Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 2, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
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The Companies Bill, 2013 Receives the Assent of the President
Published in the Gazette of India as Act No. 18 of 2013
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Index of Eight Core Industries (Base: 2004-05=100), July, 2013
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, Rbd Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Gold and Silver Notified
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RBI Reference Rate for US $ and Euro
Notifications
Highlights / Catch Notes
Income Tax
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Appeal before ITAT - the term assessee aggrieved used in section 253(1) being a person competent to file an appeal before the Tribunal is the person who is an aggrieved party liable to pay tax in terms of the order against which the appeal is to be preferred - there is no tax payable by the assessee in the present case - appeal dismissed - AT
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Disallowance of warranty provision - It is not known whether the increase in sales was result of selling of computers or other items - scientific data is not available - claim rejected - AT
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At what stage a business can be said to be set up - the assessee has not made any purchase or rented any shop premises from where sale could took place or for that matter rented any warehouse where the purchased goods intended to be sold can be stored - claim of business loss rightly rejected - AT
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Optionally Fully Convertible Debentures (OFCDs), whether a security or a loan & deposit – when the OFCDs do not fall under and cannot be equated with receipt of 'loan' or 'deposit' u/s 269SS, no violation of the said Section can be said to have been committed - No penalty u/s 271D - AT
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Penalty u/s 271(1)(c) – Gift received from the foreign friends - It may be true that the assessee may not remember the full addresses but atleast he should have known the State or city of U.S.A. where such donees were living, the assessee do not remember even that - penalty confirmed - AT
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Applicability of section 68 or u/s 41(1) – the amounts in question were outstanding for the last three years - there is no infirmity in the stand taken by the creditors that they did not have any transaction with the assessee during the year - no addition - AT
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Addition u/s 69B - Nature of transaction - Onus to prove - Reference to valuation officer u/s 142A(1) - the provisions of Section 142A(1) of the Act are merely machinery provisions and the substantive provisions of Section 69B cannot be overridden by them. - AT
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Bed debts - advances given for development of website - when the website did not materialize, the amounts advanced to the companies who were engaged to develop the websites, when they became irrecoverable, can be written off and claimed as loss incidental to the business - AT
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TP - Non compete fees - Estimation of income - assessee had signed non compete agreement - no justification for non payment of non compete fees to the assessee - estimation of income from non-compete fee and additions confirmed - AT
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Income on account of slot chartering - u/s 44B - AO has erred in not considering the receipts of the four ships only because details were not provided for, that itself can not be a ground - income from slot hire agreements fall within section 44B they must be held to be within the ambit of Article 9(1) - AT
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Penalty u/s 271(1)(c) - voluntary surrender of income - There is no reference to any investigation or adverse material - The assessee’s offer is to be held as voluntary surrender, accepted by the department - No penalty - AT
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Notice of demand u/s 156 - Period of statutory period for deposit of demand reduced from 30 days to 7 days - it cannot be said that non-meeting of the budgetary deficit could be a reason for holding reasonable belief that permitting the full period of 30 days for payment of tax would be detrimental to the cause of the Revenue. - HC
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Whether assessee was liable to deduction u/s 36(1)(iii), on account of interest accrued in respect of capital converted into loan - Held No - Payment of a liability is distinct from creation or accrual of the liability and under the mercantile system profits and gains of persons are computed on the basis of principle of accrual during the period for which profits and gains have to be computed - HC
Customs
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If the DEPB scrip had been validly issued by the DGFT, but being obtained by fraud/mis-declaration on the part of the exporter - subsequently cancelled - duty can not be recovered from the transferee, if utilized before cancellation - stay granted - AT
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Import of Betel nuts - rejection of declared values and for enhancement of the values – Confiscation of goods – There was a clear violation of principles of natural justice in not furnishing the Mahazar relating to seizure of documents at the premises and copy of the statement, if any, by the representative - matter remanded back - AT
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Import of Second hand goods without licence - Confiscation of goods – Redemption fine – Commissioner (Appeals) reduced the redemption fine/penalty - order of Commissioner (Appeals) sustained - AT
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100% EOU - debonding - duty on capital goods - No permission has been obtained by the assesse from the Development Commissioner and the Development Commissioner had also not renewed the LOP when it expired - no depreciation - AT
Service Tax
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Maintenance and repairs of Railway sidings - For the levy of Service Tax it was immaterial whether the service provider was a Government undertaking or not and the levy applies equally to both Government undertakings as also non-Government undertakings - stay granted partly - AT
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Refund Claim on Input Service - Accumulated input service credit, not pertaining to goods exported during the quarter for which claims were made can be refunded as there was no bar in Notification No. 5/2006-C.E. (N.T.) in granting refund of credit accumulated in the past period in subsequent quarter - AT
Central Excise
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Manufacture - marble slabs and marble tiles - cutting of marble blocks into marble slabs - activity of polishing and ultimate conversion of blocks into polished tiles amounts to manufacture - confiscation upheld - AT
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MODVAT / Cenvat Credit - Whether the mistake committed by the assessees in not reflecting the quantum of credit in RG-23A Part II register would disentitle them from the benefit of credit of duty paid on the inputs - Held no - AT
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Manufacture - Classification - tobacco products - production of retail packs pouches amounts to manufacture - classifiable as other manufactured tobacco, particularly classification entry No. 24039910 - AT
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Valuation - The inclusion of product development charges in the conversion charges for the job-worked medicaments, regardless of the fact that only some of the medicaments specified in the debit note were supplied by the job worker would ipso facto indicate the fallacy of the Department’s claim that the product development charges covered by the debit note were to be treated as part of the cost of conversion - AT
VAT
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Deferral of Sales Tax - The eligibility certificate once granted cannot be reviewed by this court under any circumstances as it is only the beneficial scheme for deferral. It is not the case of the petitioner that tax is levied on a different basis - bottles for which investments were made were eligible to be counted for fixed capital investment, but at the same time, crates were excluded. - HC
Case Laws:
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Income Tax
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2013 (9) TMI 17
Disallowance u/s 36(i)(iii) - Whether assessee was liable to deduction u/s 36(1)(iii), on account of interest accrued in respect of capital converted into loan for the period 1st July, 1986 to 30th June, 1987 - Held that:- Profits and gain of business are computed on ordinary commercial principles. However, when there is a statutory interdict or stipulation, regardless of the ordinary commercial principles, the statute has to be followed. Section 36(1)(iii) of the Act does not help the appellant -assessee in form of any statutory interdict. There is no statutory provision that this amount should be allowed as interest accrued pursuant to the two letters dated 4th April, 1988 and 20th April, 1988 - under the ordinary principles of accountancy the two amounts were liabilities. It was only after letters dated 4th April, 1988 and 20th April, 1988, interest became payable and accrued liabilities were incurred. Interest became due and payable for the first time. Period for which interest became payable, is different and should not be confused with time/date when liability accrued. As per the ordinary principles of commercial accountancy, the said liabilities cannot be allowed as an expenditure in the earlier years. Payment of a liability is distinct from creation or accrual of the liability and under the mercantile system profits and gains of persons are computed on the basis of principle of accrual during the period for which profits and gains have to be computed. It is not material that the liability is to be discharged at a future date or by mistake or failure, no entry of the accrued liability was made in the books of accounts. An assessee will be entitled to a particular expenditure or deduction depending upon provisions of law and not on the basis of existence or absence of entries in the books, which are not conclusive. The same principle applies to accrual of income - Following decision of Additional Commissioner of Income Tax, Delhi-II versus Rattan Chand Kapoor [1984 (2) TMI 60 - DELHI High Court] - Decided against assessee.
