Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 7, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
Highlights / Catch Notes
Income Tax
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Disallowance under Section 14A - whether disallowance can be made in a year in which no exempt income has been earned or received by the Assessee? - Section 14A will not apply if no exempt income is received or receivable during the relevant previous year - HC
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Nature of addition made u/s 68 - cash credit - Once it is so done for the purpose of set off or any other purpose, the said unexplained income cannot be treated as business income under any one of the head provided under Section 14 in which case the question of set off does not arise. - HC
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Validity of reopening of assessment - Non deduction of TDS - without application of mind they had disposed of the matter. - CIT(A) shall decide the question as regards the legality of exercise of power under Sections 147 and 148 - HC
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Disallowance of Egypt tour expenses - AO disallowed the expenses mainly on the ground that there was no basis for the provision and the tour was actually conducted in the next year and all the expenditures were actually incurred in next year - Expenses allowed - AT
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Revision u/s 263 - The Commissioner exercising the powers u/s 263 of the Act cannot direct a second investigation without first finding the order erroneous and that too such an extent that it is prejudicial to the interests of the Revenue. Pointing out of an error by the Commissioner is not an empty formality. - AT
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MAT - Book profit - Amortization of lease hold land has been made as per accounting standard 10 of ICAI and amortization of land unclassified as per Accounting Standard 6 of ICAI and in view of CAG, which has been done to meet the requirement of companies Act and amortization of land is permitted u/s 115JB. - AT
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Disallowance of expenditure of “Additional discount/rate difference” - appellant has not furnished any evidence to support its claim - Since the payments were withheld the assessee could have claimed as a bad debt, which was not done - No allowance - AT
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Eligibility for exemption U/s.10A - the “profit” will remain the same, since “telecommunication charge” is excluded from both “debit” side and “credit” side of the “profit and loss account”, however the “export turnover” and the “total turnover” will stand reduced to the extent of “telecommunication charges” so excluded - AT
Customs
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Levy of duty on goods actually imported – Revenue in its show cause stated that quantity of crude oil mentioned in various bills of lading should be basis for payment of duty, and not quantity actually received into shore tanks in India - contention of the revenue rejected - SC
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Classification of goods as "auto analysers" or "photometers" – Admitted fact that models BTS 310 and BTS 320 were imported with inbuilt software that contained programmes for analysis and interpretation – From this it does not follow that what has been imported is only photometer - SC
Indian Laws
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Dishonour of cheque - The advance cheques issued towards payment of rent when deposited for realization of the rent for the said period were dishonoured upon presentation - The respondents are convicted of the offences under Section 138 of the NI Act- HC
Service Tax
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Denial of refund claim - Once the debit is made at the instructions of the audit team, the Revenue is under a legal obligation to initiate proceedings for confirmation of the amount in question, by deciding on the disputed legal issue. No such proceedings, by way of show-cause notice stands initiated against the appellants - refund allowed - AT
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Club or Association Service - Amount received from Vanprashta Ashram Donations - Petitioner has made out a prima facie case though not a strong prima facie case, in respect of its immunity on this demand. - AT
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Amway distributor - Receipt of commission - an individual cannot be faulted if she thought that she was only a dealer; a difference between the purchase price and the sale price or MRP is available to her and therefore - no demand of service tax invoking extended period of limitation - AT
Central Excise
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Classification - printing biri wrappers cut to size - Classification under Chapter sub-heading 4821.00 or under Chapter Heading 4823.19 - the goods in question would fall under Item No. 4901.90 which attracts nil duty - SC
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SSI Exemption - Use of brand name - significance of evidence - In the absence of any evidence except the single document, which had no description of the goods, the said document purporting to be a sales statement cannot be treated as containing the figures of sale of Maharaja brand mixer-grinders manufactured and cleared - HC
VAT
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Validity of Compounding Scheme – Relief to declare compounding scheme to be ultra vires, is not entertainable inasmuch as on one hand petitioners have prayed for declaring scheme to be ultra vires and on other hand they prayed that benefit of scheme be provided to them for part of period - HC
Case Laws:
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Income Tax
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2015 (9) TMI 239
Monetary limit for filing an appeal - ‘Tax effect’ less than the prescribed limit – instructions dated 9.2.2011 – Held that:- It is not a matter of dispute, that all the appeals were preferred prior to 2011, whereas, the instructions dated 9.2.2011 clearly indicate in paragraph 11 thereof, that they shall not govern cases which have been filed before 2011, and that, the same will govern only such cases which are filed after the issuance of the aforesaid instructions dated 9.2.2011. The matters are remitted back to the High Court for re-adjudication of the appeals on merits, in accordance with law.
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2015 (9) TMI 238
Disallowance under Section 14A - whether disallowance can be made in a year in which no exempt income has been earned or received by the Assessee? - Held that:- In the present case, the factual position that has not been disputed is that the investment by the Assessee in the shares of Max India Ltd. is in the form of a strategic investment. Since the business of the Assessee is of holding investments, the interest expenditure must be held to have been incurred for holding and maintaining such investment. The interest expenditure incurred by the Assessee is in relation to such investments which gives rise to income which does not form part of total income. In light of the clear exposition of the law in Holcim India (P) Ltd. (2014 (9) TMI 434 - DELHI HIGH COURT) and in view of the admitted factual position in this case that the Assessee has made strategic investment in shares of Max India Ltd.; that no exempted income was earned by the Assessee in the relevant AY and since the genuineness of the expenditure incurred by the Assessee is not in doubt, the question framed is required to be answered in favour of the Assessee and against the Revenue. The Court answers the question framed by holding that the expression “does not form part of the total income” in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. Consequently, the impugned order of the ITAT is set aside and the appeal is allowed in the above terms - Decided in favour of assessee.
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2015 (9) TMI 237
Validity of assessment u/s 153A - Whether any proceedings at all could have been initiated against the Assessee/respondent under Section 153A without there being a search warrant in her name issued in terms of Section 132 read with Rule 112 of the Income Tax Rules 1962 and Form 45 thereof? - Held that:- It is evident from Rule 112 read with Form 45 that the search warrant has to be issued in the name of the person. The search warrant will also have to indicate the place of search. The documents placed on record by the Respondent Assessee shows that while there was search warrant in the name of Mr. Raj Kumar Singhania, the father of the Respondent, there was no separate search warrant in the name of the Respondent. The panchnama dated 7th July 2006 with reference to search of locker No. 111 of the Respondent, refers to the said proceedings being in continuation of the earlier search proceedings which took place on 23rd June 2006. The search proceedings on 23rd June 2006 was on the basis of the search warrant issued in the name of the father of the Respondent and not the Respondent. As already noted, the Revenue has been unable to produce till date any record to show that there was any search warrant issued in the name of the Respondent. Respondent’s contention is correct that with the Department not having proceeded to search the locker No. 111 on 23rd June 2006 itself and having completed the search proceedings on that date by 5.15 pm, if it thereafter proposed to search locker No. 111 belonging to the Respondent, it ought to have issued a separate search warrant in her name, specifying the place of search that was undertaken on 7th July 2006. Alternatively, if the Department wanted to continue with the search warrant issued on 23rd June 2006 in the name of Mr. Raj Kumar Singhania and proceed to open locker No.111, then they could not have instituted separate proceedings against the Respondent under Section 153A without there being any separate search warrant in her name. Consequently, the Court is satisfied that apart from other reasons mentioned in the impugned order of the ITAT, the proceedings under Section 153A against the Respondent was itself without the authority of law. - Decided in favour of assessee.
