Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 9, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Govt extends time period for filing of details of outward supplies in FORM GSTR-1 for months of July and August - Notification
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Govt extends time period for filing of details of inward supplies in FORM GSTR-2 for months of July and August - Notification
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Govt extends time period for filing of details in FORM GSTR-3 for months of July and August - Notification
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Date for filing of GSTR-3B for month of July is 20.8.17 and for the month of August is 20.9.2017
Income Tax
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TPA - valid comparable - the accounting period of the comparable company should be the same with that of the assessee-company.
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TPA - RPT filter of 0% - where neither the TPO nor the assessee has made out a case of exceptional difficulty in searching the comparable companies then the normal tolerance range of 15% shall be taken as proper.
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Eligibility for deduction u/s. 80IB - The Revenue authorities were not justified in rejecting the said return without following the procedure prescribed u/s.139(9) by merely taking a view that a revised return was afterthought and was filed only to reduce assessee’s tax liability.
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Penalty u/s 271(1)(c) - claim of depreciation @100% instead of 15% - Temporary Wooden structures like interiors, glow signs etc. being Furniture & Fixture - Levy of penalty confirmed.
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Revision u/s 263 - inadequate or no inquiry by AO - If there is some inquiry by the Assessing Officer in the original proceedings, even if inadequate, that cannot clothe the Commissioner with jurisdiction under section 263 merely because he can form another opinion.
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Assessment of the bank interest - Interest on fixed deposits in providing bank Guarantee under EPCG scheme is in the nature of capital receipt and to be set off against project cost.
Customs
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Benefit of Concessional rate of duty - Import of non-alloy steel wire rods (prime) - The fact that rust was present on the goods cannot be a reason to hold that the goods are of second quality for the reason that such rust can occur if the goods are exposed to moisture
DGFT
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Amendment in Appendix - 2E of Foreign Trade Policy, 2015-2020 - reg. - Public Notice
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Amendment in import policy of Pigeon Peas (Cajanus Cajan)/Toor Dal under Chapter 7 of the ITC (HS)2017, Schedule- I (Import Policy) - Notification
State GST
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Guidelines/ Instructions for detention/ lnspection report u/s 68 and 129 of the HGST Act/CGST Act and Section 20 of the IGST Act, 2017.
Case Laws:
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Income Tax
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2017 (8) TMI 340
TPA - valid comparable - exclusion by DRP - Held that:- the accounting period of the comparable company should be the same with that of the assessee-company. - the view adopted by the hon'ble High Court in the case of PTC India Pvt. Ltd. (2016 (9) TMI 1282 - BOMBAY HIGH COURT) is absolutely perfect and is in accordance with the rules prescribed in this regard. We do not find any need or justification or any kind of deviation in this regard. The accounting period of Pfizer Ltd. is ending on 30th November. Therefore, there should be availability of data from December 1, 2008 to March 31, 2009 and also from December 1, 2007 to March 31, 2008. The adjustment is required to be made in such a manner that the last quarter's transactions would be added and the first quarter's transaction would be reduced. Further, the data should be available on the segmental basis and not as a whole. In our considered view, this kind of exercise is neither feasible nor desirable. It will add to lot of confusions in an area which is otherwise also highly subjective and vague. Celestial Labs Ltd. correctly directed for its exclusion on the ground that the said company was engaged in providing host of information technology related services Disregarding the claim of the assessee with regard to the software licence fee claimed as revenue expenditure - Held that:- It is noted by us that though objection was raised by the assessee in this regard, however, the Dispute Resolution Panel has not adjudicated this issue inadvertently. Therefore, we send grounds 3 and 4 back to the file of the Dispute Resolution Panel for its adjudication afresh. It was submitted by the learned counsel that identical issue has already been decided by the Tribunal in the assessment year 2008-09. The assessee is permitted to raise all the legal and factual issues before the Dispute Resolution Panel and may also submit the order of the Tribunal before the Dispute Resolution Panel for its consideration. The Dispute Resolution Panel shall decide this issue afresh
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2017 (8) TMI 339
TPA - RPT filter of 0% - comparability - CIT(A) applied the 0% related party transaction filter as well as the high profit margin of more than 50% - Held that:- Only in extreme and exceptional circumstances when the comparable companies are not easily available or found then this tolerance range is relaxed up to 25%. Therefore in the case of the assessee where neither the TPO nor the assessee has made out a case of exceptional difficulty in searching the comparable companies then the normal tolerance range of 15% shall be taken as proper. - 15% tolerance range of related party is reasonable and proper in the case of the assessee. Selection of comparable - Held that:- As directed the AO / TPO to exclude certain companies from the set of comparables therefore and also remanded certain companies for verification of fact therefore the TPO/AO is directed to recompute the arms length price on the basis of the remaining set of comparables. Needless to say the benefit of proviso to section 92C(2) of the Act shall also be considered. Deduction u/s 10A - amount of provision for management charges payable to its AE - Held that:- We note that the AO as well as CIT(A) has denied the claim of deduction u/s. 10A in respect of this amount of ₹ 8,01,755/- pertains to the reversal of provision for management charges payable to its parent company. The assessee has stated that this amount was allowed as business expenditure in the earlier year and therefore the business profit of the assessee for the purpose of deduction u/s. 10A was reduced by this amount in the earlier year. During the year under consideration the assessee has reversed the provision which has resulted increase in the business income of the assessee and therefore it is eligible for deduction u/s. 10A. - Matter remanded back to the record of the AO for verification of the relevant facts and then decide the claim of the assessee as per law.
