Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 15, 2015
Case Laws in this Newsletter:
Income Tax
Customs
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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Exemption u/s 54F - the prior to date on which house was purchased, the Assessee was not the owner of another residential house and therefore the exemption under Section 54 read with Section 54F of the Act could not be denied to him. - HC
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Interest u/s.244A - The shortfall, if any, of the refund amount with reference to the amount so computed, would have to be apportioned between the principal (tax) and interest amounts, so that interest u/s.244A shall arise on the un-refunded tax, while no interest u/s.244A is exigible under the Act on the unpaid interest there-under - AT
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Deduction u/s 80IB(10) - simply because of the presentation of account, which may not be fully correct, the assessee cannot be denied deduction under section 80IB, if the assessee is otherwise eligible for the same - AT
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Registration under section 12AA denied - for serving a chartable purpose, it is not necessary that the object should be for the benefit of the whole mankind or all persons in a country or a State and it is sufficient if the intention is to benefit, a section of the public as distinguished from a specific individual or person - AT
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Provisions of section 41(1) are clearly applicable when it is established that the said liabilities as shown by the assessee actually ceased to exist in the year under consideration itself. - AT
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Addition of vehicle expenses debited to profit & loss account treating the same as expenses for non-business purposes - Though no construction activity was carried out by the Assessee but it does not warrant the disallowance of 75% of the expenses for non business purpose - AT
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Rejection of books of account - trading addition - Assessee cannot claim advantage of lesser addition by getting the books rejected year after year and avoiding the maintenance of proper books of accounts - AT
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Artificial Juridical Person or Association of person - AO had on his own had changed the status of the appellant from AJP to AOP. This legally he cannot do it and the entire assessment is wrong and bad in law. It is liable to be annulled. - AT
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Eligibility for exemption U/s. 11 - the business of renting vastu etc. for a fee - charitable activity u/s 2(15) - FAA had not considered the later judgment which is considered one of the landmark judgments dealing with charitable activities since 1980 - matter remanded back - AT
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Setting off of loss of 10A unit, against interest income assessed under the head ‘income from other sources’ - undisputed position that the Circular dated 16.7.2013 issued by the CBDT is beneficial to the assessee - effect of the said Circular is required to be given - AT
Customs
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Drawback Claim under S.no. 48026210 – export of plain paper cut in size - Quality of goods – onus was on department and not on respondent, to prove nature of goods – Nothing substantial could be brought on record to prove that goods were other than prime in nature - CGOVT
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Classification of goods - import of optical fibre cables (OFC) – merit classification under CTH 9001 of the Customs Tariff and not under CTH 8544 70 90 - AT
Service Tax
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Waiver of penalty - Since the entire amount has already been recovered, there is no liability on the appellant. These reasons perhaps impelled the learned Tribunal to invoke provisions of Section 80 - order of CESTAT upheld - HC
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Taxability - Real Estate Agent Service - the service rendered in relation to agriculture is excluded from the scope of Section 65 (97a) - the service rendered by the appellants was not in relation to agriculture, but was in relation to real estate even if the land was agriculture land. - AT
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An assessee who paid the service tax on ‘Renting of immovable Property’ before introduction of Sec 80(2) cannot be put at a disadvantage vis-a-vis a tax payer who delayed and paid tax on the same service after 6.3.2012. - AT
Central Excise
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Levy of penalty for abetment - The Appellant is supplier of raw material, which was received by the main noticee as per procedure prescribed. In such situation, the imposition of penalty on the appellant is unjustified. - AT
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Valuation - clearing soaps in bulk to job-worker without marking MRP - Job worker in turn were packing the individual soaps in multi-piece packaging - it is only just to say that difference between the values of the two clearances is only the cost of packing material. Under Rule, 11 it would appear reasonable to allow the adjustment on account of cost of packing material as claimed by the appellant. - AT
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CENVAT Credit - whether the Appellant is eligible to take CENVAT Credit on the ISD invoices issued by Head office situated in Mumbai - services of Professional Fees & Brokerage for sale of Land - credit allowed - AT
VAT
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Denial of input tax deduction – Bogus or false invoices – Assessing officer arrived at conclusion that input tax credit claimed by petitioner was based on false invoice even prior to extending opportunity to petitioner to prove otherwise - matter restored before AO - HC
Case Laws:
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Income Tax
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2015 (9) TMI 640
Exemption u/s 10(1) - Disallowance of agriculture income - AO disallowed the amount on the reason that this is not agriculture income but income from business operations - Held that:- No reason to interfere with the order of the Ld.CIT(A). Not only that, the issue in earlier years was already crystalised in favour of assessee by the decision of the Hon'ble High Court of Judicature of Andhra Pradesh at Hyderabad in assessee's own case in [2014 (2) TMI 1197 - ANDHRA PRADESH HIGH COURT]. Hon'ble High Court on similar questions raised in AY. 2008-09 has upheld the order of the ITAT in that year - Decided against Revenue.
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2015 (9) TMI 613
Sale of shares - whether constitute long term capital gain? - Held that:- After analysing the documentary evidence produced by the Assessee, the CIT (A) fairly concluded that the actual transfer of the shares took place only on 8th November 2006 and that therefore, the Assessee had held shares for more than one year. The further consequential finding that long term capital gains resulted cannot be said to be perverse. Question is answered in favour of the Assessee and against the Revenue. Exemption u/s 54F - Held that:- The evidence produced by the Assessee showed that the house was purchased by him on 10th April 2007 within the time allowed under Section 54F of the Act, after making payment and by obtaining the possession thereof. A substantial part of the consideration of ₹ 2 crores was paid on the date of the agreement to sell itself. The balance payment of ₹ 22 lakhs was made on 17th April 2007 when the possession was handed over. The conclusion that the house was in fact purchased on 10th April 2007 within the time allowed under Section 54F of the Act stands supported by the documents placed on record by the Assessee. The Court is satisfied that the prior to 10th April 2007 the Assessee was not the owner of another residential house and therefore the exemption under Section 54 read with Section 54F of the Act could not be denied to him. - Decided in favour of the Assessee.
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2015 (9) TMI 612
Rectification under Sec.154 - assessee seeking to rectify the order of assessment, contending that out of the gross income of ₹ 2,66,50,000/- an amount of ₹ 84,00,000/- was received during the previous year ending 31.03.2005 from Mr. K.K. Joseph as loan and ₹ 1,62,50,000/- was also received as loan from K.K. Joseph during the current year - Held that:- On a perusal of the facts, the orders rendered by the statutory authorities and the Tribunal and appreciating the pleadings put forth, we are of the considered opinion that the question raised for invoking Sec.154 of the Act was a question ought to have been raised in a regular appeal and the same has nothing to do with rectification of any mistake apparent from the record. The findings entered by the Assessing Authority was based clearly on facts which was susceptible to an appeal. We also did not find any error apparent from the record which enabled the assessee to invoke the said provision. In the said circumstances, we do not find any illegality or other legal infirmities in the finding entered by the Appellate Tribunal so as to invoke our jurisdiction conferred under Sec.260A
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2015 (9) TMI 611
Legality of affidavit - Assessing Officer had filed the subject appeal has also filed affidavit dated 24 August 2015 pointing out that a mistake occurred on his part as he proceeded to file this appeal on the note prepared by his staff - Held that:- We accept the unconditional apology of the present incumbent Assessing officer as well as erstwhile Assessing officer who was Officer responsible for filing the appeal. We trust that they would be more careful in the manner in which appeals/affidavits etc. are filed in the Court and would cease to adopt a casual approach as reflected in the filing and prosecution of the subject appeal. We accept the incumbent Assessing Officer's statement in the affidavit dated 24 August 2015 that there was no intent on his part to mislead this court in affidavit dated 29 June 2015 and that the same happened due to a genuine mistake and misunderstanding on his part. We trust that the Principal Commissioner of Income Tax would take appropriate action, if necessary, after considering the explanation received from the concerned officers. We accept the apology of the erstwhile and incumbent Assessing Officer and close the present issue.
