TMI Tax Updates - e-Newsletter
September 4, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. No reversal of ITC on closing stock of iron and steel goods is warranted under rule 21(8) of Punjab VAT Rules

   By: AMIT BAJAJ ADVOCATE

2. Intermediary for Supply of Goods

   By: Smitesh Desai

3. SERVICE TAX – RELEVANCE OF GENERAL CLAUSES ACT VIS. A. VIS BRITISH CALENDER

   By: Rishi Chanan

News

1. Finance Minister Approves Setting-up of A Committee to Examine un-Claimed Amount Remained in PPF, Post Office and Savings Schemes and Recommend how this Amount can be Used to Protect and Further the Financial Interest of the Senior Citizens.

2. RBI cancels Licence of The Merchant’s Co-operative Bank Ltd., Dist. Dhule, Maharashtra

3. RBI Reference Rate for US $

Circulars / Instructions / Orders

Service Tax

1. LETTER D.O.F. NO.334/15/2014-TRU - dated 25-8-2014

Tax base broaden by extending the levy of service tax to all forms of advertising except print media.

Highlights / Catch Notes

Income Tax

• Interest from Employees and Equipment Hire Charges Ineligible for Special Deduction u/s 80IA of Income Tax Act.

  Case-Laws - AT : Deduction u/s 80IA - eligible profit - Interest received from employees - the equipment hire charges would not be entitled to special deduction u/s 80I of the Act - AT
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• High Court Rules TDS Not Required on Export Commission Payments; Section 9 & Section 195 Not Applicable.

  Case-Laws - HC : TDS not deducted on export commission paid -Section 9 of the Act is not applicable to the case, Section 195 of the Act does not come into play - HC
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• Deemed Dividends: Payments Not Loans/Advances u/s 2(22)(e) Are Not Erroneous Based on Case Law.

  Case-Laws - HC : Deemed dividend u/s 2(22)(e) - if the payment cannot be termed as loan or advance to the shareholder, then, even such a view cannot be termed in the given facts and circumstances and without anything more as perverse or vitiated by error of law apparent on the face of the record - HC
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• Short Land Holding Doesn't Mean Taxable Profit: Consider Use and Other Factors for Agricultural Land Tax Classification.

  Case-Laws - AT : Agriculture land or not - Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade or capital gain - AT
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• LTCG on Timber Sales Needs Solid Basis, Not Just a Government Officer's Letter for Cost Assessment.

  Case-Laws - AT : LTCG on sale of wood – Sale of timber out of shade trees - Solely on the basis of some letter written by the Officer of the Government Department, the cost of acquisition of the assets cannot be assessed. - AT
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• Gujarat Buffer Agency Denied Section 80IA(4) Tax Deduction for Not Qualifying as Infrastructure Developer.

  Case-Laws - AT : Deduction u/s 80IA(4) - Buffer agency granting work contract of local bodies on behalf of the Government of Gujarat and not as a developer of infrastructure facility - no deduction - AT
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• Trust's Activities Deemed Broadly Charitable, Not Subject to Section 115BBC Stringency of Income Tax Act.

  Case-Laws - AT : Nature of the activity carried on by Trust - Religious or Charitable - merely because the assessee is not limiting itself to disbursing food medicine, providing shelter etc and is also giving lectures on spirituality was not the kind of assessee contemplated under section 115BBC who was to be visited by the rigours of the said section. - AT
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Service Tax

• Applicant Wins Waiver of Pre-Deposit in Service Tax Case on Design Services; Tax Demand on Tools Justified.

  Case-Laws - AT : Waiver of pre-deposit of tax - Design Service - applicant has made out a case for waiver - Prima facie, demand of tax on design and development of tools would be justified - AT
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• Court Grants Waiver of Pre-Deposit for Applicant in Revenue-Sharing Property Rental Case.

  Case-Laws - AT : Waiver of pre deposit - Renting of immovable property service - revenue sharing basis agreement - e applicant has made out a case for waiver. - AT
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Central Excise

• CENVAT Credit Approved for Supporting Structures Acquired with Plant Under Central Excise Regulations.

  Case-Laws - AT : Denial of CENVAT Credit - Supporting structure - as these structures were purchased as part of the plant therefore they are entitled for CENVAT credit - AT
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• Appellant Entitled to CENVAT Credit on Capital Goods via Endorsed Invoices in Lease Agreement; No Factual Dispute Found.

  Case-Laws - AT : Availability of CENVAT credit - endorsed invoices - capital goods - lease agreement - in the absence of any dispute to the factual aspect, the appellant is entitled to the CENVAT credit - AT
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• Assessees can choose the most beneficial exemption notification when multiple options are available for a product.

  Case-Laws - AT : When there are two exemption notifications available for a product then it is upto the assessee to choose the exemption notification more beneficial to him. - AT
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VAT

• Petitioner Barred from Contesting Tax Recovery After Benefiting from Exemption; Condition Challenge Invalid per Court Decision.

  Case-Laws - HC : Recovery of tax from successor company - The petitioner is estopped from raising such contention at this stage, for the reason that having availed the exemption the petitioner cannot turn around and contend that at this belated stage that the said condition is a nullity being violative of the provisions of the Act or is opposed to public policy - HC
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• Court Upholds Constitutionality of Entertainment Tax on DTH Services; Encourages Interpretations Supporting Statute Validity.

  Case-Laws - HC : Levy of entertainment tax on entertainment content in DTH services – The court must make every effort to uphold the constitutional validity of a statute, even if that requires giving the statutory provision a strained meaning, or narrower or wider meaning, than what appears on the face of it. It is only when all efforts to do so fail should the court declare a statute to be unconstitutional. - HC
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Case Laws:

• Income Tax

• 2014 (9) TMI 100
  Assessment u/s 153A - Additions towards Bogus purchases deleted – Held that:- The assessee has been carrying out development activity for Sun city Group of Companies and has on the basis of most of the receipts received from the Sun city Group returned an income of Rs. 6.16 crore odd on 13/9/2008 - the assessee along with Sun city Group of cases was subjected to search u/s 132 on 25/9/2008 proceedings u/s 153A were initiated and in response to notice u/s 153A, the same income was returned by the assessee on 7/9/2009 – AO was of the view that neither the purchases made by M/s Padmesh Realtors is correct nor has anything been sold to the assessee - the statement not confronted of Mrs. Kamini Gupta has no relevance in the absence of any evidence to the contrary - the factum of Padmesh Realtors having been examined in the content of CCD of Rs. 600 crore Deutsche Bank, Singapore has already been in the knowledge of the AO and Investigation Wing - This fact cannot be ignored as the existence was in the know of the department all along the fact coupled with documents of Statutory Authorities; coupled with NOC filed for Registration purposes of Mrs. Kamini Gupta conclude the issue against the Revenue in the absence of any rebuttal on facts and evidence. Availability of go-down facilities – Held that:- Nothing has been placed to show that the person was closely linked either to Kumar Ice Factory or M/s Padmesh Realtors and on the contrary has consistently been described as a stranger by the assessee who has instead placed on record before the AO the correct address of M/s Kumar Ice Factory who had 2000 square meters of area which was allowed by the owner to be used as godown by M/s Padmesh Realtors for their storage of material - the statement of an unconcerned person and enquiry at the wrong address is the only basis of the allegation that M/s Padmesh Realtors did not have godown facilities the same has no relevance in the face of documents issued by Statutory Authorities listed in the impugned order and discussed at length in the earlier part of this order - In the absence of any contrary evidence, we find ourselves unable to come any other conclusion than the conclusion arrived at by the CIT(A). The assessee and the Sun city Group of companies were subjected to search and nothing incriminating except these two documents qua the assessee have been found - The arguments that signatures in invoices appear to be different is not backed by any document in support of the claim - The onus placed upon the assessee stands discharged - a decision is an authority specifically on what it is called upon to decide on the facts available on record as such referring to decisions in order to hold that remand is not warranted in the peculiar facts and circumstances of the case is not necessary as before the said discretion is exercised in revenue's favour there must be some argument or fact on record warranting such a decision - no fact or evidence has been placed on record in order to canvass that facts have not been in correctly appreciated - The documents available on record remain unrebutted – Decided against Revenue.

