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2011 (1) TMI 1273
Whether these petitions are to be considered on merits notwithstanding the availability of the statutory remedy of filing the appeal?
Do the impugned orders suffer from the vice of bias? Is the approach of the appellate authority likely to be biased in favour of the Revenue?
Held that:- the courts are not well-equipped to go into the scientific and technological aspects of the matter. It is therefore desirable that the petitioners file the statutory appeals. The appellate authority has to consider the case of the petitioners and the respondents by taking into account the materials placed on record. Given the nature of the subject, it may also be necessary for the appellate authority to embark on a fresh enquiry, perhaps by taking the assistance of the technical persons and technical bodies in the matter.
Thus, It cannot be said with any rate of success that these petitions involve pure and simple questions of law. They involve complicated, scientific and technological questions, which certainly fall within the realm of factual controversies. As held by the apex court in the case of Vicco Laboratories [2007 (11) TMI 21 - SUPREME COURT OF INDIA], the writ court's interference is ruled out where factual adjudication is necessary.
That the Deputy Commissioner has taken part in the proceedings of the committee on the subordinate legislation or is instrumental in filing the review petition are no grounds for alleging the bias. In the instant case, the Deputy Commissioner has passed the similar reassessment orders for different assessment periods on July 31, 2006 and January 12, 2007 long before the meeting of the committee on subordinate legislation. On the similar set of facts, the Deputy Commissioner has passed the similar orders. Therefore he cannot be held to be at fault for passing the impugned orders.
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2011 (1) TMI 1272
Issues Involved:
1. Addition to book profit on account of Lease Equalization Charge.
2. Addition to total income on account of Lease Equalization Charge.
3. Disallowance of Bond Issue Expenses.
4. Disallowance of Depreciation on office building purchased from NBCC.
Summary:
1. Addition to book profit on account of Lease Equalization Charge:
The first issue relates to confirming the addition of Rs.1,42,02,48,221/- to book profit on account of lease equalization charges. The assessee argued that lease equalization charges represent recovery of fair value of leased assets and should be deducted from lease rentals, in accordance with the Institute of Chartered Accountants of India guidelines. The assessing officer rejected this, stating that the method of computation for Income-tax purposes is not determined by these guidelines. The CIT (A) upheld the addition based on the Authority for Advance Ruling in the case of NHPC Ltd., which was later reversed by the Supreme Court. The Supreme Court held that Advanced Against Depreciation (AAD) is not a reserve for the purpose of section 115-JB and is an allowable deduction. ITAT, Delhi Bench also supported this view in the case of G.E. Capital Transportation Financial Services Ltd. Thus, lease equalization charges are not in the nature of reserve to be added under clause (b) of Explanation 1 to section 115-JB(2). The assessing officer is directed to delete the addition.
2. Addition to total income on account of Lease Equalization Charge:
The assessing officer added Rs.1,42,02,48,221/- to the total income under normal provisions of the Act. The CIT (A) upheld the disallowance following previous years' decisions. ITAT, Delhi Bench had previously decided this issue in favor of the assessee, stating that lease equalization charges should be allowed as deduction. The matter is set aside to the assessing officer for verification, following the precedent set by ITAT.
3. Disallowance of Bond Issue Expenses:
The assessee incurred Rs.10,09,92,445/- towards bond issue expenses and claimed it as a deduction. The assessing officer treated it as capital expenditure. The CIT (A) upheld the disallowance. ITAT had allowed the appeal in favor of the assessee in previous years, following the Delhi High Court judgment in the case of M/s. Khirani Chemicals Ltd., which allowed such expenses as a permissible deduction. The assessing officer is directed to delete the addition.
4. Disallowance of Depreciation on office building purchased from NBCC:
The assessee claimed depreciation on office building at Rs.1,45,16,016/-. The assessing officer disallowed it, stating that mere occupation is not sufficient without a registered sale deed. The CIT (A) upheld the disallowance. ITAT had previously allowed depreciation for the assessee in a similar case, stating that possession and payment are sufficient for claiming depreciation, even if registration formalities are pending. Following the precedent, the assessee is entitled to depreciation.