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2015 (9) TMI 610
Transfer pricing adjustment - Payment of royalty - Whether the assessee is paying royalty for the receipt of technical guidance, it need not have paid management fee as held by TPO - Commercial and Business expediency of incurring any expenditure - Held that:- The TPO while giving the appeal effect to the order of Hon'ble ITAT examined the additional evidences submitted by the assessee and deleted the addition on account of management fees vide its order dated 12.01.2015.Further in the AY 2009-10 and AY 2011-12 also the TPO has accepted the transaction of payment of management fees as being at arm’s length and did not draw any adverse inference in this regard. Hence, the payment of management fees, therefore, is made entirely for business consideration and is an expenditure incurred wholly and exclusively for the purposes of business.- Decided in favour of assessee. Disallowance under section 40A(2)(b) on account of payment of administrative charges - Held that:- It is not necessary for the assessee to show that any legitimate expenditure incurred by him is also incurred out of necessity or the expenditure incurred by him for the purpose of business actually resulted in profit. TPO is not justified in determining the ALP on the payment made for management fees. There is no warrant for disallowance of sum paid to M/s Talbros Automotive Pvt. Ltd. as the Assessing Officer failed to discharge the onus that was lying upon him as per the mandate of the provisions of Section 40A(2) of the Act - Decided in favour of assessee.
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2015 (9) TMI 609
Transfer pricing adjustment - deletion of adjustment pertaining to agency services function carried on by the appellant by CIT(A) - whether TPO/CIT(A) were incorrect in not bench-marking the functioning of import of products from M/s Corning SA France and receipt of agency commission from M/s Corning SA France - Held that:- The conclusion however of the authorities below is that the distribution function and agency service function are not comparable. It has been found that distribution function involves import of furnished goods, its warehousing, advertisement marketing and distribution/sale of productions; whereas agency function involves coordination between customers and the head office and undertaking certain marketing and logistic services. Furthermore the risks assumed in distribution function are contract risk, marketing risk, credit risk, inventory risk etc.; whereas an agency functions assessee does not undertake contract risk, inventory risk, credit risk, etc. There is no dispute to the above findings arrived at by the authorities below. Having regard to the above factual matrix we are thus inclined to uphold the conclusion of the CIT(A) to benchmark the two independent functions separately. We do not find any merit in the contention raised by the learned counsel that these are closely linked transactions undertaken by the appellant. On the contrary the nature of transactions are functionally different and even the risk assumed are different. We thus negate the stand of the assessee and uphold the findings of CIT(A) in benchmarking the distribution/agency function separately. Allocation of expenses - No infirmity in the approach adopted by the CIT(A). The CIT(A) has correctly held that allocation of expenses in proportion to sales would amount to give equal weightage in terms of functions performed, assets utilized and risks assumed to both distribution function as well as agency service activity, which otherwise involves much lesser functions and utilization of assets and risk. - Decided against revenue. Excluding the custom duties on the import of ROB for benchmarking the arm’s price - CIT(A) deleted the addition excluding the increased custom duties out of the cost of import of ROBs for benchmarking the arm’s length price of distribution segment - Held that:- . It may be taken note that in TNMM, basically a single line item of an expenditure of customs duty should not be excluded from the total cost for computing the operating profit. It is seen that the distributor / respondent has made a operating loss for the distribution business. It is noted that the assessee, TPO in spite of the loss suffered by the distributor, have applied TNMM to bench mark the distribution results. In our view the Revenue authorities and assessee should have looked into the characterization and accordingly pricing policy for the distribution business need to have been made after ascertaining as to whether the remuneration or pricing policy was at gross margin or net margin level in order to examine the reason for the loss. It is only after doing the said exercise the functional profile of the assessee as a normal risk taking distributor, which is capable of suffering a loss or limited risk distributor which generally operates with a steady but routine operating margin, can be ascertained. Thereafter, based upon such exercise, the applicability of the proper transfer pricing methodology namely re-sale price or TNMM may be applied with proper comparables. In the light of the aforesaid opinion of ours, we set aside this issue back to the file of the TPO/AO for fresh adjudication as stated above. - Decided partly in favour of revenue for statistical purpose.
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2015 (9) TMI 608
Exigibility to interest u/s.244A - refund of tax to the assessee for the relevant year - Held that:- The Apex Court per its larger bench decisions in Modi Industries Ltd. (1995 (9) TMI 324 - SUPREME Court) and Gujarat Fluoro Chemicals (2013 (10) TMI 117 - SUPREME COURT) settled that there is no right to get interest of refund except as provided by the statute. The proposition of the interest being exigible on any amount paid, irrespective of either any obligation to pay or even its character under the Act, and from the date of its payment (i.e., except in the case of prepaid tax), cannot, in view thereof, be countenanced; Section 244A covers the allowance of interest on refund arising on payment of tax or penalty under the Act, and is a separate code in itself, providing for both the right to interest as well as the manner of its computation, including the resolution of any dispute qua the determination of the issue of the attribution of the delay, if any, in the grant of refund. Where an amount is paid with reference to or in violation of the provision, it cannot be said to be paid there-under. Section 140A requires payment of tax on the basis of the return, where-under only the assessee is to prefer his claims under the Act. The same, thus, contemplates an assessment by the assessee of its tax liability under the Act, as crystallized per the return finalized, i.e., for filing under the Act, paying the shortfall there-under, if any, along with the interest to date. How could it, even where not unambiguously worded, be otherwise, i.e., follow as it does the scheme of the Act. Any amount paid over and above the said shortfall cannot be regarded as tax, which, by definition, is that chargeable under the Act. [ss.2(43) r/w s. 4]. To regard any amount deposited as self assessment tax would be to do violence to the clear language of the provision of the Act, as well as its scheme. The said case excess, however, on being allowed credit for against the tax payable, assumes the character of tax, i.e., upon the processing of the return for the relevant year, filed subsequently by the assessee, which constitutes a notice of demand u/s.156, vide proviso thereto. Prior thereto, the A.O. cannot take cognizance thereof, much less refund it. This, then, is the earliest point of time at which such excess can be regarded as payment of tax, exigible to refund u/s. 143(1) r/w s. 237. Not so regarding would make the machinery unworkable and prejudicial to the assessee. The assessee shall, therefore, be entitled to refund from this date to that of the grant of the refund. The facts of the case, the refund to the extent of ₹ 260.98 lacs, adjusted for the amount of interest u/s.234B, if any, up to 31.05.1994, shall arise only subsequent to the date of processing u/s.143(1), i.e., up to the date of grant of refund. In-as-much as the law does not contemplate grant of refund exclusive of interest, the same must necessarily be worked out at gross of interest u/s.244A up to the date of refund. The shortfall, if any, of the refund amount with reference to the amount so computed, would, therefore, have to be apportioned between the principal (tax) and interest amounts, so that interest u/s.244A shall arise on the un-refunded tax, while no interest u/s.244A is exigible under the Act on the unpaid interest there-under. The balance tax refund of ₹ 20.98 lacs (i.e., ₹ 2061.86 lacs – ₹ 2040.88 lacs), would be governed by s. 244A(1)(a) of the Act. - Decided in favour of assessee as directed.
