Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 23, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Non service of notice under Section 143(2) - proviso to Section 292BB would not apply where the Assessee has raised the objection before the completion of the assessment. - HC
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The amount spent on repair and maintenance of the building and construction of boundary wall thereof was held to be capital expenditure. - HC
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Export incentives accrued on target plus scheme and focus market scheme - notional income computed by the assessee cannot be treated as taxable income of the assessee during the relevant to assessment year, however the same shall be taxed in the previous year in which the assessee has received the licenses and derived such income - AT
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Estimation of sales consideration - unaccounted business in the real estate activity - when the material brought on record suggests the correct state of affairs of the assessee, it is not appropriate to estimate the income of the assessee on the basis of irrelevant consideration. - AT
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Double addition of the same amount in both the assessee and assessee’s wife - receipts estimated on hospital - Since neither party is able to furnish any evidence with reference to actual number of surgeries being done, the reasonable estimation of the AO cannot be faulted. - AT
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Treating the built up area of a property as stock-in-trade instead of part of the capital asset - The assessee was not carrying out any business,that the built up area was not stock in trade and that he was entitled to the benefit of inflation index - AT
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Condonation of delay - appeals have been filed late by almost 12 years and the reason is stated to be that the assessee was not keeping up good health, was in severe depression due to various issues and the lenders were asking for money. - delay cannot be condoned - AT
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Condonation of delay - In the facts ofthe assessee’s case, we condone the delay of 72 days in filing of appeal before the CIT(A) and direct the Ld. CIT(A) to decide the issue on merits. - AT
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Deduction u/s 80E - Availing Education abroad - AO / CIT(A) observed that same is allowably only in case of Indian Educational Institutes which are authorised in India and naturally not for Abroad or Foreign education institutes - Deduction allowed - AT
Customs
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Denial of Duty drawback claim - Interest u/s 75A - respondent is hereby directed to pay the interest at the rate of 18% on the sanctioned and paid duty drawback claim amount entitled by the petitioner for the period from 18.02.2010 to 24.09.2010 - HC
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Duty free import authorisation - Transferable DFIA - Once license was endorsed for transferability by licensing authority, nexus between import goods use in export goods, was not required to be established afresh by transferee - AT
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Confiscation of improperly imported goods - Chinese mobile phones – Customs duty cannot be demanded from appellant as it is case of town seizure and date/time of inspection is not known to determine rate of duty, exchange rate and value of goods - Appellant being transporter cannot be expected to know all - he was not aware of smuggled nature of seized goods - No penalty - AT
Service Tax
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Refund - Unjust enrichment - service tax liability has been discharged based upon working back from the amount which has been recovered from their customers, question of unjust enrichment arises and the appellant is not able to dislodge the presumptions and that they have recovered the amount of service tax from their customers - AT
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Activities like carpentry work involving different types of furniture items, modular partitions, fixation of false ceiling, painting of walls and ceilings etc. are not falling under the category of "interior decorator services" - AT
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Classification of service - Appellants are only managing the services and the consultation is only in relation to IT and therefore, in our opinion, the activities are not covered by “Management Consultancy Service” at all - AT
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IPR service - Merely because the payment for that transfer continued even during the period when that services became liable to tax does not negate the fact that the taxable event was the transfer of rights which took place during the time when the service was non-taxable - stay granted - AT
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Business auxiliary service - Merely because somebody evaded sales-tax, it would not mean that the transaction would not be a sale, even if, it satisfied the definition of sale - AT
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Waiver of penalty u/s 78 was allowed but waiver of penalty u/s 76 was refused by the tribunal - once the assessee proves that there was reasonable cause for the failure. Section 80 starts to operate, insulating the imposition of any other penalties under Section 76, Section 77 or Section 78 of the Act. Insofar as the appellant is concerned, this is inexcusably applicable in law - HC
Central Excise
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Reversal of CENVAT Credit - Re-classification of goods - classification has been changed only to ensure that they are in a position to take higher credit and pay lower duty. - there is clear cut suppression of fact and wilful misstatement - in view of the fact and circumstances, extended period of limitation has been correctly invoked. - AT
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Denial of exemption claim - Classification of salted potato chips - the goods in question, would be covered under Heading No. 2005 20 00 of Chapter 20 and accordingly, the same would be exempted from duty - AT
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Denial of refund claim - assessable value - discounts given - the invoice price mentioned in the invoices issued earlier would stand reduced to that extent and in such a situation, the burden of proof would shift to the Department and it would be for the Department to establish that the credit notes issued are bogus - AT
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Disallowance of CENVAT Credit - duty paying document - For taking Cenvat Credit on input it is not mandatory that payment towards purchase of the input has to be made - appellant have correctly and legally availed the Cenvat Credit on the invoices wherein appellant name is appearing as consignee and even where the name of buyer on the invoice is different - AT
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SSI Exemption - assignment to use the brand name - The mere fact that a different view is possible on the same set of facts cannot be a ground to exercise power under that provision - exemption cannot be denied - HC
Case Laws:
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Income Tax
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2015 (9) TMI 970
Gains from Share Transactions - Short Term Capital Gain OR Business Income - Held that:- On examination of all the facts it has inter alia come to the conclusion that the activities carried out by the respondent assessee cannot be classified under the head 'business income' but more appropriately as claimed by the respondent assessee under the head 'short term capital gains'. This is particularly so on application of CBDT circular. This finding of fact by the CIT (A) has been upheld on examination by the Tribunal. In view of the concurrent finding of fact arrived at by the CIT (A) and the Tribunal, according to us, no substantial question of law would arise to warrant admission of the question as proposed. It is to be noted that even according to the Revenue, there can be difference of opinion on the appreciation of facts. If that be so, the CIT (A) and the Tribunal has taken a particular view which is not shown to be perverse or arbitrary in the context of the facts. The view taken is a possible view on the facts and therefore, calls for no interference. Thus we see no reason to entertain the question as proposed. - Decided against revenue.
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2015 (9) TMI 969
Reopening of assessment - 54% of the total interest income accrued on different FDRs was escaped assessment - whether notice issued under Section 148 of the Act for reassessment was hopelessly time barred in view of the provisions of Section 149 read with Section 150 and 153 (3) Explanation 3 of the Income Tax Act? - Held that:- Bare perusal of Explanation 3 of Section 153 (3) of the Act shall demonstrate that excluded income of original assessee, can be assessed in the income of third party, if third party was heard by the Authority, making observations or issuing direction that excluded income is of third party, therefore, shall be excluded from the income of original assessee. Meaning thereby, the third person whose liability is found by the assessing authorities while making assessment against the original assessee, such third party has to be heard before fixing his liability. If such third party is heard then only reassessment under Section 148 read with Sections 149 and 150 of the Act is permissible. However, if he is not heard, then notice for reassessment has to be issued within the period of limitation, as provided under Section 149 (1) (b) of the Act.In the present case, admittedly, assessee was not heard by ITAT, Lucknow Bench, while observing that out of total income derived from the interest on FDRs, tax liability of UPFC is only to the extent of 46% and liability on the total interest income to the extent of 54 % shall be of UFDC. Therefore, we do not find any illegality in the order passed by ITAT, Delhi Bench 'H', New Delhi. Therefore, question is answered against the Revenue and in favour of the assessee.
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2015 (9) TMI 968
Condonation of delay - whether the applicant has shown sufficient cause so as to become entitled for condonation of delay? - Held that:- The affidavit in support does not set out the reasons why the Revenue decided to file an appeal in the case of "M/s. Shiv Roadways" in respect of the Assessment Year 2007-08 particularly when a conscious decision was taken on the same issue in case of the respondent assessee not to file an appeal. We expect the Revenue to adopt a consistent stand. Merely because an appeal has been filed in respect of the order of the Tribunal in respect of "M/s.Shiv Roadways" for the Assessment Year 200708 and the subsequent admission, would not be ground enough to condone the delay in the backdrop of the conscious decision having been taken not to file an appeal in the case of respondent assessee. Therefore, following the test laid down by us in the "Somerset Place Cooperative Housing Society Ltd." (2015 (2) TMI 507 - BOMBAY HIGH COURT ), where a conscious decision has been taken not to prefer an appeal, the subsequent event such as the decision of the Court of law would not entitle a party to assail the order consequent to the aforesaid decision and seek the condonation of delay.
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2015 (9) TMI 967
Interest under Section 244A - interest on the delayed refund of the TDS retained by the Revenue - delayed refund of amount due to the Petitioner - condonation of delay for refund made beyond a period of six years from the relevant Assessment Year whether could not be considered under Section 119 (2)(b) - Held that:- Before the Court, in the earlier Writ Petition leading to the order dated 15th January, 2014, there was no dispute between the parties that the Petitioner was entitled to refund under the Act, nor there was any dispute with regard to the quantum of refund. The only objection which was urged before us at that time the application for refund seeking to invoke under Section 119(2)(b) of the Act was time barred as it was filed beyond the period of six years from the end of the relevant Assessment Year. This court on consideration of the facts, in the order dated 15th January, 2014 came to the conclusion that filing of the revised refund with the Respondent Revenue on 30th September, 2009 should be taken as a date/ application made under Section 119(2)(b) of the Act. It was in the above view, Court directed the Respondent Revenue to grant refund of the amount claimed by the Petitioner. The refund which was granted to the Petitioner consequent to the order of this Court dated 15th January, 2014 was under the Act and not granted dehors the Act as seems to have been misunderstood by the Commissioner of Income Tax. In the above view, we set aside the impugned order of the Commissioner of Income Tax, we restore the Petitioner's application for fresh consideration on merits of the claim for interest made by the Petitioner to the Commissioner of Income Tax. - Decided in favour of assessee statistical purposes.