Conclusion:
The appeal filed by the assessee is decided in favor of the assessee on all issues, with directions to the assessing officer to delete the additions and allow the deductions as indicated.
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2011 (1) TMI 1271
Issues involved: Appeals by the assessee against orders of CIT (A) regarding disallowance of interest paid and fringe benefits tax assessment.
Appeals related to interest paid disallowance:
The assessee, a government undertaking providing housing loans, appealed against disallowance of interest paid to banks and financial institutions due to not showing interest income in profit and loss account. The assessing officer disallowed the interest claim as no interest income was offered. The CIT (A) upheld this decision. The assessee argued that recoveries from beneficiaries were not considered as income, and interest payments were part of expenditure. The department contended that no accounts for interest received were maintained. The ITAT found the assessee not in the construction business and allowed the interest payment claim, directing the assessee to provide details of interest received for assessment.
Appeal related to fringe benefits tax assessment:
The assessee appealed against the imposition of fringe benefits tax by the assessing officer, upheld by the CIT (A). The assessee claimed exemption under section 12A, stating the corporation did not fall under the status of an employer. However, no evidence was produced to show income exemption under section 12A. The ITAT confirmed the lower authorities' decision on the fringe benefits tax assessment.
Conclusion:
The ITAT partly allowed the appeals related to interest paid disallowance for statistical purposes, directing the assessee to provide interest details. The appeal regarding fringe benefits tax assessment was dismissed.
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2011 (1) TMI 1270
Issues involved: Appeal against order passed by CIT(A) for assessment year 2005-06.
Issue 1: General ground not requiring adjudication
- The first ground raised by the Revenue was deemed general and did not require further adjudication.
Issue 2: Deletion of addition of excess agency commission
- The AO made an addition of Rs.32,11,200/- on account of excess agency commission paid to a foreign agent.
- Assessee claimed the commission was payable at 10% of F.O.B. value for services rendered.
- CIT(A) deleted the addition, noting substantial increase in profits despite commission payment.
- ITAT upheld CIT(A)'s decision, stating the assessee has the discretion to determine commission percentage based on business exigencies.
Issue 3: Deletion of addition of rent, rates, and taxes
- AO made an addition of Rs.2,55,827/- for property taxes claimed by partners of the assessee firm.
- CIT(A) deleted the addition based on the argument that the properties were used for business purposes.
- ITAT overturned CIT(A)'s decision, stating lack of evidence to prove business use of the properties.
Issue 4: Deletion of addition of labor charges
- AO made an addition of Rs.4,62,376/- due to incomplete signing of labor register.
- CIT(A) deleted the addition, noting subsequent signing of the register and proper payment of EPF & ESIC.
- ITAT upheld CIT(A)'s decision, finding no basis for ad hoc disallowance and accepting the rectification proposal.
Issue 5: Payments to non-resident shipping companies
- AO made an addition of Rs.17,29,389/- for payments made without deducting tax at source.
- CIT(A) deleted the addition based on additional evidence submitted, contravening Rule 46A of IT Rules.
- ITAT set aside CIT(A)'s decision, directing AO to decide the issue afresh after allowing the assessee to present evidence.
In conclusion, the ITAT partially allowed the appeal, directing a fresh assessment on the issue of payments to non-resident shipping companies in compliance with Rule 46A.
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2011 (1) TMI 1269
Whether the representations filed on behalf of the detenus were not disposed of in accordance with the mandate of Article 22(5) of the Constitution?
Whether the manner of consideration and rejection of representation by the Central Government is in accord with the principles laid down by this Court on this aspect in several cases?