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2015 (9) TMI 607
Transfer Pricing adjustment - selection of comparable - Inclusion of WEAL INFOTECH LIMITED - Held that:- No reason to disturb the view of the ld. CIT(A) because the assessee included it in the list of comparables in its Transfer pricing study. The very comparability of this company was not disputed by the TPO. In that view of the matter, the ld. CIT(A) cannot be faulted with for directing to include the data of a company in the list of comparables, which was originally included by the assessee and not objected to by the TPO. As regards the second aspect of the computation of the profit margin of this company, we find that the ld. CIT(A) accepted the data furnished by the assessee of this company and proceeded to include the same in the list of comparables without affording any opportunity to the TPO for examining the same. We, therefore, find that there is violation of rule 46A to this extent. Accordingly, we set aside the impugned order on this score and send the matter back to the AO/TPO for verifying the correctness of the calculation of OP/TC of this company for the purposes of calculating arithmetic mean of PLI of the comparable companies Inclusion of F I Sofex Limited & TULSYAN TECHNOLOGIES LIMITED - Held that:- Even though the assessee in its TP study has included the turnover filter of less than ₹ 1 crore, the assessee has given reasons for inclusion of these two companies in the list of comparables, primarily for the reason that these are not start-up companies and functional data for these companies are reliable. The Tribunal in the case of Techbook International Pvt. Ltd. (2015 (7) TMI 473 - ITAT DELHI ) has held that low turnover per se cannot be reason to exclude a company from the comparable test. In view of the reasons given in the aforesaid order of Tribunal in case of Techbook International Pvt. Ltd., we hold that the CIT (A) is not justified in excluding F I Sofex Limited and Tulsyan Technologies Limited from the list of comparables purely on account of its low turnover. The issue needs to be examined by the AO/ TPO whether these two companies are otherwise functionally similar to that of the assessee irrespective of having low turnover. Exclusion of DATAMATICS TECHNOLOGIES LIMITED AND HINDUJA TMT LIMITED - Held that:- In view of the high significant related party transactions which has not been examined either by the AO/TPO or CIT (A) in the instant case, we deem it appropriate to restore the issue to the file of AO/TPO for de novo consideration Interest Income earned on short term deposite whether business income or income from other sources - Held that:- We notice that in assessee’s own case for assessment year 2002-03, the matter has been decided by the Tribunal in favour of the assessee. It has been brought to our notice that this order of the Tribunal is subject matter of appeal to the Hon’ble jurisdictional High Court u/s 260A of the Act. It was submitted that appeal before the Hon’ble High Court is pending adjudication. For the sake of consistency, we decide the matter in favour of the assessee by holding that interest on surplus business funds kept with short term deposits is to be treated as ‘income from business’ entitled to the benefit of deduction u/s 10A/10B of the Act. Exclusion of HINDUJA TMT LIMITED - Held that:- this company is having high related party transactions to the extent of 68%. This categorical finding of the CIT(A) has not been challenged by the revenue in its grounds The various orders of the Tribunal have held that the companies having related party transactions in excess of 25% are to be excluded from the comparable list. Thus we hold that the CIT (A) is justified in excluding the same from the list of comparables. Whether Foreign exchange income and Misc Income are operating Income? - Held that:- CIT (A) is justified in including the foreign exchange income and misc. income as the operating income. It is ordered accordingly. Denial of deduction u/s 10A of the Act in respect of the newly set up AEGSC unit - Held that:- The issue in question is covered in favour of the assessee by order of the Tribunal in assessee’s own case for assessment year 2002-03 and assessment year 2007-08 as held CIT(A) has considered all the parameters which may be necessary for adjudicating whether the set up of the new unit is by way of splitting up of the existing business or it is a new set up over and above the existing set up. He has recorded the finding that the physical location of both the units is different. The nature of activities is different, separate license is obtained for the new unit, separate infrastructure is created in the new unit, fresh funds have been invested in the new unit and even after the setting up of the new unit, the turnover of the old unit has not reduced but, on the other hand, increased. During AY 2002-03, when no new unit was in existence, the turnover of old unit was ₹ 129 crores which, after the setting up of the new unit, has increased to ₹ 294 crores in AY 2008-09. In view of the above facts, we do not find any infirmity in the order of ld. CIT(A) - Thus assessee was entitled for deduction u/s 10A as it had established a new unit. - Decided in favour of assessee.
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2015 (9) TMI 606
Eligibility of deduction u/s 80IB(10) - CIT(A) confirmed the action of the AO by observing that the society, Punit (Motera) Cooperative Hsg. Society Ltd., Ahmedabad was the sole owner of the land and the assessee has not incurred expenses on purchases of cement, steel etc. and that the assessee constructed and sold shops in the scheme, the built up area of which exceeds limit of 2000 sq.ft prescribed in clause (d) of section 80IB(10) with respect to shops constructed - Held that:- Facts in the present appeal are similar as were in the case of M/s.Skyland Developers (2014 (6) TMI 704 - ITAT AHMEDABAD) except that in the instant case, it has also been alleged by the Revenue that the assessee has not debited purchase of cement, steel etc. in the profit & loss account. Thus, we find that it is not in dispute that the assessee has actually made purchases of cement, steel etc. Actually, the AR of the assessee explained that as per the terms of agreement, the assessee was entitled to receive all the expenditure incurred for materials and 25% above that amount, apart from labour charges at ₹ 700/- per square feet. Thus, the agreement for development was cost-plus-method. The assessee instead of debiting the cost of material in the profit & loss account and crediting the profit & account with cost, and 25% thereof has credited the profit & loss account with only 25% of the cost of material and set off the expenses incurred for cost of material with corresponding receipts. In our considered view, simply because of the above presentation of account, which may not be fully correct, the assessee cannot be denied deduction under section 80IB, if the assessee is otherwise eligible for the same. As we find that apart from the above, other facts involved in the instant case is similar to the facts in the case of M/s.Skyland Developers (supra), the said decision is squarely applicable in the instant case. In the instant case, the project was approved by the Ahmedabad Urban Development Authority vide permission dated 11.6.1999, which was before the date of amendment to section 80IB(10) w.e.f. 1.4.2005. Therefore, this amendment is not applicable to the project under consideration, in view of the above quoted decision of the Hon'ble Gujarat High Court. Therefore, we hold that for the above cited reasons, the AO was not justified in not allowing deduction under section 80IB(10) to the assessee for the assessment years 2000-01, 2001-02, 2002-03 and Asstt.Year 2006-07 of ₹ 11,24,990/- each and for the Asstt.Year 2003-04 & 2004-05 of ₹ 21,86,870/- each. - Decided in favour of assessee.
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2015 (9) TMI 605
Disallowance under section 14A read with Rule 8D - suo moto disalllowance - Held that:- It is seen that the appellant company itself has made the disallowance of expenditure u/s 14A r.w.r. 8D of ₹ 1,39,39,685/. The claim of disallowance made by the appellant company was examined by the AO during the course of assessment. The appellant produced the books of accounts and the evidences, which the ld. Assessing Officer had verified the ld. AO examined the books of accounts, evidences and records of the appellant and verified the voluntary disallowance by appellant u/s 14A of the Act. The AO has not pointed out any deficiency in the books of accounts nor in respect of claim of the appellant u/s 14A of the Act. In other words, the AO has not expressed satisfaction that the appellant’s claim u/s 14A is incorrect, a prerequisite for invoking the provisions of section 14A of the Act. In view of the aforesaid reasoning and findings we restrict the disallowance under sec.14A to be ₹ 1,39,39,685/-. - Decided in favour of assessee.
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2015 (9) TMI 604
Reopning of assessment - basis of reopening of the assessment order was lesser figure of total turnover - Held that:- It is undisputed fact that AO had not borrowed the satisfaction from the audit party as nowhere in the satisfaction he has mentioned the audit objection. As per his working in reasons recorded excess deduction had been calculated at ₹ 27,66,386/- on the basis of total turnover of ₹ 16,82,67,037/- whereas the assessee has taken total turnover in computation made by the CA in prescribed form at ₹ 15,39,35,866/- but this issue has not been considered by the AO at the time of completing the assessment. He simply reduced the other income from total income ₹ 1,43,31,171/- which includes interest at ₹ 12,14,227/-, dividend income of ₹ 32,550/- and brokerage and commission income of ₹ 12,736/- and business profit has been calculated at ₹ 3,12,21,537/- in place of ₹ 3,24,81,050/- shown by the assessee. It is clear that ld. AO had not made any addition on the basis of reopening or satisfaction recorded. AO has not made any addition on the basis of formation of believe under section 147 of the IT Act. The AO has power as per Explanation 3 to include the items of income which came to his notice subsequently in the course of proceedings under this section for which no separate reopening is required, but in final out come both the additions have to be made by the AO in assessment order which has not been the case of AO during the year under consideration as he has not made any additions on the basis of total turnover. - Decided against revenue.