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2013 (9) TMI 16
Notice of demand u/s 156 along with notice u/s 274 read with Section 271 - Amount recovered from bank - Period of statutory period for deposit of demand reduced from 30 days to 7 days - Held that:- the very object of obtaining permission of the superior officer is to ensure that the powers are not exercised arbitrarily and there is a safeguard of higher officer applying its mind independently to the issue in question when such belief is communicated by the Assessing Officer. The curtailment of the statutory period of 30 days would surely cause inconvenience to the assessee which also restricts the period of challenge of assessee before exercise of such powers by the Assessing Officer, the previous approval of the Joint Commissioner has been made mandatory by law - reasons recorded by the Assessing Officer cannot be held to be with due application of mind, much less reasonably sufficient for the curtailment of the full period so as to constitute the ground 'detrimental to the Revenue'. By no stretch of imagination, it can be said that non-meeting of the budgetary deficit could be a reason for holding reasonable belief that permitting the full period of 30 days for payment of tax would be detrimental to the cause of the Revenue. It is not such a situation where interest of Revenue is likely to be affected on account of any act of assessee - the past performance all through out of the petitioner-assessee was not such which would give rise to any apprehension in the mind of the Revenue so as not to allow the entire period. On the contrary, the very letter of the Assessing Officer is self-evident that the "rich cash flow enjoyed by the assessee" would help him meeting the target of budget deficit and thus it can be concluded that the belief had neither any relevant or valid reasons and it also does not have any direct nexus to the conclusion of reduction of period. Both the authorities have acted without truly grasping the essence of use of this provision. Resultantly, the action of invocation of the discretionary powers under Section 220(1) of the Act shall have to fail. Recovery u/s 226 - Other modes of recovery - Held that:- While issuing notice to the bank under Section 226(3) of the Act for making payment, a notice has also to be given to the assessee which in this case is on the very day when the notice was issued to the bank. No opportunity had been given to the assessee for meeting with such a notice issued to the Bank. The sizeable amount of Rs. 1,39,00,000/- (rounded off) has been withdrawn and deposited in the account of Revenue on the very same day. Notice was an illusory and empty formality. This arbitrary exercise of withdrawal of amount from bank also requires interference. Moreover, when the very action of the Assessing Officer is held to be contrary to the provisions of the law, petitioner's not resorting to Note (3) of the demand notice under Section 156 of the Act or his having resorted to an alternative remedy, is no bar to the Court exercising writ jurisdiction - Revenue cannot be permitted to sustain the action of the Assessing Officer of reduction of period of 30 days - Decided in favour of assessee.
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2013 (9) TMI 15
Penalty u/s 271(1)(c) - voluntary surrender of income - concealment of income or furnishing inaccurate particulars of income - Held that:- In the assessment order, there is no adverse comment about the assessee’s books of account and the surrender offer as made by the assessee was accepted by the assessing officer without any objection or reservation thereof about income offered or the other contents. The sole basis of assessing the income is only this surrender offer without relying any adverse material - Besides in this case the finding in assessment order is not of concealed income but that of a voluntary surrender and hence cannot be made a sole basis for imposing penalty. Thus, the finding in the assessment order itself does not militate against the stand taken by the assessee that it was a voluntary surrender. In view of the above facts and circumstances we have no hesitation to hold that the assessee made this surrender offer voluntary in peculiar circumstances of this case. Assessing officer himself accepted it as voluntary offer, reproduced the same in his order and assessed the income on exactly the same amount. There is no reference to any investigation or adverse material. Thus, the assessee’s offer is to be held as voluntary surrender, accepted by the department accordingly. There being no adverse material available on record or any reliance thereon, the observations of assessing officer and CIT(A) about concealment or inaccurate particulars are not borne from the record and the same are contradictory to each other - Decided in favour of assessee.
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2013 (9) TMI 14
India-UK DTAA - income on account of slot chartering - taxable u/s 44 B OR 28 to 43 - Held that:- . In so far as the business of the assessee is concerned, it is undisputed, that it is shipping business. If once, it is accepted it is shipping business then either the DTAA shall apply or section 44B shall apply. The AO has removed the receipts of four ships only because the details could not be produced in respect of less then .5% of receipts. The fact that complete details had been provided to the AO along with the return of income, which includes receipts on these ships also cannot be denied. AO has erred in not considering the receipts of the four ships only because details were not provided for, that itself can not be a ground, because, the AO, has, with him powers to call for third party details/evidence, which he chose to ignore. There is no dispute with regard to the operation of ships in international traffic in case of four ships, whose revenues were less than even .5% of the total revenues of the assessee, hence, in our opinion, the ratio laid down in the case of Balaji Shipping (2012 (8) TMI 681 - BOMBAY HIGH COURT), would fully applies on the assessee. - income from slot hire agreements fall within section 44B they must be held to be within the ambit of Article 9(1) Stock Exchange is providing the entire transaction on BOLT and for that complete service, the SE is charging from its members/brokers. But this is not the case of the assessee. Assessee only provides information regarding the whereabouts of cargo, to its agents/customers. In our opinion, the case of the assessee is different on facts. Also the case of Kotak Securities neither pertained to international taxation nor came under any treaty. Since the issue is already decided by the coordinate Benches in the assessee's own cases in preceding years.
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2013 (9) TMI 13
Adjustment of transfer pricing - Non compete fees - Estimation of income - Held that:- Non compete fees is paid by a party, acquiring the business for signing the not compete agreement so as to not compete with the business aquired for a certain period. Such payments are made to persons who have complete and extensive knowledge of business process, technology and working of the company and have the resources to compete with the business of the acquirer by setting up similar new businesses or in any other way - However for setting up of a new business number of years spent on running the company is not the only factor to be considered. What is required for setting up of a new business is that the person should not only be knowing the business process and know how and technology used in the business, but he should also have resources to set up similar business. The assessee had controlling stake in the company for three years and, therefore, it had full access to knowledge, know how, process and working of the business, which are necessary for setting up of a new business. Secondly the assessee is a part of a multinational Group running several such companies worldwide and, therefore, it is in a much better position than the RA Group for setting up of a new business - investment companies holding shares which are part of RA Group and who are not involved in the day to day management of business, have also been paid non compete fees - assessee who had signed similar non compete agreement for three years could not be denied payment of such non compete fees - no justification for non payment of non compete fees to the assessee - no infirmity in the order of authorities below estimating the non compete fess at the same rate as paid in case of RA Group - Decided against assessee. Determination of arm's length price - Sale of shares - Control premium - Held that:- The SEBI regulations do not regulate the price to be negotiated between the buyer and seller of shares. It only provides that in case of transfer of stake exceeding 15% of share holding, the general public is also required to be offered to the extent of 20% of share holding which has to be the highest of the four factors i.e. negotiated price; the share price paid by the acquirer for any acquisition during the 26 week period prior to the date of public announcement; the average daily high and low on the stock exchange during the 26 week period preceding the date of public announcement; and average daily high and low of the share price on the stock exchange during the two week period preceding the date of public announcement. This is only a formula to safeguard the interest of general share holders. It does not in any way state that price negotiated by the assessee with the buyer is at arm's length price. Infact the general share holders would have got more price had the negotiated price also included the control premium - Decided against assessee. Transactions relating to sale of TPC business - Sybron Chemicals BV had sold entire share holding in its 100% subsidiary i.e. Lanxess BV and, therefore, it was alone entitled for sale consideration. It had not received any payment for any other asset separately. The AO himself has noted that shares had been sold through a separate Dutch Share Transfer Agreement as per Clause 4.1 of MSPA. Thus the purchaser was aware about this sale and the total consideration thus did not include the share sale value. The share sale value therefore, had to go exclusively to Sybron Chemical BV. Further the transfer of capital reserve has taken place before the date of sale and had been duly noted in Clause 4.2 of MSPA. This was only internal transfer before the date of sale agreed between the two parties and, therefore, it had nothing to do with the total sale consideration. Similarly the IPR rights were held exclusively by the Lanxess Deutschland Gmbh. Therefore, it had been separately paid such consideration - entire issue requires fresh consideration at the level of AO/TPO - Decided in favour of assessee. Unexplained investment u/s 69 - Held that:- AO/TPO had asked for almost entire details of transactions entered into by the assessee which was voluminous. The assessee before the DRP had filed further material on sample basis covering 89.43% of cases in which replies had not been received and 69.57% cases in which the notices had been returned back. It has been pointed out that the assessee was now having full details and, therefore, in case further details are required the assessee could submit the same before the AO. Similarly in case of discrepancies it has been pointed out that the assessee had given explanation in respect of differences positive or negative pointed out by the parties in the cases in which reply had been received and these explanation had been duly noted by AO in assessment order. The explanation given had not been examined and the entire difference had not been added - matter requires fresh examination at the level of AO by specifically considering each explanation by the assessee in respect of differences found and the assessee may also be given further opportunity to provide details and evidence in respect of cases in which no reply had been received or the notices had been returned back because disallowing the entire amount considering the voluminous nature of details is not justified - Decided in favour of assessee.
