TMI Tax Updates - e-Newsletter
September 6, 2014

Case Laws in this Newsletter:

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

Articles

1. DISAGREEMENT WITH THE INQUIRY REPORT BY DISCIPLINARY AUTHORITY

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Government Approves Twenty Two (22) Proposals of Foreign Direct Investment (FDI) Amounting to About ₹ 3951.61 Crore

2. RBI Reference Rate for US $

3. Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

4. Release of additional installment of Dearness Allowance to Central Government employees and Dearness Relief to pensioners due from 01.07.2014

Notifications

Customs

1. F. No.437/103/2014-Cus IV - dated 4-9-2014 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Royal Palms (India) Pvt. Ltd., Survey No. 169, Aarey Milk Colony, Near Unit No.26, Goregaon (E), Mumbai-400065

2. F. No. 437/105/2014-Cus IV - dated 4-9-2014 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Junaid Plaster of Paris, No.4, A S Tower, Opp. Adugodi Post Office, B T S Road, Bangalore

3. F. No. 437/100/2014-Cus IV - dated 4-9-2014 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Sony India Pvt. Ltd., A-31, Mohan Co-operative Ind. Estate, Mathura Road, New Delhi.

4. 75/2014 - dated 4-9-2014 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 5th September, 2014.

SEZ

5. S.O. 2180 (E) - dated 26-8-2014 - SEZ

To set up a sector specific Special Economic Zone for Biotechnology at village Mann, Taluka Mulshi- Hinjewadi, District Pune in the State of Maharashtra.

6. S.O. 2179 (E) - dated 26-8-2014 - SEZ

To set up a sector specific Special Economic Zone for Information Technology at Focal Point Industrial area, Phase VIII-Extension, District Mohali, Punjab

Circulars / Instructions / Orders

FEMA

1. 26 - dated 5-9-2014

Exim Bank's Line of Credit of USD 26.50 million to the Government of the Republic of Honduras

2. 27 - dated 5-9-2014

Exim Bank's Line of Credit of USD 18 million to the Government of the Republic of Mauritius

Highlights / Catch Notes

Income Tax

• Dividend, commission, and interest income from share trading are taxed as "Income from other sources" per tax rules.

  Case-Laws - HC : Income from dividend, commission and interest from the business of trading in shares – dividend income arrived at by the appellant was chargeable under the head “Income from other sources“ - HC
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• Court Rules Asset Enhancements Not Deemed Dividends u/s 2(22)(e) of Income Tax Act; No Income Additions.

  Case-Laws - HC : Applicability of deemed dividend u/s 2(22)(e) – asset of the Respondent may have enhanced in value by virtue of repairs and renovation in respect of which it cannot be brought within definition of the advance or loan to the Respondent - no additions - HC
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• High Court Upholds Penalty u/s 271(1)(c) for Unexplained Cash Deposits, Assessee Lacks Sufficient Evidence.

  Case-Laws - HC : Levy of penalty u/s 271(1)(c) - unexplained cash deposits - No entry in the cash book appeared - as there was no proper explanation by the assessee showing that the transaction was bona fide, penalty confirmed - HC
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• Court Denies Deductions for Loans to Subsidiaries and Abandoned Projects u/s 37 of Income Tax Act.

  Case-Laws - HC : Deduction on payment of interest for borrowed loan u/s 37 - Claim of expenditure u/s 37 on account of loss incurred by the subsidiary company in abandoning the new project - merely because the money was lent to a sister concern or to a subsidiary company would not enable the assessee to claim deduction- HC
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• Fair Market Value as Full Consideration in Partnership Dissolution: Asset Transfer and Acquisition Cost Explained.

  Case-Laws - AT : When the Fair Market Value of the asset as on date of dissolution of the partnership firm is deemed to be the full value of consideration received or acquired as a result of transfer, the Fair Market Value shall be the cost of acquisition in the hands of the transferee/the partners who received the property/capital asset. - AT
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• Amendment to Section 80P(2)(a)(i) Explores Tax Deductions for Entities Providing Banking Services Without Proper Licenses.

  Case-Laws - AT : Deduction u/s 80P(2)(a)(i) – Effect of amendment - banking or credit facilities to its members - Whether the Assessee is a co-operative bank or not - If licence is not obtained it may be an illegal banking business under the other statute - exemption allowed - AT
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Customs

• Irregular Duty Drawback Case: Addendum Doesn't Alter Original Notice, Action Not Barred by Limitation.

  Case-Laws - HC : Recovery of irregular duty drawback - discrepancy in the show cause notice - it cannot be said that the addendum structurally alters the nature of the show cause notice and it is barred by limitation - HC
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Service Tax

• Service Providers Can Claim Cenvat Credit for Pre-Registration Inputs or Services Received.

  Case-Laws - AT : Cenvat Credit in respect of inputs/input services received by an output service provider during period prior his obtaining service tax registration is admissible - AT
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• Cable Operator's Subscriber Figures Unchallengeable Under Telecom Regulatory Authority of India Act, 1997 Contract Terms.

  Case-Laws - AT : Cable operator service - dispute about figures of subscriber base - Once the figures are taken from a written contract, which is in pursuance to a statute, namely, Telecom Regulatory Authority of India Act, 1997 and the regulations made thereunder, the same is beyond challenge. - AT
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• Service Tax Demands on Advertising Agency Services Dismissed; Claims on Discounts and Rate Differences Rejected.

  Case-Laws - AT : Advertising Agency Services - demand is on account of volume discount received from these media, write back of the amount in respect of payments not claimed by the print/electronic media and the rate difference between the amount actually charged from the advertiser and the amount paid to the media. - demand set aside - AT
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• Pre-June 2007 Repair and Renovation Contracts in Commercial Construction Affected by Section 65 (25b) Service Tax Rules.

  Case-Laws - AT : Repair, alteration, renovation or restoration service - Commercial or Industrial Construction - If the contracts were entered into prior to 01/06/2007, they would be governed by the provisions of Section 65 (25b) relating to ‘commercial or industrial construction service'. - AT
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Central Excise

• Tribunal Orders Petitioner to Deposit Rs. 1.14 Crores; Evaluates Net Worth for Financial Assessment.

  Case-Laws - HC : Waiver of pre-deposit - tribunal directed the petitioner to deposit a sum of ₹ 1.14 crores - tribunal must consider the argument of net-worth for ascertaining financial position - HC
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• Assessee's Right to Claim Separate Rebates for Duties on Inputs and Excisable Goods u/r 18 and Rule 19.

  Case-Laws - HC : Rebate / refund under Rule 18 while claiming rebate under Rule 19 on Inputs - If the assessee is entitled to get rebate of duty paid on both the items, there was no necessity for the Central Government to issue two separate notifications requiring assessee to claim rebate separately on the duty paid on excisable goods and on inputs - HC
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• Tribunal Confirms Duty Demand Time-Barred; Extended Limitation Period Not Applicable in Valuation Dispute.

  Case-Laws - HC : Extended period of limitation - jurisdiction - dispute regarding valuation was settled by the larger bench of tribunal - Tribunal rightly turned down the demand of duty prior to the period of one year from the date of issuance of show cause notice dated 9-11-2009, holding the same to have been hit by the law of limitation - HC
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VAT

• Property Buyers Inherit Dues: No Protection u/ss 53 or 100 for Bona Fide Purchasers Without Notice.

  Case-Laws - HC : Recovery of dues from the purchaser of property - Obligation of payment of duty on successor of property - buyer cannot claim protection either of Section 53 of the Transfer of Property Act or of Section 100 thereof, on the ground that he is a bonafide purchaser of the property for valid consideration and without notice of the charge. - HC
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Case Laws:

• Income Tax

• 2014 (9) TMI 173
  Income from dividend, commission and interest from the business of trading in shares – Business income or income from other sources – Shares held as stock in trade - Held that:- Assessee held shares as stock-in-trade - The dividend income earned by him on the shares does not cease to be income which arises in the course of business, though for the purpose of chargeability to tax, such income would be included under the head "Income from other sources" - where a shareholder receives dividends in respect of the shares held by him, the dividend is received because of the fact of his holding the shares - There may be no doubt of earning substantial dividends on the shares but one has to consider from the point of view that the assessee 's business income consist of purchase and sale of shares - assessee does not purchase the shares with a view to get dividend, but the object of purchasing his shares is to earn profit by the sale of those shares - earning of dividends is merely the incidental result to the main activity of the purchase and sale of shares - receipt of dividends will not be chargeable to income tax under the head "profits & gains from business or profession" - relying upon Commissioner of Income-Tax, Bombay City-II Vs. D.G.Goenka [1980 (4) TMI 41 - BOMBAY High Court] the dividend income arrived at by the appellant was chargeable under the head "Income from other sources" – the order of the Tribunal is upheld – Decided against Assessee.

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• 2014 (9) TMI 172
  Applicability of deemed dividend u/s 2(22)(e) – Expenses on construction/renovation of the owned premises incurred – Held that:- The AO was of the view that the amount of Rs. 2.51 crores was paid on behalf of the assessee - analysis of section 2(22)(e) would reveal that in order attract the provisions of sub-section (22) the payment made by the Company must be by way of advance or loan to the shareholder who is entitled to the shares which do not carry a fixed rate of dividend with or without a right to participate or a payment to him for his individual benefit - no money has been paid by way of advance or loan nor was any payment made for his individual benefit - it is deemed that the Company did spent Rs. 2.51 crores towards repair and renovation on the premises owned by the Respondent - the Company had taken rent on the premises - the asset of the Respondent may have enhanced in value by virtue of repairs and renovation in respect of which it cannot be brought within definition of the advance or loan to the Respondent - Nor can it be treated as payment by the Company on behalf of the Respondent share holder or for the individual benefit of such shareholder – the order of the Tribunal is upheld – Decided against Revenue.

