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Showing 501 to 520 of 1179 Records
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2013 (8) TMI 681
Nature of Product - Whether cassia meal (husk and germ) of Cassia seeds can be considered as excisable at all – The cassia gum is exported. - Held that:- the appellants themselves treated this item as a cattle feed supplement/cattle feed and did not consider it as a waste. - The classification of the product was also held to be under the heading 2302 and the goods were excisable.
Whether cassia meal can be considered as a waste at all - Held that:- cassia meal was not a waste at all and was excisable, the obvious conclusion that emerges was that appellant was not eligible for exemption under notification No.23/03 which under sl.no.21 exempts waste from food industries arising from purchasing of indigenous raw material.
Whether the product is foodstuff - Held that:- the definition of hydrocolloids and use of their product, cassia gum product is basically used as a texturising agent, gelling agent to provide suspension and stabilisation of the end product and to improve end product appearance. Therefore it only improves the quality of food and can by no means by called as food itself.
Product Indigenous or Not - Whether the product can be considered to have been manufactured wholly of indigenous raw materials or not - Held that:- The manufacturing process explained and from the records what emerges is that the cassia meal gets segregated and separated and taken out of the product before further processing starts by using imported raw materials - it cannot be said that importer raw materials have been used in the manufacture of waste - The word goods was to be considered as waste from food industry which was what was exempted from payment of duty if the condition was fulfilled - it appears that what was intended was that for manufacture of waste, indigenous raw materials only should have been used.
Alternative claim for exemption under notification No.23/03 as waste of oil seeds - Held that:- There was no merit in the alternative claim made by the assesses - assesses own production literature and the details available on their website show that they had described cassia as a new hydrocolloids supplying to the group of galacto mannans like guar, thara and locoest bee gum (LBG) and they had never described it as an oil seed - the chemical examiner also had given a clear opinion that cassia meal was other than waste of oil seeds and during the cross examination of chemical examiner no question was raised on this issue with the chemical examiner.
Extended Period - Whether the extended period had been rightly invoked - Held that:- Extended period cannot be invoked – it would be appropriate that no penalty to be imposable on the appellants and therefore penalty imposed was set aside - Subsequent to audit report and investigation, from the records it emerges that appellants did make efforts to prove that their product was waste by getting technical opinion and getting a letter from the Development Commissioner - Relying upon NIRMA CHEMICAL WORKS Versus COLLECTOR OF CENTRAL EXCISE [1992 (9) TMI 196 - CEGAT, NEW DELHI] - It had to be observed that many technical experts had given them the opinion that the product was a waste - All the facts and circumstances would show that this would not be a fit case for invoking extended period.
Benefit of Cum Duty Price – Reduced Duty Demand – Interest - Confiscation of Goods - Held that:- There was nothing wrong with the view taken by the Commissioner - Demand duty was reduced and since goods were not available the same cannot be confiscated - relying upon COMMISSIONER OF CENTRAL EXCISE, DELHI Versus MARUTI UDYOG LTD. [2002 (2) TMI 101 - Supreme Court] - cum duty benefit cannot be allowed and in that case duty had been demanded on clandestine clearances by the EOU without payment of duty and without issue of invoices - goods were cleared by EOU without payment of duty under parallel invoices and clearances were made by fraudulently availing exemption - None of the circumstances exist in this case - Interest on the duty demanded within the normal period had to be upheld - the demand for duty was upheld to the extent of duty demanded within the normal period of limitation with interest as applicable - Decided against Revenue.
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2013 (8) TMI 680
Scrap chargeable to duty or not - scrap generated in the repair & maintenance workshop of the factory - The appellants sold the old and worn out parts of the machinery and also the scrap generated in the course of fabrication of parts of the machinery without payment of duty - The department was of the view that this scrap was chargeable to central excise duty - Held that:- The M.S. scrap and Iron scrap cannot be said to be a by-product of the final product - At the best, it was the by-product of the repairing process which uses welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams - The metal scrap and waste arise only when the assessee undertakes repairing and maintenance work of the capital goods and, therefore, do not arise regularly and continuously in the course of a manufacturing business of cement.
The scrap generated in the repair & maintenance workshop of the factory cannot be said to be the scrap generated in a manufacturing process or a byproduct of manufacturing process and hence the same was not excisable - M/s. Grasim Industries Ltd. Versus Union of India [2011 (10) TMI 2 - SUPREME COURT OF INDIA] - The issue of getting a new identity as M.S. Scrap and Iron Scrap as an end product due to manufacturing process does not arise for consideration - The repairing activity in any possible manner cannot be called as a part of manufacturing activity in relation to production of end product - Order set aside – Decided in favor of assesse.
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2013 (8) TMI 679
Whether sale of DEPB license constitute business and liable to VAT / Sales Tax - Whether the assesse was carrying out any Business - The assesse effected sale of DEPB license in the course of the trade or commerce and sold them locally during the assessment years 1999-2000 and 2000-2001. The assesse claimed that the sale of DEPB license was not liable to be included in the turnover, there being no "business" carried on in that line - there was no sale of goods; consequently, the same was not assessable under the provisions of the Act – Held that:- For all purposes or for substantive part of the definition "business", there must be frequency, continuity and regularity in the transactions and the said activity would qualify to be termed under the definition of "business", the incidental or ancillary activity to the main business does not call for such interpretation - By use of the expression "any transaction in connection with the business", one can hold that the Act itself does not contemplate the frequency or regularity or continuity of the transactions, as has been done in the substantive part in sub clause (1) of sub section (d) of Section 2 of the Act.
