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2009 (4) TMI 968
Issues Involved:
1. Power of CIT to direct withdrawal of claims under ss. 80HH and 80-I in subsequent years.
2. Continuity of deductions under ss. 80HH and 80-I once granted in the initial year.
3. Eligibility of deduction under ss. 80HH and 80-I for manufacturing intermediary products used in construction.
Issue-wise Detailed Analysis:
1. Power of CIT to Direct Withdrawal of Claims Under ss. 80HH and 80-I:
The Tribunal held that the CIT had no power to direct the withdrawal of claims under ss. 80HH and 80-I in the order passed under s. 263 of the Act, as it would amount to reviewing the order passed by the AO for the assessment year 1982-83, which had been barred by limitation. The Tribunal's position was based on the principle that once a decision is taken in the initial year, it cannot be revisited in subsequent years without disturbing the initial year's assessment.
2. Continuity of Deductions Under ss. 80HH and 80-I Once Granted in the Initial Year:
The Tribunal and the assessee argued that once the benefit of deduction under ss. 80HH and 80-I is allowed in the first year, it should continue for the subsequent years until the expiry of the statutory stipulated period of benefits, namely, ten years. This argument was supported by the judgments in Saurashtra Cement and Chemical Industries Ltd. vs. CIT and CIT vs. Paul Brothers. However, the Revenue contended that each assessment year is a separate unit, and subsequent assessments must adhere to the law as interpreted by the Supreme Court, even if it means departing from the initial year's decision. The court agreed with the Revenue, noting that if the Supreme Court clarifies the law in a manner contrary to the initial year's basis, the assessing authority must follow the Supreme Court's interpretation in subsequent years.
3. Eligibility of Deduction Under ss. 80HH and 80-I for Manufacturing Intermediary Products Used in Construction:
The core issue was whether the activity of laying down the railway track amounts to manufacturing of goods/articles. The Revenue argued that such activity is construction, not manufacturing or production, relying on the Supreme Court judgment in N.C. Budharaja, which held that construction activities like dams, bridges, and roads do not constitute manufacturing or production of articles. The assessee countered that it was engaged in manufacturing numerous items used in the railway tracks, thus fulfilling the eligibility condition for deductions under ss. 80HH and 80-I. The court noted that the Tribunal had not examined this angle and remitted the matter for fresh consideration, emphasizing that the end product (railway track) is the test, not the intermediary products.
Conclusion:
The court set aside the Tribunal's orders and remitted the matters for fresh consideration, directing the Tribunal to examine the eligibility of deductions under ss. 80HH and 80-I in light of the Supreme Court's judgment in N.C. Budharaja. The appeals were allowed, and no costs were awarded.
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2009 (4) TMI 967
Issues Involved:
1. Alternative Remedy
2. Violation of Principles of Natural Justice
3. Coercion
4. Cross-Examination
Summary:
1. Alternative Remedy:
The writ petition challenges the order passed by the Central Excise authorities imposing duty, penalty, and confiscation. The respondents argued that the writ petition is not maintainable due to the availability of an alternative remedy. However, the court held that the writ petition is maintainable as the issue raised pertains to a question of law regarding the alleged violation of principles of natural justice, and the writ petition had been admitted and pending for ten years.
2. Violation of Principles of Natural Justice:
The petitioner contended that the orders should be set aside due to the violation of principles of natural justice, as they were not permitted to cross-examine the persons who gave statements during the investigation. The court found that the respondents did not solely rely on the statements but also on various documents and materials. The refusal to permit cross-examination did not vitiate the orders, as the findings were based on corroborated evidence, and the plea for cross-examination was seen as an attempt to prolong the issue.
3. Coercion:
The petitioner claimed that the statements were obtained by force and coercion. The court rejected this contention, noting the absence of retraction by the persons concerned and the lack of evidence to support the claim of coercion. The court referred to precedents where retracted confessions were still considered admissions and binding.
4. Cross-Examination:
The court held that the right to cross-examination depends on the facts of each case. In this case, the authorities rightly decided that cross-examination was not required, considering the relationship of the persons who gave the statements and the materials available on record. The court cited precedents where the denial of cross-examination did not amount to a violation of principles of natural justice.
Conclusion:
The court dismissed the writ petition, holding that the orders passed by the respondents were valid in law, and there was no violation of principles of natural justice. The plea of coercion was not accepted, and the request for cross-examination was deemed unnecessary. Consequently, the connected miscellaneous petitions were closed, and no costs were awarded.