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• 2014 (9) TMI 99
  Deduction u/s 80IA - eligible profit - Interest received from employees - Claim of equipment hire charges, crane hire charges, and ammonia tank wagon hire charges disallowed - Held that:- Following the decision in KRISHAK BHARATI CO-OPERATIVE LTD. Versus JOINT COMMISSIONER OF INCOME-TAX [2006 (11) TMI 129 - DELHI HIGH COURT] - the interest on loans to employees, would not be entitled to special deduction u/s 80I of the Act – with regard to equipment charges, following the decision in KRISHAK BHARATI CO-OPERATIVE LTD. Versus JOINT COMMISSIONER OF INCOME-TAX [2006 (11) TMI 129 - DELHI HIGH COURT] – the equipment hire charges would not be entitled to special deduction u/s 80I of the Act - Decided against Assessee. Service charges received from Heavy Water Board of the Department of Atomic Energy, Govt. of India – Held that:- With regard to service charges, following the decision in Krishak Bharti Cooperative Limited Versus Deputy Commissioner of Income Tax [2013 (7) TMI 632 - DELHI HIGH COURT] - the issue of ownership is irrelevant, the service charges received by Kribhco from the Heavy Water Board, would have to be regard as profits or gains derived from an industrial undertaking so as to qualify for deduction u/s 80I of the Act – Decided in favour of Assessee. Interest from IDBI under Investment Deposit u/s 32AB – Held that:- Held that:- Following the decision in CIT Vs. Pandian Chemicals Ltd 2003 (4) TMI 3 - SUPREME Court] - The word “derived from” income in section 80HH of the Act, must be understood as something which has direct or immediate nexus with the assessee industrial undertaking – the contention of the assessee is accepted that the interest derived from IDBI under investment deposit u/s 32AB could not be said to be income derived from the industrial undertaking and we do not see any direct or immediate nexus of the income from the assessee’s undertaking, consequently we hold that the interest derived from IDBI under investment u/s 32AB cannot qualify as profit and gain derived from the undertaking for the purpose of the said deduction u/s 80I of the Act – Decided against Assessee. Claim of legal and professional charges incurred on various consultants for feasibility studies – Held that:- The assessee who is in the business of production of fertilizer intended to produce more fertilizers of different variant, for ultimate purpose of promotion of agricultural production and though the attempt was not successful and the fact that it was abandoned is of no consequence and the expenditure has to be treated as business expenditure - the assessee made attempt to conveniently carry on some more business activities to produce more profit which it could not and ultimately abandoned - All the payments were made to obtain consultant’s report, feasibility study for carrying on same, connected business activity but ultimately had to be abandoned for various reasons as detailed against each case - substantially the amounts were paid for getting technical reports, details and feasibility studies, and the amounts have been debited to the existing head "legal and professional charges" and qualify as revenue expenditure because the said expenditure incurred had direct nexus with the existing business carried on by the assessee it is allowable expenditure u/s 37 of the Act - CIT(A) has not looked into the issue properly and passed a cryptic order without analyzing properly the business of the assessee – relying upon CIT Vs. Priya Village Roadshows Ltd. [2009 (8) TMI 765 - Delhi High Court] - the claim of the assessee was correct and need to have been allowed u/s 37 of the Act – Decided in favour of Assessee.

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• 2014 (9) TMI 98
  Computation of deduction u/s 80I(IA) – Gross total income derived from business of Industrial undertaking – Deduction u/s 80HHC not made – Held that:- The assessee is entitled for the deduction u/s 80HHC as well as 80IA – relying upon IPCA Laboratory Ltd. Vs. Deputy Commissioner of Income Tax [2004 (3) TMI 9 - SUPREME Court] - section 80HHC has been incorporated in the Income Tax Act, 1961, with a view to providing incentive for earning foreign exchange - Even though a liberal interpretation has to be given to such a provision the interpretation has to be as per the wording of the section - It the wording of the section is clear, then benefits which are not available cannot be conferred by ignoring or misinterpreting the words in the section - a plain reading of Section 80HHC makes it clear that in arriving at profits earned from export of both self-manufactured goods and trading goods, the profits and losses in both trades have to be taken into consideration. If after such adjustments there is a positive profit the assessee would be entitled to deduction u/s 80HHC(1) - If there is a loss the assessee would not be entitled to deduction - section 80AB has been given an overriding effect over all other sections, in Chapter VI-A. Section 80HHC does not provide that its provisions are to prevail over section 80AB or over any other provision of the Act - both the deductions under Section 80HHC and 80IA can be granted from the total income - the assessee herself has shown the computation, which was allowed by the AO - the assessee has claimed deduction u/s 80IA in the return of the income on the basis of the balance profit remaining after deduction of benefit u/s 80HHC of the Act – there is no reason to interfere with the order – Decided against Assessee.

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• 2014 (9) TMI 97
  STCG on sale of shares – Income from business or not – Held that:- Assessee was maintaining two separate portfolios, one of shares held as investment and the other of shares held as stock-in-trade - business income from trading in shares can result in good profit in one year, but lower or marginal in another year because of the inherent risks involved in the business – AO has accepted that the assessee had maintained two separate portfolios; investment, and stock-in-trade portfolio for the shares - There is no allegation that the shares were transferred from one portfolio to other - The portfolios have been in existence since the AY 2004-05 onwards - The nature and extent of the transactions in the two portfolios have been noticed - Investment portfolios had shares of a few companies and transactions were infrequent. Transactions in the trading portfolio were of thousands of shares in 199 companies – the order of the Tribunal is upheld – Decided against Revenue.

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• 2014 (9) TMI 96
  TDS not deducted on export commission paid - Whether the Tribunal was correct in deleting the disallowance made by the AO towards export commission paid by the assessee to the non- resident on which it failed to deduct tax at source – Held that:- The assessee paid amount by way of commission to foreign agents for services rendered outside India – following the decision in The Commissioner of Income Tax v. Faizan Shoes Private Limited [2014 (8) TMI 170 - MADRAS HIGH COURT] - the assessee is not liable to deduct tax at source when the non-resident agent provides services outside India on payment of commission - the services rendered by the non-resident agent can at best be called as a service for completion of the export commitment and would not fall within the definition of fees for technical services - Section 9 of the Act is not applicable to the case, Section 195 of the Act does not come into play - The services rendered by the non-resident agent can at best be called as a service for completion of the export commitment and would not fall within the definition of fees for technical services and, Section 9 of the Act is not applicable and Section 195 of the Act does not come into play – Decided against Revenue.

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• 2014 (9) TMI 95
  Liability to deduct TDS on income from sale of securities – Held that:- The Tribunal has rightly came to the conclusion that there is no tax liability on the income by way of gains from sale proceeds of government securities in India in UAE - If the gains accrued to the residents of UAE and that was not subject to or liable to any tax in UAE, then, it could not be held that the Tribunal or the CIT(A) committed any perversity in taking note of the treaty obligations or its clauses - the concurrent finding is recorded that once there is no liability to tax the capital gains arising to the individual constituents/investors on the transaction in government Treasury bills undertaken through the bank, the bank was not obliged to deduct the tax at source - The income is not liable to tax and, therefore, tax deduction at source on such income was not permissible and in the given facts and circumstances – Decided against Revenue.

