cogent and sufficient reason therefor. The Tribunal, therefore, while endorsing the basis adopted by the CIT(A), has found no reason to sustain any addition and hence, deleted the addition altogether - Tribunal cannot be faulted in accepting the profit rate as declared by the assessee while not approving the rate as applied by the AO - Following decision of ) CIT v. Jaimal Ram Kasturi & Partners [2013 (7) TMI 813 - RAJASTHAN HIGH COURT] - Decided against Revenue.
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2013 (8) TMI 192
Penalty u/s 271(1)(c) - Failure of TDS deduction - Tribunal upheld disallowance but deleted penalty - Held that:- disallowance was due to non-payment of TDS, which was at the most a technical default. There being nothing to indicate any concealment of the income or furnishing of inaccurate particulars of income by the assessee, the Assessing Officer was rightly not justified in levying the penalty - Decided against Revenue.
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2013 (8) TMI 191
Disallowance on depreciation on intangible asset - Tribunal deleted disallowance - Held that:- installation of software could be checked by the technical person whether it was loaded in the system or not. Therefore, the finding in the survey cannot be relied upon. Even the AO has accepted the fact that some of the software were developed locally and installed in the system - valuation report of assets prepared by Dalal Mott Macdonald which was found in survey which indicated that software developed and installed by the assessee in the system. The assessee produced all the vouchers and receipt for the same which was also examined by learned CIT(A). Nothing is produced during the course of arguments to rebut the findings of learned CIT(A) - Decided against Revenue. Disallowance of interest u/s. 36(1)(iii) - Tribunal deleted addition - Held that:- advances made to the different concerns were for the purpose of purchase of raw material or for the purchase of plant-machinery. On having found from the record that there was sufficient fund available with the assessee-respondent, it had held that there was no question of diversion of interest bearing funds by way of loan and advances - Following decision of S.A. Builders Ltd. Vs. Commissioner of Income-tax(Appeals) and another [2006 (12) TMI 82 - SUPREME COURT] - Decided against Revenue. Disallowance of loss on sale of raw materials - Tribunal deleted addition - Held that:- assessee had provided the requisite details elaborately before the CIT(A) and based on that the remand report was called for from the Assessing Officer. It was noted by the Tribunal that the assessee suffered a loss and this basic fact was not even challenged by the Assessing Officer in the remand report submitted to the CIT(A) - Decided against Revenue. Difference in balance - Tribunal deleted addition - Held that:- In absence of any difference in details and reconciliation statement furnished by the assessee, the CIT(A) deleted the addition and the same came to be confirmed by the Tribunal. There being no material to take a contrary view & as both the authorities have concurrently held to delete the said addition - Decided against Revenue.
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2013 (8) TMI 190
Validity of notice u/s 158BD - Search operation done against petitioner's husband - Certain income found belonging to petitioner - Held that:- When notice under Section 158BD was issued against the petitioner, assessment order of petitioner's husband was not in existence - On the date of issuing notice under Section 158BD of the Act, there was no satisfaction recorded by the Assessing officer of the searched person - The conditions precedent for invoking the provisions of section 158BD, thus are required to be satisfied before the provisions of the said Chapter are applied in relation to any person other than the person whose premises had been searched or whose documents and other assets had been requisitioned under section 132A - Following decision of Manish Maheshwari Vs. Asst. Commissioner of Income-tax and another [2007 (2) TMI 148 - SUPREME COURT OF INDIA] - Decided in favour of Assessee.
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2013 (8) TMI 189
Depreciation on nursing home - Tribunal treated nursing home as plant and machinery and allowed depreciation - Held that:- if it was found that the building or structure constituted an apparatus or a tool of the taxpayer by means of which business activities were carried on, it amounted to a "plant" ; but where the structure played no part in the carrying on of those activities but merely constituted a place wherein they were carried on, the building could not be regarded as a plant - assesses nursing home is equipped to enable the sterilisation of surgical instruments and bandages to be carried on which cover 250 sq. ft. and that nursing home is also equipped with an operation theatre. Therefore the plant and nursing home stated as plant and machinery and the depreciation should be allowed on it accordingly - Following decision of CIT Vs. Dr. B. Vankata Rao [1999 (2) TMI 11 - SUPREME Court] - Decided against Revenue.