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2015 (9) TMI 236
Revision u/s 263 - Assessing Officer had allowed the assessee's claim of deduction on account of premium paid on buyback of shares by merely assuming the facts, without applying his mind as per CIT(A) - Held that:- Assessing Officer as well as the Tribunal were satisfied that the amount paid by the Respondent-Assessee to buy-back shares of one group of share holders was only for the purpose of ensuring that it can run its business smoothly and more profitably. This is essentially a finding of fact. It would be pertinent to point out that the impugned order of the Tribunal also relies upon its order in Chemosyn Ltd. (2012 (9) TMI 804 - ITAT MUMBAI) arising on an identical facts. The Revenue carried the above order. This Court by order [2015 (2) TMI 863 - BOMBAY HIGH COURT] dismissed the Revenue's appeal holding that expenditure so incurred by the Respondent-Assessee for purchase of shares and subsequent cancellation thereof was only for the purpose of enabling smooth running of its business. It was further held that the aforesaid finding is essentially a finding of fact and the Revenue was not able to show that the finding is in any manner perverse and/or arbitrary. The above observation applies with equal force to the present facts. Decision of the Apex Court in the case of Brooke Bond [1997 (2) TMI 11 - SUPREME Court] is inapplicable to the present facts. In view of the above, it cannot be said that the order of the Assessing Officer is erroneous for the purpose of exercising of power under Section 263 of the Act. In any event, at the very highest, the issue would be a debatable issue and in these circumstances, the exercise of power by the Commissioner of Income Tax under Section 263 of the Act is not valid. - Decided in favour of assessee.
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2015 (9) TMI 235
Validity of assessment u/s 153A framed on a non-existent entity - ITAT referring to the decision of CIT v. Vived Marketing Services Pvt. Ltd. (2009 (9) TMI 917 - Delhi high court) which held that an assessment could not be validly framed on a non-existent entity - Held that:- Recently this Court in CIT v. Images Credit and Portfolio Pvt. Ltd (2015 (9) TMI 234 - DELHI HIGH COURT) held that proceedings under Section 153C could not be initiated against an entity that had ceased to exist at the relevant time. Similarly in Spice Enfotainment Ltd. v. CIT (2011 (8) TMI 544 - DELHI HIGH COURT) it was held by this Court that the defect of passing an assessment order in respect of an entity that had ceased to exist on the date of such order, could not be treated as a mere procedural defect. The mere fact that the Respondent communicated to the AO, prior to the Assessment order and subsequent notice, in its name without disclosing the fact of amalgamation with OPPL, will not cure the fundamental defect of the assessment having been framed against an entity that had ceased to exist in the eye of law. - Thus the impugned common order of the ITAT does not call for interference - Decided against revenue.
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2015 (9) TMI 234
Validity of proceedings u/s 153A - notice was issued under Section 153C on a date when the noticee has ceased to exist in the eyes of law - ITAT quashed proceedings - Held that:- De hors the decision in Spice Enfotainment Ltd. (2011 (8) TMI 544 - DELHI HIGH COURT) the undisputed fact is that on the date on which the notice was issued to the Respondent under Section 153C of the Act i.e. 10th September 2010 it was an entity that has ceased to exist in the eyes of law. The mere use of the noticee’s letterhead to address correspondence to the AO cannot tantamount to reviving an entity which has already ceased to exist. Further the mere fact that in the assessment order the AO has said that the Respondent had amalgamated with SAPL could not cure the fundamental defect in the very proceedings initiated under Section 153C of the Act i.e. a notice being issued to an entity which does not exist in the eyes of law. In that view of the matter, the Court is satisfied that the ITAT has committed no legal error in coming to the conclusion that the entire proceedings initiated under Section 153C of the Act stood vitiated and deserves to be quashed. - Decided in favour of assessee.
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2015 (9) TMI 233
Assessment of profit from commodity trading as cash credit under Section 68 - set off of current years business loss as well as brought forward losses/unabsorbed depreciation against the income assessed - transactions showing generation of commodity trading profit were sham and bogus transactions without any element of genuineness as confirmed by ITAT - Whether having confirmed the addition of the alleged commodity trading profit as unexplained cash credit under Section 68 of the Act, whether the Tribunal was justified in allowing set off? - Held that:- Answer to this question should be in the negative. This is evident from the judgment of the Gujarat High Court in Fakir Mohmed Haji Hassam v. CIT (2000 (8) TMI 44 - GUJARAT High Court) distinguished by the Tribunal itself where it has been held that when income cannot be classified under any one of the heads of income under Section 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. Insofar as this case is concerned, admittedly the income has been treated as unexplained cash credit under Section 68 of the Act. Once it is so done for the purpose of set off or any other purpose, the said unexplained income cannot be treated as business income under any one of the head provided under Section 14 in which case the question of set off does not arise. Insofar as the Supreme Court judgment in Lakhmichand Baijnath v. Commissioner of Income Tax, West Bengal (1958 (11) TMI 3 - SUPREME Court) relying on which the Calcutta High Court has rendered its judgment in Daulatram Rawat Mull v. CIT (1966 (4) TMI 73 - CALCUTTA HIGH COURT) is concerned, reading of the judgment itself show that the disputed income therein was assessed by the Assessing Officer as concealed profits of the business. This finding of the Assessing Officer was confirmed by the First Appellate Authority, Tribunal, High Court and the Supreme Court. Therefore, the decision rendered on the basis of such a conclusion could not have been of any assistance to arrive at the conclusion of the Tribunal that the assessee was entitled to set off the unexplained income under Section 68 of the Act in accordance with the provisions of the Act relating to set off. We, therefore, set aside the order passed by the Tribunal, to the extent it has set aside the order of the Commissioner of Income Tax (Appeals) directing the Assessing Officer to allow the set off of current year business loss as well as brought forward business loss/unabsorbed depreciation against income assessed under Section 68 of the Act. - Decided in favour of the Revenue.
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2015 (9) TMI 232
Application seeking approval under Section 10(23-C)(VI) rejected - Held that:- Prescribed authority has to ascertain whether the educational institution has been applying its profit wholly and exclusively to the objects for which the institution is established. Merely because institution has earned profit would not be deciding factor to conclude that educational institute exists for profit. To decide the entitlement of institution for exemption under Section 10(23-C)(VI) of the Income Tax Act the test of pre-dominant object of the activity has to be applied by posing the question whether it exists mainly for education and not to earn profit. The perusal of objects of the society/trust would make it clear that predominant object of the trust/society is to impart education besides other charitable purposes. Inclusion of other consequential charitable purposes as mentioned in the trust deed would not lead to the conclusion that institution was established to earn profit.In view of the above, order impugned does not sustain in the eyes of law and is hereby quashed. Consequently, present petition succeeds and is hereby allowed. The Chief Commissioner of Income Tax, Dehradun is directed to decide the application moved by the petitioner afresh in the light of observations made hereinbefore preferably within 90 days from today. - Decided in favour of assessee.
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2015 (9) TMI 231
Reopening of assessment - whether the Tribunal erred in holding that the issue of notice u/s 148 was bad in law as the proceedings initiated were merely on the change of opinion? - whether the facts that the issue of completion of project was never before the Assessing Officer in the course of proceedings u/s 143(3) and the Assessing Officer, in the original assessment order u/s 143(3) had not formed any opinion about the completion of the project? - Held that:- The impugned order of the Tribunal records the fact that the assessment orders passed in regular assessment proceedings in the subject assessment years has held that conditions laid down in Section 80IB(10) of the Act had been fulfilled by the respondent-assessee. This itself presupposes that the order of assessment passed in the two subject assessment years had applied its mind to the eligibility of the respondent-assessee to the benefit of deduction under Section 80IB(10) of the Act. The impugned order of the Tribunal cannot be found fault with. Moreover, the impugned order merely records a finding of fact which is evident from the order of the Assessing Officer passed in regular assessment proceedings for the two subject years. This finding of fact is not shown to be perverse or arbitrary. Thus the question as formulated does not give rise to any substantial question of law. - Decided against revenue.
