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Showing 141 to 160 of 1599 Records
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2013 (10) TMI 1460
Issues:
1. Deletion of addition of bonus paid to directors.
2. Deletion of addition of extra depreciation claimed on computer peripherals.
Deletion of Addition of Bonus Paid to Directors:
The appeal by the Revenue challenged the deletion of an addition of &8377; 17,55,103/- on account of bonus paid to the directors of the company for the assessment year 2008-09. The AO had added this amount as bonus paid to directors who held more than 50% of the company's shareholding, suspecting it to be a disguised dividend. However, the ld. CIT (A) noted that the directors' shareholding was around 8% on a consolidated basis with no separate shareholding exceeding 3%. The directors were also paid remuneration of &8377; 1.06 crores in addition to the bonus. The ld. CIT (A) found that all employees, including directors, were paid bonuses and that the directors had paid tax on the bonus at the maximum marginal rate. Consequently, the Tribunal held that the bonus paid to directors was fully deductible u/s 36(1)(ii) of the Act, as there was no loss to the revenue. The appeal ground was not allowed.
Deletion of Addition of Extra Depreciation on Computer Peripherals:
The second ground of appeal was against the deletion of an addition of &8377; 190972/- claimed as extra depreciation on computer peripherals. The assessee claimed depreciation at 60% on computers, justifying the higher rate for peripherals based on precedents. However, the AO disallowed the excess depreciation, treating computer peripherals as normal plant and machinery. The ld. CIT (A) overturned this decision, citing precedents that peripherals like printers, scanners, and NT Server are integral to computers and eligible for depreciation at 60%. The Tribunal upheld the ld. CIT (A)'s decision based on the precedents cited, and the appeal was dismissed.
Separate Judgement:
No separate judgement was delivered by the judges in this case.
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2013 (10) TMI 1459
Expenditure claimed towards purchase of application software - capital or revenue expenditure - Disallowance of provision for 'Sheraton Preferred Guest Scheme' -
HELD THAT:- Since as per old appendix-1 as well as new appendix-1 under the income-tax rules 1962 computer software is a depreciable asset, in our view, the CIT (A) as well as the Assessing Officer are correct in disallowing assessee's claim of expenditure on purchase of such assets. In aforesaid view of the matter, we do not find any reason to interfere with the order passed by the CIT (A) in this regard. Accordingly, we uphold the same by dismissing the grounds raised by the assessee.
Construction of compound wall - On perusal of the draft notification dated 16-9-2005 issued by the revenue department, Government of A.P, copy of which is at page-92 of the paper book, it is seen that the said notification was made for acquiring land for the purpose of widening of the road in which a part of assessee's land has also been notified. On the basis of the aforesaid draft notification, the assessee wrote a letter dated 8-8-2006 to the Commissioner, MCH, consenting to handover the land under draft notification to the MCH. The letter dated 29-9-2005 of MCH to the land acquisition Officer also clearly mentions about the consent given by the assessee for handing over of the land for the purpose of road widening at free of cost to the MCH. Thus, as can be seen the assessee had to part with its portion of land for road widening purposes of the MCH and accordingly the existing compound wall has to be demolished and a new boundary wall has to be constructed by incurring expenditure of ₹ 2,06,443/-.
From these facts, it is clear that the purpose of construction of boundary wall is not to bring a new asset but only for the purpose of preserving and maintaining an already existing asset. Therefore, in our view the expenditure claimed towards construction of the compound wall is allowable as revenue expenditure. The Assessing Officer is directed to delete the addition of ₹ 2,06,443.00. The ground raised is allowed.
Disallowance of provision for 'Sheraton Preferred Guest Scheme' - On a consideration of totality of facts and circumstances, we are inclined to remit the matter back to the file of the Assessing Officer for the purpose of verifying whether actually the assessee has paid the provision made and whatever provision was not paid was offered as income in the subsequent assessment years. If on verification of facts and materials on record the assessee's claim is found to be correct, there will be no case for disallowance of the provision made. The order passed by the CIT (A) to this extent is set aside and the issue is remitted to the file of the Assessing Officer. The Assessing Officer, of course shall afford a reasonable opportunity of being heard to the assessee in the matter. Hence the appeal is treated as partly allowed.
