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2013 (4) TMI 720 - SC ORDER
Demand of educational cess - whether the appellants are liable to pay Education Cess again on the amount which has been worked out by calculating the customs duty payable on the goods in respect of clearances made by 100% EOU to domestic tariff area.
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2013 (4) TMI 719 - RAJASTHAN HIGH COURT
no penalty under section 76(6) of the Act deserves to be imposed, since relevant documents in the form of bills and bilty accompanied the said goods and defect of not furnishing VAT-47 was removed by furnishing of the same on the very same day.
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2013 (4) TMI 718 - CESTAT MUMBAI
... ... ... ... ..... Customs Act. If that be so, it is not clear under what powers the customs authorities have initiated the present proceedings, especially when the car was confiscated and allowed to be redeemed at the time of importation. The Hon’ble Apex Court in the case of Mohan Meakin case cited supra held that a subsequent purchaser is not to be saddled with the liability of undervaluation if the adjudicating authority failed to make proper enquiry and released the same after half-hearted adjudication. There is also no evidence on record to show that the appellant herein was in any way connected with the import of the car or aided/abetted in undervaluation of the car. Thus we are of the prima facie view that the appellant has made out a strong case in his favour for grant of stay. Accordingly we grant unconditional waiver from pre-deposit of the dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal. (Operative part pronounced in the Court)
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2013 (4) TMI 717 - BOMBAY HIGH COURT
... ... ... ... ..... mbai, dated 13th February, 2013 (Exhibit ‘A’) on the ground that it was passed in violation of the principles of natural justice. We clarify that we have had no occasion to deal with the allegations contained in the show cause notice. Since the order has been set aside only on the ground noted above, we grant liberty to the Adjudicating Authority to pass a fresh order of adjudication and while doing so, we keep open all the rights and contentions of the parties. The Petitioners shall appear before the Adjudicating Authority on 6th May, 2013. Counsel appearing on behalf of the Petitioners states that in the meantime, the Petitioners intend to move the Settlement Commission for resolving the entire issue in dispute. We make no observation in that regard save and except to clarify that it would be open to the Petitioners to take recourse to such remedies as are available in law. 6. The Petition is disposed of in these terms. There shall be no order as to costs.
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2013 (4) TMI 716 - CESTAT MUMBAI
... ... ... ... ..... are allowed to be cleared on payment of duty, the rate of duty that shall apply is the rate in force on the date of payment of such duty as specified in para 2(a) of Notification 126/94, dated 3-6-1994 and para 6(a) of Notification No. 1/95, dated 4-1-1995. Therefore, the duty liability has to be computed at the rates prevalent on 7-6-2006 when the debonding was permitted, on the depreciated value from the date of commercial production to 7-6-2006, the date of debonding. Interest also leviable on the amounts of duty from the due date till the date of payment of duty. 5.2 As regards the reduced quantum of penalty, this point has not been agitated before the lower authorities. Therefore, request will have to be considered by the adjudicating authority, who has to recompute the duty demand as discussed above, in accordance with law. 6. With these directions the appeals are disposed of. The stay applications also stand disposed of. (Operative part pronounced in Court)
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2013 (4) TMI 715 - ITAT CHANDIGARH
... ... ... ... ..... ent to deal in shares. VI. The shares were held for a sufficient ly long period of time for them to qualify as investments. VII. The shares purchased were only of one company which was predominantly family owned. VIII . The profit earned on sale of part shares was only incidental . IX. Engaging a broker for purchase and sale of the shares cannot be vital for determining the nature of the receipt as for making the investments, the services of brokers are always availed. X. Conduct of the assessee and her intent ion is also one of the relevant factors though not the sale test .” 5. Keeping in view al l the above reasons and the others, which we have mentioned in the former part of this order, we can safely conclude that this is not an income from adventure in the nature of trade but it is only a short term capital gain derived by the assessee. Accordingly, we al low the appeal of the assessee and order to delete the impugned addition. 6. In the result, appeal is allowed.