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2017 (8) TMI 338
Short term capital gain - LTCG OR STCG - Held that:- When the case of assessee was selected for scrutiny and statutory notices were issued, the assessee, by way of revised computations of income, inter alia, declared long term capital gain on the sale of property No. G-023, second Floor, Phase IV, DLF City, Gurgaon. This property was allotted by HUDA to the assessee by way of buyer’s agreement on 27.12.2099, but transferred in the name of assessee by execution of sale deed on 29.01.2004. The assessee sold this property to one Sh. Mohit Sharma through registered sale deed on 09.06.2005 and accordingly computed the long-term capital gain taking the holding period of the asset for more than 36 months. The entire material available on record and we find that the issue involved in this appeal is squarely covered by the decision of Hon’ble Jurisdictional High Court in the case of CIT vs. K. Ramakrishna (2014 (3) TMI 812 - DELHI HIGH COURT) wherein it has been that in order to determine taxability of capital gain arising from sale of property, it is date of allotment of property which is relevant for purpose of computing holding period and not date of registration of conveyance deed. - Appeal of the assessee is allowed.
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2017 (8) TMI 337
Disallowance of expenses incurred on account of incentive paid to drivers - AO made adhoc disallowance for the reasons that the payments were made by the assessee in cash - Held that:- As noticed that growth in the total turnover of the assessee was about 24% which incrased the total revenue of the assessee who was engaged in the business of transportation. The assessee for the purposes of transportation services had taken services from fleet owners/transporters and paid incentive to the drivers for timely delivery of goods at destination. As considered 80% of the expenses as genuine and disallowed 20% of the expenses on adhoc basis but there was no basis for making the adhoc disallowance. The AO did not doubt the incurring of expenses, he only doubted the mode of payments. In the present case, the payments of incentives to the drivers were made for timely delivery of the goods at the destination. It was claimed that such type of expenses had been accepted in the preceding as well as the succeeding year, the said claim was not rebutted at the time of hearing. We, therefore, decide that the adhoc disallowance without any basis made by the AO and sustained by the ld. CIT(A) was not justified - Appeal of the assessee is allowed.
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2017 (8) TMI 336
Premium beyond the actual worth received by the assessee on account of sale of shares - revenue or capital receipt - whether the receipt is income from other sources - eligibile "transfer" u/s 2(47) - Held that:- It is pertinent to note that Ld. CIT(A) had referred issue to FT & TR Division of Department for verifying transaction through Competent Authority of Government of Mauritius. It has been observed by Ld. CIT(A) that investigation report forwarded by FT & TR division does not indicate any non- genuine transaction in this case. He further observes that assessing officer has not questioned genuineness of transaction and hence issue need not be examined under section 68 of the Act. Ld. CIT(A) thus came to conclusion that prize of shares fixed by virtue of agreements are mutually agreed between two parties. Further, there is a categorical finding by Ld. CIT(A) that issue of share capital was a source of funding and not a case of transfer of any undertaking which could attract provisions of section 50A or 50B of the Act. Share premium received by assessee from Mauritius Company has to be considered as capital receipt. See case of Vodafone India services private limited [2014 (10) TMI 278 - BOMBAY HIGH COURT] - Decided against revenue
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2017 (8) TMI 335
Addition u/s.50C - Replacing the full value of consideration by invoking the provisions of Sec.50C on the date on registration - assessee received the entire sales consideration by 21st December '2011 - Held that:- The transfer of the property was completed in terms of section 2(47) on date of agreement for sale. The registration of conveyance deed later was only a legal formality. Therefore, no additions are warranted u/s.50C by substituting the full value of consideration on the date of the registration of conveyance deed.
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2017 (8) TMI 334
Leasing income from commercial premises - "Income from House Property” OR "Profits & Gains from Business /Profession” - Held that:- Assessee pointed out that assessee has suffered long term capital loss on sale of Preference shares, which was sought to be carried forward. It has been explained that there was no determination by the Assessing Officer on this aspect and when the issue was taken up before the CIT(A), he has also denied the same on a misconception that the loss was on account of sale of equity shares. The Ld. Representative for the assessee pointed out that assessee company would be satisfied if the matter is restored back to the file of Assessing Officer in order to appreciate the correct position and determine the long term capital loss on sale of Preference shares.The Ld. Departmental Representative has not opposed the plea of the assessee to set-aside the issue back to the file of Assessing Officer. In the above background, we restore the issue back to the file of the Assessing Officer who shall revisit the issue on the basis of the submissions of the assessee and decide afresh in accordance with law. Disallowing the interest and other expenses under section 14A - Held that:- In so far as the finding of the CIT(A) that the interest on borrowed funds were utilized towards investment in equity shares are concerned, the same has not been negated before us by the Revenue. Therefore, the same is hereby affirmed. Even otherwise, we find that even with respect to the quantum of disallowance out of other expenses is concerned, we find no infirmity in the order of the CIT(A), which is hereby affirmed. Thus, in so far as Grounds of appeal No.1 to 3 of the Grounds of appeal, the Revenue has failed to produce any evidence in support of its claim, therefore, the same are dismissed. Disallowance of interest expenditure under section 36(1)(iii) - Held that:- No fault can be found in the plea set-up by the assessee, so however, it was essential for the CIT(A) to take into consideration the specified observation of the Assessing Officer to the effect that the assessee had failed to prove the utilization of such funds by the subsidiaries. Even at the time of hearing before us, when this was put across to the parties, the Ld. Representative for the assessee submitted that the assessee would be in a position to demonstrate the utilization of such funds by the subsidiaries for their business purposes and for that purpose the matter may be set-aside to the file of the Assessing Officer. Therefore, under these circumstances, it would be in the fitness of things that the said aspect, being a factual aspect, is appropriately put to verification by the Assessing Officer. The assessee shall submit appropriate evidence in support of its plea that the funds have been utilized by the subsidiaries for the purposes of their business and the Assessing Officer shall consider the same and, thereafter pass an appropriate fresh order
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2017 (8) TMI 333
Addition u/s 68 - Held that:- Neither the Assessing Officer nor the CIT (Appeals) have examined the cash book stated to be maintained by the assessee on day to day basis along with regular books of account. If the cash withdrawals from bank account or cash received from two aforesaid concerns are tallied with the deposits made in the bank account on the various dates, then the same stands explained. But this matter needs proper examination by the Assessing Officer. The entire matter of cash deposits should go back to the file of the Assessing Officer who shall verify and examine the total availability of cash from various sources as stated by the assessee and to see whether these cash are recorded in the regular books of account on day to day basis in the cash book and also whether the cash as reflected in the cash book have been deposited in the bank account of the assessee. Grounds raised by the assessee allowed for statistical purposes.