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2015 (9) TMI 966
Addition on interest in respect of loans advance to sister concerns - CIT(A) deleted addition - Held that:- S.A. Builders Vs. CIT(A) [2006 (12) TMI 82 - SUPREME COURT] wherein it has been held that what has to be considered is whether the advance was given as a measure of commercial expediency on the part of the respondent-assessee. The Court observed that the revenue cannot put itself in the arm chair of businessman and decide how the business is to be conducted. If the expenditure has been incurred on account of commercial expenditure, then even if there is no legal obligation to incur it, the same is to be allowed. In the above view, the question as proposed does not raise any substantial question of law. - Decided in favour of assessee. Commission paid to related parties - TDS deduction - Tribunal deleted the addition - Held that:- This issue of payment of commission, concurrent finding of fact arrived between the CIT(A) and the Tribunal holding that the commission as claimed had been paid. The view taken by the Tribunal is a plausible view and the same has not been shown to be perverse.- Decided in favour of assessee. Disallowance towards cash expenses - Tribunal allowed part relief - Held that:- We find that the CIT(A) and the Tribunal have reached concurrent findings of fact in restricting the disallowance to the extent of 10% of the cash expenditure. This results in reversing the ad-hoc disallowance of almost 70% done by the Assessing Officer without any justifiable reasons. Moreover, for the subsequent years also the Assessing Officer has himself disallowed the expenses of similar nature only to the extent of 10% as done by CIT(A) and the Tribunal by the impugned order. - Decided in favour of assessee.
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2015 (9) TMI 965
Non service of notice under Section 143(2) - Held that:- The Court finds that the question of law stands covered against the Revenue by the decision of the Supreme Court in ACIT v. Hotel Blue Moon (2010 (2) TMI 1 - SUPREME COURT OF INDIA) where the Supreme Court has categorically held that the service of the notice under Section 143(2) of the Act upon the person to whom it is addressed is mandatory requirement. For the purposes of Section 282 (1) of the Act, it is seen that unless the person upon whom the notice was served is "an agent empowered to accept service", in terms of Order V Rule 12 CPC, such service of notice cannot be treated to be valid. In the present case, admittedly, Smt. Asha Mehra was not an agent of the Assessee duly empowered to receive notice on its behalf. It is seen in terms of the proviso to Section 292BB of the Act, the said provision would not apply where the Assessee has raised the objection before the completion of the assessment. In any event Section 292BB of the Act has been introduced retrospectively from 1st April 2000. In that view of the matter, the question is answered in favour of the Assessee and against the Revenue
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2015 (9) TMI 964
Receipt of capital account transactions as a gift rejected - treating the same as income being of a revenue nature - Held that:- It has been categorically recorded by the Tribunal that the assessee has not been able to show any relationship with the donor and therefore there could not be any love and affection with the non relative. The assessee had not produced any evidence to show close relationship between him and Abinashi Lal Bajaj. In his statement, Mr. Bajaj also stated that he had not made any gift to any person. Only pay order had been given in lieu of cash. It was thus clear that the gift was not genuine. The gift requires a close association between the donor and the donee except where gifts are made for charity and philanthropic purpose. Mere fact that the amount paid had emanated from bank account of donor would not be sufficient to prove genuineness of gift. - Decided against assessee.
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2015 (9) TMI 963
Entitlement to deduction under section 80P(2)(iii) - Held that:- Once the claim was never made by the Assessee before the Assessing Officer, the same would not arise for consideration in the present appeal.In view of the above finding, question No.(a) does not arise. Denying deduction on account of interest on stiky loans being the interest doubtful of recovery - Held that:- The same is covered against the assessee by the decision rendered by this Court in The Shahabad Cooperative Sugar Mills Limited vs. CIT, Aayakar Bhawan, Sector 13, Karnal(2013 (10) TMI 1350 - PUNJAB & HARYANA HIGH COURT). Amount spent on repair and maintenance of the building and construction of boundary wall thereof was held to be capital expenditure - Held that:- The amount spent on repair and maintenance of the building and construction of boundary wall thereof was held to be capital expenditure. It was noticed that the amount had been spent for the purchase of ACC sheets, dryer and construction of boundary wall. Learned counsel for the assessee was unable to substantiate that the said expenditure would qualify as revenue expenditure in the facts and circumstances of the present case
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2015 (9) TMI 962
Transfer Pricing adjustment - Upward adjustment due to brand promotion expense attributable to the assessee s holding company - Held that:- Considering the facts of the case which is identical to the case decided by the Special Bench of the Tribunal in the case of LG Electronics India Pvt Ltd. [2013 (6) TMI 217 - ITAT DELHI ] and in the case Ford India Pvt. Ltd [2013 (6) TMI 458 - ITAT CHENNAI] we hereby direct the Ld. Assessing Officer to delete the adhoc addition of 1% on sales which is treated as brand development fee by following the decision of the Tribunal cited supra. The aforesaid decisions of the Tribunal has also held that Bright Line Test would be the best method for determining developer of the intangible property, which the Ld. A.R. claimed that such test was made on the assessee by the Ld. DRP; however no additions were made because on the computation of the same it was found not warranted. The same was also not controverted by the Ld. D.R. Therefore, we hereby restrain ourselves from remitting back the matter for the computation of bright line test. - Decided in favour of the assessee. Addition on account of advertisement and sales promotion expenses which ought to have been receivable from the assessee s holding company U/s.92B - Held that:- we hereby accept the concept of Bright Line Test (BLT) as held by our predecessors with respect to the concept of Bright Line Test for distinguishing between the routine and non-routine expenditure incurred on advertisement and brand promotion wherein advertisement and marketing promotion expenses to the extent incurred by uncontrolled comparable distributors is to be regarded within the Bright Line Limit of the routine expenses and the advertisement and market promotion expenses incurred by the distributors beyond such Bright Line Unit constituted non-routine expenditure resulting in creation of economic ownership in the form of marketing intangibles which belong to the owner of the brand. However, in this case even after computing the ALP by following the Bright Line Test the Ld.TPO has deleted the addition ₹ 76.63 crores. - Decided against assessee. Disallowance being royalty paid by the assessee to its Holding Company M/s.HMC Korea - Held that:- TPO has herself accepted the high-tech technology passed on to the assessee company by its Holding Company and also after details study of 35 licenses arrived at a conclusion that the royalty payment of 4.7% is prevalent in the automotive sector. Therefore from these circumstances, we do not find it appropriate on the part of the Revenue to make addition on account of ALP of royalty payment. Therefore, we hereby delete the addition made by the Ld.TPO following the directions of Ld. Members of the DRP. - Decided in favour of the assessee. Disallowance of depreciation on capital subsidy - Held that:- The matter requires a categorical finding as to how the cash received as subsidy from SIPCOT has been utilized by the company in order to address merits of the case. Therefore, we hereby remit the issue back to the file of Ld. DRP in order to examine the complete facts of the issue in the light of the various decisions cited by the Ld. A.R and pass appropriate order as per merits and law.- Decided in favour of the assessee for statistical purposes. Disallowance U/s.14A - Held that:- In the present case before us, the details of investment made were not brought before us. But as pointed out by the assessee Rule 8D was introduced by the Income Tax Fifth Amendment Rules, 2008 with effect from 24.03.2008. Therefore, it would not be applicable to the case of the assessee for the assessment year 2007-08. Moreover under such circumstances, various judicial authorities have held that 2% to 5% of the dividend earned may be disallowed in order to justify the provisions of Section.14A of the Act. However, in the present case before us, the Ld. A.R. has claimed that the assessee had not received any dividend during the year, which has not been rebutted by the Ld. D.R. Therefore, we hereby hold that disallowance of Section 14A of the Act for ₹ 5,29,910/- is not warranted and accordingly, we direct the Ld. Assessing Officer to delete the same - Decided in favour of the assessee. Disallowance of expenditure towards 100 cars given to Police Department - Held that:- The expenditure incurred by the assessee was not incidental to carrying on the business and there is no commercial expediency in incurring this expenditure and therefore, the view of the learned Judicial Member is upheld. Therefore by the majority view, this ground raised by the assessee is dismissed. - Decided against assessee. Addition on account of export incentives accrued to the assessee on target plus scheme and focus market scheme - Held that:- The export incentive towards target plus scheme is bestowed as a reward in order to encourage the accelerating growth in exports. The incentive on target plus scheme is also nothing but an entitlement for a duty credit based on incremental exports which should be substantially higher than the general annual export target that is fixed. The incentive on focus market scheme is to offset high freight cost and other externalities to select international market with a view to enhance India s export competiveness in these countries. It is pertinent to note that the assessee will be entitled to such benefit only after verification of the claim of the assessee by the relevant Govt. authorities and issuance of the license by such Government authorities. Therefore, the facts of the assessee s case are similar to the facts of the case decided by the Hon ble apex Court Excel Industries Ltd., reported in [2013 (10) TMI 324 - SUPREME COURT], thus we hereby hold that the notional income computed by the assessee cannot be treated as taxable income of the assessee during the relevant to assessment year, however the same shall be taxed in the previous year in which the assessee has received the licenses and derived such income. Thus, this issue is also decided in favour of the assessee. Disallowance of additional depreciation in respect of assets used in regional offices - Held that:- The assessee is entitled to additional depreciation if it has satisfied the condition that it is engaged in the business of manufacture or production of any article or thing. There is no condition stipulated in the Act that additional depreciation shall be allowed only if the asset is deployed in the factory of the assessee and not the office of the assessee. Therefore, we accept the argument of the Ld. A.R. and reject the observations of the Revenue on this regard and accordingly direct the Ld. Assessing Officer to allow the claim of additional depreciation of ₹ 8,52,500/- if the other conditions of the Act remains satisfied. - Decided in favour of the assessee. Disallowance of credit for the tax deducted at source - Held that:- A.R. has also not furnished the details of the TDS claimed by the assessee and the amount disallowed by the Revenue. Therefore, in the interest of justice we remit this matter back to the file of the Ld. Assessing Officer for examining the relevant documents furnished by the assessee and pass appropriate speaking order as per merits and law after giving opportunity to the assessee of being heard. - Decided in favour of the assessee for statistical purposes.