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2013 (9) TMI 12
Adjustment of transfer pricing - Method of computation - Held that:- In subsequent year the DRP has accepted the CUP method as the Most Appropriate Method - As no distinguishing facts have been brought on record, there is no reason why the directions issued by the DRP for AY 2006- 07 should not be followed for the year under consideration when the facts and the circumstances for payment of royalty are the same - AO is directed to examine the CUP offered by the assessee in its TP report and adjustment, if any, required should be made on that basis - Decided in favour of assessee. Claim of bed debt - Amounts paid for development of websites is allowed as business loss– If the websites had materialized, the expenditure could not have been viewed as capital expenditure because the website is put up for the purposes of day-to-day running of the business and even if one were to view that some enduring benefit is obtained by the assessee, the benefit cannot be said to accrue to the assessee in the capital field - A website is something where full information about the assessee’s business is given and it helps the assessee’s customers in dealing with it - A website constantly needs updating, otherwise it may become obsolete - It helps in the smooth and efficient running of the day-to-day business - The expenditure would have been allowable as revenue expenditure; as a corollary, when the website did not materialize, the amounts advanced to the companies who were engaged to develop the websites, when they became irrecoverable, can be written off and claimed as loss incidental to the business. The loss is thus allowable as business loss in terms of section 28 of the Act - Following decision of Deputy Commissioner of Income Tax Versus M/s Edelweiss Capital Ltd., Mumbai [2011 (2) TMI 284 - ITAT MUMBAI] - Decided in favour of assessee. Disallowance u/s 14A - Held that:- AO has applied Rule 8D by invoking the provisions of section 14A of the Act. It is now well settled that Rule 8D is applicable from AY 2008-09 as is held in the case of DCIT vs. Godrej and Boyce Manufacturing Co. Ltd., [2010 (8) TMI 77 - BOMBAY HIGH COURT]. The CIT(A) has given a very categorical finding that the dividend warrants were credited electronically. However, the CIT(A) has restricted the disallowance to ₹ 2 lakhs, which, in our considerate view and on the facts of the case appear to be very reasonable. No reason to interfere with the findings of the Ld. CIT(A) - Decided in favour of assessee.
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2013 (9) TMI 11
Business income or Capital gain - Profit from sale of shares - AO treated the entire profit from sale of shares as Business income chargeable to tax at normal rates. - Held that:- The fact that shares were held for such a long period amply demonstrates that the intention of the assessee was to keep such shares as Investment'. The further fact that the assessee consistently showed such shares as "Investment" in his balance sheets of the earlier years clearly brings out his intention of retaining the shares as Investments' and not as Stock in trade'. If such shares had been held as stock in trade, naturally these would have been valued at Cost or market price, whichever is less' and not at Cost price'. These facts indicate that insofar as profit from transfer of shares held for such a long period is concerned, it cannot be classified as Business income but has to be held as long term capital gain. Another salient feature, which is relevant but not decisive, is that the assessee had purchased the shares with his own capital and there is no outstanding loan in his balance sheet. These facts amply show that the profit from sale of such shares cannot be considered as Business income as has been held by the authorities below - Decided in favour of assessee. Sale of shares - repeated transaction in the case of shares of Steel Authority of India Limited - Held that:- The facts indicate that the profit of Rs.5.61 lakh resulting from the transfer of these shares is in the nature of "Business income" and not short term capital gain as claimed by the assessee. In view of the foregoing discussion - Held as business income - Decided against the assessee. Disallowance of bad debt - Held that:- The interest income so shown by the assessee was duly accepted as business income. That is how in all the earlier years the stand point of the assessee that the interest was earned from money lending business came to be accepted by the Assessing Officer through various orders passed for several years in scrutiny assessment. In such a situation the non-recovery of Rs.15 lakh out of the loan advanced in earlier years, interest from which was shown as business income, cannot be considered as anything other than bad debts of the money lending business. Sub-section (2) of section 36 clearly provides that in making any deduction for bad debt or part thereof, no deduction shall be allowed unless the debt or part thereof inter alia represents money lent in the ordinary course of business of money lending which is carried on by the assessee. Since the assessee is admittedly engaged in the money lending business and a sum of Rs.15 lakh turned out to be irrecoverable from such business, there is no justification in denying the deduction u/s 36(1)(vii) read with section 36(2) - Decided in favour of assessee.
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2013 (9) TMI 10
Addition u/s 69B - Nature of transaction - Onus to prove - Reference to valuation officer u/s 142A(1) - Held that:- when undisputedly, the details of the sellers of the land to the assessee were on record before the Assessing Officer and the Assessing Officer had all power to make inquiry under the Act from such sellers and the Assessing Officer, for reasons best known to him, did not make any such inquiry, the onus on the department to prove that the investment made by the assessee was in fact more than that depicted in its books of account, did not get discharged at all. In the following cases, as correctly noted by the Ld. CIT (A), it has been held that the onus is on the revenue to substitute apparent consideration and that addition u/s 69B of the Act can be made only on the basis of positive material or evidence regarding consideration in excess of what is recorded in the books as having been paid and that no addition u/s 69B of the Act can be made simply on the basis of difference of opinion - It is only on the basis of a definite finding of the Assessing Officer to the foregoing effect that a reference can be made to the valuation officer u/s 142A of the Act. It goes without saying that the provisions of Section 142A(1) of the Act are merely machinery provisions and the substantive provisions of Section 69B cannot be overridden by them. In the present case, on the other hand, undisputedly, the Assessing Officer did not have any such material before him, which could form the basis for reference being made to the DVO u/s 142A of the Act, as has been rightly held by the Ld. CIT (A) - Decided against Revenue. Valuation u/s 50C - inclusion of stamp duty in the value - Held that:- it has been correctly found that the Assessing Officer had erred in taking the cost of acquisition without considering the stamp duty towards such cost of acquisition. The sale consideration was also taken at a rate higher than the circle rate. Thus, whereas the stamp duty payable and the correct sale consideration, based on the circle rates, as per the provisions of Section 50C of the Act were to be considered. This error has appropriately been rectified by the Ld. CIT (A) while directing the Assessing Officer to recompute the STCG by taking the cost of plot at Rs. 12 lac to include the stamp duty towards the cost of acquisition. The Ld. CIT (A) also correctly directed to apply the stamp duty rates to the sale price of the plot for arriving at the STCG in view of the provisions of Section 50C of the Act, while correctly holding addition of various amounts towards sale of land over and above the stamp duty rates, to be not justifiable, as per the provisions of Section 50C of the Act - Decided against Revenue.