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2013 (4) TMI 714 - CESTAT MUMBAI
... ... ... ... ..... d supra held that the appellants are liable to discharge CVD liability on the MRP price under Section 4A of the Central Excise Act, 1944, notwithstanding the fact that the imported goods are re-packed into kits and sold thereafter. The Revenue was a party to the said decision. If that be so, the decision of the Advance Ruling Authority is binding on the Revenue under Section 28J of the Customs Act. Therefore, if CVD liability is discharged on the basis of the MRP, which implies that the goods are intended for retail sale, the benefit of Notification No. 29/2010 cannot be denied to the appellant on the ground that the goods are being subjected to re-packing and re-labelling before they are sold in retail. The decisions of this Tribunal in the case of Vijirom Chem. Pvt. Ltd. case and the Daikin Airconditioning India Pvt. Ltd. cited supra also support this view. Accordingly, we allow the appeal with consequential relief, if any. (Operative part of the order pronounced in Court)
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2013 (4) TMI 713 - CESTAT MUMBAI
... ... ... ... ..... ) of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977. Though the commodity is notified under Section 4A, there is no statutory requirement in the law for declaring the MRP on the packages cleared by the manufacturer.” 5.6 The facts obtaining in the present case before us are identical/similar to the facts obtaining in the various decisions rendered by this Tribunal in the above cited cases. The glues are pre-packaged and are sold by weight which is clearly indicated on the packages. Since the net weight is less than 10 g, the appellant is exempted from declaring the RSP on the packages under Rule 26 of the Legal Metrology Rules, 2011. Since the appellant is statutorily exempted from declaring the RSP on the packages, the assessment of CVD has to be done on the basis of transaction price and not on the basis of RSP. 6. Accordingly, we allow these appeals with consequential relief, if any. (Operative part of the order pronounced in Court)
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2013 (4) TMI 712 - CESTAT MUMBAI
Valuation - includibility - royalty - Held that: - in the absence of any evidence adduced by the Revenue to prove that the technical know-how supply and the payment of royalty is a condition of sale for the goods imported by the appellant from the foreign principal - matter restored to the adjudicating authority.
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2013 (4) TMI 711 - CESTAT MUMBAI
Confiscation u/s 111(d) - violation of Exim policy - misdeclaration of value and other material particulars - whether the Toyota Landcruiser vehicle imported vide B/E No. 986965, dated 1-9-2008 is liable to confiscation and if so, under what provisions - Held that:- As regards the undervaluation of the car, the same is clearly established. The admission by both Mr. Rehman Shaikh and Mr. Shaikh Safder in their statements clearly show the value to be US $ 108000 and the invoice for US $ 64000 dated 31-7-2008 submitted to the Customs to be a fabricated one. It is also a settled position in law that admitted facts need not be proved as held by the Hon’ble High Court of Madras in the case of Govindasamy Raghupathy [1997 (6) TMI 356 - MADRAS HIGH COURT]. - Thus misdeclaration and liability to confiscation under Section 111(m) of the Customs Act, 1962 is clearly established. In the light of these evidences, the determination of value at US $ 108000 as the purchase price by the adjudicating authority cannot be faulted.
Liability to confiscation under Section 111(d), an IE code was required for the importer and the de facto importer Mr. Rehman Shaikh did not have any such code. Therefore, violation of Section 7 of FTDR Act, 1992 and Rules 2(c), 11 and 14 of Foreign Trade (Regulations) Rules, 1993 is also established. Consequently, provisions of Section 111(d) are attracted. Thus liability to confiscation stand clearly established in this case. Consequently both the appellants Mr. Rehman Shaikh and Mr. Shaikh Safder are liable to penalty under the provisions of Section 112(a) and Section 114AA for the commissions and omissions in rendering the car liable to confiscation
Even if the goods have been disposed of during the pendency of adjudication proceedings, the Revenue could not have appropriated the entire sale proceeds. This Tribunal in the case of Yakub Ibrahim Yusuf (supra) had held that in a case where goods have been sold without giving option of payment of redemption fine to importer, importer was entitled to return of sale proceeds with deduction for redemption fine and penalty and duty was not required to be deducted as there was no actual redemption of goods. Therefore, in the present case, where the goods were seized before clearance from the customs, the option to pay fine in lieu of confiscation should have been given to the person who in the view of the Revenue was the real owner/importer. Since no such option has been given, the matter has to go back to the original adjudicating authority.
Liability to confiscation of the impugned car under the provisions of Section 111(d) and 111(m) of the Customs Act, 1962 and the liability to penalty of both the appellants under Sections 112(a) and 114AA of the said Act is upheld - However, we remand the matter to the original adjudicating authority to give a finding as to whether the goods are prohibited or not after taking into account the type approval certificate issued by DGFT, New Delhi, vide letter dated 18-1-2010 (if necessary, after verifying the veracity of the same) and if the goods are found not prohibited, to consider grant of option to redeem the goods on payment of fine and penalty to the owner/importer of the car - Decided partly in favour of assessee.