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2017 (8) TMI 332
Penalty u/s 271(1)(c) - disallowance of loss claimed on account of stock damaged/stolen - AO observed that the event of theft did not occur in the year under consideration - Held that:- In the case in hand, the explanation furnished by the assessee has not been examined in the light of evidences furnished in the course of appellate proceeding before the Ld. CIT-A, while upholding the penalty invoking Explanation -1 to the section 271(1)(c) of the Act. In the interest of Justice, we feel it appropriate to restore the issue to the file of the Ld. CIT-A with the direction to admit the additional evidences filed by the assessee, examine the applicability of Explanation-1 to the section 271(1)(c) and decide the issue afresh in accordance with law. Grounds of appeal are accordingly allowed for statistical purpose.
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2017 (8) TMI 331
Eligibility for deduction u/s. 80IB - genuineness of revised return - as belated return filled therefore no claim u/s.80IB can be allowed - Held that:- AO himself admits that the return filed on 30th September, 2009 is a revised return. Secondly, nowhere authority below has raised a question that the return filed on 30.9.2009 is invalid return and the reliance has been placed on the case of R. Kasi Vishwanathan and brothers vs. ACIT, [2013 (10) TMI 1456 - ITAT COCHIN] where it has been held that the assessee filed a revised return in accordance with the provision of Section 139(5) of the Act. The Revenue authorities were not justified in rejecting the said return without following the procedure prescribed u/s.139(9) by merely taking a view that a revised return was afterthought and was filed only to reduce assessee’s tax liability. In the present case also no averment with regard to invalid return has been raised by any of the authorities below and in short the provision of Section 139(9) have not been invoked and in such circumstances the pleadings taken by learned DR relying upon the orders of both the authorities below cannot be upheld and the orders of both the authorities are reversed accordingly. - Decided in favour of assessee.
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2017 (8) TMI 330
Penalty u/s 271(1)(c) - claim of depreciation @100% instead of 15% - Temporary Wooden structures like interiors, glow signs etc. being Furniture & Fixture - Claim of depreciation after the compnay taken over from Erstwhile GTB upon amalgamation - Held that:- CIT(A) has rightly found that in the instant case, it stood established that assessee had furnished inaccurate particulars of income, the explanation of the assessee was not found a bonafide explanation and hence, the claim of assessee that he made full and complete disclosure of facts necessary for assessment, was found false. CIT(A) after considering all the aspects of the case has rightly concluded that it was not a case where two opinions about the allowability of depreciation were possible. Therefore, we find no material on record to interfere with the order of the ld. CIT(A) and the same deserves to be upheld. As a result, the appeal of the assessee has to fail. - Appeal of the assessee is dismissed.
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2017 (8) TMI 329
Unexplained investment - unregistered agreement - addition on account of agricultural land and deposits before the date of sale - Held that:- Order of the learned CIT(A) is quite reasoned one and is based on the identical issue dealt with by the learned CIT(A) in the preceding year since the assessee was not accorded the benefit of cross-examining through Shri Tazbar Singh Bhandari and the purchaser Shri Dharmendra Singh and such statement cannot be used against the assessee. The only question is whether the middlemen, namely, Shri Ayodhya Prasad Semwal and Shamim Ahmad entered into an agreement with Shri Tajbar Singh Bhandari or not. It is immaterial to the assessee’s case. Once they have confirmed that they paid the money to the assessee on account of the sale of his land, the source of the money is to be investigated in their hands. As far as the assessee is concerned, the source is explained. Therefore, it cannot be regarded as unexplained investment and brought to tax as such. Therefore, the addition made by the AO on this account is unsustainable. - Decided against revenue
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2017 (8) TMI 328
Profit and sale of allotment right - income from other sources or capital gain - elibibility of claim made before AO - Held that:- The claim made before the Assessing Officer during the course of assessment proceedings is well within the law and held by the hon'ble jurisdictional High Court in the case of CIT v. Sam Global Securities Ltd. [2013 (9) TMI 876 - DELHI HIGH COURT]. As more than 90 per cent. of the payments made for the said property will tantamount to a right which is transferable arid will be termed as a capital asset. The total payment having been made for ₹ 89,50,000 whereas on transfer the assessee received ₹ 1,19,32,000 fetching about ₹ 30 lakhs profit which has been offered under the head "Capital gains". See CIT v. Tata Services Ltd. reported in [1979 (1) TMI 26 - BOMBAY High Court]. The findings of the learned Commissioner of Income-tax (Appeals) cannot be approved and therefore ground of the assessee are allowed.
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2017 (8) TMI 327
Validity of reopening of assessment - speaking order before proceeding with the reassessment proceedings - Held that:- Assessing Officer is mandated to decide the objection to the notice under sec. 148 and supply or communicate it to the assessee. Thereafter, the assessee gets an opportunity to challenge the order in a writ petition. Thereafter, the Assessing Officer may pass the reassessment order. It is not open to the Assessing Officer to decide the objection raised against notice under sec. 148 by a composite assessment order. Thus, the Assessing Officer was required to first decide the objection of the assessee filed under sec. 148 and serve a copy of the order on assessee. It is well settled law that the reopening of the assessment u/s 147 and issuance and service of notice u/s 148 is a jurisdictional matter and whenever such a jurisdiction is challenged, then it is incumbent upon the Assessing Officer to pass an order either rejecting the assessee’s objection or drop the proceedings in case he agrees with such an objections. - Decided in favour of assessee.
