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Validity of notice u/s 148 – Re-opening of assessment u/s 147 - Escaped assessment - Change of opinion - Jurisdictional requirement to issue notice u/s 148 - Sufficiency of reasons recorded - Claim deduction u/s 54EC against earnest money received for sale of land - Capital Gain - Investment made in the NABARD bonds - Circular No.359, dated May 10, 1983 - Assessee sold property at Pune to a builder - Received a sum as earnest money before the sale/execution of the conveyance – Said sum invested by the petitioner in the NABARD bonds and the National Housing bonds prior to sale/execution of the conveyance and claim deduction u/s 54EC – Held that:- As concluding from the fact of the case that the assessee was asked by a letter dated August 5, 2008, by the revenue to submit details of investment made u/s 54EC. Fresh application of mind by the Officer on the same set of facts amounts to a change of opinion and does not warrant reopening. The notice u/s 148, is without jurisdiction and set aside the same. In favour of assessee
Validity of notice u/s 148 – Re-opening of assessment u/s 147 - Escaped assessment - Change of opinion - Jurisdictional requirement to issue notice u/s 148 - Sufficiency of reasons recorded - Claim deduction u/s 54EC against earnest money received for sale of land - Capital Gain - Investment made in the NABARD bonds - Circular No.359, dated May 10, 1983 - Assessee sold property at Pune to a builder - Received a sum as earnest money before the sale/execution of the conveyance – Said sum invested by the petitioner in the NABARD bonds and the National Housing bonds prior to sale/execution of the conveyance and claim deduction u/s 54EC – Held that:- As concluding from the fact of the case that the assessee was asked by a letter dated August 5, 2008, by the revenue to submit details of investment made u/s 54EC. Fresh application of mind by the Officer on the same set of facts amounts to a change of opinion and does not warrant reopening. The notice u/s 148, is without jurisdiction and set aside the same. In favour of assessee
Rectification u/s 154 - whether AO was correct to take the recourse of rectification u/s 154 when the assessee claimed the issue to be highly debatable - mistake to allow the carried forward loss of a year prior to assessment year 2001-02 as loss pertained to A.Y. 1997-98 - disallowance was made as per clear provisions of section 10A (6)(ii) - assessee contested that the assessee is very well entitled to relief of brought forward loss and depreciation for the assessment year 1997-98 as accepted in the assessment order - Held that:- Section 10A was incorporated with effect from 01.04.1981 providing tax holiday of five consecutive year beginning with the assessment year relevant to the previous year in which the concern undertaking begins manufacturing or production of the article, things or computer software with the amendment incorporated w.e.f. 01.04.2001 where the period of tax holiday of five assessment year stands extended to ten consecutive assessment years with certain conditions that while computing the income after the tax holiday period is over i.e. sub-section 6 comes into play as per which, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of relevant assessment year, no loss under section 72 or 74 relating to business of the undertaking is to be allowed to be carried forward or set off if it pertains to any of the relevant assessment year before 01.04.2001.
Thus interpreting the above definition and opening lines of sub-section 6, it emerges that sub-section (6) would apply in the previous year relevant to the assessment year immediately succeeding last of the relevant assessment year i.e. the previous year relevant to the first assessment year succeeding tax holiday period. To put in other words, since the assessee's exemption period is continuing as it chose to avail the benefit of tax holiday from assessment year 1999-2000, sub-section 6(ii) does not apply in this case. The aforesaid provisions that they apply during the assessment years after the end of the holiday period & as admittedly the present AY relates to the holiday period and therefore the above provisions are not applicable - AO as well as CIT(A) have erred in subjecting the assessee's claim of brought forward loss and depreciation to sub-section 6(ii) by invoking rectification under section 154 - in favour of assessee.
Rectification u/s 154 - whether AO was correct to take the recourse of rectification u/s 154 when the assessee claimed the issue to be highly debatable - mistake to allow the carried forward loss of a year prior to assessment year 2001-02 as loss pertained to A.Y. 1997-98 - disallowance was made as per clear provisions of section 10A (6)(ii) - assessee contested that the assessee is very well entitled to relief of brought forward loss and depreciation for the assessment year 1997-98 as accepted in the assessment order - Held that:- Section 10A was incorporated with effect from 01.04.1981 providing tax holiday of five consecutive year beginning with the assessment year relevant to the previous year in which the concern undertaking begins manufacturing or production of the article, things or computer software with the amendment incorporated w.e.f. 01.04.2001 where the period of tax holiday of five assessment year stands extended to ten consecutive assessment years with certain conditions that while computing the income after the tax holiday period is over i.e. sub-section 6 comes into play as per which, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of relevant assessment year, no loss under section 72 or 74 relating to business of the undertaking is to be allowed to be carried forward or set off if it pertains to any of the relevant assessment year before 01.04.2001.