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2013 (4) TMI 710 - MADRAS HIGH COURT
Waive of pre deposit - Held that:- The total duty payable by the petitioner/appellant Bank and M/s. ORJ Electronic Oxides Limited is said to have been quantified at ₹ 30,61,064 - duty is payable jointly and severally by ICICI Bank and the said ORJ Electronic Oxides Limited. - there shall be an order of interim stay on condition that the petitioner/appellant shall deposit a sum of ₹ 15,00,000 with the second respondent, within a period of four weeks - partial stay granted.
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2013 (4) TMI 709 - CHHATTISGARH HIGH COURT
Denial of refund claim - refund of the higher duty paid on the higher price fixed in the formal order - Whether assessee is entitled to refund of difference of excise duty on the ground that subsequently there was fluctuation in the prices of commodities and the price was reduced - Held that:- Commissioner itself has noted that the buyers had issued a certificate to the effect that the incidence of duty was not passed on to them. In case, the incidence of the duty was not passed on to the buyers, then the extra duty was paid by the assessee and in this eventuality its application could not be rejected - Assessee was entitled to refund of the difference of the excise duty paid and the Tribunal committed no illegality in allowing the appeal. - Decided against Revenue.
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2013 (4) TMI 708 - CHHATTISGARH HIGH COURT
Denial of MODVAT Credit - Capital Goods - Held that:- Subject eight items are the components of the capital goods and an assessee is entitled to claim Modvat credit in respect of the components of the capital goods. - there is no merit in the appeal. Both the substantial questions of law are decided against the Department - Decided against Revenue.
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2013 (4) TMI 707 - CESTAT NEW DELHI
Denial of benefit of Notification No. 108/95 CE - Held that:- At the time of payment, TR 6 challan bore a remark that if any refund arises, the same may be paid directly to M/s. Power Grid Corpn. of India Ltd. Commissioner (Appeals) has construed the remark as payment of duty under protest which is being disputed by the Revenue inasmuch as no protest was lodged on each and every invoice and no letter of protest was separately filed. - identical issue was the subject matter of the Tribunal s order in the same assesse s case reported as M/s. Power Grid Corpn. of India Ltd. vs. CC, Chennai [2008 (10) TMI 92 - CESTAT, CHENNAI]. While considering all the aspects in detail, including the meetings between the representatives of various Ministries as also the fact of late sanction of world bank loan, the Tribunal arrived at a finding that the issue of time bar will not apply to sanction of refund claim by the Revenue. By following the said order, we do not find any infirmity in the impugned order of Commissioner (Appeals) - Decided against Revenue.
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2013 (4) TMI 706 - CESTAT AHMEDABAD
Waiver of pre deposit - Reversal of CENVAT Credit - exemption under Notification No. 30/2004-C.E., dated 9-7-2004 - whether Cenvat credit lying in balance when the appellant started availing full exemption under Notification No. 30/2004-C.E., dated 9-7-2004, is required to be reversed or not - Held that:- There was accumulated credit lying in Cenvat credit account which the Revenue is holding that the same will stand lapsed on the date appellant started availing benefit of Notification No. 30/2004-C.E. It is apparent from the facts on record that the provisions of Rule 11(3) of the Cenvat Credit Rules, 2004 were inserted with effect from 1-3-2007 as per Notification No. 10/2007-C.E. (N.T.), dated 1-3-2007. The period involved in the present proceedings is March, 2006. It has been held by the Hon’ble Karnataka High Court in the case of C.C. Ex., Bangalore-II v. Gokaldas Intimate Wear (2011 (4) TMI 1123 - KARNATAKA HIGH COURT) that, the assessee is entitled to the credit with respect to the inputs and inputs contained in the goods lying in stock on the date prior to exemption Notification, and that amendment brought under Notification No. 10/2007-C.E. (N.T.) will have only prospective applicability. Further, this very Bench in the case of Sunflag Filaments Industries and others under Order No. M/11719 to 11722/WZB/AHD/2013, dated 2-4-2013, has granted unconditional stay on the same issue. - prima-facie appellant has made out a case for complete waiver of confirmed dues. Accordingly, stay is granted from recovery of confirmed dues till the disposal of the appeal. - Stay granted.