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2015 (9) TMI 961
Addition on unsecured creditors - Validity of proceedings u/s 153C - Held that:- Second Proviso to section 153A clearly says that the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of search u/s 132 shall abate. In other words, if the assessment is completed or terminated by operation of law on the basis of the return of income filed in the regular course, the assessment proceeding shall not be abated. Therefore, in respect of pending assessment proceedings on the date of the search, the assessment shall be made on the basis of the seized material and other material found on record. However, in respect of the assessment proceeding which is not pending on the date of search has to be made only on the basis of the material found during the course of search operation. The completed proceedings on the date of search cannot be reopened by the assessing officer. In the case before us, admittedly, the assessee has filed the return of income on 27-03-2006. The period of 12 months for issuing notice u/s 143(2) expires on 31-03-2007. It is also not disputed that the Commissioner of Income-tax by an order dated 27-11- 2007, in exercise of his powers u/s 127(2) transferred the jurisdiction from Ward.1, Ernakulam to DyCIT / ACIT, Central Circle.1, Ernakulam. Therefore, the assessing officer of the assessee, the DyCIT / ACIT Central Circle, Ernakulam might have received the records on or after 27-11-2007 only and certainly not before that. Therefore, the assessment proceedings on the basis of the return of income filed in the regular course on 27-03- 2006 got terminated by operation of law on 31-03-2007. Assessment proceedings on the basis of the return of income filed on 27-03-2006 is not pending as on 27-11-2007 when the assessing officer is supposed to have received the seized document of the assessee. Hence, the income disclosed in the return filed in regular course on 27-03-2006 on the basis of the balance-sheet as on 31-03-2005 cannot be disturbed by the assessing officer unless there is a specific material found during the course of search operation. In this case, it is not in dispute that there is no material found during the course of search operation for the assessment year 2005-06. The assessing officer made the addition only on the basis of the balance-sheet as on 31-03-2005 which was filed by the assessee originally alongwith the return of income filed on 27-03-2006 itself. Therefore, even if the copy of the said document was found on the date of search still, that document cannot be treated as seized material. In other words, the copy of the balance-sheet s on 31-03-2005 is very much available with the revenue authorities along with the return of income filed on 27-03-2006. Therefore, this Tribunal is of the considered opinion that in the absence of any material found during the course of search operation, the assessing officer cannot reopen the assessment completed on the basis of the return filed by the assessee on 27-03-2006 wherein the unsecured creditors of ₹ 12,42,000 was disclosed. Hence, the CIT(A) has rightly deleted the addition. - Decided against revenue. CROSS Objection - AR now submitted before us that the framing of assessment u/s 153C r.w.s 153A/143(3) of the Act is bad in law - Held that:- Since there was a document found in the case of search action which belongs to the assessee and on that basis, notice us 153A was issued so as to frame assessment u/s 153C of the Act and the conditions precedent for issuance of notice is fulfilled ; therefore, the AO has taken action u/s 153C of the Act, which is valid. Accordingly, the Cross Objection filed by the assessee is dismissed. - Decided against assessee.
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2015 (9) TMI 960
Validity of Re-opening the assessment - income has escaped assessment is the adjustment worked out by the TPO under section 92CA of the Act, as per which adjustment was to be made to the total income and consequently income chargeable to tax had escaped assessment - Held that:- As relying on Maximize Learning (P.) Ltd. vs. ACIT [2015 (2) TMI 662 - ITAT PUNE] when no assessment proceedings were pending in relation to the relevant assessment year, the Assessing Officer was precluded from making a reference to the TPO under section 92CA(1) of the Act for the purposes of computing the arm's length price in relation to the international transaction. Consequently, order passed by the TPO under section 92CA(3) proposing an adjustment of ₹ 1,25,17,115/- to the arm's length price of the international transaction was a nullity in law and void ab initio. In view of the above-said facts and circumstances, such an order passed by the TPO was not a valid material for the Assessing Officer to entertain a belief that certain income chargeable to tax had escaped assessment within the meaning of section 147 of the Act. Consequently, we hold that the reasons recorded for reopening the assessment under section 147 of the Act do not meet the requirements of the section and hence the Assessing Officer had no jurisdiction to issue notice under section 148 of the Act. Consequently, the subsequent order passed by the Assessing Officer under section 143(3) r.w.s. 147 and 144C of the Act is liable to be quashed. Accordingly, we hold so. - Decided in favour of assessee.
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2015 (9) TMI 959
Estimation of sales consideration - unaccounted business in the real estate activity - CIT(A) directed AO to adopt the profit as the profit from real estate business and other activities which remain to be accounted in the books of accounts and restrict the addition - Held that:- computation of the income of the assessee is based on substantial evidence provided by the assessee and explanation given for the same. The Assessing Officer in the remand report has no material to suggest the gross income from the sale of plot at ₹ 5,68,02,885/- and contrary to this, the Assessing Officer estimated the sale value of the property without any supportive material on his hand. In our opinion, the assessee’s version of gross receipt from the sale of property is based on evidence brought on record and further loan amount considered by the Assessing Officer as unexplained income to the tune of ₹ 44,50,000/- was considered by the Commissioner of Income Tax (Appeals) and there is no reason to doubt the same and it is to be considered as explained credit only. Further, it is noted that the Assessing Officer even at the assessment stage accepted the total receipt of the plot at ₹ 2,71,16,000/-. However, the Assessing Officer was not ready to compute the income on the basis of investment method instead he adopted the income on the estimation basis. In our opinion, when the material brought on record suggests the correct state of affairs of the assessee, it is not appropriate to estimate the income of the assessee on the basis of irrelevant consideration. Hence, the Assessing Officer cannot substitute his own view to the results show in the books of accounts. - Decided against revenue. Payment of scrap sales to Mrs. Vijayalakshmi - CIT(a) deleted the addition - Held that:- In this case, the Commissioner of Income Tax (Appeals) deleted the addition on the reason that it was paid out of unaccounted income generated and such income was confirmed by the Commissioner of Income Tax (Appeals) for the assessment year 2008-2009 at ₹ 87,24,139/-. Thus, the Commissioner of Income Tax (Appeals) gave a telescopic benefit out of the addition made in the earlier assessment year towards unexplained investment of ₹ 57,00,000/-. Being so, we do not find any infirmity in the order of the Commissioner of Income Tax (Appeals) on this issue and the ground of the Revenue is dismissed.- Decided against revenue. Sale proceeds of scrap from Sri Mahendran to build up source - CIT(Appeals) confirmed only ₹ 1,27,000/- as commission from scrap sales - Held that:- It is an admitted fact that the assessee had obtained power of attorney from Mrs. Vijayalakshmi and the assessee was thereby authorized to dispose the scrap on behalf of Mrs. Vijayalakshmi. The special power of attorney dated 21.05.2008 specifically stating that the assessee was agent to manage the share of Vijayalakshmi’s properties in M/s. Standard Steel Rolling Mills, a partnership firm. Consequent to the power of attorney the assessee sold scrap on 12.02.2009 at ₹ 67,25,000/-. This fact is not disputed by the Revenue authorities. The assessee is entitled to receive commission at ₹ 1,27,000/- from this transaction and the same was offered to tax. Considering these facts the Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing Officer to the tune of ₹ 67,25,000/-. The contention of the department is that cash flow statement shows ₹ 67,25,000/- as receipt. The assessee admitted to have received this money on behalf of Mrs. Vijayalakshmi, it should be shown as receipts and not to be shown as application of money in the cash flow statement. We do not find any infirmity in the order of the Commissioner of Income Tax (Appeals) - Decided against revenue.