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2011 (1) TMI 1268
Whether exclusion of 'sport' as a subject from taxing entry 62, and inclusion of the same in non-taxing entry 33 of the State List of the Seventh Schedule to the Constitution is intentional so as to deprive the State Legislature of their competence to tax 'sport' and leave that competence to Parliament under the residuary entry 97 of the Union List?
Whether the Division Bench judgment of this court in Chrysalis International Pvt. Ltd. v. State of Haryana [2011 (1) TMI 1267 - PUNJAB AND HARYANA HIGH COURT], has been correctly decided by applying the law laid by the honourable Supreme Court in Geeta Enterprises v. State of U. P. [1983 (9) TMI 319 - SUPREME COURT]. The question is 'does the Homer nod'?
Held that:- We hold that the State Legislature is competent to impose entertainment duty/tax on entertainments and amusements, which include sports and accordingly question "(A)" is answered in favour of the Revenue and against the assessee.
The learned judge then went on to observe that "We, in the Supreme Court, do 'nod' despite great care to be correct, and once a clear error in judgment is revealed, no sense of shame or infallibility complex obsesses us or dissuades this court from the anxiety to be ultimately right, not consistently wrong." We are happy to notice that we are saved of Homer's nod. Accordingly, the second question is also answered against the petitioners and in favour of the Revenue.
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2011 (1) TMI 1267
Whether such activities [ providing facilities for swimming, games of billiards, pool, etc.] carried out by the persons, who are participating in the sports or such like activity, are liable to entertainment duty under the Punjab Entertainments Duty Act, 1955?
Held that:- here cannot be any variation in the levying of rate of entertainment duty on the basis of the decision having been taken by the Excise and Taxation Commissioner. Unless the procedure laid down, as aforesaid, is complied with, the rate of levy of entertainment duty could not have been varied. Still further, even if any decision has been taken, there cannot be any estoppel against the statute. Consequently, the said argument is without any merit. Prior to June 29, 2001, the entertainment duty at 125 per cent would be payable, but thereafter, it would be payable at 25 per cent.
The notifications dated September 1, 1977 and June 29, 2001, provide that the State Government has published the notification in exercise of the powers conferred by sub-section (1) of section 3 read with first proviso of sub-section (2) of section 3 of the Act. Meaning thereby that the publication of a draft notification has been dispensed with for fixation of rate of entertainment duty. Thus, the argument that the draft notification was not published, is not tenable as the same was expressly dispensed with.
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2011 (1) TMI 1266
Revision under section 11 of the U.P. Trade Tax Act, 1948 is directed against the order of the Tribunal dated May 22, 2003 for the assessment year 1987-88, by which the Tribunal has confirmed the order of the first appellate authority deleting the penalty levied under section 10A of the Central Sales Tax Act, 1956
Held that:- There was no reason for the first appellate authority and the Tribunal to delete the penalty without setting aside the finding of the assessing authority that there was mens rea in misusing the from C. On the facts and circumstances, in my view, the assessee had issued form C in respect of the impugned goods making the false representation that it was registered for such goods. There was absolutely no bona fide belief on the part of the assessee in issuing the form C. In the present case, the mens rea on the part of the assessee in issuing form C is fully established.
In the result, the revision is allowed. The order of the Tribunal dated May 22, 2003 and the order of the first appellate authority dated April 6, 1999 are set aside and the order of the assessing authority is restored.
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2011 (1) TMI 1265
Whether levy of penalty under section 13A(4) of the Act can be said to be unjustified?