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2013 (4) TMI 705 - GOVERNMENT OF INDIA
Rejection of application for fixation of Special Brand Rate of Drawback under Rule 7 of the Drawback Rules - failure to indicate their intention to avail Brand Rate of Drawback Rules under Rule 7 at the time of export in the relevant Shipping Bills - failure to mention Serial No. of drawback schedule in the Shipping Bills - Held that:- applicant exported the goods and claimed All Industry Rate of drawback. Subsequently, the applicant by terming the same as an inadvertent error wanted to change the same into a claim of fixation of Brand Rate - Clarification by C.B.E. & C. unambiguously states that opting of AIR drawback under Rule 3 in the Shipping Bills disentitles exporter from claiming brand rate of drawback. The said clarification has neither been withdrawn nor set aside by any court of law. As such, the said clarification is very much in existence. Moreover, exporter has to carefully choose a scheme which is beneficial to him at the time of filing Shipping Bill. After choosing a scheme he cannot be allowed to change it subsequently. In C.B.E. & C. Circular No. 10/2003-Cus., dated 17-2-2003, it was clarified that henceforth in all those cases where the exporters have applied for brand rate of drawback, they may be permitted the duty drawback at All Industry Rate as admissible under the relevant Sr. No. of duty drawback table and subsequently when exporters are issued brand rate of drawback, the differential amount may be sanctioned to them.
Applicant had exported chillers in CKD/SKD condition and claimed fixation of drawback under Rule 6(1) of Customs, Central Excise and Service Tax Drawback Rules, 1995. The fixation of brand rate of DBK under Rule 6(1) was not allowed since there was a AIR brand rate of @1.1% fixed for the said item. The goods were exported in different consignments under 8 Shipping Bills. As per C.B.E. & C. Circular No. 26/2005-Cus., dated 8-6-2005, for goods exported in SKD/CKD, unassembled condition, brand rate drawback shall also be admissible. Department had not allowed AIR drawback in earlier cases and therefore special brand rate was claimed by the exporter in the impugned export - violations pointed out in these cases cannot be merely treated as procedural minor lapses - Decided against assessee.
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2013 (4) TMI 704 - CESTAT MUMBAI
Fraudulent claim of DEPB script - overvaluation of export goods - Held that:- By resorting to some methods, overvaluation of export transactions have been done and on the basis of such overvaluation, DEPB scrips have been obtained for much higher values than actually eligible. All these manipulations have been corroborated by documentary evidences as also by statements recorded under Section 108 of the Customs Act from the exporters or their authorized signatories, the transporters of the goods, raw material suppliers, cheque discounters, CHAs who dealt with the transactions and so on. On the strength of such evidences, the licensing authority has cancelled all the DEPB scrips ab initio.
There are strong and convincing evidences against M/s. Nidhi Textiles by way of evidences collected both locally and at Dubai through diplomatic sources which shows that the value declared by the Dubai based importers of the goods exported by Nidhi Textiles, i.e. M/s. AGS General Trading, Dubai, M/s. Ditty Trading (LLC), Dubai and others, is just a fraction (average 6.4 %) of the export values declared by M/s. Nidhi Textiles (in the Shipping Bill and related export documents) before the Indian Customs. While the value declared before the Indian Customs in respect of 39 consignments/shipping bills during the period October, 2006 to April, 2008, amounted to US $ 3009931.41, for the same consignments, the value declared by the importers in Dubai amounted to only US $ 147446, that is, 6.35% of the export value declared in India. Thus the magnitude of overvaluation has been clearly established.
The commission of fraud has been admitted to by Shri Rajeev Kumar Tulsyan, Proprietor of the said M/s. Nidhi Textiles in his Statements recorded under Section 108 of the Customs Act, 1962, wherein he has explained that while remittances of the full amount for the exports made were received from overseas buyers through banking channels, the differential amount (difference between the actual and the declared value) was paid back to the local representatives of the overseas buyers in cash and the said statement has not been retracted in any legally permissible manner - Though the appellant has pleaded financial difficulties, no reliable evidence has been placed before us in support of this submission. Considering the huge amount of revenue evaded in the matter and the deep involvement of the appellant in such duty evasion, we direct the appellant M/s. Nidhi Textiles to make a pre-deposit of ₹ 1,00,00,000/- (Rs. one crore only) within a period of 8 weeks.