Thus interpreting the above definition and opening lines of sub-section 6, it emerges that sub-section (6) would apply in the previous year relevant to the assessment year immediately succeeding last of the relevant assessment year i.e. the previous year relevant to the first assessment year succeeding tax holiday period. To put in other words, since the assessee's exemption period is continuing as it chose to avail the benefit of tax holiday from assessment year 1999-2000, sub-section 6(ii) does not apply in this case. The aforesaid provisions that they apply during the assessment years after the end of the holiday period & as admittedly the present AY relates to the holiday period and therefore the above provisions are not applicable - AO as well as CIT(A) have erred in subjecting the assessee's claim of brought forward loss and depreciation to sub-section 6(ii) by invoking rectification under section 154 - in favour of assessee.
Reopening of assessment - assessee contested against jurisdiction of AO - Held that:- The expression "Assessing Officer" used in the section 148 means 'the Assessing Officer vested with the jurisdiction over the assessee as stipulated in the definition u/s 2(7A) by virtue of the directions / orders passed u/s 120, sub-section (1) & (2)'. Thus, the notice u/s 148 is required to be issued by the AO who is vested with the jurisdiction over the assessee on the basis of the criteria of territorial area, a person or classes of persons, income or classes of incomes and cases or classes of cases as enumerated in sub-section 3 of section 120 of Income Tax Act.
It is not the case of the Revenue that the Assessing Officer who has issued the notice u/s 148 was vested with the jurisdiction by virtue of any direction or orders issued under sub-section (1) or (2) of section 120 of the Income Tax Act. Thus, there is no dispute about the jurisdiction vested with the Assessing Officer - ITO, Ward-9(2)-1 over the assessee when the notice u/s 148 was issued by the ITO, Ward-10(3)-4. When it is apparent that the notice u/s 148 was issued by the AO who was not vested with the jurisdiction over the assessee then, the same is patently illegal and void liable to be set aside - in favour of assessee.
Reopening of assessment - assessee contested against jurisdiction of AO - Held that:- The expression "Assessing Officer" used in the section 148 means 'the Assessing Officer vested with the jurisdiction over the assessee as stipulated in the definition u/s 2(7A) by virtue of the directions / orders passed u/s 120, sub-section (1) & (2)'. Thus, the notice u/s 148 is required to be issued by the AO who is vested with the jurisdiction over the assessee on the basis of the criteria of territorial area, a person or classes of persons, income or classes of incomes and cases or classes of cases as enumerated in sub-section 3 of section 120 of Income Tax Act.
It is not the case of the Revenue that the Assessing Officer who has issued the notice u/s 148 was vested with the jurisdiction by virtue of any direction or orders issued under sub-section (1) or (2) of section 120 of the Income Tax Act. Thus, there is no dispute about the jurisdiction vested with the Assessing Officer - ITO, Ward-9(2)-1 over the assessee when the notice u/s 148 was issued by the ITO, Ward-10(3)-4. When it is apparent that the notice u/s 148 was issued by the AO who was not vested with the jurisdiction over the assessee then, the same is patently illegal and void liable to be set aside - in favour of assessee.
Reopening of assessment - deduction u/s. 80P without first deducting its interest expenses in contravention to section 80AB - Held that:- In the return filed by the petitioner in addition to claiming deduction of gross income of interest and dividend u/s 80P(2)(d) the petitioner further provided various details like in the Annexure-VII to the return, such deduction u/s 80P(2)(d) was bifurcated into dividend income of Rs. 53,71,450 and interest income of Rs. 1,27,56,156. Further, the petitioner had also supplied the full details of the statement showing dividend and interest income received from cooperative societies along with dividend counters in the original. Additionally, along with Tax Audit Report u/s 44AB the petitioner had given details of the dividend income, interest income as well as interest expenses for the said year, which included interest expenditure on fixed deposit, interest expenditure on the Society Savings, Employee Savings, etc.
Thus, it can be seen that full details with respect to claim for deduction u/s 80P(2)(d) was very much before AO in the original return accompanied by the audited accounts of the petitioner society. There was, thus, no failure to disclose fully and truly all the material facts necessary for assessment, thus no reason to reopen the assessment - in favour of assessee.
Reopening of assessment - deduction u/s. 80P without first deducting its interest expenses in contravention to section 80AB - Held that:- In the return filed by the petitioner in addition to claiming deduction of gross income of interest and dividend u/s 80P(2)(d) the petitioner further provided various details like in the Annexure-VII to the return, such deduction u/s 80P(2)(d) was bifurcated into dividend income of Rs. 53,71,450 and interest income of Rs. 1,27,56,156. Further, the petitioner had also supplied the full details of the statement showing dividend and interest income received from cooperative societies along with dividend counters in the original. Additionally, along with Tax Audit Report u/s 44AB the petitioner had given details of the dividend income, interest income as well as interest expenses for the said year, which included interest expenditure on fixed deposit, interest expenditure on the Society Savings, Employee Savings, etc.
Thus, it can be seen that full details with respect to claim for deduction u/s 80P(2)(d) was very much before AO in the original return accompanied by the audited accounts of the petitioner society. There was, thus, no failure to disclose fully and truly all the material facts necessary for assessment, thus no reason to reopen the assessment - in favour of assessee.