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2013 (9) TMI 9
Disallowance of lease rent - Held that:- where the business of the assessee consists of hiring out machinery and/or where the income derived by the assessee from the hiring of such machinery is business income, the assessee must be considered as having used the machinery for the purpose of business. In the present case, it is worth to mention that GNFC Ltd. has shown the lease rent as income in its hand under the head "business income". That assessment is required to be considered in the present case while deciding this technical issue. We have noted that in the case of the lessor, i.e. GNFC Ltd. the issue has been consistently decided that the assets being under the ownership of GNFC Ltd., hence entitled for claim of depreciation and that the lease rent received from the assessee is required to be assessed as "business income" - Decided in favor of assessee. TDS on payment made to CHA - disallowance u/s 40(a)(ia) - The nature of payment is reimbursement of actual expenses incurred by the agent which necessary evidence has been filed before us. The agent had deducted the TDS on these payments and paid to the exchequer within prescribed time. Thus, we do not find any reason to intervene in the order of CIT(A). - Decided in favor of assessee.
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2013 (9) TMI 8
Applicability of section 68 or u/s 41(1) – Credit are shown in regard to four parties in the liability side of the Balance sheet of the Assessee - AO u/s 133 (6) of the IT Act, called for information from the parties in all the four cases - Held that:- the amounts in question were outstanding for the last three years - As such, there is no infirmity in the stand taken by Students Book Depot, Ranchi and Unicate Publishers & Distributors, Pune, that they did not have any transaction with the assessee during the year. No credit having given in the books of the assessee during the year under consideration, the provisions of Section 68 of the Act are obviously not attracted. Since, the amounts are still outstanding, it cannot be said that they have been either written off or squared off or that any benefit has been derived by the assessee. For doing so, the provisions of Section 41 (1) of the Act are also not attracted and no addition therein is envisagable - Amounts in question pertained to sundry creditors of the assessee, they being on account of purchases of the assessee - No addition is called for, since the purchases or the sales have not been disputed by the Assessing Officer - Therefore, just because confirmations were not filed, according to 'YFC Projects (P) Ltd. vs. DCIT' [2010 (1) TMI 880 - ITAI, Delhi ], no addition can be made. Relying upon the decision in the case of 'M/s Divine International'[ 2011 (9) TMI 134 - ITAT, New Delhi], there can be three alternative allegations against the assessee. One can be that these credits represent the credit for earlier years. If that be the case, no addition can be made in this year under Section 68 of the Act. The second allegation can be that these credits represent the purchases for which payments have been made by the assessee during the year itself. If this is so, the onus will be on the department to establish that assessee has made payment to these creditors. This is not even the allegation of the assessing officer, much less his case against the assessee. The third allegation can be that these credits do not represent the purchases which have been made by the assessee. The implication of this will be that the purchases debited in the trading account are not genuine to that extent and accordingly, that the trading account is not correct. However, as discussed, the trading results of the assessee have been accepted and considering the overall facts of the case, as dwelt upon, no addition u/s 68 of the Act is called for – Decided in favor of Assessee. Disallowance of car and telephone expenses being personal in nature – Held that:- The element of personal user has not been dispelled by the assessee. However, that the addition is an ad- hoc addition - The addition made, amounting to Rs. 6,34,421/- is on the higher side - It would serve the ends of justice, if this addition is scaled down to Rs. 6 lac.
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2013 (9) TMI 7
Penalty u/s 271(1)(c) of the Income Tax Act – Gift received from the foreign friends of the assessee - Assessee has received two credit entries in the bank account of the assessee amounting to Rs. 1 lakh and Rs. 5,46,575/- respectively from Amrit Dilawari and Shri Charanjeet P. Singh respectively - Held that:- It may be true that the assessee may not remember the full addresses but atleast the persons who is giving a sum of Rs. 1 lakh and Rs. 5,46,575/-, he should have known the State or city of U.S.A. where such donees were living, the assessee do not remember even that - This clearly shows that the gifts are bogus - Further a question was asked that on what occasion the gifts were given. The assessee had stated that the gifts were received because the assessee was in a great financial difficulty. This is totally wrong - Copy of bank statement has been filed by the assessee. First gift is shown to have received on 29.10.2002. On that date balance in the Saving Bank account was Rs. 42,17,965/- and in fact statement has been filed from period 10.8.202 before us throughout August to October, 2002 there has been a balance ranging from Rs. 40 lakhs to Rs. 58.95 lakhs. The second gift was received on 16.1.2003 and before receipt of gift, bank balance in same account is Rs. 12,33,939/- - Huge bank balance in the Saving Bank Account in the Financial Year 2002-03 clearly show that the assessee was not in any financial difficulty and therefore, it is clear that these are bogus gift - Explanation (1) to Section 271 (1)(c) would not be attracted – Fit case for levy of penalty – Decided against the assessee.
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2013 (9) TMI 6
Optionally Fully Convertible Debentures (OFCDs), whether a security or a loan & deposit – For contravention of section 269SS, penalty u/s 271D to be levied – Held that:- Relying upon the decision of the Hon'ble Supreme Court in 'Sahara India Real Estate Corpn. Ltd. & Others' [2012 (9) TMI 559 - SUPREME COURT], the OFCDs of the assessee are neither 'loans', nor 'deposits', but securities - 'Hybrids', i.e., hybrid securities, i.e., OFCDs are 'securities' under the Companies Act as well as under the SEBI Act. In the case of 'Sahara India Real Estate Corpn. Ltd. & Others' it has been held that debenture issued by a company is a "Security" and not a "Loan" or "Deposit" and, therefore, the subscription received for issue of debenture cannot be equated with receipt of "Loan" or "Deposit" within the meaning of section 269SS of the I. T. Act – Further, it has been held by the Superme Court that interest on investments (Securities and bonds and debentures) was not in the nature of interest on "Loan" or "Advance" to which the provisions of Interest Tax Act where applicable. Therefore, the monies which are received by the appellant company by way of subscription money for allotment of debenture cannot be equated with respect of any deposit within the meaning of Section 269SS of the I. T. Act and the provisions of section 269SS will not be attracted to the subscription received for issue of debenture and, therefore, the penalty levied u/s 271D is cancelled. In the present case, Ld. CIT (A) cancelled the penalty levied on the assessee u/s 271D of the Act, observing the provisions of Section 269SS of the Act to be not attracted. Obviously, when the OFCDs of the assessee do not fall under and cannot be equated with receipt of 'loan' or 'deposit' under the provisions of Section 269SS of the IT Act, evidently, no violation of the said Section can be said to have been committed by the assessee. Hence, penalty u/s 271D of the IT Act is entirely not attracted – Further, the question of the assessee having been prevented by reasonable cause within the meaning of Section 273B of the IT Act for not complying with the provisions of Section 269SS of the Act, no longer survives – Decided against the Revenue.