If licence has been obtained by fraud by the original allottee who transferred the same to others and the licences were valid at the time of imports by the transferee who bought it for a valid consideration without being aware of the fraud committed by the transferor, subsequent cancellation of the licence will not have any bearing upon the imports already made by the transferee. - a purchaser of goods cannot acquire a better title than the seller and if the statute provides for transferability by endorsement, then common law will not apply and the specific statute shall prevail. If the statute provides for retrospective cancellation, full effect will have to be given to the said provisions. Whether the DEPB itself was forged or was obtained by submission of forged documents would not make any difference and both are incapable of vesting any credit on the DEPB holder.
Unconditional waiver from pre-deposit of dues adjudged against the transferees of DEPB licences and stay recovery thereof during the pendency of the appeals is granted - M/s. Nidhi Textiles, the exporter, Mr. Sanjay Kumar Agarwal and Mr. Paramanand Joshi, have not made out any case in their favour for waiver of pre-deposit of the dues adjudged against them. - Decided partly in favour of appellant.
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2013 (4) TMI 703 - ITAT LUCKNOW
Reopening of assessment - receipt of commission from Regency Hospital Ltd. on which tax deducted at source was not deducted - whether the additions made on different issues in a reassessment proceedings after having satisfied on an issue on which the assessment was reopened, are sustainable in the eyes of law? - Held that:- It is abundantly clear that the Assessing Officer has not made any addition with respect to receipt of commission from Regency Hospital Ltd. on which the assessment was reopened by the Assessing Officer. The Assessing Officer has made addition on other issues which were not part of the reasons recorded for reopening the assessment. Therefore, in the light of judgments Ranbaxy Laboratories Ltd. v. CIT reported in [2011 (6) TMI 4 - DELHI HIGH COURT] & CIT v. Software Consultants [2012 (2) TMI 18 -
the assessment framed by the Assessing Officer on other issues is not sustainable in the eyes of law. We accordingly set aside the assessment framed on other issues. Since the entire assessment is quashed, we find no justification to adjudicate the appeal on other grounds. Accordingly, the appeal of the assessee stands allowed. - Decided in favour of assesse.
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2013 (4) TMI 702 - ITAT HYDERABAD
Reopening of assessment - addition to income - Held that:- In this case the assessment u/s 143(3) has been completed. Of the three issues, the COD had not granted permission to the revenue to prosecute one of the issues viz., reversal of interest income recognised earlier, in appeal before the ITAT. Eventhough it is now recognised that approval of the COD is not necessary for prosecution of appeal, the basis of the requirement of COD approval, viz., reduction in litigation among Government Departments is still valid. If the COD had applied their mind and refused permission to the revenue to pursue the appeal in respect of certain issues, the revenue is precluded from doing so. It is an inter-se arrangement between the Government departments/ Government owned undertakings. Hence the issue regarding reversal of interest income recognised offered for income no longer survives. Even otherwise all the materials were before the AO and the AO has now sought to disallow the reversed income on the basis of the materials already before him. It is clearly a change of opinion.
Broken period interest - Held that:- Whenever securities are purchased, the purchase price is inclusive of interest upto the date of purchase. As interest earned from the securities are assessed as business income, interest for the broken period included in the purchase price of the securities are to be allowed as a deduction. (American Express International Banking Corporation vs. CIT (2002 (9) TMI 96 - BOMBAY High Court) & CIT vs. Nedungadi Bank Ltd. (2002 (11) TMI 29 - KERALA High Court ). That being so, the allowance of broken period interest as a deduction in cases of securities purchased has been allowed by various courts. Therefore in allowing the broken period interest in the original assessment, the AO can not said to have committed any error. The particulars about the broken period interest claimed was before the Assessing officer as he has taken the figure from the original assessment for disallowing. The AO had not come across any fresh material which will lead him to the satisfaction that income has escaped assessment. Therefore the present reopening on this issue is merely a change of opinion on the part of the Assessing officer.
Depreciation on securities - Held that:- Once the investment in securities are made with a view to comply with statutory requirement of liquidity, the securities constitute stock in trade and valuing them at market or cost whichever is lower is an accepted method of accounting. The Apex Court has upheld the same in the case of United Commercial Bank v. CIT (1999 (9) TMI 4 - SUPREME Court). The AO’s attempt to classify them at Held to market or ready for sale etc is merely a change of opinion. There has been no fresh facts or evidence collected by the AO on the basis of which he can be said to have come to conclusion that income has escaped assessment.