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• 2014 (9) TMI 171
  Validity of notice for reopening of assessment u/s 148 - Time-barred notice – Invocation of extended period of limitation as provided u/s 149(1)(c) – Held that:- Assessee during the proceedings had taken the specific stand that it was an Indian company and that it has no foreign asset and no foreign income and that Section 149(1)(c) of the Act had no application - It is clear from both the letter dated 16.09.2013 as well as the order dated 19.12.2013 that there is no reasoning indicated as to how Section 149(1)(c) has been invoked other than simply re-producing the contents of Section 149(1)(c) - neither the letter dated 16.09.2013 nor the order dated 19.12.2013 nor the counter affidavit filed by the revenue controvert the statement made by the petitioner that it has no asset located outside India – thus, the question of deriving an income from any such asset also does not arise - it will have to be accepted that the petitioner does not have any asset outside India and, the question of the petitioner having any income in relation to such an asset would not arise - The very condition precedent for issuing a notice u/s 148 read with Section 149(1)(c) invoking the extended period of limitation of sixteen years is that the income which has escaped assessment must have relation to any asset located outside India - This pre-condition is not satisfied - there is a complete bar to the issuance of such a notice beyond the period of four years – thus, the notice for reopening of assessment is set aside – Decided in favour of assessee.

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• 2014 (9) TMI 170
  Indexation of sale of painting by assessee – Painting acquired before 01.04.1981 – Whether the value of painting as on 01.04.1981 is to be indexed up to the date of the sale or not – Held that:- As decided in Faiz Murtaza Ali v. Commissioner of Income Tax [2013 (3) TMI 100 - DELHI HIGH COURT] paintings had been considered to be personal effects, but only those articles were to be included in the definition of “personal effects” which were intimately and commonly used by the assessee - since the assessee herself in her return had not claimed the painting as a personal effect, there is no evidence on record on either side - prior to 01.04.2008, a painting could be regarded as a “personal effect” - But, before a painting can be regarded as a “personal effect” there must be evidence on record to show that it was intimately and commonly used by the assessee - There is no such evidence on either side, and the matter is to be remitted back to the AO for determination on the basis of evidence – Decided in favour of assessee.

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• 2014 (9) TMI 169
  Levy of penalty u/s 271(1)(c) - unexplained cash deposits - No entry in the cash book appeared - Distinction between the acceptability of the explanation offered for the additions made in the computation of taxable total income as against the reasonableness of such explanation in the penalty proceedings and further overlooking the explanation 1 overlooked – Held that:- The assessee had not offered any explanation either during the assessment proceedings or during the penalty proceedings regarding the unexplained cash deposits - The assessee had also not disclosed the income in the return filed in response to the notice issued u/s 153C of the Income Tax Act - there was no proper explanation given by the assessee with regard to the undisclosed income and the assessee had not given any details as to how he would fall within Explanation 1 to Section 271(1)(c) of the Income Tax Act - without any material, the assessee had merely stated that the source of income was from the business run by his father and the assessee will be no avail - in the absence of any material, the contention of the assessee that Explanation (1) to Section 271(1)(c) of the Income Tax Act will come to play as there is some bona fide explanation with regard to the undisclosed income, could not be accepted, as there was no proper explanation by the assessee showing that the transaction was bona fide - even after the search, the assessee had not disclosed the cash deposits in the return of income filed – the order of the Tribunal is upheld – decided against assessee.

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• 2014 (9) TMI 168
  Onus to prove the genuineness of transaction - Unexplained cash credit u/s 68 – Held that:- Following the decision in COMMR. OF INCOME TAX Versus M/s LOVELY EXPORTS(PVT) LTD [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - out of 181 share applicants, 129 share applicants had appeared when summons were issued and they have accepted their investment - apart, the names and identity of the share applicants is also available on record - when the nature and source of the amount so invested is known, it cannot be said to be undisclosed income in the hands of the Spinning Mill - the burden is on the Department to show that the investment made by the share applicants actually emanated from the coffers of the assessee, so as to enable it to be treated as the undisclosed income of the assessee – revenue except making a vague statement that the managing directors have advanced monies to the alleged share applicants, did not substantiate the same with concrete evidence - the addition of subscriptions as unexplained credit u/s 68 of the Act is unwarranted - since the share applicants in are one and the same and they have confirmed the transactions, it cannot be treated as the unexplained investment of the managing directors of the company and on that score, no addition can be made in the hands of the managing directors – thus, the order of the Tribunal is upheld – Decided against Revenue.

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• 2014 (9) TMI 167
  TDS deduction u/s 194C @ 2% or u/s 194I - transport of students - buses/vehicles were hired for fixed tenure and exclusive usage by the assessee - Held that:- The Tribunal was correct in holding that the provisions of Section 194-C of the Act and not Section 194-I were attracted to the deduction of tax at source – Following the decision in Commissioner of Income Tax Vs. M/s Apeejay School Apeejay School Campus [2014 (9) TMI 51 - ALLAHABAD HIGH COURT] - Decided against Revenue.

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• 2014 (9) TMI 166
  Deduction on payment of interest for borrowed loan u/s 37 - Claim of expenditure u/s 37 on account of loss incurred by the subsidiary company in abandoning the new project - claim of expenditure incurred by the appellant as a part of the expansion into a new line of business for wholly owned subsidiary - tribunal decided that the appellant company and the subsidiary company are two separate legal entities and the loss incurred by the subsidiary company could not be allowed in the hands of the appellant – Held that:- What the sister concern did with the money has to be found out in order to find out whether it was for commercial expediency or not - the assessee was incorporated in the year 1951 - from time to time there is alteration of objects - as decided in Travancore Titanium Product Limited .vs. Commissioner of Income Tax [1966 (1) TMI 21 - SUPREME Court] - the establishment of resorts is not one of the objects of the company as is clear from their Memorandum of Association - the assessee company identified tourism and related business having great potential for earning revenue - it started its separate line of business - Specialised staff, having expertise in running/operating well reputed hotels like Taj and other resorts in the country, was recruited - Important places of tourists’ attraction were identified for putting up resorts - the subsidiary company was incorporated in July 1994 - The amount lent by the assessee to the subsidiary company was spent towards production cost - The subsidiary company has not done any business right from the date of incorporation and is also not intending to do any business or commercial activity - a request was made to strike the name of UB Resorts Limited under Section 560 of the Companies Act - Such a request has been accepted by the Assistant Registrar of Companies. When the assessee is in the business of manufacture and sale of beer and liquor, if they have lent money to a sister concern, may be a subsidiary, for the purpose of setting up a new line of business, it cannot be said that the money lent by them to the subsidiary company as an assistance could be characterized as an expenditure laid down and expended wholly and exclusively for the purpose of business of the assessee - The entire money is lent and spent only towards payment of salary and travelling expenses over a period of four to five years and no deductions were claimed in each year when such payments were made - mere mentioning of a wrong provision would not deprive the assessee of the benefit of deductions or exemptions, in trying to find out the real nature of transaction, intention of the parties at an undisputed point of time, clearly go to show that this expenditure was not incurred wholly and exclusively for the purpose of business of the assessee - The claim is only made after the claim was not accepted u/s 36(1)(vii) of the Act - Though there is no prohibition in law for starting subsidiary company, to get the benefit of Section 37, the moneys lent should be laid out and expended only for the purpose of business of the assessee - There should be a direct nexus between the assessee and the business for which the money is lent - merely because the money was lent to a sister concern or to a subsidiary company would not enable the assessee to claim deduction - The AO and the appellate authorities on careful consideration of the material on record have recorded the finding of fact – there was no justification to interfere with the finding of fact recorded – Decided against Assessee.