In the result, appeal filed by the assessee is treated as partly allowed and appeal of the department stands dismissed.
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2013 (10) TMI 1458
Issues involved: Challenge to order u/s 77 of Bihar Value Added Tax Act, 2005 and demand for VAT for Financial Year 2011-12 based on Entry tax adjustment.
Summary:
The petition was filed by Indian Oil Corporation Ltd. challenging the order of Dy. Commissioner of Commercial Taxes, Patna regarding Entry tax adjustment against VAT for Diesel imported from West Bengal to Bihar. The Corporation imported Diesel attracting Entry tax under Bihar Tax on Entry of Goods into Local Areas Act, 1993. Corporation paid Entry tax and incurred VAT liability on sale to retail suppliers, not on sales to Oil Marketing Companies. Corporation adjusted entire Entry tax against VAT, but authorities demanded arrears of VAT. The dispute was whether Entry tax adjustment is only for stock exigible to VAT or for entire stock. Corporation argued for adjustment of Entry tax on entire stock, citing Supreme Court judgments. Respondent authorities contended adjustment is only for VAT-exigible stock, not for sales to Oil Marketing Companies not attracting VAT. High Court agreed with respondents, dismissing the petition as Corporation did not incur VAT liability on sales to Oil Marketing Companies.
The judgment clarified that set off of Entry tax against VAT is only for goods attracting VAT under Bihar Value Added Tax Act, 2005. Corporation's sale of Diesel to Oil Marketing Companies, not attracting VAT, did not qualify for Entry tax adjustment. The judgment referenced a similar case where set off was allowed only for goods liable to sales tax. In this case, the High Court upheld the authorities' decision to deny set off for Diesel sales to Oil Marketing Companies. The judgment concluded that the petition lacked merit and dismissed it, advising any further disputes to be raised in statutory appeal under the 2005 Act.
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2013 (10) TMI 1457
Points not decided by the Tribunal - Held that:- In our view, for entertaining the appeal, it will be required to have the findings of the Tribunal. In that view of the matter, the remedy for the appellant is to approach the Tribunal by way of appropriate application and request the Tribunal to give the findings on all the points which are raised and argued in the appeal. The appellant will approach the Tribunal within four weeks from today with such an application. If such an application is filed, the Tribunal will decide the same within four thereafter. If the application is not filed within the stipulated time, the appellant will not get the benefit of this order.
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2013 (10) TMI 1456
Issues Involved:
The appeal involves the following issues:
(a) Non-consideration of revised return of income filed by the assessee.
(b) Confirmation of disallowance made u/s. 40(a)(ia) of the Act in respect of the advertisement expenses.
(c) Non-consideration of claim for deduction of "loss on clearance sale."
Non-consideration of Revised Return of Income:
The assessee filed a revised return of income after a search and seizure operation by the Department, disallowing advertisement charges and claiming a deduction for "loss on clearance sale." The Assessing Officer (AO) did not consider the revised return, deeming it an afterthought. The Ld. CIT(A) also upheld this decision, citing previous cases. However, the ITAT found that the AO and Ld. CIT(A) were not justified in rejecting the revised return as it was filed within the prescribed time limit u/s 139(5) of the Act. The ITAT directed the AO to complete the assessment based on the revised return.
Disallowance of Advertisement Expenses and Loss on Clearance Sale:
The AO disallowed the advertisement expenses u/s. 40(a)(ia) based on the revised return. The Ld. CIT(A) confirmed this disallowance and rejected the claim for deduction of "loss on clearance sale" due to lack of supporting evidence. The ITAT held that since the AO did not consider the revised return, all issues need fresh examination. The ITAT directed the AO to conduct a de-novo assessment based on the revised return, setting aside the Ld. CIT(A)'s order on all issues.
Conclusion:
The ITAT allowed the appeal for statistical purposes, emphasizing the importance of considering the revised return of income and conducting a fresh assessment based on it. The decision highlighted the procedural errors in rejecting the revised return and the need for a comprehensive reassessment by the AO.