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2017 (8) TMI 326
Estimate the profit @ 5% of the gross receipts excluding service tax - rejection of books of accounts - A.O noted that no documentary evidence in respect of liabilities under various heads including wages, service tax, etc. - Held that:- Estimate of profit @ 5% appears to be on the higher side. We find merit in the above argument of the ld. AR. It is an admitted fact that in the subsequent A.Ys, the A.O has not rejected the books results and has made nominal additions on account of various expenses being unverifiable in nature. Therefore, adoption of 5% N.P. rate on gross receipts for the impugned A.Y appears to be on the higher side. At the same time, it is also a fact that despite repeated opportunities given by the A.O, the assessee has not produced books of accounts. We are of the considered opinion that adoption of 3% net profit on the gross receipts excluding service tax will meet the ends of justice. It may be pertinent to mention here that this rate of estimated profit is only for this year and cannot be taken as a precedent for other years. Grounds raised by the assessee are accordingly partly allowed.
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2017 (8) TMI 325
Reopening of assessment - Held that:- Onus is on Revenue to show that there was failure on the part of the assessee to fully and truly disclose all material facts necessary for his assessment for that assessment year and in the instant case, Revenue has failed to discharge this onus. When it is not the case of the Revenue that there was failure on the part of the assessee to disclose all material facts fully and truly, Revenue cannot violate the statutory protection enjoyed by the assessee under proviso to section 147 of the Act. In the facts and circumstances of this case, therefore, we hold that the statutory protection enjoyed by the assessee under proviso to section 147 of the Act was wrongly violated by Revenue. Therefore, we dismiss all the grounds of appeal in this appeal filed by the Revenue, and hold that the assumption of jurisdiction u/s 147 of the Act and initiation of proceedings u/s 147 r.w.s. 148 of the Act was erroneous in law in the facts and circumstances of this case. In view of this conclusion, there is no need for us to adjudicate whether the initiation of proceedings u/s 147 of the Act and the additions made in order dated 17.12.2009 u/s 143(3)/147 of the Act amounted to “change of opinion” as this issue becomes purely academic.
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2017 (8) TMI 324
Disallowance u/s 14A - reopening of assessment - recording of satisfaction - AO observed that, assessee is maintaining composite account and therefore the common faculties and resources have been used, it cannot be said that the assessee has not incurred any expenditure for earning exempt income. - Held that:- On perusal of the order of the AY 2008-09 which is at page No. 163 of paper book submitted by the assessee shows that no assessment was made in case of the assessee for AY 2008-09 u/s 143(3) of the Act. The assessee’s return of income was accepted u/s 143(1) of the Act and further it was reopened u/s 147 and ld Assessing Officer made disallowance in that order only with respect to reasons for which the reopening was initiated. In view of this it is correct for ld CIT(A) to hold that as no disallowance has been made in AY 2008-09 no disallowance can be made in this year too. With respect to the finding of the ld CIT(A) regarding consistency to be followed relying upon the decision of Hon'ble Supreme Court in case of Radha Swami Satsang Vs. CIT [1991 (11) TMI 2 - SUPREME Court] we are reminded of the decision of the Hon'ble Supreme Court in case of Distributors of (Baroda) Pvt Ltd. Vs. Union of India (1985 (7) TMI 1 - SUPREME Court) wherein it has been held that to perpetuate an error is heroism to rectify it is the compulsion of judicial conscience. However, as on the issue of improper satisfaction recorded by the Assessing Officer we direct the ld Assessing Officer to delete the disallowance u/s 14A Valuation of closing stock of inventory - Held that:- As not controverted that in the next year the assessee has shown higher income because of the valuation and the tax rate in both the years are not same. The revenue also could not dispute with cogent evidence/ finding that value of the material was not nil but higher than that. In view of this we confirm the finding of the ld CIT(A) in deleting the disallowance on account of valuation of closing stock of inventory as at 31.03.2009.
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2017 (8) TMI 323
Revision u/s 263 - inadequate or no inquiry by AO - genuineness of sale purchase of the shares - Held that:- No justification for the learned Principal Commissioner of Income-tax to initiate proceedings under section 263 as there was no error in the assessment order as held in the case of Gopal Castings (P.) Ltd. and in the case of Narain Singla [2016 (2) TMI 1105 - ITAT CHANDIGARH] In the present case also, as demonstrated above by the learned counsel for the assessee, enquiry relating to the purchase price of the shares were made during the assessment proceedings and due reply filed by the assessee. A perusal of the reply filed by the assessee, as reproduced above, shows that he had also explained why the price of ₹ 6,554, based on the documents seized from the premises of Shri Surinder Kumar Gulati, be not substituted. Therefore, it is clear from the above that the issue had been duly enquired into during the assessment proceedings. The Assessing Officer had applied his mind on the issue and thereafter formed an opinion making no addition of the same. Further we find that the issue relating to the price of the shares of Pragati Nirman had been settled by the Income-tax Appellate Tribunal in the case of Ashish Singla (2016 (2) TMI 1105 - ITAT CHANDIGARH) wherein addition made on account of the alleged higher price fetched was deleted. Therefore the view formed by the Assessing Officer was in consonance with that of the Income-tax Appellate Tribunal. There was therefore, we hold, no justification for the learned Principal Commissioner of Income-tax to initiate proceedings under section 263 as there was no error in the assessment order. - Decided in favour of assessee.
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2017 (8) TMI 322
Addition made on account of bogus purchases - Held that:- Considering the profit rate declared by the assessee in earlier years and subsequent years, the CIT(A) after recording detailed finding reached to the conclusion that addition to the extent of 12.5% of the bogus purchase will serve the purpose of revenue leakage. As found that CIT(A) had applied various judicial pronouncements to the facts of the instant case and also the decision in the case of H M Esufali H Abdulla [1973 (4) TMI 49 - SUPREME Court] accordingly reached to the conclusion that disallowance of 12.5% of the bogus purchases will compensate for the profit so suppressed by the assessee. The detailed finding so recorded by the CIT(A) has not been controverted, accordingly, no valid reason to interfere in the finding so recorded by the CIT(A) upholding the addition to the extent of 12.5% of bogus purchases.