Addition being the loan written off as bad debt - ITAT deleted the addition relying on T.R.F. LTD. Versus CIT [2010 (2) TMI 211 - SUPREME COURT] - revenue contested as he debt has not become bad and the assessee was not in the business of money lending - Held that:- The Tribunal committed no error in deleting the addition as decided in T.R.F. LTD. Versus CIT (supra) it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. The objection of not in the business of money lending was overrulled by relying on CIT v. City Motor Service Ltd. [1965 (12) TMI 126 - MADRAS HIGH COURT ]
Additional condition - the assessee had to fulfill to claim bad debt u/s 36(1)(vii) was to satisfy clause (i) of sub-section (2) of section 36 - Held that:- Clause (i) of sub-section (2) of section 36 itself provides that the claim for deduction as bad debt would not be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year. It is not the case of the revenue that such condition was not satisfied - no question of law arises.
Addition being the loan written off as bad debt - ITAT deleted the addition relying on T.R.F. LTD. Versus CIT [2010 (2) TMI 211 - SUPREME COURT] - revenue contested as he debt has not become bad and the assessee was not in the business of money lending - Held that:- The Tribunal committed no error in deleting the addition as decided in T.R.F. LTD. Versus CIT (supra) it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. The objection of not in the business of money lending was overrulled by relying on CIT v. City Motor Service Ltd. [1965 (12) TMI 126 - MADRAS HIGH COURT ]
Additional condition - the assessee had to fulfill to claim bad debt u/s 36(1)(vii) was to satisfy clause (i) of sub-section (2) of section 36 - Held that:- Clause (i) of sub-section (2) of section 36 itself provides that the claim for deduction as bad debt would not be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year. It is not the case of the revenue that such condition was not satisfied - no question of law arises.
Exemption under section 54F - denial on non investing any amount of the sale proceeds in the capital gains accounts scheme before the due date u/s 139(1)- Held that:- The due date for filing the return of income under section 139(1) was on or before 31/7/2007. However, under section 139(4), the assessee was entitled to file the return up to 31/3/2009. The assessee had utilized the sale proceeds for construction of house, which was completed before 26/3/2009 (which is not in dispute). The major portion amounting to Rs.49,17,000/- out of the total investment of Rs.55,43,750/- was invested much before 6/11/2008, the date of filing the return. Since the entire amount was invested before the time allowed under section 139, though not under the time allowed under section 139(1), in view of the case of Fathima Bai v ITO [2008 (10) TMI 563 - KARNATAKA HIGH COURT] and the Tribunal order in the case of Nipun Mehrotra v ACIT [2007 (3) TMI 283 - ITAT BANGALORE-B] wherein held that it is sufficient for the assessee to utilize the capital gains for the purchase of a flat before the extended due date under section 139(4) - thus the assessee is entitled to deduction under section 54F - in favour of assessee.
Exemption under section 54F - denial on non investing any amount of the sale proceeds in the capital gains accounts scheme before the due date u/s 139(1)- Held that:- The due date for filing the return of income under section 139(1) was on or before 31/7/2007. However, under section 139(4), the assessee was entitled to file the return up to 31/3/2009. The assessee had utilized the sale proceeds for construction of house, which was completed before 26/3/2009 (which is not in dispute). The major portion amounting to Rs.49,17,000/- out of the total investment of Rs.55,43,750/- was invested much before 6/11/2008, the date of filing the return. Since the entire amount was invested before the time allowed under section 139, though not under the time allowed under section 139(1), in view of the case of Fathima Bai v ITO [2008 (10) TMI 563 - KARNATAKA HIGH COURT] and the Tribunal order in the case of Nipun Mehrotra v ACIT [2007 (3) TMI 283 - ITAT BANGALORE-B] wherein held that it is sufficient for the assessee to utilize the capital gains for the purchase of a flat before the extended due date under section 139(4) - thus the assessee is entitled to deduction under section 54F - in favour of assessee.
Additions on loan converted into shares - CIT(A) deleted the addition made on account of waived loan u/s 28(iv) - Assessee Company was joint venture between Fortune Oceanic Products Limited & M/s Ookean Ltd., a Govt. owned trading organization of Estonia (Russia) - Held that:- The loan was taken for acquiring the capital asset in the form of trawlers. This loan was taken from Ookean Ltd. who is also a joint venture partner in the company. This loan was carrying on interest @ 6%. The interest accrued up to 31.03.1995 was taken into account. Thereafter, this amount remained unchanged. Since assessee incurred heavy losses the loan could not be repaid. The capital asset in the form of trawler was registered in assessee’s name and reflected in the books of account of the assessee and the same was used for business purposes. This amount was converted into the shares and share premium & was not taken to the profit & loss account. Therefore, this amount has not changed its character from capital to revenue. The liability was not ceased. The assessee has not derived any benefit out of this conversion of one liability to another liability. The ratio laid down in the case of T.V. Sundaram Iengar and Sons [1996 (9) TMI 1 - SUPREME COURT] is not applicable to the facts of the assessee’s case as decision of the Higher Forum cannot be made applicable without discussing the factual position involved - AO has invoked section 28(iv) which covers the benefits in perquisites received in kind and it has no applicability to any transaction which involves money. The loan was taken to invest in the capital asset. There was no waiver of the loan, therefore, conversion of the loan into share capital shall not constitute a trading receipt. As held in the case of CIT vs. Jindal Equipments Leasing and Consultancy Services Ltd. [2009 (12) TMI 364 - DELHI HIGH COURT] to attract the provisions of section 28(iv), the sum in question must be a benefit or perquisite arising in the course of business is of nature, other than cash or money. Keeping these facts in view, no fault in the order of CIT (A).