As far as the contention of the assessee that it does not purchase DEPB licence was concerned, going by the scheme of DEPB and the purpose and the background in which the same was issued and the value at which it was assigned to the petitioner – there was no justifiable ground to accept the case of the assessee that he was not a dealer dealing in DEPB licence - The issue raised that the assessee was carrying business in DEPB licence was raised only before this Court and not before the authorities below where the question was whether DEPB licence would be liable to tax - it being a question of law the same be rejected - Decided against the assessee.
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2013 (8) TMI 678
Construction of Commercial Complex and Residential Complex - The assesse was engaged in construction activity both of commercial complex and residential complex - Revenue revealed that the applicant did not pay appropriate service tax on three projects executed by them - Held that:- Construction of industrial or commercial complex and construction of residential complex were made taxable under entries 65(105)(zzq) and 65(105)(zzzh) even prior to 1.6.2007. The new entry introduced on 1.6.2007 only brings in a new method of payment of service tax liability for these services - The new entry used the same expressions as were used in the previous entries - LCS City Makers Pvt. Ltd. Versus Commissioner of Service Tax, Chennai [2012 (6) TMI 363 - CESTAT, CHENNAI] – The previous entries also provided for appropriate abatement for value of goods and material involved in providing such services - The question of valuation of property handed over to the land owner was also dealt with in the said order and it was decided that value of comparable property constructed for independent buyers can be adopted as a basis for service rendered to the land owner.
It was very clear that the construction activity was undertaken on the land already registered in the name of the client and therefore service was being provided by the applicant to such clients - the clarification issued by CBEC was applicable only in cases where the constructed flats or shops were being sold and were registered for sale - For services rendered to the land owners also it was not a case of uncertain profit to be shared by the two but a case of an agreement to do the service of construction of complex for definite consideration in the form of UDS transferred by the land owner to the applicant or sold as directed by the applicant – forty lakhs were ordered to be submitted as pre-deposit – upon such submission rest ot the duty to be waived – conditional stay granted.
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2013 (8) TMI 677
Real Estate Agent Service u/s 65 (88) - service tax on transfer charges received from its clients for substituting the names of new prospective purchasers of immovable property/real estate transactions in the place of prospective purchasers who had initially agreed to purchase the properties - Extended period of limitation was invoked for passing the order of assessment.
Held that:-The service provided by the assesse in substituting names of prospective buyers of real estate, in its records, for which it collects transfer charges, does constitute real estate agent service, as defined in Section 65 (88) of the Act - ‘real estate agent service’ mean any service provided or to be provided to any person in relation to sale , purchase, leasing or renting of real estate including a real estate consultant - Since substitution of the names of prospective buyers, was an activity which was primarily in relation to sale of real estate - the concurrent conclusions by the authorities below suffer from no infirmity - extended period of limitation was invoked to assess tax liability - 50% of the duty was ordered to be paid as pre-deposit - upon such submission rest of the duty to be stayed till the disposal - Stay Granted.
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2013 (8) TMI 676
Stay - dredging activity - Site formation service - Import of manpower service - Appellant contended that dredging activity done is not in river, port, harbor, backwater or estuary and, therefore, it was not taxable - activity was done beyond the territorial waters of India and at the relevant time service tax levy was limited to activities done in territorial waters only. Held that:- This is a case, where the liability to service tax has to be proved by the Revenue - in clarification including circulars and press notes issued at the time of introducing the entry for levy of tax, Government had made it clear that service tax was payable only on dredging done in any river, port, harbor, backwater or estuary – there is a factual dispute on the issue as to whether any part of the canal can be considered as within the territorial waters or not
Site formation service – department contended that this is case of site formation, for which they were expected to recover necessary soil by dredging - Since the contract showed payment for "dredging and land reclamation" – held that:- It is not justifiable to bring them under a different category and demand tax - purpose of the contract is site reclamation and not dredging - the essential character of the contract at this stage is of site formation only - Under the category of Site formation service are specifically mentioned and are also exempted.
Maintenance and repair service – Held that:- In the case of maintenance and repair service factual dispute is raised as to whether repair was done in Singapore or in India - fact cannot be conclusively decided as sufficient evidence was not produced – no sufficient material placed before.
Import of manpower service – department contended that the assessee was making payments to their parent company abroad and not to the employees - it should be treated as a case of supply of manpower from abroad by the parent company – Held that:- In the matter of supply of manpower by a parent company to a subsidiary company, there are decisions wherein pre-deposit has been waived treating the present appellant on a different footing is not justifiable .
Other miscellaneous items, Dhamra Project and Gangavaram Port - the question whether it is a project for supply of goods appears to be a question of facts needs to be examined at the time of final hearing. - it is reasonable to call for re-deposit of Rs.2 crores - stay granted partly.
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2013 (8) TMI 675
Renting of immovable property – appellant contented that renting out of premises to Bank, BSNL and Post Office does not amount to renting of property for use in course of furtherance of business or commerce – Held that:- The Service Tax demand on the rent collected from the Bank and BSNL, is legally sustainable - Bank and BSNL are commercial organizations and the appellant has rented out their premises to them - amounts to furtherance of business or commerce - as regards the Post Office, the appellant might have a case and the arguments will have to be considered after examining the provisions of the Indian Post Act.
