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2009 (8) TMI 1186
Whether the liability of the guarantor and principle debtors are co-extensive and not in alternative?
Whether the High Court under its power of superintendence under Article 227 of the Constitution of India was not justified to stay further proceedings in O.A. 156 of 1997?
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2009 (8) TMI 1184
Issues involved: Release of goods on provisional basis, conflicting reports on quality of imported betel nut, re-testing under Prevention of Food Adulteration Act.
In the present case, the petitioner sought release of goods on provisional basis after importing betel nut and submitting a DPPQS certificate for clearance. However, the respondent conducted a sample check through CFL which reported 47.94% damage, leading to non-release of goods under Section 2(ia) of Prevention of Food Adulteration Act. The petitioner argued that the betel nuts are likely to deteriorate and requested re-testing due to conflicting reports. The respondent contended that there is no provision for re-testing under the Act.
Referring to the judgment in Magma India Vs. Union of India 2005(189) ELT 261, the Court directed the respondent to re-test the goods through CFL and DPPQS without informing the petitioner. The decision was made based on the principle laid down in the mentioned case and the specific circumstances of the present case. The respondent was instructed to take further action based on the new test reports.
The writ petition was disposed of, and a copy of the order was to be provided dasti to the counsel for the respondent.
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2009 (8) TMI 1183
Issues:
1. Appeal against imposition of redemption fine and penalty on used photo copier machines.
Analysis:
The judgment by the Appellate Tribunal CESTAT Kolkata involved an appeal where the Revenue challenged the imposition of a redemption fine of 10% and penalty of 5% on used photo copier machines. The Revenue contended that the redemption fine and penalty were on the lower side and sought enhancement. The Commissioner (Appeals) had imposed these fines based on a merger of approximately 20 to 22%. The respondent, however, argued that the value was enhanced by the Revenue and accepted by them, with reliance on previous Tribunal decisions where fines were reduced to 10% and 5%. The respondent highlighted that the Kerala High Court had dismissed Revenue's appeal against one such decision.
The Tribunal noted that the Revenue's appeal focused on enhancing the redemption fine and penalty. The Commissioner (Appeals) had based their decision on the Tribunal's ruling in the Office Devices case, where fines of 10% and 5% were upheld by the Kerala High Court. Given that the Commissioner followed the Tribunal's decisions, which were subsequently upheld by the High Court, the Tribunal dismissed the appeals. The judgment emphasized the consistency in applying fines as per precedent and upheld the decision based on previous rulings.
Overall, the judgment centered on the dispute over the redemption fine and penalty imposed on used photo copier machines, with the Tribunal ultimately affirming the Commissioner's decision based on precedent set by previous Tribunal rulings and the subsequent validation by the Kerala High Court.
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2009 (8) TMI 1182
The Gujarat High Court admitted the case and issued notices on substantial questions of law regarding Cenvat credit for services related to the operation and maintenance of a captive wind mill plant. The court questioned the eligibility of such services for Cenvat credit under the Cenvat Credit Rules, 2004. The appeal was also questioned based on the requirement for services to be received in the factory of production to qualify as input services. Additionally, the court examined whether services related to the generation of electricity used in manufacturing dutiable products are entitled to Cenvat credit. The matter was posted along with Tax Appeal No.1037/2008.
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2009 (8) TMI 1181
Issues Involved:
1. Addition of Rs. 11,71,340/- on account of unexplained investment in flat u/s 69 of the IT Act.
2. Charging of interest u/s 234B of the IT Act.
3. Deletion of addition of Rs. 19,20,000/- on account of unexplained credits shown under long-term capital gain u/s 68 of the IT Act.
Summary:
Issue 1: Addition of Rs. 11,71,340/- on account of unexplained investment in flat u/s 69 of the IT Act
The assessee purchased a flat in Mumbai for Rs. 30,62,500, but the Stamp Valuation Authority (SVA) valued it at Rs. 42,33,840, leading to a demand for additional stamp duty. The Assessing Officer (AO) treated the difference of Rs. 11,71,340 as unexplained investment u/s 69. The assessee argued that the flat was bought at a lower price due to distress sale and paid additional stamp duty for peace of mind. The AO rejected this explanation, noting the acceptance of the SVA valuation by the assessee. The Commissioner of Income Tax (Appeals) upheld the AO's decision, emphasizing the principle behind section 50C, which suggests that the sale consideration should match the jantri price. However, the ITAT found that section 50C applies only to sellers for capital gains purposes and not to buyers. The ITAT concluded that there was no evidence that the assessee paid more than Rs. 30,62,500 and deleted the addition of Rs. 11,71,340.
Issue 2: Charging of interest u/s 234B of the IT Act
The assessee did not make any submission on this ground. The ITAT held that charging of interest is consequential and disposed of this ground accordingly.
Issue 3: Deletion of addition of Rs. 19,20,000/- on account of unexplained credits shown under long-term capital gain u/s 68 of the IT Act
The assessee claimed long-term capital gain of Rs. 19,20,000 from the sale of shares of 'Offshore Investment Ltd.' The AO found discrepancies in the transaction, including cash purchase, lack of demat account, and non-compliance with SEBI guidelines, and treated the gain as unexplained cash credit u/s 68. The Commissioner of Income Tax (Appeals) deleted the addition, noting that the broker's note provided sufficient details and the transactions were genuine. However, the ITAT observed that the contract note did not mention the distinctive number of shares or Securities Transaction Tax (STT). The ITAT set aside the issue for re-adjudication, directing the AO to verify the transfer of shares, the genuineness of the transactions, and the market price of the shares on the purchase and sale dates.
Conclusion:
The appeal in ITA No. 3997/Ahd/08 is partly allowed, and the appeal in ITA No. 93/Ahd/09 is allowed for statistical purposes.
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2009 (8) TMI 1180
Issues Involved:
1. Erroneous set off of losses of non-10A units against profits of the 10A unit before arriving at the deduction u/s 10A of the Act.
2. Whether the CIT was justified in invoking u/s 263 of the Act to revise the assessment order.
Summary:
Issue 1: Erroneous Set Off of Losses
The assessee company, 24/7 Customer Private Limited, contested the CIT's order u/s 263 of the Act, which directed the AO to set off losses of non-10A units against profits of the 10A unit before arriving at the deduction u/s 10A. The CIT argued that the AO had allowed the deduction u/s 10A without setting off unabsorbed depreciation and brought forward business losses, making the order erroneous and prejudicial to the revenue. The CIT's stance was that s.10A, as amended by the Finance Act 2000, required deductions to be made from the total income, including setting off losses from other units and brought forward losses.
Issue 2: Justification of CIT's Invocation u/s 263
The assessee argued that s.10A is an exemption provision, not a deduction provision, and should be applied before computing the total income. They cited several case laws, including ACIT v. Yokogawa India Ltd. and Nous Infosystems Pvt. Ltd. v. ITO, to support their claim that the deduction u/s 10A should be computed without setting off losses from non-10A units. The CIT, however, maintained that the AO's order was not in line with the amended provisions of s.10A and thus invoked u/s 263 to revise the assessment.
Tribunal's Findings:
The Tribunal examined the relevant case laws and provisions. It noted that the AO had taken a possible view supported by judicial precedents, including the ITAT Bangalore Bench's decision in KPIT Cummins Infosystems (P) Ltd. v. ACIT, which held that s.10A should be considered as an exemption section, and eligible profits should not be reduced by unabsorbed depreciation and business losses of other units. The Tribunal concluded that when the AO has taken one of the possible views, the order cannot be termed erroneous, and the CIT was not justified in invoking u/s 263.
Conclusion:
The Tribunal allowed the appeal, ruling that the AO's order was not erroneous and the CIT did not have the power to cancel the assessment order u/s 263 of the Act. The assessee company's appeal was thus upheld.
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2009 (8) TMI 1179
Issues involved: The judgment involves issues related to the reduction of expenditure incurred in foreign currency on travel from export turnover and total turnover for computing deduction u/s 10A of the IT Act, and the allowability of exemption u/s 10A without setting off the loss of the non-STPI Unit.
Reduction of Expenditure from Turnover: The first issue pertains to the reduction of expenditure incurred in foreign currency on travel from both export turnover and total turnover for the purpose of calculating deduction u/s 10A. The AO initially reduced the expenditure from export turnover, but the CIT(A) directed to exclude it from total turnover as well. The Tribunal upheld this decision, citing precedents and the similarity between the computation formula of u/s 10A and section 80HHE of the IT Act. The Tribunal reasoned that if certain expenses are excluded from export turnover, they should also be reduced from total turnover. This view was supported by a decision of the Chennai Special Bench.
Allowability of Exemption without Setting Off Loss: The second issue concerns the allowability of exemption u/s 10A without setting off the loss of the non-STPI Unit. The assessee contended that the STPI Unit is a separate undertaking eligible for deduction under sec.10A, and the profits of this unit should not be set off against the loss of other units. The Tribunal agreed with this interpretation, emphasizing that sec.10A deals with incomes not forming part of total income, and losses of non-exempt units should not be set off against profits of the software services division eligible for exemption u/s 10A. The Tribunal cited relevant case laws to support this position.
Conclusion: The Tribunal dismissed the revenue's appeals for both assessment years, upholding the decisions on both issues. It was held that the expenditure on travel should be reduced from both export and total turnover for u/s 10A computation. Additionally, the exemption u/s 10A was allowed without setting off the loss of the non-STPI Unit, in line with the provisions of the IT Act and relevant case laws.
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2009 (8) TMI 1178
The Bombay High Court remanded the matter back to the tribunal for de novo consideration according to law as the true import of Clause 19 of the agreement dated 9th January, 1996 was not considered. The appellant had been assigned the mark and it was subsequently registered in their name in India. The appellant's submissions, including references to Supreme Court judgments and the issue of limitation, were not considered by the tribunal. The appeal was disposed of accordingly.
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2009 (8) TMI 1177
Notification u/s 4 of the Land Acquisition Act, 1894 ('the Act') was issued in respect of the land in question on 29.8.2002 - Thereafter a Notification u/s 6 was issued on 18.6.2003. The said Notification u/s 6 was challenged and the writ petition filed by the appellants was allowed on 20.1.2004 - Notification u/s 6 dated 18.06.2003 was quashed - Subsequently a second Notification u/s 6 dated 30.10.2006 was issued - Validity of Notification u/s 6 dated 30.10.2006 - HELD THAT:- In our opinion, the said Notification was clearly barred by clause (ii) of the proviso to Section 6. It can be seen from the proviso to Section 6 that it is couched in negative language. It is well settled that when a Statute is couched in negative language it is ordinarily regarded as peremptory and mandatory in nature.
In this connection we may also refer to the Mimansa Rules of Interpretation, which were our traditional principles of interpretation for over 2500 years, but which are unfortunately ignored in our Courts of law today. In the Mimansa system illustrations of many principles of interpretation are given in the form of maxims (nyayas). The negative injunction is illustrated by the Kalanja nyaya or Kalanja maxim.
The Kalanja maxim (na kalanjam bhakshayet) states that `a general condemnatory text is to be understood not only as prohibiting an act, but also the tendency, including the intention and attempt to do it.' It is thus mandatory. A plain reading of the proviso to Section 6 shows that it is a general prohibition against the whole world and not against a particular person. Hence the Kalanja maxim of the Mimansa system will in our opinion apply to the proviso to Section 6.
In fact, a Constitution bench decision of this Court in Padma Sundara Rao (Dead) and Others Vs. State of T.N. And Others [2002 (3) TMI 44 - SUPREME COURT] is clearly in support of the submission of the learned counsel for the appellants that the proviso to Section 6 is mandatory, and hence the Notification u/s 6 dated 30.10.2006 is time barred.
In our opinion, when the language of the Statute is plain and clear then the literal rule of interpretation has to be applied and there is ordinarily no scope for consideration of equity, public interest or seeking the intention of the legislature. It is only when the language of the Statute is not clear or ambiguous or there is some conflict etc. or the plain language leads to some absurdity that one can depart from the literal rule of interpretation. Therefore, there can be no estoppel against a Statute. Since the Statute is very clear, the period of limitation provided in Clause (ii) of the proviso to Section 6 has to be followed, and concessions of the counsel can have no effect.
In Govt. of A.P. v. B. Satyanarayana Rao [2000 (4) TMI 818 - SUPREME COURT] it has been held as follows:- ''The rule of per incuriam can be applied where a court omits to consider a binding precedent of the same court or the superior court rendered on the same issue or where a court omits to consider any statute while deciding that issue.” It may be seen from the judgment dated 20.1.2004 of the High Court that in the aforesaid judgment no specific reference has been made to the limitation period prescribed in clause (ii) to proviso to Section 6, though no doubt Section 6 has been generally referred to. Hence, in our opinion, the observations in paragraph 3 of the aforesaid judgment dated 20.1.2004 have to be construed as per incuriam.
In view of the aforesaid discussion, we allow this appeal and set aside the impugned judgment and order dated 21.01.2008. However, it is open to the respondent-State of Maharashtra to issue a fresh Notification u/s 4 of the Act and take proceedings in accordance with law thereafter.
Appeal allowed. No order as to the costs.
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2009 (8) TMI 1176
Constitutional validity of reservation - Interpretation and/ or application of the notifications and/or the circulars - Presidential Notification, issued under Article 341 of the Constitution of India specifying Scheduled Castes - whether in the absence of a Presidential Notification, listing any group of persons as a Scheduled Tribe in Delhi, can by policy, the benefit of reservation in services be accorded to migrant Scheduled Tribes in the Union Territory of Delhi? - HELD THAT:- We are unable to accept the contention that the members of scheduled castes and scheduled tribes notified as such in other States would come within the purview of the backward classes within the meaning of clause (4) of Article 16 of the Constitution of India. If a caste or tribe is notified in terms of the Scheduled Caste Order or Scheduled Tribe Order, the same must be done in terms of clause (1) of Article 341 as also that of 342 of the Constitution of India, as the case may be. No deviation from the procedure laid down therein is permissible in law. If any amendment/alteration thereto is required to be made, recourse to the procedure laid down under clause (2) thereof must be resorted to.
Reservations have been made in terms of the policy decision of the Central Government, namely, 7.5% for the members of scheduled tribes, 15% for the members of scheduled castes and 27% for the members of backward classes. If the members of the scheduled castes and scheduled tribes in other States are to be treated as backward classes for Delhi; intensive studies were required to be made in regard to the question whether they would come within the purview of the definition of ‘backward classes’ so as to answer the description of ‘socially and educationally backward’.
When reservation for scheduled castes or scheduled tribes had been earmarked, persons answering the description thereto only can be appointed. No recruitment is permissible for a backward class against a scheduled caste or scheduled tribe quota. That itself would be violative of clauses (1) and (4) of Article 16 of the Constitution of India. Furthermore, if a person is to be treated as scheduled caste or scheduled tribe in terms of Article 341 of the Constitution of India, the benefit attached thereto in all other areas must be conferred on him. A person cannot be treated to be a member of scheduled caste for one purpose and not for another purpose.
By judicial process or otherwise, the said executive instructions which are consistent with the constitutional scheme could not have brought about an altogether different situation as a result whereof those who are residents of Delhi being belonging to the members of the Scheduled Castes and, thus, entitled to be regarded within the framework of the quota provided for by the Government could not have been deprived therefrom by way of bringing in another class of persons within the purview of the said category of Scheduled Castes who are not entitled to the said benefit.
By reason of such an Act, those who are entitled to the benefit of the doctrine of protective discrimination contained in Clause (4) of Article 16 of the Constitution of India had been deprived of their constitutional right. Once it is found that the constitutional violation of this nature has been committed, in our opinion, the Courts would be entitled to apply the principle of strict scrutiny test or closer scrutiny test or higher level of scrutiny. It is commonly believed amongst a section of Academicians that strict scrutiny test in view of the Constitution Bench decision of this Court in Ashok Kumar Thakur [2008 (4) TMI 775 - SUPREME COURT] is not applicable in India at all.
We are of the opinion that in respect of the following categories of cases, the said test may be applied:- 1. Where a statute or an action is patently unreasonable or arbitrary.
2. Where a statute is contrary to the constitutional scheme.
3. Where the general presumption as regards the constitutionality of the statute or action cannot be invoked.
4. Where a statute or execution action causes reverse discrimination.
5. Where a statute has been enacted restricting the rights of a citizen under Article 14 or Article 19 as for example clauses (1) to (6) of Article 19 of the Constitution of India as in those cases, it would be for the State to justify the reasonableness thereof.
6. Where a statute seeks to take away a person’s life and liberty which is protected under Article 21 of the Constitution of India or otherwise infringes the core human right.
7. Where a statute is ‘Expropriatory’ or ‘Confiscatory’ in nature.
8. Where a statute prima facie seeks to interfere with sovereignty and integrity of India.
However, by no means, the list is exhaustive or may be held to be applicable in all situations.
As we have already stated, in the event the state issues any instruction through circular in the National Capital Territory of Delhi to this effect, the same will deserve strict scrutiny. After following the precedent with respect to strict scrutiny it is pertinent to explore some foundational principles in this regard.
We think we should. The decisions referred to hereinbefore clearly suggest that we are bound by a Constitution Bench decision. We have referred to two Constitution Bench decisions, namely Marri Chandra Shekhar Rao [1990 (5) TMI 235 - SUPREME COURT] and E.V. Chinnaiah [2004 (11) TMI 522 - SUPREME COURT]. Marri Chandra Shekhar Rao had been followed by this Court in a large number of decisions including Three Judge Bench decisions. Pushpa, therefore, could not have ignored either Marri Chandra Shekhar Rao or other decisions following the same only on the basis of an administrative circular issued or otherwise and more so when the Constitutional scheme as contained in clause (1) of Articles 341 and 342 of the Constitution of India putting the State and Union Territory in the same bracket.
Following Dayanand [2008 (11) TMI 679 - SUPREME COURT], therefore, we are of the opinion that the dicta in Pushpa [2005 (2) TMI 849 - SUPREME COURT] is an obiter and does not lay down any binding ratio.
Thus, the impugned judgments cannot be sustained which are set aside accordingly. The appeal and the writ petition are allowed. In the facts and circumstances of the case, there shall be no orders as to costs.
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2009 (8) TMI 1175
The Delhi High Court dismissed the appeal ITA No.784/2005 as it involved a pure question of fact already decided by the Tribunal. The error in the appeal number was noted but deemed unnecessary to summon the correct file.
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2009 (8) TMI 1174
Issues Involved:
1. Entitlement to depreciation on 'business information' classified as goodwill.
2. Treatment of expenditure as 'revenue expenditure'.
Summary:
Issue 1: Entitlement to Depreciation on 'Business Information' Classified as Goodwill
The assessee company, Bosch Ltd, claimed Rs. 30.25 lakhs as depreciation on 'payment for goodwill' for the assessment year 2004-05. The CIT (LTU) concluded that the depreciation claimed was illegal and excessive, setting aside the assessment order u/s 263 of the Act. The CIT (LTU) argued that the amount of Rs. 1.38 crores, classified by the valuer as 'goodwill', was not 'business information' eligible for depreciation. The CIT (LTU) held that the valuation method used was appropriate for goodwill, not for 'business information' or 'know-how'. The assessee's contention that the amount represented the value of the skill and know-how of employees absorbed from Phillips (India) was rejected, as human resources do not fall within the definition of 'intangible assets' u/s 32.
The Tribunal, however, found that the assessee's claim was justified. The Tribunal noted that the business information brought by the employees was a significant intangible asset that contributed to the company's profits. Citing the case of Skyline Caterers (P) Ltd. v. ITO, the Tribunal concluded that the rights acquired by the assessee under the agreement with Phillips (India) fell within the expression 'any other business or commercial rights of similar nature' u/s 32(1)(ii). Therefore, the assessee was entitled to claim depreciation on 'business information' amounting to Rs. 1.38 crores under the category of 'other identifiable intangibles (goodwill)'.
Issue 2: Treatment of Expenditure as 'Revenue Expenditure'
The CIT (LTU) rejected the assessee's alternate contention that if the amount could not be considered as 'business information' eligible for depreciation, it should be treated as revenue expenditure. The Tribunal, having allowed the main grievance of the assessee regarding depreciation, found this alternate contention to be obsolete and irrelevant.
Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the order of the CIT (LTU) and restoring the assessment order of the AO, thereby permitting the depreciation claim on 'business information' classified as goodwill. The alternate contention of treating the expenditure as 'revenue expenditure' was not taken into consideration.
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2009 (8) TMI 1173
Issues:
Quantum of penalty when duty and penalty paid before show cause notice issuance.
Analysis:
The appellant appealed against an order imposing 100% penalties even though they had already reversed the Cenvat Credit and paid interest. The primary issue was determining the quantum of penalty when duty and penalty were paid before the issuance of a show cause notice. The appellant argued that penalties should be reduced to 25% of the duty demand if duty and interest were paid within 30 days of the demand determination, citing relevant case laws. On the contrary, the Revenue contended that penalties under Section 11AC cannot be reduced, referencing a specific case law.
The Tribunal examined Section 11AC of the Central Excise Act, which outlines penalties for non-payment of duty due to various reasons. The section provides for reducing penalties to 25% of the duty amount if duty and interest are paid within 30 days of the order communication. The purpose is to provide a benefit to the assessee for prompt payment. In this case, since the appellant had reversed the Cenvat credit and paid interest before the show cause notice, they were entitled to a reduced penalty of 25% of the duty amount.
After considering the facts, the Tribunal concluded that the appellant had already taken corrective actions by reversing the Cenvat credit and paying interest before the show cause notice. Therefore, the penalty under Section 11AC was restricted to 25% of the duty amount. The appellant was directed to deposit the reduced penalty within 30 days, failing which the full penalty amount would be payable. Consequently, the appeal was disposed of with the decision pronounced on a specific date.
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2009 (8) TMI 1172
Issues involved: Interpretation and application of circular letters issued by CBDT dated 14.5.1990 for inter-charge transfers, discrimination in transfer decisions, applicability of estoppel in transfer cases.
Interpretation of Circular Letters by CBDT:
- Respondents applied for transfer from Gujarat Charge to Kerala Charge based on circular dated 14.5.1990.
- Circular specified the process for transfer requests and conditions for accommodation against vacancies.
- Despite no UDC vacancies in Kerala Charge, respondents voluntarily agreed to transfer to LDC positions.
- Order of transfer issued based on their willingness and undertakings provided.
Discrimination in Transfer Decisions:
- Respondents' representations for transfer to UDC positions were rejected despite similar cases being approved.
- Tribunal dismissed their application citing differences in cases and lack of impleaded parties.
- High Court found discrimination, criticized the transfer process, and emphasized fairness in transfer decisions.
Applicability of Estoppel in Transfer Cases:
- Appellant argued respondents were estopped from challenging transfer due to voluntary agreement.
- Respondents contended discrimination in transfer decisions and pointed out their current UDC positions post-High Court judgment.
- Court highlighted the importance of compliance with circular guidelines and necessity of clear vacancies for transfers.
Conclusion: The Supreme Court set aside the High Court's judgment, emphasizing compliance with circular guidelines and the absence of power for relaxation in transfer decisions. The Court recognized the positive concept of equality under Article 14 of the Constitution and the principle of estoppel in transfer cases. The appeal was allowed, but the first respondent's seniority was to be counted from the date of joining the U.D.C. post, without reverting to the L.D.C. position.
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2009 (8) TMI 1171
The Supreme Court dismissed the appeal in the case with citation 2009 (8) TMI 1171, with judges Harjit Singh Bedi and J.M. Panchal presiding.
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2009 (8) TMI 1170
Issues:
1. Liability for interest on differential duty payment under Central Excise Valuation Rules, 2000.
Analysis:
In this case, the applicant cleared goods to their sister concern on a stock transfer basis under Rule 8 of Central Excise Valuation Rules, 2000. The applicant initially charged duty provisionally and later paid the differential duty after determining the cost of production as per CAS-4. The Revenue contended that the applicant is liable for interest on this differential duty payment. The impugned order confirmed the interest demand but waived the penalty. The applicant challenged the interest demand, claiming revenue neutrality as duty was not payable. The Advocate for the applicant argued that if duty is not payable, interest cannot be charged. However, the JDR argued that since the applicant quantified the differential duty upon finalizing the cost of production, interest is leviable. Reference was made to a previous case where it was held that interest is applicable on delayed or deferred duty payments.
The Member (J) considered the arguments of both parties and the case's circumstances. It was found that the applicant had a strong prima facie case. Consequently, the Member (J) granted a waiver of the pre-deposit of the interest demand and stayed the demand during the appeal's pendency. The decision was pronounced in court by the Member (J).
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2009 (8) TMI 1169
Issues involved: Double taxation of service under two different categories by different Commissionerates.
The judgment addresses the issue of double taxation of the same service under two different categories by different Commissionerates. The Petitioner argued that the demand raised for cargo handling services had already been taxed under the category of GTA service by National Coalfields Limited (NCL) and others from 2005 onwards. The Tribunal directed the Revenue to examine the issue of double taxation and granted time for the same. The Revenue was instructed to provide a clear report on whether the service charges subject to tax by the impugned order were also subject to double taxation by the Commissionerate of Allahabad. The report was expected by a specified date, and the matter was scheduled for further hearing.
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2009 (8) TMI 1168
Issues Involved:
1. Treatment of Sales Tax Subsidy
2. Disallowance of Depreciation on Unregistered Building
3. Disallowance of Depreciation on Power Lines
4. Reduction of Synchronization Charges for Deduction u/s 80-IA
5. Addition of Provision for Doubtful Debts for MAT
6. Non-reduction of Book Profits by Export Business Profit u/s 80 HHC
7. Reduction of Cost of Acquisition of Assets u/s 43(6)
Summary:
1. Treatment of Sales Tax Subsidy:
The issue was whether the Sales Tax Subsidy of Rs. 61,86,51,505/- should be treated as capital receipts or revenue receipts. The CIT(A) deleted the addition made by the Assessing Officer, treating it as capital receipts, relying on earlier ITAT orders in the assessee's favor. The Tribunal upheld the CIT(A)'s order, referencing the Special Bench decision in DCIT Vs. Reliance Industries Ltd. (2004) 88 ITD 273, thus concluding the issue against the department.
2. Disallowance of Depreciation on Unregistered Building:
The revenue challenged the deletion of disallowance of depreciation of Rs. 13,65,468/- on assets not registered in the assessee's name. The CIT(A) followed the ITAT's earlier decisions in the assessee's favor, based on the Supreme Court rulings in Poddar Cement Ltd. 226 ITR 625 and Mysore Minerals Ltd. 239 ITR 775. The Tribunal found no error in CIT(A)'s decision and upheld it.
3. Disallowance of Depreciation on Power Lines:
The assessee's claim for depreciation of Rs. 8,06,020/- on power lines was disallowed by the AO and upheld by the CIT(A), as the ownership vested with U.P. State Electricity Board. The Tribunal, following its earlier decisions, upheld the CIT(A)'s order, rejecting the assessee's claim.
4. Reduction of Synchronization Charges for Deduction u/s 80-IA:
The AO reduced Rs. 1,72,82,880/- from profits for computing deduction u/s 80-IA, considering synchronization charges as an ascertained liability. The CIT(A) upheld this view. The Tribunal agreed, stating that the liability crystallized during the relevant year, and directed verification of the P&L A/c debit by the AO.
5. Addition of Provision for Doubtful Debts for MAT:
The assessee contested the addition of Rs. 2,17,512/- for computing book profit for MAT. The Tribunal found the issue covered in favor of the assessee by its earlier order, confirming that provisions for bad debts and foreign exchange fluctuations, being actual liabilities, should not be added back. The addition was deleted.
6. Non-reduction of Book Profits by Export Business Profit u/s 80 HHC:
The assessee argued for reducing book profits by Rs. 37,21,57,582/- under section 80 HHC. The Tribunal upheld the CIT(A)'s order, following the Mumbai High Court's decision in ACIT Vs. Ajanta Pharma Ltd., rejecting the assessee's claim.
7. Reduction of Cost of Acquisition of Assets u/s 43(6):
The CIT(A) directed the AO to reduce the cost of acquisition of assets by the amount of subsidy received. The Tribunal, referencing the Visakhapatnam Bench decision in Sasisri Extractions Ltd. Vs. ACIT (2008) 307 ITR 127 (AT) and the Supreme Court decision in CIT Vs. P.J. Chemicals Ltd. (1994) 210 ITR 830 (SC), held that sales-tax subsidy received for industrial development should not reduce the asset cost. The CIT(A)'s direction was overturned.
Conclusion:
The revenue's appeal was dismissed, and the assessee's appeal was partly allowed. The order was pronounced in open court on 28-8-2009.
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2009 (8) TMI 1167
Issues involved: Confirmation of demand of Central Excise duty, imposition of penalties, violation of principles of natural justice, non-compliance with orders.
Confirmation of demand of Central Excise duty: ICCONOL Petroleums Private Limited filed an appeal against the confirmation of demand of Rs. 49,46,839.00 under Section 11A along with interest and penalty. The company dispatched finished goods to buyers without payment of duty, leading to a show cause notice being issued for recovery of duty, education cess, interest, and penalty under Section 11AC of Central Excise Act, 1944. The Order-in-Original confirmed the demand and penalties, which was challenged before the Commissioner of Central Excise (Appeals).
Imposition of penalties: Appeals were also filed by other entities against penalties imposed on them for their involvement in the alleged clandestine removal of finished products. The Commissioner of Central Excise (Appeals) directed ICCONOL Petroleums Private Limited to deposit 50% of the duty demanded and penalty imposed. However, the appellants failed to comply with the order, leading to dismissal of their appeals.
Violation of principles of natural justice: The advocate for the appellants argued that the lower authorities violated natural justice by not providing copies of documents relied upon in the show cause notice and adjudication orders. Requests for documents and cross-examination of relevant individuals were not adequately addressed by the authorities, raising concerns about procedural fairness.
Non-compliance with orders: Despite multiple directives to deposit the required amounts, the appellants failed to comply, resulting in the dismissal of their appeals. The Tribunal directed ICCONOL Petroleums Private Limited to deposit a specified amount towards duty and furnish a bank guarantee within a set timeframe. Failure to adhere to these directions would lead to the dismissal of all appeals.
Conclusion: The Tribunal ordered ICCONOL Petroleums Private Limited to make specified payments and provide a bank guarantee within a set period. Upon compliance, the impugned order would be set aside, and the appeals remanded back to the Adjudicating Authority for fresh orders, ensuring procedural fairness and compliance with natural justice principles. The appeals were remanded for de novo decision, and stay petitions were disposed of accordingly.
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2009 (8) TMI 1166
Issues Involved:
1. Taxability of forfeiture of security deposit.
2. Taxability of damages received for premature termination of the leave and licence agreement.
3. Disallowance of postage, telegram, and telephone expenses.
4. Disallowance of motor car depreciation.
5. Disallowance of repair expenses related to building at Mazgaon.
Issue-wise Detailed Analysis:
1. Taxability of Forfeiture of Security Deposit:
The assessee treated the forfeiture of the security deposit of Rs. 1.55 crores as a capital receipt, while the AO considered it a revenue receipt and taxable as income. The Tribunal analyzed the nature of the security deposit, referring to the agreement dated 5th May 1999, which indicated that the deposit was intended to secure the performance of obligations under the leave and licence agreement. The Tribunal concluded that the security deposit was a capital receipt, akin to a loan, citing the Supreme Court decision in K.M.S. Lakshmanier & Sons v. CIT and other relevant case law. The Tribunal held that the forfeiture of the security deposit did not change its character from a capital receipt to a trading receipt upon termination of the agreement. Therefore, the addition on account of forfeiture of the security deposit was deleted.
2. Taxability of Damages Received for Premature Termination:
The assessee received Rs. 24,37,500 as damages for premature termination of the leave and licence agreement, which the AO treated as revenue income. The Tribunal noted that the payment was made in view of the hardship and inconvenience suffered by the licensor due to the premature termination. Since the assessee treated rental receipts as business income, the Tribunal held that the damages received were in lieu of rental income and therefore taxable as revenue income. The Tribunal distinguished this from the remission of a loan liability, which would be a capital receipt.
3. Disallowance of Postage, Telegram, and Telephone Expenses:
The AO disallowed Rs. 62,984 claimed under postage, telegram, and telephone expenses, suspecting personal use. The Tribunal upheld the disallowance, noting that the assessee did not provide evidence to prove the absence of personal use.
4. Disallowance of Motor Car Depreciation:
The AO disallowed Rs. 30,139 claimed as motor car depreciation, again due to suspected personal use. The Tribunal upheld this disallowance as well, for the same reasons as the postage, telegram, and telephone expenses.
5. Disallowance of Repair Expenses Related to Building at Mazgaon:
The AO disallowed Rs. 6,66,815 out of Rs. 9,67,979 incurred on repairs and maintenance, treating it as capital expenditure. The CIT(A) found that the expenses were for maintaining the existing structure, involving replacements, painting, repairs, etc., and not for creating any new asset of enduring nature. The Tribunal agreed with the CIT(A), noting that the repairs were necessary for the upkeep of the tenanted premises and did not result in any capital asset. Therefore, the disallowance was deleted.
Conclusion:
The Tribunal allowed the appeal of the assessee in part, specifically on the issue of the forfeiture of the security deposit, and dismissed the appeal of the Revenue, thereby upholding the deletion of disallowance on repair expenses. The damages received for premature termination were held to be taxable as revenue income, and the disallowances on postage, telegram, telephone expenses, and motor car depreciation were upheld.
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