Addition on account of share application money u/s 28 (iv) - CIT(A) deleted the addition - Held that:- The amount of Rs.5,43,50,000/- was pending for allocation of shares to Ookean Limited since 1995. During the year under consideration, the company has allotted shares. The outstanding share application money has not been carried out to the profit & loss account, thus in such a situation, the provisions of section 28(iv) cannot be made applicable - no fault in the order of CIT (A).
Addition on account of cessation of liabilities u/s 41 - CIT(A) deleted the addition - Held that:- The amount of outstanding liability of Rs.67,75,839/- has been converted into the share capital plus premium. The creditors have confirmed the allocation of the shares in their favour. Conversion of the outstanding liability into shares cannot be termed as cessation of liability. Thus no fault in the order of the CIT (A).
Applicability of ratio of decision of Hon'ble Supreme Court in the case of Mcdowell & Company [1985 (4) TMI 64 - SUPREME COURT] - revenue appeal that CIT(A) erred in allowing the relief on these three counts above and assessee company having accumulated losses exceeding Rs.20 crores allotted shares of face value of Rs.10 at a hefty premium of Rs.146.51 - Held that:- Reliance placed by the revenue on the case of Mcdowell & Co. cited supra has been considered in the case of Azadi Bachao Andolan vs. UOI [2003 (10) TMI 5 - SUPREME COURT] wherein held that if the court finds that notwithstanding a series of legal steps taken by an assessee, the intended legal result has not been achieved, the court might be justified in overlooking the intermediate steps, but it would not be permissible for the court to treat the intermediate legal steps as non est based upon some hypothetical assessment of the real motive of the assessee. Hon’ble Supreme Court also held that the Courts must dealt with what is tangible in an objective manner and cannot afford to chase a will of the wisp - order of CIT (A) confirmed - appeal of revenue dismissed.
Additions on loan converted into shares - CIT(A) deleted the addition made on account of waived loan u/s 28(iv) - Assessee Company was joint venture between Fortune Oceanic Products Limited & M/s Ookean Ltd., a Govt. owned trading organization of Estonia (Russia) - Held that:- The loan was taken for acquiring the capital asset in the form of trawlers. This loan was taken from Ookean Ltd. who is also a joint venture partner in the company. This loan was carrying on interest @ 6%. The interest accrued up to 31.03.1995 was taken into account. Thereafter, this amount remained unchanged. Since assessee incurred heavy losses the loan could not be repaid. The capital asset in the form of trawler was registered in assessee’s name and reflected in the books of account of the assessee and the same was used for business purposes. This amount was converted into the shares and share premium & was not taken to the profit & loss account. Therefore, this amount has not changed its character from capital to revenue. The liability was not ceased. The assessee has not derived any benefit out of this conversion of one liability to another liability. The ratio laid down in the case of T.V. Sundaram Iengar and Sons [1996 (9) TMI 1 - SUPREME COURT] is not applicable to the facts of the assessee’s case as decision of the Higher Forum cannot be made applicable without discussing the factual position involved - AO has invoked section 28(iv) which covers the benefits in perquisites received in kind and it has no applicability to any transaction which involves money. The loan was taken to invest in the capital asset. There was no waiver of the loan, therefore, conversion of the loan into share capital shall not constitute a trading receipt. As held in the case of CIT vs. Jindal Equipments Leasing and Consultancy Services Ltd. [2009 (12) TMI 364 - DELHI HIGH COURT] to attract the provisions of section 28(iv), the sum in question must be a benefit or perquisite arising in the course of business is of nature, other than cash or money. Keeping these facts in view, no fault in the order of CIT (A).
Addition on account of share application money u/s 28 (iv) - CIT(A) deleted the addition - Held that:- The amount of Rs.5,43,50,000/- was pending for allocation of shares to Ookean Limited since 1995. During the year under consideration, the company has allotted shares. The outstanding share application money has not been carried out to the profit & loss account, thus in such a situation, the provisions of section 28(iv) cannot be made applicable - no fault in the order of CIT (A).