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2013 (9) TMI 5
Setting up a business / commencement of business - claim of business loss - at what stage a business can be said to be set up - assessee is a group subsidiary of Carrefour Group, the second largest retailer of the world - Held that:- The business of a trader can be said to be "set up" when the assessee makes a purchase subsequent to owning/leasing of either a shop or warehouse and in the facts of the present case evidently the assessee has not made any purchase or rented any shop premises from where sale could took place or for that matter rented any warehouse where the purchased goods intended to be sold can be stored. Accordingly on considerations of the facts and circumstances of the present case, it cannot be said that the business of the assessee has been set up as is the requirement of proviso to section 3 of the Income Tax Act. Reliance is placed upon the judgments s.a. State of Punjab vs. Bajaj Electricals Ltd. [1967 (12) TMI 28 – Supreme Court], wherein it has been held that business is not commenced thus when no stock is either available and even has not been purchased by the assessee, by no stretch of imagination it can be inferred that the business has been set up and ready to commence its business. Again in CWT vs Ramaraju Surgical Cotton Mills Ltd. [1966 (10) TMI 41 - SUPREME Court] also supports the view taken as it holds that a unit cannot be said to have been set up unless it is ready to discharge the functions for which it has been set up and it is only when the unit has been put into such a shape that it can start functioning as a business. - Decided against the assessee.
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2013 (9) TMI 4
Disallowance of warranty provision - Held that:- Expenditure incurred by an assessee for warranty liability is allowable expenditure, provided it is covered by the principles enumerated by the Courts, from time to time, in this regard. As per the established law warranty liability can be considered part and parcel of the sale and might be allowed in computing the taxable income. But, for claiming the allowance one has to furnish a fair, scientific and reasonable basis to the AO - company has not scrutinised the ‘historical trend’ of warranty provisions made and compared it with the actual expenses incurred. Appellant has failed to prove that figures furnished by it are based on a ‘sensible estimate’ - appellant has not ‘maintained data systematically’.assessee has claimed that gross sales had increased over the years. Assessee in not only dealing in computer peripherals, but it is also engaged in the business of exporting of chemicals and dye stuff, bulk pharmaceuticals and intermediaries. It is not known whether the increase in sales was result of selling of computers or other items - scientific data is not available - there is no need to interfere with the order of the FAA - Decided against assessee. Disallowance u/s 14A - Held that:- AO has not mentioned anywhere as how much exempt income was declared by the assessee-company for the year under consideration. He has also silent about the expenditure incurred by the assessee for earning such income. He has disallowed Rs. 23.83 lacs on the assumption that assessee had made investment in shares of two companies and must have earned exempt income. AO/FAA has not enquired about the investments made by the assessee and the availibility of funds with it. Both of them have discussed the legal principles, but have totally missed the facts. In our opinion, if no exempt-income was shown by the assessee in the return of income and no expenditure was claimed by it to earn said income, provisions of section 14A as well as Rule 8D would not be applicable. As the FAA has not discussed these vital issues before rejecting the claim of the assessee, so, we are unable to endorse his views. In short, the basic facts of claim of exempt income and incurring expenses for earning the said income are missing in the matter under consideration - Decided in favour of assessee.
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2013 (9) TMI 3
Appeal before ITAT - Person aggrieved - Taxability of import freight - profit derived from the operation of ships in international traffic - Whether any income has been assessed in the hands of the partnership firm - Exemption on account of income received in India from the operation of ships - Interpretation of assessee aggrieved - Held that:- assessee aggrieved used in section 253(1) being a person competent to file an appeal before the Tribunal is the person who is an aggrieved party liable to pay tax in terms of the order against which the appeal is to be preferred. As already discussed by us there is no tax payable by the assessee in the present case as a result of the impugned order passed by the ld. CIT(A) even as a partner of the firm as the said order of the ld. CIT(A) has not given rise to any tax liability of the partnership firm - Decided against assessee.
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2013 (9) TMI 2
Revision u/s 263 - Exemption U/S 54EC - Assessee submitted before the Bench that the assessee-HUF sold the property by a registered sale deed.- The HUF received advances before the transfer and the money was deposited in the specified bonds as required under s. 54EC. On the basis of the same, the appellant claimed exemption under s. 54EC to the extent of value of bonds- The AO allowed the exemption in the original assessment under s. 54EC of the IT Act- But the CIT assuming jurisdiction under s. 263 held that exemption under s. 54EC was not available to the assessee as the investment in the bonds was made before the execution of the sale deed instead of within six months from the date of transfer of the property - Held that: As per the provision of s. 263, neither by the conduct of the assessee there is loss to Revenue nor the conduct of the assessee is prejudicial to the interests of the Revenue; rather the assessee was fair enough to deposit the amount immediately after receipt of the same as advance payments on the basis of the agreement to sale - assessee has invested an amount of ₹ 50 lakhs out of the advance money received on the basis of the agreement to sale, therefore, following the spirit of the CBDT Circular No.359 dated 10-05-1983 in the context of section 54E - Following decision of Bhikulal Chandak HUF Vs. ITO [2009 (6) TMI 605 - ITAT NAGPUR] - Decided in favour of assessee. Deduction u/s.54 - No approval for building plan and no structural design of the property - Held that:- although the construction was unauthorised, however the same has been regularized in the amnesty scheme and the investment towards construction of the property has been made before the due date of filing of the return u/s.139(4) and that he is in a position to produce the architect and also furnish the details towards the construction of the property. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate his case by producing the architect before him for his examination. The Assessing Officer also shall give an opportunity to the assessee to produce the various details which according to him is relevant for deciding the issue - Following decision of Commissioner of Income-tax-II, Chandigarh Versus Ms. Jagriti Aggarwal [2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT] - Decided in favour of assessee. Fair Market Value - Valuation u/s 50C - Whether addition made by the Assessing Officer on the basis of the Stamp duty valuation is correct or not - CIT deleted addition - Held that:- The valuation adopted by the appellant as on 01-04-1981 is on the basis of valuation report obtained from Govt. Approved Valuer. The normal rule is that when there is variation in the stamp duty valuation and the value adopted by the assessee on the basis of valuation report and the assessee objects for considering the .stamp duty valuation, the fair market value is to be adopted unless it is referred by A.O. to Valuation Officer and since in this case the assessee had objected to the stamp duty valuation adopted by the A.O. Assessing Officer was not right in substituting the stamp duty valuation without referring the matter to the Valuation Officer - valuation by the Stamp Authority is based on the circle rates. These circle rates adopt uniform rate of property for the entire locality, which inherently disregard the peculiar features of a particular property. Even in a particular area, on account of location factors and possibilities of its use, there can be vide variations in the price of the property. The circle rates or the ready reckonor rates adopted for stamp duty purpose disregards all these factors and a uniform rate has been taken into consideration for all the properties in that particular area - Following decision of CIT Vs. Chandni Bhuchar [2010 (1) TMI 502 - Punjab and Haryana High Court] - Decided in favour of assessee. Adoption of cost inflation index - Held that:- assessee became the owner of the property by way of a will, therefore, the cost of the same shall relate back to the previous owner. Since the previous owner had owned the property prior to 01-04-1981, therefore, the year 1980-81 adopted by the assessee for the purpose of indexation is in consonance with the provisions of the Act - Decided against assessee.