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2015 (9) TMI 603
Disallowance of deduction u/s 80P in respect of interest receivable on standard asset - Held that:- Assessee had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. If the interest amount of ₹ 19,06,609/- on the standard assets representing the loan given to the members of the assessee society, than the said income is eligible for the deduction u/s 80P being the income from the activity of credit facility to the member of the society. Therefore, subject to the verification of this fact that the interest income of ₹ 19,,06,609/- is earned by the assessee on the loan to the members of the society, the claim of the assessee is allowed. See CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha [2015 (1) TMI 821 - KARNATAKA HIGH COURT] and Tumkur Merchants Souharda Credit Co-operative Ltd. Case [2015 (2) TMI 995 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2015 (9) TMI 602
Disallowance made on account of commission payment to non-resident - as per AO assessee has not paid the actual payment within the prescribed period of 12 months framed u/s 139(1) of the Act the whole expenses claimed by the assessee is not justified and hence not allowable u/s 195 - CIT(A) deleted the addition - Held that:- From going through section 139(1), there is no such provision mentioned in which some time prescribed period of 12 months is required for making the payment of commission to non-resident. Therefore, the reference given by the AO of section 139(1) of the Act is not correct. Further the AO has disallowed the commission payment referred to section 195 of the Act but he has not dealt with the applicability of section 195 with reference to the facts of the case nor has brought on record any details for such application of section 195 and as the very basis of disallowance made by AO with reference to provisions of section 195 sub-section (1) are not correct and nor as discussed above, we do not find any error in the findings recorded by the CIT(A). We uphold the same. - Decided against revenue.
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2015 (9) TMI 601
Penalty u/s 271(1)(c) - disallowance of expenses written off u/s 35D - Held that:- Admittedly and undisputedly, the claim of preliminary expenses was allowed by the AO in five equal instalments starting from AY 2009-10 which also shows that 1/5th part of the claim of the assessee has been allowed by the AO during the year under consideration and remaining part has also been allowed by the AO in four equal instalments in the subsequent assessment years. Now, under above noted facts and circumstances, it is vivid that the claim of the assessee was not allowed in the first year viz. AY 2009-10 and the same was allowed in five AYs starting from the assessment year under consideration. Hence, in this situation, we of the considered view that the case of the assessee is squarely covered in favour of the assessee by the judgement of Hon’ble Supreme Court in the case of CIT vs Reliance Petroproducts [2010 (3) TMI 80 - SUPREME COURT] and judgement CIT vs Brahmputra Consortium Ltd. [2011 (8) TMI 8 - DELHI HIGH COURT ] wherein dismissing the respective appeals of the revenue, it was held that the AO did not contradict the plea of the assessee that excess claim was an inadvertent error and the excess claim was not advantageous to the assessee, therefore, deletion of penalty was held as justified. It is clear that the mere making of a claim which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee and such claim made in the return cannot amount to furnishing of inaccurate particulars. - Decided in favour of assessee.
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2015 (9) TMI 600
Registration under section 12AA denied - Trust is created for the benefit of a particular community, which does not ensure for the benefit of the public, and thus, hit by section 13(1)(b) as said by CIT(Exemptions) - Held that:- As decided in C.I.T. vs. Barkate Saifiyah Society (1993 (11) TMI 13 - GUJARAT High Court) the Tribunal has rightly held that section 13(1)(b) applies only to trusts which were purely for charitable purposes and the assessee trust was charitable as well as religious in nature and the assessee was entitled to exemption under section 11. Also see case of Shree Vasupujya Swami Jain Derasar Trust vs. CIT [2010 (8) TMI 937 - ITAT AHMEDABAD] wherein held that for serving a chartable purpose, it is not necessary that the object should be for the benefit of the whole mankind or all persons in a country or a State and it is sufficient if the intention is to benefit, a section of the public as distinguished from a specific individual or person. It was also held that the section of the community sought to be benefited must be sufficiently defined and identifiable by some common quality of a public or impersonal nature. As the above decisions were not cited by the assessee before the CIT (E) and the CIT (E) has not taken into consideration the aforesaid decisions for deciding the issue under appeal. Thus restore the matter back to the CIT (E) for deciding the issue after taking into consideration the above stated decisions. - Decided in favour of assessee for statistical purposes.
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2015 (9) TMI 599
Disallowance of broken period interest - CIT(A) deleted the addition - Held that:- Issue in dispute is squarely covered by the decision of the Tribunal in assessee’s own case for AY 2010-11ssue in dispute is squarely covered by the decision of the Tribunal in assessee’s own case for AY 2010-11 [2015 (4) TMI 583 - ITAT HYDERABAD] to hold that broken period interest claimed by assessee is an allowable deduction - Decided in favour of assessee. Addition on account of amortization of premium paid in excess of face value of securities - CIT(A) deleted the addition - Held that:- Undisputedly, the government securities under HTM category have been held as stock-in-trade by assessee. As held by Hon’ble Supreme Court in case of UCO Bank (1999 (5) TMI 3 - SUPREME Court), securities on which premium is paid, if held under HTM category are to be treated as stock-in-trade. ITAT Mumbai Bench in case of ACIT Vs. the Bank of Rajasthan Ltd. [2011 (9) TMI 961 - ITAT MUMBAI] while deciding the issue relating to allowability of deduction claimed towards amortization on premium paid on excess face value of securities held under HTM category has allowed assessee’s claim - Decided in favour of assessee. Disallowance of deduction claimed u/s 36(1)(viia) - Held that:- Undisputedly, assessee has not made any provision for bad and doubtful debts in the books of account as required u/s 36(1)(viia). Only in computation of income filed along with return of income assessee has claimed deduction towards provision for bad and doubtful debts. On perusal of section 36(1)(viia), it is very much clear that for claiming deduction under the said provision, the mandatory requirement is assessee must have made a provision in the books of account for claiming deduction in the manner prescribed therein. Therefore, when assessee has not made any provision in the books of account in so far as bad and doubtful debts are concerned, assessee is not eligible for deduction u/s 36(1)(viia). The Hon’ble P&H High Court in case of State Bank of Patiala Vs. CIT (2004 (5) TMI 12 - PUNJAB AND HARYANA High Court ) while interpreting the provisions of section 36(1)(viia) has held that unless assessee bank makes a provision for bad and doubtful debt in the books of account, no deduction is allowable. - Decided against assessee.
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2015 (9) TMI 598
Addition under section 68 - amount payable by the assessee to farmers towards purchase of sunflower seeds as unexplained cash credits - Held that:- As rightly submitted by the Ld. Counsel for the assessee, the impugned credits being trade credits of the assessee on account of purchase of sunflower seeds are not in the nature of cash credits as envisaged under section 68 and the same therefore cannot be added to the income of the assessee by invoking the said provision. Moreover, as pointed by him from the trading account of the assessee for the year under consideration the corresponding seeds purchased from the seven farmers for ₹ 54,49,961 were sold in the year under consideration itself for ₹ 58,89,195 and the said sale was duly credited to the trading account of the assessee. As rightly contended by the Ld. Counsel for the assessee, such sale not being possible without any corresponding purchases, the purchases so made could not otherwise be treated as bogus, despite the failure of the assessee to establish the identity of the concerned creditors/suppliers. It is also observed that the resultant profit arising from the relevant transactions of purchase and sale of sunflower seed was duly disclosed by the assessee in the trading account. Thus addition u/s 68 deleted - Decided in favour of assessee. Unexplained expenditure under section 69C - whether the amounts in question representing liabilities which had ceased to exist could be added to the total income of the assessee alternatively under section 41(1) as contended by the learned D.R? - Held that:- The two amounts in question have not been paid by the assessee till date nor any party has demanded the said amounts appearing in the books of account of the assessee as liabilities. Since the said amounts represented liabilities of the assessee on account of purchases which had been claimed as expenditure in the earlier years, we are of the view that the provisions of section 41(1) are clearly applicable when it is established that the said liabilities as shown by the assessee actually ceased to exist in the year under consideration itself. We, therefore, confirm the addition made on this issue by invoking the provisions of section 41(1) - Decided against assessee. Validity of the assessment - Held that:- The present case however is not such a case where notice under section 148 is issued to give effect to any finding or direction contained in the appellate order of the Tribunal but it is a case of regular assessment made by the A.O. under section 143(3) afresh as per the direction of the Tribunal given in order passed under section 254. The provisions of section 150(1) thus are not applicable in the case of the assessee where the assessment is made by the A.O. under section 143(3) read with section 254 and the issue raised by the assessee in ground No.6 relying on the said provisions is devoid of any merit - Decided against assessee.