Addition on account of cessation of liabilities u/s 41 - CIT(A) deleted the addition - Held that:- The amount of outstanding liability of Rs.67,75,839/- has been converted into the share capital plus premium. The creditors have confirmed the allocation of the shares in their favour. Conversion of the outstanding liability into shares cannot be termed as cessation of liability. Thus no fault in the order of the CIT (A).
Applicability of ratio of decision of Hon'ble Supreme Court in the case of Mcdowell & Company [1985 (4) TMI 64 - SUPREME COURT] - revenue appeal that CIT(A) erred in allowing the relief on these three counts above and assessee company having accumulated losses exceeding Rs.20 crores allotted shares of face value of Rs.10 at a hefty premium of Rs.146.51 - Held that:- Reliance placed by the revenue on the case of Mcdowell & Co. cited supra has been considered in the case of Azadi Bachao Andolan vs. UOI [2003 (10) TMI 5 - SUPREME COURT] wherein held that if the court finds that notwithstanding a series of legal steps taken by an assessee, the intended legal result has not been achieved, the court might be justified in overlooking the intermediate steps, but it would not be permissible for the court to treat the intermediate legal steps as non est based upon some hypothetical assessment of the real motive of the assessee. Hon’ble Supreme Court also held that the Courts must dealt with what is tangible in an objective manner and cannot afford to chase a will of the wisp - order of CIT (A) confirmed - appeal of revenue dismissed.
Exemption under Section 10B - Receipt on account of sale of vegetables, fruits, grass etc. - Held that:- It is seen that these items have no connection with the industrial undertaking and are not derived from “profits and gains” of the undertaking, therefore, the finding given by the CIT(A) that it is to be excluded from the computation of income under Section 10B is confirmed - against the assessee.
Stores Miscellaneous Sale in Century Denim Unit - Held that:- This issue has been decided by the CIT(A) that the sale of miscellaneous stores cannot be held to be derived from export oriented undertaking and in absence of any detail to controvert the same, the finding of the CIT(A) is accordingly affirmed. The assessee could not explain as to how the sale of miscellaneous store items is derived from the activities carried on by the EOU undertaking. Thus, this issue is decided against the assessee.
Receipts on account of cotton waste expenses - Held that:- Assessee is engaged in manufacturing of Denim cloth in the said EOU, which results in cotton waste also - the cost of packing material for such packing of cotton waste is debited to the waste expenses and the amount received from the customers is credited to this account and net excess is shown in the profit and loss account. This sale is directly related to the activities carried out by the assessee and, is, therefore, derived from the undertaking of EOU. Thus, this income is directed to be included in the computation for exemption under Section 10B being derived from the said unit - issue allowed in favour of the assessee.
Bonus on spare purchase from W.Schlafhorst A.G. & Co., Germany From 1.11.99 to 30.10.00 - Held that:- From the perusal of the order of the AO as well as CIT(A), it is not clear whether the purchase for stores was on revenue account or not. If it is on the revenue account, then it is derived from the profit and gain from the EOU. Therefore this issue is restored back to the file of the AO to consider it afresh after giving due opportunity to the assessee - in favour of assessee for statistical purposes.
Project expenses - revenue v/s capital - Held that:- This issue has been decided in favour of the assessee in assessee's own case for the assessment year 2001-02 & also travelled upto the stage of Hon'ble High Court wherein the departmental appeal on this question has been dismissed stating that the said expenditure was incurred by the assessee related to the same line of business carried on by the assessee and therefore allowable as revenue expenditure. The expenditure incurred related to salary, conveyance, legal and professional charges, printing and stationery, which are revenue in nature - in favour of assessee.
Disallowance of written off on leasehold land in various division - Held that:- The issue be set aside to the file of the AO following the preceding yea 2000-01 orders for re-examination of the issue in the light decision in the case of Mukund Ltd.(2007 (2) TMI 358 - ITAT MUMBAI) for finding the nature of the premium part - in favour of assessee for statistical purposes.
Disallowance of provision for doubtful debts and advances while computing the book profits under Section 115JB - Held that:- This issue now stands covered against the assessee by insertion of clause 1 in Explanation 1 to Section 115JB, which has been inserted by Finance (No.2) Act, 2009 w.r.e.f. 1-4-2001. Thus, in view of the amendment in the said provision the ground taken by the assessee cannot be allowed.
Disallowance of interest u/s 14A r.w.s. 36(1)(iii) on the notional basis - assessee contested against non establishing of direct nexus between tax free income and interest expenses - Held that:- The issue is to be restored to the AO to be decided on the basis of the decision of Godrej & Boyce Mfg. Co. Ltd. vs DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT].
Disallowance of deduction u/s 80HHC - the income as per normal computation is Nil and accordingly no deduction is allowed u/s 80HHC while computing book profit u/s 115JB - Held that:- This issue now stands covered in the case of DCIT Vs. Syncome Formulations (I) Ltd., [2007 (3) TMI 288 - ITAT BOMBAY-H] wherein it has been held that deduction under Section 80HHC in the case of MAT assessment, is to be worked out on the basis of adjusted book profit and not on the basis of profit computed under the regular provisions of law applicable to the computation of 'profit and gains of business or profession'. This judgment of the Special Bench has been affirmed by the Hon'ble Supreme Court in the case of Al- Kabeer Exports Limited Vs. CIT [2012 (2) TMI 119 - SUPREME COURT OF INDIA].