Held that:- None of the authorities below has accepted the explanation put forward by the applicant that it has sold only 9 M.T. bitumen against bill No. 79 dated March 1, 2002 which was being transported in Tanker No. U.P. 81 D-4408 from Agra to Jabalpur and further 10.310 M.T. bitumen was loaded in the said tanker at Mathura, which was purchased by Jabalpur party from Indian Oil Corporation Limited and Tanker No. U.A.C. 9078 had been subjected to break down. Admittedly, at the time of inspection, neither the bill of 19.310 M.T. bitumen was produced nor the bill of 9 M.T. bitumen, claimed to have been sold by the applicant, was produced. Bill No. 7924318 dated February 14, 2002 issued by the Indian Oil Corporation Limited and G.R. No. 597 dated March 1, 2002 were produced. In bill No. 7924318 dated February 14, 2002, Tanker No. U.A.C. 9078 was mentioned. There was nothing to show that the said bill and bilties relate to the goods loaded in the tanker. The driver and khalasi of the tanker in their statements have not stated that the goods of Tanker No. U.A.C. 9078 have been loaded in Tanker No. U.P. 81 D-4408. Admittedly, the entries of 19.310 M.T. bitumen, found at the time of inspection, was not found entered in the books of account of the applicant. In the circumstances, levy of penalty under section 13A(4) of the Act cannot be said to be unjustified.Appeal dismissed.
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2011 (1) TMI 1264
Whether the contractee-Election Department can supersede/override the decision of the taxing authority like respondent No. 5, the Commissioner of Taxes, who is appointed for carrying out the purpose of the Act?
Whether the supply of materials in question comes within the purview of the works contract or is wholly exempted from the purview of VAT in view of the provisions of section 9 read with entry at serial No. 5 of the First Schedule to the Act, 2003?
Held that:- This court is of the opinion that the petitioner is not supposed to pay the VAT against supply of the printing materials to the Election Department in connection with general elections to Lok Sabha, 2009. Consequently, the impugned orders dated April 2, 2009 and April 27, 2009 (annexures F and H, respectively) are quashed and the letter dated September 23, 2009 (annexure-Motor Vehicles Act, 1988) is also set aside. In the result, the writ petition is allowed.
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2011 (1) TMI 1263
Whether the Tribunal failed to look into sub-section (3) of section 21 of the Act which provides that if the notice is served within the period provided under sub-section (2) of section 21 of the Act the assessment order may be made within six months after expiration of such period?
Held that:- Section 21(2) of the Act says that except as otherwise provided in this section, no order of assessment or reassessment be passed after the expiry of two years from the end of such assessment year and further the proviso provided that the Commissioner may authorise the assessing authority to make such assessment or reassessment after the expiration of two years but not after the expiration of six years from the end of such year. Therefore, sub-section (2) provides limitation for eight years for passing the order.
Sub-section (2) is subject to the other provision of the section. It is subject to sub-section (3) which provides that if the notice is served within the period specified in sub-section (2) the assessment may be made within six months after the expiration of such period. In this way sub-section (3) extends six months further period for passing the order.
In view of the above, the order of the Tribunal is erroneous and liable to be set aside. Thus, the Tribunal is required to decide the appeal on the merits. Revision allowed.
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2011 (1) TMI 1262
Whether, in the facts and circumstances of the case, clean air equipment (laminar flow clean air equipment) and accessories thereof are electrical appliances under entry 18, Schedule A of the Act or industrial machinery (general goods)?
Whether the assessee was liable to pay interest under section 25(5) of the Act ibid. in view of the honourable Supreme Court of India judgment in J.K. Synthetics Ltd. v. Commercial Taxes Officer reported in [1994 (5) TMI 233 - SUPREME COURT]?
Held that:- There is no dispute that the equipment in question is run with the electrical energy and provides filtered air. No distinction can be made on the basis of domestic purpose or the industrial purpose for use of the article. We, thus, do not find any reason to take a view different from the one taken by the Tribunal. The question is, thus, answered against the assessee and in favour of the Revenue.
Now coming to question (ii), it is not disputed on behalf of the State that in view of the Constitution Bench judgment of the honourable Supreme Court in J.K. Synthetics Ltd. v. Commercial Taxes Officer [supra] the levy of interest was effective from the date of issuance of demand notice and not from the date of filing of return. The said question, thus, stands answered in favour of the assessee and against the Revenue.