Amount of turnover - whether the turnover of the appellant has exceeded the thresh hold limit under SSI Exemption Notification No. 8/2005 or not is a question of fact and has to be examined – Held that:- The matter remanded back to the lower appellate authority as the lower appellate authority has not examined any of these facts - for the purpose of examining the thresh hold limit, the gross amount received for renting of immovable property has to be taken into account - appellant being a sugar factory, they must be discharging the Service Tax on GTA services availed by them - such services might also be includable in thresh hold limit and this fact needs to be examined – matter remanded back.
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2013 (8) TMI 674
Service tax demand u/s 73A – sale of flats - collection of amount towards service tax but not as service tax - contingent liability – department contended that service tax liability would arise under ‘Works Contract Service' for prospective customers under the agreement for sale – appellant constructed flats for sale - a circular dated 01/08/2006 CBEC clarified that liability to pay service tax is on the person who undertook actual construction and not on the builder – Held that:- Provisions of Section 73A are not attracted - the appellant cannot be blamed for believing that the amount is required to be collected - It was the Directorate General of Service Tax which issued the circular saying that the amount is required to be collected and - the appellant cannot be blamed for believing that the amount is required to be collected - appellant took the precaution of collecting it as ‘contingent liability' and not as service tax per se – he also made it clear that in case the outcome of the judicial proceedings emerges in their favour, the amount would be refunded along with interest – appeal allowed in the favour of assessee.
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2013 (8) TMI 673
CENVAT credit - Input Service - The assesse were manufacturer of ball and roller bearings chargeable to Central Excise duty in their factory - They avail Cenvat credit of Central Excise duty paid on inputs and capital goods and of Service Tax paid on input services used in or in relation to manufacture of their final products - The department was of the view that the assesse had wrongly taken service tax credit along with interest and imposition of penalty on them under Rule 15 of Cenvat Credit Rules, 2004 - Held that:- All the services had nexus with the manufacturing business of the assesse and hence the same being services related to manufacturing business of the assesse would be covered by the definition of ‘input service’.
Internet Connection Service - Website Development Service - Rent-a-car Service – General Insurance Service – Held that:- As Decided in CCE, Nagpur Versus Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] interest connection service was held as input service – the service of website development was covered by the definition of input as decided in UNIVERSAL CABLES LTD. Versus COMMISSIONER OF C. EX., BHOPAL [2007 (3) TMI 99 - CESTAT,NEW DELHI] - The service of rent-a-car was covered by the definition of ‘input service’ as it was held in COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II Versus J. K. CEMENT WORKS [2009 (1) TMI 146 - CESTAT NEW DELHI] - As regards, the service of general insurance for plant and machinery to cover the assesse against losses due to fire, machinery break down etc. - The service was also covered by the definition of input service and would be eligible for Cenvat credit – Following COMMISSIONER OF C. EX., RAIPUR Versus BEEKAY ENGG. & CASTINGS LTD. [2009 (6) TMI 96 - CESTAT, NEW DELHI] - The total Cenvat credit availed in respect of insurance service, internet access/connection service and website development service was about Rs. 16 lakhs which appeared to had been correctly availed.
Waiver of Pre-deposit - Assesse had a prima facie case in their favour and requiring them to pre-deposit the amount of Cenvat credit demand, interest and penalty would cause undue hardship - The requirement of pre-deposit of Cenvat credit demand, interest and penalty was waived for hearing of this appeal and recovery was stayed till the disposal of the appeal – Stay Granted – Decided in favor of assesse.
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2013 (8) TMI 672
Surrender of Sale (income) - whether unaccounted sundry debtors are part of surrendered sale - Unaccounted sale and debtors - Search conducted u/s 132 of the Income Tax Act - Assessment u/s 153A of the Act - Held that:- The total amount of surrender was included in the income of assessee in its computation of income - The amount of Rs. 84.20 lacs is on account of outstanding debtors not recorded in the books of accounts - During search proceedings, the assesssee had surrendered a particular amount representing various undisclosed assets including sundry debtors of Rs.84.20 lacs. When all other undisclosed assets has been accepted as income for A.Y 2007-08, the Assessing Officer was not justified in splitting this particular asset on the basis of seized material – Also, Sh. Naveen Jindal had agreed that the amount of Rs.84.20 lacs was debtors out side the books of accounts on 15.01.2007 which was surrendered and was a part of total surrender of five crores – Appeal allowed – Decided in favor of Assessee.
Disallowance of telephone, car expenses etc – Held that:- No incriminating material was found in respect of such expenses which could enable the Assessing Officer to disallow a part of it during proceedings u/s 153A – Thus, relying upon the judgment in the case of Jai Steels India vs. CIT in [2013 (6) TMI 161 - RAJASTHAN HIGH COURT], it was held that in case of assessment u/s 153A, the completed assessment can be tinkered only on the basis of incriminating material found during search - Without any incriminating material Assessing Officer was not justified in making disallowance – Decided in favor of Assessee.