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2015 (9) TMI 230
Reverse of ex parte order passed by ITAT - whether such change of opinion is sustainable in law? - Held that:- Admittedly Paper Book filed by the appellant does not contain the Miscellaneous Petition filed by the respondent before the Tribunal for recalling the order dated 21st February, 2003 and the order passed thereon. As it appears that the Tribunal had recalled the order dated 21st February, 2003 and had proceeded to hear the appeal afresh after giving notice to the parties and had passed the impugned order, in view of the law laid down in Income Tax Officer vs. Murlidhar Sarda (1973 (6) TMI 21 - CALCUTTA High Court) and in Khaitan Paper & Industries Ltd (2004 (4) TMI 15 - CALCUTTA High Court ), the question no.(i) is answered in the negative, against the Revenue and in favour of the assessee. Expenditure incurred for project expenditure - AO disallowed the expenditure as it was not related to the current year’s income - CIT(A) and ITAT allowed claim - Held that:- In our view since the project was abandoned in the assessment year 1995-96 and the entire expenses was written off during the said assessment year, the issue stands covered by the judgment in Binani Cements [2015 (3) TMI 849 - CALCUTTA] wherein it was held that “The decision to abandon the project was the cause for claiming the deduction. The decision was taken in the relevant year. It can therefore be safely concluded that the expenditure arose in the relevant year. - Decided in favour of the assessee. Deferred Revenue expenditure - ITAT allowed claim - Held that:- Since section 43B of the Income Tax Act deals with certain deductions to be made on actual payment, that is payment of tax, duty, cess or fee, or any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees or other deduction as referred to in section 36 or any sum payable by the assessee as interest on any loan or advance or any sum payable by the assessee as an employee in lieu of any leave at the credit of his employer or any sum payable as interest on any loan or borrowing from any public financial institution in accordance with the terms and conditions, which does not have any bearing on the subject matter in issue, and as we find that the Tribunal, while allowing the matter had directed the Assessing Officer to verify whether the claim of ₹ 4,60,000/- is already embedded in the amount of ₹ 31,83,750/- and after verification to allow deduction on the actual amount written off by the assessee during these years, the question need not be answered.- Decided in favour of the assessee.
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2015 (9) TMI 229
Addition u/s 69 - Unexplained investments - ITAT deleted the addition - Held that:- AO has made the addition merely on the basis of papers seized from the possession of K.K.Mahipal, the assessee’s brother. Save and except the said papers, the Assessing Officer did not bring any corroborative material to prove that the assessee and his other family members had advanced the said amount to K.K.Mahipal. In order to saddle the assessee with such addition of income, in our view, the materials sought to be relied on have to be corroborated. In the instant case, it was neither corroborated nor the assessee, at any stage of the proceedings, was confronted with the said seized documents. - Decided against the revenue. Addition of capital gains received on surrender of tenancy right under section 55(2)(a) - ITAT deleted the addition - Held that:- As found by the Tribunal, in view of section 158BB in the absence of any corroborative evidence the addition cannot be made on the basis of presumption. The judgement in CIT vs. Ashim Krishna Mondal (2004 (7) TMI 80 - CALCUTTA High Court) very succinctly lays down the principle of law that computation is different from estimation and computing an income under section 158BB cannot be on the basis of conjecture and surmise. In the case in hand, as the addition of ₹ 25 lakhs was made in violation of section 158BB which stipulates that computation has to be made on the basis of material or information available with the Assessing Officer which is lacking in the instant case, and as in our view, the statement made on 20th February, 1998 by the respondent was incomplete and thus as the addition of ₹ 25 lakhs was solely on the basis of surmise and conjecture - Decided against the revenue.
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2015 (9) TMI 228
Revision u/s 263 - CIT(A) setting aside the order passed by AO wherein he allowed interest paid in respect of income by way of dividend exempt under section 10(34) against taxable income, contrary to the provisions of section 14A of the Act - ITAT set aside revision orders - Held that:- Under the amended provisions, the authority of the Assessing Officer has been whittled down. Jurisdiction conferred is purely an arithmetical exercise. An Assessing Officer has to look whether tax or interest is due on the basis of return filed by the assessee after adjustment or any refund is due to the assessee on the basis of return filed. Therefore, on or after 1st June, 1999 law does not confer jurisdiction on the Assessing Officer to disallow any expenditure claimed in the return of income while preparing the intimating under Section 143(1). A.O.'s order u/s 143(1) preparing an intimation on 16.10.01 is not erroneous and prejudicial to the interest of the revenue mere because that no disallowance of expenditure relating to earning of exempted dividend income was made by the A.O., in his intimation sent u/s 143(1) of the Act, inasmuch as, there was no scope of making such disallowance while preparing the intimation u/s 143(1) of the Act as would be evident from the provisions contained in section 143(1) of the Act effected from 1.6.99. We, therefore, hold that the CIT’s order u/s 263 is without jurisdiction and is liable to be set aside - Decided in favour of assessee.
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2015 (9) TMI 227
Validity of reopening of assessment - non deduction of TDS - Whether the power under Section 148 was exercised by the Assessing Officer due to any change of opinion or the income had really escaped assessment was essentially a question of fact - contention of the assessee was that tax was not deducted because it was not deductible - ITAT allowed assessee appeal - Held that:- Some amount of exercise in order to find out whether the contention of the assessee was correct was required both on the part of the CIT(A) and the Tribunal, regard being had to the fact that they are the fact finding authorities. Surprisingly they did not think it necessary to do any such thing and proceeded to dispose of the matter merely on the basis that the exercise of power was based on change of opinion. We have no doubt in our mind that without application of mind they had disposed of the matter. In the circumstances, both the orders passed by the CIT(A) and the Tribunal are set aside. The matter is remanded to the CIT(A) for a decision afresh. The CIT(A) shall decide the question as regards the legality of exercise of power under Sections 147 and 148 after going into the claims and contentions raised by the assessee including the submission that no tax was deductible at source. - Decided in favour of revenue for statsitical purposes.
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2015 (9) TMI 226
Jurisdiction under section 132A to continue to seize the cash - writ prayed directing the respondents to release cash of ₹ 32,64,560/- with interest at the rate of 15% per annum from the date of seizure till the date of payment - Held that:- When the petitioner failed to disclose the source of the aforesaid huge amount of cash and even his explanation was found to be incorrect and/or the petitioner could not substantiate his initial claim that the said amount was received by him from his father and family members by selling jeweleries and thereafter after recording the reasons when the amount has been requisitioned after valid authorisation, it cannot be said that the authorisation under section 132A of the IT Act is illegal, unauthorised and/or contrary to the provisions of the Act. So far as the prayer of the petitioner to release the balance amount after deducting tax on the aforesaid amount of ₹ 32,64,560/- treating the said amount as undisclosed income of the petitioner in the AY 2014-15 is concerned, as such considering section 153A of the IT Act the same is not required to be granted. In any case, application of the petitioner for release of the cash is pending before the appropriate authority / concerned AO, Palanpur office and considering proviso to section 132B of the IT Act, it is ultimately for the concerned AO to pass appropriate order on the application of the petitioner for release of the cash. It appears that no order has been passed by the concerned AO on the application submitted by the petitioner for release of the cash seized / requisitioned. Under the circumstances, the concerned AO is to be directed to pass appropriate order in accordance with law and on merits on the application submitted by the petitioner for release of the cash seized / requisitioned considering proviso to Sub-section (1) of Section 132(B) of the IT Act.However, considering the fact that no order has been passed by the concerned AO on the application submitted by the petitioner to release the cash requisitioned / seized, considering the proviso to section 132B of the AO (Palanpur office) is hereby directed to pass appropriate order on the said application in accordance with law and on merits considering proviso to section 132B of the IT Act, within a period of 12 weeks from today.