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2013 (8) TMI 188
Addition u/s 68 - Portfolio Investment in Shares - CIT(A) deleted the addition - Held that:- The impugned investments are not related to the previous year to the assessment year under consideration. When the fact being so the provisions of Section 68 is not applicable to the said investments for the year under consideration as the provision is applicable only when the sum is found credited in the books of the assessee in the previous year relevant to the assessment year. Also find merit in the contention of the assessee that the assessee has not been required to maintain any books of account in the earlier years as the only source of income is out of her salary. It is also found that the past investments made by her are duly incorporated during the F.Y. 31/3/2007 - the impugned addition u/s 68 is not sustainable in law and in facts. In favour of assessee. Disallowance of sale of agricultural land as 'short term Capital Gain' - Held that:- It is not disputed by the Revenue at any stage of the assessment proceedings that the subject matter of transfer is agricultural land and also the sale deed clearly indicates that the sale pertains to agricultural land. In view of that matter, no infirmity in the order of the CIT(A) in holding the immovable property as agricultural land. Thus no merit on in the contention of the Revenue that the assessee has not discharged her onus of proving the subject matter of sale as agricultural land. Agricultural land sold by the assessee is not a 'capital asset' since it is in rural area within the meaning of section 2(14)(iii), the impugned receipt cannot be brought to tax as capital gain by invoking section 54B. As the provisions of section 54B are not applicable to the facts of the case, the issue of holding period of the land for less than 2 years does not arise at all in the instant case - no reason to sustain the addition made by the AO. In favour of assessee.
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2013 (8) TMI 187
Re opening of assessment - disallowance of deduction u/s 10B and correctness of the interest charged u/s 234B and 234C - Held that:- It is not in dispute that the reassessment proceedings were initiated after expiry of four years from the end of the relevant assessment year and in a case where the original assessment was completed under section 143(3) two conditions have to be satisfied to issue a notice under section 148 of the Act, i.e., (a) failure on the part of the assessee to make a return under section 143 or to a notice issued under sub-section (1) to section 147 or section 148 or disclose fully and truly all material facts necessary for assessment, and (b) income chargeable to tax has escaped assessment. In the instant case computation of total income alongwith annexures as well as the details furnished during the course of regular assessment proceedings clearly indicate that the assessee furnished all the details necessary for the purpose of making an assessment and in the absence of recording a reason that reassessment proceedings were on account of failure on the part of the assessee to furnish true and correct particulars of income, reopening of assessment cannot be said to be valid in law. Under these circumstances we quash the reassessment proceedings. Since the notice issued under section 148 is held to be bad in law, other issues urged by the assessee in its appeal as well as the grounds urged by the Revenue in the cross appeal do not survive for consideration. In favour of assessee.
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2013 (8) TMI 186
Transfer pricing adjustment - Rejection of MacMillan India Ltd as comparable as the financials of Macmillan India Ltd were for the year ended 31st December 2005 whereas the Financials of the tested party are for 31st March 2006 - whether DRP/AO erred in upholding/making an addition under Chapter-X of the Income Tax Act, 1961 - DRP not granted the benefit for adjustment of the Arms Length Price by +/- as per the proviso to section 92C(2) - Held that:- Reiterating the annual closure of the companies it can in no way hamper the comparability of the results as long as the results are for a uniform period. In the case of selection of MacMillan India Ltd as comparable the Annual results of both the Companies are for a period of 12 months as such both the companies have gone through the normal annual business cycle. MacMillan India ltd. operates in 3 major segments. The operating Margin of MacMillan in the publishing segment for the 12 month period ending 31st Dec 2005 is 5.67%. If the TPO's logic is used for comparing results, then the results of no international Company can be used as a comparable, since all the international Companies close their accounts on dates other than 31st March each year & most international Companies use calendar year as their year end. Based on the above, financial data of MacMillan India Ltd. can be used as a comparable. On a perusal of the order of the DRP it has to be set aside as finding support from the judgement of Vodafone Essar Ltd. which has very categorically held that when a quasi Judicial Authority like the DRP deals with lis u/s 144C then it is obligatory on its part to ascribe cogent and germane reasons as reasons are the heart and soul of the matter and facilitate the appreciation of the order when the order is called in question either before a superior forum or an Appellate forum. It is an admitted position on record that in support of its comparables various assertions and facts have been made which has been not dealt with by the DRP. Accordingly, the DRP's order along with the impugned order is set aside and the issue is restored back to the file of the DRP with the direction to pass a speaking order in accordance with law - in favour of assessee for statistical purposes.