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2013 (9) TMI 1
Capital expenditure or Revenue expenditure - Disallowance of software expenses - Whether The expenditure incurred by the assessee on account of software and professional expenses was a revenue expenditure or not - CIT held it as capital expenditure - Held that:- The treatment of a particular expense or a provision in the books of accounts can never be conclusively determinative of the nature of the expense. An assessee cannot be denied a claim for deduction which is otherwise tenable in law on the ground that the assessee had treated it differently in its books - Following decision of COMMISSIONER OF INCOME TAX Versus M/S ASAHI INDIA SAFETY GLASS LTD. [2011 (11) TMI 2 - DELHI HIGH COURT] - Decided in favour of Assessee. Disallowance of royalty expenses - CIT confirmed disallowance - Held that:- Assessee claimed expenditure on acquisition of such rights from producers as revenue expenditure. Assessing Officer held that audio rights could not be equated to raw material/stock material but were right in perpetuity on global right basis and that master plate did not become useless after recording of series of cassette. He held that acquiring of audio right was of enduring nature and therefore expenditure incurred thereon by assessee had to be treated as capital in nature applying provision of section 35A. Whether since revenue had treated-in-house expenses of production of similar item as revenue in nature, assessee was correct in claiming expenses for acquiring ‘audio rights’ as revenue expenditure - Royalty paid for obtaining copyright by the assessee who was in the business of manufacturing pre-recorded cassettes was held to be revenue expenditure - Following decision of Tips Cassettes & Records Co. vs. ACIT [2000 (7) TMI 210 - ITAT BOMBAY-E] and Commissioner of Income-Tax Versus M. Subramaniam [2003 (12) TMI 9 - MADRAS High Court] - Decided in favour of assessee. Disallowance of Distributor’s Settlement expenditure - Held that:- nature of payment is not clear and what is coming out of the finding of the Assessing Officer is that there was some kind of criminal suit filed by the Distributors against the Employees and Director of the companies for which out of Court settlement was done and sum of Rs. 10,00,000/- was paid. It has not been brought on the record as how such an expenses was incurred for business purposes or for smooth functioning of the business. The onus is upon the assessee, which has not been discharged - Decided against assessee.
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Customs
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2013 (9) TMI 30
Assesses obtained DEPB scrip fraudulently on the basis of forged/fake export documents Duty demand – penalty u/s 112(a) – Held that:- if the DEPB scrip had been validly issued by the DGFT, but being obtained by fraud/mis-declaration on the part of the exporter - subsequently cancelled - duty can not be recovered from the transferee if before the cancellation of the DEPB scrips duty free imports had been made by the transferee and there was no evidence showing that the transferee had not acted bona fide or was aware of the fraud committed by the original holder of the DEPB scrip – following the judgement of Commissioner of Customs, Amritsar Vs Patiala Castings Pvt. Ltd.(2012 (11) TMI 266 - CESTAT, NEW DELHI) wherein the decision of Friends Trading Co. Vs UOI (2008 (10) TMI 344 - PUNJAB & HARYANA HIGH COURT) was considered. Waiver of pre deposit of duty – pre deposit of duty and penalty along with interest waived – stay granted.
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2013 (9) TMI 29
Undervaluation of imported goods - import at very low price - Import of footwear, Socks, Watch Battery, Baby Optical Frame etc, - Confiscation u/s 111(d) and 111(m) – redemption fine u/s 125 – penalty u/s 112 – power to enhance the value in terms of the provision of Rule 9 of the Valuation Rules. - matching of the value in terms of Country of original, time of import, quality of goods and quantity of goods. Dissenting judgement – matter referred to larger bench.
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2013 (9) TMI 28
Import of Betel nuts - rejection of declared values and for enhancement of the values – Confiscation of goods – Redemption fine – Penalty – Held that:- The matter had to be considered afresh after supplying copy of the said documents along with Mahazar and the statements of representative explaining the contents of the said documents – order was set aside – matter remanded back to the original authority - There was a clear violation of principles of natural justice in not furnishing the Mahazar relating to seizure of documents at the premises and copy of the statement, if any, by the representative - Commissioner had not dealt with some of the submissions by the importers relating to rejection of declared values and consequent enhancement of values for assessment - Commissioner had not adequately dealt with some of the submissions by the importers relating to rejection of declared values and consequent enhancement of values for assessment - The assesses had made some fresh submissions for the first time before us which also requires to be considered – Decided in favor of assesses.
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2013 (9) TMI 27
Import of Second hand goods without licence - Confiscation of goods – Redemption fine – Commissioner (Appeals) reduced the redemption fine/penalty imposed by the original authority - import of old and used analogous and digital copiers of Canon brand, old and used computer systems, monitors, old and used MFP, copier machines, old and used monitors and parts like RAM and CPU – Held that:- It is not the case of the department that the Commissioner has fixed the quantum of redemption fine and penalty arbitrarily. In all these cases, no statement has been taken from the representatives of the respondents and no show-cause notice has been issued to any of the respondents on the ground that they waived written show-cause notices. Therefore, the basis on which the department is alleging that the redemption fine and penalty imposed by the Commissioner is not adequate is not forthcoming. As already mentioned these are not cases involving any other violation except violation relating to import without requisite licences. – Decided against revenue.
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2013 (9) TMI 26
100% EOU - debonding - duty on capital goods - Eligibility for depreciation - what should be the value on which duty can be demanded on the capital goods and whether the appellant would be eligible for any depreciation or not – Held that:- No permission has been obtained by the assesse from the Development Commissioner and the Development Commissioner had also not renewed the LOP when it expired – In the absence of any such permission, the question of allowing any depreciation on the value of the capital goods does not arise – depreciation was permissible only when the capital goods were cleared after getting approval from the Development Commissioner for being taken to any other place in India in accordance with the EXIM policy. Duty demand on raw materials – Held that:- The quantity and value lying unutilized on the date of export of warehousing period was not forthcoming from the records - If any such raw materials were lying unutilized on the date of deemed removal - they had to be assessed to Customs duty on the original value of the importation but at the rate prevailing on the date of deemed removal - if the raw materials were consumed in the manufacture of goods exported, then the demand of duty will not arise at all – Only in respect of raw materials lying unutilized still remaining in the bonded premises, the question of demand on duty on raw materials would arise. Confiscation of goods u/s 111(o) – Redemption fine – Penalty u/s 112(a) - Held that:- Assesses had failed to fulfil the terms and conditions of the exemption - the goods were liable to confiscation u/s111(o) - Inasmuch as the assesse had been allowed to function as an EOU from April 2009 onwards - the imposition of a nominal fine in lieu of confiscation would suffice – assesse’s penalty was reduced – managing director’s Penalty was set aside. Duty on imported goods – Interest – Held that:- Appellant was liable to pay duty on the imported capital goods deemed to had been removed at the rate of duty prevailing on the date of deemed removal - Interest was also leviable on such amount of duty - Only if any such materials were lying in stock on the date of deemed removal, duty liability will have to be discharged at the rate prevailing on the date of deemed removal – matter remanded back to the adjudicatory authority for re computation of Demand – decided partly in favor of assesse.
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Corporate Laws
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2013 (9) TMI 25
Jurisdiction of the Court - The main issue raised vide the instant petition is that Delhi Courts have no territorial jurisdiction to try and adjudicate upon the complaint case filed by the respondent because of the fact that petitioner is working at Lucknow has its registered office at Lucknow and the alleged offence was committed at Lucknow. – Petition for Quashing the Complaint and Subsequent Proceedings in the case of SEBI v/s Maha Bhairav Plantation and Finance Ltd. - The petitioner and the co-accused sponsored and caused to be sponsored Collective Investment Schemes called as CIS without getting the mandatory registration from Complainant/Respondent SEBI, and thereby violated the provisions of section 12 (1B) of the SEBI Act, 1992 - Held that:- The petition for quashing the Complaint was rejected - The important factor of the case was that it was at the fag end of the trial now fixed for the defence evidence and as such there was no difficulty or prejudice caused to the petitioner to proceed further. - Proceedings before the trial court, Delhi to continue. - Decided against the petitioner.