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2015 (9) TMI 958
Adjustment of brought forward losses before allowing deduction u/s 10A - Held that:- This Tribunal is of the considered opinion that in the absence of adjustment of brought forward losses while computing deduction u/s 10A in the draft assessment order forwarded to the assessee and in the direction of the DRP, the Assessing Officer cannot make such adjustment in the final assessment order which was passed consequent to the direction of the DRP. Under sec. 144C(13) of the Act, the Assessing Officer has to pass an order in conformity with the direction of the DRP without giving any further opportunity to the assessee. In case there was no direction with regard to brought forward losses before deduction u/s 10A, the Assessing Officer cannot go beyond the direction of the DRP and make adjustment of brought forward losses before allowing deduction u/s 10A of the Act. This Tribunal is of the considered opinion that the Assessing Officer has exceeded his jurisdiction in passing the final assessment order in conformity with the direction of the DRP by making adjustment of brought forward losses before allowing deduction u/s 10A of the Act. Therefore, the adjustment made by the Assessing Officer with regard to brought forward losses before allowing deduction u/s 10A of the Act, is set aside and the Assessing Officer is directed to grant deduction u/s 10A before making any adjustment of brought forward losses. Determination of ALP in respect of M/s Allsec Technologies Ltd. - DRP directed the TPO to include M/s Allsec Technologies Ltd. as comparable if the same was rejected for the reason of incurring losses consecutively for two years - Held that:- It is mandatory for the DRP to consider the specific characteristics of service provided by the assessee and the comparable companies. It is also necessary to examine the functions performed by the assessee and the comparable companies. While comparing the functions performed by the assessee and other companies, it is necessary to take into account the assets employed or to be employed by the assessee and other comparable companies. At the very same time, the risk assumed by the assessee and other comparable companies also needs to be taken into consideration. Admittedly, M/s Accentia Technologies Ltd. had engaged itself in medical transcription, billing, collection and coding etc. The Revenue authorities found that M/s Accentia Technologies Ltd. also provides BPO service into Medical transcription. Since M/s Accentia Technologies Ltd. earned 90% of the total revenue from call centre and back office support service the DRP rejected the contention of the assessee. In the absence of any material to demonstrate that the profit of the comparable was abnormally high, the claim of the assessee was rejected. The DRP has also taken note of the fact that during financial year 2008-09 M/s Accentia Technologies Ltd. had earned more than 90% of its total revenue from call centre and back office support service. M/s Cosmic Global Ltd. - Held that:- The DRP has not examined the contractual terms of transaction as provided in Rule 10B(2)© of the Income-tax Rules. Unless and until the contractual terms of transaction was examined, we may not be able to say how the responsibility risk and benefits are divided between the respective parties to the transaction. No material is available on record with regard to contractual terms of transaction between the parties. Apart from that, the DRP has not examined the transaction between the parties with regard to geographical location, cost of the labour involved, the level of competition in the market etc. The DRP has not examined the asset employed by the assessee and other comparable cases. What was examined is only a working capital adjustment. The assets employed by the assessee need to be considered by the DRP in the light of the procedure provided in Rule 10B(2). Exclusion of two comparable companies namely, M/s Genesis International Co. Ltd and M/s Vishal Information Technologies Ltd (Coral Hub Ltd.) - Revenue appeal - Held that:- DRP directed the Assessing Officer to exclude M/s Vishal Information Technologies Ltd and M/s Genesis International Co. Ltd. Since the DRP has not examined the responsibilities, risk assumed, benefits shared by the respective parties in terms of contractual agreement, this Tribunal is of the considered opinion that the matter needs to be reexamined in respect of these two companies which are directed to be excluded by the DRP. Accordingly, the orders of the lower authorities are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall refer the matter once again to the DRP and the DRP shall examine the comparables in the light to Rule 10B(2) of the Income-tax Rules after giving a reasonable opportunity to the assessee. Both, the appeal of the assessee and the Revenue are allowed for statistical purposes.
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2015 (9) TMI 957
Transfer pricing adjustment - computation of the Arm’s Length Price - Management Service Fees (‘MSF’) received whether taxable in India as ‘Fees for Technical Services’ (‘FTS’) within the meaning of Article 12 of the India-Sweden read with the protocol thereto ? Held that:- Since the nature of services provided by the assessee company to its affiliates during A.Y. 2007-08 and 2008-09 are similar, therefore, following the decision of the Tribunal in assessee’s own case in the immediately preceding assessment year and in absence of any contrary material brought to our notice we hold that the Management Service Fees received by the assessee is not taxable in India on the principle of most favoured nation clause the payment received by the assessee company from its Indian subsidiaries cannot be brought to tax. We hold and direct accordingly. - Decided in favour of assessee.
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2015 (9) TMI 956
Double addition of the same amount in both the assessee and assessee’s wife - receipts estimated on hospital - Held that:- Department did not have any evidence of suppression of receipts. It may be altogether a different issue that assessee has not maintained any Books of Account nor the hospital has any records. The only in-patient diary was available without any fee received or amount spent. It was the contention that hospital not only undertakes the room charges and nursing charges but also consultation fee of the doctors which was passed on to respective persons. As far as assessee is concerned, he is only a specialized doctor for the hospital being run in his wife’s name and surgical fee is received by him. There is no evidence of how many patients are surgery patients and how many are non-surgery patients. Therefore, AO has taken up roughly at about 25% as non-surgery cases as the nursing home was mainly run under the guidance of assessee being a surgeon. Since neither party is able to furnish any evidence with reference to actual number of surgeries being done, the reasonable estimation of the AO cannot be faulted. Therefore, the bifurcation adopted by the AO in the respective years out of the total patients is however, upheld. On issue of estimation of fee received in surgery cases and non-surgery cases, it seems the amounts are on higher side. In one of the statements recorded from the patient there is a signed proforma for claim of reimbursement of medical expenditure in which surgery fee was shown at ₹ 3,500/-. Based on that, it is fairly reasonable to estimate that amount as fee received for surgery in that year. Based on the above, the receipts from surgery in AY. 2004-05 would be at ₹ 10 Lakhs (4,000 X 2,500), in AY. 2005-06 at ₹ 11,49,000/- (383 X 3,000) and in AY. 2006-07 at ₹ 6,93,000/-. The estimation submitted by assessee at our instance is based on the statement from which the surgery fee at ₹ 3,500/- could be inferred. Accepting the same, with reference to non-surgery fee also, the total receipts per year can be determined. - Decided partly in favour of assessee. Assessment u/s. 153C - Held that:- The only incriminating material which AO considered is with reference to inpatient register of the hospital, based on which receipts were estimated by the AO. Apart from that there was no incriminating material on any other issue. Since there is some incriminating material and as the AO was satisfied that in-patient register pertains to the hospital being run by assessee, we are of the opinion that proceedings U/s. 153C were validly initiated. Assessee is questioning that proceedings U/s. 153C were initiated without any satisfaction. Even though this ground was raised no evidence was placed by either party in order to examine this aspect. Therefore, the grounds are considered as not validly raised. However, while making the additions, the aspect that proceedings U/s. 153C were initiated and completed has been kept in mind, as any addition without any corresponding incriminating material may not be sustained. Estimation of receipts - Held that:- Considering the estimations adopted by the AO, clarification given by assessee and the evidences on record, we are of the opinion that assessee might be passing on the receipts to others. Substantial part was towards Doctors which was separately considered in Dr. S V Prasad hand. Considering the receipts accounted and ratio of expenditure claimed, we are of the opinion that estimation of net receipts can be considered by increasing the receipts by another 50% i.e., about ₹ 3,50,000/- in AY. 2004-05, ₹ 4,30,000/- in AY. 2005-06. In AY 2006-07 the in-patient register shows less number of patients. Assessee has shown substantial increase in receipts already. Keeping that in mind an amount of ₹ 2,00,000 can be estimated to be additional receipts in assessee case. The reasons given in the husband’s appeals in estimation will equally apply here. We are of the opinion that the above estimation will meet the ends of justice as there is no addition to wealth identified in search. AO is directed to modify the orders accordingly. Capital Gains - Held that:- This issue arises in AY. 2003-04. The facts are similar to the facts discussed in the case of Dr. S. Venkateswara Prasad above for AY. 2003-04. For the reasons stated therein, since assessee has got possession in the year relevant to AY. 2004-05, the capital gains cannot be brought to tax in AY. 2003-04, accordingly, the grounds are allowed. AO is directed to delete the amount made as an addition in this year. Agricultural Income - Held that:- There is lot of variation of the agricultural income depending on the agricultural holdings. Assessee’s husband Dr. S. Venkateswara Prasad also offered agricultural income and the same was accepted as such. Keeping that in mind and also the fact that no incriminating material was found and proceedings are u/s 153C, we are of the opinion that action of the AO cannot be upheld. He is directed to accept the agricultural income as offered by assessee.