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2013 (8) TMI 185
Software development and upgradation charges - Revenue v/s Capital expenditure - Held that:- As decided in Asahi India Safety Glass [2011 (11) TMI 2 - DELHI HIGH COURT] the treatment of a particular expense or a provision in the books of accounts can never be conclusively determinative of the nature of the expense. An assessee cannot be denied a claim for deduction which is otherwise tenable in law on the ground that the assessee had treated it differently in its books - decided in favour of assessee.
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2013 (8) TMI 184
Forward contract cancellation loss - whether be treated as business loss or speculation loss - Held that:- As decided in CIT vs. Friends and Friends Shipping Pvt. Ltd [2013 (5) TMI 458 - GUJARAT HIGH COURT] as relying on Badridas Gauridu (P) Ltd. [2003 (1) TMI 61 - BOMBAY High Court] & Soorajmull Nagarmull case [1980 (9) TMI 69 - CALCUTTA High Court] the expenditure would not be covered under section 43(5) of the Act as speculative transaction. Assessee was not a dealer in foreign exchange therefore, foreign exchange contracts were booked only as incidental to the assessee's regular course of business. Under section 43(5) “speculative transaction” has been defined to mean a transaction in which a contract for the purchase or sale of commodity is settled otherwise than by the actual delivery or transfer of such commodity. However, as state above, the assessee was not a dealer in foreign exchange. In order to hedge against losses, the assessee had booked foreign exchange in the forward market with the bank. However, the export contracts entered into by the assessee for export in some cases failed. Thus the assessee was entitled to claim deduction as a business loss. In favour of assessee.
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Customs
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2013 (8) TMI 214
Valuation of goods - inquiry was made by the department to ascertain the actual value of the goods – they determined the transaction value on the basis of the wholesale market price in India - in case of import of pre-packaged commodities, the MRP at which the imported goods were to be sold was required to be declared on the goods, but the same had not been declared and hence the goods appeared to be liable for confiscation under Section 111(d) of Customs Act, 1962, besides being liable for confiscation under Section 111(m) for misdeclaration of description and value - held that:– order was set aside and the matter was remanded back to original authority - The quantum of penalty on the importer firm shall be in proportion to the value of the goods held to be liable for confiscation - No separate penalty on the partners would be required - goods were not liable for confiscation u/s 111(m) - there was no justification for rejecting the declared transaction value in respect of chandeliers lamps, ceiling lights, glass/spare parts, table lamps, down lamps, spot lights and the same has to be accepted and for the same reasons – the question of confiscation of the goods u/s 111(d) has to be decided only after giving a clear finding as to whether the goods imported were in pre-packaged form so as to attract the provisions of Note 5 (e) of General Note of the Foreign Trade Policy – decided in favour of assessee
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2013 (8) TMI 213
Valuation of Goods - whether charging of PMT as throughput charges from the appellant was required to be included in the value of the imported goods u/s 14 r.w the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Held that:- The charges for transportation of the goods by barges from the mother ship at BFL to the Dharamtar Jetty cannot be added to the valuation of the imported goods for the purpose of levying customs duty - any amount collected by the revenue as duty on barge charges shall be refunded forthwith to the assessee with statutory interest from the date of payment to the date of refund - Similar view had been expressed by the court in CC Kandla vs. Indian Potash Limited (2006 (12) TMI 441 - CESTAT, AHMEDABAD ) - expenditure incurred by the importer if not a consideration between the buyer situated abroad and the importer - not required to be included in the assessable value. Penalty – Held that:- The case goes in assessee’s favour - there was no question of imposing penalties and the same were set aside – decided in favour of assessee.