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2011 (1) TMI 1261
When an appeal in MTA No. 106 of 2008 filed by the petitioner in regard to the levy of tax of ₹ 77,656 (rupees seventy seven thousand six hundred and fifty six only) and the penalty levied for ₹ 92,568 (rupees ninety two thousand five hundred and sixty eight only) are pending before the Sales Tax Appellate Tribunal, (AB) Madurai, then it is not open to the second respondent/Deputy Commercial Tax Officer, Virudhunagar, to issue prerevision notice dated April 24, 2008 in reference Asst. No. 5720959/97-98 and the same is per se illegal in the eye of law.
Held that:- Inasmuch as the appeal filed by the petitioner in MTA No. 106 of 2008 before the Sales Tax Appellate Tribunal (AB), Madurai is pending as on date and since the same has not been disposed of till date, this court is of the considered view that it is not open to the second respondent/Deputy Commercial Tax Officer I, Virudhunagar, to issue the pre revisional notice dated April 24, 2008 claiming tax due on the wilful non-disclosure at ₹ 77,656 and the penalty proposed at 150 per cent as per section 16(2) of the Act at ₹ 1,16,484 and the same is per se illegal and invalid one.
Resultantly, this court exercises its inherent power under writ jurisdiction and sets aside the pre-revision notice dated April 24, 2008 issued by the second respondent and allows the writ petition to prevent an aberration of justice.
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2011 (1) TMI 1260
Whether the appellant has sold parched groundnut or unparched groundnut?
Held that:- In view of undisputed legal position that the parched groundnuts are different from groundnuts and were not covered by the category of declared goods, mere fact that the Tribunal held to the contrary, in a particular case, is not a ground to interfere with the impugned order.
The petition is dismissed.
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2011 (1) TMI 1259
Whether the petitioner did not record rest of the purchases in his books of accounts and thus concealed the transactions with a view to avoiding payment of taxes under the 2005 Act?
Held that:- The authorities below have manifestly erred in holding the petitioner guilty of concealment and in making the impugned orders under section 32(1) of the 2005 Act. In absence of any independent material connecting the petitioner with the alleged transactions we need not remand the matter to the assessing officer to consider the matter afresh.
As we have held the impugned orders to be manifestly wrong, made on surmises and conjectures, in absence of any valid material the petitioner need not be relegated to avail of the alternative remedy of statutory appeal before the Tribunal. Appeal allowed.
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2011 (1) TMI 1258
Revision under section 11 of the U.P. Trade Tax Act, 1948 against the order of the Tribunal dated November 25, 2010 for the assessment year 2007-08
Held that:- No explanation has been given at the time of survey about the shortage. It has not been told that the stocks were lying in some other room. If it would have been told to the surveying officer that the stock was lying in another shop, the same would have been verified. Therefore, any explanation offered by the applicant that the stock was lying in another room has rightly been rejected by the assessing authority and by the Tribunal. The stock has been valued at ₹ 2 lcas.Therefore, having regard to the value of the stock, which was not found at the time of survey, the estimate of turnover at ₹ 5 lacs of the manufactured tobacco and the purchases of raw materials from the unregistered dealer cannot be said to be excessive or without any basis. However, the Tribunal has erred in levying the tax on the turnover of chemicals @32.5%. Under the Notification No. KA. NI.-2-1084/XI-9 (51)/99................dated 25.2.2003 all kinds of chemicals are liable to tax @4%. Therefore, the order of the Tribunal is modified to this extent. The authorities below are directed to recalculate the turnover levying the tax on the chemicals @4% instead of 32.5%. Revision allowed in part.
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2011 (1) TMI 1257
Issues involved: Two revisions u/s 11 of the U.P. Trade Tax Act, 1948 challenging the Tribunal's order for the assessment year 1993-94 under the U.P. Trade Tax Act, 1948 and the Central Sales Tax Act, 1956.