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• 2014 (9) TMI 165
  Nature of expenses capital or not u/s 37(1) - Professional fees disallowed u/s 40(a)(i) – TDS not deducted on payment made to Non-resident – Held that:- The payment was made to the M/s RPC, a USA company for providing marketing and sale support to promote new/proposed products of the assessee viz. “Frozen Desserts and Veggie Magic” - the grounds taken by the tax authorities for disallowing the amount are not found to be correct - the agreement with M/s RPC does not provide that their services shall be restricted to foreign countries alone and they may be rendering services in India also - CIT(A) has held that M/s RPC has “made available” its services in India - CIT(A) has held that M/s RPC has ‘made available’ its consultancy services to the assessee - the sales promotion or marketing services will not fall in the category of “Fee for technical services” - the agreement entered between the assessee and M/s RPC specifically provide that the services shall be provided from outside India and it will not have permanent establishment in India - the payment was made in foreign currency to M/s RPC - the tax authorities have failed to show that the payment received by M/s RPC was liable to tax in India either in terms of Indian Income tax Act or in terms of Indo-US DTAA, the assessee was not liable to deduct TDS on such payments made to a foreign resident, as decided in GE India Technology Centre Private Ltd. Versus Commissioner of Income Tax & Anr [2010 (9) TMI 7 - SUPREME COURT OF INDIA] - the assessee had paid the amount to M/s RPC before the Explanation was inserted u/s 9(2) of the Act with retrospective effect - the order of CIT(A) is set aside – Decided in favour of assessee. Architect fees disallowed – Expenses capital in nature or not – Held that:- The payment was made to the Architect in connection with an existing factory building - the architect has carried out some work to suit the Vaastu - the expenditure has been incurred in connection with an existing factory building and it is not the case of the revenue that a new asset has come into existence due to spending of the amount - There is no material on record to substantiate the view of the tax authorities that the consultation provided by the architect would have enduring benefit – the payment cannot be considered as Capital in nature – Decided in favour of assessee. Software expenses disallowed u/s 40(a)(ia) – TDS not deducted u/s 194J – Effect of retrospective amendment - Whether the software purchases would fall in the category of “royalty” and the disallowance made u/s 40(a)(ia) of the Act is justifiable or not – Held that:- The payments for purchase of software have been made during the period from 1.4.2006 to 31.3.2007 - The amendment to sec. 9(1)(vi) has been brought by Finance Act, 2012 w.e.f. 1.6.1976 - the contention of the assessee is accepted that a liability cannot be imposed on the assessee in respect of a past transaction on the strength of the amendment brought into the Act subsequently with retrospective effect – it shall apply to the entire amount which was disallowed u/s 40(a)(ia) of the Act for non-compliance with the provisions of sec. 194J of the Act - the tax authorities are not justified in disallowing the same u/s 40(a)(ia) of the Act on the basis of an amendment brought into the Act subsequent to 31.3.2007 with retrospective effect – the order of the CIT(A) is set aside – Decided in favour of assessee. Valuation of stock - Difference between balance of CENVAT u/s 145A – Adjustment of Excise duty and VAT – Held that:- The inclusive method and exclusive method are two different methods of accounting the transactions - Profitability would not be affected under either of methods - assessee is following exclusive method for accounting taxes relating to raw materials/packing materials - it is the duty of the assessee to prepare financial statements under inclusive method in order to satisfy the AO that there was NIL effect on the profitability - the AO has followed some methodology to work out the addition in the immediately preceding year, the assessee did not appear to have furnished revised financial statement prepared under inclusive method - If the assessee fails to furnish the revised financial statement in this year also, the AO has got no other option, but to adopt some method to work out the addition to be made – the matter is to be remitted back to the AO for fresh consideration – Decided in favour of assessee.

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• 2014 (9) TMI 164
  Genuineness of loss on sale of shares – Consideration of Cost of acquisition of shares sold against recomputed capital gain – Held that:- The assessee is engaged in the business of share broking, trading and dealing in shares and securities - without giving any justification, the CIT(A) has directed the AO to allow loss of Rs. 2 crore against capital gains earned on sale of BSE shares - CIT(A) has also mentioned merger of GDSS in the assessee company as one of the reason for sale of shares at a loss - this aspect was not stated before the AO nor there was any argument on this point - since the sales was to the close relative, the actual price of the share as on the date of sale is required to be seen for determining the true profit or loss on sale of shares - the GDSS is a private limited company, the value of share is to be determined as per the NAV, which has not been done by the CIT(A) - The finding of the CIT(A) was to the effect that since dividend was not declared by GDSS, the discount is to be allowed while valuing the price of shares at the time of sale, is not correct insofar as record shows that GDSS earned sold profit of Rs. 1.40 crores in the financial year 2005-06 and Rs. 1.95 crores in the financial year 2006-07 relevant to the AY 2007-08 - there was no justification in the order of CIT(A) for allowing any discounting factor while working out price of shares so sold – the order of the CIT(A) in directing the AO to allow bogus loss of Rs. 2 crores is set aside and the matter is remitted back to the AO for fresh adjudication after finding out value of share of GDSS as per NAV in the year of sale. Share allotted to the assessee by BSE in lieu of its membership card was sold by the assessee during the year - long term capital gain arose thereon was computed by the AO by taking the WDV of membership card so allotted - The CIT(A) deleted the addition so made by observing that u/s 55(2)(ab) was introduced by Finance Act, 2001, according to which in case of sale of capital asset being equity share allotted to the shareholder of a recognized stock exchange in India under scheme of demutualization, shall be the cost of acquisition of its original membership of the exchange - CIT(A) found that the original cost of acquisition of membership card at Rs. 91,23,000 - the CIT(A) directed the AO to recomputed the capital gain on sale of shares of BSE by taking the cost of acquisition at Rs. 91,23,000/- and allowing indexation thereon as per provisions of law – there was no infirmity in the order of CIT(A) for directing the AO to re-compute capital gain by taking cost of acquisition at Rs. 91,23,000/- Decided partly in favour of revenue.

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• 2014 (9) TMI 163
  Expenses incurred on normal repairs and maintenance – nature of expenses capital or not - Whether the expenses incurred so qualifies u/s 31(1) - Enhancement of assessed income – Procedure u/s 251(2) not followed – Held that:- The assessee made contract with NHAI to construct, operate and maintain 90 KMs N.H. between Jaipur to Kishangarh and incurred total cost more than Rs. 590 crores - The assessee collected total revenue from the toll is more than Rs. 136 crores and shown net income more than Rs. 59 crores from this project – assessee had already got constructed earthen shoulder road on both sides of road and fencing but on used by the heavy traffic, it got damaged and is not remained in good condition to be used smoothly by the heavy traffic, therefore, nominal tear and wear is required - The assessee incurred 3.86 crores expenditure on normal repair and maintenance including expenditure on repairing of fencing - This highway was taken on contract on BOT basis for 18 years - The assessee has to recover his cost as well as profit on investment within given time, which hardly extended by the NHAI - assessee had to maintain the national highway in good condition to attract the traffic to increase toll collection, so profit can be maximized. Expenditure on replacement is also a revenue expenditure - If the expenditure is treated capital expenditure, it cannot be recovered in 18 years of period of contract - it required to incur expenditure every year and under which section, the assessee would claim last years’ repair and maintenance expenditure as full - the normal repair expenditure on earthen shoulder road on both sides of highway with normal tear wear on fencing has been claimed by the assessee and allowable u/s 31(1) of the Act - the assessee has exceptional circumstances of constructing highways on BOT basis - The expenditures are not capital expenditure as no new assets has been created - the assessee has only constructive ownership for the period of 18 years on it – the AO has allowed the expenditures as revenue in AYs 2009-10 and 2010-11 – Decided partly in favour of assessee. Depreciation on road construction – Rate of depreciation on EDP equipment @ 60% or 15% - Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the depreciation @ 10% is allowed on expenditure incurred on road by considering the amendment made in item number building in depreciation schedule in favour of the assessee - the order of the CIT(A) is upheld – Decided against Revenue.

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• 2014 (9) TMI 162
  Expenses treated as Non-business expenses – Expenses incurred through credit card and in ordinary course of business – Held that:- Assessee has failed to produce any evidence to establish that the expenditure incurred under various heads of expenditure was relatable to the business of the assessee and in the absence of any evidence being filed by the assessee to prove its stand – the order of the CIT(A) is upheld – Decided against Assessee. Applicability of provisions of TDS - Disallowance u/s 40(a)(ia) – Held that:- The first aspect of the issue of non-deduction of tax at source was the payments to doctors, faculty, in respect of advertisement, contractor and professional as referred to by the AO - assessee during course of hearing had furnished on record tabulated period-wise chart in respect of the payments to doctors and faculty, payments on account of advertisement, contactor and professionals along with evidence of deposit of tax at source - The complete payments on which tax was deducted by the assessee from time to time was deposited before the due date of filing of the return of income – relying upon CIT Vs. Rajinder Kumar [2013 (7) TMI 454 - DELHI HIGH COURT] - in view of the amended provisions of the Act, the expenditure on which the tax was due to be deducted and the same was deducted and deposited before the due date of filing of return, is to be allowed as an expenditure in the hands of the assessee - The second set of the disallowance was the items on which tax was not deducted at source - the payments were made to the franchises and not the employee directly and in the absence of any satisfactory explanation with regard to the nature of such payments booked under the head incentive and because of failure to deduct the tax at source, the amount is not allowable in the hands of the assessee – Decided partly in favour of assessee. Amount paid to ROC for increasing Authorised capital disallowed – Held that:- The expenditure having been incurred in the capital field is the capital expenditure in the hands of the assessee and is not allowable as revenue expenditure in the hands of the assessee – following the decision in Brook Bond India Ltd. Vs. CIT [1997 (2) TMI 11 - SUPREME Court] - Expenditure incurred by a company in connection with issue of shares is directly related to the expansion of the capital base of the company, and is capital expenditure, even though it may incidentally help in the business of the company and in the profit making – Decided against assessee. Payments made to the imprest account disallowed u/s 40A(3) – Held that:- Payments made to the imprest account do not attract the provisions of section 40A(3) of the Act - if any expenditure is booked in cash over and above Rs. 20,000/-, then the provisions of section 40A(3) of the Act are to be applied and disallowance are to be worked out thereunder - the assessee claimed that the imprest account was available with the directors from time to time and only remuneration at the end of the year was adjusted and hence no cash payment for the said expenditure of remuneration to the Directors - the stand of the assessee needs to be verified – thus, the matter is to be remitted back to the AO for verification – Decided in favour of Assessee. Employees contribution towards PF account u/s 36(l)(va) – Payment made before due date of filling of return – Held that:- Following the decision in CIT Vs. Nuchem Ltd. [2010 (2) TMI 959 - PUNJAB AND HARYANA HIGH COURT] - and in case the employees contribution toward PF account is paid before filing of the return, then no disallowance is warranted - The AO is directed to verify the claim of the assessee and recompute the disallowance, if any - Decided in favour of Assessee. Estimated addition of commission paid to doctors – Held that:- The statement of the employee of the assessee was recorded in the presence of the learned counsel for the assessee and was also signed by him - the disallowance on account of commission paid to the doctors for referring the patients to the hospital are to be added as income in the hands of the assessee in view of the provisions of section 69C of the Act – the amount of addition is restricted – Decided partly in favour of Assessee.