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2009 (4) TMI 966
Issues Involved: Challenge to order dated 16th March 2006 passed by ACMM in Complaint Case No. 180 of 1991 u/s 174 IPC.
Issue 1: Cognizance of Offence under Section 174 IPC
The complainant alleged that the petitioner failed to appear despite summons u/s 40(4) of FERA, leading to an offence u/s 174 IPC. The ACMM took cognizance of the offence on 21st August 1991. The petitioner argued that the complaint was not maintainable post-repeal of FERA by FEMA, and no complaint was filed within the sunset period. The ACMM held that cognizance was already taken and listed the case for pre-charge evidence on 17th April 2006.
Issue 2: Maintainability of Complaint
The petitioner contended that the complaint did not mention Section 56 FERA, which was the correct provision for the offence. The Supreme Court's ruling in Enforcement Directorate v. M. Samba Siva Rao mandated trying non-compliance under Section 56 FERA, not Section 174 IPC. The ACMM's decision to proceed under Section 56 FERA was deemed erroneous by the High Court.
Issue 3: Conversion of Summons Case
The ACMM erred in converting the summons case into a warrant case under Section 259 CrPC. The failure to mention Section 56 FERA in the complaint altered its nature, making it triable only in a summary manner u/s 174 IPC. The legal position did not change due to the accused's delayed appearance, leading to the quashing of all proceedings.
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2009 (4) TMI 965
Issues involved: Application for waiver of predeposit of CENVAT credit u/s 16,35,766/- for input services consumed at windmills.
In the judgment by Appellate Tribunal CESTAT CHENNAI, the issue revolved around the admissibility of CENVAT credit alleged to have been wrongly taken by the assessees during a specific period in relation to input services consumed at their windmills. The department contended that the credit was not admissible as the power generated by the windmill was supplied to the T.N.E.B. and drawn by the assessees from the T.N.E.B grid near the plant. The department's stance was that credit is only admissible if the power generated in windmills is directly drawn by the assessees.
The Tribunal referred to a recent decision in L.G. Balakrishnan & Bros. Ltd. Vs CCE Coimbatore, where predeposit of a similar amount confirmed on an identical issue was waived. This decision was made after considering a previous final order of the Tribunal in Rajans Metals (P) Ltd. Vs CCE Rajkot, which took a contrary view. The Tribunal noted that a prima facie case had been made out by the assessees based on the L.G. Balakrishnan order cited. Consequently, the Tribunal decided to waive the predeposit of the amounts in question and stayed the recovery pending the appeal.
This judgment highlights the importance of legal precedents and the interpretation of relevant laws and regulations in determining the admissibility of CENVAT credit in cases involving input services consumed at windmills.
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2009 (4) TMI 964
Issues involved: Appeal against order of CIT(A)-XII, New Delhi for A.Y. 2005-06.
First Issue - Disallowance of commission on sales:
The assessee appealed against the disallowance of commission on sales paid to companies stockiest for sales to Kendriya Bhandar and CSD canteens. The AR argued that the payments were reimbursement of expenses and not against public policy. Citing a precedent, it was contended that unless proven otherwise, disallowance of such commission is not justified. The DR supported the lower authorities' orders. The Tribunal found that the commission was legitimate and not against public policy, as the revenue failed to provide evidence to the contrary. Relying on the precedent, the Tribunal directed the AO to allow the commission claimed by the assessee.
Second Issue - Addition of employees' PF contribution:
The second ground concerned the addition of employees' PF contribution deposited beyond the due date. Referring to a Tribunal decision in a similar case, it was noted that both employer and employee contributions were allowed as deductions if paid before the last date of filing the return u/s 139(1) of the IT Act. The Tribunal followed the precedent and reversed the lower authorities' decision, directing the AO to delete the addition of employees' PF contribution made before the due date for filing the return. The appeal of the assessee was allowed in this regard.
Conclusion:
The Tribunal allowed the appeal of the assessee in both issues, directing the AO to allow the commission claimed and delete the addition of employees' PF contribution made before the due date for filing the return.
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2009 (4) TMI 963
The Supreme Court granted liberty to the petitioner to move the High Court for review as a relevant point had not been argued in the case. Special Leave Petitions were disposed of accordingly.