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• 2014 (9) TMI 94
  Cancellation of penalty u/s 271(1)(c) – Quantum appeal kept alive by Tribunal - Whether the Tribunal is justified in cancelling the penalty levied u/s. 271(1)(c) of the Act inspite of the fact that the quantum appeal is kept alive by the same ITAT Bench – Held that:- Following the decision in Commissioner of Income Tax Versus Pravinchandra C. Parekh [2014 (3) TMI 186 - GUJARAT HIGH COURT ] - Tribunal while disposing of the appeal upholding the deletion of penalty imposed by the CIT(A) has solely relied upon the order passed by the CIT(A) on quantum of appeal and it was challenged before the Tribunal and the order was set aside and further direction was issued, the order passed by the Tribunal also deserves to be quashed and set aside and the matters are required to be remanded to the Tribunal to decide the appeal afresh – Decided in favour of Revenue.

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• 2014 (9) TMI 93
  Recovery order - garnishee order - interest income during liquidation proceedings - whether the amount payable under the EMIs can be said to be the independent income of the 3rd respondent when it is under liquidation - Held that:- On the strength of an interim order, the 2nd respondent has been depositing the EMIs in a nationalised bank and the amount is earning interest also - assessee on the one hand and the 1st respondent on the other hand had put forward their claims before the official liquidator - the amount, that became payable up to this date from the 2nd respondent, together with interest, which are now said to be in the Syndicate Bank, Banjara Hills Branch shall be made over to the 3rd respondent company, which is now under liquidation. the petitioner on the one hand and the 1st respondent on the other hand shall be entitled to submit their claims before the official liquidator and he in turn shall make the payments out of the available sources to the petitioner and the 1st respondent in accordance with the priorities that are provided for under the Companies Act. This exercise shall be completed within a period of three months.

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• 2014 (9) TMI 92
  Estimation of income @ 8% of total turnover - Entire deposits in bank account treated as total turnover - Undisclosed business of trading in art silk cloth – Onus to prove the source of credit entries on revenue or not - Whether the Tribunal was justified in accepting the amount as trading receipt of the assessee though the same was never proved by the assessee either at the time of assessment proceeding or appellate proceeding – Held that:- The Tribunal directed to treat the entire deposit made by the assessee in his bank account in cash - The working out pick credit and sustaining addition to the extent of pick credit would arise if it is established by the assessee that his undisclosed income is relatable to the trading in art silk cloth - When it has been found that the assessee has miserably failed to establish and prove that he was in the business of trading in art silk cloth and that the deposit made in cash in his bank account was with respect to his undisclosed business of trading in art silk cloth, there is no question of further making addition on the basis of estimation at 8% of the total turnover working out pick credit - there is no such discussion and/or the reasons assigned by the Tribunal on the directions that the income of the assessee shall be estimated at 8% of the total turnover - Even nothing is on record how and on what basis the Tribunal has even estimated the income at 8% of the total turnover – the order directing that the income of the assessee shall be estimated at 8% cannot be sustained – thus, the order of the CIT(A) in making addition in his total income of the assessee u/s 69A of the Act is restored – Decided in favour of Revenue.

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• 2014 (9) TMI 91
  Applicability of Section 2(47)(v) – Transfer of rights in property - Held that:- Assessee's own stand is that the developer's took possession of the land and started development work - This was during the relevant period and the subject assessment year - the transaction is of Transfer of the rights in the property and to the extent of the assessee's share – thus, the order of the Tribunal is upheld that Section 2(47) (v) is squarely attracted in the facts and circumstances of the present case – Decided against assessee.

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• 2014 (9) TMI 90
  Admission of appeal - Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAR was correct in deleting the disallowance u/s.14A of the Act, despite the fact that the Hon'ble ITAT itself held the dividend income as exempt? - appeal admitted on this issue. Computation of profit of insurance business - Held that:- We do not understand as to how the Assessing Officer can ignore Section 44 of the Income Tax Act, 1961 and the First Schedule. - Following the decision in General Insurance Corporation of India v/s Deputy Commissioner of Income Tax and Anr [2011 (12) TMI 70 - BOMBAY HIGH COURT] - The computation of profit and gain from the insurance business is to be made separately from any other business - the provisions have been made in the Income Tax Act, 1961, particularly, bearing in mind the nature of the insurance business – Decided against the revenue.

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• 2014 (9) TMI 89
  Tax Credit - TDS of salaried employee uploaded in system by not properly accounted in the system - Violation of upteen instructions issued by CBDT – Held that:- The Instruction No.05/2013 clearly mandates as to how the tax deduction made by the employer, on evidence being produced, is to be dealt with, though not uploaded in the system - assessee had produced Instruction No.05/2013, which is subsequent to Instruction No.05/2013 and which would also further the case of the assessee – the AO is directed to consider it in accordance with Instruction No.05/2013 – Decided in favour of assessee.

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• 2014 (9) TMI 88
  Deemed dividend u/s 2(22)(e) - Assessee company was not a shareholder in the lending company Held that:- The legislature has incorporated and inserted the definition of the term dividend - It is made inclusive of distribution of profits, any distribution to the shareholders by a company of debentures, debenturestock, or deposit certificate in any form, or distribution made to the shareholders upon liquidation of a company - Equally, amount distributed on reduction of capital is termed as dividend - What is also then included is a payment made by a company to its shareholder - That is by way of advance or loan to him - This is included so as to visit the shareholder with a liability to pay tax - It is eventually, the shareholder who will pay tax on the same - The shareholder cannot escape that liability merely because the loan or advance has been made over to any concern in which such shareholder is a member or a partner and in which he has substantial interest - legislature noted that the shareholder would receive the sum from a company and which is not strictly falling within the concept of dividend . Any reference to Explanation 3 and particularly the definition of term concern will not advance or carry the Revenue s case any further - it is the shareholder who is registered as such who is entitled to receive the dividend - Merely because the payment is made to him by way of advance or loan was not termed as such earlier that the legislature has inserted such a payment in the definition of the term dividend and made the definition wide and broad so also inclusive - The view taken in the present case that the recipient/assessee was not a shareholder, thus is in consonance with the legal position. Relying upon Commissioner of Income Tax v/s C. P. Sarathy [1971 (10) TMI 8 - SUPREME Court] - the beneficial owner of shares whose name does not appear in the register of the shareholders of the company cannot be said to be a shareholder though he may be beneficially entitled to the shares but he is not a shareholder - by the deeming provision, such payment by the company is treated as dividend - The purpose is to tax dividend in the hands of the shareholder - so long as the Tribunal in the matters and the Appeals which are brought on hold that the assessee company before it was not a shareholder in any of the entities which have advanced and lent sums, then, the addition is required to be deleted following the decision in Commissioner of Income-tax Versus Universal Medicare Private Limited [2010 (3) TMI 323 - BOMBAY HIGH COURT] - if the payment cannot be termed as loan or advance to the shareholder, then, even such a view cannot be termed in the given facts and circumstances and without anything more as perverse or vitiated by error of law apparent on the face of the record Decided against revenue.

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• 2014 (9) TMI 87
  Claim of 100% depreciation on imported equipment – Installation got completed or not – Held that:- Not only the machinery or plant must have been installed, but also it must have been used for the purpose of business, meaning thereby, much more than mere trial run – relying upon Deputy Commissioner of Income Tax Vs. Yellamma Dasappa Hospital [2006 (11) TMI 150 - KARNATAKA High Court] - though the applicant might have installed the machinery before 31.03.1987, it was not capable of being put to use, much less, it was, in fact, put to use – Decided against Assessee. Penalty u/s 271(1)(c) – Admission of additional evidence – Held that:- Penalty was imposed upon the applicant, almost as a consequence of disallowing depreciation - Section 271 of the Act confers power upon the Income Tax Officer to levy penalty, if it is found that any claim made by the assessee is found to be wrong - No one can claim that his understanding of a provision of law, that too, of a complicated and ever-changing enactment like the Income Tax Act, is the ultimate or free from flaw - A genuine effort made by the applicant to claim depreciation on the imported machinery, must not result in double disadvantage, on denial of depreciation and imposition of penalty – Decided in favour of assessee.