Disallowance of unrealised interest - Held that:- The issue is covered by the decisions of Union Bank of India Vs. ACIT,(2012 (6) TMI 500 - ITAT MUMBAI )
Deduction u/s 36(1)(vii) in respect of debts written off by the non-rural branches of the asessee’s bank - Held that:- Covered in favour of the assessee by the Cathelic Syrian Bank Vs. CIT [2012 (2) TMI 262 - SUPREME COURT OF INDIA] .Thus in the instant case there is nothing new which has come to the notice of the Assessing officer after the original assessment u/s 143(3). - Appeal decided in favour of assessee.
Notional profit on sales of investments in trading book as income of the assessee - Held that:- Notional profit on sale of investment of trading book has been brought to tax by the AO relying on the statutory audit report as real income and following the order u/s 263 of the Act. The CIT(A) held that the AO was justified in bringing to tax the profits that have been unreported by the assessee in its accounts. The learned counsel for the assessee submitted that the issue is covered in favour of the assessee by the decision of CIT Vs. Realest Builders, [2008 (5) TMI 6 - SUPREME COURT ] and in the case of CIT Vs. Bilahari Investment (P.) Ltd., [2008 (2) TMI 23 - SUPREME COURT] to held that the department has to prove satisfactory that the accounts books are unreliable and incorrect or incomplete before it can reject the books of accounts and this can be done by showing that important transactions are omitted or if proper particulars and vouchers are not forthcoming or the accounts do not include entries relating to a particular class of business. - Decided in favour of assessee.
Estimation of income - Non Rejection of books of accounts - Held that:- As decided in ACIT Vs. Intermedia cable communication Pvt. Ltd. [2012 (4) TMI 265 - ITAT PUNE] How the AO can resort to estimation of income without rejection of accounts systematically maintained by the assessee for all the years under consideration and also without invoking the provisions of section 145 of the Act after duly complying with the conditions specified in them ? AO’s order does not contain a whisper about the provisions of section 145 of the Act, while he proceeded to make best judgment of the assessment. This is not done. Therefore, in our considered opinion the AO made a best judgment assessments in this case assuming jurisdiction u/s 145(3) of the Act invalidly - Decided in favour of assessee.
Disallowance under 14A - expenditure attributable to earning of exempt income - CIT(A) confirming ₹ 3,17,01,996/- out of operating expenditure holding that expenditure to that extent was incurred by the appellant for earning tax free income - Held that:- Delhi High Court in the case of CIT Vs. Oriental Structural Engineers Pvt. Ltd., [2013 (1) TMI 720 - DELHI HIGH COURT] has upheld the disallowance of reasonable amount based on the facts of the case. Following the decision of the Delhi High Court we direct the AO to disallow 2% expenditure as relating to earning of the exempted income u/s 14A as we find it reasonable looking into the facts of the case. - Decided partly in favour of assessee.
Disallowance of deduction u/s 35D - Held that:- This issue is covered against the Assessee by the order of the tribunal Assessee’s own case for the Assessment Years 2000- 01 to 2004-05 as the meaning of the word depends on the company it keeps and in s. 35D, since it is used with reference to industrial undertaking, it has to be understood to be an operation connected with industrial undertaking only and nothing else. There may be certain activities prior to the commencement of actual production and income may accrue from such activities. It is to describe these activities, the word 'operation' has been in s.35D. - Decided against assessee.
Disallowance of provisions made on standard assets and claimed as a deduction under section 36(1)(viia) - Held that:- Issue under consideration is squarely covered by the decision of the ITAT in its own case for AY 2003-04 and 2004-05 as against assessee wherein held that it is prescribed by the RBI that the provision for standard assets need not be netted out from the gross advances but should be shown separately as “contingent provisions against standard assets”. The heading itself is indicative of the fact that this provision is contingent in nature whereas the provision for non performing asset is to guard against a loss which is looming large on the bank or for the loss which was already taken place. Therefore, the RBI further prescribed that provision on standard assets should not be reckoned for arriving at net NPAs. The Act itself has given an option to the assessee to make provision for its doubtful or loss assets first proviso to Section 36(1)(viia). We do agree that the bank is bound to follow the RBI guidelines.But the deduction available has to be as per the provisions of the Act only. Accordingly, we uphold the order of the CIT(A) disallowing the deduction in respect of provision made for standard assets. - Decided against assessee.