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2013 (8) TMI 671
Unexplained income - Father of the assessee Shri Lalta Prasad Garg has executed Will in favour of the assessee and other family members - Deceased father having jewellery with him and given the same to the assessee and other family members through Will - Sold the same jewellery to M/s. Kalicharan Durga Prasad of Gwalior - In the case of one of the family member Shri Rajan Garg, the AO did not make any addition in this case and accepted the claim of receipt of jewellery through the Will and receipt of sale consideration of the said jewellery - The purchase of jewellery by M/s. Kalicharan Durga Prasad is supported by bills and books of account who has also made statement before the AO for purchase of jewellery from the assessee and other family members - All the entries are recorded in their books of account – The above informations obtained from commercial tax officer, Gwalior u/s. 133(6) by the AO to show that the jewellery was purchased by M/s. Kalicharan Durga Prasad, which is also disclosed in the Sales Tax Return. Therefore, the purchase of jewellery from the assessee and their family members are not in dispute - The returned income of the purchaser has been accepted by the AO also – Held that:- Revenue has not produced any material to contradict the findings of facts recorded by the ld. CIT(A) - ld. CIT(A) on proper appreciation of evidences on record correctly deleted the addition of Rs.65,00,000/-.
As regards the addition of Rs.20,00,000/-, assessee produced agreement to sale dated 06.06.06 before the AO through which the assessee received advance of Rs.20,00,000/- from Shri Kaushal Kishore Pawaiya - Shri Pawaiya, admitted in his statement of giving of advance of Rs.20,00,000/- in cash to the assessee - Purchaser of the property has admitted giving of advance to the assessee – In case of doubt in the minds of the AO of execution of agreement to sale, no examination of the marginal witnesses who have signed the agreement to sale to find out the truth in the matter, was done – Also, Shri Kaushal Kishore Pawaiya has maintained regular books of account which were produced before the AO in which availability of Rs.20,00,000/- as cash with him have been specifically mentioned - Plot of land was available to the assessee for sale at the time of entering into agreement to sale - Authorities of the Revenue department have not asked the purchaser to prove source of the source. The purchaser also in his statement explained the reasons for giving the advance in cash to the assessee because he was not maintaining bank account for the last ten years - The assessee in view of the above facts and circumstances and evidences on record has been able to prove identity of the purchaser, genuineness of the transaction and the amount actually received from the purchaser as advance – Appeal allowed – Decided in favor of Assessee.
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2013 (8) TMI 670
Reference made to TPO by Assessing Officer – Whether Section 92C and 92CA of the income tax act are independent of each other – Held that:- Proceedings in both the sections are quite independent of and distinct from each other and the proceedings under section 92CA(1) of the Act are not dependent on the proceedings under section 92C(3) of the Act. This is due to historical reasons as two provisions were introduced at different times as noted above.
The expression "necessary" or "expedient" is quite distinct from and independent of the circumstances mentioned in section 92C(3). The Assessing Officer may consider it necessary or expedient to refer the case of the assessee to the TPO even without considering existence of circumstances mentioned in section 92C of the Act. The Assessing Officer has only to be satisfied that it is necessary or expedient to make a reference to the T.P.O. No other condition is prescribed in the provision - Assessing Officer would consider it "necessary" or "expedient" would depend upon facts of each case. No doubt, even in cases covered by section 92C(3) of the Act, the Assessing Officer may in appropriate cases consider it necessary or expedient to refer the case of the assessee to the TPO for determining the ALP but that does not mean that powers of the Assessing Officer to refer the case to the TPO is restricted to those cases which are covered by section 92C(3) of the Act.
Had the legislature contemplated to refer the case of the assessee to the TPO only in the circumstances mentioned in section 92C(3) then the legislature would have to provide such conditions in place of words "necessary" or "expedient" in sub-section (1) of section 92CA. The requirements under both the sections are quite distinct as procedure to be followed in the sections is different. In the above sub-section 92CA(1) there is no reference to section 92C(3) - The CIT(A) has emphasized on the words "the said international transaction under section 92C". These words, only refers to the transaction in respect of which reference can be made to the TPO but the same does not, lead to the conclusion that the requirement of section 92C(3) can be read into section 92CA(1) of the Act – The view of this court is relying upon the decision of the Hon'ble Delhi High Court in the case of Sony India (P.) Ltd. v. CBDT [2006 (10) TMI 88 - DELHI HIGH COURT] - Decided against the Assessee.
Companies having higher profits included in comparable for computation of Arm’s Length price - To include Gemini Communication as comparable - The objection against the Gemini Communication Ltd. was raised by the assessee on the ground that the said company is having a super normal profit at 28.07% – Held that:- Profit at 28.07% is not a super normal because the decision relied upon by the assessee in support of its contention are based on the fact where the profit of the comparable as noted by the Tribunal was ranging from 50% to 100% and in those circumstances the Tribunal held that the cases where exceptional profit has been earned and termed as super normal profit should be excluded from the comparables. Therefore, when the profit in case of Gemini Communication does not fall in the category of super normal then merely because of high profits margin cannot be a factor for exclusion from proposed comparables until and unless the extreme results of a case are as a result of exceptional conditions exist.
Even as per OECD TP guidelines, the extreme results might consist of losses or unusually high profits itself cannot be a factor for potential comparables; but further examination would be needed to understand the reasons for such extreme results. If some reasons are detected which indicate a defect in the comparability or exceptional conditions for such an extreme results, then only the case may be excluded from the proposed comparables.