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• 2014 (9) TMI 86
  Stay application – Recovery of tax and interest – Petition to be moved to appellate authority - Held that:- To balance the equation and safeguard the interest of the petitioners and the Revenue, assessee is permitted to move the appellate authority for stay of the demand notice, and to enable the petitioners to avail such benefit, till then proceedings pursuant to order and the demand notices needs to be stayed – stay granted.

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• 2014 (9) TMI 85
  Agriculture land or not - Exemption on gain from sale of land – nature of transaction – adventure in the nature of trade - Held that:- The land is classified in the Revenue records as agricultural land and there is no dispute regarding this issue and actual cultivation has been carried on this land and income was declared from this land in the return of income filed by the assessee for the AY as agricultural income - the assessee has not applied for conversion of the agricultural land for non-agricultural purposes before sale of this property and the assessee has not put the land to any purposes other than agricultural purposes - neither the property nor the surrounding areas were subject to any developmental activities at the relevant point of time of sale of the land as per the evidence brought on record. The nature of the crop and the person who cultivated the land are duly mentioned in the revenue records shows that at the relevant point of time the land was used for agricultural purposes only and nothing is brought on record to show that the land was put in use for non-agricultural purposes by the assessees – relying upon Gopal C. Sharma vs. CIT [1993 (10) TMI 41 - BOMBAY High Court] - the profit motive of the assessee in selling the land without anything more by itself can never be decisive to say that the assessee used the land for non-agricultural purposes. The agricultural land of the assessee is outside the Municipal Limits of Hyderabad Municipality and that also 8 km away from the outer limits of this Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset - no capital gain tax can be charged on the sale transaction of this land entered by the assessee – relying upon Deputy Commissioner of Income-tax, Circle 8, Kolkata Versus Arijit Mitra [2011 (8) TMI 556 - ITAT, KOLKATA] - the mere circumstances that a property is purchased in the hope that when sold later on it would leave a margin of profit, would not be sufficient to show, an intention to trade at the inception. Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade or capital gain - The period of holding should not suggest that the activity was an adventure in the nature of trade - the land sold is not only agricultural in nature but is also situated beyond 12 kms from the limit of a municipality notified by the central govt. - land sold by assessee not being a capital asset, the gain derived there from is not taxable at the hands of the assessee - Decided in favour of assessee.

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• 2014 (9) TMI 84
  LTCG on sale of wood – Sale of timber out of shade trees - Business income or not – Held that:- Following the decision in Tata Coffee Ltd. Versus Joint Commissioner of Income-tax, Special Range-2, Bangalore [2012 (11) TMI 512 - KARNATAKA HIGH COURT] - the trees are held to be the capital asset and part of the fixed structure of a coffee or tea plantation - When the trees have been cut and removed, the capital gain has to be assessed on the basis of Section 48 but in the instant case, the cost of acquisition of the assets has not been properly examined by the authorities below - Solely on the basis of some letter written by the Officer of the Government Department, the cost of acquisition of the assets cannot be assessed. The CIT (A) while setting aside the order passed by the Assessing Authority directed the Assessing Authority to work out the market value of the assets as on 01-04-1981 after obtaining the specific notification from the office of the Conservator of Forests with regard to market value in respect of rosewood and silver oak trees as on 01-04-1981 and to work out the capital gain by working out the indexed market value - Except the letter dated 31-3-1981, no other materials has been produced before the authorities - the order passed by the ITAT in setting aside the order passed by the CIT (A) wherein the Commissioner has directed the Assessing Authority to reconsider the matter is contrary to law - The Appellate Tribunal has also not examined the market value of the assets as on 01-04-1981 the order passed by the Appellate Tribunal cannot be sustained - The matter has to be re-examined by the Assessing Authority by working out the indexed market value in respect of rosewood and silver oak trees – Decided in favour of revenue. Value of timber lying with the Govt. for auction deleted – Held that:- The contention of the assessee is that merely transmitting the wood to the auction depot would not entitle it to recognize the income from the sale of rosewood in its book, because up to that stage it cannot claim such income has received or a right entitling it to receive has been accrued – the FAA has appreciated this aspect in right perspective, because no right was accrued to the assessee by the time the wood was handed over to the Govt. Depot - Only on finalization of its auction and deposit made by the bidder, its sale can be recognized - CIT (A) has rightly deleted the addition – Decided against revenue. Restriction of 50% of wood processing charges – Held that:- It is nowhere discernible what specific defect was noticed by him in the details of expenditure maintained by the assessee - In a very vague way, he observed that no supporting material was available - The contention of the assessee is that payments were made on the basis of the invoices raised by the Contractor - He has not directed the assessee to bring confirmation from the contractor or he himself has not directly verified from the contractor about the invoice - It is not justifiable to disallow 50% of the expenditure claimed by the assessee by making such observation – Decided against Revenue. Loss claimed on supply division – Held that:- The FAA has erred in confirming the disallowance - The assessee has offered an income of Rs. 8.22 crores - There could not be any reason to inflate the expenses of such a small nature in one of the Division - The AO in the findings failed to assign any reason, how the claim made by the assessee is not reliable - Merely loss has occurred in such a Division, does not mean that such a loss is to be disallowed by just disbelieving the accounts – Decided in favour of assessee. Marketing expenses disallowed – Held that:- If any expenditure which is to be incurred wholly and exclusively for the purpose of the business which is not in the nature of capital expenditure or any other expenditure provided in section 30 to 36, that can be claimed under the residuary provision of section 37 – the details of expenditure are not directly relatable to each head - The AO has bifurcated the expenditure claimed by the assessee under various heads and then pointed out why expenses meant for a particular head has been debited in a different head namely "other marketing expenses" - The assessee failed to give any reply to this aspect - accounts under this head did not give correct picture - Some disallowance on an adhoc basis has to be made, because of unsatisfactory explanation given by the assessee - CIT (A) has restricted the disallowance at Rs. 25.00 lakhs – Decided in favour of assessee. Restriction of 10% out of car hire charges – Held that:- The assessee has not been maintaining the log book of the vehicles, exhibiting their exclusive usage – the FAA has rightly observed that possibility of users other than for business purpose cannot be ruled out - 10% disallowance out of the total expenses cannot be termed on higher side – Decided against Assessee. Miscellaneous expenditure disallowed – Entertainment expenses – Held that:- Except stating that the expenditure was incurred for the purpose of business the appellant company was unable to furnish any further details in respect of this expenditure - the AO and the addition made by the AO to the extent of Rs. 5.00 lakhs is confirmed – claim of any expenditure can be allowed to an assessee, if it is proved on the record that expenditure was incurred wholly and exclusively for the purpose of the business - There is a lacuna in the claim made by the assessee - It could not substantiate all the expenses with supporting vouchers - AO has observed that during the course of hearing, defects were noticed and pointed out – the order of the CIT(A) is upheld – Decided against assessee.