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2013 (8) TMI 211
Imposition of fine and penalty – confiscation of goods – stay application - whether the items presented for export can be considered to be prohibited – whether there was a misdeclaration or an attempt to export prohibited goods by the assessee justifying the imposition of redemption fine and penalty - Held that:- The confiscation was set aside and redemption fine and penalty are also consequently set aside - in the absence of any mis-declaration or deliberate attempt to export goods which are prohibited without having any ground for a belief that the same were not prohibited - imposition of fine and penalty cannot be sustained - even if the goods were prohibited the customs authorities as well as the appellants genuinely believed that the same was not prohibited – the opinions given by the DGFT and the NOC issued by the Forest Department also support the case of the appellant that there was no intention to export the prohibited goods and there was no mis-declaration – stay application allowed – decided in favour of assessee.
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2013 (8) TMI 210
Mis declaration of goods – assessee was claiming the benefit of Notification No.21/2002 on their import of steel coils - difference of opinion - matter referred to larger bench on the following issues: 1. Whether to qualify as ‘other alloy steel' minimum one element in the proportion prescribed in Chapter Note 1(f) of Chapter 72, ( in addition to steel), is essential as held by Member (Technical) in para 5.1.2 of the order, or 2. Whether to qualify as ‘other alloy steel' not only one element is essential in proportion prescribed but if there are more than one element (in addition to steel) all should be in proportion prescribed in Chapter 1(f) of Chapter 72, are essential, as held by the Member (Judicial.)
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2013 (8) TMI 209
Adjudication of Advance Bill of Entry - Assesse filed Advance Bill for import of a new vehicle – Revenue was of the view that after examination of the goods no adjudication can be done on advance bill of entry only duty can be paid on it – Held that:- Commissioner was empowered to adjudicate the Advance Bill of Entry - The importers desirous of a veiling the above facility should submit application along with the advance Bill of Entries to the Import Department – Commissioner can assess the Advance Bill of Entry as prayed by the assesse in accordance with law - following the judgement of MOHAN MEAKIN LTD. Versus COMMISSIONER OF CENTRAL EXCISE, KOCHI [1999 (12) TMI 58 - SUPREME COURT OF INDIA] - Alongwith Advance Bill of Entry the importer/ CHA will produce copy of Bill of lading/ AWB and invoice issued by the supplier and other documents required for assessment – Decided in favor of assesse.
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Service Tax
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2013 (8) TMI 219
Stay - Survey and Exploration of Minerals, Oil and Gas Services – Duty demand – Interest and Penalty – Revenue was of the view that freight charges and equipment rental charges paid by the applicant to the foreign contractors have to be included in the value of taxable service – Held that:- The service agreement was in relation to survey and exploration of minerals, oils and gas services and rental of equipment was part of the service – the foreign contractors do not have their office in India - assesse paid service tax as recipient of taxable service on clearing charges and service engineer in terms of Rule 2 (1) (d) (iv) of the Service Tax Rules, 1994 but not on freight charges and equipment rental charges - the agreement placed by the learned senior counsel was in complex nature – assesse had taken the equipments on rental basis of the agreement. Waiver of pre deposit – applicant failed to make out a prima facie case for waiver of entire amount of dues - 30 lakhs were ordered to be submitted –upon such submission rest of the duty stayed till the disposal – Decided partly in favor of assesse.
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2013 (8) TMI 218
Service of "manpower supply" - cutting/harvesting of sugarcane and transportation of the same from the farmers' fields to the sugar factory – Held that:- From the agreement dated 2.1.2006 with the sugar factory, it is seen that the same is for cutting and transportation of sugarcane from the farmer's fields to the sugar factory, who have agreed to sell their sugarcane to the sugar factory. The agreement is not for supply of any labour. The rates agreed upon for the said work are per tonnage of sugarcane supply, both for harvesting as well as transportation. This would clearly indicate that the activity undertaken cannot, by any stretch of imagination, be called supply of manpower. Held that:- Agreement entered into between the Trust and the transporters is for the transporter to engage labour for harvesting and transporting the sugarcane to the sugar factory and the rates agreed to be paid are on tonnage basis of the sugarcane supplied and not for the supply of any manpower. From these agreements, it is obvious that no manpower has been supplied by the appellant to the sugar factory to constitute supply of manpower. Also, as per decision in the case of Amrit Sanjivni Sugarcane Transport Co. Pvt. Ltd. [2013 (8) TMI 58 - CESTAT MUMBAI], it has been held that harvesting of sugarcane and transportation thereof to the sugar factory from the farmers' fields would not come under the purview of manpower recruitment or supply agency service and would be more appropriately classifiable under "business auxiliary services" - The demand has to be made in accordance with law, taking into account the contracts entered into by the appellant with the various parties involved in the transaction. The demands cannot be confirmed on the basis of a wrong understanding entertained by the appellant or anybody else – Decided in favor of Assessee.