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2015 (9) TMI 597
Disallowance deleted by CIT(A) - CIT(A) deleting the addition of excess provision written back by the assessee in the profit and loss account and not offered for tax in this year - Monetary limits for the Revenue to file appeals - Held that:- Considering proposition laid down by the hon'ble High Court in the case of CIT v. Smt. Vijaya V. Kavekar [2013 (2) TMI 451 - Bombay High Court] we hold that in view of the revised Instruction issued by the Central Board of Direct Taxes under which, the monetary limit for filing the appeals before the appellate authorities, Tribunals has been revised and fixed at ₹ 4 lakhs, i.e., only appeals with tax effect exceeding ₹ 4 lakhs were maintainable. In the present appeal filed by the Revenue, the monetary limit admittedly, is less than ₹ 4 lakhs. In view of Instruction No. 5 of 2014 which are applicable not only to the new appeals to be filed by the Revenue, but also to the appeals pending before the Tribunal, we dismiss all the appeals filed by the Revenue because of small tax effect.- Decided against revenue
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2015 (9) TMI 596
Disallowance u/s 14A r.w.r 8d - Held that:- The issue arising before us is identical to the issue before Tribunal in Rainy Investment Pvt. Ltd. Vs. ACIT (2013 (2) TMI 602 - ITAT MUMBAI ) and following the same parity of reasoning, we hold that no disallowances under section 14A of the Act is to be made in respect of the investment made by the assessee in share application money. However, relying on the order of the Tribunal we restore this issue back to file of the AO for verifying the claim of the assessee that the such investment is in share application money as on 31.03.2008 and 31.03.2009. In case the stand of the assessee is found to be correct then no disallowance is warranted under section 14A read with Rule 8D of the Rules. In respect of the second aspect of the issue we are in conformity with the finding of the Tribunal in Rainy Investment Pvt. Ltd Vs. ACIT (supra) that the deletion of addition under section 14A on account of share application money was not for the reason that it did not yield any tax free income for the relevant year, but for the reason that it was incapable of generating any such income. Accordingly, we hold so. - Decided in favour of assessee for statistical purposes. Addition of vehicle expenses debited to profit & loss account treating the same as expenses for non-business purposes - Held that:- No merit in the orders of the authorities below as this is the case of the Pvt. Ltd. Company which was engaged in carrying on the business. During the year under consideration admittedly the assessee had earned income from leasing of properties. Though no construction activity was carried out by the Assessee but it does not warrant the disallowance of 75% of the expenses for non business purpose. Reversing the order of the CIT(A), we direct the AO to allow the expenditure on account of vehicle expenses, petrol expenses and depreciation on motorcar.- Decided in favour of assessee. Claim of brought forward business losses disallowed - Held that:- The said adjustment was not allowed by the AO which in turn was also not allowed by CIT(A), though ground of appeal was raised by the assessee in this regard. Following the principles of natural justice, we deem it fit to revert this issue back to the file of the AO, to verify the claim of assessee and allow the adjustment of brought forward losses in accordance with law. - DEcided in favour of assessee for statistical purposes.
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2015 (9) TMI 595
Rejection of books of account - trading addition - Held that:- The assessee's books have been rejected year after year and estimate has varied in each year. The ld. Counsel for the assessee has requested for addition on lump sum basis which in our view is not a scientific method and cannot be adopted in assessee's case. Thus looking at the repeated failure of not maintaining proper books, despite a voluminous business, nature of the business and the transactions, assessee cannot be allowed to escape the situation created by his own default and demand a lump sum addition. Assessee cannot claim advantage of lesser addition by getting the books rejected year after year and avoiding the maintenance of proper books of accounts. In the entirety of the facts and circumstances of the case, we take a lenient view and direct the AO to adopt estimate of 2.5% (against 4% adopted) of net profit rate on transportation receipts, which will meet the ends of justice. The AO is directed to calculate the taxable income accordingly. - Decided partly in favour of assessee.
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2015 (9) TMI 594
Additions made on the basis of assessment completed as AOP - CIT(A) deleted the addition - whether the assessee has nowhere proved that it falls under the category of Artificial Juridical Person and is created by the Ministry of Petroleum and Natural Gas as its extension wing? - Held that:- CIT(A) in the impugned order has correctly deleted the addition in dispute by respectfully following his own earlier order for the asstt. year 2004- 05 wherein on the basis of the notification [Resolution No. 13013/4/84-0R-I dated 10.1.986] issued by the Ministry of Petroleum and Natural Gas, it is very clear that it is nothing but a government and an extension of the government. Hence it is not liable for any tax; . The assigning officer had on his own had changed the status of the appellant from AJP to AOP. This legally he cannot do it and the entire assessment is wrong and bad in law. It is liable to be annulled. - Decided against revenue.
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2015 (9) TMI 593
Unexplained cash deposits in savings bank account - CIT(A) deleted addition - DR relied upon the orders of AO and submitted that no bill of sale has been produced before the authorities below. Therefore, the assessee could not co-relate the sale with the amount in question - Held that:- Commissioner of Income-tax (Appeals) noted that the assessee has withdrawn the amount of ₹ 10 lakhs each from M/s. Shiv Shankar Mega Mart which was deposited in the savings bank account of the assessee with Axis Bank Ltd. However, no details of the bank account maintained by M/s. Shiv Shankar Mega Mart has been considered and discussed in the appellate order. Copy of the bank account of M/s. Shiv Shankar Mega Mart is also not produced before us for inspection and verification The assessment year in question is 2009-10 and many years have gone now, therefore the assessee must be in a position to produce the sale/purchase bills for verification, that the amount in question is part of the sale proceeds. However, it is admitted fact that sale/purchase bills were never produced before the authorities below as well as before us. Therefore, these two documents are necessary for examination, i.e., bank account of the assessee's proprietary concern M/s. Shiv Shankar Mega Mart as well as the assessee's sale vouchers and produce sufficient material to show that the amount received was part of the sale proceeds. In the absence of these documents on record, we set aside the orders of the authorities below and restore this issue to the file of the Assessing Officer with direction to redecide this issue by giving reasonable sufficient opportunity of being heard to the assessee. - Decided in favour of revenue for statistical purposes.
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2015 (9) TMI 592
Eligibility for exemption U/s. 11 - whether both the AO as well as CIT(A) erred in law as well as on facts in holding that the appellant trust was carrying the business of renting vastu etc. for a fee and, therefore, it attracted the first provisio to Section 2(15)? - Held that:- The assessee a Public Charitable trust, was created vide deed of trust dated 01.06.2000, that it was granted registration u/s. l2A of the Act, w.e.f. 27.07.2001 that it was granted approval u/s. 80G(5)of the Act, in 2009, that during the year under consideration the AO held that the activities carried out by it were not eligible for claiming the exemption, that in earlier and subsequent years claim made by the assessee about exemption was accepted by the AO. But, it is not known as to whether any of the orders was passed u/s. l43(3) of the Act. During the appellate proceedings, the FAA has not fully mentioned the submissions made by the assessee and has decided the issue relying upon a judgment that has been overruled long back i.e. in Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1979 (11) TMI 1 - SUPREME Court]. It is surprising that the FAA had not considered the later judgment which is considered one of the landmark judgments dealing with charitable activities since 1980. He totally ignored the judgment of Hon'ble Delhi High Court delivered in the case of Institute of Chartered Accountants of India (2013 (7) TMI 205 - DELHI HIGH COURT) that was relied upon by the assessee. His order is cryptic and does not contain the facts narrated by the AO . Thus the order of justice matter should be restored back to the file of the FAA for re-adjudication, who will decide the issue afresh after affording the assessee a reasonable opportunity of hearing - Decided in favour of assessee by way of remand.