Exclusion of Punjab Communication Ltd. from the list of comparables for computation of Arm’s Length Price – Held that:- The said company is a persistent loss making company - For the last four years this company has been consistently suffering loss - The persistence loss from year after year itself shows existence of exceptional and extreme circumstances and therefore is a good reason for exclusion of the company from comparables. There is a consistence view of this Tribunal on this point that a company showing persistent losses from year after year cannot be considered as a good comparable for the purpose of determination of ALP.
Use of multi-year data for selecting comparables – Held that:- Data relating to the financial year in which the international transaction has been entered into to be used for computation of Arm’s Length Price - It is stipulated under Rule 10B(4) r.w.s Rule 10D(4) that contemporaneous information and documents should be considered as far as possible for the purpose of comparing uncontrolled transaction with the international transaction. Therefore, the comparability of an uncontrolled and unrelated transaction with the international transaction has to be tested by using current year data. Only when the current year data does not give a true picture of the affairs and results of the comparables due to existence of some abnormal circumstances, the multi year data can be considered.
Use of data by the TPO after the cut off date – Held that:- There is no infirmity in the action of the TPO in using contemporaneous data at the time of transfer pricing audit, though the same may not have been available to the assessee at the time of preparation of statutory transfer pricing study / documentation
Benefit of proviso to section 92C(2) of the Income Tax Act – Held that:- The benefit of proviso to section 92C(2) is available only when the price of international transaction of the assessee is within the tolerance range of ±5% of the ALP computed by taking the arithmetic mean of more than one price - Benefit under the proviso to section 92C(2) is available only as a tolerance range and not as a standard deduction. Accordingly, allowed the benefit of the proviso if the prices of the international transaction of the assessee are within the tolerance range of ±5% of the arithmetic mean of more than one comparable prices.
Effect of financial results on TPA – Held that:- Under the Transfer Pricing regulation/provisions the testing party is the assessee and the international transaction entered into by the assessee has to be tested by comparing the same with uncontrolled, unrelated comparable transaction - Price of international transaction in the hand of the AE of the assessee is absolutely irrelevant. The concept of Transfer Pricing based on the principle that instead of entering into a transaction with related party if the assessee had entered into a similar transaction with unrelated party what would have been the prices of said transaction between the assessee and unrelated party. The comparison is always in the context of the effect of the related party transaction and unrelated party transaction at the hand of the assessee. Therefore, the financial results of the AE are not at all relevant for the purpose of determination of arm's length price in relation to the international transaction entered into by the assessee. - Decided against the assessee.
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2013 (8) TMI 669
Book profit adjustment - MAT u/s 115JB - Addition made by the A.O. for calculating the book profit being the provision for retirement benefits – Held that:- Clause (f) in Section 43B of the Act. As per this clause (f), the expenses of leave encashment are allowable on an actual payment basis. No corresponding amendment, however, was brought about in Section 115JB of the Act, with the result that the provisions for expenses accrued and ascertained shall be allowed while computing book profits under MAT - Computation of retirement benefits, having been made on the basis of actuarial valuation, is based, undoubtedly, on a scientific basis - Ld. CIT (A) has correctly held that the provision for retirement benefit, as duly certified by the actuarial valuation, cannot be treated as a contingent or unascertained liability and it is a definite liability in present, which is to be discharged at a future date - Decided in favor of Assessee.
Computation of Transfer price on comparables - Apropos Phoenix Lamps was situated in an SEZ and it was enjoying certain benefits and was, thus, in more advantageous position as compared to the assessee – Held that:- Phoenix were to be retained as a comparable, certain adjustments were required to be made to its statistics – There are remaining three comparables, i.e., Indo-Japan Lightings, Fiem Industries Ltd. and Jagan Lamps Ltd. - The PLI’s of these comparables were 8.1%, 2.69% and 1.91% respectively, amounting to a total of 12.77%. - Average PLI of these comparables at 4.26%. The assessee’s margin, at 6.5%, it is seen, is higher than the above average PLI of 4.26% and the assessee’s margin, therefore, does not call for any adjustment on account of ALP concerning royalty payment on purchase of raw material - The CIT (A)’s order in this regard is found to be fully justified as against that of the TPO, who initially observed that an FAR convergence was mandatory and then, simply rejected the comparables on the basis of turnover, without checking out the FAR convergence, and thereafter, chose a single comparable which too (according to him) was not comparable to the assessee company, which observation has correctly been subverted by the Ld. CIT (A) - Since Phoenix Lamps, as found by the Ld. CIT (A), was operating in an SEZ, it, in order to be retained as a comparable, would have required adjustments to be made for the purpose, which, undeniably, was not done by the TPO. As such, Phoenix was rightly rejected as a comparable by the CIT (A). Even otherwise, undisputedly, the product manufactured by Phoenix is entirely different from that produced by the assessee. Whereas the assessee manufactures the complete lamp, i.e., the full lighting assembly or headlight/tail-light used in automobiles, Phoenix is making only the bulb contained therein - Phoenix nowhere qualifies as a ‘comparable’ to the assessee.