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2015 (9) TMI 955
Penalty under section 271(1)(c) - disallowance of deduction under section 80IB and 80HHC - Held that:- Undisputedly the issue of deduction under section 80IB and 80HHC of the Act on export incentive was debatable. Various Benches of the Tribunal have taken a contrary view; rather there was a conflict in the view of different High Courts. The controversy in this regard was set at rest by the Hon'ble Apex Court in the case of Liberty India vs. CIT (2009 (8) TMI 63 - SUPREME COURT ). But before this judgment, the issue was highly debatable and therefore on a debatable issue penalty should not be levied under section 271(1)(c) of the Act, as the claim of deduction was made on the basis of a bonafide belief after relying upon certain judgments of the Tribunal/High Courts. In such circumstances, we are of the view that penalty under section 271(1)(c) of the Act cannot be levied. We have also carefully examined the order of the ld. CIT(A) and we find that the ld. CIT(A) has adjudicated the issue in the light of the judicial pronouncements of the Apex Court and various High Courts. Since we do not find any infirmity in the order of the ld. CIT(A), we confirm his order deleting the penalty. - Decided in favour of assessee.
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2015 (9) TMI 954
Transfer pricing adjustment - Held that:- If the assessee's claim for revised segmental results are found to be acceptable, there is every possibility that pricing of its international transactions would come within +/- 5% of the PLI worked out by the TPO himself. Then the issue regarding exclusion and/or inclusion of comparables may not arise at all. We therefore, set aside the orders of the authorities below and remit the issue back to the file of the AO/TPO for consideration afresh in accordance with law. Right of the assessee to challenge all other aspects of the assessment and conditions are kept open - Decided in favour of assessee for statistical purposes. Selection of comparable - Held that:- Eclerx Services Ltd. company cannot be taken as a comparable both for the reasons that it was having supernormal profit and it is engaged in providing KPO services, which is distinct from the nature of services provided by the assessee. Mold-Tek Technologies Ltd (seg) - In recent decision rendered in the case of Adobe Systems India Pvt. Ltd. (2011 (1) TMI 933 - ITAT NEW DELHI) exclusion of comparables showing supernormal profits as compared to other comparable is fully justified. We, therefore set aside the impugned order of the ld. CIT(A) on this issue and restore the matter to the file of the A.O. with a direction to decide the same afresh after taking into consideration the submissions made by the assessee before the learned CIT(A) Vishal Information Technologies Ltd - their annual accounts that the company outsourced a considerable portion of their business. As the assessee carried out entire operations by itself, in our considered opinion, rightly excluded. Re computation of the claim of deduction u/s. 10A - Held that:- Since as already directed that reallocation of HO expenditure in between various segments are to be done before comparing the results of the assessee with that of the comparables, while making the TP study, we prefer to keep this issue open. AO can consider the claim of the assessee that deduction u/s. 10A of the Act, has to be given to it after the TP adjustments, if any required for the ITES. - Additional ground allowed for statistical purposes.
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2015 (9) TMI 953
Treating the built up area of a property as stock-in-trade instead of part of the capital asset - Disallowance of benefit of indexation on capital gains - Held that:- The assessee had not sold any part of the property except the above mentioned two flats, that he had rented out his share of property to have constant rental income,that the income earned by the assessee was capital gains and not income from business or trade, that the assessee had parted his right to the extent of 50% of the land, that building could not have been constructed separately without its base on the land,that the land under the building could not be used separately, the cost of construction of the area would be equal to 50% of the market value of the land plus value of additional FSI if any,that he was entitled to proportionate claim of deduction for cost of construction, that assessee was also eligible for indexation as per the provisions of the Act. We find that in the case under consideration the assessee had sold two units and was having rental income from the remaining flats he was offereing the rental income under the head ‘house property income’. The assessee was not carrying out any business,that the built up area was not stock in trade and that he was entitled to the benefit of inflation index - Decided in favour of the assessee.
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2015 (9) TMI 952
Purchase and sale of shares - Short term capital gain v/s business income - Held that:- AO has accepted the capital gains from sale of shares held by the assessee for more than one year as long term capital gain which means that the AO has accepted that assessee is having some part of his portfolio as for investment and not for business which further gives support to the claim of assessee by showing income from share transactions in two heads i.e. ‘capital gains’ and ‘business income’. The intention of the assessee at the time of purchase of shares was very clear and the shares held by the assessee at the close of the Financial Year were shown under the investment account in the balance sheet under the head “shares in securities”. The AO has already accepted the claim of assessee of long term capital gains on sale of shares. The investment in shares has been shown at the cost price which otherwise if held for business would have been shown as “stock-intrade” to be valued at cost or market price whichever is lower. From the perusal of the balance sheet of the assessee it is quite clear that no specific funds were borrowed for the purchase of shares and the main source of investment in shares and securities was from the capital account of the assessee. Assessee has also maintained separate profit and loss account for F & O business and no link between investment account and F & O business has been brought on record by the AO and the investment in shares and securities have been brought forward from Financial Year wherein as on 31st March, 2005 the investment in shares and security ₹ 1,05,11,605/-and thereafter during the Financial Year 2005-06 the shares purchased and sold under the investment account have been treated as short-term and long term capital gains. However, looking to the transactions entered into by the assessee as shown under the head short term capital gains, have been properly analyzed by the CIT(A) and, therefore, in view of above, we do not find any error at the end of learned first appellate authority and, therefore, no interference is called for in the order of CIT(A). - Decided against revenue.
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2015 (9) TMI 951
Condonation of delay rejected - appeals have been filed late by almost 12 years and the reason is stated to be that the assessee was not keeping up good health, was in severe depression due to various issues and the lenders were asking for money. - Whether CIT (Appeals)-2, Chandigarh was right in holding that the appeals filed by the assessee were barred my limitation? - Held that:- In the instant case, the assessee has miserably failed to prove the sufficient cause to the effect that because of some event or circumstance arising before limitation expired, it was not possible to file appeals before the learned CIT (Appeals) within time. It is relevant to observe here that the assessee was retired from the government service after attaining the age of superannuation. He has not taken retirement on medical grounds. He has retired as Superintendent Grade-I. There is no evidence on record to show that the assessee was prevented by sufficient cause from filing the appeals within time. Section 249(3) of the Act provides that the learned CIT (Appeals) may, on good and sufficient cause for the delay being shown, admit an appeal after the expiry of the period of limitation. Thus, the appellant/assessee has to show that he had "sufficient cause" for not preferring the appeal within the period of limitation. It is well settled law that in essence, the phrase "sufficient cause" is not a question of principle, but is a question of fact. Hence, whether to condone the delay, or not depends upon the fact and circumstances of each case as "sufficient cause" for condonation of delay depends only on the fact placed by the applicant before the authority concerned. Thus, it is clear that it is required to be taken in the facts of individual case whether the said circumstances constitute a "sufficient cause" for condoning the delay. This in the present case the delay in filing the appeals before the learned CIT (Appeals) can not be condoned. - Decided against assessee.
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2015 (9) TMI 950
Condonation of delay - non admission of appeal by the CIT(A) on the ground that there was delay in filing of first appeal by the assessee before the CIT(A) by 72 days - Held that:- In the matter of condonation of delay, the primary object which is to be seen is that, it should not destroy the rights of the party for a legal remedy. The word “sufficient cause” has to be construed liberally because primary function of the appellate authority or court is to adjudicate the dispute between the parties and to advance substantial justice. The time limit fixed for filing the appeals is to see where there is dilatory tactics by the parties or to seek their remedy promptly. Considering the reasons set out for condonation of delay before the CIT(A) that, the company commenced its operations in A.Y. 2008-09 itself and assessee’s operations were located in and around Lucknow and, therefore, it was difficult to organize the logistics in the initial period. The Senior Manager, Finance, who was responsible and entrusted with the Income Tax matters had quit the job on 15.12.2010, i.e. immediately after the passing of the assessment order. The new incumbent was not aware of such a statutory time limit and, therefore, immediately when the management in Bombay came to know about such a delay, took immediate steps for filing the appeal, CIT(A) was not justified in dismissing the assessee’s appeal as not admitted on the ground that it is barred by limitation. In the facts ofthe assessee’s case, we condone the delay of 72 days in filing of appeal before the CIT(A) and direct the Ld. CIT(A) to decide the issue on merits. Accordingly, the appeal is restored back to the file of the CIT(A) to adjudicate the issue on merits and in accordance with law after giving due and effective opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes.