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• 2014 (9) TMI 161
  Genuineness of transaction - Whether purchase transactions of shares of LIL are genuine – Held that:- The transaction of purchase was arranged through M/s P.K. Agrawal & Company. Shares in both the cases are of the same company i.e. LIL - Both the assessees considered shares as stock in trade and computed loss by valuing shares at a prevailing market price on the year ending - What difference the margin money of Rs. 1.35 lac would make to the purchase consideration of Rs. 11.05 lac in the case of Ratan Lal Baid, is beyond my comprehension when we consider it in the light of the fact that the assessee also made purchases in identical circumstances - profit of Rs. 1.27 lac earned by the instant assessee on shares of LIC Housing Finance on 03/09/2004 also remained with P.K. Agrawal & Company - there can be no doubt about the genuineness of the purchase transactions of shares of LIL between the assessee and Shri P.K. Agrawal. Whether the shares are 'Investment' or 'Stock' –Held that:- If the shares are construed as 'Investment', then obviously there can be no question of computing any loss on valuation until these are sold - It is only if the shares are held as stock in trade, that the regular method of valuing closing stock "at cost of market price, which is less" would apply so as to reduce the market price of shares to Rs. 2.64 lac - a transaction of purchase cannot be deferred till the actual possession of shares is received or payment is made - the assessee instructed P.K. Agrawal & Company to purchase shares on her behalf in the year relevant to the assessment year - The shares were purchased in the instant year alone, but the delivery was not given to the assessee till the payment, which event took place in the subsequent year - As the dates of contracts of sale as declared by the parties fall in the instant year and these were actually followed up by actual delivery of shares, these transactions need to be considered in this year alone - since the AO himself held these to be trading transaction though relevant to the next year, the character of such purchase transactions of shares is not disturbed - such shares were held by the assessee as 'Stock in trade' and not as 'Investment'. Nature of transaction - Whether the transaction is Speculative or Non-speculative transactions – Held that:- The mere fact that the delivery was not received up to 31/3/2005, being the year ending relevant to the A.Y. under consideration, would not make a non-speculative transaction to be a speculative one - Since the assessee received delivery of shares, the character of non-speculative transaction cannot be changed by viewing this transaction as on 31/3/2005, till which date no delivery was received - it is not a case that transactions of purchase were settled otherwise than by way of actual delivery - the assessee received the delivery of shares after making due payment by cheques – the transactions of purchase cannot be considered as speculative transactions. Loss in shares disallowed - Whether the CIT(A) was justified in deleting the addition made by the AO on account of disallowance of loss in shares – Held that:- The transactions for purchase of shares of LIL made by the assessee are genuine. Further such shares were purchased as 'stock in trade' in a non-speculative business and the resultant loss arising out of the valuation of such shares at the market rate on the year end, which is obviously less than the cost price, is fully allowable - CIT(A) was justified in deleting the addition made by the AO on account of disallowance of loss in shares – Decided against Revenue.

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• 2014 (9) TMI 160
  Transfer pricing adjustment – sale of MycoMofteil to AE – Held that:- The assessee is engaged in the business of manufacturing and Consultancy of Biotechnology based products and bulk drugs - the assessee sold 7005 kgs. of Mycophenolate Mofetil to its AE situated in USA for Rs. 17,37,87,525.00 i.e. at an average rate of Rs. 24,809.00 per kg - The TPO observed that though the same products were sold to non-associate enterprises situated in India and in Mexico at a price lesser then the price at which it was sold to AE but those prices cannot be compared because those sales were in an uncontrolled market whereas sale to associated enterprise was in USA which is controlled market - the sale of Mycophenolate Mofetil to AE is at a price which is more than the price at which the same product was sold to non-associated enterprise situated in India and Mexico - the cost of Mycophenolate Mofetil is Rs. 18,840.00 per kg whereas the cost of Pencillin G Amidase Enzyme and Lovastatin is Rs. 6,011.00 per kg - as because the latter product is of lesser value - more profit in terms of percentage is earned on the latter product - the lower authorities have not examined the issue from this angle - No material has been brought by both the parties to show what was the profit earned in Pencillin G Amidase Enzyme and Lovastatin in its sale in India or other uncontrolled markets - no material has been brought by both the parties to show that sale of same products to associated enterprises situated in USA at the same profit margin at which disclosed during the year was accepted by the department in earlier years or succeeding years – thus, the matter is to be remitted back to the TO for fresh adjudication – Decided in favour of assessee. Disallowance u/s 14A r.w. Rule 8D – Held that:- The AO made disallowance of interest expenditure and administrative expenses for earning interest free dividend income of assessee by invoking the provisions of section 14A of the Act which was confirmed in appeal by the DRP – following the decision in CIT Vs. Hitachi Home and Life Solutions (I) Ltd. [2013 (7) TMI 359 - GUJARAT HIGH COURT] - where the assessee’s interest free funds exceed investment made for earning dividend income, disallowance u/s. 14A was not justified – disallowance of interest expenses deleted – Decided partly in favour of assessee.

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• 2014 (9) TMI 159
  Unexplained secured loans – Claim of interest disallowed – Held that:- The primary onus is on the assessee to conclusively prove the source of the sum of money found credited in the books of accounts of the assessee - the AO had asked the assessee time and again to furnish all the details but that requirement was partially complied with by the assessee - although the amounts were carried forward from the past years but in the absence of any verification in the past as prescribed u/s.68, then the AO in any of the subsequent year, when an amount is found credited in their accounts, then the A.O. is entitled to invoke the inquiry as prescribed u/s.68 of IT Act - Furnishing of PAN can lead to an inquiry from the concerned officer having jurisdiction over the creditor, but the creditworthiness was required to be independently investigated to accept the loan u/s 68 of IT Act - in a situation when on one hand the assessee has furnished the documents which were required to be investigated by the AO and on the other hand the AO has not thoroughly investigated those parties who have advanced the loans – the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of revenue. Interest expenses u/s 36(1)(iii) – Held that:- In the absence of any comparable instances the AO was not justified in presuming that the rate of interest was higher than the prevailing rate - for the purpose of the expansion of the business, the assessee was in need of the funds, and arranged the funds from private parties instead from banks and paid the interest @ 15% - the order of the CIT(A) is upheld – Decided against Revenue. Rejection of books of accounts – Held that:- Without placing on record any substantive defect in the books of account it was not justifiable on the part of the AO to presume that there was suppression of production - the production was also subject to scrutiny by Excise Department - The production accounts were therefore also subject to audit by the department - The assessee has also furnished the comparative figures of the turnover, also the corresponding profits earned from the past years – the order of the CIT(A) is upheld that in the absence of any particular defect in the books of accounts and in the absence of any material brought on record against the assessee, the AO was unjustified in estimating the percentage of the suppression of production – Decided against Revenue. Inclusion of Excise Duty in valuation of closing stock as per section 145A – Held that:- After the introduction of Section 145A the method of accounting has been streamlined - provision inspite of anything contained in Section 145 of IT Act the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "profits and gains of business or profession" shall be further adjusted to include the amount of any tax, duty, cess (by whatever name called) actually paid or incurred by the assessee as on the date of valuation - To appreciate the correct figures of Excise duty accounted for in the P&L A/c and as to whether it was transferred to the balance-sheet by the assessee, are not emerging from the facts of the case – the matter is required to be remitted back to the AO for fresh adjudication – Decided partly in favour of revenue. Commission expenses disallowed – Held that:- The commission was paid to the agents for procuring orders from outside and also getting payment on the sales which were executed through those agents - the TDS on commission was also deducted - this is not the case where payment of commission was made merely through account payee cheques but this is the case where the facts have revealed that the order have been procured and the sales were excluded through those commission agents, therefore, on payment of commission the TDS was deducted by the assessee – Decided in favour of Assessee.