Disallowance of depreciation / fall in value of investment held to maturity (HTM) - investment in HTM category cannot be treated as stock in trade as per RBI guidelines and hence no depreciation is to be provided on these investment - Held that:- The Apex Court in the case of UCO Bank Ltd Vs CIT [1999 (9) TMI 4 - SUPREME Court ] has held that value of the securities at cost or market value whichever is less should be accepted for income tax even if the banks in their books do not value on that basis. Therefore, it is an accepted proportion that investment made by the bank to comply with the SLR requirement would constitute their stock in trade and depreciation in value of the same is an allowable deduction. Thus we uphold the claim of the assessee and direct the AO to allow depreciation / fall in value of investment in Government Securities including those classified under HTM category. No doubt the value in opening stock in the next year would correspondingly be adjusted. - Decided in favour of assessee.
Disallowance of broken period expenses (net) at the time of purchase of HTM Securities - Held that:- As held by the Supreme Court in the case of Southern technologies Ltd v JCIT (2010 (1) TMI 5 - SUPREME COURT OF INDIA ), directions of the RBI are not binding for deciding the issue under the Income tax Act. Securities which are held for comply with SLR has consistently been held to be stock in trade. That being so there can be no further distinction and no part such holding will cease to be stock in trade merely because RBI has classified the same as `held to maturity’. Thus we direct the Assessing officer to allow a sum of ₹ 5,07,02,515/- being broken period interest (net) included in the purchase value of HTM securities as revenue deduction. - Decided in favour of assessee.
Deduction being unrealised interest on NPA which is reduced from the interest income - Held that:- Income which was earlier recognised is not to be allowed in the subsequent year in case it is permissible for the assessee to write off such income in concerned assessment year when it was found that it was not recoverable. Thus we direct the AO to allow deduction of ₹ 2.36 crores being unrealised interest offered for tax in the earlier year now reversed by the assessee. - Decided in favour of assessee.
Disallowance of provision for leave encashment - Held that:- The ITAT which is creature of the Income tax Act is bound by the provisions of the Act and therefore in view of the specific provisions of sub-clause (f) to Section 43B the claim of the assessee for deduction of ₹ 1056911015/- towards provisions for leave encashment cannot be allowed. - Decided against assessee.
Disallowance u/s 14A - CIT(A) deletion of interest payments which the AO held to be relatable to investment in Tax free securities - Held that:- When the Assessee has sufficient interest free funds, the investments should be considered to have been made out of those funds and not interest bearing borrowals. It is only with the introduction of Rule 8D, interest expenditure was apportioned on the basis of investment, even though there was no direct nexus between the borrowals and the investments. Rule 8D is not applicable to the AY under appeal ( Godrej & Boyce Mfg Co Ltd (2010 (8) TMI 77 - BOMBAY HIGH COURT ). However it was held by the Bombay High Court a reasonable amount should be disallowed under 14A. In view of the above, we uphold the order of the CIT(A) deleting the disallowance of interest disallowance
Disallowance of administrative expenses - CIT(A) upheld the disallowance at 5% of the tax exempt income - Held that:- We have held in the appeal by the Assessee that their contention that no expenses were incurred cannot be accepted. The expenditure to be disallowed is to be necessarily to be made on an estimate basis. We find that the Delhi High Court in the case of CIT Vs. Oriental Structural Engineers Pvt. Ltd.,[2013 (1) TMI 720 - DELHI HIGH COURT] has upheld the disallowance of reasonable amount based on the facts of the case. We follow the said decision of the Delhi High Court and reduce the disallowance to 2% expenditure as relating to earning of the exempted income u/s 14A - Decided partly in favour of assessee.
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2013 (4) TMI 701 - ITAT HYDERABAD
Disallowance u/s 14A - Held that:- CIT(A) correctly following his decision in assessee’s own case for AY 2000-01 to 2004-05, directed the Assessing Officer to follow the conclusions drawn in the said years wherein the CIT(A) had deleted disallowance made out of interest expenditure u/s 14A and restricted disallowance on account of operating expenditure to two months salary of the funds department of the assessee at Mumbai. - Decided against revenue.
Broken period interest - CIT(A) deleted the addtion - Held that:- The Bombay High Court in the case of American Express International Ltd Vs CIT reported in [2002 (9) TMI 96 - BOMBAY High Court] and Karur Vysya Bank Ltd [2009 (7) TMI 1210 - MADRAS HIGH COURT] has held that the broken period interest included in the purchase price of Government securities held by the banking company to comply with SLR requirement is entitled to deduction. Issue under consideration is identical to that of AY 2006-07, respectfully following the decision of the Tribunal in that year, we uphold the order of the CIT(A) in directing the Assessing Officer to delete the addition made on this count - Decided in favour of assessee.
Outstanding credits in blocked accounts - CIT(A) held that the decision to carry the amount to the capital reserve by the assessee bank is nothing but a unilateral act which cannot be treated as a cessation of liability in real sense of the term and accordingly, the same cannot be treated as income as held by the Assessing Officer, thus directed AO to delete the disallowance made on this account - Held that:- nfirmity in the order of the CIT(A) in directing the AO to delete the disallowance made on this count, as the CIT(A) decided the issue following the decision of CIT Vs. Sugauli Sugar Works Ltd. (1999 (2) TMI 5 - SUPREME Courta). The ITAT in Canara Bank Vs. CIT (2012 (6) TMI 772 - ITAT BANGALORE) held that amount received by the assessee from customers was not received as a trading receipt in the sense that the face value of the demand drafts, pay orders, etc. were the customer’s money to be paid transferred as per the direction of the customer. - Decided in favour of assessee.
Disallowance of deduction u/s 35D - Held that:- Issue under consideration is decided against the assessee and in favour of the revenue by the coordinate bench of Tribunal in assessee’s own case for AYs 2000-01 to 2004-05 as the meaning of the word depends on the company it keeps and in s. 35D, since it is used with reference to industrial undertaking, it has to be understood to be an operation connected with industrial undertaking only and nothing else. There may be certain activities prior to the commencement of actual production and income may accrue from such activities. It is to describe these activities, the word 'operation' has been in s.35D. - Decided against assessee.
Disallowance provisions on standard assets and also claimed as deduction u/s 36(1)(viia) - Held that:- On being asked by the AO to explain, the assessee stated that it had made a provision for various kinds of assets as per the guidelines issued by the RBI. However, the argument of the assessee was rejected by the AO and he observed that provision on standard asset is not of the same species as the one specified u/s 36(1)(viia). Accordingly, the claim of the assessee was rejected and disallowance was made on this account by the AO. Before the CIT(A), in the statement of facts, the assessee submitted that deduction u/s 36(1)(viia) is allowable in respect of any provision for bad & doubtful debts made by the bank not exceeding 7˝% of the total income and an amount not exceeding 10% of the aggregate average advances made by the rural branches of a bank in computing the total income. Further, it was submitted that since the provision had been made in accordance with section 36(1)(viia), the AO was not justified in disallowing the same. - Decided in favour of assessee.
Disallowance unrealised interest on NPAs which was claimed as deduction - Held that:- Income which was earlier recognised is not to be allowed in the subsequent year in case it is permissible for the assessee to write off such income in concerned assessment year when it was found that it was not recoverable. Thus we direct the AO to allow deduction being unrealised interest offered for tax in the earlier year now reversed by the assessee. - Decided in favour of assessee.
Addition of amount realized from the investments written off in the previous years which was not allowed as deduction in those years - Held that:- From the order passed u/s 264 by the CIT for the assessment year 2004-05, a copy of which was produced before us, it was found that similar issue was raised by the assessee before the CIT. The CIT after considering the submissions of the assessee and examining the materials found the claim of the assessee to be correct and deleted the addition by observing that the same income has been taxed twice - remit this issue to the file of the Assessing Officer, who shall consider the claim of the assessee and decide the issue after verifying all the materials and details produced by the assessee - Decided in favour of assessee for statistical purposes.
Depreciation on investments classified under HTM category - Held that:- investment in HTM category cannot be treated as stock in trade as per RBI guidelines and hence no depreciation is to be provided on these investment - Held that:- The Apex Court in the case of UCO Bank Ltd Vs CIT [1999 (9) TMI 4 - SUPREME Court ] has held that value of the securities at cost or market value whichever is less should be accepted for income tax even if the banks in their books do not value on that basis. Therefore, it is an accepted proportion that investment made by the bank to comply with the SLR requirement would constitute their stock in trade and depreciation in value of the same is an allowable deduction. Thus we uphold the claim of the assessee and direct the AO to allow depreciation / fall in value of investment in Government Securities including those classified under HTM category. No doubt the value in opening stock in the next year would correspondingly be adjusted. - Decided in favour of assessee.
Deduction u/s 36(1)(vii) - debts written off by the non-rural branches of the assessee bank - Held that:- Covered in favour of the assessee by the Cathelic Syrian Bank Vs. CIT [2012 (2) TMI 262 - SUPREME COURT OF INDIA] - Decided in favour of assessee.
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