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2015 (9) TMI 591
Unexplained liabilities - Held that:- As far as the accounts of M/s. Bhagyoday Enterprises and M/s. Bhavana Trading Company, both under proprietorship of one Mr. A.P. Tripathi were not required to be disbelieved because of the reason that the liability outstanding as on 31st March, 2007 was not an old liability; hence, could not be considered as a doubtful liability. Since, the accounts were alive and the assessee was settling the accounts by making payments through account payee cheques, therefore, it is not proper as well as justifiable to hold that those liabilities have ceased to exist so as to invoke the provisions of Section 41(1) of IT Act. We, therefore, direct not to make any addition in respect of these two accounts by invoking the provisions of Section 41(1) of IT Act. In respect of Akshar Enterprises we have inquired from learned AR that since how long the liability was outstanding and whether the assessee had made any attempt to liquidate this liability. We have also inquired that whether this amount was squared up by making payment in any of the subsequent years. In the absence of suitable evidence on record, so as to satisfy our above query, we hereby deem it proper to refer this part of the dispute back to the stage of the AO to inquire from M/s. Akshar Enterprises about the nature of the outstanding liability and whether the assessee has squared up the account by making the payment. Naturally if the liability is in existence then it should have been paid by the assessee for which a satisfactory explanation should be offered with supporting cogent evidences. With these directions, this part of the ground is restored back to AO for re-adjudication - Decided partly in favour of assessee. Addition u/s. 40A(3) - cash paid in excess to ₹ 20,000/- - Held that:- In total the assessee had made cash payment to eleven parties totaling ₹ 8,34,829/- and in the absence of any satisfactory explanation 20% of the same amounting to ₹ 1,66,968/- was taxed in the hands of the assessee. When the matter was carried before the First Appellate Authority, learned CIT(A) has held that no explanation was offered; hence, affirmed the addition. Even before us this ground has not been contested, therefore, we hereby affirm the findings of the authorities below and dismiss this ground.- Decided against assessee.
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2015 (9) TMI 590
Setting off of loss of 10A unit against the ‘income from other sources’- disallowance made by the AO on account of assessee’s claim for setting off of the loss of 10A unit against interest income assessed under the head ‘income from other sources’ was confirmed by the ld. CIT(A) - Circulars beneficial to the assessee - Held that:- Keeping in view the legal position emanating from the judgments of Varghese (K.P.) v. ITO [1981 (9) TMI 1 - SUPREME Court] and Keshavji Ravji and Co. v. CIT, [1990 (2) TMI 1 - SUPREME Court] that the benevolent Circulars issued by the CBDT are binding on the revenue authorities and having regard to the undisputed position that the Circular dated 16.7.2013 issued by the CBDT is beneficial to the assessee on the issue involved in the present case, relating to set off of the loss of 10A unit claimed by the assessee against income from other sources, we are of the view that the effect of the said Circular is required to be given, as the same is binding on the revenue authorities. We, therefore, set aside the order of the ld. CIT(Appeals) confirming the disallowance made by the AO on account of the assessee’s claim for setting off of 10A unit loss against ‘income from other sources’ and restore the matter to the file of the Assessing Officer for deciding the same afresh, in the light of CBDT Circular dated 16.7.2013 issued recently after the judgment of Hon’ble High Court of Karnataka in the case of Yokogawa India Ltd, (2011 (8) TMI 845 - Karnataka High Court ). - Decided in favour of assessee.
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Customs
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2015 (9) TMI 619
Dismissal of Appeal – Suspension of Identity card – Applicant changes finding recorder in impugned order that as per provisions of Custom House Agents License Regulations, 2004, only appeal lies against order passed under Regulation 20 or Regulation 22 and no appeal is pending before Tribunal against suspension of Identity Card, hence appeal was dismissed – Held that:- Admittedly both punishments, namely imposition of fine and suspension of Identity Card were challenged in appeal – However impugned order recording dismissal of appeal only on ground of non-pendency of appeal before tribunal in regards to suspension of identity card was incorrect – Therefore, dismissal of appeal was product of non-application of mind – Customs authority to pay compensation to applicant – Matter remanded to Tribunal to consider appeal on merit – Application disposed of.
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2015 (9) TMI 618
Validity of service of Notice – Notices send via speed post – Condonation of Delay – Due to non-existence of All Industry Rate for riding breeches with artificial leather cloths, petitioner had made six applications for fixation of brand rate under Rule 6(1)(a) of Customs and Central Excise Duties and Service Tax Drawback Rules 1995 – Application was rejected on ground of two days delay – Revision was filed however it was informed that it had been filed beyond time, when calculated from order dated 27.04.2011 – Petitioner alleged that he had no knowledge of order dated 27.04.2011 – Held that:- Respondents in affidavit averted that notice of order dated 27.04.2011 was dispatched through speed post – Rule 153 of Customs Act stipulated sending of notices or summons by registered post only –No evidence also to show that it was sent to person to whom it was intended or to his agent – Therefore, department failed to comply with requirements of Section 153 of Act – Even otherwise, delay of two days cannot be said to be fatal – Impugned orders set aside – Delay condoned – Respondent-authorities directed to hear and decide appeal of petitioner on merits – Petition disposed of.
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2015 (9) TMI 617
Valuation - Suppression of value of goods - Inclusion of separate charge for design, engineering fee - Confiscation of goods - Redemption fine and penalty - Tribunal vide impugned order reported in [2014 (11) TMI 612 - CESTAT BANGALORE] set aside confiscation of goods, redemption fines and penalty - Present court is of opinion that certified copy of impugned order, which is annexed to appeal was underlined with red ink and also some endorsement was made by Officer with words “urgent AO/Legal” - Document, which is supposed to be filed in Court, must not be touched by anyone else and because of this reason, this appeal has to be dismissed.
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2015 (9) TMI 616
Denial of refund claim - Overvaluation of goods - Voluntary payment of duty - Tribunal vide impugned order reported in 2014 (10) TMI 506 - CESTAT BANGALORE held that refund sanctioned by original authority was in accordance with law and there was no need to interfere with same by filing appeal, thereby dismissed appeal of revenue - High court after hearing counsel for parties found that duty was paid by assessee under protest and ultimately it was found that such duty was not leviable - Therefore, ultimately necessary sanction was accorded for refund - In view of said findings, nothing was left for adjudication in this appeal- Appeal dismissed.
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2015 (9) TMI 615
Drawback Claim under S.no. 48026210 – export of plain paper cut in size - Quality of goods – Respondents claimed drawback under Sl. No. 48026210 @ 5.5% – Lower authority classified export goods under drawback S. No. 4802 0099 and allowed eligible drawback of 1% and not 5.5% as claimed by respondents – Commissioner(A) allowed drawback @ 5.5%, in favour respondent – Held that:- original authority held that goods are not of prime quality and hence, classifiable under drawback S. 48020099 @ 1% only – Benefit of drawback @ 5.5% is available to those sheets cut to sizes only from prime quality paper – CPPRI to whom samples were sent for testing, neither confirmed that goods were prime or otherwise – Nature of finished goods as ‘prime’ or otherwise is decided on basis of physical, chemical and other critical parameters of finished goods and not by nature of raw material used for manufacture of such finished goods – There are no categorical evidences brought on record that impugned goods are not prime – Report of CPPRI is inconclusive – Further, onus was on department and not on respondent, to prove nature of goods – Nothing substantial could be brought on record to prove that goods were other than prime in nature – Therefore, respondents are rightly eligible for drawback @ 5.5% – Decided against revenue.
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2015 (9) TMI 614
Classification of goods - import of optical fibre cables (OFC) – Tariff entry CTH9001 and CTH8544 – Confiscation – Vide impugned order, adjudicating authority classified optical fibre cables imported by appellant under CTH 9001 and denied benefit of notification No. 24/2005-Cus, confirmed differential duty demand and confiscated goods – Whether goods were to be classified under CTH 8544 or under CTH 9001 of Customs Tariff – Whether confiscation of goods and imposition of penalty was justified – Held that:- as observed in case of ALCATEL INDIA LTD [2006 (2) TMI 196 - AUTHORITY FOR ADVANCE RULINGS] Optical fibre cables fall under both Headings 85.44 and 90.01, if optical fibre cable was made up of individually sheathed fibre, it fall under Heading 85.44 and all other optical fibre cables fall under Heading 90.01 – In current case, Optical fibre cables were not “made up of individually sheathed fibres” which was basic criterion to be fulfilled by any optical fibre cable to merit classification under tariff heading 8544 – Since tariff heading 9001 specifically covers “optical fibre cables other than those of heading 8544, products in question would accordingly fall squarely under heading 9001 – Thus, correct classification of OFCs imported by appellant was under CTH 9001 Customs Tariff – Therefore impugned order in respect of classification of goods, upheld. No evidence to prove that appellant misdeclared description of goods under import with intent to evade payment of duty – Goods were imported by appellant over long period of time and they have been classifying same under CTH 8544 all along – Goods were also examined or ought to have been examined by Customs at time of importation – Therefore, laying claim to some exemption, was matter of belief of assessee and does not amount to misdeclaration warranting confiscation – Also show cause notice for demand of differential duty was hit by time-bar – Thus, entire differential duty demand with interest, confiscation of goods, imposition of fine and penalties were not sustainable and hereby set aside – Decided in favour of Assesse.