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2013 (8) TMI 217
Refund claim under Notification No.41/2007-ST and 17/2009-ST – Held that:- Refund claim filed for the quarter ended March - 2009, June-2009 and September - 2009 under Notification No.17/2009 are clearly hit by limitation as appellant filed refund claim on 31/05/2010 under Notification No.41/2007-ST. The said notification requires an assessee to file a refund claim within six months from end of the relevant quarters - To that extent, refund application filed by the appellant for the quarter ended March-2009, June - 2009 and September, 2009 are correctly held as hit by limitation and there is no reason to interfere in such an order - Regarding refund claim for the quarter ended December-2009 and March – 2010, refund claims are within the prescribed time but the applicant is required to file refund claim under Notification No.17/2009-ST - As per notification No. 17/2009-ST, specific category of services of service provided under section 65(105)(zzb) of the Finance Act, 1994 are only eligible for refund. The category of services claimed as refund by assessee is not eligible for refund hence question of allowing such a claim of assessee does not arise – Appeal rejected – Decided against the Assessee.
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2013 (8) TMI 216
Nature of service rendered by foreign agent - import of service - classification - Business Support service or Storage and Warehousing Services or Clearing & Forwarding Agency Service - section 65 (104c) – The services would be to Logistics services for Comstar. A&S would provide the warehousing services using their warehouse facilities, information system comprising of the Warehouse Management system, communication facilities, and the service of log on with the noticee’s India and Europe information connectivity, receiving in process comprising of inbound and outbound handling, storage, Customs handling, out bound transportation and one way pallet for outbound transportation. A&S would also provide insurance service for the goods of the notice during the tenancy of the custody with A&S. Held that:- Prima facie demand of tax under Business Support Service was sustainable – foreign agents were providing services to the assesse in relation to the assesse’s business and the different activities would be covered in inclusive portion of the definition - Entitlement to avail cenvat credit for payment of tax which would be examined on the basis of record. Waiver of pre deposit – aprima facie case is against the assessee - No waiver of pre deposit of entire amount of tax along with interest and penalty – 18 lakhs were ordered to be submitted – rest of the duty interest and penalty to be stayed till the disposal – Decided partly in favor of assesse.
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2013 (8) TMI 215
Goods Transport Agency - Service Tax on GTA under reverse charge - payment of service tax through cenvat credit - assessee was engaged in manufacture of yarn of different kinds – Whether the Tribunal was correct in disregarding the Board Circular while deciding the appeal when it had been held by Apex Court and other High Courts that the interpretation of the CBEC will be binding upon the Revenue – Held that:- Department was of the view that the adjustment of the CENVAT Credit side towards the liability on Service tax was contrary to the Rule – Duty demand u/s 73 – Interest u/s 75 – penalty u/s 76 - the Rules contemplated adjustment of service tax liability as against the CENVAT Credit available to the assessee the circular relied on would not be of any assistance to the Revenue - the view of the Punjab and Haryana High Court, the Delhi High Court and the Himachal Pradesh High Court endorsed. Whether the Tribunal was right in holding that the respondents did not provide any taxable service though they did manufacture an excisable product – the GTA service so received by the respondents would have been covered under the definition of "input service" under Rule 2(1) of Cenvat Credit Rules. By virtue of the explanation, it shall be deemed to be "output service" even after deletion of the explanation given at Rule 2(p) read with definition given at Rule 2(q) and (r) convey similar meaning" - Held that:- There was no error in the reasoning of the Tribunal that in the payment of service tax liability by the recipient of taxable service - assesses were also entitled to make use of CENVAT Credit to discharge their liability under the Service Tax provisions – A reading of Rules 2(l) and 2(b) would show that they cover two different situations and though their operations were totally different - for the purpose of giving credit to the service tax payable from the CENVAT Credit available - the recipient was also entitled to the same relief as a provider of the service – while Rule 2(l) and 2(p) cover two classes of persons, the recipient of GTA services, by virtue of the Explanation to Rule 2(p) of the CENVAT Credit Rules, as a provider of output service, was entitled to all benefits that a person providing input service would be entitled to in the matter of CENVAT credit adjustment.