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2017 (8) TMI 321
Unexplained unsecured loans - identity, creditworthiness and genuineness of the loan - transactions through the mediator - amount was re-paid - Held that:- When once the primary documents were already supplied to the revenue by the assessee then the revenue could have served the said mediator Mr. Jalaj Batra and by not doing so, the assessee cannot be punished for not producing the said mediator and even otherwise without Mr. Jalaj Batra being in picture, the assessee has already discharged the primary onus cast on him by furnishing various details like PAN, TAN, addresses, master data from the website of Ministry of Corporate Affairs, details of directors, bank statement of the assessee indicating transaction through banking channel. Thus we hold that the additions made by AO and sustained by CIT(A) on the ground that summons were returned back and the parties were not produced are bad in law, hence the same are ordered to be deleted. - Decided in favour of assessee. Additions on account of unexplained bank deposits - Held that:- As submitted that the bank account belonged to M/s. Gift & Novelties Impex, Proprietorship concern of the assessee and in this respect, the statement was also produced before the A.O. After hearing the parties and on perusal of the documents, the statement in respect of withdrawal of 5 lacs from Indian Overseas Bank is reflected and as per the submissions of the assessee. The remaining amount of Rs,1,00,000/- was alleged to be deposited out of cash-in-hand lying with the assessee. However, no documentary evidence in support of availability of 1 lakh was brought on record before the lower authorities nor before us. Therefore, we hold that the AO should have restricted the additions only to the amount which the assessee could not explain the source. Therefore in our view, the additions made by AO and confirmed by CIT(A) is restricted to ₹ 1 lakh only in place of ₹ 6 lakhs.
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2017 (8) TMI 320
Addition u/s 14A - set-off / carried forward of business losses / depreciation - Held that:- A perusal of Balance Sheet reveals that the assessee’s Share Capital & Reserves stood at ₹ 23.21 Crores, Loan Funds stood at ₹ 46.16 crores whereas investments stood at ₹ 42.45 crores. The assessee has debited finance charges of ₹ 4.68 Crores in the Profit & Loss Account. Prima facie, the assessee has used mixed funds to make the investments which results into triggering of Rule 8D(2)(ii). In the revenue’s appeal, we have already settled that the rental income earned by the assessee shall be chargeable under the head ‘Business Income’. We are of the considered opinion that disallowance computed by AO under Rule 8D require re-appreciation / re-working in the light of our decision in revenue’s appeal. Therefore, we deem it fit to restore this matter back to the file of AO for re-appreciation / re-working of disallowance u/s 14A read with Rule 8D. We accordingly direct so. To reiterate, the rental income earned by assessee shall be assessed as ‘Business Income’ against which business expenditure as per law shall be allowable. The disallowance u/s 14A read with Rule 8D shall be computed denovo. The assessee shall be allowed set-off of unabsorbed depreciation in terms of our above order. The set-off / carried forward of business losses / depreciation, if any, shall also be reworked. The assessee’s appeal stands allowed for statistical purposes.
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2017 (8) TMI 319
Block assessment u/s 158BC - extension of time limit for special audit - block assessment order passed beyond two years of the last of the authorisation even after excluding the period commencing from the day on which the AO directs the assessee to get his accounts audited under section 142(2A) - Held that:- Assessing Officer did not have the suo motu power to extend the time limit for special audit without the assessee applying for the same, and since the assessee has not applied before the Assessing Officer for extension of time for submission of the special audit report and the Assessing Officer does not have the power to suo motu extend the time limit then as per the provisions of law existing at that time, the limitation period for passing of assessment order runs from February 20, 2005 i.e., 60 days from February 20, 2005 and so the Assessing Officer ought to have passed the assessment order before April 21, 2005. Therefore we find force in the submission of the learned counsel for the assessee that since the Assessing Officer has passed the impugned assessment order only on July 18, 2005, the assessment order is barred by limitation and so we have no other alternative but to quash the same. Thus, the appeal of the assessee is allowed
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2017 (8) TMI 318
Revision u/s 263 - inadequate or no inquiry by AO - difference in income as per ITR and 26AS - creditworthiness and genuineness of consultancy charges paid - Held that:- A perusal of the order passed by the Commissioner of Income-tax indicated that the assessment order passed by the Assessing Officer was cancelled on the ground that the Assessing Officer has not made proper enquiry and verification in respect of the issue as discussed above. This, in our considered opinion, cannot be sufficient ground for cancelling the assessment. While making the assessment order, it is the satisfaction of the Assessing Officer who made the enquiry and it should be the touchstone of assessment order passed by him. No cogent material or evidence was brought to our knowledge by the learned Departmental representative which may prove that the view taken by the Assessing Officer in the case of the assessee was unsustainable in law. Therefore, we are of the view that the order passed by the Commissioner of Income-tax is illegal and without jurisdiction. If the order passed by the Commissioner of Income-tax is sustained then this will permit the illegality to continue and the subsequent action is carried out on the illegal order is also illegal per se. If there is some inquiry by the Assessing Officer in the original proceedings, even if inadequate, that cannot clothe the Commissioner with jurisdiction under section 263 merely because he can form another opinion. At the most the case of the assessee can be regarded to be the lack of inquiry in accordance with Commissioner of Income-tax if he has different opinion how to proceed with the assessment of the assessee.See CIT v. Vodafone Essar South Ltd. [2012 (12) TMI 70 - DELHI HIGH COURT] - Decided in favour of assessee.