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• 2014 (9) TMI 83
  Share application/ share capital subscribed – Additions u/s 68 as undisclosed income – Admissibility of statements made - accommodation entry providers - Held that:- Sufficient material has been brought on record by the department to prove that appellant introduced its own unaccounted money in the garb of share application - The initial source of funds in the case of allottee companies remains unexplained - Statements of Mr. Ram Dinesh Sharma, Mukesh Choksi and Jayesh Patel clearly indicate the nature of accommodation entry business carried out by the four allottee companies - an iota of doubt that the transactions are bogus. The addition is made u/s. 68 of the Act on the ground of unexplained cash credit - as per the provisions of section 68, the initial onus lies upon the assessee to prove the nature and source of amount credited in his books of account - this initial onus was discharged by the assessee by furnishing documents like MOA, AOA, share application & board resolution, Certificate of Incorporation, Certificate of Commencement, acknowledgements of ITRs, audited accounts etc. of concerned companies - the onus shifted upon the Department and it was for the Department to bring on record relevant material to show that why inspite of the documents, the addition is still to be made in the hands of the assessee - the Department has endeavoured to discharge its burden on the basis of statements recorded by it. The assessee requested for cross-objection of the maker of the statement - the AO also made an attempt to allow the assessee opportunity to cross-examine the makers of the statement by issuing summons to them - the cross-examination could not take place because of failure on the part of the makers of the statements to appear on the appointed date – but, thereafter the AO did not take any step to allow effective opportunity to the assessee to cross-examine the makers of the statements - the assessee was not allowed any real opportunity to cross-examine the persons who made the statement at the back of the assessee - the statement of those persons cannot be read against the assessee – relying upon Heirs and Legal Representatives of Late Laxmanbhai S. Patel Vs. Commissioner of Income Tax [2008 (7) TMI 544 - GUJRAT HIGH COURT] - the statements of the persons are not admissible evidence against the assessee - In absence of these statements, no other material has been brought on record by the Revenue to show that why still the amount should be treated as income of the assessee when the assessee furnished all the documents which were available with it to discharge the onus which was upon it u/s. 68 of the Act - the addition was made solely based on the inadmissible and unreliable material and the addition made cannot be sustained - the addition of Rs. 2,00,00,000/- made in the case of M/s Charted Motors Pvt. Ltd. as well as addition of Rs. 70,00,000/- made in the case of M/s. Chartered Speed Private Limited is set aside – Decided in favour of assessee.

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• 2014 (9) TMI 82
  Denial of deduction u/s 80IA(4) - Buffer agency granting work contract of local bodies on behalf of the Government of Gujarat and not as a developer of infrastructure facility – Held that:- As decided in assessee’s own case it has been held that assessee’s works as a nodal agency for implementation of various works undertaken/decided by the government - on a project originally estimated at Rs. 100 crore, the actual cost over runs to any amount may be even Rs. 500 crore; the assessee loses nothing - its own allocation increases and it gains - it doesn't get any benefit when it saves cost or is more efficient - the appellant is doing the work of a concern engaged in work which is in the nature of a works contact awarded by any person (including the Central or State Government) and executed by it - as per the amended Explanation below section 80IA(13) with retrospective effect from 1.4.2000, the work should not be of the nature of contract and not only contract - the project costs and source not being revenue of the appellant, it being not affected by the actual cost and efficiency of work, the assets created and the source not being of the appellant at any stage and it being entitled to a fixed remuneration for its professional services; it clearly is falling in the excluded category as per the amended Explanation below section 80IA(13); and therefore, not eligible for deduction - the objections of the CIT(A) was that the assessee does not bear any risk and consequences arising from the project – Decided against assessee. Interest on unutilized grants as income from other sources – whether taxable or part of grant received from the government and not taxable - Held that:- the assessee is 100% government owned company appointed as a Nodal Agency for implementation of various infrastructure development projects all across Gujarat - the observation of the AO that the interest is not credited to the respective Grant accounts is factually incorrect, as a perusal of the balance-sheet and the respective ledger accounts of the Grant/Project clearly show that in fact the interest is credited to the respective account. - Earlier decision of the same assessee [2014 (4) TMI 789 - ITAT AHMEDABAD] followed - interest is not taxable – Decided in favour of Assessee.

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• 2014 (9) TMI 81
  Nature of the activity carried on by Trust - Religious or Charitable - Interpretation of law – Applicability of section 115BBC – general public utility - charitable purpose u/s 2(15) - Held that:- The AO was of the view that the assessee is falling within the scope of “general public utility”- the tax authorities have completely misdirected themselves in considering the issue - since the assessee was engaged in spiritual lectures which according to their understanding of the context in which the explanation was offered was mistakenly and erroneously considered to be a bar to the assessee in claiming that the rigors of sec. 115BBC were not attracted - The conclusion has been arrived at by the tax authorities, the tax authorities have proceeded on a very narrow and incorrect understanding in holding that the assessee trust was engaged in spreading spirituality and since section115BBC only exempts religious trust, a trust imparting spiritual knowledge was consequently not contemplated as an exception by the Legislature as much as it consequently is barred to claim exemption vis-à-vis the anonymous donation. The objects of ameliorating their miseries, providing night shelter, self-help capability, knowledge distribution of food medicines etc coupled with solace in the name of God cannot be outrightly rejected and merely because the assessee is not limiting itself to disbursing food medicine, providing shelter etc and is also giving lectures on spirituality was not the kind of assessee contemplated under section 115BBC who was to be visited by the rigours of the said section. Lectures/discourses on the teachings of the prevalent and predominant religions of the country are claimed to have been given as would be found from the written submissions extracted in the impugned order which have also been reproduced from the impugned order in the present proceedings - during these lectures voluntary donations by the attendees have been made which constitutes the anonymous donations - the voluntary donations exigible to tax on the understanding that the assessee trust was not fulfilling the requirements of a public religious trust - the objects of the trust and the context in which spiritual lectures espousing the philosophy i.e. the spirituality of the major and predominant religions of the country needs to considered in the light of the well-accepted and well-known fact that all the major religions of the world with one voice eulogise the importance of taking care of the old, infirm, disabled, visited by misfortune etc. on account of some natural or man-made calamity, widowed, orphaned etc. and these discussions/lectures are not divorced from religion as mankind is exhorted in the name of God and saints to take care of the weak and the needy - the Revenue has incorrectly applied section 115BBC to the facts of the assessee’s case – thus, the objects of the trust have been considered vis-à-vis the relevant provision along with the Circular No.-14 and relying upon Cit, Ujjain vs M/s Dawoodi Bohara Jamat [2014 (3) TMI 652 - SUPREME COURT], the claim of the assessee deserves to be allowed – Decided in favour of Assessee.