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Central Excise
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2013 (8) TMI 212
Refund on accumulated CENVAT credit - nexus between the products exported and the input services. - Revenue filed appeal against allowing refund of accumulated CENVAT credit under Rule 5 of CCR, 2004 – held that:- Assessee would be entitled for the refund of CENVAT credit- Revenue appeal failed both on merits as well as on the ground of judicial discipline - the only ground taken by the Revenue for appealing is that this decision has not been accepted - the judicial discipline requires that the decision of the Tribunal in the case of CST vs. M/s. Convergys India Pvt. Ltd. (2009 (12) TMI 562 - CESTAT, NEW DELHI) required to be followed – appeal decided against the revenue.
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2013 (8) TMI 208
Interest on defaulted payment - Held that:- discharge of duty liability by the appellant through the cenvat account which had balance. Despite the fact that the said duty liability on the finished goods cleared by the appellant has been discharged by them by utilising the cenvat credit and hence government was for all practical purposes was not deprived of the duty - Following decision of SOLAR CHEMFERTS PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, THANE-I [2011 (6) TMI 640 - CESTAT, MUMBAI] - Decided in favour of assessee. Quantum of penalty - Held that:- appellant has violated the provisions of Central Excise Rules, 2002 by utilising the cenvat credit for discharge of duty liability when he was debarred to do so, having defaulted in making payments as per the Central Excise Rules, 2002 - Decided against assessee.
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2013 (8) TMI 207
Pre-deposit – Stay Application - Cenvat credit of service tax paid for the services rendered by the commission agents for sales promotion of their final products – Held that:- Judgment of the Hon’ble High Court of Gujarat in the case of Cadila Healthcare Ltd [2013 (1) TMI 304 - GUJARAT HIGH COURT] is on merits and against the Appellants but appellant was under a bonafide belief and availed the cenvat credit of the service tax paid on commission agent services - Question of limitation is debatable and arguable - appellants needs to be put to some condition to hear and dispose the appeal – Thus, the appellant directed to pre-deposit an amount of Rs.10,000/- within a period of four weeks.
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2013 (8) TMI 206
Recovery of duty from the successor of the defaulter - Section 11 of the Central Excise Act read with Section 142 of the Customs Act, 1962 - Property of Vaishnavi was taken over by Gujarat Industrial Investment Corporation Ltd. (GIICL) and on an occasion transferred to M/s. Sachin Dyeing & Printing Mills Pvt. Ltd. on as is whereas basis as per the agreement of sale. The central excise duty initiated an action of recovery of central excise duty against M/s. Sachin Dyeing & Printing Mills Pvt. Ltd. as dupe of defaulter company from transferring company – Held that:- Appellant cannot be considered as successor as neither the business or trade of Vaishnavi is transferred to the appellant hence conditions of proviso to Section 11 of the Central Excise Act will not apply and are not sustainable. Though assets were sold, sale of assets by itself would not be transfer of business in whole or in part. There must be material on record to show that the business has been transferred to the Petitioner and consequent thereto the Petitioner has succeeded in said business - In the facts and circumstances of this case, M/s. Sachin Dyeing & Printing Mills Pvt. Ltd. are not successors in business or trade of Vaishnavi relying upon the decision in the case of Krishna Lifestyle Technologies Ltd.[ 2008 (2) TMI 2 - HIGH COURT, BOMBAY]. The facts of the present case is clearly distinguishable from the facts of the case Rana Girders Ltd. [2012 (11) TMI 478 - ALLAHABAD HIGH COURT], wherein there was a clear and unequivocal stipulation; in the deed of sale and in the agreement of sale of plant & machinery; that all statutory liabilities arising out of said property (land & building) shall be borne by purchaser and that the corporation shall not be held responsible for the same and have held that central excise dues and penalties are statutory liabilities and hence M/s. Rana Girders Ltd. are liable to pay the said statutory dies as they have agreed for discharge of all statutory liabilities. In the case in hand, agreement does not talk about any statutory liabilities that may be undertaken to be paid by the appellant M/s. Sachin Dyeing & Printing Mills Pvt. Ltd. The facts of the case in hand are totally different - Hon’ble High Court of Bombay in the case of Krishna Lifestyle Technologies Ltd. has specifically dealt with the succession of the business as is referred to in proviso to Section 11 of the Central Excise Act, 1944 – Decided in favor of appellant.