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2017 (8) TMI 317
Estimation of income - project completion method - Held that:- Though the assessee claimed to have followed the project completion method, it is obligatory on the part of the assessee to maintain the regular books of account and support the contention with the books of account, bills and vouchers, that it is following project completion method and true and correct financial position can be drawn with the books of account. The expenditure debited to the work-in-progress/advances received required to be accounted correctly to show that no inflation of expenditure and no suppression of income was made by the assessee. The assessee has not produced the books of account, bills and vouchers. In the absence of the books of account, bills and vouchers the contention of the assessee that it is following project completion method is without any basis. It is clear from the facts gathered from the assessment order and the Commissioner of Income-tax that, the assessee is not following any method which gives true and current financial affairs to deduce the income correctly. Therefore, we do not find any reason to disturb the order of the Commissioner of Income-tax. Accordingly, we confirm the addition made by the Assessing Officer at the rate of 8 per cent. on the gross receipts. - Decided against assessee. Estimation of income on accumulated gross receipts in the assessment year under consideration - Held that:- In the earlier years, the assessee has not admitted any income and filed "nil" return of income as discussed earlier. No books of accounts were produced before the Assessing Officer to estimate that the Revenue and expenditure was accounted correctly. Therefore, till the date of filing the return, the assessee has admitted 'nil' income and the earlier receipts were not offered to income. The assessee has not produced the books of account before the Assessing Officer and the relevant evidence in respect of expenditure incurred till date. In the absence of books of account, the correctness of the expenditure could not be established. Therefore, only option available to the Assessing Officer to estimate the income on the gross receipts received up to accounting year 2009.- Decided against assessee.
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2017 (8) TMI 316
Non grant of the registration under section 12AA - whether section 10(23C) of the Act has been correctly applied in the case of the assessee? - Held that:- Admittedly, the prescribed limit was ₹ 1 crore for the impugned assessment year. If we take each of the educational institution separately, only in the case of PKD Matric Higher Secondary School, the receipt has exceeded ₹ 1 crore. The annual receipts of all other institutions were less than the threshold amount of ₹ 1 crore. In our opinion, the lower authorities had not applied section 10(23C) of the Act in respect of these educational institutions, which has gross receipts less than ₹ 1 crore. The question whether each educational institution could be considered separately for applying the threshold annual receipt of ₹ 1 crore, which was applicable for the impugned assessment year, has not been considered by any of the lower authorities in the proper perspective. The matter therefore, requires a fresh look by the Assessing Officer. Though the assessee is not eligible for exemption under section 11 of the Act, the question whether it could claim exemption under section 10(23C) of the Act in the case of these institutions which had gross receipts below the threshold limit requires a fresh look. Therefore, we set aside the orders of the lower authorities and remit the issue regarding application of section 10(23C) of the Act back to the Assessing Officer for consideration afresh, in accordance with law. Rectification of mistake - application for sec 10(23C)(vi) being rejected for non-mentioning of non-profit nature of the institutions run by the assessee in its trust deed - Held that:- Even if we presume that this is only an application for rectification of mistake, such mistake which can be rectified under section 154 of the Act, is one which is glaring and apparent. The order dated June 24, 2013 passed under section 10(23C)(vi) of the Act, on which the review petition was filed, had specifically stated that the application was being rejected for non-mentioning of non-profit nature of the institutions run by the assessee in its trust deed. We cannot say that no reason was cited by the learned Chief Commissioner of Income-tax or the reason cited was perverse. Thus the order was not, in our opinion, amenable to a rectification proceeding under section 154 of the Act. There was no mistake which was glaring enough, which could have been rectified under section 154 of the Act. Viewed in any manner, we are of the opinion that the appeal of the assessee has no merits.
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2017 (8) TMI 315
Assessment of the bank interest under the head "Income from other Sources" - interest on Bank fixed deposits provided as Bank guarantee on EPGS scheme for the purpose of import of capital goods - Held that:- Delhi High Court in the case of Pr. CIT Vs Facor Power Ltd.(2016 (1) TMI 461 - DELHI HIGH COURT ), it was held that where assessee is engaged in generating electric power, kept margin money in the form of fixed deposits for procurement of various capital goods for setting up the power project, interest earned on fixed deposits would be in nature of capital receipt, not liable to tax. The assessee company had made fixed deposits to procure capital goods for project as per terms of EPCG Scheme Interest on fixed deposits in providing bank Guarantee under EPCG scheme is in the nature of capital receipt and to be set off against project cost and Accordingly we direct the Assessing Officer to delete the addition and allow the ground of the assessee.
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Customs
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2017 (8) TMI 303
Benefit of Concessional rate of duty - N/N. 21/2002 (Sl.No. 207) dated 1.3.2002 - imported non-alloy steel wire rods (prime) - denial of benefit on the ground that the goods are not of prime quality - Held that: - Apart from the report of NML stating that the goods are seconds, there is no evidence to establish that the goods are not prime. The benefit of Notification is eligible if the goods are of prime quality. The expert of IIT, Chennai has certified that the goods belong to prime category and the same has also been noted in the Bill of Entry. The fact that rust was present on the goods cannot be a reason to hold that the goods are of second quality for the reason that such rust can occur if the goods are exposed to moisture - the denial of benefit of Notification is unjustified - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 302
Clandestine removal - residual dust and copper scrap - penalty on appellant on the ground that he was working as an administrative manager and aided and abetted the evasion of customs duty - Held that: - there is no dispute about the clearance of dust/scrap from the unit of SMC Jewels without payment of customs duty - it is clear that the appellant was actively involved in removal of goods without payment of customs duty. Therefore, he has aided and abetted the evasion of customs duty - penalty upheld - appeal dismissed - decided against appellant.
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2017 (8) TMI 301
Refund of SAD - time limitation - N/N. 102/2007 dated 14.09.2007 - rejection on the ground that the refund claim was filed after one year from the date of import of goods - Held that: - the refund claims in all these appeals pertain to the period of after 01.08.2008 - the judgement of the Hon’ble Gujarat High Court in the case of Indian Oil Corporation Ltd. Vs. UOI [2011 (12) TMI 540 - GUJARAT HIGH COURT] is squarely applicable to the facts of the present case, whereunder it is held that the limitation prescribed for refund cannot be extended - appeal dismissed.
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2017 (8) TMI 300
Absolute Confiscation - silver weighing less than 2 kgs. and having no foreign marking - penalty - Held that: - The appellant narrated the illegal importation of silver in detail in his statements. The appellant retracted his statement in his reply to the Show Cause Notice dated 07.04.2014. I agree with the finding of the Adjudicating Authority that the retraction of the statement after a lapse of more than 8(eight) months without any cogent reason cannot be accepted - confiscation and penalty justified. Penalties on other persons - Held that: - the Adjudicating Authority imposed penalties on other persons, who had not filed any appeal as informed by the Registry. There is no attempt on the part of the appellant to clarify the reason for carrying the imported silver. The submission of the ld.Counsel on behalf of the appellant is without any substance. Appeal dismissed - decided against appellant.
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Corporate Laws
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2017 (8) TMI 297
Compounding fee applicability - compound the offence and the Compounding Application - Held that:- After considering the materials on record and after taking into account the submissions made by the Practicing Company Secretary that lenient view may be taken, we hereby levy compounding fee for violations of provisions of section 166 and sub-section 5 of section 210 of the Companies Act, 1956 for the delay in conducting Annual General Meeting and non- submission of audited annual accounts before the Annual General Meeting on the Applicants. In pursuant to our Order dated 20th June 2017 mentioned herein above, the Applicants have paid the compounding fee by depositing 9 Demand Drafts of different Banks drawn on 01/07/2016 in favour of “Pay and Accounts Officer, Ministry of Corporate Affairs, payable at Chennai”. And as the compounding fee has been remitted by the Applicants, the offence stated in the petition is compounded.
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Insolvency & Bankruptcy
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2017 (8) TMI 298
Corporate Insolvency Resolution Process under Section 7 of Insolvency and Bankruptcy Code, 2016 - wilful defaulter. - ESSAR stated that there is no diversion of funds, fraud or malfeasance. - It is the case of ESSAR that it has submitted proposals for restructuring of its debts to the Lenders for approval - Held that:- Appearing for SCB, that the Interim Resolution Professional proposed by SCB has to be appointed on the ground that SCB's Application is prior in point of time, in my considered view, is not an argument that merit acceptance. If the date of initiation of the Corporate Insolvency Resolution Process is taken as criteria, if two Applications by two different Creditors for initiation of Corporate Insolvency Resolution Process were filed on one day, then it has to be seen which Application was presented first in point of time on the same day. Therefore, the date of initiation of Insolvency Resolution Process cannot be taken as a yardstick or as a guideline for appointing. Interim Resolution Professional. By this Common Order, this Adjudicating Authority admitted both the Applications. - Interim Insolvency Resolution Professional appointed to commence Corporate Insolvency Resolution Process in respect of ESSAR. Order of moratorium shall be in force from the date of order till the completion of Corporate Insolvency Resolution Process subject to the Proviso under sub-section (4) of Section 14.
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Service Tax
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2017 (8) TMI 314
Abatement - GTA Services - abatement from the gross freight paid - Held that: - the entire resolution of the dispute will hinge on the documents that the appellant should have produced to prove their case but which, as per the impugned order, they did not. In the circumstances, the matter requires to be remanded back to the adjudicating authority for de novo consideration - appeal allowed by way of remand.
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2017 (8) TMI 313
Commercial and Industrial Construction Service - use of property, whether Commercial or Non-Commercial in nature? - CBEC Circular No.157/8/2012-ST dt. 27.4.2012 - Held that: - the appellants have pointed out that only farmers charges are collected for the maintenance of the property and the said property is not registered out or sold to anybody. In view of above, it is apparent that the use of the said property is of non-commercial nature for the facilitation of the farmers. When the property in question is not used by owner for commercial purpose then it cannot be liable for payment of service tax under commercial and industrial construction service as is apparent from Circular dt. 27.4.2012. It is apparent that CBEC circulars considered the use of the said property as non commercial in nature. In these circumstances service tax under the head of Commercial and Industrial Construction cannot be levied on such properties. Appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (8) TMI 312
Entitlement of interest - delayed grant of refund - Held that: - There was delay in sanctioning the refund claim from three months after 27 September 2004 to 9 March 2006. The entitlement of interest, therefore, decided and by the impugned order the Respondent's Appeal was allowed. The Supreme Court in Union of India Vs. Hamdard (WAQF) Laboratories [2016 (3) TMI 68 - SUPREME COURT], while dealing with the interest of delayed refund is payable under Section 11BB of the Central Excise Act on expiry of three months from date of receipt of application from such date till date of refund of duty, has held that liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made. Appeal dismissed - decided against Revenue.
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2017 (8) TMI 311
CENVAT credit - removal for use in another place - whether the assessee, which in this case is BSNL, could have claimed CENVAT credit in respect of capital equipment, which was removed for use to another place within the same zone? - Rule 3(5) of Cenvat Credit Rules, 2004 - Held that: - the assessee cannot be denied the right to avail the CENVAT credit - Rule 3(1)(i) allows, inter alia, a provider of output service to take CENVAT credit of any duty of excise, which is paid on capital goods received in the premises of the provider of output service, whereas, there is nothing in the said Rule which suggests that CENVAT credit would be available to an output service provider, only if, the capital goods in issue are used in the very same premises. This interpretation accords with what we have stated with regard to Rule 3(5) read with the proviso appended thereto - appeal dismissed - decided against Revenue.
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2017 (8) TMI 310
Levy of duty - Molasses - whether the Assessee would be liable to pay duty on molasses, which is stored in earthen pits, i.e., Katcha pits, located within the factory premises? - Held that: - Rule 9(1) would show that it, inter alia, prohibits removal of excisable goods whether for consumption, or, export, or, even for manufacture of any other commodity either in or outside the place where they are produced, cured or manufactured or any other premises appurtenant thereto, which may be specified by the Commissioner, in this behalf, without payment of excise duty. Whether the storage of molasses in earthen pits, i.e., katcha pits, amounted to removal within the meaning of rule 9 read with rule 49? - Held that: - the molasses were not removed outside the precincts of the factory - the premises appurtenant to the place of production, curing or manufacture can only be premises, which are attached or annexed to such premises. The earthen pits, i.e., katcha pits, in this case, were not annexed to the place of production or manufacture, i.e., factory premises, as is evident from the record and, upon perusal of the impugned Show Cause Notice. The earthen pits, i.e., katcha pits were located within the factory premises. The Assesseee could not have been called upon to pay duty, merely, on account of the fact that the molasses had been stored in earthen pits, i.e., katcha pits, which are otherwise located within the factory premises - appeal allowed - decided in favor of assessee.
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2017 (8) TMI 309
Method of valuation - MRP based valuation - Powder Hair Dye (PHD) packed in sachets of 3 gms. 6/8 such sachets are put in a mono-carton - Section 4 or Section 4A of Central Excise Act, 1944? - Held that: - In view of the categorical clarifications issued by the Competent Authority, we find no merit in the conclusion drawn by the Original Authority regarding non-applicability of the Legal Metrology provision to the impugned goods - the Revenue did not bring any evidence to support the claim that the 3 gms. sachet is in fact a commonly traded retail pack in the market. On the contrary, the appellants produced supporting evidence to state that the mono-cartons containing multiple sachet are generally considered in retail trade as retail packs. Valuation has to be done in terms of Section 4A the calculation of duty liability and confirmation of demands in terms of Section 4 is not sustainable - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 308
Rebate claim - Rule 18 of the CER, 2002 - export of goods - activity of labeling - whether the process undertaken in respect of goods exported on payment of duty amounted to the process of manufacture or not? - Held that: - the identical matter has already been decided by this Bench in appellant's own case M/s. Glovis India Pvt. Ltd. Vs. CCE, Chennai-IV [2017 (7) TMI 754 - CESTAT CHENNAI], where it was held that the appellants have been able to successfully establish that such activities have been undertaken by them after purchase of the goods from various vendors till the goods are exported. For these reasons, the activities undertaken by the appellant amounts to manufacture - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 307
Benefit of N/N. 15/2010-CE, dt.27.02.2010 - clearance of structures and parts of structures for initial setting up of solar power plant - whether the structures and parts of structures manufactured and cleared for initial setting up of solar power plant consisting of reflector, support beam, support post, upper/middle/lower vertical leg weldment, cross beam are eligible to the benefit of N/N. 15/2010-CE, dt.27.02.2010 as amended? Held that: - all items of machinery are exempted which included prime movers, instruments, apparatus and appliances, control gear and transmission equipments and auxiliary equipments (including those required for testing and quality control) and components. Needless to say that the said notification covers a wide range of items including those mentioned in the inclusive clause, comprising of machinery required for setting up of a solar power generation project or facility. The Larger Bench of the Tribunal in the case of Rakhoh Enterprises [2016 (11) TMI 1207 - CESTAT MUMBAI], while considering the eligibility of the items viz. ‘doors of windmills’ under the exemption under N/N. 6/2006-CE as amended observed that these are parts of ‘Wind Operated Electricity Generator’ (WOEG) and eligible to the benefit of notification. The items in question definitely be considered as ‘components’ of the reflector, undisputedly used being required for initial setting up of a solar power generation project or facility, hence eligible to the benefit of exemption N/N. 15/2002CE dt.27.02.20010, as amended - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 306
Refund of unutilised CENVAT credit - Rule 41 of the CESTAT Procedure Rules, 1982 - pendency of appeal - Held that: - the impugned order is in challenge before this Tribunal and the fate of the same is pending before this Tribunal, therefore, in consequence of the impugned order, any exercise done by the adjudicating authority, as per directions in the impugned order, shall be futile, till disposal of the appeal - decided in favor of applicant.
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2017 (8) TMI 305
CENVAT credit - rejected goods - demand of recovery on the ground that the appellant had neither maintained the records of receipt and disposal of the rejected goods and also could not able to establish that the nature of process undertaken on the rejected goods resulted manufacture - Held that: - the appellant could not place any documentary evidence in support of their claim that the rejected rubber parts were received and reprocessed resulting into manufacture and later cleared on payment of duty - the appellant are not eligible to the CENVAT credit - appeal dismissed - decided against appellant.
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2017 (8) TMI 304
CENVAT credit - whether the M.S. Plate, S. S. Plate, H.R. Plate, Aluminium Coils, G.I. Earthing Strips etc., undisputedly used for the repair and maintenance of various capital goods, in the factory premises of the appellant are eligible to CENVAT credit under the definition of “input” as prescribed under Rule 2(k) of CCR, 2004? - Held that: - similar issue decided in the case of KISAN SAHKARI CHINI MILLS LTD. Versus COMMISSIONER OF C. EX. LUCKNOW [2013 (7) TMI 2 - CESTAT NEW DELHI], where it was held that the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for CENVAT credit - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (8) TMI 299
Sale of capital goods - car used as a demo car - exemption from tax - Section 6 (3) of the DVAT Act - Held that: - It makes no distinction whether the main business of the Assessee is dealing in cars or some other business in order for goods purchased in the Assessee's own name and used for the purposes of the Assessee's business to be treated as capital goods. The Assessee being a dealer selling new cars, it is but natural that the Assessee purchases some cars in its own name for use as demo cars. Prospective customers might like to ‘test drive’ or “inspect‟ the demo car before making an informed choice of purchasing the new car. The fact that these cars are purchased by the Assessee in its own name clearly indicates that the Assessee intends to use these cars as ‘demo cars’ and therefore, would be entitled to treat them as Assessee‟s capital goods. Such demo cars are used for the purchase of Assessee’s business. It must be noticed at this stage that VATO gave no reasons whatsoever for denying the benefit of exemption except saying that the case of the Appellant cannot be accepted. It is only a conclusion without any reasons. The Department has expressed an apprehension that the Appellant may be dressing up regular sales transactions as sale of capital goods for avalining the benefit under Section 6 (3) of the DVAT Act. The denial of benefit of that provision cannot be based on mere apprehensions and suspicions. The fact remains that the Department has been unable to produce any credible material to show that in selling any of the demo cars in either 2009-10 or 2010-11, the Appellant was seeking to camouflage regular sale transactions as sale of capital goods in order to claim the benefit under Section 6 (3) of the DVAT Act. Appeal allowed - decided in favor of appellant.
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