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• 2014 (9) TMI 80
  Admission of additional ground – Return of undisclosed income u/s 158BC – Held that:- Following the decision in Aravali Engineers (P.) Ltd. Versus Commissioner of Income-tax [2010 (12) TMI 750 - PUNJAB AND HARYANA HIGH COURT] - the assessee has sought to raise the additional ground for the first time before the ITAT with regard to non-service of notice u/s 143(2) - an appellate authority can allow a question to be raised for the first time even if a question was not raised at a lower forum but the discretion to do so has to be exercised in the interest of justice in the facts and circumstances and not mechanically - the assessee sought to raise the additional ground for the first time in 2009 – thus, the additional ground cannot be admitted – Decided against assessee. Relief out of undisclosed income not provided – Income returned for various years – Held that:- Following the decision in Commissioner of Income Tax Versus Ashim Krishna Mondal [2004 (7) TMI 80 - CALCUTTA High Court] - after considering the amendment in Section 158BB, it has been held that the income below the taxable limit of the previous year could not be included as undisclosed income for the block period – also in Chain Sukh Rathi Versus Commissioner Of Income Tax [2003 (9) TMI 12 - RAJASTHAN High Court] it has been held that income has been concealed and it should be computed in cases of search in accordance with the provisions of section 158BB and after computing the total concealed income, it should be taxed as per the rates specified for the concealed income, in each year - the AO is directed to allow appropriate relief to the assessee – Decided in favour of Assessee. Income earned during the year – Undisclosed income or not – Held that:- No disclosure in any other manner was made by the assessee - The assessee has not paid any advance tax or self- assessment tax - merely because some TDS was deducted by the payee, it cannot be presumed that the income is disclosed by the assessee so as to exclude the same from the undisclosed income under Chapter XIV-B - For AY 1997-98, the assessee had income of more than Rs. 10 lakhs, he did not file any return at all - The assessee has not paid any advance tax - there was no overt act on the part of the assessee which would indicate that the assessee had the intention to disclose the income - merely because TDS is deducted by a third party, which he was obliged to deduct under the statute, cannot be indicative of the intention of the assessee to disclose the income – Decided against Assessee. Share of profit brought to tax or not - Held that:- Out of the total advances given for purchase of land, the advance given by the assessee is only Rs. 31,43,580 - in the case of the assessee, only his income can be assessed and not the income of the family members - If the Revenue is of the opinion that the family members are the benami of the assessee, then the onus was upon the Revenue to establish so - no evidence is brought on record by the AO to establish that the other family members were benami of Ram Kumar - the AO himself accepted that income of only Ram Kumar is to be assessed in his hands and not the income of family members – there was no infirmity in the direction of CIT(A) for excluding the profit earned by other family members from the income of the appellant – Decided against Revenue. Profit from deal of estate and housing – Commission paid disallowed – Deduction on miscellaneous expenses not allowed – Held that:- Before the assessee and family members got the land transferred in their names, they could find a buyer for a higher value and instead of getting the land transferred in his or family member’s name, they got the land transferred directly in the name of such buyer viz., M/s Gopal Das Estate & Housing (P) Ltd. and received commission from M/s Gopal Das Estate & Housing (P) Ltd. - incurring of some expenditure by the assessee and family members on brokerage/commission at the time of purchase of land i.e. agreement to purchase, and transfer of land to M/s Gopal Das Estate & Housing (P) Ltd. cannot be ruled out - incurring of the expenditure on conveyance, documentation, obtaining revenue records of the sellers etc. cannot be ruled out - The assessee has not maintained complete details of these expenditure incurred by him and his family members - the deduction is restricted at Rs. 10 lakhs to be allowed to the assessee as against Rs. 19,83,350/- claimed by the assessee, for brokerage, commission and other expenses – Decided partly in favour of assessee. Bank accounts in name of family to be added or not – Held that:- The cash/cheque deposited in the bank account of various family members is to be considered in their hands and if any part remains unexplained, then the addition, if any, can be made in their hands - The bank accounts of various family members cannot be added in the hands of the assessee unless the Revenue proves that these bank accounts were benami accounts of the assessee - the onus of establishing that the bank accounts in the name of family members are benami accounts of the assessee is upon the Revenue - Revenue has not brought on record an iota of evidence to establish that the bank accounts in the name of various family members were the bank accounts belonging to the assessee - the direction of the CIT(A) to the AO to exclude the cash and cheque deposited in the accounts of different members of the family cannot be said to be unjustified or incorrect – Decided against Revenue.

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• Customs

• 2014 (9) TMI 103
  Undervaluation of goods - import of old and used CPU/HDD/RAM, computer cabinet and old and used monitors etc - import in violation of the Foreign Trade Regulations as well as such goods were undervalued - Held that:- The goods imported by nature appear to be of economic value without being scrap in absence of any evidence to the contrary. So also in absence of evidence to show that scrap was only imported, the appellant fails to succeed as to the nature of goods. Further, there is no evidence led by the appellant through any ground to consider about different nature of the goods imported. Therefore on that count also ld. Commissioner is correct to hold that there was violation of Foreign Trade Regulation by the appellants in importing the goods - Commissioner found that the goods were of higher value. He has therefore come to the conclusion that reduction of redemption fine from Rs. 2,50,000/- to Rs. 1,50,00/- and penalty from Rs. 75,000/- to Rs. 50,000/- was warranted. This clearly shows his application of mind in consideration of totality of the facts and circumstances of the case - Decided against assessee.

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• 2014 (9) TMI 102
  Condonation of delay - Demand of differential duty - Enhancement in value of goods - Rejection of transaction value - Copnfiscaton of goods - Redemption fine - Held that:- What is required to the appellant is that justice needs to be done. No doubt, the law is important and the Commissioner has no power to condone the delay beyond the condonable period. Nevertheless, the fact remains that in this case, the covering letter which we reproduced above would show clearly that 2 sets of appeal papers filed by M/s Hotel Ashok and Sri Ashok G. Koti were enclosed and the same was acknowledged also. When the appeal was filed on behalf of the Managing Partner contesting the personal penalty of Rs. 10 lakhs imposed on him, it is difficult to believe that another appeal was not filed by the Hotel. In view of this matter, the Commissioner (Appeals) should have considered the appeal as having been filed on the date of receipt of the covering letter. In our opinion, in this case, the Commissioner (Appeals) should have heard the appeal and stay application filed by the appellants and taken a decision in accordance with law. Therefore, we set aside both the impugned orders and remand the matter to the Commissioner (Appeals) for deciding the stay application as well as the appeal in accordance with law after giving reasonable opportunity to the appellants. - Decided in favour of assessee.

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• 2014 (9) TMI 101
  Waiver of predeposit of penalty - Section 112(b) of the Customs Act, 1962 - Held that:- Bank Guarantees executed by the Applicant Nos.(1) & (4) for Rs. 8.00 lakh and Rs. 3.00 lakh respectively, would fairly cover the penalties imposed on them. Regarding the role of the Applicant No.(2), prima facie, I am not convinced with the argument of the ld. Advocate for the Applicants, that the said Applicant might not be involved at all in any manner, in the activity of bringing the betel nuts in question, at this stage. Similarly, the Applicant No.(3) had also admitted of bringing the betel nuts of third country origin, illicitly, into India. However, prima facie, I find that the Applicant No.(5) had been penalized without making a discreet enquiry by way of recording his statement of his involvement in the act of smuggling. In view of the above observations, I am of the opinion that the Applicants, namely, Md. Aftab Ahmed, Applicant No.(2) and Shri Rajesh Gupta,Applicant No.(3) could not able to make out a prima-facie case for total waiver of predeposit of the penalty imposed on each of them. - stay granted partly.

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• Service Tax

• 2014 (9) TMI 115
  Waiver of pre deposit - GTA service - non issuance of consignment notes - demand confirmed within the category of Manpower Recruitment or Supply Agency Service - Held that:- The Commissioner (Appeals) observed that demand under GTA service is not acceptable as no consignment note was issued. Prima facie, we find that the applicant hired JCB and tippers and provided transport services for transporting the coal within the BHEL unit. There is no material available that they have supplied manpower. applicant has made out a strong prima facie case for waiver of predeposit of entire dues and accordingly we grant waiver of predeposit of entire dues and stay recovery thereof during the pendency of the appeal - Stay granted.

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• 2014 (9) TMI 114
  Waiver of pre-deposit of tax - Design Service - dispute relates to the charges received by the applicant from the manufactures of motor vehicles, for design and development of Piston set/assemblies, which were used in the manufacture of Piston/Piston Rings - Held that:- In the case of Metzeler Automotive Profiles India (P) Ltd. (2005 (3) TMI 595 - CESTAT, NEW DELHI) as relied by the applicant, the value of tools was included in the value of the final products, which was cleared on payment of Central Excise Duty. In the present case, the value of tools was not included in the final products, so the said case law would not apply in the present case. We have noted that this is a separate transaction for design and development of tools. It is also noted that the applicant had not claimed these tools as capital goods under Central Excise law. Prima facie, we find that demand of tax on design and development of tools would be justified - Partial stay granted.