Disallowance u/s Sec.37(1) - damages or penalty or interest - Held that:- Similar issue was there in the earlier year also for the assessment year 2001-02, wherein the Tribunal set aside this issue to the file of the Assessing Officer to re-examine the exact nature of payments whether these are compensatory or penal in nature - as decided in Prakash Cotton Mills Pvt. Limited Versus Commissioner of Income-Tax [1993 (4) TMI 3 - SUPREME COURT] and Standard Batteries Ltd. vs. CIT [1994 (4) TMI 2 - SUPREME COURT] whatever is paid to the Govt. authorities, though known as penalty, but if the same is of compensatory nature, then the same, strictly speaking, is not penalty and has to be allowed as business expenditure - remit the matter back to the file of AO for re-examination.
Exemption under Section 10B - Receipt on account of sale of vegetables, fruits, grass etc. - Held that:- It is seen that these items have no connection with the industrial undertaking and are not derived from “profits and gains” of the undertaking, therefore, the finding given by the CIT(A) that it is to be excluded from the computation of income under Section 10B is confirmed - against the assessee.
Stores Miscellaneous Sale in Century Denim Unit - Held that:- This issue has been decided by the CIT(A) that the sale of miscellaneous stores cannot be held to be derived from export oriented undertaking and in absence of any detail to controvert the same, the finding of the CIT(A) is accordingly affirmed. The assessee could not explain as to how the sale of miscellaneous store items is derived from the activities carried on by the EOU undertaking. Thus, this issue is decided against the assessee.
Receipts on account of cotton waste expenses - Held that:- Assessee is engaged in manufacturing of Denim cloth in the said EOU, which results in cotton waste also - the cost of packing material for such packing of cotton waste is debited to the waste expenses and the amount received from the customers is credited to this account and net excess is shown in the profit and loss account. This sale is directly related to the activities carried out by the assessee and, is, therefore, derived from the undertaking of EOU. Thus, this income is directed to be included in the computation for exemption under Section 10B being derived from the said unit - issue allowed in favour of the assessee.
Bonus on spare purchase from W.Schlafhorst A.G. & Co., Germany From 1.11.99 to 30.10.00 - Held that:- From the perusal of the order of the AO as well as CIT(A), it is not clear whether the purchase for stores was on revenue account or not. If it is on the revenue account, then it is derived from the profit and gain from the EOU. Therefore this issue is restored back to the file of the AO to consider it afresh after giving due opportunity to the assessee - in favour of assessee for statistical purposes.
Project expenses - revenue v/s capital - Held that:- This issue has been decided in favour of the assessee in assessee's own case for the assessment year 2001-02 & also travelled upto the stage of Hon'ble High Court wherein the departmental appeal on this question has been dismissed stating that the said expenditure was incurred by the assessee related to the same line of business carried on by the assessee and therefore allowable as revenue expenditure. The expenditure incurred related to salary, conveyance, legal and professional charges, printing and stationery, which are revenue in nature - in favour of assessee.
Disallowance of written off on leasehold land in various division - Held that:- The issue be set aside to the file of the AO following the preceding yea 2000-01 orders for re-examination of the issue in the light decision in the case of Mukund Ltd.(2007 (2) TMI 358 - ITAT MUMBAI) for finding the nature of the premium part - in favour of assessee for statistical purposes.
Disallowance of provision for doubtful debts and advances while computing the book profits under Section 115JB - Held that:- This issue now stands covered against the assessee by insertion of clause 1 in Explanation 1 to Section 115JB, which has been inserted by Finance (No.2) Act, 2009 w.r.e.f. 1-4-2001. Thus, in view of the amendment in the said provision the ground taken by the assessee cannot be allowed.
Disallowance of interest u/s 14A r.w.s. 36(1)(iii) on the notional basis - assessee contested against non establishing of direct nexus between tax free income and interest expenses - Held that:- The issue is to be restored to the AO to be decided on the basis of the decision of Godrej & Boyce Mfg. Co. Ltd. vs DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT].
Disallowance of deduction u/s 80HHC - the income as per normal computation is Nil and accordingly no deduction is allowed u/s 80HHC while computing book profit u/s 115JB - Held that:- This issue now stands covered in the case of DCIT Vs. Syncome Formulations (I) Ltd., [2007 (3) TMI 288 - ITAT BOMBAY-H] wherein it has been held that deduction under Section 80HHC in the case of MAT assessment, is to be worked out on the basis of adjusted book profit and not on the basis of profit computed under the regular provisions of law applicable to the computation of 'profit and gains of business or profession'. This judgment of the Special Bench has been affirmed by the Hon'ble Supreme Court in the case of Al- Kabeer Exports Limited Vs. CIT [2012 (2) TMI 119 - SUPREME COURT OF INDIA].