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2013 (8) TMI 205
Cenvat credit - Authority held that assessee availed cenvat credit on the basis of fake invoices - Held that:- provisions of section 11AC are invokable as the party fraudulently issued the invoices without accompanying the goods and have availed the cenvat credit with sole intention to defraud the Revenue - Unbeleivable that huge quantity of winding wire of copper has been shown to be transported through passenger vehicle Tata Sumo in single day from Delhi to Jaipur - these activities had been fraudulently undertaken by the appellant - Decided against Assessee. Imposition of penalty - Held that:- on the basis of finding on clandestine removal that the invoices have been issued and no goods have been supplied to the appellant, it has ingredients of fraud, mis-statement, intention to defraud the Revenue - it is fit case to impose equivalent penalty under section 11AC - Thus there is no case of any reduction of penalty - Decided against Assessee.
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2013 (8) TMI 204
Imposition of penalty - Commissioner upheld penalty against assessee - Held that:- copy of statement of the partner of the appellant tendered before investigating team the last invoice issued by them was numbering 266 dated 28.7.2008 - there has been clandestine removal and appellant is liable for imposition of penalty under Rule 25 subject to provisions of section 11AC. This is fit case for imposition of equivalent penalty. Benefit of reduced penalty as provided under section 11AC is not available as penalties have been have been levied under Rule 25. Reference of section 11AC in the rules is only for limiting the penalty equalvant to duty/cenvat involved - Decided against assessee.
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2013 (8) TMI 203
Suppression of tax - manufacture of gutka without licence - Held that:- This a case involving manufacture without getting registration thus attracting charge of suppression. Duty for the previous period involving excluded period is rightly confirmed though the adjudicating authority has failed to impose penalty of equivalent amount under section 11AC - Decided in favour of Revenue.
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2013 (8) TMI 202
Waiver of Pre-deposit – Cenvat Credit on service Tax paid on CHA Services for the services rendered for the goods exported from port – Held that:- Relying upon the decision in the case of Adani Pharmachem Pvt. Ltd. [2008 (7) TMI 102 - CESTAT AHMEDABAD], Cenvat Credit is available on CHA services used for the export of goods – Waived pre-deposit – Decided in favor of Assessee.
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2013 (8) TMI 201
Waiver of Pre-deposit - Availment of CENVAT Credit of Service Tax paid on the construction services which are used for laying the pipelines for drawing the water from Narmada canal to their factory premises – Held that:- Appellant’s consistent stand before both the lower authorities that the water which is drawn from Narmada canal is used for the manufacturing activity which is manufacturing of chemicals - This issue is not disputed by the lower authorities - The consistent stand of the appellant before both the lower authorities has not been disputed by the adjudicating authority as also the fact that the appellant had given the manufacturing process chart to the lower authorities, which is in detail, that the water which is drawn from Narmada canal is used for manufacturing activity – Application for waiver of pre-deposit allowed – Decided in favor of Assessee.
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2013 (8) TMI 200
Limitation – Period of filing of rebate claim under Section 11B of the Central Excise Act, 1944 - Petitioner had submitted the rebate claim on 5-11-2007, along with the relevant documents. The second respondent had returned the enclosures submitted by the petitioner, along with the rebate claim application, vide letter, dated 20-2-2008 - Final confirmation of the date of shipment had been made only on 23-12-2008 – Held that:- Rebate claim scheme has been introduced as a beneficial scheme to encourage exports it has to be construed in a liberal manner. As such, the relevant date for calculating the period of limitation should be taken as 5-11-2007, when the petitioner had submitted the rebate claim application. Even though certain documents filed along with the rebate claim application had been returned to the petitioner, it cannot be said that the rebate claim application had not been filed on 5-11-2007. In fact, the second respondent had retained the application for rebate of duty, in Form C. It is also noted that the final confirmation of the date of shipment was made only on 23-12-2008, due to the delay by the Shipping Corporation of India Limited. Therefore, it cannot be said that the rebate claim had been made by the petitioner, belatedly, beyond the period of limitation prescribed, under Section 11B of the Central Excise Act, 1944 – Rebate granted – Decided in favor of Assessee.