Adjustment in the Arm’s Length Price – There is agreement between the assessee and Stanley - Assessee was into a commercial relationship with Stanley and the expatriate engineers had been sent to ensure that the technology supplied was properly applied – Held that:- Mere obtaining of moulds, designs and drawings could not lead to disallowance of the royalty payment, since the technology for use thereof was what required the payment of royalty; that from the fact that the assessee’s turnover had increased over the years and that the assessee was establishing its own R&D Centre and thereby trying to absorb the technology the company received from its AE, went to show that it could not be said that there was no transfer of intangible, or that no technology had actually been received, or was required to be received.
Since Phoenix Lamps was an entity situated in an SEZ, enjoying certain benefits, being in an advantageous position as compared to the assessee, if it were to be retained as a comparable, certain adjustments were required to be made to it; that in Assessment Year 2006-07, the TPO had himself rejected Phoenix Lamps as a comparable; that so, Phoenix Lamps was being rejected as a comparable; that the remaining three comparables gave a PLI of 6.07% on the current year’s basis; and that the assessee’s PLI was at 6.50% and so, no adjustment was required to the arm’s length results - CIT (A) has correctly deleted the addition made – Decided against the Revenue.
Expenditure on account of foreign tour of the Director of the assessee company - Assessee’s Director, Shri D.K. Jain had incurred an expenditure of ₹ 1,11,497/- on his visit to the USA on 15.08.2003 and that of ₹ 1,47,937/- on his visit to Dubai on 01.10.2003 – Contended by Revenue that no import from the two countries, there was no business connection and the expenditure incurred was not commercially expedient- Held that:- As per Section 37(1) of the Act, it is not necessary that the incurrence of the expenditure should always result in earning of profits and it can be for any purpose, even incidental or ancillary to the business, for which the expenditure may have been incurred, in order to be allowable under the provision – Expenditure allowed – Decided against the Revenue.
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2013 (8) TMI 668
Rectification of mistake - Tribunal directed AO to recalculate interest u/s 234A, 234B and adjustment of seized amount with advance tax - A.O. failed to follow direction - Held that:- There is no mistake in the said order of the Tribunal, warranting any rectification, as the Tribunal made it amply clear and gave direction that seized amount has to be adjusted first towards existing liabilities and thereafter it should be adjusted towards the outstanding tax liability of the assessment years under consideration, and accordingly directed the Assessing Officer to recalculate the interest under S.234A and 234B of the Income-tax Act. It clearly means that if there is no exiting tax liability at the time of seizure of the cash, the seized amount should be adjusted towards payment of advance tax in terms of judgments cited by the assessee, noted above.
When once the Tribunal decides an issue in one way, the only course available to the Assessing Officer is to follow the order of the Tribunal in true spirits, and it is not permissible for the Assessing Officer to take a different view, or to sit in judgment over the order of the Tribunal by interpreting the same in the manner he wanted - while there is no warrant for rectification of the order of the Tribunal, in the absence of any specific mistake therein, and the grievance if any to the assessee, arises out of the consequential orders passed by the Assessing Officer - Decided against the Assessee.
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2013 (8) TMI 667
Re-opening of Assessment under section 147 of the Income Tax Act - Assessing Officer granted additional depreciation in the regular assessment and also agreed for deduction u/s. 80HHC on DEPB entitlement – Held that:- Thereafter, assessing Officer not came in to possession of any tangible fresh material to come to the conclusion that the deduction granted to the assessee in respect of additional depreciation and 80HHC deduction in respect of sale proceeds of DEPB entitlement is incorrect - There is no dispute that the assessee furnished full details in the original return of income and there is only change of opinion and the Assessing Officer did not demonstrate what material came to his knowledge for reopening the assessment which was not available at the time of completion of regular assessment – Relying upon the Apex Court judgment in the case of CIT vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA ], it has been held that reopening of assessment is not in accordance with law – Decided in favor of Assessee.
Availability of Additional depreciation u/s 32(1)(iia) – Held that:- Relying upon the judgment in the case of ACIT vs. SIL Investment Ltd. [2012 (6) TMI 83 - ITAT DELHI], eligibility for additional depreciation stands admitted
Profit element of DEPB can be reduced from the export profits for the purpose of working out the deduction u/s. 80HHC – Held that:- It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Explanation (baa) to section 80HHC read with the words used in clauses (iiid) and (iiie) of section 28; the assessee was entitled to a deduction under section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee – Appeal allowed – Decided in favor of Assessee.
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2013 (8) TMI 666
Valuation of closing stock - The Hon'ble ITAT set aside the order of Ld CIT(A) with the directions to the assessee to submit the required information so as to arrive at the correct valuation of stock. However, the assessee did not file the required information. Therefore, the Assessing Officer made fresh assessment on the basis of earlier addition which was earlier made by the Assessing Officer by adopting GP rate - ITAT has held that at best the valuation could have been made by the Assessing Officer at Rs.1,29,28,299/- and not more than it as the method of valuation adopted by the assessee was cost or market price whichever is lower - CIT(A) has done the same and has taken this valuation to arrive at the disallowance. The Ld CIT(A) while taking this figure has ignored the discount of Rs.15,42,378/- as claimed by assessee in original assessment proceedings – Held that:- Had the assessee furnished break up of age- wise stock, the disallowance would have been less than this figure or at the most equal to Rs.15,42,378/- as Ld CIT(A) has taken full cost price of stock as on 31.3.1996 which was also the observation of ITAT. – No infirmity in the order of CIT(A) – Decided against the Revenue.