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Service Tax
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2013 (9) TMI 35
Time Barred Appeal - Condonation of Delay - The Commissioner (Appeals) rejected the appeal on the ground that appeal was filed before him beyond the condonable period of 3 months - Held that:- Following the judgement of Kouni Travels Pvt. Ltd. Vs CST Bangalore 2009 (9) TMI 208 - CESTAT, BANGALORE - The appellant received the order on 20.4.2011 and filing of appeal was expired on 20.4.2011 - The further period 3 months for condonable period would start from 21.4.2011 and to be ended on 21.7.2011 - The appellant filed appeal on 21.7.2011, which was within the stipulated condonable period of 3 months – Accordingly the impugned order was set aside and the matter was remanded back to him to decide the COD application on merit - While computing the condonable period of 3 months, the first day of the next block of 3 months will be excluded - the appeal was allowed by way remand – Decided in favor of assesse.
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2013 (9) TMI 34
Pre-deposit – demand on the ground of non-production of invoices/documents - assessee claims that now in possession of all the necessary documents/invoices for the relevant period by which they could establish that the confirmed service tax is not payable, as the receipt of the services charges pertain to the period when such services were not taxable. - Held that:- Applicant produced all these documents to rebut the allegation in the demand notice and not considered by the adjudicating authority, but these documents were not in their possession at the material time – Considering all the circumstances in mind including financial hardship of the Applicant and in the interest of Revenue, offer made by the Ld. C.A. for the Applicant, to deposit Rs.15.00(Fifteen Lakhs) is accepted and directed to make pre-deposit of the said amount – stay granted partly.
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2013 (9) TMI 33
Demand of service tax on GTA service - both consignor as well as consignee are body corporate - Held that:- Consignor who would be liable to pay service tax and the same cannot be demanded from the appellant - person liable to pay service tax on the GTA service received would be the one who is liable to pay the freight either himself through his agent - on perusal of rule 2(1 )( d) (v) of the Service Tax Rules and the notification No.35/2004-ST it is seen that in respect of GTA Service when the consignor or consignee fall in the categories mentioned in the sub-rule and the notification. Pre- deposit of duty – court waived the requirement of per-deposit of service tax demand, interest thereon and penalty and allowed the stay application – appeal decided in the favour of the appeallant
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2013 (9) TMI 32
Management, Maintenance and Repair Services u/s 65(105)(zzg) - The assesse undertook maintenance and repairs of Railway sidings - The Revenue was of the view that the activities undertaken by the Railways comes under the taxable service of “management, maintenance and repair services” as defined under Section 65(105)(zzg) of the Finance Act, 1994 read with Section 65(64) w.e.f. 16-6-2005 - Held that:- For the levy of Service Tax it was immaterial whether the service provider was a Government undertaking or not and the levy applies equally to both Government undertakings as also non-Government undertakings - in the absence of any specific exemption notification exempting the activities undertaken in respect of maintenance, management or repairs of Railway sidings, the assesse was liable to pay Service Tax - The Railways were not collecting any statutory fee but were collecting service charges for the services - There was also no financial hardship pleaded by the assesse. Waiver of Pre-deposit - assesse had not made out a prima facie case for complete waiver of dues adjudged against them - the assesse was directed to make a pre-deposit of 50% of the Service Tax - on such compliance the balance of Service Tax, interest and penalties shall stand waived and recovery stayed during the pendency of the appeals – conditional stay granted.
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2013 (9) TMI 31
Refund Claim on Input Service - The appellants were engaged in providing “Commercial Training & Coaching, Business Auxiliary Services and Transport of Goods by Road” - They filed a refund claim of service tax paid on inputs services under Rule 5 of Cenvat Credit Rules, 2004 - Held that:- In terms of the Board circular and also the decision of the Tribunal in the case of CCE, Mysore v. Chamundi Textiles (Silk Mills) Ltd. 2011 (3) TMI 193 - CESTAT, BANGALORE - the appellant was eligible for the refund of the entire amount of service tax credit paid by them on the input service irrespective of when the credit was taken - From the Board’s Circular dated 19-1-2010, it was abundantly clear that refund of Cenvat credit can be allowed irrespective of when the credit was taken in case of service providers exporting 100% of their services - it was evident that the appellant was continuously undertaking exports during the said period and there were no domestic clearances. Accumulated input service credit, not pertaining to goods exported during the quarter for which claims were made can be refunded as there was no bar in Notification No. 5/2006-C.E. (N.T.) in granting refund of credit accumulated in the past period in subsequent quarter - Decided in favor of assesse.
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Central Excise
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2013 (9) TMI 24
Review of the earlier decision - whether judgment dated 8.3.2013 [2013 (3) TMI 365 - ALLAHABAD HIGH COURT] suffers from any error apparent on the face of the record wherein the issue was decided against the assessee - CENVAT credit - Held that:- It is apparent that on findings recorded by the Commissioner the question of levy of penalty was neither raised nor decided by CESTAT and thus it was found that no substantial question of law arises for consideration. The second issue regarding the denial of CENVAT Credit on the capital goods, which was fully exempt from central excise duty, was neither raised nor decided by the CESTAT. The counsel appearing for the appellants had raised the issue. The question, however, was not considered as it was neither raised nor decided by the CESTAT. In appeal under Section 35G of the Central Excise Act, 1944, the appellant is permitted to raise only such ground, which was raised and decided by the CESTAT. Since the question was neither raised and decided by the CESTAT, it was not considered by the Court while deciding and dismissing the appeals. We do not find that the judgment suffers from any error apparent on the face of the record. The grounds quoted as above to review the judgment were argued by learned counsel for the appellant and were considered in the judgment dated 8.3.2013 [2013 (3) TMI 365 - ALLAHABAD HIGH COURT], in which we held that the questions raised in the appeals are questions of fact and that there was no substantial question of law to be considered in the appeals. - Decided against the assessee.
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2013 (9) TMI 23
Condonation of Delay - Held that:- In the facts of the case and the explanation offered by the petitioner that the security agency engaged by it did not make available the order-in-Original though received it on 3.5.2012 was unacceptable - The Commissioner(Appeals) was fully justified in rejecting the application to condone the delay and consequently declining to accept the appeal - Commissioner of Customs and Central Excise vs. Hongo India (P) Limited and another [2009 (3) TMI 31 - SUPREME COURT ] - the legislature intended the Appellate authority to entertain the appeal by condoning the delay upto only thirty days after expiry of sixth days which was the preliminary limitation period for preferring an appeal - in the absence of any Clause to condone the delay by showing sufficient cause, there was complete exclusion of Section 5 of the Limitation Act. The appellate authority was a creature of the Statute vested with jurisdiction to condone the delay but not beyond the period permissible under the Statue - The period upto which the prayer for condonation can be accepted was statutorily provided - The failure to file an appeal within the time stipulated under Section 3 5 of the Act, did not entitle the petitioner to condonation of delay of the period beyond the period prescribed under the Statute - the petitioner should have filed the appeal within sixty days and in terms of the proviso extended by another thirty days - Under Section 35, the Commissioner had no authority or jurisdiction to allow the appeal to be presented beyond the period of thirty days - The legislature having intended the appellate authority to entertain the appeal by condoning the delay only upto thirty days after expiry of sixty days period after preferring the appeal, there was complete exclusion to the application of Section 5 of the Limitation Act – Decided in favour of Assessee.