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2013 (8) TMI 199
Period of limitation of refund claim under section 11B of the Central Excise Act – Held that:- Relying upon the decision in the case of Dena Snuff (P) Ltd v. Commissioner of Central Excise, Chandigarh [2003 (9) TMI 84 - SUPREME COURT OF INDIA], it has been held that period of limitation of one year prescribed under Sub Section (1) will not apply in case duties are paid under protest. Hon'ble Supreme Court held that the relevant date from which the period of limitation starts to run is from the date on which the assessee's own case finally decided by the Tribunal - Issue relating to period of limitation, uniformly held that no limitation was applicable to the payment made under protest - Payment made herein is also deemed to be under protest and no limitation is applicable and the claim is maintainable and is rightly decided by the CESTAT – Decided against the Revenue.
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2013 (8) TMI 198
Remission of duty under Rule 21 of the Central Excise Rules, 2002 - M/s. Hindustan Coca Cola Beverages Pvt. Ltd. is manufacturers of aerated water, mineral water and soda - After filling with mineral water and aerated water in bottles, there occurred some breakage in the store of finished goods - Applicant supplied the figure of breakage only after pursuance of department and that they did not file any application for remission of duty – Show-cause Notice issued making demand of duty along with interest and also imposed penalty of an amount equal to duty on applicant – Held that:- Circular No. 930/20/2010-CX., dated 9-7-2010 is clarificatory in nature, and when any circular is issued clarifying the provision of any previous circular, the same is applicable retrospectively. In the instant case, the Circular, dated 9-7-2010, has been issued to clarify the provisions of Circular, dated 17-9-1975 in light of some judicial pronouncement, introduction of MODVAT/CENVAT Scheme and also in view of Central Excise Rules, 2002 – The said circular being clarificatory in nature, has a retrospective effect - In case of breakage/destruction of final product, remission can be claimed under Rule 21 of Central Excise Rules, 2002, but the remission is granted subject to condition of reversal of CENVAT credit availed on the inputs. In this case, the applicant was required to file application for remission of duty, which he failed to do. As such, they rendered themselves liable for payment of duty along with interest and penalty - Decided against the Assessee.
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CST, VAT & Sales Tax
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2013 (8) TMI 220
Imposition of penalty - Notice u/s 15-A(1)(qq) issued - Tribunal stayed 70% of tax - Held that:- During the pendency of the statutory appeal, the Tribunal is required to look into the prima facie merit of the case as well as financial condition of the petitioner. Further, the appellate authority is required to consider the relevant factor like financial hardship and other relevant facts because the condition of deposit will make the purpose of filing of appeal itself nugatory - Order of Tribunal modified - Decided in favour of assessee.
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Wealth tax
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2013 (8) TMI 221
Nature of the asset - Whether the flat purchased by the assessee in an incomplete condition was not an "asset" u/s 2(ea) nor was a piece of an "urban land" u/s 2(ea)(v) - The AO had treated the investment as an "urban land" u/s 2(ea)(v) - Held that:- If the construction was partly completed or the building is under construction, in that case the exception engrafted in the definition of the words "urban land" does not get attracted - In that event the urban land or undivided interest of the assesse continues to be open for taxation within the category of urban land – relying upon CWT v. Girdhar G. Yadalam (2007 (3) TMI 334 - KARNATAKA HIGH COURT) - The intention of the Legislature appears to be to tax the wealth either in the form of urban land or in the form of a house – the flat was purchased in an incomplete condition and was yet to be fully completed - there can be no doubt that the construction was yet to be completed – Order set aside to the aforesaid extent - The matter shall now go back for reassessment – Decided in favor of revenue.
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