Disallowance u/s Sec.37(1) - damages or penalty or interest - Held that:- Similar issue was there in the earlier year also for the assessment year 2001-02, wherein the Tribunal set aside this issue to the file of the Assessing Officer to re-examine the exact nature of payments whether these are compensatory or penal in nature - as decided in Prakash Cotton Mills Pvt. Limited Versus Commissioner of Income-Tax [1993 (4) TMI 3 - SUPREME COURT] and Standard Batteries Ltd. vs. CIT [1994 (4) TMI 2 - SUPREME COURT] whatever is paid to the Govt. authorities, though known as penalty, but if the same is of compensatory nature, then the same, strictly speaking, is not penalty and has to be allowed as business expenditure - remit the matter back to the file of AO for re-examination.
Reopening of assessment - entire sale consideration on sale of DEPB scrip should be discarded for deduction u/s 80HH and not merely the profit margin thereof - Held that:- There is not an iota of allegation that the assessee failing to disclose fully and truly any of material fact either in the reasons recorded or anywhere else. In fact, in the reasons recorded, the AO observes that, thus, a mistake has been committed by the AO, but a mistake on the part of the AO surely would not be a ground to reopen an assessment previously framed after scrutiny beyond a period of four years.
Besides such observation which is damaging to the revenue also, there are other sufficient indications in the reasons recorded that in the original assessment the entire issue was examined threadbare by the AO. To the extent he was convinced that the claim was exaggerated, disallowances were made. Thus perusing minutely the portion of the reasons recorded it becomes clear that the AO in the original assessment had examined the claim of the assessee pertaining to deduction u/s 80HHC at considerable length. Various aspects were gone into and disallowances to the extent found required were made. Quite apart from there being nothing on the record to suggest that the AO formed a belief that the income chargeable to tax has escaped assessment due to the reason of the assessee failing to disclose truly and fully all material facts, the present case would be one of mere change of opinion. On all counts, therefore, the impugned notice must fail. Rule made absolute - decided in favour of assessee.
Reopening of assessment - entire sale consideration on sale of DEPB scrip should be discarded for deduction u/s 80HH and not merely the profit margin thereof - Held that:- There is not an iota of allegation that the assessee failing to disclose fully and truly any of material fact either in the reasons recorded or anywhere else. In fact, in the reasons recorded, the AO observes that, thus, a mistake has been committed by the AO, but a mistake on the part of the AO surely would not be a ground to reopen an assessment previously framed after scrutiny beyond a period of four years.
Besides such observation which is damaging to the revenue also, there are other sufficient indications in the reasons recorded that in the original assessment the entire issue was examined threadbare by the AO. To the extent he was convinced that the claim was exaggerated, disallowances were made. Thus perusing minutely the portion of the reasons recorded it becomes clear that the AO in the original assessment had examined the claim of the assessee pertaining to deduction u/s 80HHC at considerable length. Various aspects were gone into and disallowances to the extent found required were made. Quite apart from there being nothing on the record to suggest that the AO formed a belief that the income chargeable to tax has escaped assessment due to the reason of the assessee failing to disclose truly and fully all material facts, the present case would be one of mere change of opinion. On all counts, therefore, the impugned notice must fail. Rule made absolute - decided in favour of assessee.
Whether manual filed return is a valid return under Income Tax Act, whereas e-filling is mandatory as per CBDT - Assessee has filed the return manually before the due date prescribed u/s 139(1) - The electronic return alone was filed after the due date - The CBDT has prescribed to file the returns electronically - Deduction u/s 80IC – Deduction not allowed by virtue of Sec. 80AC
Held that:- Yes, that return is absolutely valid in law. This compulsion has been made as a result of the direction issued by the CBDT. The direction of the CBDT cannot go beyond the Act and Rules. It cannot overtake the apparent words of the statute. Therefore, filing of return electronically is a directory provision and if the return is filed manually on or before due date, such return cannot be ignored. The maximum the A.O. can ask the assessee is to file the return again electronically, so that the technicality of processing is satisfied. This is only for the administrative convenience of the Income-tax department.
The statute consisting of Act and Rules speak of filing of return before due date and contents of that must be furnished in that return. The format has been prescribed by the Rules and also the contents have been prescribed by the Rules. Filing of the return also has been prescribed by the Act. Nowhere in the Act or Rules, there is a mandatory provision that the return must be filed only electronically.