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2013 (9) TMI 22
Cenvat credit - Revenue held that the appellant is not entitled to avail cenvat credit in respect of the short quantity of H.R. Coils - Held that:- shortage of coils was in respect of the weight of the same, which was to the tune of 0.039%. Admittedly, the manufacturer of the coils has paid the excise duty on the total weight of the coils and it is the same duty paid by the manufacturer , which stands claimed by the assessee. The marginal difference in weight of the coils, for which the appellant laid claim with the manufacturer, will not lead to denial of credit to the appellant inasmuch as the manufacturer has admittedly paid the duty on the full weight of the coils - Following decision of Commissioner of Central Excise, Nagpur Versus Ispat Industries Ltd.[2011 (2) TMI 198 - CESTAT, MUMBAI] - Decided in favour of assessee.
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2013 (9) TMI 21
Manufacture - marble slabs and marble tiles - cutting of marble blocks into marble slabs - Held that:- activity of polishing and ultimate conversion of blocks into polished tiles amounts to manufacture - those marble tiles were seized as the same were not accounted for in the statutory record maintained by the appellant as such those were liable to be confiscated in view of Rule 25(1)(b) of the Central Excise Rules. As regards cutting of marble blocks into marble slabs, since the activity is not amounting to manufacture, the order of confiscation is not valid.
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2013 (9) TMI 20
MODVAT Credit Claim - Whether the mistake committed by the assessees in not reflecting the quantum of credit in RG-23A Part II register would disentitle them from the benefit of credit of duty paid on the inputs - Held that:- A manufacturer becomes entitled to take credit immediately on receipt of the inputs without any further formality - The amount of credit was to be simplicitor written in the records - the provisions of sub-rule (7) of Rule 57G require a manufacturer to maintain an account in form RG- 23A, Part I and Part II - entries in RG-23A Part I itself would entitle an assessee to avail the credit and the entries in RG-23A Part II is only for accountal purposes - As such, it was clear that RG-23A Part-II was only for the purpose of reflecting upon the quantum of credit taken, utilised and balance of the same - RG-23A Part II does not confer substantive right to the assessee for availment of credit. Bar of Limitation - when the entries stand made in RG-23A Part I within a period of six months, the availment of credit after six months period was permissible or not - Held that:- An assessee would be entitled to take the credit even after a period of six months - the time-limit of six months in availing the credit had been introduced with the sole objective of avoiding the evil of taking the credit in respect of inputs which had been cleared by the input manufacturer more than six months back - Relying upon COMMISSIONER OF CENTRAL EXCISE, HYDERABAD Versus AUROBINDO PHARMA LTD. [2000 (10) TMI 93 - CEGAT, CHENNAI] - The said provision cannot be pressed into service to deny the otherwise available substantive benefit of credit, to an assessee who had received the goods within the period of six months from the date of clearance from the input manufacturer’s factory and has duly made entries in RG-23A Part-I record - ultimately the period of six months introduced in the said rule was withdrawn by the legislature with effect from 1-4-2000 - There were no merits in the Revenue’s appeal and reject the appeal.
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2013 (9) TMI 19
Manufacture - Classification - tobacco products - entry No. 24039910 or 24012090 - Whether unmanufactured tobacco purchased in bulk and thereafter converted into small pouches by mixing it with a lime tube would amount to manufacture as defined under Section 2F of the Central Excise Act - Adjudicatory Authority was of the view that the tobacco pouches marketed by the assessee were covered by classification only No. 24039910 Section V Chapter 24 and the order of the adjudicating authority confirming the demand, interest and penalty on the ground that the demand raised by the department was barred by limitation was rejected - Held that:- Once it was concluded that production of retail packs pouches amounts to manufacture the pouches produced and marketed by the respondent would fall under the sub-heading 2403 of Chapter 24, which relates to other manufactured tobacco, and particularly classification entry No. 24039910 - There was no infirmity in the order of Commissioner (Appeals) classifying the product in question under entry No. 24039910 - there was no merit in the appeal filed by the department. It was clear that repacking of raw tobacco from bulk packs to retail packs amounts to manufacture - the appellants were purchasing bulk tobacco from the market and repacking the same into small pouches along with lime tube - The process obviously amounted to deemed manufacture of retail pouches in view of chapter note 3 of Chapter 24 - Decided against Revenue.
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2013 (9) TMI 18
Valuation - Demand of differential duty – Whether the product development charges and the consultancy charges collected by the assesse by raising debit notes were liable to be included in the assessable value of the job-worked medicaments cleared to the latter during the period of dispute – Revenue contended that the product development charges and consultancy charges should also be included in conversion charges so as to be part of the assessable value of the goods - Held that:- Any expense which was not attributable to the job work cannot be included in the cost of conversion and hence cannot be added to the assessable value - The inclusion of product development charges in the conversion charges for the job-worked medicaments, regardless of the fact that only some of the medicaments specified in the debit note were supplied by the job worker would ipso facto indicate the fallacy of the Department’s claim that the product development charges covered by the debit note were to be treated as part of the cost of conversion – Decided against revenue.
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CST, VAT & Sales Tax
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2013 (9) TMI 36
Deferral of Sales Tax - Revenue denied deferral of sales tax at turnover relating to sale of steel scrap made by the assesse from their unit – Held that:- When once the eligibility certificate is given, the petitioner is bound by the same. The Sales Tax authorities are merely acting on the terms of the eligibility certificate. Thereafter, when the petitioner moved the authorities for reconsidering their stand, impliedly they have said that the earlier eligibility certificate did not include the scrap produced during the manufacturing of goods. Having sought for clarification and failed in their attempt, they cannot now make use of this court to seek to expand the scope of the eligibility certificate. The eligibility certificate once granted cannot be reviewed by this court under any circumstances as it is only the beneficial scheme for deferral. It is not the case of the petitioner that tax is levied on a different basis. On the other hand, the liability to pay the tax was accepted. It was only the deferral of tax payment as concession that was obtained by the petitioner is now sought to be revised. The eligibility certificate followed by an agreement reached between the parties cannot be reopened at the instance of the petitioner that too sitting under Article 226 of the Constitution. In different circumstances, the common sense meaning of certain products can mean different things and difference places especially in the context of deferral scheme. ITC Batrachalam Vs. State of A.P. [2001 (3) TMI 873 - SUPREME COURT OF INDIA] - When matters are interconnected, it is the duty of the counsel to bring it to the notice of the court the pendency of other matters in relation to the same subject - Even otherwise the court merely directed the respondents to reconsider the question as to whether the steel scrap produced by the petitioner industry will qualify to be the product so as to enjoy the eligibility certificate. Under Section 4-A of the U.P. Trade Tax Act, a soft drink company claimed eligibility certificate for deferral payment. The eligibility certificate defined the financial limit for fixed capital investment for availing deferrals. The question arose whether bottles and crates which hold them will also be eligible to come under the fixed capital came to be considered by the Supreme Court in Commissioner of Trade Tax, Uttar Pradesh Vs. Varun Beverages Limited [2011 (4) TMI 592 - SUPREME COURT OF INDIA] and agreed that bottles for which investments were made were eligible to be counted for fixed capital investment, but at the same time, crates were excluded. – Decided against assesse.
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