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2015 (9) TMI 225
Disallowance u/s 40(a)(ia) - Non deduction of TDS u/s 194J - tax deducted under wrong provision - CIT(A) deleted disallowance - Held that:- The issue under consideration is squarely covered in favour of assessee by the decision of CIT(A) vs. M/s. S. K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT ] wherein the assessee deducted tax u/s. 194C of the Income Tax Act. According to the Assessing Officer, the tax should have been deducted u/s. 194I. He, therefore, made proportionate disallowance u/s.40(a)(ia). The Tribunal held that where tax has been deducted by assessee, though under the wrong provisions, the provision of Section 40(a)(ia) cannot be invoked and Revenue can initiate proceedings u/s.201 for short fall in deduction of tax at source. - Decided in favour of assessee. Disallowance u/s 43B - whether CIT(A) erred in allowing the claim regarding notified area tax liability paid as per provisions of section 43B without considering the fact that any expense in connection with closed business is not an allowable deduction u/s. 43B - Held that:- The only ground on which the disallowance of the payment of tax was made was the presumption of the Assessing Officer that the business was closed. After the order of CIT(A), there remains no dispute that the business was not closed but such business was leased out by the assessee and the rental income was assessed under the head ‘income from business’. In view of above, we do not find any infirmity in the order of CIT(A) - Decided in favour of assessee. Disallowance of Egypt tour expenses - AO disallowed the expenses mainly on the ground that there was no basis for the provision and the tour was actually conducted in the next year and all the expenditures were actually incurred in next year - Held that:- when the assessee has promised to arrange the tour for its clients, sub commission agents and Engineers on the basis of their performance during the year under consideration, then persons who achieved the target given by the assessee have acquired the right to go on tour as per the Scheme of assessee. Therefore, once the assessee’s clients, commission agents and Engineers fulfill the target given to them, the assessee incurs the liability to take them on tour to Egypt as per the Scheme. Therefore, the provision for Egypt tour is to be allowed in the year under consideration.- Decided in favour of assessee. Responsibility of claim of provision for Egypt tour - Held that:- The assessee made the provision of ₹ 24,88,000/- while the actual payment made by the assessee in the next year was ₹ 41,37,880/-. In the above situation, the provision made by the assessee cannot be said to be unreasonable or excessive. In view of above, we direct the Assessing Officer to allow the deduction for the provision of Egypt tour expenses amounting to ₹ 24,88,000/- - Decided in favour of assessee.
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2015 (9) TMI 224
Disallowance of depreciation - CIT(A) allowed the claim - Held that:- It is to be seen that the CIT(A) has only restored the issue back to the Assessing Officer for factual verification as to whether the assesssee has already considered the very depreciation in its computation not as so as to avoid double disallowance. The assessee places before us the Assessing Officer’s consequential order dated to be 22/02/2010 wrongly mentioned expressly stating CIT(A)’s order under challenge. The impugned disallowance on account of depreciation of ₹ 8,62,13,944/- stands deleted in the said order. The Revenue’s grievance is rendered infructous. Its corresponding ground accordingly fails. - Decided against revenue. Other income not deducted u/s. 10B - Held that:- There is no dispute that this sum of ₹ 8,24,522/- has arisen from insurance claim of exported goods, purchase material discounts and ‘other’ income of ₹ 7,41,717/-, ₹ 81,706/- and ₹ 1,099/-; respectively. The CIT(A) accepts assessee’s arguments and holds that the same is directly linked to its business in question as per the tribunal’s order in case of Aarti Industries [2005 (2) TMI 428 - ITAT AHMEDABAD-C]. The Revenue fails to rebut these findings of fact and law by quoting cogent material or case law to the contrary. We observe in these facts that these amounts lead to reduction in purchase price of the corresponding material purchased for the purpose of business only. The CIT(A)’s findings under challenge are affirmed.- Decided against revenue. Sec. 10B deduction claimed on interest received on late recoveries from customers by assessee - Held that:- The assessee is otherwise entitled for sec. 10B deduction being a newly established hundred percent export oriented undertaking. This statutory provision grants deduction of such profits and gains as are derived from a hundred percent export oriented undertaking from export of articles or things or computer software. The assessee’s stand throughout is that this interest sum of ₹ 20,82,239/- has arisen from late payments of export proceeds only from overseas export customers. Even the CIT(A) observed that the impugned interest can be treated to have been derived from industrial undertaking since the same is received from debtors is part of profits, but not derived from exports. We disagree with this reasoning as the interest has been derived from export proceedings of the eligible business unit only. We refer Nirma Industries Ltd case (2006 (2) TMI 92 - GUJARAT High Court ) in this backdrop of facts and hold that assessee’s interest sum of ₹ 20,82,239/- realized from its export customers on account of delayed payments of export proceeds forms part thereof only so as to be entitled to be treated as eligible profits and gains from export business only as the same is not an independent receipt - Decided in favour of assessee.
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2015 (9) TMI 223
Validity Revision u/s 263 by CIT(A) - Held that:- Commissioner exercising the powers u/s 263 cannot shirk the legal mandate of pointing out the error in the assessment order coupled with the requirement to point out that the error is prejudicial to the interests of the Revenue. It is not each and every error which the law permits the Commissioner to revise as is settled by the Apex Court in Malabar Industries [2000 (2) TMI 10 - SUPREME Court] and consistently followed by various Courts. Even otherwise the present case is a case of enquiry and is not a case of no enquiry. It is well settled that the Commissioner u/s 263 cannot revise the order on the reasoning that the enquiry as conducted by the AO be substituted by her method of enquiry without first meeting the twin conditions. The enquiry of the AO cannot be substituted by the Commissioner. The law permits the doing of a thing in a particular manner and the law does not permit a fishing and roving enquiry based on suspicions and surmises. The Commissioner exercising the powers u/s 263 of the Act cannot direct a second investigation without first finding the order erroneous and that too such an extent that it is prejudicial to the interests of the Revenue. Pointing out of an error by the Commissioner is not an empty formality. These twin requirements which the Ld. Commissioner is required, fulfilled cannot be said to be met because the Commissioner is of the view that another view may be possible. The decision of Duggal & Co. [1994 (8) TMI 6 - DELHI High Court] strongly relied upon by the Ld. CIT it is seen is distinguishable on facts and the principle arrived at in those facts cannot be selectively picked and applied to facts which are entirely distinguishable. In the facts of that case the assessee company was found to be paying higher rate of interest to the extent of 9 to 12 % on its borrowing while it charged lesser rate of interest on advances made to a particular firm. It was in these circumstances where diversion of a part of its borrowings for its investments for considerations other than that of business that the action of the Commissioner in invoking the provision of Section 263 was consistently upheld. In the facts of the present case there is no such error and it is only a case of suspicion that if proper enquiry is done a different picture may result. Such suspicious do not justify the invokes of the power u/s 263. Thus we hold the section 263 in the facts of the present case has wrongly been invoked - Decided in favour of assessee.
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2015 (9) TMI 222
Disallowance of provision for gratuity and other benefits since they are contingent in nature while computing book profit u/s 115JB - Held that:- The Tribunal for assessment year 2002-03 order [2010 (10) TMI 1022 - ITAT DELHI] has considered an identical issue and had decided the matter in favour of the assessee wherein AO is directed to compute the book profit without making any addition for aforesaid provisions. - Decided in favour of assessee. Depreciation on land amortized while calculating book profits under section 115JB - Held that:- Amortization of lease hold land has been made as per accounting standard 10 of ICAI and amortization of land unclassified as per Accounting Standard 6 of ICAI and in view of CAG, which has been done to meet the requirement of companies Act and amortization of land is permitted u/s 115JB. The identical issue was also involved in the case of appellant for A.Y.2008-09 and as per the detailed discussion, this issue has been decided in favour of the appellant. Since the issue is already covered by the decision for earlier year, the addition made by the AO for the purpose of computing book profit u/s 115JB of the Act is directed to be deleted - Decided in favour of assessee. Disallowance under section 14A - CIT(A) deleted the disallowance - Held that:- We find that the assessee has earned exempt income to the tune of ₹ 51,75,50,800/- and has suo motu disallowed ₹ 13.78 crores under section 14A of the Act. We find that the AO has invoked Rule 8D without spelling out the reason for not being satisfied with the computation made by the assessee in respect to expenditure incurred for earning the exempt income. Without recording the objective satisfaction as required under sub-section (2) to section 14A that he is not satisfied with the correctness of the claim of the assessee in respect of expenditure in respect to exempt income, the AO cannot invoke Rule 8D to compute the disallowance under the said Rule. See CIT vs. Taikisha Engineering India Limited [2014 (12) TMI 482 - DELHI HIGH COURT ] - Decided in favour of assessee.