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2013 (10) TMI 1455
Issues involved:
1. Disallowance of write-off of obsolete and slow-moving inventory.
2. Disallowance of provision for site expenses.
3. Disallowance of security deposits adjusted and/or becoming irrecoverable.
4. Disallowance of write-off of irrecoverable advances.
5. Disallowance of sundry advances written off.
6. Disallowance of bank guarantee expenses.
7. Disallowance of write-off of bad debts.
8. Disallowance u/s 40(a)(i) on account of payment made to a non-resident without deducting tax at source.
Summary:
1. Disallowance of write-off of obsolete and slow-moving inventory:
The assessee's claim of Rs. 68,31,255/- for slow-moving inventory was disallowed by the AO and upheld by the CIT(A) as the assessee couldn't substantiate the market value of the inventory. The Tribunal restored the issue to the AO for fresh adjudication, directing the assessee to provide evidence regarding the valuation and treatment of such inventory.
2. Disallowance of provision for site expenses:
The AO disallowed Rs. 12,22,279/- claimed by the assessee for site expenses due to lack of details. The CIT(A) upheld the disallowance, and the Tribunal found no merit in the assessee's arguments, dismissing this ground.
3. Disallowance of security deposits adjusted and/or becoming irrecoverable:
The AO disallowed Rs. 24,00,000/- claimed as bad debts due to lack of details. The CIT(A) upheld the disallowance. The Tribunal restored the matter to the AO, directing the assessee to provide full details to substantiate the claim.
4. Disallowance of write-off of irrecoverable advances:
The AO disallowed Rs. 2,45,21,333/- as the conditions u/s 36(1)(vii) were not met. The CIT(A) upheld the disallowance. The Tribunal partly allowed the claim, permitting Rs. 41,75,312/- as business loss and treating the balance as capital advance or gratuitous payment.
5. Disallowance of sundry advances written off:
The assessee did not press this ground for smallness of the amount (Rs. 1,46,560/-), and it was dismissed as 'Not pressed'.
6. Disallowance of bank guarantee expenses:
The AO disallowed Rs. 50,93,888/- claimed as bad debts. The CIT(A) deleted the addition, treating it as an allowable business expenditure u/s 37 r.w.s. 43B. The Tribunal upheld the CIT(A)'s order.
7. Disallowance of write-off of bad debts:
The AO disallowed Rs. 4,28,77,778/- as bad debts. The CIT(A) deleted the addition, noting the conditions u/s 36(1)(vii) r.w.s. 36(2) were met. The Tribunal upheld the CIT(A)'s order, citing the Supreme Court's decision in TRF Ltd.
8. Disallowance u/s 40(a)(i) on account of payment made to a non-resident without deducting tax at source:
The AO disallowed Rs. 1,69,32,093/- for non-deduction of TDS. The CIT(A) deleted the addition, noting the payment was not chargeable to tax in India. The Tribunal upheld the CIT(A)'s order, referencing CBDT Circular No.23 and Circular No.786.
Conclusion:
The appeals were partly allowed for statistical purposes, and some issues were restored to the AO for fresh adjudication. The Tribunal upheld the CIT(A)'s decisions on several grounds, dismissing the Revenue's appeals.
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2013 (10) TMI 1454
Issues Involved:
1. Transfer Pricing Adjustment
2. Arm's Length Price Determination
3. Unabsorbed Depreciation Adjustment
4. Penalty Proceedings u/s 271(1)(c)
Summary:
Transfer Pricing Adjustment:
The assessee contested the transfer pricing adjustment of Rs. 35,17,37,000 made by the AO based on the DRP's directions. The AO aggregated the manufacturing sub-segments and failed to appreciate the nuances of the segmented business operations. The DRP/AO did not consider the TP policy and additional evidence submitted by the assessee. The ITAT remanded the case back to the AO to analyze the additional evidence submitted before the DRP, in line with the decision in the assessee's own case for Assessment Year 2007-08. The ITAT emphasized the need for a transaction-by-transaction analysis to determine the arm's length nature of the international transactions, as supported by various judicial precedents and OECD guidelines.
Arm's Length Price Determination:
The DRP/AO erred in determining the arm's length price for the Contract R&D support services segment by ignoring the tax holiday entitlement u/s 10A and not allowing the benefit of the +/-5% range mentioned in the proviso to Section 92C(2). The ITAT directed the AO to first ascertain the comparability of the supplementary evidence provided by the assessee and then analyze the pricing policy in light of these evidences.
Unabsorbed Depreciation Adjustment:
The assessee raised the issue of not adjusting the unabsorbed depreciation of Rs. 1,38,51,671 from Assessment Year 2007-08 against the current year income. Since the order for Assessment Year 2007-08 was already set aside to the AO, the ITAT restored this issue back to the AO for reconsideration.
Penalty Proceedings u/s 271(1)(c):
The issue of penalty proceedings u/s 271(1)(c) for concealment of income or furnishing inaccurate particulars was considered premature by the ITAT. The ITAT remanded the issue back to the AO along with the transfer pricing adjustment and the determination of the assessee's entitlement u/s 10A.
Conclusion:
The ITAT allowed the appeal for statistical purposes, remanding all issues back to the AO for fresh adjudication based on the supplementary evidence and in accordance with the principles of arm's length pricing. The order was pronounced in open court on October 9, 2013.
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2013 (10) TMI 1453
Issues Involved:
1. Deduction u/s 80IA - Bogus and fabricated purchases and sales.
2. Validity of block assessment u/s 158BC without notice u/s 143(2).
Summary:
1. Deduction u/s 80IA - Bogus and Fabricated Purchases and Sales:
The Revenue contested the allowance of deduction u/s 80IA by the CIT(A), arguing that the sales and purchases were bogus and fabricated. The case involved a search u/s 132 at the premises of the assessee and his associates, revealing substantial activities in manufacturing "Attar Hina" (AH), used in Gutkha and other tobacco products. The Assessing Officer (A.O) relied on the statement of Shri Nemichand Mehta (NCM) recorded during the search, concluding that the sales to M/s Jaywant Products Ltd. (JPL) and M/s Jaywant Industries Ltd. (JIL) were bogus, leading to the disallowance of deduction u/s 80IA. However, the CIT(A) allowed the claim, finding that the A.O's conclusions were based on evasive statements without considering relevant evidence. The CIT(A) observed that the assessee provided substantial evidence of manufacturing and selling AH, and the A.O ignored these facts. The ITAT upheld the CIT(A)'s decision, noting that the block assessment cannot be based on inferences without direct evidence of undisclosed income. The transactions were duly recorded in the books of account, and no incriminating material was found during the search.
2. Validity of Block Assessment u/s 158BC without Notice u/s 143(2):
The assessee raised a new plea regarding the validity of the block assessment u/s 158BC due to the absence of a notice u/s 143(2). The assessee argued that the A.O lacked jurisdiction to initiate the block assessment without issuing this notice. The Revenue countered that a composite notice u/s 142(1) and 143(2) was issued, and the letter dated 23.5.2003 satisfied the requirement of section 143(2). The ITAT noted that while the assessee can raise a fresh plea, the issue became academic due to the dismissal of the Revenue's appeal on merits. Therefore, the ITAT did not adjudicate this new plea.
Conclusion: The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s order allowing the deduction u/s 80IA and confirming that the block assessment was not sustainable without direct evidence of undisclosed income. The new plea regarding the validity of the block assessment was not adjudicated as it was deemed academic.
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2013 (10) TMI 1452
Issues involved: Disallowance of interest and disallowance of loss on account of revaluation of foreign exchange contracts.
Dispute on disallowance of interest:
The dispute revolved around the disallowance of interest paid by the assessee to the head office/overseas branches due to non-deduction of tax at source. The AO disallowed the claim of interest expenditure, which was confirmed by CIT(A) citing a special bench decision. However, the Tribunal, referring to a different special bench decision, held that the interest payment was not taxable in the hands of the bank and allowed the claim of expenditure on interest.
Dispute on disallowance of interest and other expenses:
The revenue raised disputes on disallowance of interest and other expenses related to exempt income from tax-free bonds and other sources. The AO disallowed a portion of interest and other expenses, but the CIT(A) deleted the additions after considering the source of funds for investments. The Tribunal upheld the decision regarding disallowance related to NHB bonds but remanded the matter concerning interest income from another source back to CIT(A) for further examination.
Dispute on disallowance of loss on revaluation of foreign exchange contracts:
The AO disallowed the loss on revaluation of foreign exchange contracts as contingent and notional. However, CIT(A) allowed the claim, citing relevant Tribunal decisions. The Tribunal upheld CIT(A)'s decision, referring to a Supreme Court judgment allowing such losses as expenditure u/s 37(1).
In conclusion, the appeal of the assessee was allowed, and that of the revenue was partly allowed, with the Tribunal providing detailed reasoning for each issue involved in the judgment pronounced on 7-10-2013.
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2013 (10) TMI 1451
Issues involved: Seizure of goods during transportation, legality of seizure, demand of security, relevance of consignor and consignee registration.
Summary:
The High Court of Allahabad heard two revisions arising from the same tribunal order dated 27.9.1993 regarding the seizure of goods being transported from Delhi to West Bengal. The revisionists, who were purchasers of the goods, were intercepted in the State of U.P. and a seizure order was passed on 4th September, 2013. Despite failed representation and appeal, the security demanded for the release of goods was reduced. The revisionists contended that the seizure was illegal and unjustified.
The Court noted that the goods were seized based on the opinion that the consignor and consignee were non-existing and not genuine. However, it was established through previous decisions that the existence or registration of consignor and consignee with trade tax authorities is not relevant for seizing goods in transit. The purpose of the transit declaration form is to prevent the evasion of trade tax by ensuring that goods entering the State of U.P. are not sold within the State.
Therefore, the Court held that if the transit declaration form and accompanying documents are in order, the seizure cannot be justified merely on the grounds of non-existing consignor or consignee. Consequently, the tribunal order and the seizure order were set aside, directing the immediate release of seized goods without any security requirement.
As a result, Sales/Trade Tax Revision No.777 of 2013 filed by the revisionists was allowed, while Sales/Trade Tax Revision No.764 of 2013 filed by the revenue was dismissed.
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2013 (10) TMI 1450
Invoking the provisions of section 179 - Held that:- The statute permits the lifting of the corporate veil section 179 of the Act as one of the modes of the statutes permitting such piercing of the veil provided of course Directors of the Private Company behind the veil are the beneficiaries and who have created such a complex web for their personal interest so as to defraud the Revenue. When the facts are eloquent enough in the instant case, where the petitioners were never concerned with the affairs of the Company until 28.12.2005 and the Company had already become Public Limited Company and by the time they became Directors, they were not even simple shareholders for the entire period till the year 2006, there does not arise any question of applying the ratio of decision of Pravinbhai M. Kheni V/s. Assistant Commissioner of Income -Tax and others [2012 (12) TMI 494 - GUJARAT HIGH COURT] for that matter upholding the action of the respondents of invoking the provisions of section 179 of the Act.
In our opinion, the very action of the respondents of invocation of powers under section 179 of the Act qua the petitioners is bad in law and requires quashment, and therefore, impugned notice dated 14.10.2011 and all consequential orders are hereby quashed and set aside.
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2013 (10) TMI 1449
Issues involved: Interpretation of the definition of 'banking and other financial services' under Section 65(12) of the Finance Act, 1994 in relation to leasing activities carried out by commercial concerns.
Summary:
The Revenue filed appeals against four sugar manufacturing units for leasing out their factory, claiming it falls under 'banking and other financial services' u/s 65(12) of the Finance Act, 1994. The Commissioner (Appeals) allowed the appeals, leading to the Revenue's appeal before the Tribunal.
The main issue was whether leasing activities by commercial concerns fall under the definition of 'banking and other financial services' as per Section 65(12) of the Finance Act, 1994. The Revenue contended that the modification in the definition to include 'commercial concern' should cover the respondents' activities.
The Tribunal referred to previous decisions and the definition of 'banking and other financial services' during the relevant period. It was noted that the ownership transfer and risk-bearing aspects of leasing were crucial in determining financial leasing. The Tribunal also cited a circular clarifying the taxability of financial leasing charges.
In a similar case, the Tribunal held that leasing activities by a public limited company did not constitute financial services, emphasizing the need for the company to be engaged in lease finance to be liable for Service Tax. The Tribunal found no merit in the Revenue's appeals and dismissed them based on precedent.
Therefore, the Tribunal dismissed the Revenue's appeals, emphasizing that the respondents were not engaged in lease finance activities to be considered as providing financial services under Section 65(12) of the Finance Act, 1994.
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2013 (10) TMI 1448
Issues involved: Interpretation of service tax liability u/s Chapter V of the Finance Act, 1994 based on a show cause notice, classification of services provided under a composite contract, absence of clear attributions/allegations in the notice, validity of the notice for vagueness, need for a fresh show cause notice invoking extended period.
Interpretation of service tax liability: The Additional Commissioner confirmed service tax liability of Rs. 9,10,838/- on the appellant for providing cargo handling, cleaning, and other services mentioned in Chapter V of the Finance Act, 1994. The appellant's appeal before the Commissioner (Appeals) was rejected.
Classification of services under composite contract: The appellate authority considered an agreement between the appellant and M/s. Cattle Feed Factory, categorizing the services into "cargo handling", "manpower recruitment or supply agency", and "cleaning activity" services. The agreement was deemed a composite one where the appellant agreed to provide a range of services, including "manpower recruitment or supply agency" and "cleaning activity".
Validity of the show cause notice: The show cause notice dated 3-5-2011 was criticized for its vagueness and lack of clear attributions/allegations regarding the taxable services provided by the appellant. Neither the adjudicating authority nor the Commissioner (Appeals) identified the predominant nature of the taxable service under the composite contract.
Need for a fresh show cause notice: Due to the vagueness of the initial notice, it was deemed unsustainable. The judgment suggested that a fresh show cause notice invoking the extended period might be necessary for part of the period in question. The show cause notice dated 3-5-2011 and the subsequent adjudication order were quashed, allowing the appellate authority to issue a new notice in accordance with the law.
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2013 (10) TMI 1447
Issues involved: Demand for service tax on a sub-broker under the category of 'Business Auxiliary Service' and the applicability of Circular issued by the Board regarding payment of service tax by sub-brokers.
Summary:
The Appellate Tribunal CESTAT BANGALORE considered the demand for service tax on the appellant, a sub-broker of a financial services company, and the issue of whether the sub-broker is liable to pay tax when the stock-broker has already paid the tax. The proceedings resulted in the confirmation of the demand for service tax with interest and penalty. The appellant relied on a Circular issued by the Board to support their case. The Tribunal noted that the Circular excluded sub-brokers from the purview of Service Tax after 1-6-2005 and emphasized that there could not have been a demand against the appellant. The original authority's refusal to accept the confirmation from the financial services company regarding payment of service tax further supported the Tribunal's decision. The Tribunal allowed the appeal, stating that the impugned order had no merit and provided consequential relief to the appellant.
The Tribunal waived the requirement of pre-deposit and proceeded to take up the appeal for final decision due to the issue being of a short compass. The demand for service tax on the appellant was based on the allegation of failure to pay service tax under the category of 'Business Auxiliary Service'. The appellant's argument was supported by a Circular issued by the Board, which stated that sub-brokers are not liable to pay tax if the stock-broker has already paid it. The Tribunal considered the submissions from both sides and highlighted the Circular's observation regarding the exclusion of sub-brokers from the purview of Service Tax post-1-6-2005. The Tribunal also noted the original authority's reluctance to accept the confirmation of service tax payment by the financial services company, despite the letter provided. The Tribunal concluded that there could not have been a demand against the appellant after 1-6-2005 and allowed the appeal, emphasizing the lack of merit in the impugned order.
The Tribunal's decision was based on the Circular issued by the Board, which clarified that sub-brokers should not be charged to Service Tax as commission agents under Business Auxiliary Service. The Tribunal highlighted that the Circular's exclusion of sub-brokers from Service Tax liability after 1-6-2005 meant that there should not have been a demand against the appellant. The Tribunal also pointed out the original authority's failure to accept the confirmation of service tax payment by the financial services company, despite the letter provided. The Tribunal emphasized that the impugned order had no merit and allowed the appeal, providing consequential relief to the appellant.
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2013 (10) TMI 1446
Issues involved: Determination of liability to pay Service Tax on net commission received from banks u/s 'Business Auxiliary Service'.
Summary:
The appeal was filed by the Revenue against the order passed by the Commissioner of Service Tax, holding the respondents liable to pay Service Tax on the net commission received from banks. The respondents, acting as commission Agent/Direct Selling Agent for marketing auto loan products, were arranging loan facilities for buyers of motor vehicles. The main issue in the appeal was whether the respondents should pay Service Tax on the net amount received or the gross amount paid by the bank.
During investigations, it was revealed that the DSA discounts the commission by way of subvention to the banks as per commercial arrangements. The banks accounted for the gross commission to the credit of the DSA before deducting the subvention. The Revenue contended that Service Tax should be paid on the gross commission, while the respondents argued that they should pay tax only on the actual amount received as commission from the banks.
The Tribunal referred to previous decisions where it was established that Service Tax should be paid on the gross amount charged by the service provider. The Tribunal found that the impugned order holding the respondents liable to pay tax on the net commission was not sustainable and set it aside. It was decided that the respondents were liable to pay Service Tax on the gross amount of commission. Regarding penalties under Sections 76 and 78 of the Finance Act, it was noted that as the respondents were under a bona fide belief that tax should be paid on the net amount of commission, penalties were not imposed.
In conclusion, the appeal was disposed of in favor of the Revenue, with the decision pronounced on 17-10-2013.
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2013 (10) TMI 1445
Issues involved: Determination of service tax liability on maintenance and repair services, inclusion of cost of components in taxable value, applicability of previous tribunal decision.
In the present case, the appeal was filed against the adjudication order passed by the Commissioner, Customs and Central Excise, Meerut II, confirming a service tax demand for the period from 18.4.06 to 31.3.11 under the taxable category of Management, Maintenance, and Repair. The Revenue alleged that the assessee under-declared the gross taxable value and evaded remittance of the entire service tax due, specifically focusing on the cost of components replaced during the repair of transformers under a composite agreement. The adjudication order was based on this premise.
The agreement between the appellant and M/s Paschimanchal Vidyut Vitran Nigam Limited, Meerut, categorized the cost of components to be incorporated/replaced during the maintenance of transformers separately from labor costs. The appellant excluded the cost of components like HV/LV leg coil and transformer oil, which had already suffered excise duty or sales tax/trade tax, from the taxable value as these were separately accounted for in the agreement. However, the adjudicating authority included the cost of these components in the gross taxable value, leading to the assessment of additional liability for service tax and penalties.
The crucial issue revolved around whether the cost of components replaced during the repair services should be included in the taxable value for service tax purposes. The Tribunal referred to its previous decision in the case of Kailash Transformers, where it was held that materials supplied during a service transaction are not to be included in the gross value for taxable services. The Tribunal, relying on the precedent set in Kailash Transformers, ruled in favor of the assessee, allowing the appeal and waiving the pre-deposit requirement. No costs were awarded in this matter.
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2013 (10) TMI 1444
Issues Involved:
The issues involved in this case include the demand of Service Tax u/s 65(68) of the Finance Act, 1994, invoking the extended period of limitation, along with interest and penalty u/s 76, 77 & 78, on an un-incorporated body of individuals in the nature of a trade union. The main contention raised is whether the body falls under the definition of a 'club or association' and is liable to pay Service Tax for the services provided.
Contentions Raised:
1. The appellant, a trade union, was constituted under the Industrial Disputes Act, 1947, to resolve issues related to cargo handling in Cochin Port. The union ensured fair wages and benefits for workers and was jointly administered by employers and workers' representatives.
2. The union faced financial constraints due to exceeding expenses despite collections. The administration of the union changed hands over the years to ensure smooth operations at Cochin Port.
3. The union, initially named United Stevedores Association Pool, later became United Steamer Agents Pool and ceased to exist in 2011 after workers retired.
4. The definition of 'club or association' u/s 65(25aa) excludes bodies like trade unions jointly administered by employers and employees for the promotion of industrial relations.
5. The appellant argued that as a trade union, there is no element of service from one person to another, as it is jointly managed for mutual benefit.
6. The appellant contested the demand for Service Tax, citing financial difficulties and minimal assets, as most workers had retired or passed away, and the association existed mainly to settle workers' claims.
Decision:
After considering the contentions, the Tribunal found that the appellant, being a trade union jointly administered by workers and employers, did not fall under the tax net as per Section 65(25aa) of the Finance Act, 1994. A prima facie case was made in favor of the appellant, and the Tribunal allowed a stay on the disputed tax, interest, and penalty until the appeal's disposal.
Note:
This summary provides a detailed overview of the issues, contentions, and decision in the judgment delivered by CESTAT Bangalore.
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2013 (10) TMI 1443
Issues involved: Delay in filing appeal, Cenvat credit eligibility, Imposition of penalty
For the issue of delay in filing appeal, the appellant submitted that there was a delay of 78 days due to the negligence of the advocate-firm. The delay was condoned as the appellant should not be penalized for the advocate's lapse. The stay application was taken up for consideration.
Regarding the Cenvat credit eligibility, the appellants had taken credit before the merger of their units, which was advised to be irregular. The demand for Cenvat credit of Rs. 15,85,951/- was confirmed along with a penalty. The appellant argued that it was a procedural omission and the credit was admissible, especially as they were a Large Taxpayer Unit (LTU) entitled to transfer credit between units.
In the judgment, it was noted that the invoice was in the name of the STPI unit and services were received by that unit. Even though credit could be transferred, taking credit in a unit that did not receive the service was irregular. The Revenue's stance that interest should be paid for the period was deemed reasonable. The appellant agreed to pay the interest, and it was held that no penalty was necessary in this case.
In conclusion, the appeal was disposed of with the direction for the appellant to pay interest for the irregular credit availed. The imposition of a penalty was deemed unnecessary given the circumstances. The operative portion of the order was pronounced in open court at the conclusion of the hearing.
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2013 (10) TMI 1442
Issues involved: Cenvat credit denial u/s Rule 6(3) of Cenvat Credit Rules, 2004; Applicability of Composition Scheme for payment of Service Tax on works contract service.
Cenvat Credit Denial: The appellant, a manufacturer of MS Pipes, had Cenvat credit denied on the grounds that their Head Office, registered for payment of Service Tax, was availing the benefit of Composition Scheme for works contract service. The Revenue contended that since the Head Office was a service provider under the Composition Scheme, the appellant could not have taken the credit of duty on inputs used in manufacturing pipes. However, the appellant argued that once duty was paid on the pipes, if the Head Office did not avail the credit of excise duty paid on the pipes, both the service provider and manufacturer were not in violation of the Central Excise Act.
Composition Scheme Applicability: The Tribunal found merit in the appellant's argument that the Head Office, as a service provider, had not taken the credit of excise duty paid on the pipes, making them eligible for the Composition Scheme. It was noted that duty had been paid on the MS Pipes and credit had been utilized. The Tribunal concluded that the appellant had followed the correct procedure, justifying a bona fide belief that Cenvat credit was entitled to them. Consequently, the Tribunal ordered a waiver of pre-deposit of disputed dues and a stay against recovery during the pendency of the appeal.
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2013 (10) TMI 1441
Issues involved: Application for waiver of Service Tax, classification of activity under Dredging services u/s 65(36a) of the Finance Act.
Summary:
The applicants sought waiver of Service Tax, interest, and penalty amounting to Rs. 12,75,866, contending that they only performed drilling and blasting activities as directed by the main contractor, not dredging. The Revenue argued that drilling and blasting fall under Dredging Service as per the Finance Act. The applicants failed to produce a work order explaining the scope of work, relying only on a letter from the contractor. The Tribunal noted that dredging involves material removal, which drilling and blasting achieve, directing the applicants to deposit Rs. 4 lakhs within eighty weeks for partial waiver of dues, with recovery stayed during the appeal. Compliance was required by a specified date.
In conclusion, the Tribunal found that the drilling and blasting activities undertaken by the applicants essentially resulted in material removal, aligning with the definition of dredging service under the Finance Act. Despite the lack of a detailed work order, the applicants were directed to make a partial deposit for waiver of the remaining dues, with recovery stayed pending the appeal.
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