Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 11, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Registration granted u/s. 12A cancelled - If the trustees are misappropriating the funds, if they are maintaining false accounts, it is open to the authorities to deny the benefit under section 11 of the Income Tax Act, but that is not a ground for cancelation of registration itself. - HC
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Treatment to be given to the entrance fee received by the assessee from Life Members - AO was wrong in splitting the fee received from life members into capital and revenue receipts in 20:80 ratio. - AO was not justified in making an addition to the income on account of subscriptions transferred from the advance subscription account of ordinary members to the life members subscription account - AT
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Payment of logo charges - revenue v/s capital expenditure - Usage of logo by the assessee is only for displaying it on the product manufactured i.e. rubber contraceptives. That too, for a limited period as in lieu of payment @ 2% of the gross sales - allowed as revenue expenditure - AT
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Revision u/s 263 - Endless enquiry is not possible and it is for the Ld.AO to decide when to end the enquiry. The Ld.CIT cannot transgress the jurisdiction u/s. 263 of the Act by mentioning that no proper enquiry was made. - AT
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Accrual of income - it was received only as advance for performing projects in future. Advances received cannot be assessed in the year of receipt but has to be assessed in the year of performing contract - AT
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Levy of penalty u/s.271(1)(c) - default u/s. 2(22)(e) - the assessee has no explanation for his conduct in not returning the impugned income - This, despite being aware of the provision being attracted - also there is shift in the assessee’s stand with time - levy of penalty confirmed - AT
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Failure to deduct TDS under section 194C - assessee got transported the sugar cane from the fields of farmers to its premises with the help of transporters - assessee was not at all responsible for transportation of the sugar cane. Thus, section 194C is not applicable - AT
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Penalty imposed u/s. 272A(2)(k) - e-TDS statements filed much later than the due dates - Once the delay in payment of tax is explained satisfactorily, penalty u/s. 272A(2)(k) of the Act cannot be levied for the period till payment of tax. - AT
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Benefit of carry forward of set off of loss - restriction u/s 80 - even though it had very genuine and reasonable cause for not filing return of income for A.Y. 2004-05 on or before the due date u/s. 139(1) of the Act. It is not possible to allow relief to the assessee based on equitable considerations - AT
Customs
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Denial of benefit of Exemption Notification No. 34/98-Cus – so far as imported item, viz., pig bristles is concerned, no sales tax, in fact, is charged on same – Since no tax is chargeable on sale of such goods, said Exemption Notification will therefore, not apply - SC
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Valuation of goods - Inclusion of lumpsum trademark fee and lumpsum royalty for technical knowhow - SC confirmed the decision of CESTAT wherein it was found that, the same is condition of sale for purchase of raw-materials from related foreign entities - liable to be included - SC
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Misclassification due to suppression of facts – Imposition of penalty – Settlement Commission ought to be aware of ramifications of imposing penalty – Commission failed to apply its mind to this important aspect of matter and court constrained to set aside order passed by Commission to this limited extent - HC
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Release of Consignment - import of Canola Oil – Action of Food Authority, therefore, is arbitrary and is violative of Article 14 of Constitution of India – Food Authority to clear consignments which have been detained by them, subject to compliance of provisions of other relevant Act, Rules and Regulations - HC
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Revocation of Customs Broker Licence - offence relating to smuggling of Red Sanders - The punishment of revocation of licence is disproportionate to the offence committed and therefore cannot be sustained - AT
Corporate Law
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Winding-up petition - unable to pay the dues - The Respondent has abused the judicial process in order to delay the discharge of an acknowledged debt for almost a quarter of a century, in which period it has continued in business. - SC
Indian Laws
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Validity of notice u/s 13(2) and u/s 13(4) of the SARFAESI Act - right of the third party - Territorial Jurisdiction of Debt Recovery Tribunal (DRT) - the protection given by this Court is completely misused and to institute multiple proceedings - petition dismissed with cost - HC
Service Tax
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Activity of laying, jointing, testing and commissioning of PSC Pipes, construction of pumps, civil structures, supply, delivery and commissioning of submersible pump set and turbine pump sets, maintenance etc. - It was an activity in public interest, to take care of the civic amenities liable to be provided by the State - Not taxable - HC
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Levy of penalty - service tax and interest were paid before issue of show cause notice - scope of section 73(3) - assessee is not liable to pay any penalty under such circumstances - Levy of penalty u/s 78 set aside - AT
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Commercial coaching and training - parallel college - levy of service tax in respect of training and coaching provided by the appellants which form an essential part of a course or curriculum of a University, leading to issuance of certificate or diploma or degree to the students recognized by law is not justified. - AT
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Penalty u/s 78 - the provisions that shall apply are those existing at the time of commission of the offence. Therefore, there was no scope for the lower appellate authorities to reduce the penalty from the statutory stipulated penalty equal to amount of service tax short paid - AT
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Denial of refund claim - unutilized cenvat credit - refund claim for a particular quarter need not be in respect of input services consumed in that quarter. The appellants had no domestic sales - refund allowed - AT
Central Excise
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Classification of shrink sleeves - the printing was only incidental and the main purpose of the product is to provide tamper protection to the product to make shatter resistance, enhance puncture resistance and tamper proof packing - it is covered by plastic industry - SC
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Restoration of appeal - Having found that the present Writ Petition is gross abuse of this Court’s jurisdiction, the order of pre-deposit passed in the year 2001 was complied with belatedly and the restoration application was not pressed before the Tribunal we dismiss this Writ Petition with costs quantified at ₹ 25,000/- - HC
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Refund of excess duty - Valuation - If the discounts are given, the value would be lowered resulting in assessees’ liability to pay reduced duty in which case, if assessee has paid back the excess duty to the customers, he would be entitled to the refund of the same. - AT
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Cenvat Credit on capital goods - Export of Yarn exempted from duty - Since during the period of dispute the appellant was clearing the goods by availing full duty exemption as well as on payment of duty, the capital goods cannot be treated as having been used exclusively in the manufacture of exempted goods and Cenvat credit in respect of the same cannot be denied - AT
VAT
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Fixation of higher rate of tax – Increase in turnover – Violation of Natural Justice – Department was duty bound to consider all documents, atleast documents called for from their side – That shows there was absence of application of judicious mind - HC
Case Laws:
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Income Tax
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2015 (9) TMI 450
Registration granted u/s. 12A cancelled - activity of the trust was not genuine and was not being carried out in accordance with the objects of the trust - Held that:- In the instant case, the material on record shows that the Trust has established educational institution and imparting medical education. Every year, students are admitted. Huge investment is made for construction of buildings for housing the college, hostel and to provide other facilities to the students who are studying in the College. The College is recognized by the Medical Council of India, State of Karnataka and all other statutory authorities. Therefore, it cannot be said that the T rust is not genuine. Admittedly, the students are being admitted every year. Students are studying in all courses. Thus the object of the constitution of the Trust namely imparting of education is going on uninterruptedly. Therefore, i t cannot be said that the activities of the Trust are not being carried out in accordance with the objects of the Trust. When the aforesaid two conditions are fully satisfied, on the ground that the trustees are misappropriating the funds of the Trust the registration of the Trust cannot be cancelled . If the trustees are misappropriating the funds, if they are maintaining false accounts, it is open to the authorities to deny the benefit under section 11 of the Income Tax Act, but that is not a ground for cancelation of registration itself. That is precisely what the Tribunal has held . - Decided in favour of the assessee
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2015 (9) TMI 449
Exemption u/s 11 and 12 - whether status of the assessee should be taken as "Trust" as against AOP adopted in the assessment order - whether "borrowed capital" needs to be taken into consideration while deciding whether shares held by the trust exceeds 5% of the share capital of the company or not? - Held that:- As decided in Commissioner of Income Tax –vs- M/s.Islamic Academy of Education [2015 (9) TMI 450 - KARNATAKA HIGH COURT] exemption u/s 11 and 12 of the Act shall not be denied to assessee. Appellate Authorities were correct in law in directing in revenue’s appeal that the status of the assessee should be taken as "Trust" as against AOP adopted in the assessment order-
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2015 (9) TMI 448
Concept of mutuality - Enhancement of income by the FAA - Held that:- FAA for enhancing the income during appellate proceedings, the FAA should not travel outside the record, i.e., the return made by the assessee or the assessment order of the AO, that the power of enhancement was restricted to the sources of income which have been the subject-matter of consideration by the AO from the point of view of taxability,that consideration did not mean incidental or collateral examination of any matter by the AO in the process of assessment,that there must be something in the assessment order to show that the AO had applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection. In the assessment order passed by the AO, there is nothing to show that he had applied his mind to the particular subject matter i.e. applicability of principle of mutuality. Therefore,the FAA was not justified in enhancing the income of the assessee by applying principles of mutuality for the year under appeal. - Decided in favour of assessee. Exemption from payment of income tax on interest earned - Decided against assessee as per the decisions of Banglore Club case [2013 (1) TMI 343 - SUPREME COURT] Allowance of carry forward of short term and long term capital losses to the subsequent assessment years - Held that:- We find that the assessee made a request to the FAA for admitting fresh evidence,that the FAA had admitted the same and had decided the issue in favour of the assessee without calling for a remand report from the AO.In our opinion,he should have called for a report from the AO in this regard. We are of the opinion that in the interest of justice,the matter should be restored back the file of the AO for fresh adjudication and verification of the documents produced by the assessee before the FAA - Decided in favour of revenue for statistical purposes. Allowance of loss on sale of fixed assets - Held that:- We find that the figure of loss claimed on sale of depreciable asset is different from the disallowance made by the AO.In our opinion it needs further verification.Therefore, in the interest of justice we are remitting back the matter to the file of the AO for verifying the exact figure of the loss claimed by the assessee and to allow the same if it has been disallowed by the assessee itself while computing the income for the year under appeal.- Decided in favour of revenue for statistical purposes. Short deduction of TDS - CIT(A) deleted addition - Held that:- As stated earlier the assessment was completed under section 144 of the Act and no details whatsoever was produced before the AO by the assessee during the assessment proceedings, that the FAA held that part of the TDS payment was shown in the earlier years. In our opinion it was the duty of the FAA to call for the remand report from AO before allowing the appeal.Therefore, in the interest of justice we are remitting back the matter to the file of AO to decide the issue again.The assessee is directed to produce relevant certificates before the AO.The AO would give credit for the taxes paid paid in the earlier years,as claimed by the assessee - Decided in favour of revenue for statistical purposes. Treatment to be given to the entrance fee received by the assessee from Life Members - Held that:- The issue has been settled by the Bombay High Court in its own case in assessment year 1963-64 and assessment year 1964-65 (1990 (4) TMI 51 - BOMBAY High Court) as held that the entrance fee paid by the life members equivalent to the amount collected from ordinary members is a capital receipts not liable to tax and the balance amount is in fact compounded payment, in lieu of annual subscriptions and therefore these are revenue receipts. Thus it will be seen that Bombay High Court has not laid down any ratio for the purpose of splitting entrance fee between revenue and capital receipt. Therefore, the Assessing Officer was wrong in splitting the fee received from life members into capital and revenue receipts in 20:80 ratio. Assessing Officer was not justified in making an addition to the income of the Appellant on account of subscriptions transferred from the advance subscription account of ordinary members to the life members subscription account - Decided in favour of assessee.