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2015 (9) TMI 949
Disallowance of depreciation of goodwill - Held that:- As find that in the case of B. Raveendran Pillai v. CIT [2010 (9) TMI 434 - Kerala High Court] the hon'ble High Court has held that when the goodwill paid was for ensuring retention and continued business, it was for acquiring a business and commercial rights and was comparable with trade mark, franchise, copyright, etc., rendered in the first part of clause 2 of section 32(1) and so much so, goodwill was covered by the above provision of the Act entitling the assessee for depreciation. We also find that the hon'ble apex court in the case of CIT v. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] has held that goodwill is an asset under Explanation 3(b) to section 32(1). Before us, the Revenue has not pointed out any contrary binding decision in its support. In view of these facts and relying on the aforesaid decisions we are of the view that the assessee is eligible for depreciation. - Decided in favour of assessee. Addition on account of lump sum disallowance out of milgine and factory expenses as per para 5 of the appellate order - Held that:- While confirming the disallowance, the learned Commissioner of Income-tax (Appeals) has noted that no submissions were made by the assessee in respect of the aforesaid ground. Before us also apart from the general statement, no details have been filed by the assessee in support of its submissions. In view of the aforesaid facts, we find no reason to interfere with the order of the learned Commissioner of Income-tax (Appeals) and thus this ground of the assessee is dismissed. - Decided against assessee.
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2015 (9) TMI 948
Transfer pricing adjustment - computation of the arm’s length price of the International Transaction in respect of a provision of Investment Advisory Services - selection of comparables - Held that:- As respectfully following the order of the Tribunal in assessee’s own case in the immediately preceding assessment year 2009-2010, we direct the AO to exclude M/s Motilal Oswal Investment Advisors Pvt Ltd from the list of comparables and to recompute the adjustment to be made u/s.92C(1) of the I. T. Act. Assessee is engaged in business of providing investment research and advisory services to Bain Mauritius, on a non-exclusive and non-binding basis, in connection with potential investment opportunities in India. IDFC rendered portfolio management services for hybrid infrastructure portfolio, agriculture opportunities portfolio and farm fork portfolio. IDFC is registered as portfolio managed with SEBI. Thus, IDFC is functionally different from the assessee which is engaged merely in non-binding investment advisory support services. since IDFC is functionally different, we direct the AO to exclude the IDFC from the list of comparables for computing arms’ length adjustment. In view of the above, we direct the AO to recompute the arms length adjustment after excluding Motilal Oswal Investment Advisory Pvt. Ltd. and IDFC from the list of comparables. - Decided in favour of assessee for statistical purposes.
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2015 (9) TMI 947
Denial of deduction u/s.80E - AO denied the deduction on the ground that the same is allowably only in case of Indian Educational Institutes which are authorised in India and naturally not for Abroad or Foreign education institutes - Held that:- We find merit in the submission of assessee that there is no such stipulation u/s.80E of the I.T. Act that the education should be in India only. Had there been such an intention by the legislature it would have been definitely and specifically mentioned as had been mentioned in section 11 of the I.T. Act which provides that any income or property held for charitable purposes is exempt from tax u/s.11(1)(a) only to the extent it is applied in India. Therefore, if the legislature wanted education in India itself for availing of the deduction, the legislature would have specifically stated so in the section itself. Since the son of the assessee is pursuing his MS Electrical Engineering in Washington, United States of America after completing his Secondary Education examination or its equivalent and since the interest expenditure is not in dispute, therefore, we do not find any reason as to why the assessee shall not get the benefit of deduction u/s.80E of the I.T. Act. In this view of the matter, we set aside the order of the CIT(A) and direct the Assessing Officer to allow the deduction u/s.80E of the I.T. Act. - Decided in favour of assessee.
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2015 (9) TMI 946
Disallowance invoking the provision of Section 40(a)(ia) - CIT(A) treating the expenditure incurred towards debit notes raised by with M/s. S & V Industries Inc., USA as unexplained and not genuine - Bad debts u/s 36(1)(vii) - Held that:- On perusal of the facts it is crystal clear that M/s. S & V Industries Inc., USA had raised the debit notes against the assessee for whatever reasons it may be and it has become extremely difficult for the assessee to recover its entire sales proceeds. In order to keep good business relationships, the assessee had conceded to the debits notes raised by M/s. S & V Industries Inc., USA and preferred to accept a lesser amount than what was invoiced. In these circumstances, the debit notes raised by the assessee will either relate to the expenses reimbursable by the assessee to its client or the debt that has become bad which the assessee has written off in its books of accounts. From these facts, it is crystal clear that the assessee is forced to incur the expenditure or accept the same as bad debt. Apparently the assessee has also debited the expenditure account and credited M/s. S & V Industries Inc.,USA account, thereby satisfying the conditions laid by the Hon’ble Apex Court in the case TRF LTd. Vs. Ld. CIT (2010 (2) TMI 211 - SUPREME COURT) as pointed out by the Ld. A.R. Therefore, we do not have any hesitation to accept the contention of the Ld. A.R and accordingly we hereby delete the addition of ₹ 44,83,941/- made by the Ld. Assessing Officer which was further sustained by the Ld. CIT (A). - Decided in favour of assessee.
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Customs
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2015 (9) TMI 976
Denial of Duty drawback claim - Interest u/s 75A - Held that:- where any drawback payable to the claimant is not paid within a period of one month from the date of filing a claim for payment of such drawback interest at the rate fixed under Section 27-A from the date after the expiry of the said period of one month is payable to the petitioner. Therefore, when it is made clear that the petitioner is entitled to claim interest, as per Section 75-A and further notification with regard to quantum of interest and also as per Notification Customs No.18/2011-Customs (N.T), 1st March 2011, 18% interest per annum having already fixed by the Central Government is hereby fixed. - respondent is hereby directed to pay the interest at the rate of 18% on the sanctioned and paid duty drawback claim amount entitled by the petitioner for the period from 18.02.2010 to 24.09.2010, within a period of four weeks - Decided in favour of assessee.
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2015 (9) TMI 975
Confiscation of goods - Imposition of penalty - Violation of EXIM Policy - Held that:- There is no bar on the adjudicating authority, in a de-novo proceedings, to determine the quantum of fine or penalty. The fine and penalty imposed has been set aside and the matter is live for re- adjudication. Hence earlier order imposing fine or penalty does not have any relevance. The adjudicating authority, at its discretion, may impose appropriate fine or penalty. It does not matter whether the proceedings have been initiated afresh or heard by way of de-novo proceedings on the orders of the Tribunal. Question of challenging enhancement of penalty does not arise in a case of this nature, where the adjudication order itself has been set aside in its entirety and the matter remanded back to the original authority for re-adjudication, namely de-novo enquiry. - Decided against assessee.
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2015 (9) TMI 974
Seizure of goods - After order of release of goods instead of refund the goods or paying the value in full revenue refunded only the partial amount - Held that:- In order to give quietus to the issue, without going into the merits of the claim made by the petitioner, the respondents are directed to consider the representation of the petitioner dated 19.03.2004 followed by reminders dated 07.04.2004 and 21.04.2004 issued through his lawyer and pass appropriate orders on the same on merits and in accordance with law within a period four weeks - Appeal disposed of.
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2015 (9) TMI 973
Duty free import authorisation - Transferable DFIA - Respondent filed Bill of Entry for clearance of “Phosphoric Acid” 85% technical grade and claimed duty free clearance against DFIA in terms of Notification No 98/2009-cus – By impugned Order, Commissioner (Appeals) allowed claim of Respondent – Held that:- DFIA was originally issued by exporters and after fulfilment of export obligation, same was transferred to Respondent – Notification No 90 provides declaration of actually used quantify of Inputs in export goods – Adjudicating Authority directed exporter to intimate actual quantity of phosphoric acid used in export of goods, who did not provide information to department –As exporter fulfilled export obligation, licence were transferred to respondent/importer as endorsed by Licensing Authority – Exporter cannot be compelled to furnish any information in respect of said DFIA, which was already transferred to respondent – In present case, Phosphoric Acid had specific entry mentioned in DIFA Licence – Once license was endorsed for transferability by licensing authority, nexus between import goods use in export goods, was not required to be established afresh by transferee – Decided against Revenue.
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2015 (9) TMI 972
Improper importation of goods – Confiscation of goods and Imposition of penalties – Appellants made import of second hand printing machinery under fictitious names as actual user and same were sold in violation of EXIM Policy in open market – Imported goods were confiscated and personal penalties were imposed under under Section 112(a) of Customs Act for contravention of FTP Policy and Customs Act – Held that:- Commissioner in first imposed penalty on individual persons – Adjudicating authority has dealt issue in detail and modus operandi of floating fictitious firms and imported second hand machinery violating actual user condition which was investigated by D.R.I. – Therefore court hold that appellants are liable for penalty under Section 112 (a) – Appellants contravened provisions of Customs Act and EXIM Policy by fraud, collusion, abetting thereby imported goods became liable for confiscation under Section 110 of Customs Act which is clearly established in present case – Accordingly, appellants are liable for penalty however penalties imposed on respective importer-appellants are reduced – Impugned order modified – Appeals partly allowed – Decided partly in favour of Appellants.