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Service Tax
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2015 (9) TMI 639
Waiver of pre deposit - Mandatory pre deposit - Section 35F - Held that:- Applicability of Section 35 F of the Finance Act is pending consideration before the Hon'ble Division Bench of this Court, this Court permits the petitioner to file an appeal along with waiver application, within a period of two weeks from the date of receipt of a copy of this order. Since the matter is pending before the Division Bench of this Court, testifying the validity of Section 35-F of the Finance Act, relating to pre-deposit, the appellate authority is directed to receive the appeal along with waiver application filed by the petitioner, which would be subject to the result of the issue pending before the Division Bench.
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2015 (9) TMI 638
Waiver of pre deposit - Manpower supply service - Held that:- Tribunal ought not to have granted absolute waiver and also stay of recovery without imposing any condition, does not merit any consideration in the facts of the case. The Tribunal had taken into consideration of the fact that the issue with regard to similar circumstances was already the subject matter of two decisions of the Tribunal at Delhi, stated supra. In that view of the matter, when the issue is squarely covered, there would be no justification for directing a pre-deposit. Hence, we see no illegality or infirmity in the impugned order. - Decided against Revenue.
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2015 (9) TMI 637
Imposition of penalty - Tribunal set aside penalty invoking section 80 - Held that:- Since the entire amount has already been recovered, there is no liability on the appellant. These reasons perhaps impelled the learned Tribunal to invoke provisions of Section 80 of the Act. Moreover, the learned Tribunal has followed its earlier decisions on the same point and those orders are not stated to have been challenged before any Court of law. - Tribunal exercised the power under Section 80 of the Act irrationally or capriciously - Decided against Revenue.
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2015 (9) TMI 636
Demand of service tax - GTA Service - Held that:- ratio laid down in Cheran Spinner's case (2013 (8) TMI 215 - MADRAS HIGH COURT), is equally applicable to the cases on hand, following the said ratio, these appeals are also liable to be dismissed. - Decided against Revenue.
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2015 (9) TMI 635
Waiver of pre deposit - Real Estate Agent Service - land acquired was agricultural land for real estate - Held that:- Value of the land is not includible in the assessable value for charging service tax and noted that the appellants failed to give the cost of land and that the average cost of land mentioned by the appellants was inclusive of the profit of the appellants which was includible in the assessable value. In the absence of data given by the appellants the primary adjudicating authority prima facie felt constrained in granting the deduction of value of the land. Taxability of service - Held That:- as per Section 65(97a) the service rendered in relation to agriculture is excluded from the scope of Section 65 (97a) while the service rendered by the appellants was not in relation to agriculture, but was in relation to real estate even if the land (for the sake of argument) was agriculture land. As regards the contention that there was no wilful mis-statement or suppression of fact, this requires a detailed discussion which can be taken up only at the time of final hearing. However, having regard to all these factors and facts and circumstances, we are of the view that pre-deposit of 25% of the impugned service tax liability with proportionate interest would meet the requirement of Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. - Partial stay granted.
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2015 (9) TMI 634
Imposition of penalty - Payment of commission to foreign service provider - Liability under Reverse Charge mechanism - Bonafide belief - Held that:- Under Reverse Charge Mechanism the services receiver located in India who has received the services from the service provider located outside India is required to pay service tax under Reverse Charge Mechanism. Therefore, the contention of the bonafide belief is not sustainable. - appellant has paid the entire amount of service tax, in fact excess amount of service tax within a period of one month of the issuance of show cause notice. Therefore, penalty is required to be reduced to 25% of the Service tax confirmed against the appellant. - Decided partly in favour of assessee.
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2015 (9) TMI 633
Renting of Immovable Property - Penalty u/s 76, 77 & 78 - Held that:- As per the above provision an assessee who paid the service tax on ‘Renting of immovable Property’ before introduction of Sec 80(2) cannot be put at a disadvantage vis-a-vis a tax payer who delayed and paid tax on the same service after 6.3.2012. Further, there was a dispute on the levy of service tax on ‘Renting of Immovable Property’ and the same was brought to the notice of the department by the appellant through a letter dt 12.6.2008. Accordingly, it has to be held that appellant had a reasonable cause for non-payment of tax during the relevant period. For such an eventuality waiver from penalties was always available under Sec 80 of the Finance Act 1994 even before the introduction of Sec 80(2). - Decided in favour of assessee.
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2015 (9) TMI 632
Condonation of delay - Demand of service tax - Renting of immovable property - Penalty - Held that:- entire amount of service tax has already been recovered by the Revenue Authorities - following the earlier decisions, we set aside the penalties imposed on the appellant in their entirety taking a view that appellants are eligible for the benefit of provisions of Section 80 of the Finance Act 1994. As regards service tax and interest, the liability has been admitted and said to have been recovered. - Delay condoned conditionally.
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Central Excise
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2015 (9) TMI 627
Condonation of delay - Delay of 69 days - Held that:- Tribunal has stated in the impugned order that the non- availability of the Managing Director is not shown to have resulted in the business of the appellant to a standstill, and therefore, there is no reason to condone the delay, we think that the totality of the grounds raised in the appeal ought to have also been relevant consideration for viewing the situation as one where ends of justice would be satisfied, if delay is condoned on terms. This is because, if that course is adopted, that would pave way for better dispensation of justice by extending an opportunity of hearing to the appellant and the establishment to have a proper disposal of the matter relating to service tax on merits, rather than on default. - impugned order of the Tribunal is set aside and the application seeking condonation of delay in instituting the appeal before the Tribunal will stand allowed on condition that the appellant remits to the Revenue an amount of ₹ 10,000 - Delay condoned conditionally.
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2015 (9) TMI 626
Power of Tribunal to set aside ex parte order - whether the Customs Excise & Service Tax Appellate Tribunal, is empowered while exercising power under the Central Excise Act, 1944 to set aside an ex-parte order - Held that:- A perusal of order allowing the appeal against the appellant reveals that counsel for the appellant was not present. The Tribunal instead of passing an order initiating ex-parte proceedings, chose to forthwith decide the appeal and set aside the order passed in favour of the appellant. While appreciating the endeavour of the Tribunal to dispose of appeals expeditiously, it needs to be emphasised that interest of justice should not be jeopardised and that Courts and Tribunals are respected for their ability to adjudicate matters on merits. A perusal of the application for recalling the ex-parte order reveals that adequate explanation was furnished for failure of the counsel to put in appearance. This apart, negligence on the part of a counsel should not visit a party with consequences that involve monetary liability. We are, therefore, satisfied that the impugned orders are contrary to law. - Decided in favour of assessee.
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2015 (9) TMI 625
Restoration of appeal - Appeal dismissed for non compliance with pre deposit order - Held that:- If an application had been filed on 22-8-2014 for rectification/modification of the order dated 11-7-2014 before the last date fixed for compliance by pre-deposit on 15-9-2014, we are of the view that the application was required to be considered and disposed in accordance with law. The order states that the application was not on record. If the Office of the Tribunal did not place it on record, the Appellant cannot be faulted with. - order in its present form with regard to the present Appellant is not sustainable. The order dated 15-9-2014 is set aside and the matter is remanded to the Tribunal to dispose of the Appellant’s application for rectification/modification dated 22-8-2014 at the earliest. - Decided in favour of assessee.