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• 2014 (9) TMI 158
  Unpaid sundry creditors remained outstanding in books - addition made in respect of all the three creditors - when the matter went before CIT(A), CIT(A) deleted the addition - u/s 41(1) the onus is on the Revenue to prove that the Assessee has derived benefit by virtue of remission or cessation of a liability in respect of which the Assessee has earlier claimed deduction in his books of accounts - The liability does not get ceased or extinguished merely on the basis that the period of limitation prescribed under the Limitation Act has expired for taking any action for recovery of the amount by the creditor and the creditor will get prevented from enforcing the debt against the debtor – relying upon CCIT, Cochin vs. Kesaria Tea Company Ltd.[2002 (3) TMI 1 - SUPREME Court] – the order of the CIT(A) is upheld – Decided against Revenue. Genuineness of expenses – Business expenses paid as consultancy charges – Held that:- Revenue could not produce any cogent material or evidence which may prove that the finding given by the CIT(A) about the genuineness of the transaction is incorrect and are not based on the evidences produced by the Assessee during the course of the hearing before the AO as well as before the CIT(A) - the payment has been through cheque and TDS has been deducted - Statement of Shri Zoivant Cano was also recorded on oath and he has duly confirmed that he has received consultancy charges - The agreement need not be in writing - The situs of the services rendered must be proved - The proprietor of the firm is a Production Engineer and had experience in mining field - He has worked as Engineer in pelletizing plant of Mandovi Pellets Ltd. as shift incharge - He has also worked as manager of iron ore benefication plant in V.S. Dempo & Co. Pvt. Ltd. - He also started a Partnership firm providing screening and crushing services for iron ore under the name and style of M/s. P&R Screeners & Crushers – the order of the CIT(A) is upheld – Decided against Revenue. Restriction of labour charges – Held that:- As decided in assessee’e own case for the earlier assessment year, it has been held that disallowance was restricted to 10% of the total labour charges - no interference is called for in the order of CIT(A) restricting the disallowance to 10% of the labour charges as judicial discipline demands that the decision of the earlier year in the case of the Assessee by the ITAT has to be followed – the order of the CIT(A) is upheld – Decided against Revenue. Site development expenses disallowed – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the land taken by the Assessee on lease was for business purpose - The lease was for 5 years and after the expiry of the 5 years, Assessee has handed over the possession of the land to the lessor - The land taken for the business purpose was not in usable condition and the Assessee had to incur expenditure for levelling approach road etc. for making the land in workable condition for storage of iron ore - The expenditure as such as been incurred for the purpose of business and during the course of the business - The expenses were not personal expenditure of the Assessee – relying upon CIT vs. Hoechst Pharmaceuticals, [1977 (11) TMI 55 - BOMBAY High Court] - short period of 5 years cannot be said to be long period and that the Assessee could be said to have acquired or brought into existence an advantage of an enduring character - no enduring benefit has been derived by the Assessee by incurring the expenditure for site development as without incurring these expenses, the Assessee would not have been able to carry on its business - The expenditure cannot be regarded to be a capital expenditure – Decided against Revenue. Closing stock disallowed – Stock register not maintained – Held that:- The Assessee has segregated the stock to what extent it belonged to a particular supplier and has valued the same on that basis - CIT(A) has duly verified the same and noted some mistake in the working of the Assessee The stock was accordingly re-valued - This method has been consistently followed by the Assessee – the order of the CIT(A) is upheld – Decided against Revenue.

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• 2014 (9) TMI 157
  Inflated price debited u/s 40A(2)(b) - Whether the assessee has inflated turnover to show higher profit for obtaining and continuing loan from financial institution – Held that:- The assessee has also never brought this aspect before the AO that there are also fictitious sales - assessee has only filed before the AO a copy of ledger extracts of Entraco Power Systems Pvt. Ltd. in the books of Engineering Marketing Company Pvt. Ltd. and vice versa - The ledger extract of the other related concerns are not filed in the paper book – the matter requires fresh adjudication at the level of the AO – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of revenue. TDS u/s 40(a)(ia) not deducted as per chapter XVIIB – Held that:- Following the decision in Shri Antony D. Mundackal Versus The Assistant Commissioner of Income-tax [2013 (12) TMI 67 - ITAT COCHIN] – the arguments are being advanced before the Tribunal for the first time and the correctness of the contention has not been examined by the tax authorities – thus, the matter is remitted back to the Ao for fresh adjudication – Decided in favour of revenue. Payment made towards employees contribution of ESIC and PF – Payment made after the due date – Held that:- Although the PF & ESIC dues were not deposited within the statutory due date prescribed under the relevant Act, however, the same has been deposited within the same financial year, i.e. much prior to the due date of filing of the return - if the Employees Contribution to PF & ESIC, are deposited prior to the due date of filing of the return u/s.139(1), then the same cannot be disallowed - the assessee has deposited the PF & ESIC dues before the due date of filing of the return u/s 139(1) – the order of the CIT(A) is upheld – Decided against Revenue.

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• 2014 (9) TMI 156
  Determination of effective date for cost of acquisition - Computation of LTCG - Whether the cost of acquisition of the property is to be taken as on 09/08/1985 when the property was originally purchased by the assessees or as on December, 1987 when the respective shares of the property were distributed to the assessees on dissolution of the partnership firm – Held that:- The distribution of assets on dissolution of firm admittedly took place on 31st April, 1987 - the provisions of this section could not apply and the cost of acquisition shall not be the cost for which the previous owner of the property acquired it – as per section 45(4) of the Act, the profit or gains arising from transfer of capital asset by way of distribution of capital asset on dissolution of a firm or other association of persons, shall be chargeable to tax as income of the firm of the previous year for which the said transfer took place and for the purpose of section 48 of the Act, the Fair Market Value of the asset on the date of such transfer shall be deemed to be the full value of consideration received or acquired as a result of transfer - When the Fair Market Value of the asset as on date of dissolution of the firm is deemed to be the full value of consideration received or acquired as a result of transfer, the Fair Market Value shall be the cost of acquisition in the hands of the transferee/the partners who received the property/capital asset. The circular No. 495 dated 22nd September, 1987 issued by CBDT clarifies the doubt raised with regard to the computation of capital gain or profit & gains of the partnership firm on conversion of partnership asset into individual asset on dissolution of the firm - The Board has clarified that conversion of the partnership asset into individual asset on dissolution or otherwise also forms part of scheme of tax avoidance - Keeping in view the clarification given by the CBDT and the provisions of section 45(4) of the Act, it has been held that on dissolution of the firm, if the capital assets are distributed, the cost of acquisition of capital asset in the hands of the recipients or the partners, would be the Fair Market Value of the asset on the date of transfer, which was taken into account for computing the profit and gains of the firm on transfer of capital asset on its dissolution - the CIT(A) has properly adjudicated the issue and deleted the addition – Decided against Revenue.

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• 2014 (9) TMI 155
  Entitlement for deduction u/s 80P(4) – Effect of amendment to the statue - banking or credit facilities to its members - admission of any other co-operative society as a member of the co-operative society - Whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 – Held that:- The Assessee has not to be regarded to be a primary co-operative bank as all the three basic conditions are not complied with, therefore, it is not a co-operative bank and the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i) - the order of the CIT(A) is upheld in allowing deduction u/s 80P(2)(a)(i) to the assessee and direct the AO to allow deduction to the assessee u/s 80P(2)(a)(i) on the income generated for providing banking or credit facilities to its members. Whether the Assessee is a co-operative bank or not – Held that:- It is not necessary that the co-operative society should have a banking licence as per the definition under the Income Tax Act for carrying on banking business - If licence is not obtained it may be an illegal banking business under the other statute - The income has to be assessed u/s 14 of the Income Tax Act under the same head even if the nature of the business is illegal - the types of the deposits which the assessee has accepted as per bye-laws are the same as are being accepted during the course of the carrying out the banking activities - the paid up share capital and reserves in the case of the Assessee is more than Rs. 1 lac - the Assessee satisfies the second condition - Sec. 16 of The Karnataka State Co-operative Societies Act, 1959 permits admission of any other co-operative society as a member – Decided against Revenue.

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• 2014 (9) TMI 154
  Deduction u/s 80P(2)(a)(i) – Effect of amendment - banking or credit facilities to its members - admission of any other co-operative society as a member of the co-operative society - Whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 – Held that:- The aforesaid provision of Sec. 20 to 21A mandates admission of any other co-operative society as a member of the co-operative society - Section 21A further states that the co-operative society can be admitted as nominal or associate member for any specific purpose for any specific period as may be mentioned in the bye-laws - the society being a co-operative bank providing banking facilities to members is not eligible to claim deduction u/s 80P(2)(a)(i) after the introduction of sub-section (4) to section 80P - the Assessee was denied deduction u/s 80P(2)(a)(i) – relying upon ACIT vs Palhawas Primary Agriculture Co-operative Society Ltd. [2012 (10) TMI 276 - ITAT DELHI] - Section 80P(4) clearly excludes primary agriculture credit society from its domain - section 80P(2)(a)(i) nowhere talks of co-operative credit society and therefore the distinction made under the Banking Regulation Act cannot be imported u/s 80P(2)(a)(i) - the Assessee has not to be regarded to be a primary co-operative bank as all the three basic conditions are not complied, it is not a co-operative bank and the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i) – AO is directed to allow deduction to the assessee u/s 80P(2)(a)(i) on the income generated for providing banking or credit facilities to its members. Whether the Assessee is a co-operative bank or not – Held that:- If the co-operative society complied with all the three conditions - once the Assessee will not fall within the provisions of Sec. 80P(4), the Assessee will be eligible to get deduction u/s 80P(2)(a)(i) in respect of whole of the income which the Assessee derives from carrying on the business of banking or providing credit facilities to its members - it is not necessary that the co-operative society should have a banking licence as per the definition under the Income Tax Act for carrying on banking business - If licence is not obtained it may be an illegal banking business under the other statute - the paid up share capital and reserves in the case of the Assessee is more than Rs. 1 lac - the Assessee satisfies the second condition - Sec. 20 of The Karnataka Souharda Sahakari Act, 1997 permits admission of any other co-operative society as a member – Decided against Revenue.

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• Customs

• 2014 (9) TMI 191
  Acquittal of accused - Recovery of foreign and Indian currency - attempted to be exported in contravention of the provisions of the Customs Act and the Foreign Exchange Regulation Act, 1973 (“FERA’) - whether the bag recovery was belong to accused - retracted statement - Held that:- Once the confessional statement had been retracted it was necessary to seek corroboration of the facts adverted to therein. - The mystery of Mr. Grover carrying only one hand bag for visiting Hongkong without a change of clothes has not really been satisfactorily explained by the prosecution. One shaving kit was recovered from the cardboard carton and the other from the sea green suitcase. Why would the Respondent be carrying two shaving kits has also not been explained. The mere fact that one shaving kit was recovered from Mr. Grover and another from the Respondent does not lead to the conclusion that the Respondent was carrying Mr. Grover’s carrying shaving kit. Surprisingly the baggage tags were not consecutive which was even more surprising, if indeed both the bags had been checked in at the same time. There are too many unexplained facts and unanswered questions in the prosecution case which persuade the Court to agree with the reasoning and conclusion arrived at by the trial Court. The prosecution has been unable to prove the case against the Respondent beyond reasonable doubt. - Decided against the revenue.

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• 2014 (9) TMI 186
  Seizure of the imported goods - Jurisdiction of DRI - proper officer - import of Eucalyptol - Directorate of Revenue Intelligence, however, under a belief that the petitioners had made misdeclaration and the goods actually wore not “Eucalyptol” - Eucalyptol is classifiable under Customs Tariff Heading No. 2909 20 00 - Held that:- under notification dated 2-5-2012, the officers of DRI have not been assigned specific function of adjudication under Section 28 of the Customs Act. - Under the notification dated 7-3-2002, the officers of DRI have been given jurisdiction over the whole of India. Most significant notification is one of 6-7-2011. As noted, the notification, for the purpose of Section 2(34) of the Customs Act, assigns functions of the proper officer to the various officers including those under the Directorate of Revenue Intelligence, such as Additional Director, Joint Director, Deputy Directors and Assistant Directors for the purposes of Sections 17 and 28 of the Customs Act. The show cause notice was issued on 24-1-2013, that is, after the notification dated 6-7-2011. To our mind, therefore, respondent No. 1 had the jurisdiction to issue show cause notice. - Decided against the petitioner.

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• 2014 (9) TMI 185
  Recovery of irregular duty drawback - discrepancy in the show cause notice - period of limitation - allegation that the duty drawback claimed and paid for export of readymade garments of cotton was irregular/fraudulent - 100% EOU of Gemini Textile industries - Held that:- In the show cause notice all facts have been mentioned. The petitioners have been called upon to show cause as to why penalty should not be imposed on them under Section 114(iii) of the Customs Act, 1962. In the original show cause notice, the petitioners were not asked to show cause as to why the duty drawbacks should not be recovered. However, in the addendum dated 2-5-2002, the petitioners have been asked to show cause as to why the duty drawbacks drawn by them should not be recovered. A careful reading of the addendum shows that the changes to the original show cause notice do not structurally alter the show cause notice. Whatever is alleged in the show cause notice is virtually repeated in the addendum except calling upon the petitioners to show cause as to why the duty drawbacks should not be recovered. Therefore, it cannot be said that the addendum structurally alters the nature of the show cause notice and it is barred by limitation. - In fact no limitation has been prescribed for recovery of duty drawbacks. - petition dismissed - Decided against the assessee.

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• Service Tax

• 2014 (9) TMI 182
  Recovery of Cenvat Credit refunded under Rule 5 of CCR - export of services - input services - providing Management Consultancy Services - credit availed for the period when assessee was registered - Held that:- There is no dispute that the earlier the appellant's Bombay branch had service tax registration and subsequently when the Delhi branch started operating, for some period there was no separate registration till the centralized registration was obtained in respect of Delhi branch. There is no dispute about the receipt of the services. The Tribunal in case of C. Metric Solution Pvt. Ltd. (2012 (7) TMI 379 - CESTAT, AHMEDABAD) has held that in clear terms that Cenvat Credit in respect of inputs/input services received by an output service provider during period prior his obtaining service tax registration is admissible and denial of Cenvat Credit on the ground that at the time of receipt of inputs/input services by a output service provider, there was no registration with the Central Excise, is not correct. - demand set aside - Decided in favor of assessee.

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• 2014 (9) TMI 181
  Cable operator service - dispute about figures of subscriber base - huge difference between the figures of subscriber base as furnished by the appellant to the department and information received from the broadcasters - the statements of payments received from ICC by the broadcasters also corroborated - Held that:- for the determination of the short payment of service tax, Revenue has adopted the number of subscribers given in the agreements entered into by the appellant with the broad casters and the same has been compared with the figures adopted by the appellant for discharge of payment of service tax as declared in the statutory ST3 returns. Once the figures are taken from a written contract, which is in pursuance to a statute, namely, Telecom Regulatory Authority of India Act, 1997 and the regulations made thereunder, the same is beyond challenge. For the period subsequent to 10/09/2004, Section 73 which was substituted vide Finance Act, 2004, provided for rejection of declared value and determination of tax liability on the basis of the evidence available. Therefore, the confirmation of service tax demand on the basis of these legal provisions cannot be challenged/questioned. Once the liability to pay service tax is decided, the question of interest liability is automatic and consequential in terms of provisions of section 75 of the Finance Act, 1994. While the penalty under section 76 is for default/delay in the payment of service tax and no mens rea is required to be proved, penalty under section 78 involves mens rea on the part of the appellant. Prior to 10-5-2008 penalties under both the sections could be imposed simultaneously - However penalties cannot be imposed simultaneously under both the above sections with effect from 10-5-2008 as the law was amended to that effect. - demand of service tax and penalties confirmed - Decided against the assessee.

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• 2014 (9) TMI 180
  Advertising Agency Services - demand is on account of volume discount received from these media, write back of the amount in respect of payments not claimed by the print/electronic media and the rate difference between the amount actually charged from the advertiser and the amount paid to the media. - Held that:- These payments are made only as a gratuitous payments for the advertisements placed on the media. There is no contractual obligation between the advertising agency and the media for provision of any services. In the absence of such a contractual obligation, it is difficult to accept the Revenue's contention that on the incentives received, the appellant is liable to service tax under BAS. Decision in the case of P. Gautam & Co. [2011 (9) TMI 392 - CESTAT, AHMEDABAD] and Euro RSCG Advertising Ltd. [2006 (12) TMI 61 - CESTAT, BANGALORE] followed - Decided in favor of assessee.

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• 2014 (9) TMI 179
  Repair, alteration, renovation or restoration service - Commercial or Industrial Construction - whether the activity of interior work such as plastering of walls, tiling of floor, carpentry work, partition work, work relating to bathroom/toilets, etc. undertaken by the appellants would fall under clause (d) of Section 65 (25b) - Held that:- the activity undertaken by the appellants, as may be seen from the work orders placed before us, appears to merit classification under Clause (d) of Section 65 (25b). Consequently, the benefit of abatement would be available under Notification 1/2006. In respect of the period post 01/06/2007, where the appellants have discharged the service tax liability under Works Contract Service, they shall also produce the copies of the contracts to ascertain whether the contract was entered into prior to 01/06/2007 or afterwards. If the contracts were entered into prior to 01/06/2007, they would be governed by the provisions of Section 65 (25b) relating to ‘commercial or industrial construction service'. If the contracts were entered into on or after 01/06/2007, then they would be covered under the provisions of ‘Works Contract Service' as held by the hon'ble apex Court in the case of Nagarjuna Construction Co. Ltd. [2012 (11) TMI 404 - SUPREME COURT]. - Decided in favor of assessee by way of remand.

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• 2014 (9) TMI 178
  Erection commissioning or installation service - Exemption under Notification No. 12 of 2003-ST dated June 20, 2003 - exemption is denied also on for the reason that there was no sale of goods within the meaning of the word "sale" in section 2(h) of the Central Excise Act, 1944 and the "deemed sale" defined in article 366(29A)(f) of the Constitution of India - installation of retail visual identity elements (RVIs) and sign boards for petrol pumps. - Held that:- The excise authorities themselves are making out a case that the appellants manufactured and sold excisable goods to petrol pumps for executing the contract. No proof other than the value of excisable goods arrived at by the excise authorities will be required in respect of such items for the purpose of Notification No. 12/2003-ST. If there is proof in respect of bought out items supplied by the appellant it is for the appellant to submit such proof. Very nature of this case would justify extension of Cenvat credit of excise duty to be paid on goods manufactured if the appellant is not intending to avail of benefit of Notification No. 1/06-ST and 32/07-ST. Which course will be beneficial to the appellant will be known only on determination of the excise duty liability which is yet to be determined finally. The appellants have a plea that they have been paying service tax and filing regular service tax return and that the facts were known to the Department and hence there cannot be a charge of suppression against them. - stay granted - matter remanded back - decided in favor of assessee.

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• Central Excise

• 2014 (9) TMI 190
  Waiver of pre-deposit - Restriction of utilizing cenvat credit for default in making payment of duty of excise - recovery of duty with interest and penalty - defaulted payment was beyond a period of 30 days - Held that:- assessee has lost before the Commissioner (Appeals) during the first period from August, 2008 to March, 2009 and for the subsequent periods, the Commissioner (Appeals), taking note of the offer made by the assessee, was inclined to order pre-deposit of 50% of the duty confirmed. The learned Single Judge also confirmed the order of pre-deposit vide order [2013 (3) TMI 482 - MADRAS HIGH COURT]. The order passed by the Commissioner (Appeals) in Order-in-Appeal No.62/2013(M-IV), dated 20.2.2013, in respect of the first period is in favour of the Revenue. Therefore, balancing the interest of the Revenue and that of the assessee and taking note of the offer made by the assessee, interim order was passed by the Commissioner (Appeals) for the subsequent periods and the Tribunal also passed similar orders. We do not find any error in such exercise of discretion by the Tribunal. At this juncture, the learned counsel for the appellant pleaded that as a last chance one month's time may be granted for payment of the pre-deposit amount, as directed by the Tribunal. - time allowed - appeal restored before tribunal.

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• 2014 (9) TMI 189
  Waiver of pre-deposit - tribunal directed the petitioner to deposit a sum of Rs. 1.14 crores - petitioner raising various issues including the issue that the petitioner’s company has been referred to Board for Industrial and Financial Reconstruction (in short “BIFR”) and, therefore, the action for recovery of the amount is impermissible - held that:- The impugned order completely lacks the finding on the net-worth of the company, which is one of the factors to be considered at the time of consideration of an application for stay or waiver of pre-condition deposit under Section 35F of the Central Excise Act. There is no absolute bar in entertaining the writ petition despite the availability of a remedy by way of an appeal or otherwise provided under the statute. The Writ jurisdiction is based on rule of discretion than of compulsion. The power cannot be circumscribed in a narrow compass, as the language under Article 226 of the Constitution is designedly couched in a broader language and not confining it only to the power to issue a prerogative Writ as understood in English Law, but can reach where the injustice is found. The order impugned is set aside. The CESTAT is directed to consider the application afresh in the light of the law laid down in case of Sagarika Acoustronics Pvt. Ltd. (2007 (3) TMI 723 - Supreme Court of India) and the observations made in this order, and shall restrict its decision on the net-worth of the company on the basis of the records and materials already produced by the petitioner. - Decided in favor of assessee.

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• 2014 (9) TMI 188
  Rebate / refund under Rule 18 while claiming rebate under Rule 19 on Inputs - exports desk diaries through merchant exporter against form C.T.-I without payment of duty - Government (revisionary authority) while rejected the claim was of considered opinion that is the instant case goods were exported under the provisions of Rule 19 of Central Excise Rules, 2002 and therefore the benefit of rebate claim under Rule 18 ibid is not admissible in this case - Held that:- Whilst facially the DEPB Scheme and particularly Para 4.1 might be suggestive of the intent to confer the benefit only to exporters to use imported inputs, the larger intention of giving the benefit of duty drawback so as to level the ultimate amended cost of export products in the international market cannot be lost sight of. This is what weighed with the Bombay High Court in Indorama Textiles Ltd. [2006 (5) TMI 8 - HIGH COURT OF JUDICATURE (BOMBAY)], which supported its reasoning by the language adopted in Rule 18 which specifically talks of ‘rebate of duty paid on such excisable goods or duty paid on materials used in the manufacture or processing of such goods’. In order to consider the purport of Rule 18 of the 2002 Rules, Notification Nos. 19/2004 and 21/2004, dated 6-9-2004 issued by the Central Government are relevant. These two notifications are issued in exercise of power conferred by Rule 18 of the 2002 Rules for grant of rebate of duty on the excisable goods exported as well as grant of rebate of duty paid on the materials used in the manufacture or processing of such excisable goods respectively. These two notifications pertain to grant of rebate of duty paid on two different items. If the assessee is entitled to get rebate of duty paid on both the items, there was no necessity for the Central Government to issue two separate notifications requiring assessee to claim rebate separately on the duty paid on excisable goods and on inputs - Rebate claim allowed - Decided in favor of assessee.

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• 2014 (9) TMI 187
  Extended period of limitation - jurisdiction - dispute regarding valuation was settled by the larger bench of tribunal - clearances of cement to their own units - valuation under Rule 8 read with Rule 9 of the Central Excise Valuation Rules, 2000. - Held that:- Larger Bench in the case of Ispat Industries [2007 (2) TMI 5 - CESTAT, MUMBAI] had concluded that the provision of Rule 8 of the Valuation Rules would not apply in a case where some part of the production of goods were cleared to the independent buyers. Admittedly, in the instant case, there is a sale of loose cement to the independent buyers at a value higher than arrived at by the respondent for the discharge of the duty liability of the cement. Noticing the fact that regular monthly returns were being filed by the respondent from March, 2008 onwards, which were accepted by the authorities without any murmur, while fixing the higher value at which the sale was made to the independent buyers being the assessable value of goods transferred to another plant, extended period of limitation was not sustained by the Tribunal. Thus on both the counts, firstly that there came a decision explaining and clearing the doubts as to in what manner the valuation requires to be done in the event of captive consumption of goods as also in case of goods transferred to sister concern or to another factory of the same assessee and till then, board circular governed the field. And, also because from March, 2008 onwards. On regular basis, the monthly returns have been filed by the assessee respondent indicating all possible details. Thus, the Tribunal rightly turned down the demand of duty prior to the period of one year from the date of issuance of show cause notice dated 9-11-2009, holding the same to have been hit by the law of limitation. - Decided against the revenue.

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• 2014 (9) TMI 184
  Classification - rate of duty - Jurisdiction of high court - import of ‘worn clothing’ - 78 bales of Ladies Cotton Pant were found to be completely soaked and unfit for use. - restrictions in terms of Foreign Trade Policy the consignment - Held that:- The language of Section 130E is wide. Appeal to the Supreme Court lies not only from determination of duty or determination of valuation but determination of any question having relation to the rate of duty of customs or to the value of goods. Thus any decision which is in any way related to determination of any question having any relation to the rate of duty of customs or to the value of goods for the purpose of assessment is appealable before the Supreme Court and not the High Court. - appeal dismissed.

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• 2014 (9) TMI 183
  Restoration of appeal - earlier appeal was rejected by the tribunal for want of COD clearance - held that:- The impugned order of the learned Tribunal may have been passed on 22nd April, 2013, four days before the Division Bench delivered its judgment in Bharat Sanchar Nigam Ltd. v. Commissioner of Central Excise & Service Tax, Siliguri, Commissionerate [2014 (5) TMI 169 - Calcutta High Court]. The learned Tribunal ought, to have appreciated that its Larger Bench judgment in the case of Burn Standard [2013 (11) TMI 615 - CESTAT KOLKATA] could no longer be good law in view of the judgment and/or order of the Single Bench of this Court dated 3rd January, 2013 in W.P. No. 1009 of 2012 (Steel Authority of India Limited v. Customs, Excise and Service Tax Appellate Tribunal, East Zone), which was not interfered with or set aside by any higher forum. - Tribunal directed to dispose of the appeal/stay application as expeditiously as possible - Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2014 (9) TMI 177
  Waiver of pre deposit - Whether Appellate Tribunal Value Added Tax was justified and correct in directing the appellant-assessee to deposit 10% of the penalty amount as a pre-condition for hearing the appeal - Held that:- The total amount of tax and interest due, which already stands adjusted, is to the tune of Rs. 10,73,202/-. The total amount of penalty imposed is Rs. 7,99,340/-, out of which Rs. 4,68,096/- is already available with the Revenue as due and refundable. Revenue is not required to refund the said amount and is entitled to make adjustment. We feel in the facts of the present case that the appellant-assessee has made substantial deposits and there are legal issues and contentions, which require detailed adjudication and decision. Question of penalty itself would be a matter of debate in view of legal submissions. Judgment of the Supreme Court in Andhra Agencies (2008 (11) TMI 379 - SUPREME COURT OF INDIA) is relied upon by the appellant-assessee. Further, in terms of the certificate issued by M/s Hindustan Petroleum Corporation Limited, they have paid full tax without taking any adjustment in respect of incentives and discounts - stay granted.

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• 2014 (9) TMI 176
  Recovery of dues from the purchaser of property - Obligation of payment of duty on successor of property - purchaser claims that he had no knowledge of dues pending - malafide intention - Attachment of property - Charge on property - Held that:- Section 16-C of the A.P.G.S.T. Act, 1957 stipulated that, notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax, penalty, interest and any other sum, if any, payable by a dealer or any other person under the Act, shall be the first charge on the property of the dealer or such person. Section 17-A of the A.P.G.S.T. Act, 1957 provided that where, during the pendency of any proceeding under the Act or after completion thereof, any dealer creates a charge on, or parts with possession by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever of, any of his assets in favour of any other person, with the intention to defraud the revenue, such charge or transfer shall be void as against any claim in respect of any tax, or any other sum payable by the dealer as a result of the completion of the said proceeding or otherwise. It is only if the defaulting dealer proves that transfer of the property, which is subject to first charge under Section 26 of the A.P. VAT Act, is not with the intention to defraud revenue, would the transferee be entitled to claim title over the subject property for, otherwise, such transfer of property is void. Where property has been transferred and the defaulting dealer, who has transferred the property which is subject to a statutory charge under Section 26 of the A.P. VAT Act, does not discharge the onus of proving that the transfer was not with the intention to defraud revenue, a person, who has purchased such immovable property from the defaulting dealer, cannot claim protection either of Section 53 of the Transfer of Property Act or of Section 100 thereof, on the ground that he is a bonafide purchaser of the property for valid consideration and without notice of the charge. Even after a notice was issued in Form IV, the 4th respondent did not dispute their liability to pay arrears of VAT for the years 2005-06 and 2006-07 and, instead, made part-payment. Though notice of this Writ Petition was served on the 4th respondent, no counter-affidavit has been filed by them to show that transfer of property, during pendency of proceedings under the A.P. VAT Act for the years 2005-06 and 2006-07, was not with the intention to defraud the revenue. It is made clear that in case the petitioner makes payment of the tax arrears, due from the 4th respondent prior to the date of transfer i.e., 17.03.2007, within four weeks from today the subject property shall not be put to sale. On such payment it is open to the petitioner to institute appropriate legal proceedings to recover the amount, paid by them to the revenue, from the 4th respondent. It is also made clear that, in case the petitioner does not make payment within four weeks from today, it is open to the respondents to bring the charged property to sale for recovery of the tax arrears due from the 4th respondent prior to the date of transfer i.e., 17.03.2007. - Decided against the petitioner.

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• 2014 (9) TMI 175
  Exemption from tax - concessions and relief to the new entrepreneurs for starting rubber industries - benefit allowed to all industries be it new or old or allowed to only new industries - whether office order to be considered as Notification - G.O. Ms. No. 124/88/ID dated August 31, 1988 versus notification No. 1091/99 with retrospective effect from August 31, 1988 - Whether the respondent-assessees are entitled to the benefit of concessional rate of tax as vouchsafed under G.O. Ms. No. 124/88/ID dated August 31, 1988 - Held that:- G.O. Ms. No. 124/88/ID is not published in the gazette. In S.R.O. No. 1091/99, it is specifically stated that it is issued under the provisions of the Act. If we are persuaded to hold that G.O. Ms. No. 124/88/ID is not published in the gazette and therefore, it cannot be treated as a notification, it cannot be treated as a notification issued under section 10 of the Act, which was superseded and therefore, the respondent-assessees would be entitled to the benefit of reduced rate of tax. According to the learned Government Pleader, while it is true that in the Bill, there was an Explanation and in the law as finally made, the Explanation was omitted, unless and until G.O. Ms. No. 124/88/ID conforms to the definition of the word "notification", it cannot hold good after the insertion of the definition of the word "notification" in the Act. Non obstante clause refers to the judgments rendered and the intention of the Legislature to provide that any notification existing as on the date, despite any judgments to the contrary, which do not conform to the main provision of the definition, shall not be treated as a notification issued under the provisions of the Act. G.O. Ms. No. 124/ 88/ID was published on August 31, 1988. It was published by the Industries Department of the State of Kerala. It was intending to encourage the industrial activities of the State, especially rubber based industries, it was issued. Among the benefits vouchsafed under the said Government Order, was the grant of concession in the matter of rate of tax in respect of products sold by rubber industries situated in the State of Kerala. Government Pleader has not shown to us that the said G.O. was withdrawn by the Government or modified. Unless the G.O. is withdrawn or modified, that would continue to remain in force. This controversy earlier also came up before this court and then a learned single judge of this court in Thamarappally Rubber Products v. Additional Sales Tax Officer [1994 (2) TMI 282 - KERALA HIGH COURT] held that it could be seen from the order that the Government had issued orders to the effect that the sales tax on finished rubber goods had been reduced to three per cent. There was no justification for the State to contend that this notification had not been issued under section 10 of the Kerala General Sales Tax Act, 1963. Therefore, the liability of the petitioner was only to pay tax at three per cent on finished rubber products from factories in Kerala. Whether G.O. Ms. No. 124/88/ID, which is a Government Order and that too, issued by the Industries Department in the year 1988, would be affected by the insertion of the definition of the word "notification" in the year 1998 - Held that:- In exercise of the powers conferred under section 10 of the Act and in supersession of the notifications mentioned in the Schedule, the Government proposed various deductions. When we contrast the wording of the aforesaid notification with the wording of S.R.O. No. 1091/99, it is quite clear that the intention of the Government was that once S.R.O. No. 1091/99 came into force, all earlier notifications which were in force as on December 31, 1999, except the notification which was expressly saved, were to cease to exist. The significance of this difference is sufficient to answer the contentions raised by the learned counsel for the party respondents that G.O. Ms. No. 124/88/ID was not expressly referred to and superseded. We are of the view that it is not necessary to expressly refer to G.O. Ms. No. 124/88/ID when the intention of the Government was that there must be one compendious notification, providing for reduced rate of tax as stated in S.R.O. No. 1091/99. Government intended to give the benefit of concessional rate on those units which were governed by S.R.O. No. 968/80 also. Likewise, S.R.O. No. 654/89 provided for exemption in respect of tax payable on the sale of goods produced and sold by the new industrial units for a period of five years from the date of commencement of the sale, subject to certain conditions. The same came into force with effect from April 1, 1989. What is relevant is that the notification did not specifically withdraw G.O. Ms. No. 124/88/ID. More importantly, the Government in the policy decision in G.O. Ms. No. 17/92 dated January 24, 1992, specifically directed that the concessions announced in G.O. Ms. No. 124/88/ID will continue. G.O. Ms. No. 124/88/ID has to be held as a notification issued under section 10 of the Act, despite the insertion of the word "notification" in the definition clause of the Act. The definition clause would have prospective operation and if the notification is issued after the date of such notification, it must fulfil the requirements in the definition. - G.O. Ms. No. 124/88/ID would continue to have efficacy as a notification issued under section 10 of the Act as held by the Division Bench of this court only till the date of S.R.O. No. 1091/99. In other words, from January 1, 2000, G.O. Ms. No. 124/88/ID cannot be in force - Decided against Revenue.

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• 2014 (9) TMI 174
  Tax liability under section 6B of the Karnataka Sales Tax Act, 1957 - sale from one oil company to another oil company - levy of resale tax - fiction created by the third proviso to section 5(3)(a) - whether the order passed by the learned single judge holding that the assessee has no liability under section 6B of the Act is sustainable or not - Held that:- On a reading of section 6B of the Act, it is obvious that the liability under this section is on all registered dealers and those who are liable to get registered in respect of their total turnover but excluding such part of the turnover in respect of which the dealer is liable to pay tax under sections 5A, 5B, 5C or 6 of the Act. That means the turnover which is liable for tax in these sections is kept out of the purview of the resale tax under section 6B of the Act. The argument on behalf of the assessee-dealers is that though they enjoy exemption either under the second proviso to section 5(3)(a) of the Act, as in the case of the writ petitioner, or under the third proviso of section 5(3)(a) of the Act, as in the case of the revision petitioner and the appellant in revision petition and sales tax appeal respectively, such turnover, i.e., part of the turnover of sales or transfer from one oil company to another oil company and turnover relating to sale of goods by manufacture and supply of goods to a brand owner to market under its brand name continues to be liable though they may get such exemption under section 5 of the Act. This argument is fallacious for the reason that under the proviso to section 5(3)(a) of the Act, tax liability is exonerated on such dealers and they neither pay tax nor are they liable in respect of such part of the turnover under section 5 of the Act. The other sub-sections and levy of tax under sections 5A, 5B, 5C or 6 of the Act being in the alternative, they are not liable under any of these other provisions also and therefore even in respect of such turnover which is a transfer from one oil company to another, supply of goods by manufacturer to a brand holder, it is nevertheless, forming part of the turnover for the purpose of section 6B of the Act is not acceptable. On perusal of the charging section, section 6B of the Act which is an independent charging section, it is quite clear as to the nature of levy and the situation when the levy is attracted. In fact, reliance placed by the learned Government Advocate on the judgment of the Supreme Court in the case of Municipal Council, Kota v. Delhi Cloth & General Mills Co. Ltd. [2001 (3) TMI 91 - SUPREME Court] wherein the Supreme Court had an occasion to consider the nature of levy under that Act which was captioned "dharmada", caption though was "water tax" is not tax on water nor was on its production and applying this ratio, holding that the real character or nature of levy alone is determinative and not nomenclature, motive or wrong reasons, etc., and had concluded that "dharmada" levy raised for specific purposes, it was, nevertheless, in the nature of an octroi and did not amount to double taxation and therefore was a levy in the competence of State Legislature. Liability under provisions of section 6B of the Act from the scope of which is excluded that part of the turnover which is liable to tax under sections 5, 5A, 5B, 5C and 6 of the Act and in the instant case we are concerned only with the dealers who are governed by the second and third provisos to section 5(3)(a) of the Act and in their hands there is no liability under section 5(3)(a) of the Act and therefore such part of the turnover which is not having liability under section 5(3)(a) of the Act in the hands of the dealers concerned, nevertheless, can, definitely, form subject-matter of levy of the tax under section 6B of the Act. If the fiction created under the proviso to section 5(3)(a) of the Act cannot be extended, then we notice that for the applicability of tenth proviso to section 6B of the Act and on the language of the tenth proviso, no case is made out for the assessee-dealer either about the amount paid or payable by the dealer as consideration for purchase of any of the goods in respect of which tax is leviable at the point of sale, in particular, in fact at the point of sale there is no liability and therefore payment of any tax at the point of sale in the hands of such dealers covered by second and third provisos to section 5(3)(a) of the Act does not arise. Therefore, tenth proviso to section 6B of the Act has no application to the assessees. The assessees are not liable to tax under section 5 of the Act as no liability was created in terms of the proviso to section 5(3)(a) of the Act, liability that matters for the purpose of section 6B of the Act being such part of the turnover in respect of which there is no liability under sections 5, 5A, 5B, 5C and 6 of the Act and there being no liability as noticed above, provisions of section 6B of the Act in respect of disputed turnover is very much attracted. - Decided against assessee.

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