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2015 (9) TMI 971
Confiscation of improperly imported goods - Chinese mobile phones – Appeal was filed against order of Commissioner(A) upholding order confiscating 3,437 number Chinese mobile phones under Section 111(d) & (i) of Customs Act, 1962 and also imposed penalty upon appellant – Held that:- All persons whose names were found on boxes seized have either disowned seized goods or were not found –Disposal of goods through E-auction by department indicates that restriction imposed was either curable or was not essential and could also have been complied by appellant in case redemption option was allowed – As impugned goods have already been disposed off by department, therefore, sale proceeds with respect to 388 pcs. are ordered to be released to appellant after imposing and adjusting suitable redemption fine to be calculated & imposed by Adjudicating Authority after affording opportunity of personal hearing to appellant – Sale proceeds pertaining to remaining mobile phones is also ordered to be released to appellant – Further Customs duty cannot be demanded from appellant as it is case of town seizure and date/time of inspection is not known to determine rate of duty, exchange rate and value of goods – Appellant being transporter cannot be expected to know all and no such statement exists that he was aware of smuggled nature of seized goods – In view of observations, penalty imposed is set aside – Decided in favour of Assesse.
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Service Tax
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2015 (9) TMI 993
Refund of service tax - Business Auxiliary Services - Unjust enrichment - Held that:- Appellant has not charged any service tax separately but when the revenue authorities directed them to pay service tax under the category of ‘Business Auxiliary Service', it is seen that the appellant had discharged service tax liability considering the amount recovered from their customers as cum-tax amount and worked out the service tax liability. - There being no dispute as to the fact that the service tax liability has been discharged based upon working back from the amount which has been recovered from their customers, question of unjust enrichment arises and the appellant is not able to dislodge the presumptions and that they have recovered the amount of service tax from their customers. On this factual matrix, the appeal fails on the ground of unjust enrichment. - Decided against assessee.
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2015 (9) TMI 992
Extension of stay order - Held that:- The power to grant stay has not been expressly provided in the Statute. However, power to grant stay is an inherent power as has been held in the case of Shri Ram Narayan Dyg. & Ptg. Mills Vs. CCE, Surat-I [2009 (11) TMI 784 - CESTAT AHMEDABAD]. This inherent power to grant stay has been expressly recognised even by the Hon'ble Supreme Court as is evident from para 6 of the judgement in the case of CCE, Chandigarh Vs. Baldev Raj Ram Murthi [2005 (4) TMI 377 - CESTAT, NEW DELHI]. - With the abolition of Section 35C(2A) ibid with effect from 06.08.2014, the power of the Tribunal with regard to grant of stay in no way got attenuated. Even during the existence of sub-section 35C(2A) of the Act (i.e. prior to 06.08.2014), the Tribunal in the case of Halidram India Pvt. Ltd. Vs. CCE, Delhi [2014 (10) TMI 724 - CESTAT NEW DELHI (LB)] held that the Tribunal had power to extend the stay beyond the period of 365 days in cases where appellant was ready and willing to pursue the appeal, but the Tribunal owing to the older pendency was unable to take up the appeal. - delay in taking up these appeals is not attributable to the appellants - Stay extended.
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2015 (9) TMI 991
Demand of service tax - Interior decorator service - appellant undertook various activities like carpentry work involving different types of furniture items, modular partitions, fixation of false ceiling, painting of walls and ceilings etc. - Held that:- Activities which are undertaken by the appellant are not falling under the category of "interior decorator services". - impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.
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2015 (9) TMI 990
Classification of service - Maintenance, management and repair service or Management Consultancy Service - Held that:- The description of the services in the show cause notice itself would show that the appellants are actually managing services in the first category and in the second category the consultancy and integration is entirely relatable to hardware and software in information technology. The show cause notice itself states that under managed service, HP takes over the entire responsibility of managing, maintaining, improving upon the procurement and replacement of IT components so as to keep the IT environment functioning properly keeping in account the business requirement of the client. Appellants are only managing the services and the consultation is only in relation to IT and therefore, in our opinion, the activities are not covered by “Management Consultancy Service” at all. Since on the basis of facts and application of law to the facts, we find that the services provided cannot be considered as “Management Consultancy Service” - Decided in favour of assessee.
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2015 (9) TMI 989
Business auxiliary service - management, maintenance or repair service - Penalty u/s 76, 77 & 78 - Held that:- Merely because somebody evaded sales-tax, it would not mean that the transaction would not be a sale, even if, it satisfied the definition of sale. We find from the adjudication order that even in respect of the 5 contracts, which have been specifically mentioned therein the adjudicating authority has prima facie not adverted to and dealt with the contentions of the appellants that they did not constitute ECIS as is evident, for example from para 88 of the impugned order. It is seen that the benefit of Notification No. 12/2003-S.T. has also not been extended and prima facie the reasons, therefor, have also not been clearly brought out. - As regards the demand under Intellectual Property Rights Services, it is seen that the right to fabricate products was transferred on November 1, 2002 when the said service was not liable to tax. Merely because the payment for that transfer continued even during the period when that services became liable to tax does not negate the fact that the taxable event was the transfer of rights which took place during the time when the service was non-taxable. Regarding the impugned demand relating to management, maintenance or repair service the appellants have prima facie made out a good case that as the management, maintenance or repair was performed outside India by the persons also located outside India and on the goods located outside India, prima facie, there is no import of service. - appellants have made out a good case for waiver of pre-deposit and so waive the requirement of pre-deposit and stay recovery of the adjudicated liabilities during pendency of the appeal - Stay granted.
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2015 (9) TMI 988
Chargeability to Service Tax - Maintainability of appeal - Held that:- From the Appeal memo itself it is obvious that the Appeal is not directed against the order passed by the Tribunal which is in favour of the Assessee, but certain observations and findings therein. We have not been shown anything in law which would enable us to entertain the Appeal challenging the order which is ultimately in favour of the Appellant/Assessee. We are of the opinion that the final order in this case grants the relief to the Assessee and as such it is in his favour. In these circumstances this Appeal is clearly not maintainable - Decided in favour of assessee.
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2015 (9) TMI 987
Waiver of pre deposit - Held that:- Tribunal has passed a discretionary order waiving deposit of the penalty amount asking to deposit principal amount and interest component. No case of financial hardship was made out before the Tribunal. But before us, it was casually mentioned that there is financial hardship without support of any document. We therefore, do not find any reason to admit the appeal. - Decided in favour of assessee.
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2015 (9) TMI 986
Waiver of pre deposit - Penalty u/s 76 - Held that:- Except for the bald and vague statement found in the affidavit stating that any direction of the Tribunal towards pre-deposit would cause severe financial hardship and the petitioner also faces shortage of working capital, no material was placed before the Tribunal in support of such contention. In such circumstances, we find no error in the discretionary order passed by the Tribunal. Accordingly, we hold that the assessee has not made out a case for interference. - Decided against assessee.
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2015 (9) TMI 985
Penalty u/s 76 & 78 - Benefit of Section 80 - waiver of penalty u/s 78 was allowed but waiver of penalty u/s 76 was refused by the tribunal - Held that:- Section 80 opens with a non-obstante clause saying that notwithstanding anything contained in Section 76, Section 77 or Section 78, no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure. - words “or Section 78” were introduced into Section 80 by the Finance Act of 2004, to exclude Section 79 from the net of Section 80. Therefore, once the assessee proves that there was reasonable cause for the failure. Section 80 starts to operate, insulating the imposition of any other penalties under Section 76, Section 77 or Section 78 of the Act. Insofar as the appellant is concerned, this is inexcusably applicable in law - appeal is eligible to succeed. - Decided in favour of assessee.
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Central Excise
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2015 (9) TMI 984
Denial of CENVAT Credit - Notification No. 214/86-CE dated 25/3/1986 - Job worker - Held that:- Section2 (f) (i) even activity of completion of manufacture product is considered as manufacturer. Job workers admittedly engaged in the processing of component/parts which activity undoubtedly a manufacturing activity, accordingly the job worker is also a manufacturer. From Rule 2(n) also, it is clear that the manufacture takes place in the course of job work also therefore in the present case the job worker activity is manufacturing activity and the job work is also constitutes as manufacture. In view of this legal position the job worker being manufacturer, Cenvat credit was wrongly denied merely on the contention that the job worker is not the manufacturer. - Cenvat credit in respect of input services availed by the appellant during the course of job work manufacture in terms of Notification No. 214/86-CE is correctly admissible to them. Therefore both the lower authorities have gravely erred in disallowing the credit - impugned orders are set aside - Decided in favour of assessee.