Details of the Judgment:
Issue 1: Allegation of non-production of manufacturing account
The applicant, a manufacturer of carpets, had purchased carpets from an unregistered dealer and claimed export against form H. The assessing authority rejected the books of account due to alleged non-maintenance of the manufacturing account. The Deputy Commissioner (Appeals) and the Tribunal upheld this decision. The applicant contended that the books of account were produced before the assessing authority. The High Court noted that the show-cause notice only mentioned the non-production of the manufacturing account, not other books of account. Referring to legal precedent, the Court emphasized the mandatory nature of maintaining the manufacturing account. As the reason for estimating turnover was not provided, the Court directed the Tribunal to reconsider the matter and allowed the revisions.
Issue 2: Estimation of turnover and tax levy
The assessing authority estimated the taxable turnover within U.P. at Rs. 5 lakhs and inter-State sales at Rs. 14,87,960. The applicant disputed this estimation, arguing that there was no basis for it. The Court observed that the Tribunal did not provide a rationale for the turnover estimate under both the U.P. Trade Tax Act and the Central Sales Tax Act. Citing legal precedent, the Court emphasized the necessity of maintaining accurate accounts. The Court set aside the Tribunal's order and remanded the case for fresh consideration, allowing the revisions.
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2011 (1) TMI 1256
Whether the Tribunal has already granted stay to the extent of 90 per cent, therefore, no further interference is called for?
Held that:- Having regard to the facts that no assessment order has been passed and present is the case of penalty and considering the entire facts and circumstances and financial hardship, the order of the Tribunal requires little modification. As per order of the Tribunal, the applicant is required to deposit ₹ 29,45,129. In case if the applicant deposits ₹ 15 lacs within a period of one week, the recovery proceeding for the balance amount shall remain stayed till the disposal of appeal. The appellate authority is further directed to decide the appeal expeditiously preferably within a period of four weeks from the date of presentation of a certified copy of this order.
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2011 (1) TMI 1255
Whether ENA manufactured by the applicant is rectified spirit?
Held that:- It is necessary to examine whether ENA, which is claimed to be purified rectified spirit containing 98 per cent alcohol and is not fit for human consumption ceases to be rectified spirit. No enquiry or investigation has been made in this regard by the authorities below. Therefore, in my view, the matter requires reconsideration.
In the result the revision is allowed. The order of the Tribunal dated November 22, 2006 is set aside and the matter is remanded back to the Tribunal to decide the appeal afresh in the light of the observations made above.
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2011 (1) TMI 1254
Issues involved: Challenge to penalty order u/s 28A(2)(a) of Karnataka Sales Tax Act.
The Karnataka High Court heard a State's petition against the Karnataka Appellate Tribunal's decision to quash a penalty order imposed by a check-post officer. The goods in question were under transit from Maharashtra to Tamil Nadu, passing through Karnataka. The Tribunal found no liability to pay tax under the Karnataka Sales Tax Act, as the goods were not intended for Karnataka. The penalty was imposed for failure to present necessary documents at the entry check-post, as required by section 28A(2)(a) of the Act. The first appellate authority reduced the penalty to 50%, leading to the second appeal before the Tribunal.
The Karnataka Appellate Tribunal, after considering the facts, concluded that there was no tax liability under the Karnataka Sales Tax Act for the transaction in question. It emphasized that there was no attempt to evade tax owed to Karnataka. The Tribunal also noted that discrepancies in documents related to the inter-State sale did not impact the penalty under the Karnataka Sales Tax Act. The Court upheld the Tribunal's decision to set aside the penalty, as there was no evidence of tax evasion or non-payment when there was no tax liability under the Act.
In the final analysis, the High Court found no grounds to interfere with the Tribunal's well-reasoned decision. It clarified that the case did not involve any attempt to evade tax or non-payment when no tax liability existed under the Karnataka Sales Tax Act. Consequently, the Court dismissed the petition, stating that there were no merits to support a different outcome.
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