Therefore, the claim of the assessee for deduction u/s 80IC cannot be denied on the ground of law stated in Sec.80AC. In favour of assessee
Whether manual filed return is a valid return under Income Tax Act, whereas e-filling is mandatory as per CBDT - Assessee has filed the return manually before the due date prescribed u/s 139(1) - The electronic return alone was filed after the due date - The CBDT has prescribed to file the returns electronically - Deduction u/s 80IC – Deduction not allowed by virtue of Sec. 80AC
Held that:- Yes, that return is absolutely valid in law. This compulsion has been made as a result of the direction issued by the CBDT. The direction of the CBDT cannot go beyond the Act and Rules. It cannot overtake the apparent words of the statute. Therefore, filing of return electronically is a directory provision and if the return is filed manually on or before due date, such return cannot be ignored. The maximum the A.O. can ask the assessee is to file the return again electronically, so that the technicality of processing is satisfied. This is only for the administrative convenience of the Income-tax department.
The statute consisting of Act and Rules speak of filing of return before due date and contents of that must be furnished in that return. The format has been prescribed by the Rules and also the contents have been prescribed by the Rules. Filing of the return also has been prescribed by the Act. Nowhere in the Act or Rules, there is a mandatory provision that the return must be filed only electronically.
Therefore, the claim of the assessee for deduction u/s 80IC cannot be denied on the ground of law stated in Sec.80AC. In favour of assessee
Immunity under Explanation 5 to section 271(1)(c) - Search and seizure conducted on 23-08-2006 - ROI filed u/s. 153A r.w s. 139(1), filed on 28-08-2007 - Furnishing inaccurate particulars of income - Undisclosed income - Penalty for concealment - Held that:- As per clause 2 of Explanation 5 section 271(1)(c), i.e., the provision under which the assessee seeks immunity, and which has been found applicable by the first appellate authority, is applicable only to cases where the due date for furnishing the return of income u/s. 139(1) has not expired as on the date of search, which in the instant case is 23-08-2006. Immunity under Explanation 5 to section 271(1)(c) was not maintainable for three reason.
First, inapplicability of the provision for the relevant years; the due date for filing the return u/s. 139(1) having expired or elapsed as on the date of search; rather, much prior thereto. - Secondly, for non-satisfaction of the condition of payment of tax and interest by the due date of filing the return of income u/s. 153A in response to notice thereunder pursuant to search u/s. 132, or even the actual date of filing of the return thereunder; being, rather, only after the date of assessment - Thirdly, as aforesaid, even if the CIT(A) held the view that the extended period for the payment of admitted demand is available, such a view, being in any case contentious and not free from debate, could not have been taken by him in the rectification proceedings u/s. 154.
So, however, the matter having been conceded to by the ld. DR during hearing, admitting to the assessee's case for the relevant years being squarely covered by Explanation 5 to section 271(1)(c), we, as aforesaid, on the basis of said concession, dismiss the Revenue's appeal for both the years. We decide accordingly. - In favour of assessee
Immunity under Explanation 5 to section 271(1)(c) - Search and seizure conducted on 23-08-2006 - ROI filed u/s. 153A r.w s. 139(1), filed on 28-08-2007 - Furnishing inaccurate particulars of income - Undisclosed income - Penalty for concealment - Held that:- As per clause 2 of Explanation 5 section 271(1)(c), i.e., the provision under which the assessee seeks immunity, and which has been found applicable by the first appellate authority, is applicable only to cases where the due date for furnishing the return of income u/s. 139(1) has not expired as on the date of search, which in the instant case is 23-08-2006. Immunity under Explanation 5 to section 271(1)(c) was not maintainable for three reason.
First, inapplicability of the provision for the relevant years; the due date for filing the return u/s. 139(1) having expired or elapsed as on the date of search; rather, much prior thereto. - Secondly, for non-satisfaction of the condition of payment of tax and interest by the due date of filing the return of income u/s. 153A in response to notice thereunder pursuant to search u/s. 132, or even the actual date of filing of the return thereunder; being, rather, only after the date of assessment - Thirdly, as aforesaid, even if the CIT(A) held the view that the extended period for the payment of admitted demand is available, such a view, being in any case contentious and not free from debate, could not have been taken by him in the rectification proceedings u/s. 154.
So, however, the matter having been conceded to by the ld. DR during hearing, admitting to the assessee's case for the relevant years being squarely covered by Explanation 5 to section 271(1)(c), we, as aforesaid, on the basis of said concession, dismiss the Revenue's appeal for both the years. We decide accordingly. - In favour of assessee
Speculative loss not allowed to be set off against the business income - loss under consideration is not covered under proviso (c) of section 43(5) - assessee derived income from share of profit from firm, loss from speculation, income (Loss) from trading on MCX and income from other sources - Held that:- In the instant case, assessee is a dealer by virtue of membership and buys and sells the commodity on every movement of the price of the commodity, which makes his activity as jobbing activity. Trading-cum-clearing member means a person who is admitted by the Exchange as the member of the Exchange conferring a right to trade and clear through the Clearing House of the Exchange as a clearing member and who may be allowed to make deals for himself as well as on behalf of his clients and clear and settle such deals only. Since, his ordinary course of business as a member is to trade in MCX market along with acting as clearing house for his clients, as per the rules of MCX, he is trading in the same market, and therefore it is his ordinary course of business as such a member. