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2013 (6) TMI 682
Investment by the assessee-society - whether investment is not according to section 11(5) and had violated the provisions of section 13(1)(d)? - Held that:- The reasoning given by the Assessing Officer is not correct inasmuch as the advances given by the assessee towards implementation of its project have to be treated as application of income and not as an investment out of the grant received by the assessee. The word "applied" need not necessarily imply "spent". Even if an amount is irretrievably earmarked and allocated for the charitable or religious purpose or purposes, it may be said to have been "applied" to the said purposes. (CIT v. Radhaswami Satsang Sabha [1953 (10) TMI 36 - ALLAHABAD HIGH COURT]. Therefore, the Assessing Officer was wrong in observing that the application of funds by the assessee was not according to section 11(5) and the advance was not utilisation of the funds.
Further, the Assessing Officer held that purchase of land at Silchar for ₹ 11,25,297 was in violation to section 11(5) as property purchased was in the name of Department of Heavy Industry and not in the name of the assessee. Considering the terms of the grant, this objection is not sustainable. Therefore, the purchase of land is also to be considered as application of income. Accordingly, there was no violation of section 11(5). Therefore, the very premise on which the Assessing Officer had proceeded, was wrong and the same cannot be sustained. Further the grant received was on capital account and not a recurring grant towards revenue expenses. Hence it could not be taken to income and expenditure account as per Accounting Standards 12 issued by the Institute of Chartered Accountants of India. Therefore, the learned Commissioner of Income-tax (Appeals) rightly held that the project grant was neither income nor corpus of the assessee-society.
As far as interest on fixed deposit receipt is concerned the same related to the unutilised project grant on which the Government had overriding title. Further, this interest was also at par with the grant received from the Government of India and, therefore, the same reasoning would apply to the interest on fixed deposit receipt as to the grant. Therefore, interest on fixed deposit receipt amounting to ₹ 2,20,21,847 could not be treated as income of society - Decided in favour of assesse.
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2013 (6) TMI 681
Denial of duty drawback claim - Bar of limitation - no formal communication was sent to exporter - Held that:- Public notice is a valid communication asking the exporter to submit replies through EDI service centre to pending queries within 15 days failing which the pending drawback claim will be liable for rejection. This public notice did not prescribe any new procedure so there is no question of its prospective applicability. Despite this communication, applicant failed to reply the queries raised by Appraiser and the claim was thus rightly rejected. The claim status as scrolled out to zero claim can be viewed by the exporter in this EDI system service centre. So, he cannot claim that no communication was sent to him. - The drawback claim in respect of shipping bill No. 5318142, dated 12-7-2006 was paid to exporter vide scroll No. 1830/2006. So the exporter became aware of sanction of one claim in 2006 itself. Despite this he did not care to check the status of other claim. The shipping bill was filed electronically on EDI system so he was required to check the status of shipping bill electronically only. - supplementary claim filed on 9-4-2010/6-12-2010 after a delay of more than 17 months was clearly time-barred in terms of Rule 15 of Drawback Rules and Commissioner (Appeals) has erred in treating it as filed in time - Decided in favour of Revenue.
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2013 (6) TMI 680
Simultaneous availment of benefit of Notification No. 30/2004-C.E., dated 9-7-2004 and Notification No. 23/2003-C.E - DTA clearances - Held that:- Excisable goods cleared by the appellant are covered by both the notifications. However, rates and conditions are different in two notifications. Notification No. 29/2004-C.E. prescribed duty of 4% (on cotton yarn) and 8% (on other yarns covered by specific headings) without any condition. Notification No. 30/2004-C.E., on the other hand prescribes NIL rate of duty subject to the condition that no credit of duty on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004. This condition cannot be satisfied on the goods manufactured or produced outside India and imported into India as the Central Excise Law including Cenvat Credit Rules, 2004 are inapplicable there. Thus we hold that duty rates applicable will be as per Notification No. 29/2004-C.E. or any other notification (if relevant to the goods in question) and not as per Notification No. 30/2004-C.E. Further, Explanation to Section 3(1) of the Customs Tariff Act clearly mandates that where excise duty is leviable at different rates, the highest duty is to be taken.
Notification No. 30/2004-C.E. is not applicable to the imported goods as conditions prescribed therein cannot be satisfied on the goods produced or manufactured outside and imported into India. Even for the sake of argument, if it is assumed that it is applicable, in view of Explanation to Section 3(1) of the Customs Tariff Act, 1973 as also Explanation 1 to Section 3(1) of the Central Excise Act, 1944 (which is specific to 100% Export Oriented Units), we have no hesitation in holding that rates prescribed under Notification No. 29/2004-C.E., which are higher than prescribed under Notification No. 30/2004-C.E. will be applicable. We accordingly hold that Additional duty of Customs will be computed as per Notification No. 29/2004-C.E. and Notification No. 30/2004-C.E.
For the units (other than 100% EOU), two options are available viz. pay 8/4% excise duty (without any condition) or NIL rate of excise duty provided no Cenvat credit is taken on the inputs or capital goods used in the manufacturing process. Appellant has contended that they have not availed Cenvat credit on inputs, hence NIL rate will be applicable to them. Both the Notification Nos. 29/2004-C.E. and 30/2004-C.E., as held by us earlier are inapplicable for 100% EOU in view of proviso to Section 5A(1) of the Central Excise Act and therefore availment or non-availment of Cenvat Credit by 100% EOU is irrelevant. In any case unlike normal unit, 100% EOU can get inputs duty-free and therefore not avail the Cenvat credit or get duty-paid inputs and avail Cenvat credit. Normal DTA units have no such option. They have to get duty-paid inputs. However, after paying duty on inputs, they have option to avail or not to avail credit and pay duty on the final product or clear it at NIL rate of duty. Thus NIL rate is conditional. Under the circumstances, we hold that the final products of appellant has to be considered as dutiable at the rate of 8 or 4% under Notification No. 29/2004-C.E., dated 9-7-2004 and not NIL rate under Notification No. 30/2004-C.E., dated 9-7-2004.
Documents do not prove that goods cleared in DTA were manufactured from the raw materials produced or manufactured in India. Lot registers or production related documents have not been produced. However, there are certain claims like cotton fibre has never been imported. If purchase documents do not indicate that material is imported, it would be reasonable to assume that cotton yarn is manufactured from raw material produced or manufactured in India and duty benefit under Sr. No. 3 of Notification No. 23/2004-C.E. can be extended. Similarly, if in a particular period all the polyester yarn was made only from polyester staple fibre produced in India and appellant did not have stock of imported PSF or final product made of imported PSF, then benefit under Sr. No. 3 of Notification No. 23/2004 can be extended - Matter remanded back - Decided in favour of assessee.
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2013 (6) TMI 679
Denial of rebate claim - Requisite declaration filed much after processing and export of the goods - Held that:- condition and procedures prescribed in Notification No. 21/2004-C.E. (N.T.) r/w Chapter 8 of C.B.E. & C. Excise Manual on supplementary instructions has not been followed. The declaration of input and output has neither been filed before processing and export of goods nor any expost facto approval is granted by competent authority. In such a situation the use of duty paid inputs in the manufacture of exported goods cannot be determined correctly. As such, the input rebate claim is rightly held inadmissible by lower authorities. - Decided against assessee.
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2013 (6) TMI 678
Denial of rebate claim - applicant cleared the exported goods by payment of 10% duty instead of 8% duty payable and received rebate claim of duty paid @10% - Held that:- erroneous refund/rebate sanctioned under an order can be recovered by invoking provisions of Section 11A of Central Excise Act, 1944, without taking recourse to provisions of Section 35E ibid and filing appeal against the assessment on the basis of which refund was initially sanctioned. Hence, Government finds that appellate authority erred in holding that since the assessment at the time of export was not challenged, the rebate claim cannot be reduced with reference at time of assessment.- export goods shall be assessed to duty in the same manner as the goods cleared for home consumption are assessed. Further the classification and rate of duty should be as stated in Schedule of Central Excise Tariff Act, 1985 read with any exemption notification and/or Central Excise Rules, 2002. These C.B.E. & C. Instructions clearly stipulate that applicable effective rate of duty will be as per the exemption notification. The said instruction is issued specifically with respect to sanctioning rebate claim of duty paid on exported goods and therefore assessee has to pay the effective rate of duty and claim rebate accordingly.
Government holds that duty was required to be paid @ 8% on said goods on 24-2-2009, and rebate is admissible of duty paid @ 8% only under Rule 18 of Central Excise Rules, 2002 read with Notifn. No. 19/2004-C.E. (N.T.), dated 6-9-2004. Any plea of ignorance of law cannot be admitted as legal and proper - any amount paid in excess of duty liability on one’s own volition cannot be treated as duty and it has to be treated as a voluntary deposit with the Government which is required to be returned to the assessees/respondents in the manner in which it was paid as the said amount cannot be retained by Government without any authority of law. - Impugned order is set aside - Decided in favour of Revenue.
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2013 (6) TMI 677
Denial of rebate claim - non submission of rebate claim before the rebate sanctioning authority Maritime Commissioner, Mumbai, ACCE, Thane as indicated in ARE-1 - Held that:- have mentioned in the ARE-1 the address of Maritime Commissioner, Thane as rebate sanctioning authority. Government notes that goods covered vide 5 AREs-1 were exported from JNCH, Nhava Sheva and ACCE Raigarh who is the Maritime Commissioner for export through Seaport Nhava Sheva, is the rebate sanctioning authority in this case. There is a force in the pleading of the respondent that this is a clerical mistake in wrong mentioning of rebate sanctioning authority in 5 AREs-1 and same may be condoned. Government in view of the case laws cited by applicant finds that this procedural lapse is condonable as mentioning of wrong rebate sanctioning authority cannot be a valid ground for denying the substantial benefit of rebate of duty paid on exported goods. - Hence in this case the fundamental condition of claiming rebate stands complied with. The rebate claims in respect of these 5 ARE-I allowed by Commissioner (Appeals) is in order and cannot be faulted with.
In one case, the goods were exported from New Custom House, Mumbai and in such case the original authority i.e. Maritime Commissioner, Raigarh Central Excise, who exercises jurisdiction over exports made through JNCH, Nheva Sheva will have no jurisdiction. The respondent was pointed out regarding this discrepancy by the original authority and the respondent ought to have withdrawn his rebate claim and could have filed the same before proper authority, which he failed to do. As such, rebate claim w.r.t. goods exported from NCH, Mumbai has rightly been rejected as beyond jurisdiction by the original authority. Hence, the respondent is not entitled for this particular rebate claim. - Decided partly in favour of assessee.
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2013 (6) TMI 676
Benefit of Notification No. 23/2003-C.E., dated 31-3-2003 as amended by Notification No. 22/2006-C.E., dated 1-3-2006 - Whether the appellants are entitled for the benefit of Notification No. 23/2003, dated 31-3-2003 as amended - Held that:- The benefit of the notification is available after fulfilling the condition No. 1 of the said notification - Tribunal held that the appellant has availed special exemption granted by the State of U.P. in respect of clearance made to DTA within U.P. only and are paying sales tax in respect of clearance made to some of the States. In other words, part of the clearances are not suffering sales tax while rest of the clearances are subject to sales tax/VAT. The Larger Bench of the Tribunal held that in respect of a 100% EOU availing sales tax exemption for determining the excise duty payable based on aggregate value of customs duty, the element of SAD should be taken into account. Therefore, on merits the appellants are not having any case.
Appellant has declared to the department before the first clearance of the tractor that the appellants are availing the benefit of Notification 23/2003 which was well within the knowledge of the department. Therefore, the appellants cannot be accused of having suppressed the fact of availing the benefit of Notification 23/2003 without considering the SAD while determining the assessable value. Therefore, extended period of limitation is not invocable in the facts of this case. Accordingly, the demand, beyond the normal period of limitation is set aside. As the allegation of suppression is not sustainable therefore, following the decision of Rajasthan Spinning & Weaving Mills (2009 (5) TMI 15 - SUPREME COURT OF INDIA), penalty imposed under Section 11AC is also not sustainable.
Admittedly, the appellant is availing the benefit of exemption from payment of whole of Sales Tax/VAT in respect of its sales of Agricultural Tractors and parts thereof by virtue of the above mentioned order dated 1-4-2005. Consequently, the appellant is not eligible for the benefit of the Notification No. 23/2003-C.E., dated 31-3-2003 - Decided partly in favour of assessee.
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2013 (6) TMI 675
Disallowance of depreciation - Depreciation on intangible asset, goodwill and furniture and fittings - Held that:- issue in dispute is squarely covered by the decision of the Tribunal, Mumbai in the case of Kotak Forex Brokerage Ltd. v. Asst. CIT [2009] 33 SOT 237 (Mum) - any right which is obtained for carrying on the business effectively and profitably has to fall within the meaning of intangible asset. - Supreme Court in the case of CIT v. Smifs Securities Ltd. [2012] 348 ITR 302 (SC) held that goodwill is an intangible asset eligible for depreciation under section 32 of the Act. In these circumstances, we remit the issue to the file of the Assessing Officer to decide the issue in the light of the said decisions to consider the allowability of depreciation on intangible assets after getting bifurcation of payment of ₹ 75 lakhs and to allow depreciation on the goodwill at 25 per cent.
Assessee himself has submitted that the learned Assessing Officer should have appreciated that during the previous year relevant to the assessment year 2008-09 the amount of ₹ 60 lakhs paid by the assessee-company for deduction of ₹ 15 lakhs in question qualifies for inclusion under the head "intangible asset" as provided under section 32(1)(ii) and is entitled to a depreciation at 25 per cent. on intangible assets. Hence, we direct the Assessing Officer to allow depreciation on goodwill at 25 per cent. on the intangible assets and with respect to furniture and fittings depreciation to be allowed at 10 per cent. since they fall under block of assets as furniture and fittings. The assessee is directed to give bifurcation of goodwill and furniture and fittings. - Decided in favour of assessee.
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2013 (6) TMI 674
Denial of exemption under section 10(23C)(iiiab) - Objection on Sole purpose of the trust - Eduction should be sole purpose - Objection on substantial funding by government - Disallowance of contributions made by trust - Held that:- In the instant case, a perusal of income and expenditure account for the year ended March 31, 2009, which is placed at page 8 of the paper book shows the total income of the assessee from various sources, viz., fee collection, grant received from the State Government as well as the UGC, interest received from bank, miscellaneous collections, scholarship collections amounts to ₹ 8,51,66,550. Out of which grant-in-aid from the State Government is ₹ 4,01,01,971, which is almost 47 per cent. of the total income of the assessee. Thus, the assessee is substantially funded by the Government or instrumentality of the Government, i.e., UGC. The Commissioner of Income-tax (Appeals) erred in concluding that educational institution is only said to be substantially funded by the Government, if it is either established or created by a special statute of Parliament. Refereed case - [2010 (8) TMI 890 - KARNATAKA HIGH COURT]
The fact that the trust exists solely for educational purposes is evidenced from the assessment orders for the assessment years 2000- 01 and 2006-07, copies of which form a part of the record before the court. Both these orders which have been made under section 143(3) of the Act, contain a statement to the effect that the assessee is running schools with Gujarati and English as medium of instruction at the primary and secondary stages and that the assessee also conducts a college for girls with the sole intent of imparting education. The record of these proceedings also contains a judgment of a Division Bench of this court dated June 29, 2005 [Trustees of Vanita Vishram [2005 (6) TMI 17 - BOMBAY High Court]] in a reference under section 256(1) to which the petitioner was the applicant. The issue before the court in the reference was whether the assessee was entitled to exemption under section 10(22) on interest earned on surplus funds of the school run by the trust for the assessment years 1979-80 and 1980-81. The Division Bench observed that merely because a certain surplus arose from the operations of the trust, it could not be held that the institution was run for the purpose of profit, so long as no person or individual was entitled to any portion of the profit and the profit was utilised for the purpose of promoting the objects of the institution. The income of the trust was, therefore, held to be exempt under section 10(22). The Division Bench followed the decision of the Supreme Court in Aditanar Educational Institution [1997 (2) TMI 3 - SUPREME Court] and noted as a principle of law that if after meeting the expenditure, a surplus results incidentally from an activity lawfully carried on by the educational institution, the institution would not cease to be one which is existing solely for educational purposes since the object is not to make profit. The Division Bench also observed that if the trust exists solely for educational purposes and conducts an educational institution, the fact that it had other objects would not disentitle it to the exemption so long as the activity carried out by it in that assessment year was that of running an educational institution and not for profit. The court observed that the assessee had existed only for educational purposes which consisted of running educational institution and not for earning profits.
In Aditanar Educational Institution, the Supreme Court, while construing the provisions of section 10(22), held that the availability of exemption should be evaluated each year to find out whether the institution has existed during the relevant year solely for educational purposes and not for the purposes of profit. If after meeting the expenditure, a surplus results incidentally from an activity lawfully carried on by the educational institution, the institution will not cease to be one existing solely for educational purposes since the object is not to make profit. The decisive or acid test, the Supreme Court observed, is whether on an overall view of the matter, the object is to make a profit. In evaluating or appraising the issue, the Supreme Court noted that one should bear in mind the distinction between the corpus, the objects and the powers of the concerned entity. Therefore, in the facts and circumstances of the present case and the law laid down by the hon'ble Bombay High Court, the view of the authorities below that the assessee is not carrying on the sole object of education, is misconceived.
However, we observe that the assessee during the period has made certain contributions towards Lions Club International (service organisation) and Meenakshi Sundararajan Fine Arts Academy. The Lions Club International (service organisation) may be undertaking some charitable activities, but by and large, it is a social club, and cannot be strictly construed to be a social organisation for undertaking social work as envisaged in the study curriculum.As regards the contribution to the Meenakshi Sundararajan Fine Arts Academy, there is no explanation furnished by the assessee that as to why contributions were made. The only plausible reason for making contribution to the abovesaid two organisations is that secretary-cum-correspondent of the assessee was an office bearer of the abovesaid organisation. The expenditure claimed by the assessee towards the contribution to the aforesaid two organisations cannot be allowed as expenditure.
Since we have held that the assessee is eligible for claiming exemption under the provisions of section 10(23C)(iiiab), it is not mandatory for the assessee to seek registration under the provisions of section 10(23C)(vi). Be that as it may, the assessee had applied for registration in the year 2002, nothing was communicated to the assessee regarding the rejection or allowing application of the assessee for registration. The assessee cannot be held responsible for the inaction of the Department. If the Department is in slumber, the assessee cannot be faulted. - Decided partly in favour of assessee.
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2013 (6) TMI 673
Disallowance of expenditure incurred on an abandoned film - Capital or Revenue expenditure - Held that:- Commissioner of Income-tax (Appeals) did not commit any error in allowing proper relief to the assessee - Following decision of CIT v. Mukta Arts P. Ltd. [2008 (8) TMI 879 - BOMBAY HIGH COURT] - Decided against Revenue.
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2013 (6) TMI 672
Delay in online application in form IB to remit compounded tax for cooked food - Doctrine of substantial compliance - Doctrine of implied power - petitioner argued that there is no prohibition or inhibition going by the phraseology of rule 11 of the Rules, and therefore, the statutory authority could have accepted the application for compounding, since they did not find any other default or defect in it - Held that:- The doctrine of substantial compliance does not, in any manner, authorise a statutory authority to permit institution of certain matter in the form of returns, etc., after the period prescribed. If the doctrine of implied power or the doctrine of substantial compliance is stretched to that limit, we can easily foresee abuse of power. The provision in rule 11 of the KVAT Rules, read with section 8 of the KVAT Act, does not provide any room for the statutory authority to condone delay on a ground referable to default of the assessee or his accountant, as in the case here. - Decided against assessee.
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2013 (6) TMI 671
Retention of documents - How long can the accounts, registers, records or other documents seized under the provisions of the Kerala Value Added Tax Act, 2003 be retained by the officer seizing them - held that:- The documents in the instant case (numbering about 23) including purchase bills, stock register, retail invoices, etc., were seized from the business premises of the petitioner under exhibit P3 receipt dated November 10, 2011. The petitioner is a registered dealer under the Act engaged in the business of gold jewellery with the trade name "Malabar Gold" and the business premises was its branch at Pathanamthitta. The intelligence squad of the Department of Commercial Taxes also took physical stock of the jewellery available in the premises and prepared exhibit P2 shop inspection report on the same day. - more than 18 months (540 days) have now expired after the seizure of the documents and its retention by the Intelligence Officer without any demonstrable reason. It is however fairly conceded by Mr. V. V. Asokan, Advocate on behalf of the petitioner, that a notice dated March 7, 2013 under section 67(1) of the Act proposing to impose a penalty has been received. But the proceedings for the imposition of penalty under sections 67, 68, 69 and 70 of the Act are altogether different from prosecution covered by sections 71, 72 and 73 of the Act. I cannot therefore agree with the contention of Mr. Shaij Raj. T.K., Government Pleader on behalf of the respondents, that proceedings for penalty tantamount to proceedings for prosecution. - Decided in favour of assessee.
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2013 (6) TMI 670
Levy of tax on the estimated sale value of shutters - assessing officer rejected the contention of the assessee that the shutters came into existence only in the course of execution of the works contract - assessee contends that being an indivisible works contract and that the shutters came into existence only by way of accretion at the work site, there could be no liability to tax - Held that:- Court straight away reject the contention of the assessee by following the decision of this court reported in [2001 (9) TMI 1114 - MADRAS HIGH COURT] (Apparels and Handloom Exporters Association v. State of Tamil Nadu), which was also considered by us in other previous cases also. Thus when the nature of execution of the work demanded that the assessee took the material to the site of the customer and executed the work, it does not mean that there was no sale of the shutters. Similar issue was also considered by the apex court in the decision reported in [2005 (2) TMI 519 - SUPREME COURT OF INDIA] (State of Andhra Pradesh v. Kone Elevators (India) Ltd.). - Decided against assessee.
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2013 (6) TMI 669
Can an assessment under the Central Sales Tax Act, 1956 be completed belatedly by availing of the time extended for the relevant year under the Kerala General Sales Tax Act, 1963 - Held that:- Heavy reliance is placed by the petitioner on State of Punjab v. Bhatinda District Co-operative Milk Producers' Union Ltd. [2007 (10) TMI 300 - SUPREME COURT OF INDIA] to urge that a reasonable period of four years should be read into the Rules. The Supreme Court has in the said decision held that the power to revise suo motu under section 21 of the Punjab General Sales Tax Act, 1948 should be exercised within a reasonable period. The period was arrived at on the basis of the statutory scheme and the notice issued to show cause against the proposed revision of assessment order five years after its completion was quashed. It is the case of the petitioner that a period of four years for completing the assessment under rule 6(5) of the Rules is reasonable when the same period has been specified for reassessment under rule 6(7) and 6(8) of the Rules. There is however no scope for such hypothesis in the instant case since section 17 of the KGST Act comes to the rescue of the respondents to complete the assessment within the extended time in view of section 9(2) of the CST Act. I however permit the petitioner to file objection to exhibits P1, P3 and P4 notices and raise all available contentions notwithstanding the fact that its attempt to nip the assessment in the bud is hereby aborted. - Decided against assessee.
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2013 (6) TMI 668
Reopening of assessment - Non acceptance of return - Held that:- Though ground is raised before the first appellate authority that turnover included pure labour contract it is not made specific nor a claim for deduction of annual maintenance charges is made by the assessee, but only a ground. In the absence of any specific issue made in respect of annual maintenance charges and proper foundation having been laid by the assessee to claim the same, we cannot merely because the assessee had contended that the turnover included value of labour which was purely in the context of the earlier stand that it was only a works contract and not a sale and therefore we cannot permit the assessee to come up with such grounds in these revision petitions on the premise that the authorities have committed an error on this aspect.
The main question of law sought to be raised in these revision petitions being the question as to the transaction is a sale or a works contract and in almost identical circumstances, the Supreme Court having held that it is a sale in Kone Elevators' case [2005 (2) TMI 519 - SUPREME COURT OF INDIA], this question is now covered by the judgment of the Supreme Court and therefore the revision petitions are only to be dismissed. - Decided against assessee.
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2013 (6) TMI 667
Addition towards LTCG on sale of house property - Penalty u/s 271(1)(c) - Held that:- It is an undisputed fact that the assessee had received Rs. 34,11,000/- on the sale of property & assessee out of the total cost of Rs.16.70 lacs incurred for acquiring the property, the assessee had paid only Rs.7,97,500/- and the remaining amount was paid by Shri Jagdish Khurana. In the audited balance sheet of the assessee for F.Y. 2003-04 it is seen that the assessee had shown investments in Sweet Co.Op. Housing Society of Rs. 8,12,500/-. Assessee also has placed on record the copy of computation of income for A.Y. 2006-07 of Shri Jagdish Khurana wherein the long term capital gain on sale of property has been disclosed by him. As the Revenue has not brought on record any material to prove that the assessee was the sole owner of the property it is also a fact that Mr. Khurana, the co-owner of the property, has offered his share of capital gains in the return of income for A.Y. 2006-07. However there is nothing on record to show as to how the profit on sale of aforesaid property has been treated in the hands of Shri Jagdish Khurana while finalizing his assessment. Thus the entire capital gains cannot be taxed in the hands of assessee ,therefore this aspect needs examination at the end of AO.
As the addition itself has been deleted the penalty does not survive. In favour of assessee.
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2013 (6) TMI 666
Determination of income - addition towards estimated G.P. on unaccounted sale of Gutkha and Pan Masala - Held that:- AO has supported its finding by the statement of the Assessee recorded on 02.04.2009 post survey carried on 05.02.2009. As find from the record that the AO supplied the copy of the said statement to the Assessee but did not supply the other documents/record requisitioned from the Sales Tax Department based on which the unaccounted sale was worked out by AO.
Assessee vide its letter demanded the alleged record though AO has referred the notice u/s 142(1) to show that the copies of the documents were shown to Assessee for examination. It is pertinent to note that no documents can be used against the Assessee without giving him proper opportunity to rebute the same or to produce counter evidence. The assess denied that the alleged record belongs to the Assessee and demanded the cross-examination of the panchnama on this point. The whole case of the department is based on the presumption that the Assessee is C & F Agent of Godhwat Industries for sale of Gutkha and Pan Masala. AO made the estimated GP addition by working out the unaccounted sale whereas in case of C & F Agent the income is only the commission as agreed between the parties and not any profit margin from purchase and sale because the purchase is made by the traders and dealers and the sale is made by the manufacturer.
There cannot be any purchase and sale by the C & F Agent but it facilitates the purchase and sale between the Trader/Dealer and the manufacturer. AO adopted the GP rate admitted by the Assessee on its business of Trade which is not permitted to be adopted for the income being commission of C & F Agent.
AO worked out unaccounted sale for 10 months on the reason that the search was conducted by the Sales Tax Department on 20th January. Therefore the 10 months sale was worked out from the April 2007 to January. 2008. But it is material to note that the search was conducted on 20th January.2009 and not on 20th Janyary.2008, therefore the record found during the search cannot be said to be upto to 20th January.2008 so that the unaccounted sale on the basis of that record can be worked out upto 20th January.2008. Also when the Sales Tax Department who carried out the search and seizure operation and seized the record in question has come to the conclusion that the unaccounted sale is from the purchase from outside state then the view of the AO that the unaccounted sale is from the purchases made within the state is not sustainable. Thus set-aside the orders of the authorities below qua this issue and delete the addition of estimated GP towards unaccounted sales.
Addition on account of cash payment - Held that:- Since the addition is made on the basis of the seized material by the Sales Tax Department therefore in view of finding in respect of the issue of addition on account of unaccounted sale as well as the conflicting view taken by the Sales Tax Authority and Income Tax Authorities on the same evidence this addition is deleted.
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2013 (6) TMI 665
Deduction u/s 80IA disallowed - conditions specified at (a), (b) and (c) of the section are not found fulfilled by assessee - Held that:- Respectably following assessee's own case [2010 (9) TMI 938 - ITAT HYDERABAD] claim of the assessee for deduction 80IA allowed. Against revenue.
Payment to PSAM towards professional charges disallowed - Held that:- AO and the CIT(A) were not correct in concluding that there was no necessity for services to be rendered over and above those contemplating in the BIMCO agreement. As refering to the decision of CIT Vs. Dhanrajgiri Raja Narsingiriji [1973 (3) TMI 6 - SUPREME Court] wherein held that "it is not open to the Department to prescribe what expenditure an assessee should incur and in what circumstances he should incur that expenditure. Every businessman knows his interest best." In the case of Jaipur Electro (P) Ltd. Vs. CIT 1996 (5) TMI 55 - RAJASTHAN High Court] it was held that "the doctrine that the businessman is the best judge of business expediency does not affect the right, any duty of the assessing authorities to know whether it was incurred for business purposes and not for other extraneous conditions." Thus the expenditure to PSAM has been wholly and exclusively incurred for the purpose of business is to be allowed as a deduction. In favour of assessee.
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2013 (6) TMI 664
Depreciation claim disallowed - additions to the relevant blocks of assets admittedly made at the end of the financial year had not been shown to be put to use - Held that:- The trial production is usually for the entire unit, as it is only when the entire machinery is set up, that the production or trial production could be made. The running of a single machine, as it is perhaps this that has been construed as a trial run, is only a part of its commissioning, as vendors are usually required to demonstrate the working of the machine as a part of its commissioning. Again,from the list of the additions to the fixed assets there are additions dating as far as back to May, 2007. The assessee has also sought to place on record the copy of the invoice dated 28.02.2008, with a request that the same be admitted on record, perhaps to meet the objection by the first appellate authority that the production would only be accompanied by payment of excise duty.
Thus restore the matter back to the file of the assessing authority for a de novo examination of the matter - assessee's appeal allowed for statistical purposes.
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2013 (6) TMI 663
Jurisdiction power u/s 263 by CIT(A) - assessee is maintaining its accounts on an exclusive basis, i.e., valuing its inventories as well as purchases and sales, at net of excise duty, which is being accounted for separately, therefore, admittedly there is a technical breach of section 145A - Held that:- Section 145A is a non-obstante provision, which, therefore, is to be necessarily followed for the purpose of returning the income under the Act. The A.O. has, firstly, by not discharging his obligations, being duty bound to verify the assessee's return as being in accordance with the law, and then in acting in disregard of the directions by the ld. CIT, has put the assessee to inconvenience, and which cannot but be depreciated.
As regards the invocation of s. 263 case of Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME Court] laid down four-way test for invocation of a provision i.e. incorrect assumption of facts, incorrect application of law, without applying the principles of natural justice, and without application of mind. It is the last category, if not perhaps the first one as well, which arise in the instant case. Thus confirming the invocation of section 263 in the instant case, direct the assessing authority to observe the directions of the revisionary authority both in letter and in spirit so as to avoid multiplicity of proceedings.
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