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2015 (9) TMI 624
Denial of CENVAT Credit - nexus with manufacturing activity - Held that:- For the nexus of the services impugned, I find that the respondent paid service tax on lending of DLF office Chandigarh, maintenance charges Mumbai office, brokerage and commission paid to the agent for obtaining office building at Bombay, insurance, plant and machinery, security charges of Chandigarh office, house keeping charges at Chandigarh, Medical and accident insurance of employees, maintenance / rent charges of Bangalore office, insurance of office at Chandigarh and Mumbai. As these service has been availed by the respondents in the course of their business of manufacturing. In these circumstances, as held by the Hon’ble Bombay High Court in the case of Ultratech Cement (2010 (10) TMI 13 - BOMBAY HIGH COURT), I hold that appellant are entitled to take Cenvat credit. - Decided against the revenue. Although they have taken the Cenvat credit in the absence of invoices which were not found during the course of audit, but thereafter no efforts have been made by the appellant to produce original invoice. In these circumstances, I do not find infirmity in the order of imposition of penalty on the respondent. In these circumstances, I do not find any infirmity in the impugned order, same is upheld - Decided against the assessee.
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2015 (9) TMI 623
Levy of penalty for abetment - allegation of diverting and illicitly clearing the raw materials procured duty free and their finished product in DTA by resorting to under-valuation - Held that:- appellant is a 100% EOU. They supplied the raw materials to the main noticee under the cover of CT3 certificate after observance of the procedure prescribed under Central Excise Rules 2002. There is no dispute that the main noticee received the raw material supplied by the Appellant. The case of the Revenue is that the main noticee diverted the finished goods in DTA in violation of notification. The Appellant is supplier of raw material, which was received by the main noticee as per procedure prescribed. In such situation, the imposition of penalty on the appellant is unjustified. The penalty imposed on the appellant is not warranted. Accordingly, the penalty imposed on the appellant is set aside.
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2015 (9) TMI 622
Export of goods against ARE-1 and bond - evidence - discrepancy in the description and classification of the goods - inter company movement of goods for Job work shown as sale and purchase - paper transactions - Held that:- Invoices which form the basis for demanding duty are issued by NSSL and these invoices are in the name of JNL. However, these invoices very clearly indicate the consignee as USCO Spa, Italy. Thus it is very clear that the goods covered by the invoices are being exported and sent to Italy though the payment of the same will be received from JNL. JNL, in turn, has produced the copy of the invoices which they have raised to USCO Spa, Italy and these invoices indicate the prices in Dollar. We find that the specification and number of different cylinder heads given in both the invoices are exactly the same. Even the number of cylinder head of each type is exactly the same. We have also seen the corresponding bill of lading and the packing list. There also, the number is the same. - The invoices are also attested and the officers have also certified the description, net weight, value etc. In view of this position, we do not find any discrepancy between ARE-1 and the invoices. The only discrepancy is the heading number written in ARE-1 is 7325.10 and that in the invoice of NSSL as 87. This can be an inadvertent mistake. All the documents indicate that the goods have been exported. Under the facts and circumstances, we are convinced that the goods on which duty is being demanded are the same goods which were exported under various ARE-1s for which the bonds were executed by JNL and later on, the said undertaking/bonds have been released. Under the circumstances, we hold that the demand of duty will not survive. - Decided in favour of assessee.
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2015 (9) TMI 621
Valuation - Determination of assessable value - clearing soaps in bulk to job-worker without marking MRP - Job worker in turn were packing the individual soaps in multi-piece packaging - Held that:- Since there is no assessable value determinable in this case recourse to Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 has been done. It would appear that determination of assessable value has been done by resorting to Rule 4 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Thought, rule 4 is not strictly applicable to the situation as it only factors in the time of clearance but no difference on account of packing. It is seen that none of the Rules 4 to 10 are applicable to this situation and resort to Rule 11 is to be made. - Revenue has already accepted the valuation of the goods cleared from M/s Hindustan Lever Ltd. on the basis of assessable value of similar goods (except for the packing material) cleared from the job-worker's premises. The only difference between the goods cleared from the appellant premises and their job-worker's premises is a packing. Therefore, it is only just to say that difference between the values of the two clearances is only the cost of packing material. Under Rule, 11 it would appear reasonable to allow the adjustment on account of cost of packing material as claimed by the appellant. - Decided in favour of assessee.
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2015 (9) TMI 620
Denial of CENVAT Credit - whether the Appellant is eligible to take CENVAT Credit on the ISD invoices issued by Head office situated in Mumbai - services of Professional Fees & Brokerage for sale of Land is not in relation to manufacturing activity and is not eligible for CENVAT Credit - Held that:- Bench in the case of Cadmac Machinery Co. (P) Ltd Vs CCE Ahmedabad (2011 (8) TMI 709 - CESTAT AHMEDABAD) has held that the services regarding valuation of property have to be considered as an activity relatable to the business of the Appellant and accordingly eligible for CENVAT Credit under Rule 2(l) of CENVAT Credit Rules 2004. While deciding the issue, this Bench has relied upon the case of Commissioner Vs Ultratech Cement Ltd [2010 (10) TMI 13 - BOMBAY HIGH COURT] and also a case law of Commissioner Vs ABB Ltd [2011 (3) TMI 248 - KARNATAKA HIGH COURT] decided by Hon'ble Karnataka High Court. As the period involved in the present proceedings is also prior to 01.04.2011, therefore, it has to be held that the services availed in relation to Professional Fees & Brokerage for sale of Land belonging to Appellant are eligible to CENVAT Credit. This Bench has not gone into the jurisdictional issue and time barred aspect of the appeal as on merit, CENVAT Credit has been held to be admissible to the Appellant. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (9) TMI 631
Denial of input tax deduction – Bogus or false invoices – Respondent-Authority vide impugned order disallowed input tax deduction as claimed by petitioner on ground that invoices produced by petitioner was based on fake or duplicate invoices – Held that:- petitioner had claimed input tax credit however said claim was disallowed by after verifying records and finding that invoice which was relied upon by petitioner to claim input tax credit was bogus invoice or false invoice – Burden was cast on assesse, to prove that claim for deduction of input tax was correct – Assessing officer arrived at conclusion that input tax credit claimed by petitioner was based on false invoice even prior to extending opportunity to petitioner to prove otherwise – Thus order required to be interfered – Matter remitted back for being adjudicated by extending opportunity to petitioner – Decided in favour of Assesse.
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2015 (9) TMI 630
Penalty Proceedings – Petitioner impugns order passed in penalty proceedings in which it was stated that assesse acknowledged notice and filed reply involving objections to proposal for assessment under Rule 6(5) of CST (Kerala) Rules 1957 – It was alleged that Proceedings are initiated for levying penalty only on account of incorrect understanding of factual situation, So much so, proposal to impose penalty is without any basis – Held that:- In view of reply given by petitioner, finding in impugned order that in penalty proceedings petitioner has not explained anything regarding penalty notice was unsustainable – Therefore impugned order set aside – Decided against Petitioner.
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2015 (9) TMI 629
Waiver of pre-deposit amount – Petitioner sought direction to Tribunal to admit its appeal without insisting on pre-deposit of 30% of disputed amount as stipulated under Section 63(4) of Karnataka Value Added Tax Act, 2003 – Held that:- Section 63(4) insists on pre-deposit of 30% of tax or other amount disputed and also fee equal to 2% of amount of assessment objected to – There is no discretion vested with Appellate Authority to either reduce amount of deposit or waive deposit or make payment in any other form such as by bank guarantee – Thus, relief claimed by petitioner cannot be granted – Petitioner directed to make deposit in terms of Section 63(4) –Decided against Petitioner.
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Indian Laws
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2015 (9) TMI 628
Denial of actual benefit of pay in the post of Inspector of Central Excise - Held that:- The very fact that the appellant was subsequently promoted, though notionally, indicates that the respondent-Union of India accepts the wrongful denial of such promotion to the appellant. The promotion made on the recommendation of the DPC would go to show that the appellant was fit and eligible for promotion on the dates when his juniors were promoted. The only ground that had prevailed upon the Union of India to refuse the appellant the benefit of actual pay following such notional promotion is that the appellant had not worked in the higher post of Inspector and Superintendent. While the aforesaid fact is correct what cannot be ignored is that the said consequence emanates from the initial decision of the Union not to promote the appellant to the higher post which was subsequently corrected by the Union itself. - High Court had erred in refusing the benefit of regular pay to the appellant with effect from the dates of his notional promotion to the post of Inspector and Superintendent respectively - Decided in favour of assessee.
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