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2015 (9) TMI 983
Reversal of CENVAT Credit - Re-classification of goods - Penalty u/s 11AC - Held that:- It is not under dispute that the polymer imported are classifiable under Chapter 39 and the duty is being paid accordingly. Further, the process being undertaken in the factory is only repacking of the goods in smaller container and putting labels. Thus there is no change in the characteristic of the imported goods or the use of the imported goods and thus the process will not amount to manufacture. One has to consider that the goods have been cleared as such. The importer is required to reverse/repay the Cenvat credit taken at the time of importation. However, this was not done. It is also not in dispute in the present case that the Cenvat Credit taken at the time of importation was much higher than the duty paid on the repacked goods and cleared as chemical additives for lubricating oil. Nobody can make out that the credit on inputs taken are falling under Chapter 39. Further, while clearing the goods no description is mentioned and the classification of the goods mentioned is 38. It is not possible from the above description for any human being that the inputs have been cleared as such and the classification of the input have been changed. We do not see any reason for the appellant to change the classification. To our mind, the classification has been changed only to ensure that they are in a position to take higher credit and pay lower duty. In our view, there is clear cut suppression of fact and wilful misstatement and in view of the fact and circumstances, extended period of limitation is correctly invoked. Classification of the product has been changed without any manufacturing process. This fact was in their knowledge and therefore they were aware that the goods are liable to confiscation and they were also concerned with the said goods and in view of the said position, the penalty is imposable on them - However, penalty is reduced - Decided partly in favour of assessee.
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2015 (9) TMI 982
Denial of exemption claim - Classification of salted potato chips - whether the fried and salted potato wafers packaged in retail packing for sale and which are sold under the brand name 'Lays" are classifiable under sub-heading No. 2005 20 00 as "potatoes prepared or preserved otherwise than by vinegar or acetic acid, not frozen, other than products of Heading 2006" or the same are classifiable under Heading No. 2006 90 99 as "food preparations not elsewhere specified or included" - Held that:- there is no difference between Chapter 20 of the Central Excise Tariff prior to 1-1-2005 and Chapter 20 of the Central Excise Tariff w.e.f. 1-1-2005, except that the 8-digit tariff is more detailed and specifically covers a large number of commodities in the General Group of the "preparations of vegetable, fruits, nuts or other parts of the plants". In our view, therefore, Board's Circular dated 6-2-88 clarifying that the potato slices fried in edible oil, salted and packed in printed plastic pouches (or other unit containers) are classifiable under Chapter 20 is applicable. Ratio of judgment [2011 (10) TMI 564 - UTTARAKHAND HIGH COURT] is squarely applicable to the facts of this case and hence, in view of this judgment also, the goods in question, would be covered under Heading No. 2005 20 00 of Chapter 20 and accordingly, the same would be exempted from duty under Notification No. 3/2006-C.E. (Sl. No. 22). - circular of the Board has been totally ignored by the Commissioner. In any case, when Sl. No. 29 of the Notification No. 3/06-C.E. covers, "Sweetmeats (known as 'misthans' or 'mithai' or by any other name) namkeen, bhujia, mixture, chabena and similar edible preparation in ready for consumption form" for which nil rate of duty is prescribed, just because such mithais, namkeens, etc., though in ready to eat form are in retail packs, the same would not cease to be covered by the Sl. No. 29 of the Notification. - as per the CBEC Circular No. 841/18/2006-CX dated 06/12/2006 although they made classify under Central Tariff Heading 2106 90 99 the item in question is not dutiable, therefore, we hold that impugned order is not sustainable in the eyes of law consequently impugned order is set aside - Decided in favour of assessee.
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2015 (9) TMI 981
Denial of refund claim - Determination of assessable value - Inclusion of discounts given - Unjust enrichment - Held that:- discount policy of the assessee is known prior to the clearance as the rate of discount is mentioned in the assessee s agreements with their dealers and also from the circulars, it is clear that the deduction of quantity discount cannot be disallowed. - there is nothing in the agreements from which it can be inferred that the quantity discounts being given by the assessee to their dealers are a compensation for the expenses incurred by the dealers for maintaining the showrooms in certain manner and providing certain minimum facilities in the showrooms. A manufacturer can always insist on maintenance of certain minimum facilities in the showrooms by its dealers which would result in more sales and which in turn will benefit both, the assessee as well as the dealer. Discounts have been passed on by the issue of credit notes. Once the credit notes are issued by the assessees to his dealers, the invoice price mentioned in the invoices issued earlier would stand reduced to that extent and in such a situation, the burden of proof would shift to the Department and it would be for the Department to establish that the credit notes issued are bogus. In the present case, there is no such evidence produced by the Department. In view of this, following the judgement of the Hon'ble Rajasthan High Court in the case of A.K. Spintex Ltd. (2008 (11) TMI 89 - RAJASTHAN HIGH COURT), and the judgement of the Karnataka High Court in the case of Sudhir Papers (2011 (3) TMI 1443 - KARNATAKA HIGH COURT), we hold that there is no unjust enrichment and that the incidence of higher duty paid by the assessee and whose refund is being claimed has been borne by them and has not been passed on by them to their customers. - Decided against Revenue.
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2015 (9) TMI 980
Disallowance of CENVAT Credit - duty paying document - Demand of interest - Held that:- Invoices, on which credit was disputed was issued by manufacturer and the appellant’s name is clearly appearing as consignee therefore the invoices in question squarely covered by clause (a) of sub rule 1 of Rule 9. I do not agree with the Revenue’s contention that in case of purchase of input from dealer invoices should be issued by first stage dealer or second stage dealer. In my view only in case where the input is purchased directly from a dealer on his invoices and the manufacturer invoices is not indicated the name of the recipient as consignee the first stage dealer or second stage dealer as case may be is registered with Central Excise should issue invoices as provided under Rule 11 of Central Excise Rules, 2002. However, in the present case invoices on which credit was taken issued by manufacturer and appellant s name is appearing as consignee, in such cases credit is admissible on these invoices and there is no need of separate invoices to be issued by the registered dealer for taking credit. For taking Cenvat Credit on input it is not mandatory that payment towards purchase of the input has to be made. There are number of transactions in the trade such as procurement input from group company, sister concern on payment of duty procurement of input for job work etc. in such transaction there is no transaction of any payments towards supply of inputs, despite this position Cenvat credit is admissible and can not be disputed so long input is duty paid, received in the factory and used in the manufacture. In view of my above discussion, I am of the considered view that appellant have correctly and legally availed the Cenvat Credit on the invoices wherein appellant name is appearing as consignee and name of the M/s. Somaiya Steel Corporation and M/s. Hansraj Karsanraj & Co., appearing as buyer therefore I set aside the impugned order - Decided in favour of assessee.
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2015 (9) TMI 979
Demand of differential duty - shortage of stock - 100% Export Oriented Unit - Clandestine removal of goods - Held that:- Whatever may be the justification to levy Excise duty by invoking power under Section 3 of the Act, vis-ŕ-vis the manufacture, a totally different legal regime exists, when the agency sought to be proceeded is a 100% EOU. What is payable by that unit would be Customs duty. The parameters for levy of Customs duty, on the one hand, and the Excise duty, on the other, are totally different. So much so, the authorities also are not the same. The points, at which the duty leviable is the Excise duty, or the Customs duty, are substantially different. - Tribunal recorded a clear finding to the effect that there was serious defect in the very process of verification of the stock. It was mentioned that the gross area of the slabs was taken into account, though what becomes chargeable is a net area. The substantial quantity goes towards wastage and that was not taken into account. - Though the adjudication undertaken by the High Court happens to be the first by a judicial agency, the one undertaken by the Tribunal cannot be interfered just like that. It is only when substantial question of law raises that an occasion would arise to require the Tribunal to refer the questions to the High Court. - No question of law arises - Decided against Revenue.
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2015 (9) TMI 978
Waiver of pre deposit - ex-parte order - Held that:- Petitioner has not remained present and participated in the proceedings before the Tribunal. Time and again, the Tribunal was compelled to adjourn the proceeding at the request of the petitioner. Finally, when there was no participation, the Tribunal decided such application ex parte. Even after remand from this Court, the petitioner did not appear before the Tribunal. The petitioner again approached the Tribunal on the ground that there was no oral submissions made on behalf of the petitioner. The Tribunal while not accepting such ground, still further reduced requirement of pre-deposit of ₹ 60 lacs. In view of conduct of the petitioner, no further indulgence would be permissible. We do not see any reason why we should interfere with the order of the Tribunal in exercise of its discretionary jurisdiction in facts of this case. - Decided against assessee.
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2015 (9) TMI 977
SSI Exemption - assignment to use the brand name - whether the respondent was entitled to the benefit under the notification, dated 28-2-1993 - Held that:- as long as an assessee has manufactured the goods, the mere fact that he used the trade or brand name of another individual does not make any difference. This may take in its fold the case of assignment of the trade mark. Even otherwise what becomes essential is the activity of manufacture of the product, than mere usage of brand name. - respondent clearly pleaded that it has the proper assignment to use the brand name. The fact that it has got the assignment from the UK company was made clear in the returns of classification. The authority, who processed them was satisfied about this. There must be clinching evidence for reopening the case under Section 11A of the Act. The mere fact that a different view is possible on the same set of facts cannot be a ground to exercise power under that provision. There is no dispute that it has manufactured the product by itself. The Tribunal followed the judgment of the Supreme Court [2003 (8) TMI 49 - SUPREME COURT OF INDIA] and we do not find any basis to interfere with the same. - Decided against Revenue.
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