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2009 (4) TMI 962
Issues Involved:
1. Validity of the amendment to Rule 2(n) of the Kerala Abkari Shops Disposal Rules, 2002.
2. Validity of the notification issued by the Government as S.R.O. No.145/2007, fixing the strength of ethyl alcohol in different types of toddy.
3. Whether the excess alcohol content in toddy constitutes a foreign ingredient under Section 57(a) of the Abkari Act.
4. Prosecution under Section 57(a) of the Abkari Act based on alcohol content exceeding prescribed limits.
Issue-wise Detailed Analysis:
1. Validity of the amendment to Rule 2(n) of the Kerala Abkari Shops Disposal Rules, 2002:
The amendment to Rule 2(n) defines toddy as "fermented juice drawn from any coconut, palmyra, or Choondapana palms and conforming to such specifications and restrictions as may be notified by Government based on scientific studies and Indian Standard Specifications." The court found that the definition in the Rules does not conflict with the definition in Section 3(8) of the Act, which defines toddy as "fermented or unfermented juice drawn from a coconut, palmyra, date or any other kind of palm tree." Since there is no conflict, the amendment is valid. The court also found nothing wrong with the amendment to Rule 9, which requires that all toddy sold must be natural and conform to government-notified specifications.
2. Validity of the notification issued by the Government as S.R.O. No.145/2007:
The notification S.R.O. No.145/2007 specifies the permissible alcohol content in different types of toddy: 8.1% for coconut toddy, 5.2% for Palmyra palm toddy, and 5.9% for Sago palm (Choondapana) toddy. The court noted that the prescription for coconut toddy is supported by scientific studies and the Indian Standards Institution, which found that the maximum natural alcohol content in coconut toddy is 8%. Therefore, the prescription of 8.1% is valid. However, for Palmyra palm and Sago palm toddy, the court found no scientific basis for the 5.2% and 5.9% limits and declared these prescriptions ultra vires and unauthorized. The vendors of such toddy cannot be faulted if the alcohol content goes up to 8.1%.
3. Whether the excess alcohol content in toddy constitutes a foreign ingredient under Section 57(a) of the Abkari Act:
Section 57(a) penalizes the mixing of any foreign ingredient likely to add to the intoxicating quality of toddy. The court noted that ethyl alcohol is a natural ingredient of toddy, and if found in excess, it can be presumed to be added from an external source. The court agreed with the learned Single Judge that the excess alcohol should be treated as a foreign ingredient, making the licensee liable under Section 57(a).
4. Prosecution under Section 57(a) of the Abkari Act based on alcohol content exceeding prescribed limits:
The court held that if alcohol is found in excess of the prescribed limit (8.1% for coconut toddy), it can be presumed to be added externally, making the licensee liable under Section 57(a). The court upheld the learned Single Judge's view that the legislative changes and scientific studies now provide a clear basis for this presumption, removing any vagueness in the law. Therefore, the prosecution under Section 57(a) is valid if the alcohol content exceeds the prescribed limits.
Judgment Summary:
The court dismissed the appeal in W.A.No.2867/2007, upholding the validity of the amendment to Rule 2(n) and the notification S.R.O. No.145/2007 concerning coconut toddy. The court declared the prescriptions for Palmyra palm and Sago palm toddy as ultra vires. The court also upheld the prosecution under Section 57(a) for selling toddy with alcohol content exceeding the prescribed limits, treating the excess alcohol as a foreign ingredient. The related writ petitions were disposed of in line with this judgment.
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2009 (4) TMI 961
The High Court of Delhi dismissed the appeal regarding foreign travel expenditure of spouse for Assessment Year 2001-2002, citing a previous decision. The issue of gratuity provision was also ruled against the Revenue based on previous judgments. No substantial question of law was found, and the appeal was dismissed.
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2009 (4) TMI 960
Issues:
Appeal against acquittal under Sections 8 and 18 of the NDPS Act based on non-examination of a crucial witness.
Analysis:
The appeal challenged the acquittal of the respondent by the Sessions Judge of Rajasthan High Court under Sections 8 and 18 of the NDPS Act. The respondent was initially convicted by the Special Judge, NDPS cases, Chittorgarh for possessing 6 Kg. of opium. The prosecution's case was based on a secret information received by PW.1, leading to the arrest of the respondent. The accused was searched, and opium was recovered from him, which was later confirmed by the FSL report. The trial court convicted the respondent based on this evidence.
In the appeal, the High Court set aside the conviction solely on the ground that a crucial witness, Jamnalal, who handled the samples, was not examined. The High Court deemed this non-examination as detrimental to the prosecution's case, raising doubts about possible tampering with the samples. However, the State argued that the entire process from seizure to submission at the FSL was meticulously followed, ensuring the integrity of the samples. The State contended that the non-examination of Jamnalal should not discredit the prosecution's case, especially when the seals were intact, as confirmed by the FSL report.
The Supreme Court analyzed the sequence of events meticulously. It noted that the samples were sealed, deposited, and submitted to the FSL without any delay. The role of Jamnalal was limited to receiving and returning the samples, and the FSL report confirmed the integrity of the seals. Referring to the case of Hardip Singh vs. State of Punjab, the Court emphasized that even delays in sending samples to the laboratory do not invalidate the prosecution's case if the seals remain intact. The Court found the High Court's conclusion of possible tampering unfounded, given the FSL report's clear confirmation of the seals' integrity.
Conclusively, the Supreme Court overturned the High Court's judgment, reinstating the trial court's conviction. The respondent was directed to surrender and serve the remaining sentence. The Court emphasized the importance of maintaining the integrity of evidence and dismissed the appeal, upholding the conviction based on the established facts and legal principles.
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2009 (4) TMI 959
Issues Involved:
1. Legitimacy of the plaintiff and defendant no.4 u/s 112 of the Indian Evidence Act.
2. Validity of the Will executed by Balak Ram.
3. Nature of the property (ancestral or coparcenary).
4. Limitation period for filing the suit.
Summary:
Issue 1: Legitimacy of the plaintiff and defendant no.4 u/s 112 of the Indian Evidence Act
The High Court upheld the presumption of legitimacy u/s 112 of the Indian Evidence Act, stating, "The fact that any person who was born during the continuance of a valid marriage... shall be conclusive proof that he is the legitimate son of that man, unless it can be shown that the parties to the marriage had no access to each other." The court emphasized that "the presumption can only be rebutted by a strong, clear satisfying and conclusive evidence." The High Court concluded that the plaintiff and defendant no.4 were legitimate sons of Balak Ram as there was no evidence of non-access.
Issue 2: Validity of the Will executed by Balak Ram
The High Court noted that the Will was validly executed by Balak Ram in favor of defendant nos.1 and 2, stating, "The two courts below have concurrently held the Will Ex. DW 1/A to have been validly executed by the deceased Balak Ram." However, it was also observed that the property in the hands of Balak Ram was ancestral, and under the custom governing the parties, a Will could not be executed in respect of ancestral property.
Issue 3: Nature of the property (ancestral or coparcenary)
The High Court found that the property was ancestral, inherited by Balak Ram from his father. It was stated, "There is no denying that the property in the hands of the deceased Balak Ram was ancestral since admittedly he had inherited the same from his father." The court also noted that the District Judge erred in holding the property to be coparcenary without proper pleadings.
Issue 4: Limitation period for filing the suit
The High Court observed that the suit was not filed within the prescribed limitation period of three years. It was noted, "Considering the pleadings as a whole as set out in the plaint, the suit of the plaintiff as laid, on the face of it, was not within time." The court concluded that the findings of the Trial Court and the District Court on the issue of limitation were correct.
Conclusion:
The appeal was dismissed, with the High Court's findings on the issues of legitimacy, validity of the Will, nature of the property, and limitation being upheld. The court emphasized the strong presumption of legitimacy u/s 112 of the Indian Evidence Act and the inadmissibility of questioning the paternity of children born during a valid marriage.
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2009 (4) TMI 958
Supreme Court dismissed the appeal in the case with citation 2009 (4) TMI 958 - SC. Justices S.H. Kapadia and Aftab Alam delivered the order.
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2009 (4) TMI 957
Issues Involved:
1. Clubbing of clearances and mutuality of interest.
2. Classification of Synthetic Rubber Master Batch (SRMB).
3. Classification of Colour Master Batch (CMB).
4. Classification of strap-plaps.
5. Invocation of extended period of limitation.
6. Validity of the second show cause notice dated 30-3-2006.
7. Denial of Modvat benefit.
8. Imposition of penalties.
Detailed Analysis:
1. Clubbing of Clearances and Mutuality of Interest:
The Revenue proceeded against the units for clubbing clearances of three units on the grounds of mutuality of interest and use of the common brand name 'Premier'. The Commissioner, in the de novo proceedings, demanded duty separately for each unit, which was contrary to the Tribunal's directive to treat the units as one entity and demand duty from one unit treating others as dummies. The Tribunal found this approach flawed and reiterated that the duty demand should be on a single concern.
2. Classification of Synthetic Rubber Master Batch (SRMB):
The appellants claimed SRMB under Chapter heading 4005.20, which carries a nil rate of duty if used within the factory of production. The Commissioner classified it under 4005.90 with 16% duty, stating it was removed between units and not used captively. The Tribunal set aside this classification, noting that SRMB was used to produce Rubber Mix within the same premises and thus should be classified under 4005.20.
3. Classification of Colour Master Batch (CMB):
The Chemical Examiner's report on CMB was inconclusive as the FTIR instrument was out of order, and the sample was not sent to the Central Revenues Control Laboratory for further testing. The Tribunal upheld the appellants' claim for classification due to the inconclusive report and granted the benefit of doubt to the appellants.
4. Classification of Strap-Plaps:
The Commissioner followed a previous Tribunal decision, classifying strap-plaps under heading 4008.29 as sheets of vulcanized rubber. The appellants argued they should be classified as parts of Hawai chappals under heading 6401.92, invoking Rule 2(a) of the Interpretative Rules and citing the Supreme Court decision in Phoenix International Ltd. The Tribunal acknowledged the conflict and referred the matter to a Larger Bench for a definitive ruling on the classification.
5. Invocation of Extended Period of Limitation:
The Tribunal found that the issues raised pertained to interpretation of the Central Excise Tariff/law and thus did not justify the invocation of the extended period of limitation. Consequently, any demand should be confined to the normal period, and all penalties were set aside.
6. Validity of the Second Show Cause Notice Dated 30-3-2006:
The second show cause notice was issued after the first adjudication order, invoking the longer period despite the facts being known to the Department. The Tribunal, citing the Supreme Court decision in P&B Pharmaceuticals (P) Ltd., held that suppression could not be alleged, rendering the entire demand for the period from 31-1-2003 to 31-1-2005 time-barred and set aside.
7. Denial of Modvat Benefit:
The Tribunal directed the Commissioner to take a decision on the Modvat benefit on EVA in accordance with the law based on available evidence during the de novo proceedings.
8. Imposition of Penalties:
Given that the extended period of limitation was not applicable, the Tribunal set aside all penalties imposed under Section 11AC of the Central Excise Act, 1944.
Conclusion:
(i) SRMB is classifiable under 4005.20 with nil duty, requiring re-calculation of total duty liability.
(ii) Differential duty on CMB is set aside.
(iii) Classification of strap-plaps to be decided by a Larger Bench.
(iv) Demand should be confined to the normal period, and all penalties are set aside.
(v) The second show cause notice dated 30-3-2006 is time-barred, and all related demands are set aside.
Pronounced in the Court on 21-4-09.
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2009 (4) TMI 956
Issues:
Non-maintenance of production-clearance records for 20 days, confiscation of unaccounted goods, imposition of penalties under Rule 25 and Rule 26, justification of penalties under Section 11AC, evidence of clandestine removal, modification of penalties, restoration of original authority's order.
Analysis:
The case involved a situation where officers found unaccounted stock during a visit to a factory premises, leading to the confiscation of goods valued at approximately Rs. 12 lakhs. The original authority imposed penalties under Rule 25 and Rule 26, along with a penalty under Section 11AC. The Commissioner (Appeals) later set aside the original authority's order, stating that the intention to remove the goods without paying the appropriate Central Excise duty was not proven. The department appealed this decision.
During the appeal, the learned DR argued that the appellant had not maintained records for 20 days and had conducted clearances during this period. The original authority's decision to confiscate the unaccounted goods and impose penalties was deemed justified. The learned DR sought the restoration of the original authority's order.
Upon careful consideration, the judge noted that the respondent had failed to maintain up-to-date records for about 20 days and had conducted clearances without proper documentation. The judge emphasized the strict obligation to maintain production-clearance records. While upholding the confiscation of unaccounted goods, the judge disagreed with the original authority's presumption that the goods were intended for clandestine removal, as there was no evidence to support this claim. Notably, no demand of duty had been confirmed despite allegations of goods being cleared before a certain date. The judge found the penalties imposed under Section 11AC and Rule 26 unjustified due to lack of evidence of clandestine removal, but acknowledged the need for some penalties for non-maintenance of accounts.
In the final decision, the judge set aside the Commissioner (Appeals)'s order and restored the original authority's decision with modifications. The confiscation was upheld, allowing redemption of goods upon payment of a fine. The penalty under Section 11AC was reduced to Rs. 2,000 for non-maintenance of records, while the penalty on the partner was set aside. The appeal was disposed of based on these terms.
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2009 (4) TMI 955
Whether, on the facts and circumstances of the case, could it be said that the contract between the Indian buyer and TISCO on the one hand and the contract between TISCO and Tata incorporated, USA on the other are so inextricably interlinked as to attract the first limb of section 5(2) of the 1956 Act?
Held that:- Department appeal allowed. As according to the Department, the sales effected by TISCO to the Indian buyer did not fall within the first limb of section 5(2) of 1956 Act. In our view, the High Court had failed to consider various documents which were placed on record before it, namely, the invoices, the bill of lading, the modality of payment, the name of the consignee, etc. We do not wish to express any opinion on these documents at this stage. Suffice it to state that the above question needs to be examined by the High Court de novo in accordance with law. The High Court had erred in proceeding on the basis that no question of law arose on the interpretation of the documents placed on record before it.
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2009 (4) TMI 954
Issues Involved:
Cross appeals against CIT (Appeals) order for assessment year 2000-01.
Assessee's Share Valuation:
- Assessee purchased property at Roop Nagar, Delhi for &8377; 14 lacs.
- AO referred matter to Valuation Officer u/s 142A, who valued property at &8377; 2,00,12,792.
- Assessee's 1/8th share worked out at &8377; 25,01,600.
- Difference of &8377; 11,01,600 added to assessee's income.
- CIT (Appeals) reduced value to &8377; 15,37,500, confirmed addition of &8377; 1,37,500.
Legal Interpretation - Section 142A:
- Tribunal held that for invoking section 142A, there must be evidence of investment outside books or undisclosed investment.
- Burden to prove understated consideration lies on Revenue.
- Valuation Officer's method challenged, found suffering from defects.
- Addition of &8377; 17,37,000 not sustainable, upheld CIT (Appeals) decision.
Decision:
- DR failed to produce material requiring valuation under section 142A.
- Comparable case for valuation found not suitable, rough estimate basisless.
- Order set aside, assessee's appeal allowed, revenue's appeal dismissed.
Conclusion:
- Order pronounced on April 22, 2009 by R. P. Garg (Senior Vice President) of ITAT Delhi.
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2009 (4) TMI 953
Detention of person - smuggling - red sanders - principles of natural justice - the relied upon document, the detention order of Anil Kumar was not supplied to the detenu and the detenu was prevented from making effective representation which has violated his constitutional right under clause (5) of Article 22 of the Constitution
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2009 (4) TMI 952
Issues Involved:
1. Validity of reopening of assessment u/s 147.
2. Sustenance of disallowance of depreciation on windmill.
3. Sustenance of disallowance of rent paid.
4. Sustenance of disallowance of consultancy charges.
Summary:
1. Validity of Reopening of Assessment u/s 147:
The AO issued a notice u/s 148 based on a survey report indicating that the windmill was not installed during the relevant assessment year. The Tribunal upheld the reopening, stating that the AO had a "bonafide reason to believe" that income had escaped assessment. The Tribunal found no evidence that the AO had examined the depreciation issue in detail during the original assessment.
2. Sustenance of Disallowance of Depreciation on Windmill:
The AO disallowed the depreciation claimed on the windmill, asserting it was not installed and operational before 31.03.02. The Tribunal, however, found that the assessee had provided sufficient evidence, including meter reading sheets and commissioning certificates, proving the windmill was installed and generated electricity before the end of March 2002. The Tribunal concluded that the assessee fulfilled the conditions for claiming depreciation u/s 32 of the Act and directed the AO to allow the claim.
3. Sustenance of Disallowance of Rent Paid:
The AO disallowed the rent paid to Mr. Y Birla for a property in Alibaug, questioning its business purpose. The Tribunal upheld the disallowance, agreeing with the CIT(A) that the premises were used as a guest house, and the expenditure was not allowable as business expenditure. The Tribunal cited the decisions in Britannia Industries Ltd. vs. CIT and Raja Bahadur Motilal Poona Mills Ltd. vs. CIT to support its conclusion.
4. Sustenance of Disallowance of Consultancy Charges:
The AO disallowed consultancy charges paid to Osian's Connoisseurs of Art Pvt. Ltd., doubting their business purpose. The Tribunal found that the assessee had not provided supporting material for the payment. In the interest of justice, the Tribunal set aside the orders of the revenue authorities and remanded the matter back to the AO for fresh consideration, directing the AO to decide the issue afresh after providing a reasonable opportunity of being heard to the assessee.
Conclusion:
The appeal was partly allowed for statistical purposes, with the Tribunal directing the AO to allow the depreciation claim on the windmill and to reconsider the consultancy charges after further examination. The disallowance of rent paid was upheld.
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2009 (4) TMI 951
Case: Supreme Court dismissed the Special Leave Petition. Time for pre-deposit extended by two weeks from today. (2009 (4) TMI 951 - SC)
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2009 (4) TMI 950
Sales tax exemption - inter-State sale of goods - power under sub -section (5) of Section 8 of the CST Act - Held that:- The impugned notification is issued by the State Government on the basis of the amendment made to Section 8(5) of the CST Act - No doubt sales tax exemption is granted in favour of the appellant's company from the year 1998 for a period of 12 years i.e., from the date of commencement of the production of its goods. In the meanwhile, the parliament, in exercise of its legislative powers, has made amendment to sub -section (5) of Section 8 of CST Act. On fulfillment of the requirements laid down in sub -section (4) by the dealer, sales tax exemption can be availed by the company.
Incorporation of the said amended portion of sub -section (5) of Section 8 was notified to the company by issuing the notification impugned in the writ petition. The appellant dealer cannot contend that the amended provisions of sub -section (5) of Section 8 of CST Act is not applicable to it and therefore the impugned notification adding additional conditions are bad in law - The grant of sales tax exemption in favour of the appellant -company is a benefit. Therefore, the same cannot be claimed as a matter of right.
The assessment order was passed for the period from 1 -4 -2004 to 31 -3 -2005 onwards as the appellant has not complied with the requirements of sub -section (4) of Section 8 of CST Act.
Appeal dismissed.
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2009 (4) TMI 949
Issues Involved:
1. Rejection of books of account by the AO.
2. Addition of Rs. 2,41,70,279 by estimating gross profit at 1% of total turnover.
3. Validity of the assessee's explanation for the incurred losses.
4. Acceptance of the closing stock valuation method.
Summary:
1. Rejection of Books of Account by the AO:
The AO rejected the books of account of the assessee, citing that the profit and loss shown were not correctly deduced. The AO observed that the assessee showed a gross loss of 16.7% in the diamond business, which is rare. Despite the assessee providing detailed explanations and inventory records, the AO found the records insufficient and unreliable, leading to the rejection of the books of account.
2. Addition of Rs. 2,41,70,279 by Estimating Gross Profit at 1% of Total Turnover:
The AO estimated the gross profit at 1% of the total turnover, resulting in an addition of Rs. 2,41,70,279. The AO compared the case to Samir Diamonds Export (P) Ltd. vs. A.K. Gautam, ITO and Anr., where a similar estimation was made. The CIT(A) upheld this decision, stating that the assessee's continuous losses in the diamond export business were not justifiable.
3. Validity of the Assessee's Explanation for the Incurred Losses:
The assessee argued that the losses were due to the valuation of closing stock as per market value or purchase value, whichever was lower, a consistent method adopted by the company. The assessee also highlighted that the AO accepted similar losses in the previous assessment year (2002-03) under s. 143(3). The Tribunal found that the assessee's method of accounting and explanations were consistent and justified, noting that no specific defects were pointed out by the AO.
4. Acceptance of the Closing Stock Valuation Method:
The Tribunal observed that the closing stock valuation method used by the assessee was consistent and accepted in previous years. The AO's rejection of the closing stock valuation was deemed unjustified as the same method was accepted in the immediately preceding year and the subsequent year. The Tribunal concluded that the AO and CIT(A) were not justified in rejecting the books of account and disallowing the loss claimed by the assessee.
Conclusion:
The Tribunal set aside the orders of the AO and CIT(A), directing the AO to allow the claim of the assessee as per the books of account. The appeal of the assessee was allowed.
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9911796707