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2015 (9) TMI 447
Unexplained drastic variation in net profit rate - AO mentioned that considering the fact that the sales are not verifiable, it will not be unreasonable to compute the profits at the rate of 5% of the disclosed sales - Held that:- We are of the considered opinion that neither the AO nor the CIT(A) examined the books of accounts. Both of them did not pin point any defects in the books of account. Further selling its products in cash is not against the law. A different percentage of profit cannot be adopted only because the assessee makes cash sale. We, therefore, delete the addition made by the AO - Decided in favour of assessee. Addition in the hands of the other person u/s. 153A /153C - Held that:- It appears that in the case of appellant no assessment was completed either u/s.143 (3) or u/s.147 or under any other provisions of the Act except processing of the return of income u/s.139 (1) of the Act. Since no assessment was made in this case for the assessment years 2005-06 to 2010-11 prior to the assessment u/s.153C of the Act which is the first assessment for the years under consideration, the scope of assessment expands to the original jurisdiction as well as jurisdiction conferred u/s.153A and in other words, the A.O may conclude the assessment based on the findings of the search and also on the basis of any material existing or brought on record of the A.O. In view of the above, the ground raised in this regard is not entertained. - Decided against assessee. Approval of the Joint Commissioner as mandated u/s. 153D is absent and hence the assessment is bad in law as per assessee - Held that:- It is not clear whether the appellant literally means that under the provisions of section 153D prior approval of the Jt. Commissioner is required, whereas in this case prior approval of the Addl. Commissioner of Income Tax is obtained. It is relevant to mention that Section 2(28C) of the Act defines the Jt. Commissioner as a person appointed to be Joint Commissioner of Income-tax or an Addl. Commissioner of Income-tax under sub section 1 of section 117 of the Act. In view of the above, the ground of appellant is hereby dismissed. - Decided against assessee.
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2015 (9) TMI 446
Unexplained cash credits u/s.68 - Held that:- CIT(A) while accepting loan to the tune of ₹ 48,40,992/- in respect of 4 persons sustained the addition of ₹ 10,08,079/- which is the difference between the figures shown by the assessee and the figures as per the loan confirmation letters filed before the AO by the above 4 parties. Therefore, the order of the CIT(A) sustaining the difference of ₹ 10,08,079/- is upheld. Now coming to the balance amount of ₹ 84,99,237/- taken from the 5 parties, it is a fact that despite letters issued by the AO, the above loan creditors did not respond to such letters during the remand proceedings. It is the settled position of law that for accepting any cash credit, the onus is always on the assessee to substantiate with evidence regarding the identify and credit worthiness of the loan creditor and the genuineness of the transaction. In the instant case, although the assessee has filed certain confirmations, however, the fact remains that the credit worthiness of those loan creditors has not yet been proved.since the Ld. Counsel for the assessee made a plea that given an opportunity the assessee is in a position to produce the loan creditors before the AO with documentary evidence to his satisfaction regarding the credit worthiness of the loan creditors, therefore, we in the interest of justice, deem it proper to restore the issue to the file of the AO with a direction to give one more opportunity to substantiate with evidence to his satisfaction regarding the credit worthiness of the loan creditors for the loan of ₹ 84,99,237/-. The assessee is directed to produce the parties before the AO for his examination. - Decided partly in favour of assessee for statistical purposes.
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2015 (9) TMI 445
Payment of logo charges - revenue v/s capital expenditure - Held that:- Tribunal in assessee's own case for the assessment years 2002-03 to 2007-08 [2012 (10) TMI 1001 - ITAT CHENNAI] decided the issue in favour of the assessee wherein held title of the 'logo' in question has not passed over to the assessee. Further, there is no acquisition of assets or part of any capital asset. Usage of logo by the assessee is only for displaying it on the product manufactured i.e. rubber contraceptives. That too, for a limited period as provided in the agreement in lieu of payment @ 2% of the gross sales. Thus we hold the instant 'logo' charges are also revenue expenditure within the meaning of Sec.37 of the Act in the nature of wholly and exclusively for the purpose of assessee's business - Decided in favour of assessee. Payment of royalty for technical know-how - revenue v/s capital expenditure - Held that:- By following the decision of the Tribunal in assessee's own case for the assessment years 2002-03 to 2007-08 decided the issue in favour of the assessee, wherein, the Tribunal has observed the payment made by the assessee in the shape of technical know-how fee by way of royalty @ 2% of the gross sales is Revenue expenditure - Decided in favour of assessee.
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2015 (9) TMI 444
Disallowance of deduction under S.80IB(10) - the commercial space of 11,913 sq. ft. in the project developed by the assessee was more than the prescribed limit of 5% of the total built up area of the project - Held that:- In the present case, the plot of land on which the commercial complex was built had already been sold by the assessee and since the commercial complex on the said plot of land was developed by the owners of the land and not by the assessee, we are of the view that the same could not be considered as part of the project of the assessee, especially when the project of the assessee excluding that plot of land independently complied with all the conditions for claiming deduction under S.80IB(10). It is also pertinent to note here that profit arising from the development and sale of commercial complex was duly offered by the owners to tax in their returns of income, and neither they nor the assessee claimed any deduction under S.80IB(10) in respect of the said profit. Out of total 136 units constructed by the assessee in the project, two units bearing Nos.118 and 121 (correct No. is 21, as pointed out by the learned counsel for the assessee) were having built up area of more than the maximum area of 1,500 sq. ft. permissible as per the relevant provisions - Held that:- As explained on behalf of the assessee before the authorities below as well as before us, the said unit was built on a corner plot and keeping in view the location as well as the size of the plot, duplex house was constructed, having a built up area of less than 1,500 sq. ft. It is also observed that a copy of the sale deed for residential unit No.21 was filed by the assessee even before the learned CIT(A), but still the learned CIT(A) brushed aside the same, by observing that the same was not sufficient to prove that the built up area of the unit was less than the limit of 1,500 sq. ft. prescribed under S.80IB(10). In our opinion, the said sale deed was sufficient to show that the area of the duplex unit constructed by the assessee as residential unit No.21 was having less than 1,500 sq. ft. built up area and the approved plan annexed to the sale deed further established this position. As demonstrated by the learned counsel for the assessee at the time of hearing before us, this position is duly supported by the copy of the sale deed dated 3.9.2010, placed at page Nos.67 to 78 of the paper-book, which clearly shows that the residential unit No.118 comprising of plot of land as well as a residential unit having only ground floor with built up area of 1,4765 sq. ft. duly completed, was sold by the assessee. The area of the said unit sold by the assessee on 3.9.2010 was having a built up area of 1,475 sq. ft. only and the additional built up area in the form of first floor which was under construction as found by the DVO on 17.12.2011 was done by the owner of the unit and not by the assessee. Both the residential units bearing Nos. 118 and 21 thus were having built up area of less than1,500 sq. ft. as developed and sold by the assessee and in our opinion, there was no violation of any condition as alleged by the authorities below, for claiming deduction under S.80IB(10). - Decided in favour of assessee.
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2015 (9) TMI 443
Revision u/s 263 - disallowance u/s. 40(a)(ia) and u/s. 40A(3) made by AO - Held that:- As from the material on record, it is clear that the AO made enquiries on the very same issues during the course of assessment proceedings and merely because, the returned income is lower, the assessment order cannot be termed as erroneous. It is only after the examination of detailed information filed during the course of assessment proceedings that assessment order came to be passed. It is not a case of lack of enquiry. It is for the AO where to stop the enquiry. It is only in the case of nonenquiry, the jurisdiction u/s. 263 can be exercised by the Commissioner. We notice that the Ld.AO after duly considering the explanation and information filed in response to the questionnaire on various issues, on being satisfied with such explanation chose not to make any further enquiry. Endless enquiry is not possible and it is for the Ld.AO to decide when to end the enquiry. The Ld.CIT cannot transgress the jurisdiction u/s. 263 of the Act by mentioning that no proper enquiry was made. See Rishi Kumar Gupta Vs. CIT [2004 (2) TMI 270 - ITAT AGRA ] The fact that the AO issued the questionnaire on several issues and the assessee had responded to the same by filing the information and on consideration of replies from the assessee, the AO held that an amount of ₹ 23,137/- u/s. 40(a)(ia) and an amount of ₹ 1,42,650/- u/s. 40A(3) of the Act held to be disallowable, goes to prove that the AO had applied his mind while passing the assessment order and therefore, we hold that the Ld.CIT is not correct in exercising the jurisdiction in the present case under the provisions of Section 263 - Decided in favour of assessee.
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2015 (9) TMI 442
Accrual of income - Advance received by the assessee for his professional work - whether has to be assessed in the year of receipt or in the year of performing the contract? - Held that:- None of the advances received by the assessee are assessable as income of the assessee in the assessment year 2005-06 as it was received only as advance for performing projects in future. Advances received cannot be assessed in the year of receipt but has to be assessed in the year of performing contract - Decided in favour of assessee.
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2015 (9) TMI 441
Addition on account of peak credit/investment - whether the addition is duly covered in the declaration and other addition made by the Assessing Officer in the assessment order and this sustaining amounts to taxing the same amount twice? - Held that:- Since nothing has been brought before the lower authorities as well as before us that the statement given during the course of search was on wrong assumption of facts or that the statement given during the course of search is untrue or false, therefore, we do not find any merit in the arguments of the Ld. Counsel for the assessee that addition of the same will amount to double taxation. However, as already mentioned earlier, the AO himself has noted in para 4.8 of his order that debtors to extent of ₹ 10,76,176/- relates to the unaccounted business as evidenced by Bundle No.4, therefore, the assessee is entitled to relief of only ₹ 10,76,176/- out of the addition of ₹ 28 lakhs made by the AO on the basis of the admission of the assessee during the course of search being peak investment in unrecorded transactions in purchases and sales. - Decided partly in favour of assessee. Addition of ₹ 1 lakh on adhoc basis out of various expenses as were not fully verifiable with supporting vouchers - Held that:- No infirmity in the above disallowance since the assessee himself by agreeing for addition of ₹ 1 lakh prevented the AO from making further enquiries. Therefore, the CIT(A) was fully justified in not accepting the various additional evidences in the form of bills and vouchers. Merely because books of accounts are duly audited u/s.44AB, the same, in our opinion, is not sufficient to delete the addition especially when the AO had pointed out that the expenses are not supported by proper vouchers and the assessee himself has agreed for addition of ₹ 1 lakh and prevented the AO from making further enquiries. Under these circumstances the order of the CIT(A) is upheld - Decided against assessee.
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2015 (9) TMI 440
Grant of registration u/s 12AA denied - as per DIT(E)objects of assessee do not come under the purview of charitable purpose as defined u/s 2(15) and the entire activity of collecting sperm/egg, arranging facility for surrogacy, etc, which is in the nature of medical services are actually undertaken by M/s Diana Medical Services Pvt. Ltd. and assessee has been created only on paper - Held that:- Unless corroborative evidences are brought on record to establish that the entire activity of bringing donors, collecting sperm/egg, storage etc., has been solely undertaken by hospital, assessee's role cannot be ignored. Therefore, without making any enquiry to find out the exact nature of activity of assessee and the hospital, it cannot be presumed that the entire activity of collection of sperm/egg and utilization in treatment of infertile couples is the activity of hospital. For the aforesaid reasons, we are unable to approve the decision of ld. DIT(E) in refusing to grant registration u/s 12AA of the Act to assessee. As far as the first condition is concerned, there cannot be any doubt that aims and objects of assessee society are of charitable nature. The only other condition which is required to be satisfied is genuineness of its activities. On perusal of income and expenditure statement of assessee as well as other materials, it is not visible how assessee has created awareness amongst general public whether by holding seminars, workshops etc. or through any other mode, for collecting sperm/egg from donors. Assessee has also to explain how it maintains the sperm/egg bank, since, according to its own admission it does not have infrastructure facility for storage gametes. That being the case, assessee has to bring on record the terms and conditions on which it has utilized the facilities of a third party and the consideration paid for such utilization. Similarly, though, ld. AR submitted before us, the amount collected from childless couples, who undergo treatment for infertility are only voluntary contribution but he has not furnished details as to how many patients have received sperm/egg and what is the contribution made by each patient. This is very much essential to prove the fact that assessee is not undertaking any commercial activity of trading in sperm/egg, and it is a no profit organisation. Further, nature and purpose of operational grant received by assessee from hospital also needs to be explained clearly because the MoU between the assessee and the hospital provides for payment of consideration to assessee at mutually agreed rate for utilization of items taken from the bank. All these facts have to be brought on record by the society to dispel the doubts entertained by ld. DIT(E) that entire activity relating to collection and storage of gametes and utilization in treatment of infertility is carried on by the hospital and the activity is of a purely commercial nature. Since all these aspects have not at all been examined by ld. DIT(E) while rejecting assessee's application for grant of registration u/s 12AA matter requires re-examination by ld. DIT(E). - Decided in favour of assessee by way of remand.
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2015 (9) TMI 439
Addition u/s 68 - assessee received a portion of cash through the will of his father who expired on 28.12.2002 and his aunty who expired on 14.6.2003 - Held that:- We notice that the assessee has a written a letter dated 10-12-2010 before the assessing officer, wherein he has pointed out that the assessing officer is asking for details of the income of the deceased person after expiry of about six years since the demise of the executor of the will. Though the said letter was written in the context of the will executed by the father of the assessee, the same reasoning equally applies to the will written by Smt. Ganga Tarachand Ahuja. The said lady died on 14.6.2003 and the information relating to her income was being sought in December, 2010, i.e., after expiry of about seven years. Hence, the difficulty on the part of the assessee to obtain necessary details, in our view, should be appreciated. However, we notice that the assessee has obtained certificate about availability of agricultural income in the hands of the executors of the will, which in a way substantiates the availability of income. Hence, in the peculiar facts of the case, we are of the view that the tax authorities have rejected the claim of receipt of cash through wills, only on the basis of surmises and conjectures and accordingly we are of the view that the said claim requires to be accepted. we are of the view that the claim of availability of cash as on 31.3.2004 should be accepted in the peculiar facts and circumstances of the case and accordingly there is no justification in assessing the same as income of the assessee. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the assessing officer to delete the assessment of the impugned cash balance. - Decided in favour of assessee.
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2015 (9) TMI 438
Transfer pricing adjustment - whether Terex GB Ltd. is not assessee’s Associate Enterprise? - Held that:- The finding given by DRP that the prices and other conditions relating thereto are not influenced either by the assessee or Terex GB Ltd. could not be controverted by the Ld. Departmental Representative. A bare perusal of the various clauses of the distributor agreement shows that both are independent parties. We therefore do not find any infirmity in the order of the DRP holding that Terex GB Ltd. is not assessee’s Associate Enterprise. The Ld. Departmental Representative also could not point out any distinguishable features so as to take a different view than the view taken by the DRP. We accordingly uphold the same. The grounds raised by the Revenue are accordingly dismissed. - Decided against revenue.
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2015 (9) TMI 437
Compliance to TDS provisions - whether interest payment to associate/nominal members are not covered under the said provision of exemption u/s 194A(3)(v) - difference in rights and privileges between regular members on one side and associate/nominal members on the other found by AO and observed that ‘member’ as envisaged u/s 194A(3)(v) only refers to a regular member and not all the members of the society - Held that:- On perusal of the provisions contained u/s 194A(3)(v), it is very much clear that there is no distinction made under the said provision between different categories of members. The language used u/s 194A(3)(v) is ‘Member’, the Hon’ble Bombay High Court in case of the Jalgaon District Central Cooperative Bank Ltd. & anr. Vs. Union of India and others (2003 (9) TMI 56 - BOMBAY High Court ), while examining the provision contained u/s 194A(3)(v), held that exemption granted to a cooperative society u/s 194A(3)(v) cannot be taken away by creating a distinction between duly registered member and nominal member. The aforesaid decision of the Hon’ble Bombay High Court has been affirmed by the Hon’ble Supreme Court while dismissing SLP preferred by the department. In view of the the principle laid down in the judicial precedents, as noted above, to the effect that no distinction can be made between different categories of members while applying the provisions of section 194A(3)(v) of the Act, in our view decision of ld. CIT(A) cannot be interfered with. It may be worthwhile to note here that the impugned assessment order was also subject matter of revision proceeding u/s 263 of the Act. Ld. CIT while revising the assessment order u/s 263 of the Act, held that AO should also have applied TDS provisions to registered/regular member and ITAT held that Explanation ‘c’ to section 263(1) clearly spells out that ld. CIT can exercise his power u/s 263 to an issue which is not contested and decided in appeal proceeding. Therefore, as in the present case, the issue in dispute is clearly the subject matter of appeal before ld. CIT(A) and a decision has already been rendered by ld. CIT(A) much prior to the exercise of power u/s 263 of the Act, in our view, assessment order has merged with the order of ld. CIT(A), hence, could not have been revised by invoking the provisions of section 263. Therefore, the exercise of power u/s 263 is invalid - Decided in favour of assessee.
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2015 (9) TMI 436
Levy of penalty u/s.271(1)(c) - default u/s. 2(22)(e) - Held that:- Ignorance of law is no excuse, even as clarified in CIT vs. Alkesh K. Patel [2010 (3) TMI 416 - BOMBAY HIGH COURT] wherein the assessee-respondent pleaded similarly, admitting to a bona fide mistake in view of his being not aware of the relevant provision of law, being, in fact, the provision under reference, i.e., section 2(22)(e). The Hon’ble Court discountenanced the plea of a bona fide mistake on account of being unaware of the provision of law, which would be by itself not sufficient. All the relevant facts and circumstances of the case could though be considered to arrive at a finding of fact with regard to a bona fide belief, and which had not been evaluated by the tribunal. The matter was accordingly restored back to it for the purpose, to do so upon considering all the material facts and circumstances. The matter of bona fide belief, or a mistake on its basis, would thus have to be examined on its merits. The assessee in the instant case himself admits to have realized his mistake, implying of his knowledge of having, perhaps inadvertently, violated the law in-asmuch as he could not, as a substantial shareholder, have, except by way of dividend, diverted the profits of a company in which public is not substantially interested, for his personal purposes. Precisely what we are saying, i.e., that the assessee having realized his mistake well in time, with the default u/s. 2(22)(e) – the law on which is very clear, having been committed, he ought to have returned the said income in-asmuch as he has no reason for not so doing, preferring instead not to return his income – in the admitted facts of the case, in accordance with law. He could have, at least, while not returning the same, narrated the sequence of events leading to the attraction of the provision of section 2(22)(e), besides the subsequent events, pleading to an indulgence in non-invoking section 2(22)(e). It is though doubtful if this would have served the purpose in-as-much as the assessee himself admits to have realized his mistake, i.e., having become aware of the position of law, and which gets established by his ‘immediate’ returning the funds back to the company. The same, however, would have provided scope for consideration of the assessee’s explanation, which we find as absent in the instant case. In short, the assessee has no explanation for his conduct in not returning the impugned income and, further, not declaring the material facts per the return of income. This, despite being aware of the provision being attracted. We have, rather, as afore-stated, observed a shift in the assessee’s stand with time. No case for the non levy of penalty u/s.271(1)(c) in the facts and circumstances of the case is made out. In view of the foregoing, we confirm the levy of the penalty u/s.271(1)(c), which is at the minimum sum, i.e., in principle. We have already stated that the assessee having been allowed part relief by the tribunal, sustenance of penalty on the same is untenable, so that we direct its deletion to that extent. - Decided partly in favour of assessee.
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2015 (9) TMI 435
Credit for tax deducted - CIT(A) allowed claim - Held that:- CIT(A) has given a clear finding that there was no revenue impact, since the payments made by the assessee has been fully reimbursed during the year under consideration, meaning thereby, if the profit and loss account is recast by including the payments and reimbursements as its expenditure and income respectively, then the provisions of sec. 199 of the Act read will Rule 37BA would stand complied with. Since the Ld CIT(A) has followed the decision rendered by the Delhi bench of Tribunal in the case of Escorts Ltd (2007 (5) TMI 362 - ITAT DELHI) and since the said view also finds support from the decision rendered in the case of Arvind Murjani Brands (P) Ltd (2012 (5) TMI 138 - ITAT MUMBAI ) and further since the entries passed by the assessee do not have any revenue impact, no reason to interfere with the order passed by Ld CIT(A). - Decided against revenue.
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2015 (9) TMI 434
Benefit of deduction u/s 54F - whether the AO is right in restricting the benefit for the one property, when two properties are adjacent? - Held that:- Assessee had sold two commercial properties and had invested the capital gain within the stipulated period in a Group Housing Complex at Bangalore, in the ground floor and first floor of the same property, numbered as IC-1 and IC-2. Before the AO, the assessee, on query, had contended that both the premises in fact constituted one residential unit, inasmuch as the ground floor thereof comprised one bed room, dining room, hall, kitchen, toilet and servant room and the first floor consisted of two bed rooms, hall, kitchen and two toilets. There was only one staircase, which was internal and led to the first floor. There was no independent entry to the first floor. There was only one kitchen in the entire house. It did not matter that the two floors had been purchased vide separate agreements. In fact, IC-2, i.e., the first floor was purchased just one day after the purchase of the ground floor. The house thus was a duplex or two storied house, comprising one single residential unit. As per the grounds of appeal raised before the CIT(A), the assessee had, during the assessment proceedings, verbally requested the AO to get the house physically inspected by his counter part in Bangalore. This the AO did not do. It cannot be gainsaid that the AO is amply empowered to get such an inspection done. Apropos the AO’s observation that no approval was shown to have been obtained by the assessee, nor any payment of statutory dues had been shown to have been made by the assessee, concerning the modification to the house, it is available from the statement of facts filed before the CIT(A), that there was no question of the assessee obtaining any approval or making any payment, since the modification was done by the developer himself, as per the plans, the approval whereof was obtained directly by the developer. Otherwise also, the assessment order does not evince any query in this regard having ever been raised by the AO to the assessee The facts of the present case and the facts of the case relied upon by the AR on Addl. CIT vs. Narendra Mohan Uniyal [2009 (8) TMI 825 - ITAT, DELHI] are slightly different. The issue before the Hon’ble Delhi bench was whether benefit of exemption u/s 54F can be given to two flats situated in ground and first floor, when the assessee used both the flats for own residential purpose after modifying it as duplex house. The Hon’ble Bench rightly held that what the assessee had in her possession was one single residential unit and not two, comprising two floors of one and the same double storied residential house. In the present case on hand, the assessee, claims that he has made it into a single unit of house by purchasing two units of adjacent plots. It was submitted that the house was sold and assessee do not have any copy of the sale deed. Therefore, the issue require examination whether the building is one or two units. Therefore, the issue needs further examination by the assessing officer in the light of the above discussion. - Decided in favour of assessee for statistical purpose.
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2015 (9) TMI 433
Failure to deduct TDS under section 194C - assessee got transported the sugar cane from the fields of farmers to its premises with the help of transporters - assessee-in-default liable to tax under section 201 as well as interest under section 201(1A) - CIT(A) deleted the disallowance - Held that:- Assessee's contention that it has not got the sugar cane transported with the help of contractor rather, it was obligation of the farmers to supply sugar cane at the factory gate was nowhere recorded any by AO in his findings that it is the responsibility of the assessee to get the sugar cane transported from the fields of the farmers to the factory premises. The AO is totally silent in his order. On the other hand, the assessee has made reference to the resolutions, bye-laws and standing orders in this respect. The ld.First Appellate Authority has also considered the submission of the assessee in details, and thereafter recorded a finding that the assessee was not at all responsible for transportation of the sugar cane. Thus, section 194C is not applicable in the present situations. The ld.CIT(A) has rightly deleted the demand raised by the AO. - Decided in favour of assessee.
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2015 (9) TMI 432
Allocation of cost of land - whether CIT(A) has erred in holding that there is no basis and justification to allocate ₹ 5,28,12,000/- towards the building? - adoption of cost of building - work out long term capital gain on transfer of leasehold rights on land - Held that:- AO has arbitrarily allocated the cost of land by taking into consideration the cost of the building overlooking the claim of the assessee that even if new construction has to be made in the same plinth area it cannot be more than ₹ 87,00,000/-. The learned CIT(A) has correctly taken into consideration the fact that the MIDC has not taken into consideration the market value while calculating the differential premium. Since the leasehold rights were transferred to the purchaser at ₹ 7.20 crores, the learned CIT(A) had correctly taken into consideration the fact that the purchaser would have paid the amount essentially based on the land cost and the chance of constructing a new building for new I.T. based industries with adjoining infrastructural facilities and hence it is improper to segregate a large chunk of consideration towards cost of building since the dominant object was to acquire the leasehold rights on the land. Under these circumstances we are of the view that the order passed by the learned CIT(A) on this aspect does not call for any interference - Decided against revenue. Depreciation on the property held for more than 40 years - whether no depreciation was ever claimed and even if it was claimed, in respect of properties which are more than 40 years old, there were still to be some value to the said property and as per the Stamp Duty Ready Reckoner 2007 the value of the said property can be arrived at by reducing it to 30% of the present cost - Held that:- Assessee had given the calculation, based on several parameters, to show that the cost of building, if constructed in financial year 2007-08, works out to ₹ 6,87,12,170/-. The AO merely brushed out the said calculation of the assessee arbitrarily assuming that the purchase cost would be more than ₹ 5 crores. In our considered opinion the matter deserves to be set aside to the file of the AO who is directed to verify the computation given by the assessee and if the cost of building as computed by the assessee is reasonable then the reasonable value can be estimated as on 01.04.1981 accordingly. Decided in favour of assessee allowed for statistical purposes.
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2015 (9) TMI 431
Disallowance of interest expenses - assessee has allegedly diverted interest bearing funds for non-business purposes - Held that:- The advances have been made to M/s Suresh Goel & Son (HUF) for the purpose of the business and on account of commercial expediency, and it has not been established by the learned Assessing Officer that advances are for non - business purposes and as such, disallowance made by the learned Assessing Officer is unsustainable in law. Therefore, delete the addition in dispute amounting to ₹ 10,54,790/- made by the AO and upheld by the Ld. CIT(A). See S.A. Builders Ltd. vs. CIT [2006 (12) TMI 82 - SUPREME COURT] - Decided in favour of assessee.
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2015 (9) TMI 430
Penalty imposed u/s. 272A(2)(k) - e-TDS statements filed much later than the due dates - Held that:- Period for levying the penalty has to be counted from the date of payment of tax because the delay in filing the return till the date of payment of tax is already explained on the ground that the assessee could not pay the taxes for which separate penal provisions exist. The assessee has also explained the reasons for not paying the tax to the Central Government in time which was because of financial difficulties. The assessee has filed the copies of P & L account and balance sheet to substantiate the claim that it was incurring losses and there were substantial liabilities on account of creditors. The assessee has placed reliance on the decision of Mumbai Tribunal in the case of M/s. Porwal Creative Version P. Ltd. Vs. ACIT(TDS), Mumbai [2011 (3) TMI 880 - ITAT, Mumbai ] in which financial hitches have been accepted as reasonable cause for default in payment of tax. Once the delay in payment of tax is explained satisfactorily, penalty u/s. 272A(2)(k) of the Act cannot be levied for the period till payment of tax. Hence, we modify the order of the Assessing Officer. The Assessing Officer is directed to levy the penalty u/s. 272A(2)(k) of the Act only for the delay in payment of tax by the assessee. The order of Ld. CIT(A) is modified accordingly. - Decided partly in favour of assessee.
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2015 (9) TMI 429
Validity of reopening of assessment - Held that:- AO assumed the jurisdiction u/s 148, once a definite information was received from the office of DIT (Invt.), Ludhiana. This, according to us is a good enough reason to initiate proceedings for reopening. As mentioned by the revenue authorities that it was not a case, where four years had elapsed and that the AO needed some evidence of incriminatory nature to initiate the reassessment proceedings.We, therefore sustain the order of the CIT(A) on this issue and sustain the reopening of assessment u/s 147/148. - Decided against assessee. Disallowance of depreciation on the Air Pollution Control Equipment leased to Prakash Industries Ltd on the ground that the real nature of the transaction is finance lease and the appellant is not entitled to depreciation - Held that:- The fact that the assessee took the issue before the Arbitration itself goes to prove that the transaction was genuine. From the details as filed by the assessee we find that as a consequence of award of the Arbitration in favour of the assessee, the assessee was able to repossess the equipment and sell the same on as is where is basis. The factual aspect of claim and allowance of depreciation has been held to be in favour of the lessor, by the courts. As the fact that the assessee repossessed the APEC equipment and sell it, goes to prove the genuineness of the transaction and the title of the equipment always lay with the assessee. In these circumstances, we are of the opinion that the assessee was entitled to depreciation. - Decided in favour of assessee.
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2015 (9) TMI 428
Commission/royalty estimated at 2% on accrued basis on the sub contracted work - revision u/s 263 by CIT(A) as AO without properly examining the material on record has estimated the profit at 2% on work given on sub contract basis as claimed by the assessee and has not examined the assessee’s claim of exemption under section 54F for an amount of ₹ 11.00 lakhs against the capital gain arising out of sale of agricultural land - Held that:- As far as the first issue relating to CIT’s directions on estimation of profit from work contract business, as agreed by both the parties, it is of mere academic interest as in the consequential order passed by the Assessing Officer in pursuance to the directions of the CIT under section 263 the Assessing Officer has not made any variation to such income determined by him in the original assessment order. On a perusal of section 54B, it is evident that if the capital gain arising from sale of agricultural land is invested in purchase of agricultural land, then the assessee is eligible for exemption. Similarly section 54F provides that if the capital gain arising from transfer of long term capital asset, not being a residential house is utilized for purchase of a residential house, within a period of two years, then assessee will be eligible for exemption under section 54F. On a reading of the aforesaid provisions, we do not find any restriction/conditions imposed therein that if an assessee claims exemption under section 54B is not eligible to claim under section 54F. Respectfully following the order in ACIT vs. Sri Satyanarayana [2013 (11) TMI 1550 - ITAT HYDERABAD] we hold that the assessee will be eligible for exemption under section 54F for the amount of ₹ 11.00 lakhs invested in purchase of an apartment. Accordingly we set aside the impugned order of the learned CIT on this issue and restore the order of the Assessing Officer. - Decided in favour of assessee.
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2015 (9) TMI 427
Benefit of carry forward of set off of loss for A.Y. 2004-05 - non filing of return within due date - assessee is a co-operative bank assessed in the status of AOP and carries on banking business - Held that:- Admittedly, in the case of assessee, the return of income was not filed within the due date and therefore the loss for A.Y. 2004-05 has not been determined in accordance with the provisions of sub-section (3) of 139 for A.Y. 2004-05. Such a loss cannot be therefore set off against the profits of A.Y. 2006-07. In terms of section 119(2)(b) of the Act, the CBDT alone has the power to condone the lapse on the part of assessee in not filing the return of income for the A.Y. 2004-05 within the statutory time permitted u/s. 139(3) of the Act. In this case, the time for making such application to CBDT had expired by the time the AO issued show cause notice u/s. 154 to the assessee for the A.Y. 2006-07. Thus, the assessee was taken by surprise and could not exercise the remedies in law, even though it had very genuine and reasonable cause for not filing return of income for A.Y. 2004-05 on or before the due date u/s. 139(1) of the Act. It is not possible to allow relief to the assessee based on equitable considerations, since equity and tax laws are strangers to each other. In view of the specific provisions of section 80 of the Act, we are of the view that claim of the assessee cannot be entertained. We are of the view that the revenue authorities were justified in denying the claim of set off of loss for A.Y. 2004-05 in the assessment of income for A.Y. 2006-07. - Decided against assessee.
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2015 (9) TMI 426
Rectification of mistake - Non-reduction of the management fees offered to tax - CIT(A) directing AO to reduce the management fee offered to tax by the Appellant in its return of income in respect of direct sales by the Head Office - Held that:- As per Para 42 of the order the fact which remains uncontroverted by the revenue authorities and the DR are that the assessee in the year under consideration was covered under the TP regulations and in those proceedings, the factum of management fee has dealt with extensively and in the process, the TPO found the receipt of management fee by the India Branch from SJMH related to services provided to both SJMI & SJMH. It is evident from the accounts submitted before the AO, because in the Profit & Loss Account submitted, it showed the receipt of ₹ 9,60,57,310/- which included ₹ 79,20,240/- under the head management fee for marketing support at ₹ 79,20,240/-. Para 44 of the order read as: - “44. We, therefore, are of the opinion, that all the requisite details were placed before the AO, along with the return on income, which based the computation of returned income on receipts related to services provided to both SJMH and SJMI Since the absence of the missing words would affect the basic structure of the order, wherein, we had deleted the addition of ₹ 1,76,87,465/-, we accept that the above pointed inadvertent mistakes are patent and qualify to be rectified.
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Customs
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2015 (9) TMI 482
Mis-declaration of Fabric – Waiver of pre-deposit of penalty – Applicant attempted to export fabrics by mis-declaration of goods to avail undue DEPB benefits – Applications are filed for waiver of pre-deposit of penalty – Held that:- Applicants were directly involved in claiming undue DEPB benefits – Prima facie, penalties are impossible on applicants – Therefore, all applicants are directed to make pre-deposit within period of four weeks and report compliance – Upon deposit of said amount, pre-deposit of balance amount of penalties would be waived and its recovery stayed till disposal of appeals – Decided against applicants.
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2015 (9) TMI 458
Denial of benefit of Exemption Notification No. 34/98-Cus – Pig hair bristles that were imported were sold against which revenue issued show cause notice stating that since these pig hair bristles were sold without any sales tax been paid thereon, benefit of Exemption Notification would not be available to importer – Commissioner, concluded that Exemption Notification exempting pig hair bristles from tax would amount to case where no tax is chargeable on sale of goods and therefore, benefit of said Notification would not be available to importer – Tribunal vide impugned order reversed order of commissioner – Held that:- on reading of Sections 3 and 7 of Delhi Sales Tax Act, 1975, it becomes clear, that so far as imported item, viz., pig bristles is concerned, no sales tax, in fact, is charged on same – Since no tax is chargeable on sale of such goods, said Exemption Notification will therefore, not apply – We, accordingly, set aside judgment of tribunal and restore Commissioners’ order – Appeal disposed of.
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2015 (9) TMI 457
Valuation of goods - Inclusion of lumpsum trademark fee and lumpsum royalty for technical knowhow - It was held that lump sum payments for trade mark usage and royalty for technical know-how is condition of sale for purchase of raw-materials from related foreign entities and therefore, it should be added on proportionate basis to value of goods imported - Tribunal vide impugned order [2015 (2) TMI 646 - CESTAT MUMBAI] set aside on basis that same is unsustainable in law - Admittedly there is delay of 209 days in filing instant appeal - After hearing parties Suprecourt is of opinion that no good ground found to interfere with judgment and order passed by Tribunal - Accordingly, Appeal is dismissed both on ground of delay as well as on merits.
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2015 (9) TMI 456
Misuse of Advance license – Goods diverted to domestic market – Appellant and his associates were allegedly misusing license received under Advance License Scheme and were evading customs duty on imported goods by diverting goods imported duty free under license into local market without utilizing them for intended purpose – Show cause notice was issued to appellant along with other persons proposing to confiscate goods, demand customs duty and levy penalty – Held that:- Even though personal hearing was granted twice to appellant, appellant did not appear before Authorities, hence no error found in order of Tribunal ordering pre-deposit – Adjudicating Authority has considered involvement of appellant in illegal import of goods by indulging in act of misusing advance licence and evading customs duty on imported goods – Evidence available indicates knowledge and involvement of appellant in import of goods, which established role of appellant – Therefore, we find no justification in modifying order passed by Tribunal – Order of Tribunal stands confirmed – Decided against Appellant.
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2015 (9) TMI 455
Misclassification due to suppression of facts – Imposition of penalty – Settlement Commission vide order imposed penalty upon on petitioner – Main issue was of misclassification arising due to alleged suppression of facts regarding source of insoluble sulphur crystex HB OT 20 by petitioners – Held that:- if letter, informing source of elemental sulphur, issued from overseas supplier was required so as to term dispute as not genuine or bonafide, that aspect has not been at all considered by Commission – Commission must render finding when it is pointed out that petitioners are liable to penal action as proposed in show cause notice – Commission ought to be aware of ramifications of imposing penalty – Commission failed to apply its mind to this important aspect of matter and court constrained to set aside order passed by Commission to this limited extent – As result petition succeed – Commission's order to extent it imposes penalties on petitioner set aside – Matters sent back to Commission to examine whether it can impose penalties on parties and if it can in law whether there are circumstances justifying such imposition – Commission to re-examine this aspect and uninfluenced by its earlier order – Petition disposed of.
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2015 (9) TMI 454
Release of Consignment - import of Canola Oil – Labels not in conformity with Packaging and Labelling Regulations – In past petitioner was permitted to import Canola Oil and no objection was taken by respondent No.1, but consignments imported in January and June, 2014 was rejected on ground that label does not conform to Packaging and Labelling Regulations under Clause 2.2.2(2), which was published on respondent-1 website – Held that:- label prima facie appears to be in complete conformity with clause – Therefore, action of rejecting said consignments is absolutely arbitrary – Pertinent to note that Food Authority, after having rejected consignment of January, had cleared consignment of same product in April and thereafter again in June consignment of same product was rejected – Action of Food Authority, therefore, is arbitrary and is violative of Article 14 of Constitution of India – Food Authority to clear consignments which have been detained by them, subject to compliance of provisions of other relevant Act, Rules and Regulations – Decided in favour of Assesse.
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2015 (9) TMI 453
Revocation of Customs Broker Licence - offence relating to smuggling of Red Sanders - whether revocation of licence of the customs broker, the appellant is correct considering the role of the appellant broker in clandestine export of Red sanders. - Held that:- The three actions of the appellant of failing to advice the client regarding affix of bottle seal no., obtaining dock permits and obtaining the second bottle seal have been taken together to come to the conclusion that the omissions of the appellant cannot be treated as innocent acts of omission but a series of acts which taken together become acts of commission on the part of customs broker to facilitate the smuggling of prohibited red sanders. Whether the omission on the part of Broker is deliberate - Held that:- Therefore even though not advising the client is an omission on the part of the appellant, it cannot be said that this action was one of the series of acts of the appellant to facilitate smuggling of red sanders. In fact the opposite would have been done if the intention was to facilitate smuggling of red sanders as observed by us earlier. The same applies for obtaining dock permit also. The very fact that appellant simply obtained the dock permits and ignored the fact that the name was different gives a feeling that they may not be actively involved in smuggling because if they were involved they would have advised the client that this could create a problem and they would have changed the transporter or the truck or found some other way. There is no evidence of collusion at the port gate. The fact that they simply obtained the dock permits, in our opinion, cannot mean that it shows malafide intention. The punishment of revocation of licence is disproportionate to the offence committed and therefore cannot be sustained. - Decided in favor of appellant.
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Corporate Laws
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2015 (9) TMI 452
Winding-up petition - unable to pay the dues - the claim was for a sum of ₹ 3,54,500/- together with interest at the rate of ten per cent per annum together with ₹ 1,09,958/- deducted by the Respondent on account of the tax deducted at source (TDS). These amounts have remained unpaid even after the receipt of the statutory notice. - Held that:- The Company Judge had no alternative but to proceed for Winding up of the Respondent Company since it had failed to discharge the admitted debt even after the service of the afore-noted statutory notice. The said junior Advocate of the Respondent had, in fact, displayed legal sagacity in getting the winding-up of the Company postponed and avoided the publication in the Winding-up petition by praying for and obtaining leave to pay the debt in installments. Had he not done so, the Respondent would have had to pay the entire debit at once or face certain commercial death as a consequence publication/citation of Winding-up petition. The Respondent has abused the judicial process in order to delay the discharge of an acknowledged debt for almost a quarter of a century, in which period it has continued in business. These Appeals are allowed. - Respondent to directed to pay the said admitted dues - All these amounts are payable within 45 days from today. No extension for payment shall be granted since the accommodation and the indulgence granted by the learned Company Judge has been abused by the Respondent. - Decided in favor of appellants.
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Service Tax
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2015 (9) TMI 481
Waiver of pre-deposit - Business Auxiliary Services - application was partly allowed by directing the Appellant to deposit 25% of the amount demanded - Held that:- Tribunal observed that certain processes on the material supplied by the Ship-builder are required to be carried out by the appellant at his works as per work terms and conditions of the contract. Whether factually this has been done or not is a matter which is required to be decided on the basis of material placed before the learned Tribunal. However, it cannot be said that the observation made by the learned Tribunal is not on the basis of the document which is not part of the record. The learned Tribunal found some substance in the case of the appellant and has directed him to deposit only 25% of the demand and not the entire 100% amount. It can thus be clearly seen that the learned Tribunal has taken into consideration the factors i.e. prima facie case and the interest of the Revenue. - if the amount is deposited within a period of 8 weeks, the learned Tribunal to decide the appeal on its own merits. - Time limit to comply with the pre-deposit extended - Decided partly in favor of assessee.
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2015 (9) TMI 480
Waiver of pre-deposit - cenvat credit - exempted and taxable services - trading activity - tribunal directed the appellant to deposit 50% of the CENVAT Credit disallowed - prima facie view - Held that:- So long as any tentative and prima facie finding will suffice for disposal of such interim applications, the Tribunal must be careful and render only them and nothing more. We find that not just absence of a word “prima facie” but otherwise as well the findings cannot be termed as tentative. In these circumstances, we are of the opinion that we should not express any view on the debatable issue and on merits. Rather we should only interfere with that part of the Tribunal's order where it has imposed conditions of deposit. Interest of justice would be served if the appellant deposits a sum equivalent to 25% of the confirmed demand and if that deposit is made within a period of eight weeks from the date of receipt of a copy of this order, the Tribunal shall hear the appeal on merits and according to law. - Stay order modified - Decided partly in favor of assessee.
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2015 (9) TMI 479
Commissioning or installation of construction service - Activity of laying, jointing, testing and commissioning of PSC Pipes, construction of pumps, civil structures, supply, delivery and commissioning of submersible pump set and turbine pump sets, maintenance etc. - Held that:- As rightly pointed out by the Tribunal, the Assessee was entrusted with the task of laying a long distance pipeline to enable the Tamil Nadu Water Supply and Drainage Board to supply water. It was an activity in public interest, to take care of the civic amenities liable to be provided by the State. Therefore, the Tribunal was right in holding in favour of the Assessee. - Decided against the revenue.
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2015 (9) TMI 478
Validity of filing an appeal - application of mind by the Committee of Chief Commissioners (COCC) on the issues - Tribunal had dismissed the revenue appeal - Held that:- the scope of the present appeal is confined to the correctness of the impugned order of the CESTAT dismissing the CST's appeal at the threshold after holding that the decision of the COCC was vitiated for non-application of mind. It is evident from the order of the Full Bench [2015 (7) TMI 824 - DELHI HIGH COURT] that the CESTAT could not have gone into the merits of the decision. Consequently, in the present appeal the Court cannot permit the Respondent to challenge the decision of the COCC. It will, however, be open to the Respondent to raise such challenge to the decision of the COCC in any other appropriate proceedings, if permissible, in accordance with law. - Appeal restored before the CESTAT - Decided in favor of revenue.
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2015 (9) TMI 477
Levy of penalty - service tax and interest were paid before issue of show cause notice - scope of section 73(3) - Held that:- it is seen that the matter is no more res-integra. The Division Bench of the Karnataka High Court in the case of CCE & ST, LTU, Bangalore vs. Adecco Flexione Workforce Solutions Limited [2011 (9) TMI 114 - KARNATAKA HIGH COURT], had held that assessee is not liable to pay any penalty under such circumstances - Levy of penalty u/s 78 set aside. - Decided in favor of assessee.
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2015 (9) TMI 476
Commercial training or coaching service - The appellant is a R&D organization under the Ministry of Commerce & Industry with a mandate to undertake and promote research and other scientific work connected with cement and building materials and also to impart training to skilled and unskilled labour in construction field - Held that:- no doubt that with the retrospective amendment to the definition of the service tax category, the liability would arise against the assessees. However such liability would be in accordance with the provisions of limitation. Both the authorities below have held that there was no mala fide suppression on the part of the assessee, the invocation of longer period of limitation cannot be held justifiable inasmuch as the criteria for invocation of longer period is also mala fide misstatement or suppression of facts. As such, we find no justification for invocation of the longer period of limitation. - Decision in the case of Morarji Goculdas B&W Co. Ltd. [1995 (1) TMI 94 - SUPREME COURT OF INDIA] followed - Decided in favor of assessee.
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2015 (9) TMI 475
Input services being GTA services - Claim of refund on input services used in Export of goods - Notification No.41/2007-ST - xport invoices numbers are not mentioned in the lorry receipt and the shipping bills - Held that:- However, they are in a position to establish the link between the lorry receipt and the respective export invoices under which the goods were exported. There is no need to examine whether the said condition is substantive or otherwise as I find that on similar issue, this Tribunal in the case of M.R. Organization (2009 (10) TMI 402 - CESTAT, AHMEDABAD) allowed the refund claim subject to verification. The present case also be remitted to the original authority for verification of the claim of the Appellant on the use of GTA service in the export of goods by establishing a link between the lorry receipt and the export invoices and also the export invoices and shipping bills - Decided in favor of assessee.
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2015 (9) TMI 474
Commercial coaching and training - parallel college - appellant contended that coaching is offered as per the University Curriculum and the students appear for examination and the degrees are awarded by the respective Universities - both curriculum and fees are decided by the university as per the agreement. - Charges are collected by appellant. - Held that:- Respectfully following the decision of the Hon’ble Kerala High Court in the case of Malappuram Distt. Parallel Colleges Association Vs. Union of India [2014 (9) TMI 385 - KERALA HIGH COURT] and [2005 (8) TMI 336 - High Court of Kerala] which has been followed by the Tribunal in various cases, we are of the view that the levy of service tax in respect of training and coaching provided by the appellants which form an essential part of a course or curriculum of a University, leading to issuance of certificate or diploma or degree to the students recognized by law is not justified.
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2015 (9) TMI 473
Penalty u/s 78 - manpower recruitment and supply agency service - Held that:- Prior to 08/04/2011, Section 78 envisaged imposition of penalty equal to service tax short paid or not paid if such short/non-payment was on account of willful mis-statement, suppression of facts or contravention of any other provisions of the Act with an intent to evade service tax. In the present case, the appellant had collected the service tax amount from his customers but failed to remit the same to the exchequer. It is also on record that the appellant failed to file statutory returns required to be filed by him. This conduct of the appellant clearly falls within the mischief of willful misstatement/suppression of facts and therefore, the appellant does not deserve the benefit of Section 80 of the Act. Further, since Section 78 as its stood at the relevant time did not provide for any reduction in the mandatory penalty equal to the amount of service tax not paid/short paid, the benefit of amended provision which came into force with effect from 08/04/2011 could not have been extended to the appellant. Penal provisions are substantive in character and therefore, the provisions that shall apply are those existing at the time of commission of the offence. Therefore, there was no scope for the lower appellate authorities to reduce the penalty from the statutory stipulated penalty equal to amount of service tax short paid. - Decided against assessee.
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2015 (9) TMI 472
Denial of refund claim - unutilized cenvat credit - refund in terms of notification No. 5/2006-CE(N.T.) dated 14.3.2006 - Held that:- credit of service tax taken by them was admissible. It is also a fact that the appellants were not in a position to utilize the credit against the goods exporting during the quarter to which the claim relates. Seen in this light there is no doubt that the refund claim was not in violation of the said para 4 of the said Notification. Thus the commissioner (Appeals) while rejecting the refund claim seems to have imported his own condition to the effect that the credit taken must pertain to the quarter during which the goods were exported and for which the refund was claimed - refund claim for a particular quarter need not be in respect of input services consumed in that quarter. The appellants had no domestic sales - impugned order is not sustainable and the same is therefore set aside and it is held that the appellants are entitled to obtain the refund - Decided in favour of assessee.
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Central Excise
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2015 (9) TMI 467
Classification of shrink sleeves - classifiable under Sub-heading 3020.19 or Sub-heading 4901.90 - case of the assessee is that this product is to be treated as one falling under plastic industry - whether the product in question can be treated as that of printing industry or it is covered by plastic industry. - Held that:- we are clear in our mind that the printing was only incidental and the main purpose of the product is to provide tamper protection to the product to make shatter resistance, enhance puncture resistance and tamper proof packing. - Decision in the case of Metagraphs Pvt. Ltd.(1996 (11) TMI 68 - SUPREME COURT OF INDIA) followed. Revenue relied upon the decision of Holostick India Ltd. Vs. Commissioner of Central Excise, NOIDA [2015 (4) TMI 357 - SUPREME COURT], but this case is also helps the assessee and not the Revenue - Decided against the revenue.
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2015 (9) TMI 466
MRP based valuation u/s 4A - accessories - woofer is not a part of Television set and that they are being cleared and sold separately. This was the case, prior to introduction of assessment under Section 4A(MRP). The MRP based assessment is for television set and not for its accessories. - order of the tribunal [2005 (12) TMI 149 - CESTAT, NEW DELHI] sustained - Decided against the revenue.
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2015 (9) TMI 465
Intermediate product - manufacture of sugar syrup - captive consumption - evenue wanted to impose excise duty thereon on the ground that it contains 75.2% sugar contents and, therefore, was to be classifiable under Heading 1702 - Held that:- it is not in dispute that in any case the said product is exempted from duty as per Notification No. 217/86-CE dated 02.04.1986 as amended by Notification No. 79/91-CE dated 25.7.1991. - appeal dismissed - decided against the revenue.
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2015 (9) TMI 464
Levy of penalty - quantum of penalty - intention to evade payment of duty - Rule 96ZP (3) of the Central Excise Rules, 1944 - Held that:- From perusal of the show cause notices we find that there is no allegation of intention to evade payment of duty by the respondent. The only allegation is of late payment of central excise duty. In the order in original the adjudicating authority recorded a finding of fact that the interest on late payment of duty has already been deposited by the respondent-assessee along with duty much before issuance of the show cause notice. - However The adjudicating authority imposed the penalty. Commissioner (Appeals) Customs and Central Excise, Meerut-I reduced the penalty - The Tribunal by the impugned order has increased the penalty to ₹ 3 lacs observing that the penalty confirmed by the Commissioner (Appeals) is too low. Under the circumstances, penalty under Rule 96ZP(3) of the Rules was not imposable on the respondent-assessee. However, since the respondent-assessee has not challenged the impugned order of the Tribunal and, therefore, penalty as levied by the Tribunal cannot be interfered. - Decided against the assessee.
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2015 (9) TMI 463
Restoration of appeal - Tribunal has dismissed the appeal for non-compliance with the condition of pre-deposit. - SSI Exemption - use of brand name (Cellonex) of distinct entity - manufacturing the grinders, mixers and parts thereof - Held that:- We do not see how after the Petitioner on his own approaches the Tribunal and seeks sympathy and equity by urging that the Appeal be restored to the file and heard on merits that the Petitioner now can file another Writ Petition and seeking the same reliefs from this Court. It was open for the Petitioner to seek restoration of the Appeal before the Tribunal. Having filed the restoration application claiming that the order of pre-deposit passed in the year 2001 by the Tribunal is complied with belatedly, but not pressing the application for restoration that the Petitioner cannot approach this Court and in writ jurisdiction. The Writ Petition seeks the very relief which was the subject matter of the restoration application in the Tribunal. That having been voluntarily withdrawn we do not see how third Writ Petition is maintainable. Having found that the present Writ Petition is gross abuse of this Court’s jurisdiction, the order of pre-deposit passed in the year 2001 was complied with belatedly and the restoration application was not pressed before the Tribunal we dismiss this Writ Petition with costs quantified at ₹ 25,000/- - Decided against the assessee.
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2015 (9) TMI 462
Dummy unit - allegation of evasion of duty on manufacture of cigarettes - The Department’s allegation is that PTPL, Nasik was nothing but a dummy entity or a front company floated by GTC for the purpose of duty evasion, that it is GTC who were fully controlling the activities of PTPL and that during the period of dispute, PTPL had received huge quantity of cigarette tobacco and other raw materials through GTC, which were used in manufacture of unaccounted cigarettes which were cleared clandestinely. Held that:- When the allegation of the Department is that PTPL is a dummy company or front company floated by GTC Ltd. which was being fully controlled by GTC and accordingly it is the GTC which has to be treated as the actual manufacturer, a specific finding in this regard has to be made and once such a finding is given, the demand would have to be confirmed against M/s GTC not against PTPL. If, however, there is no evidence to prove that PTPL is a front company or a dummy company floated by M/s GTC Ltd. but still there is sufficient evidence to prove the allegation of duty evasion against PTPL, the demand would have to be confirmed against PTPL and not GTC Industries Ltd. The matter has not been adjudicated in this manner and, therefore, for this reason the impugned order has to be set aside and the matter has to be remanded for de novo adjudication. - Matter remanded back.
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2015 (9) TMI 461
Valuation - inclusion of freight where goods delivered at the customer’s premises at pre-agreed freight - transaction value under section 4 - freight charges were shown in the invoices and collected by the appellant from his customers - determination of place of removal. Held that:- Claim of the ld. Advocate therefore, needs detailed examination with reference to purchase orders, invoices, L.R.s transit insurance policy, etc., to arrive at the place of sale or place of transfer of possession from appellant to customer as per Section 2(h) of the Central Excise Act. Learned Advocate has also pointed out differences in category (b) and category (c) sale. For example name of consignor/consignees, transit insurance/risk, etc. These claims will have to be first verified, particularly when no such claim was made by the appellant in the two cases referred above. After factually verifying above claim of the appellant, matter will have to be examined with reference to Sections 4 and 2(h) of the Central Excise Act. We do not consider it necessary to go into other issues such as limitation, etc., at this point of time, as the result of above exercise may have bearing on the same. - matter remanded back.
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2015 (9) TMI 460
Refund of excess duty - Valuation - deduction of various types of discounts from the assessable value - manufacture of cold rolled Steel Strips/Sheets and Galvanized Plain and corrugated sheets. - Held that:- In any case we find that the Revenue is not disputing the factum of giving of discounts to the customers. The discount policy also was available and was known to the customers at the time of clearance of their final product. The discounts stand actually given when a particular customer attains that goal of quantum of purchase. In such a scenario the Revenue cannot question the assessee, as to why, the discounts stand given to a particular customer. It may not be out of place to mention here that Revenue is not disputing the factum of grant of discount. Even though, the certificates were given subsequently, they related to the relevant period. It is also not being disputed that discount policy was floated by the assessee amongst their customers. As such, non-uploading of the same at the website would not make a difference. Otherwise also, we find that the Tribunal in the remand proceedings has held such discounts to be admissible and does not open to the Revenue to challenge the same in the remand proceedings. Revenue in their memo of appeal have submitted that as the appellant had originally recovered the duty amount from their customers, who might have taken the credit, the provisions of unjust enrichment would apply. They have further pleaded that inasmuch as the discount is always relatable to the value and not to the duty, the recovery of the entire duty from the customers and the grant of refund to the assessee would amount to unjust enrichment of the assessee. We find that the assessee’s customers have taken a categorical stand and have also produced certificates before Commissioner (Appeals) that they are not registered with the Central Excise Department and as such, the question of availing the credit does not arise. If the discounts are given, the value would be lowered resulting in assessees’ liability to pay reduced duty in which case, if assessee has paid back the excess duty to the customers, he would be entitled to the refund of the same. - Refund allowed. - Decided against the revenue.
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2015 (9) TMI 459
Cenvat Credit on capital goods - Export of Yarn exempted from duty - The yarn meant for export was being cleared on payment of duty at the rate of 4% adv. and was being exported under rebate claim. Notification No. 30/2004-C.E. provides for full duty exemption to the items specified thereunder subject to condition that no input duty credit is availed. - Alternative Notification No. 29/2004-C.E. and Notification No. 29/2004-C.E - Held that:- The contention of the Department is totally incorrect, as Exemption Notification No. 29/2004-C.E. is an unconditional exemption which prescribes a rate of duty of 4% ad valorem. There is no condition in this notification that for availing of this exemption prescribing concessional rate of duty of 4% adv., input duty Cenvat credit must be availed. The condition of non-availment of input duty Cenvat credit is for nil duty under Notification No. 30/2004-C.E. But this does not mean that an assessee not availing input duty credit cannot avail the exemption under Notification No. 29/2004-C.E., as this is an unconditional Notification. When an assessee does not avail of input duty credit, he has option to pay 4% duty under Notification No. 29/2004-C.E. and also the option to clear his goods at nil rate of duty under Notification No. 30/2004-C.E. and when two exemption Notifications are available to an assessee, he can always opt for the Notification which is most beneficial for him and in this regard the Department cannot force the assessee to avail a particular exemption Notification. Looked at from this point of view, the Department’s stand is incorrect. Since during the period of dispute the appellant was clearing the goods by availing full duty exemption as well as on payment of duty, the capital goods cannot be treated as having been used exclusively in the manufacture of exempted goods and Cenvat credit in respect of the same cannot be denied. - Decided in favor of assessee.
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CST, VAT & Sales Tax
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2015 (9) TMI 471
Fixation of higher rate of tax – Increase in turnover – Violation of Natural Justice – Notice was issued upon petitioner fixing rate of tax liability payable at 12.5% or more as per TNVAT act as turnover of petitioner exceeded ₹ 50 lakhs – In appeal against said order before respondent to drop proceedings as petitioner has not crossed limit of ₹ 50 lakhs, was filed – However respondent, without considering documents sent by petitioner, passed erroneous order – Held that:- After receipt of notice petitioner had sent all documents clearly mentioning therein that invoice was cancelled with return of cheque issued by customer and thereupon it was also further made clear that petitioner has also filed revised return – But nowhere these documents were considered – Respondent was duty bound to consider all documents, atleast documents called for from their side – That shows there was absence of application of judicious mind –Therefore, respondent miserably failed to consider entire case, direction issued to respondent to re-consider entire issue in accordance with law – Impugned order set aside – Decided in favour of Petitioner.
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2015 (9) TMI 470
Exemption from Advance tax – As per notification, exemption application was to be filed if goods were to be disposed of in manner otherwise than by way of sale or by making zero rate sales as provided under section 17, of such goods, or of goods manufactured therefrom – Petitioner submitted that application followed by various reminders was moved by petitioner for exemption of advance tax but no decision has so far been taken thereon – Held that:- after considering material on record and without expressing any opinion on merits of case, respondent No. 4 directed to take decision on application by passing speaking order and after affording opportunity of hearing to petitioner in accordance with law – Decided in favour of petitioner.
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2015 (9) TMI 469
Detention of goods transferred for replacement – Imposition of Penalty – During course of business, huge quantity of goods were found defective by purchasing dealers which were returned back by dealers for replacement – Since goods in question were moved by way of replacement and not by way of sale, obligation to fill declaration form was not required – However said goods were detained by Excise and Taxation Officer and penalty was imposed taking value of goods – Whether order imposing penalty was justified – Held that:- goods which were impounded were put to auction and were purchased for sum of ₹ 36,71,000 – Respondent agreed to adjusted amount received towards liability of assesse and excess amount shall be released – In view of said position, State permitted to adjust amount of liability from sale consideration and to release excess amount to appellant – Decided in favour of Petitioner.
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2015 (9) TMI 468
Violation of principles of natural justice – Claim of Input Credit Tax – Respondent issued notice alleging that petitioner effected purchases from dealers, whose registration was cancelled and claimed input tax credit and hence, he was liable to pay amount availed by him – Thereafter respondent passed impugned order, without affording opportunity of personal hearing to petitioner – Held that, respondent did not indicate as to proposed addition to be made in assessment, which, as per provisions of Act, was bad – In such circumstances, impugned order passed by respondent was liable to be interfered with, on that sole ground alone – Petitioner could not avail benefit of filing statutory appeal in time, on medical grounds and as of now, limitation period was also lapsed – Respondent failed to afford opportunity of personal hearing to petitioner before passing impugned order, which, was in violation of principles of natural justice – Therefore, petitioner could be given one more opportunity to meet ends of justice – Impugned order passed by respondent quashed – Petitioner directed to submit all necessary documentary evidence in support of his claim before respondent and respondent to consider claim of petitioner in accordance with law – Decided in favour of Assesse.
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Indian Laws
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2015 (9) TMI 451
Validity of notice u/s 13(2) and u/s 13(4) of the SARFAESI Act - right of the third party - Territorial Jurisdiction of Debt Recovery Tribunal (DRT) - secured creditor to take possession of the secured assets. - Held that:- this Writ Petition ex-facie was not maintainable. The petitioner throughout knew that the remedy of the petitioner to challenge any order in the Securitisation Appeal No.4 of 2012 was not to approach this Court directly. Further, even if the Presiding Officer of DRAT was not available, it is not as if urgent matters are not taken up by any other officer to whom the charge is handed over temporarily. Thirdly, if any genuine or bona fide borrower apprehended that his rights and remedies would be defeated, he would seek a limited protection from this Court and in order to enable him to avail of the alternate remedy. The reliefs that are sought from this Court were on the footing that a third party will be prejudicially affected in the event the possession is taken over and of the factory premises. If really the third party was in possession, all these facts could have been brought to the notice of the officials and while executing the notice or enforcing it, that third party could have and if genuinely apprehensive, pointed out to these officials and the Police machinery as well that it has nothing to do with the transactions between the bank and the borrower and are put in possession under a valid and legal document. Multiple proceedings for same relief were instituted at Pune and Mumbai before the DRTs. The Tribunal noted the undisputed facts that both the Securitisation Appeals are pending. They are pertaining to the same asset. The Pune Securitisation Appeal is filed by one Unnikrishnan Nambiar, Director and the present petition is filed by the company a juristic person. Thus, more or less same persons filed applications after applications to seek the same relief and on such conclusions equitable and discretionary reliefs were denied by the DRT. The petitioner's appeal / Securitisation Appeal No.4 of 2012 is pending and all this was known to the petitioner. Yet, after inducting a alleged third party in possession and to facilitate it, such collusive proceedings are brought before this Court. In the present circumstances really the protection given by this Court is completely misused and to institute multiple proceedings. Writ Petition dismissed with costs quantified at ₹ 50,000/- to be paid to the first respondent bank or its advocate - Decided against the petitioners.
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