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2013 (8) TMI 665
Bank branch classification as ‘Rural’ or ‘Urban’ – Classification as per RBI guidelines or Income Tax provisions - Overriding effect - Writing off bad debts under section 36(1)(viia) – Held that:- The Reserve Bank sanctions branches on different classifications, like rural, urban etc. In respect of the branches disputed in this case, permission of the Reserve Bank have been obtained by the assessee bank of the status that all branches are rural branches. Therefore, it is to be seen that according to banking norms, the disputed branches are rural branches. Now, this position has to be examined in the light of the Income Tax law. Income Tax law provides that a rural branch means a branch in a place where the population is less than 10,000 - Apropos the urban branches, writing off of bad debt, the assessee is eligible to write off of bad debt u/s 36(1)(viia)
A place includes a ward of a Gram Panchayat whose population is less than ten thousand and which may be a part of a panchayat whose population may be more than ten thousand as per 1990-91 census, provided the ward branch is notified as a rural branch by RBI. - the RBI Circular produced before us pertained to 3-6-2003. Ld. Counsel contends that similar panchayats have been named in licenses issued in earlier years also. - the issues are decided on principle but restored back to the file of assessing officer for verification.
Deduction of Bad-debts - Loan was given to Asia Pacific Investment Trust by consortium headed by SBI and assessee contributed a part of it – Held that:- The banking practice of advancing moneys to NBFC without taking any collateral security which was part of the loan policy and financing of the consortium becomes a business decision. Further, after the said trust went into liquidation and advance became irrecoverable, the RBI directed the assessee to write off the same as bad debt - A bad debt cannot be refused merely because of assessing officer's perception collateral securities should have been taken – Decided in favor of Assessee.
Revaluation of securities holding it to be a notional loss – Held that:- Securities held by the assessee bank in all these cases are the stock-in-trade of the business of the assessee banks and the notional loss suffered on account of the revaluation of the said securities at the close of the year is an allowable deduction in the computation of the profits of the appellant
Disallowance of expenses on modification in respect of Ahmedabad branch of the Bank, the assessee took premises on rent at Ahmedabad for a period of three years and made certain modifications to suit its requirement – Held that:- Structures were temporary in nature. The lease was only for a short period of three years and the structure was to be demolished thereafter. The temporary structure was created to increase the efficiency of the place and to suit to the assessee's banking needs - Expenditure incurred was qua the income generating apparatus of the assessee. In such eventuality the theory of enduring benefit also does not apply. Therefore, the expenditure is revenue in nature - Ground of the assessee is allowed – Decided in favor of Assessee.
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2013 (8) TMI 664
Revision u/s 263 - Erroneous or prejudicial of revenue - AO allowed the Exemption u/s. 10(34) - Insurance business - Dividend income - whether exemption u/s. 10 can be allowed to an Insurance company when income is computed u/s. 44 of the Act - Held that:- - Issue of deduction u/s. 10 of the Act was considered and allowed following the Hon’ble Bombay High Court Judgment in writ petition No. 2560 of 2011 dt. 01-12-2011 in the case of General Insurance Corporation of India, Mumbai. Versus The Deputy Commissioner of Income Tax, 1(3) Mumbai & Anr. [2011 (12) TMI 70 - BOMBAY HIGH COURT]. Relying upon the judgment in the case of CIT Vs. New India Assurance Co. Ltd [1991 (2) TMI 39 - BOMBAY High Court]; GIC of India vs. CIT(Supreme Court)[2006 (9) TMI 116 - SUPREME Court], it is held that assessee was entitled to exemption u/s. 10 including the dividend income i.e., exemption available u/s. 10(34) of the Act.
The order passed by the AO allowing exemption u/s. 10(34) of the Act cannot be said to be an order which is erroneous and prejudicial to the interest of the Revenue. - Decided in favor of assessee.
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2013 (8) TMI 663
Deduction u/s 10B - Benefit to 100% EOU - Use of old plant and machinery - conversion of existing unit - Whether the assessee is entitled to claim benefit available to 100% EOU u/s. 10B of the Act read with Circular No. 01/2005 dated 6.1.2005 issued by the CBDT - AO's contention that the old machinery transferred to the new unit exceeded 20% limit - Held that:- Revenue cannot have doubt regarding genuineness of the documents as the documents were issued by Government authorities. It was also made clear before the lower authorities that these are available at the time of survey - The assessee has taken the plant and machinery from M/s. Balaji Agro Oil Industries Pvt. Ltd. which was engaged in the business of castor oil extraction and the present assessee is engaged in chemical business. There is nothing on record to show that the assessee used the machinery used for oil extraction by Balaji Agro Oil Industries Ltd., for the purpose of manufacturing fine chemicals. Further though there was a survey action, the lower authorities not brought on record the bifurcation of the machinery which are already put in to use by Balaji Agro Oil Industries.
The Assessing Officer not made an allegation that the assessee has not furnished the details of old and new plant and machinery - existing DTA (domestic tariff area) unit can be converted into 100% EOU as per Government of India policy and this is enumerated in Circular No. 1/2005 dated 6.1.2005 issued by the CBDT. Being so, an assessee cannot be denied deduction u/s. 10B of the Act. Further, the assessee in this case applied for approval of Unit-II as 100% EOU to Development Commissioner on 18.12.2002 and the assessee was granted approval as 100% EOU by the Asst. Development Commissioner, Office of Development Commissioner, Visakhapatnam SEZ and issued green card under 100% EOU scheme on 25.4.2003.