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2015 (9) TMI 221
Penalty u/s 271(1)(c) - assessee has claimed expenses during the Assessment Year 2005- 06 on account of fee paid to ROC, depreciation, Umaid Bhawan Palace Project cost written off and other expenses in Assessment Year 2005-06, and claim of depreciation and other expenses in Assessment Year 2006-07, which have been disallowed by the A.O. being not sustainable - Held that:- Keeping in view the facts and circumstances explained it is of the considered view that against the quantum addition sustained up to the stage of ITAT, the assessee has filed appeal before Hon’ble Delhi High Court we are not adjudicating the merits of the case as it will prejudice to the interest of revenue authorities. In the interest of justice, we set aside the impugned order passed by first appellate authority and restore the matter to the A.O. who will decide the same after decision of Hon'ble High Court in the quantum appeal after giving adequate opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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2015 (9) TMI 220
Disallowance of expenditure of “Additional discount/rate difference” - appellant has not furnished any evidence to support its claim - Held that:- It is for the assessee to concide as per its agreements and the law in force. However whether on facts, it was demanded over and above the normal discount agreed to as per agreements this claim if made by the assessee has to be demonstrated by some cogent evidence. The arguments advanced is that the payments were withheld on the said aspect there is no evidence and the claim has been rejected for want of evidence. However if for moment it is presumed that the argument is correct in such an eventuality also the reasons on record for withholding should be supported by some evidence. This long chain of inference which the ld. AR wants us to draw is too far-fetched an inference without any independent evidence which the assessee would want to press for. It is for the assessee to know the actual facts which for reasons best known to the assessee he does not want to place on record. In the present proceedings we are not required to address the reasons why M/s Sudhir Gensets Ltd. does not want to come forward and the assessee is reluctant to place any evidence from the so-called affected party. The assessee’s reluctance to address the same is a motive which we do not want to conjecture suffice it to conclude that the claim has rightly been rejected on facts. Since the payments were withheld the assessee could have claimed as a bad debt and the debit notes placed on record amount to the writing of these claims. These arguments have been opposed by the Ld. Sr. DR that no such claim was made before the AO and nor has it been raised by way of a ground and have only come as an afterthought deserve to be accepted. Since the so called dispute itself is not established before us we find that the claim put forth as an aftherthough has to be rejected as the evidence does not inspire any confidence. - Decided against assessee.
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2015 (9) TMI 219
Eligibility for exemption U/s.10A - brought forward losses and unabsorbed depreciation of earlier years whether cannot be set-off against profit and gains of the undertaking while computing the eligible exemption U/s.10A? - Held that:- Since the Ld. CIT (A) has held that unabsorbed losses and depreciation of the earlier years cannot be set off against the profits from the eligible unit for computing the eligible deduction U/s. 10A of the Act following the decision of the Tribunal in the case Scientific Atlanta India Technology Pvt Ltd. Vs. ACIT [2010 (2) TMI 658 - ITAT, CHENNAI] we do not have any hesitation to confirm the order of the Ld. CIT (A) on this issue. - Decided in favour of the assessee. Expenditure incurred in foreign exchange towards telecommunication charges deducted from export turnover should also be deducted from total turnover for arriving at the eligible deduction U/s.10A - Held that:- Explanation 2(iv) to Section 10A of the Act stipulates that “export turnover” does not include freight, telecommunication charges or insurance attributable to the delivery of articles or things or computer software outside India or expenses if any, incurred in foreign exchange in providing the technical services outside India. The arithmetic consequential implication of such exclusion of the above stated expenditures from “export turnover” would be, to iron out the element of those expenditures, while computing the eligible deduction U/s. 10A of the Act. In the given case before us, the relevant expenditure that has to be excluded from the “export turnover” is “telecommunication charges”. Thus on giving effect to Explanation 2(iv) to Section 10A of the Act, the “telecommunication charges” should be excluded not only from “export turnover”, but it has also to be reduced from the “debit” side of “profit and loss account”. Moreover, once the “telecommunication charge” is reduced from the “export turnover”, it will stand reduced to that extend in “total turnover” because “export turnover” is a part and parcel of “total turnover” while drawing the “profit and loss account”. Further, needless to mention that “total turnover” is a “credit” side item in the “profit and loss account”. Thus, the overall effect in the “profit and loss account” would be that, the “profit” will remain the same, since “telecommunication charge” is excluded from both “debit” side and “credit” side of the “profit and loss account”, however the “export turnover” and the “total turnover” will stand reduced to the extent of “telecommunication charges” so excluded.- Decided in favour of the assessee.
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Customs
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2015 (9) TMI 245
Levy of duty on goods actually imported – Appellant imported crude oil which was said to have escaped payment of full customs duty –Revenue in its show cause stated that quantity of crude oil mentioned in various bills of lading should be basis for payment of duty, and not quantity actually received into shore tanks in India – According to Commissioner, full payment for goods has to be made on quantity mentioned in bill of lading – Tribunal also accepted Commissioner's reasoning – Held that:- levy of customs duty under Section 12 is only on goods imported into India – If the goods are pilferred after they are unloaded or lost or destroyed at any time before clearance for home consumption or deposit in warehouse, importer is not liable to pay duty leviable on such goods – Reasons given by Tribunal is incorrect in law –Tribunal's reasoning that somehow when customs duty is ad valorem basis for arriving at quantity of goods imported changes, is wholly unsustainable – Therefore Tribunal's judgment set aside and declare that quantity of crude oil actually received into shore tank in port in India should be basis for payment of customs duty – Appeals disposed of – Decided in favour of assesse.
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2015 (9) TMI 244
Classification of goods as "auto analysers" or "photometers" – Appellant filed Bill of Entry for clearance of models of BTS 320 and BTS 310 classified goods as "auto analysers" under Entry 9030.89 of Customs Tariff Act, 1975 – Goods were seized by custom authorities, being total of 8 BTS 320 and 15 BTS 310 models – DRI issued show cause notice stating that goods in question are "photometers" and not "auto analysers" and demanded duty, Confiscation of goods and imposition of penalty – Held that:- Without any analysis of whether imported equipments were, auto analysers or were only photometers, tribunal went on to conclude that one can never come to conclusion that photometer is same as auto analyser – Admitted fact that models BTS 310 and BTS 320 were imported with inbuilt software that contained programmes for analysis and interpretation – From this it does not follow that what has been imported is only photometer – Contention that description of imported goods was changed from photometers to auto analysers to avail benefit of exemption under notification No. 20/1999, would be material in deciding whether Section 111(m) are attracted as to amount to mis-declaration of description of goods resulting in confiscation of said goods, fine, and penalty – Therefore, appeal of assesse allowed and order of tribunal imposing penalty set aside – Decided in favour of Assesse.
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2015 (9) TMI 243
Import of second hand photocopiers – Imposition of Duty, penalty and fine – Appellant filed Bills of Entry for clearance of used photocopier main frame assemblies and other parts – Adjudicating authority had enhanced declared value and also confiscated goods for contravention of licence and misdeclaration of goods and thereby confirmed demand of duty and imposed fine and penalty – Held that:- In case of Sumit Office Systems and Others v. CC, Trichy & Tuticorin [2009 (3) TMI 858 - CESTAT, CHENNAI] wherein Tribunal observed that import of second hand photocopier prior to 19-10-2005 also do not warrant licence for import – Respectfully following earlier decision of Tribunal, court hold that no licence is required for import of second hand photocopiers prior to 19-10-2005 – Accordingly, imposing fine and penalty set aside and otherwise impugned orders upheld – Decided in favour of Assesse.
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2015 (9) TMI 242
Revocation of Project Import Contract – Substantial Expansion – Non-fulfilment – Appellant registered contract with Customs Authorities and made imports of machinery –Vide order of Deputy Commissioner of Customs, Project Import Contract were deregistered and goods imported were assessed on merits and differential duty demand was made – Reason for denial of project import benefit was that appellant’s overall production capacity had not increased substantially to make it eligible for concession – Tribunal vide impugned order remanded matter back to authority for afresh consideration – Whether imported goods were for expansion of capacity to produce HTSLR wires – Held that:- If unit per se was not eligible for grant of benefit, it will not make any difference whether benefit was under category of substantial expansion or under category of initial setting up of unit – There was no setting up of new stranded wire unit at all – Only as part of existing plant for manufacture of wires including stranded wires, additional machinery were installed for making different type of stranded wires and overall capacity was maintained at existing level by allowing appellant to dismantle old machinery – Certificate of project benefit recommended by DGTD was for substantial expansion of plant, inasmuch as capacity of plant remained same both before as well as after expansion, condition for availing benefit of project imports was not satisfied – Appellant did not have any capacity to manufacture HTSLR wires prior to 1993 and therefore, import of machinery to manufacture said wires, cannot be said to be substantial expansion for purposes of Project Import Regulations – Appellant has not satisfied condition of substantial expansion of existing installed capacity so as to be eligible for benefit of Project Imports – As per majority view Appellant was not eligible for benefit of Project Imports – Appeal dismissed – Decided against Assesse.
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2015 (9) TMI 241
Denial of benefit of notification – Confiscation of goods and imposition of redemption fine and penalty – Appellant filed bill of entry declaring products as “Hot Rolled Non Alloy Steel Cut Steel Sheets/Plates” under CTH 7208 and claimed benefit of Notification No. 21/2002-Cus – Benefit of notification was denied treating goods as defective/seconds and consequently goods were confiscated and redemption fine was imposed – Held that:- settled legal position that admissions made before Custom Officer is admissible evidence in proceedings undertaken under Customs Act – Having admitted that goods under importation were defective and also having paid duty without any protest, appellant cannot turn around now and say that goods are prime and not defective – Survey report also indicates that goods were heavily rusted and they were not prime quality – Provisions of Section 111(m) are clearly attracted and confiscation of goods upheld – Redemption fine is imposed to wipe out profit margin which appellant would have made in case appellant had been able to clear goods on basis of declaration – Appellant had sold goods at below cost and has not made any profit in transaction – In these circumstances, no justification for imposition of redemption fine. For imposition of penalty under Section 114A, there should be collusion or any wilful misstatement or suppression of facts on part of importer – Revenue has not led any evidence to show that any of these elements are present – There is no admission of any suppression or wilful misstatement of facts in statement given by Partner of appellant firm – Therefore, charge of collusion, wilful misstatement or suppression of facts is not established – Therefore, provisions of Section 114A are not attracted and accordingly, set aside – Therefore demand of duty confirmed, redemption fine and penalty set aside – Decided partially in favour of Assesse.
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Service Tax
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2015 (9) TMI 262
Denial of refund claim - Duty paid along with interest at the instance of Audit team - No proceedings initiated for duty demand - whether the refund made by the appellants is barred by limitation or not - Held that:- Appellants debited the Cenvat credit on the instructions of the audit team. The audit has no jurisdiction to adjudicate the disputed issue. Once the debit is made at the instructions of the audit team, the Revenue is under a legal obligation to initiate proceedings for confirmation of the amount in question, by deciding on the disputed legal issue. No such proceedings, by way of show-cause notice stands initiated against the appellants and the deposit so made by them does not stand forfeited or appropriated towards any confirmed demand. As such, in my view, the appellants are right in contesting that deposit made during the audit cannot be held to be falling under the umbrella of Section 11B of the Central Excise Act. - Impugned order is set aside - Decided in favour of assessee.
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2015 (9) TMI 261
Benefit of CENVAT Credit of inputs and input services - Various services - Held that:- All the services are utilized by appellant in the factory premises and some are indicating the activities relating to the business like sales and marketing. On deeper perusal of the details put-forth by appellant before the adjudicating authority, services are used in or in relation to the manufacture of final products i.e. tractors which are clared on payment of appropriate Central Excise duty, whenever applicable. Service tax paid by the service provider are on the hiring charges on forklift, which were hired out to appellant for movement of materials within the factory premises. Accordingly, we hold that these services as also all other services as enumerated in paragraph 2 herein above are eligible to be availed as input service credit. Since the correct amount is not ascertainable from the show cause notice, we direct the adjudicating authority to workout the exact figure involved in the service of life insurance cover attributable to the family of the employees and direct appellant herein to discharge the said service tax liability along with interest. Though we have upheld this demand, we find that there could be a bonafide impression on the part of the appellant such CENVAT credit is eligible to be availed hence no penalty is required to be imposed, as we set aside major portion of demand, question of imposition of penalties on appellant would not arise. - Decided partly in favour of assessee.
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2015 (9) TMI 260
Club or Association Service - Amount received from Vanprashta Ashram Donations - Held that:- Service Tax demand of ₹ 10,55,273/- is on consideration received on rendition of Intellectual Property Service, the consideration was received from M/s Media Content & Communications Services (I) Pvt. Ltd. , a Star New channel entity, under an agreement dated 12.10.2006 between MCCS and the appellant whereunder the appellant assigned to MCCS the right to hold the entire copyright vested, contingent or future, in all media, all rights of action and all other rights of whatever nature in and to the products and the service of the appellant in the program "Yog Yatra", which included a right to cover, in terms of the agreement, "Yog Shivirs" conducted by the appellant. Petitioner has made out a prima facie case though not a strong prima facie case, in respect of its immunity on this demand. We therefore, direct pre-deposit of ₹ 22 lakhs (approx. 50%) in respect of this demand. In respect of the demand of ₹ 10,55,273/- on rendition of Intellectual Property Right service since the agreement has covenants, expressing confirment of appellant's copyright in the Audio Visual Content in favour of MCCS and since copyright is an excluded component of IPR service defined in Section 65 (55a) and (55b) read with Section 65(105)(zzze), we are inclined to grant waiver of pre-deposit of the demand of ₹ 10,55,273 - stay granted partly.
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2015 (9) TMI 259
Erection and Commissioning Service - Invocation of extended period of limitation - Held that:- Appellant could have entertained a bonafide belief that as the activity undertaken by the appellant may not be covered under the category of erection and commissioning services and would be covered under the works contract which not in statue during the material period i.e 2006, they have not discharged the service tax under the category of erection and commissioning service. To that extent we hold that the demand for the period June and September 2006 is hit by limitation. As regards the demand within the limitation period i.e. November 2006 and September 2007, we upheld the same along with interest and also penalties imposable under the provisions but as per the settled law penalty equivalent to service tax liability are to be confirmed - Decided partly in favour of assessee.
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2015 (9) TMI 258
Amway distributor - Receipt of commission - Bonafide belief - Held that:- Respondent is an individual; an individual cannot be faulted if she thought that she was only a dealer; a difference between the purchase price and the sale price or MRP is available to her and therefore, it cannot be said that there was an intention to evade service tax. The only problem has arisen because the company has called such amount as 'commission' whereas she simply sold the goods to the person who asked a product at a particular MRP. Therefore, the Commissioner's conclusion is correct position and the conclusion in the circumstances considered cannot be faulted with - since there is no malafide intention, extended period of limitation cannot be invoked - Decided against Revenue.
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2015 (9) TMI 257
Demand of service tax - penalty under Section 76, 77 & 78 - Held that:- When the assessing authority, in its discretion has held that no penalty is leviable, by virtue of Section 80 of the Act, the revisional authority cannot be invoke its jurisdiction and impose penalty for the first time - issue is no longer res integra and is covered by the decision of Hon'ble High Court of Karnataka in the case of CCE Bangalore Vs Motor World [2012 (6) TMI 69 - KARNATAKA HIGH COURT]. - penalties imposed by the Commissioner cannot be sustained. Accordingly, the impugned orders are set aside - Decided in favour of assessee.
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Central Excise
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2015 (9) TMI 252
Classification - printing biri wrappers cut to size - Classification under Chapter sub-heading 4821.00 or under Chapter Heading 4823.19 - Held that:- Printing of biri wrappers would not and can never fit under the description ‘transfer decalcomanias’ inasmuch as in the present case on plain paper simple printing is done on the wrappers which are cut to size for the purpose of wrapping the biris and there is no use of sheet of plastics. In fact it is not printed on any absorbent, lightweight papers and there is no coating of starch and gum. The conclusion would be that the goods in question would fall under Item No. 4901.90 which attracts nil duty. - Decided in favour of assessee.
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2015 (9) TMI 250
Denial of SSI Exemption - Use of brand name belonging to other company - Bar of limitation - Held that:- it is seen from the order of the Tribunal that the finding of the first appellate authority to the effect that there was no suppression of fact, has not been interfered with. If the original authority had invoked the enhanced period of limitation on only one particular ground viz., suppression of fact and the appellate authority had set aside that finding, the larger period of limitation was not available to the Department themselves in view of the fact that the Tribunal did not interfere with the finding of the first appellate authority relating to the only basis on which the enhanced period of limitation was taken recourse to by the Department. In view of the above, we answer question with regard to limitation in favour of the assessee. - Decided in favour of assessee.
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2015 (9) TMI 249
SSI Exemption - Use of brand name - significance of evidence - Held that:- The impugned order has discussed in a great detail the inter-relationship between HM and its sister concerns which were also issued a show cause notice by the Department alleging that they had misutilised the exemption under the aforementioned notification and were involved in clandestine removal with a view to evading excise duty. The entire case of the Department hinged upon a single document stated to have recovered from one of the marketing companies namely Technocrat Marketing P. Ltd. (‘TMPL’). It is seen from the impugned order the third member that the said document did not mention the nature of the goods, i.e., whether the goods were mixer-grinder, electric press or toasters which were being manufactured by HM and the other sister concerns. There was nothing in the said document or any other document recovered to indicate that these sales figures pertained to mixer-grinders manufactured by HM. In the absence of any evidence except the single document, which had no description of the goods, the third member to whom the matter was referred was justified in concluding the said document purporting to be a sales statement “cannot be treated as containing the figures of sale of Maharaja brand mixer-grinders manufactured and cleared by HM during 1987”. It was also rightly observed that while the document at best gives rise to doubts about the claim of HM regarding their eligibility for SSI exemption during 1987-88, it is insufficient, even on a preponderance of probabilities, to constitute proof for establishing the allegations of duty evasion against the assessee. - No substantial question of law arises - Decided against Revenue.
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2015 (9) TMI 248
Duty demand u/s 11D - Manufacturing and sale of exempted goods where as per the agreement the price is inclusive of duty of excise - As per the appellants, the said mentioning of excise duty in the invoice so generated by them from the computer was on account of the software installed by them, which also reflected the excise duty as they were manufacturing goods and were paying excise duty. Otherwise, the element of excise duty as mentioned in the invoice was not added in the total cost of the medicines and the said amount was not being recovered by them their customers in excess of the value of the consignment of medicines covered in the invoice. Held that:- when admittedly the price fixed by DPCO is inclusive of excise duty as was the case in the matter of Hindustan Antibiotics Ltd. (2015 (1) TMI 1129 - CESTAT MUMBAI), as it is the same unit price fixed by DPCO which stands recovered by the appellants from their customers, the fact of reflection of separate duty element in the invoice, which does not stands collected from their customers will not make difference between the present case and the decision of the Tribunal in Hindustan Antibiotics Ltd. (supra). Accordingly, by following the above decision of the Tribunal, we are of the view that the appellant is entitled to unconditional stay - Stay granted.
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2015 (9) TMI 247
Denial of CENVAT Credit - Fraudulent availment of modvat credit of duty paid on inputs and capital goods on the strength of duty paying documents procured by them without actual receipt of inputs/capital goods - Shortage of goods - Seizure of goods - Held that:- Department raised a presumption against the appellants by establishing that the inputs could not have been received in the factory in vehicles mentioned in the invoices. This allegation itself is based on the reports by RTOs, who certified that the registration numbers belonged to vehicles other than goods transport vehicles with 10 tons capacity. It is for the appellants thereupon establish that indeed such vehicles as mentioned in the invoice did bring the input to their factory. They have failed to do so. Their gate register was burnt in some fire accident and the bills/vouchers indicating payment of cash to the drivers/owners of the trucks were also, destroyed in fire. One could understand that bills/vouchers, getting destroyed in fire or lost. But one cannot understand as to what has happened to the ledgers and registers to which the transactions done in cash are ultimately transferred. It is not the appellant s case that even such ledger and registers were destroyed in the fire. The fact that the inputs in the form of ship-breaking scrap was entered in RG 23A, Part-I does not establish that the goods were received in the factory. At least two truck owners have categorically denied having transported any goods to the appellant. The fact that out of the list of vehicles which were shown to be tankers, according to RTOs Office, two vehicles turned out to be regular carriers of goods does not establish that the case of other vehicles also it was true. An exception cannot make a rule. Once it is established that the input has not been transported in the vehicle mentioned in the invoice it is but reasonable to say that the inputs were not received in the factory as required under Rule 57G . - The entire transaction was vitiated by fraud coupled with misstatement and suppression of facts with intent to evade payment of duty and, therefore, extended period was rightly applied. The act being fraudulent, imposition of penalty also does not suffer from any illegality, particularly, in view of the systematic manner in which the fraud was committed; however, taking a lenient view, the penalty is reduced to Rs. 10,000. It clearly comes out that M/s BISCO has manipulated and created fictitious units so that invoices could be procured without movement of goods and subsequently credit is availed. - confessional statements by not one but by almost everyone including M.D., Directors, DGM clearly proved non-production, issue of fake invoices and subsequent non-transportation confirming scam of paper transactions. This proves clear intent to defraud revenue. - confessional statements by not one but by almost everyone including M.D., Directors, DGM clearly proved non-production, issue of fake invoices and subsequent non-transportation confirming scam of paper transactions. This proves clear intent to defraud revenue. - no infirmity in the findings recorded by adjudicating authority. Accordingly we uphold the findings in respect of appellants - Decided against the assessee.
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2015 (9) TMI 246
Waiver of pre deposit - Penalty in terms of provision of Rule 26 of Central Excise Rules, 2002 - issue of invoices without the corresponding supply of inputs - Held that:- Rule 26(2) was introduced with effect from 01.03.2007, making a provision for imposition of penalty on manufacturers/supplier of the goods, where only they raised invoices without the issuance of respective goods sent under the invoices. The period involved in the present petitions is prior to 01.03.2007. An identical issue was considered by the Tribunal in the case of Shri Ram Bilash Bansal Vs/ CCE, Chandigarh, wherein under identical circumstances the stay was granted [2009 (6) TMI 771 - CESTAT, NEW DELHI]. Accordingly, by following the same, I dispense with the condition of pre-deposit of penalties imposed upon both the applicants - Stay granted.
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CST, VAT & Sales Tax
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2015 (9) TMI 256
Validity of Compounding Scheme – Petitioners applied for compounding scheme for session 2007-08 & 2008-09, which was rejected by assessing authority on ground that regular assessment orders had already been passed for session 2007-08 – Whether petitions challenging constitutionality validity of compounding scheme dated 9.6.2009 for season 1.1.2008 to 30.9.2008 are maintainable – Held that:- impugned compounding scheme neither violates any fundamental or constitutional rights of petitioners nor it lacks legislative competence nor it is violative of any of provisions of Act –Under said circumstances, no unconstitutionality in compounding scheme is found – Relief to declare compounding scheme to be ultra vires, is not entertainable inasmuch as on one hand petitioners have prayed for declaring scheme to be ultra vires and on other hand they prayed that benefit of scheme be provided to them for part of period – Well settled that Courts, in exercise of their power of judicial review did not ordinarily interfere with policy decisions of executive unless policy can be faulted on account of malafide, unreasonableness, arbitrariness or unfairness etc – Therefore relief sought by petitioners to declare aforesaid compounding scheme as ultra vires, hereby rejected. Compounding Scheme – Applicability for part of session – Whether compounding applications for part of season from 1.4.2008 to 30.9.2008 may be accepted despite fact that compounding under Section 6 of UP VAT Act was offered for fixed period and for fixed lump sum amount – Held that:- scheme does not provide for computation of lump sum amount for part of season which may be accepted by assessing authority – Settled law that in interpreting taxing statute, equitable consideration are entirely out of place nor can taxing statute be interpreted on any assumptions or presumptions – Thus it is not open for assessing authority either to bifurcate period of season or lump sum amount under scheme unless assessing authority is permitted to do so under scheme itself – In absence of any such direction or power, assessing authority committed no error in rejecting compounding application – Therefore compounding scheme is valid and petitioners were not entitled to apply for compounding – Decided against Petitioners.
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2015 (9) TMI 255
Applicability of relevant Notification during assessment – Invocation of power under section 22 – On basis of inter-state sale effected to buyers in State of Uttar Pradesh, transaction would not attract any tax – This was done on basis of Form ‘C’ made available by respondent dealer but later on, power under Section 22 of UP Trade Tax Act, 1948 was invoked and tax at rate of 2.5% was levied – Tribunal disapproved resort to section 22 and allowed appeal – Held that:-Respondent submitted that as on date of sale relevant notification would be notification issued by State of U.P. dated 30th October, 2001 and in respect of transactions which took place thereunder, rate of tax is Nil in regard to sales against Form 3-B – AO sought to revisit assessment on basis that notification dated 07.02.2000 would be notification which is applicable – If original assessment was afflicted with error apparent, undoubtedly, power under section 22 could have been exercised – That, in turn, would depend upon question as to whether word in notification is susceptible of only one meaning – As noticed, present debate is that notification is capable of another meaning, then matter passes from realm of being undisputed to realm of dispute – If that being so, revenue would not have authority to correct any kind of mistake but only mistake which is apparent on face of record – Therefore, view taken by Tribunal does not suffer from any infirmity – Decided against revenue.
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2015 (9) TMI 254
Tax on sale of country made liquor – Refund of tax amount deposited – In relation to sale of country made liquor, assesse deposited sum with Sales Tax Authority on account of sales tax and, then, applied for refund of same on that no sales tax was payable in relation to sale of country made liquor – Said prayer has been rejected on ground that sale amount of country made liquor included amount of tax – Tribunal allowed prayer of refund as was made by assesse – In Revision, Department contended that Tribunal did not take notice of Section 29(3) of U.P. Trade Tax Act, 1948 – Held that:- no findings pertaining to ingredients for applying provisions of Section 29(3) was found in impugned order – Assessing Officer as well as Appellate Authority proceeded on basis as if price of country made liquor fixed by Excise Authority included tax and, accordingly, tax was collected from purchaser and, accordingly, there is no question of refunding tax so collected and deposited – Impugned order of tribunal upheld – Decided against revenue.
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2015 (9) TMI 253
Transfer of books or Inter-state sale - Tribunal in impugned order found that assessment was completed for relevant assessment years when, Assessing Authority was satisfied that there were book transfers – In notice under Section 21, it was opined that those were not book transfers, but were inter-State sales attracting central sales tax – Held that:- It was not held out in notice that altered opinion is based on some other relevant document or material, which escaped notice at time of assessment – Also that there has been wrong calculation due to bona fide human error or due to ignorance of correct and complete facts – Tribunal noticed that these were parameters earmarked in case of Vikrant Tyres Limited vs. State of U.P. [2005 (3) TMI 729 - ALLAHABAD HIGH COURT] – Tribunal also noticed that, before issuance of notice, there was no material on record, on basis of which, belief required to be formed for issuance of notice could be formed – Therefore Tribunal did not commit any error – Decided against Revenue.
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2015 (9) TMI 251
Power to issue demand notice - manufacture of industrial alcohol as well as potable alcohol - Demand of interest u/s 38A - Held that:- In the case of the petitioner while questioning the validity of the amendment made in Rule 12 of the Rules, a Division Bench of this Court held in its judgment [2011 (7) TMI 1122 - ALLAHABAD HIGH COURT] that Rule 12 of the Rules was made in exercise of powers under Section 41 of the Act and such overtime charges required to be paid under Rule 12 of the Rules is in fact for grant of any exclusive or other privilege granted under Section 24 or Section 24-A of the Act, or for storing any intoxicant. The Division Bench held that prescription of overtime charges was a condition of the licence and that by the nature of its imposition it is a fee connected with parting in the privilege to run the distillery. - Therefore, if excise revenue is not paid within the stipulated period, then interest becomes leviable under Section 38-A of the Act. We are of the opinion that so long the decision of this Court dated 26.07.2011 stands and is not set aside by the Supreme Court, the imposition of interest by the respondent is justifiable under Section 38-A of the Act - Decided against the assessee.
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Indian Laws
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2015 (9) TMI 240
Dishonour of cheque - Cheques given in persuance of rent due - Held that:- Appellant and the other co-owners are the owners and the landlords of the premises in question; premises in question was leased out by five different lease deeds to the respondent/lessees by the five co-owners in respect of their undivided 1/5th share each on a monthly rent of ₹ 1,10,000/- for each of the co-sharers, i. E. ₹ 5,50,000/- in the aggregate; lease had not been surrendered by the lessee, and; the advance cheques issued by the lessee towards payment of rent were dishonoured upon presentation. Pertinently, the lease agreements also provided for payment of interest on the overdue amount of arrears of rent @ 18% p. A. However, the cheques in question did not pertain to the said claim for interest. They pertained only to the monthly rent, which is an ascertained and crystallized liability. It is equally pertinent to note that the respondents admitted their liability in their reply dated 23.05.2009 and conveyed their intention to clear the cheques and stated that they were dishonoured due to their tight financial position. Advance cheques had been issued towards payment of rent by the respondent/lessees. The respondents continued to remain tenants and incurred the liability to pay rent month to month. The advance cheques issued towards payment of rent when deposited for realization of the rent for the said period were dishonoured upon presentation. The respondent/lessees incurred the liability to pay the rent as they continued to retain possession even though the same had been sealed by the municipal authorities. Thus, reliance placed on Indus Airways (2014 (4) TMI 464 - SUPREME COURT) by the learned MM is completely misplaced and this is yet another serious error of law found in the impugned judgment. - Impugned order is set aside - Decided in favour of appellant.
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