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• 2014 (9) TMI 113
  Waiver of pre deposit - Renting of immovable property service - revenue sharing basis agreement - Held that:- As per the definition of Renting of Immovable Property as provided as under Section 65 (90A) of the Finance Act, 1994, renting of immovable property includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the Course or furtherance of business or commerce - Board's Circular dated 13.12.2011 relied upon by the Revenue provided that each case and the terms of contract may be looked into and the decision is to be taken on case to case basis. In the present case, as the agreement is on revenue sharing basis and the applicant also undertakes certain obligation, therefore, prima facie we find that the applicant has made out a case for waiver. Therefore, the amount already deposited is sufficient for hearing of the appeal. Pre-deposit of remaining dues are waived and recovery is stayed during pendency of appeal - Stay granted.

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• Central Excise

• 2014 (9) TMI 108
  Denial of CENVAT Credit - Failure to adhere to the procedure prescribed under Rule 8 (3A) of the Cenvat Excise Rules, 2002 - discharge duty consignment wise through PLA - Held that:- On perusal of impugned Commissioner (Appeals) order, it is noted that Lower Authority has upheld the demand and recoverable through account cenvat/cash along with interest and also held that they are eligible to take re-credit of cenvat. To avoid such revenue-neutral exercise, he directed the appellant to pay the interest above at the rates prescribed on amount payable in account cenvat consignment wise, but not so paid during impugned period for the period for the delay i.e. till the default amount is paid. Therefore, Ld. Advocate's plea that the Lower Authority having accepted payment of duty through cenvat credit, demand of interest not applicable is not correct. The appellant prima facie has not put forth any valid grounds for waiver of interest and penalty. Accordingly, the appellant is directed to deposit 10% of the penalty - Partial stay granted.

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• 2014 (9) TMI 107
  Denial of CENVAT Credit - Supporting structure - Held that:- In the case of Saraswati Sugar Mills (2011 (8) TMI 4 - SUPREME COURT OF INDIA), the issue before the Apex Court was whether the Joints channels, angles and MS beams used in the fabricating supporting structures for installation of equipments are entitled to CENVAT credit. Admittedly, these items were purchased by the assessee to erect the supporting structure at the factory of the assessee which were embedded to earth. Therefore, they became immovable property and CENVAT credit was denied. But the same is not with the case in hand. In this case, these supporting structures were purchased by the respondent as part of sugar plant. Therefore, the facts of the case of Saraswati Sugar Mills (supra) are not relevant to the case in hand. India Cements Ltd. (2013 (5) TMI 403 - CESTAT CHENNAI) the issue came before this Tribunal wherein this Tribunal has held that as these structures were purchased as part of the plant therefore they are entitled for CENVAT credit - Decided against Revenue.

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• 2014 (9) TMI 106
  Denial of CENVAT Credit - cenvat credit on MS plates, MS angles, channels, rounds, screws etc. used in the manufacture of chimney - Held that:- Commissioner (Appeals) allowed credit following the decision of the Supreme Court in the case of Rajasthan Spinning and Weaving Mills (2010 (7) TMI 12 - SUPREME COURT OF INDIA) - The Hon'ble Supreme Court held that assessee was entitled to avail modvat credit in respect of steel plates, and MS channels used in the fabrication of chimney for the diesel generating set, by treating these items as capital goods. In the present case, the respondent used these items for fabrication of furnace. It is seen that Hon'ble High Courts in the case of Alfred Herbert (India) Ltd. (2010 (4) TMI 424 - KARNATAKA HIGH COURT) and Hindustan Zinc Ltd. (2013 (3) TMI 427 - CESTAT NEW DELHI) held that MS/SS plates used in workshop meant for repair and maintenance of machinery which are used for manufacture of final product and are necessary for running the plant and up-keeping of machinery directly involved in the manufacturing of products, are eligible to avail modvat credit - Decided against Revenue.

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• 2014 (9) TMI 105
  Availability of CENVAT credit - endorsed invoices - invoices issued by the supplier of the inputs are in the name of M/s. DSM Sugars, Asmoli, though there is no dispute that the said capital goods were received by the appellant and were duly erected and installed in their premises and were used for the manufacture of dutiable and excisable goods - Held that:- this is not a case of sale of capital goods from one manufacturer unit to another. It is a case where the capital goods are bought by the lesser and transferred to the lessee's factory, under lease agreement for further manufacture of the final product. As such, I am of the view that the certificate given by M/s. DSM Sugars, Asmoli on the invoices indicating that are being transferred and in the absence of any dispute to the factual aspect, I find that the appellant is entitled to the CENVAT credit involved in the present appeal - Decided in favour of assessee.

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• 2014 (9) TMI 104
  Denial of CENVAT Credit - Exemptions in Notification No.5/2006-CE dt. 01.03.2006 and 2/2008-CE dt. 01.03.2008 - exemption under Notification No.5/2006-CE is subject to the condition that no Cenvat Credit is taken by the appellant but Notification No.2/2008-CE has no such condition - Held that:- It is the case of the revenue that once appellant was availing the benefit of Notification No.5/2006-CE then Cenvat Credit should not have been taken. Alternately, it can also be viewed that once appellant started taking Cenvat Credit then benefit of Notification No.5/2006-CE was not admissible. If the benefit of Notification No.5/2006-CE was not admissible then appellant was entitled to the alternative benefit of Notification No.2/2008-CE where no such condition existed. It is now a settled proposition of law that when there are two exemption notifications available for a product then it is upto the assessee to choose the exemption notification more beneficial to him. - Following decision of Mangalam Alloys Ltd. Vs. C.C.E., Ahmedabad [2010 (4) TMI 493 - CESTAT, AHMEDABAD] - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2014 (9) TMI 112
  Recovery of tax from successor company - Petitioner granted exemption u/s 4A - Held that:- From a perusal of the counter affidavit that the erstwhile Company was granted an exemption under Section 4-A of the Act exempting respondent No.4 from the payment of trade tax for a stipulated period, on the ground, that it was a new unit. The petitioner, upon purchase of the unit of respondent No.4, applied for continuation of the exemption under Section 4-A(2-B) of the Act - where there is a discontinuation of business of the manufacturer, who was eligible for exemption, the successor manufacturer may apply before the competent authority for grant of eligibility certificate and for exemption from payment of tax or for reduction in the rate of tax for the unexpired portion of the period for which exemption was granted to the former manufacturer. Condition imposed by the competent authority was accepted by the petitioner and that the petitioner availed the exemption from payment of trade tax for the remaining period. The petitioner, however, did not pay the tax of the earlier period which was required to be paid by the the earlier manufacturer and which became jointly and severally payable by the petitioner under the provisions of Section 3-C(2) of the Act by the petitioner - The petitioner cannot now turn around and contend that the said condition imposed was arbitrary or opposed to public policy or the condition was in contravention to the provision of sub-Clause (2) of Section 3-C of the Act. The petitioner is estopped from raising such contention at this stage, for the reason that having availed the exemption the petitioner cannot turn around and contend that at this belated stage that the said condition is a nullity being violative of the provisions of the Act or is opposed to public policy. The petitioner cannot approbate or reprobate at the same time - Decided against assessee.

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• 2014 (9) TMI 111
  Imposition of penalty - Whether in the facts and circumstances of the case, the Tribunal was right in law in setting aside the penalty order merely on the ground that the documents have been tendered at the entry check post - Held that:- The records clearly disclose that when the CTO demanded the necessary documents with regard to the transportation of taxable goods, the person in-charge of the goods vehicle, who was carrying certain consignment, has not produced the necessary documents. After lapse of 5 hours, certain Xerox copies have been produced such as Trip Sheet and 41 LRs. On verification of the said documents, it was noticed that the seal and signature of the entry check post was not available on the said documents. The seal and signature of the check post of other States were also not available in the said documents, though the goods were being transported from Delhi to Chennai via Bangalore. Further, the person in-charge had not obtained transit pass in duplicate containing such particulars of the consignment in the goods vehicle. The transporter has not complied with Section 53(2)(d) and Section 54(l)(b) of the KVAT Act. No infirmity or irregularity in the order passed by the First Appellate Authority. The order passed by the Appellate Tribunal is contrary to law and cannot be sustained under law. Mere production of the document at subsequent point of time will not absolve the responsibility of the person in-charge of the vehicle to produce the relevant records with the seal and signature of States as well as the States in which the goods have been entered. The Tribunal has not examined the matter in detail and has not taken into consideration violation of Section 54(1)(b) and Section 53(2)(d) of the Act by the transporter. Hence, the order passed by the Karnataka Appellate Tribunal cannot sustain and the same is required to be set aside. Decided in favour of Revenue.

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• 2014 (9) TMI 110
  Works Contract - Point of taxation - Valuation - computation of taxable turnover - Interpretation of section 5F of the Act read with rule 6(2) and 6(3)(i) of the Rules - Exemption from tax - Held that:- Rule 6(3) (i) merely provides another method, a direct manner, of determining the turnover on the basis of the value of the goods purchased and supplied or used in the execution of works contracts in that year, instead of arriving at the turnover under rule 6(2) by deducting certain items of expenditure from the gross receipts paid or payable to the contractor-dealer. As rule 6(3)(i) must be read harmoniously with section 5(1) or 5F of the Act, and as the charge to tax under the Act is similar to the charging provision in the Rajasthan Sales Tax Act, i.e., on the transfer of property in the goods involved in the execution of works contract, the law laid down by the Supreme Court in Gannon Dunkerley [1993] 88 STC 204 (SC) would equally apply to the provisions of the Act, and the Rules made thereunder. A fortiori the value of goods, for the purposes of rule 6(3)(i), would not only include the cost of acquisition of goods by the contractordealer but also the transportation charges incurred by him to deliver the goods to the situs of the works wherein they are incorporated; cost of establishment relatable to the supply of material involved in the execution of the works contract; other charges borne by the contractor-dealer in relation to these goods till its incorporation in the works; the profits relatable to the value of such goods; etc. However profits on the labour component of, and the actual cost of incorporation in, the works would stand excluded as the value of the goods is only its value till the stage of its incorporation in the works, and not thereafter. The deemed turnover under rule 6(3)(i), (liable to tax under the Act), would be more or less the same as determined under rule 6(2) of the Rules. Where books of accounts are separately maintained, for works contracts, each year ascertaining profits arising therefrom would present no difficulty. Unlike other components, the profit element in the value of the goods may necessitate estimation in cases where the books of accounts are not maintained annually, but project-wise. Estimation of profit would then be a matter for determination by the assessing authority after taking into consideration all relevant factors including the profits which are, ordinarily, made in similar works executed by other contractors; profits earned by the contractor-dealer in works contracts executed by him in the previous years; the profit percentage norms accepted in the industry for works contracts of a similar kind; etc. While the assessing authority may adopt any other reasonable method, judicial pronouncements and authoritative texts would serve as a useful guide in such estimation. The charge to tax under section 5(1) read with Explanation VI to section 2(n) and section 2(s)(iii)(a)(i) of the Act, and under section 5F of the Act, is on the transfer of property in the goods involved in the execution of works contract - As the taxable event is the transfer of property in goods involved in the execution of a works contract, and the transfer of property in such goods takes place when the goods are incorporated in the works, the value of goods which would constitute the measure of tax is the value of goods at the time of its incorporation in the works - The turnover under rule 6(3)(i), for the purposes of rule 6(2), is the value of goods purchased and supplied or used in the execution of works contracts, i.e., the value of the goods when it is incorporated in the works - The word "purchased" in rule 6(3)(i) qualifies the word "goods" and only means that the contractor, executing the works, has purchased goods which are supplied or used in the works, and nothing more. The word "purchased" cannot be read in a manner as to elevate rule 6(3)(i), by implication, to that of a charging provision. While the assessing authority may adopt any other reasonable method, judicial pronouncements and authoritative texts, wherein the manner of estimation of profits for different works contracts have been dealt with, would serve as a useful guide in such estimation. A few of them have been referred to in para 41 supra. While the percentage of profits estimated at 15 per cent has been accepted as being reasonable in some of those cases, we may not be understood to have held that in all cases 15 per cent should invariably be accepted as the norm. We have merely indicated broadly the factors which the assessing authority should bear in mind while estimating the profit percentage in the facts and circumstances of the case before him - As the law now declared by us would operate from the inception, and since the exercise of revisional jurisdiction under section 20(2) of the Act is in accordance with the construction placed by us on rule 6(3)(i), the jurisdictional bar under section 20(2A) will not apply - Decided in favour of Revenue.

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• 2014 (9) TMI 109
  Levy of entertainment tax on entertainment content in DTH services – Constitutional validity of Section 2 (l) (iii) of the U.P. Entertainment and Betting Tax Act, 1979 – Held that:- The entertainment tax is to be paid on payments for admission to an entertainment, which includes contribution, subscription, installation or connection charges or any other charges collected in any manner whatsoever. Clauses (i) to (v) with their Explanation under section 2(l) defining ”payment for admission” have not undergone any change after amendment. A new sub-clause (vi) has been added, which includes the subscription or installation or charges or any other charges collected in any manner whatsoever by whatever name called for television, through cable television network or any such network of whatever name called, attached to television set or any other device at a residential or non-residential place. A further sub-clause (vii) has been added to make a clarification for any payment made by person to the proprietor of a direct-to-home service, by way of contribution or subscription or installation and connection charges, or any charges collected in any manner of whatever name called with aid of set top box or any other device at a residential or non-residential place of connection holder directly to the satellite without passing through an intermediary such as cable operator. For viewing channels through DTH connection by either prepaid or post-paid payments made through cash or credit cards, or by any other method, are all payments for admission to entertainment. The entertainment tax is to be collected by the proprietor and paid to the State Government in the manner prescribed. The proprietor includes in relation to the entertainment any person connected with the organisation of the entertainment, or charges with the work of admission to the entertainment or responsible for, or for the time being in charge of, the management thereof under section 2(m). In dealing with the challenge to the constitutional validity of the provisions of taxing statutes that it violates article 14 of the Constitution, the court, which exercises the power of judicial review should be conscious of the limitation of judicial intervention, particularly in matters relating to the legitimacy of economic or fiscal legislation. The Legislature is entitled to a great deal of latitude in fiscal legislation. The court would interfere only where a clear infraction of constitutional provision is established. The burden is all the heavier when the legislation under attack is a taxing statute, since the powers of the Legislature in classifying objects for the purposes of taxation are wide. The Legislatures possess the greatest freedom in classification and the burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it. The court must make every effort to uphold the constitutional validity of a statute, even if that requires giving the statutory provision a strained meaning, or narrower or wider meaning, than what appears on the face of it. It is only when all efforts to do so fail should the court declare a statute to be unconstitutional. Following decisions in Baldeo Singh v. Commissioner of Income-tax [1960 (8) TMI 6 - SUPREME Court], East India Tobacco Co. v. State of Andhra Pradesh [1962 (4) TMI 57 - SUPREME COURT OF INDIA], R. K. Garg v. Union of India [1981 (11) TMI 57 - SUPREME Court], State of Madhya Pradesh v. Indore Iron and Steel Mills Pvt. Ltd. [1998 (8) TMI 505 - SUPREME COURT OF INDIA] and Government of Andhra Pradesh v. P. Laxmi Devi [2008 (2) TMI 850 - SUPREME COURT] - Decided against assessee.

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