Deduction u/s. 10B has to be allowed to the assessee from the date it got the approval as 100% EOU i.e., 25.4.2003 and the Assessing Officer is directed to allow deduction u/s. 10B from the date of approval as 100% EOU by the competent authority for the unexpired period of 10 consecutive assessment years commencing from the assessment year 2004-05 being regarded as second year of production in first year of commercial production being A.Y. 2003-04. This is so because, even if the new unit was commenced in the FY 2002-03 relevant to A.Y. 2003-04, the claim of deduction u/s. 10B cannot be denied in the FY 2003-04 relevant to A.Y. 2004-05 as this year would be the second year of claim of deduction u/s. 10B of the IT Act - Decided against Revenue.
Jurisdiction of CIT - CIT set aside claim of 100% depreciation of capital equipment - Held that:- Admittedly, the CIT(A) has no power to remit the issue back to the file of the Assessing Officer with effect from 1.6.2001 as the words "or he may set aside" have been removed from section 251(1)(a) of the Act. Considering this amendment, we are inclined to hold that the CIT(A) should not have sent the issue back to the file of the Assessing Officer and he should have decided the issue by himself. Accordingly, we direct the CIT(A) to decide the issue in accordance with law - Decided in favour of Revenue.
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2013 (8) TMI 662
Undisclosed income u/s 68 - Share application maoney - Onus of proving transaction - Held that:- Assessee's company is not carrying out any business activity. This company has shown investments with others in Schedule-V but details of investment are not available. Therefore, taking into consideration, facts and circumstances and failure of assessee to comply with requirement of Assessing Officer in producing Principal Officers/Directors of share applicant companies, it failed to prove identity as well as genuineness of transaction. They have shown very nominal income. It gives an inference that such returns were filed for creating evidence to be used in future - Following decision of A. Govindarajulu Mudaliar v CIT [1958 (9) TMI 3 - SUPREME Court], CIT vs. N.R. Portfolio (P.) Ltd. [2012 (12) TMI 762 - DELHI HIGH COURT] and CIT vs. M/s. Neelkanth Ispat Udhyog Pvt. Ltd [2012 (8) TMI 198 - DELHI HIGH COURT] - Decided against assessee.
Disallowance u/s 37 - Expenditure on employee's education (son of Directors) - Held that:- there is no policy formulated by assessee company vide which it had invited applications from all employees for sponsoring their higher education - Had Employee was not son of Directors, his education expenses would have not been met by company. assessee claimed that higher education of Employee would give benefit of more than R.50,000/- per month to assessee company but who has checked credentials of Employee and what salary he would claim in open market. Without there being any material on record, how assessee can say that decision to sponsor education of Employee was not influenced by parental love and affection of Directors - Following decision of CIT vs. R.K.K.R. Steels Pvt. Ltd. [2001 (11) TMI 20 - MADRAS High Court], M. Subramanium Brothers vs. CIT [2000 (12) TMI 67 - MADRAS High Court] and CIT vs. Hindustan Hosiery Ind. [1993 (9) TMI 42 - BOMBAY High Court] - Decided against assessee.
Disallowance u/s 14- Computation of disallowance on basis of Rule 8D - Held that:- It is only if Assessing Officer is not satisfied with correctness of claim of assessee, in both cases, that Assessing Officer gets jurisdiction to determine amount of expenditure incurred in relation to such income which does not form part of total income under said Act in accordance with prescribed method. prescribed method being method stipulated in Rule 8D of said Rules. While rejecting claim of assessee with regard to expenditure or no expenditure, as case may be, in relation to exempt income, Assessing Officer would have to indicate cogent reasons for same - Matter remitted back - Following decision of Maxopp Investment Ltd. vs. CIT [2011 (11) TMI 267 - Delhi High Court] - Decided in favour of assessee.
Speculative transaction - Purchase and sales of shares - Section 73 - Held that:- The Explanation exclude certain companies whose gross total income consist mainly of income which is chargeable under heads ‘Interests on securities’, ‘Income from house property’, ‘Capital gains’ and ‘Income from other sources’ or whose principal business is of banking or granting of loans. activities of assessee do not fall in ambit of nature of business provided in Explanation. main business of assessee includes sales of shares. It has shown losses on such activities. Thus, primfacie, Explanation appended to section 73 is clearly applicable on facts of assessee’s case. Under Act, every year is an independent year. If assessee has shown losses in share trading activities and its case falls within mischief of deeming fiction provided in section 73, then, on basis of principle of consistency, assessee cannot plead that requirement of law should not be followed.
Income from other sources u/s 56 - Cash credit u/s 68 - Held that:- unexplained cash credits have to be brought to tax under section 68 and not under section 56. Both aforesaid sections operate in fields reserved for them. It cannot therefore be said that what is assessable as income u/s 68 must be assessed as income from other sources u/s 56.
Set off of business loss from income u/s 68 - Held that:- Section 71 permits set off of loss from one head against income from another head of income as enumerated in section 14 - income assessable u/s 68 cannot be assessed under any particular head of income including income from other sources u/s 56 - Therefore, this addition cannot be set off against business losses computed in earlier years. However, as far as expenses disallowed on account of education expenses and on account of establishment expenses are concerned, they are to be set off.
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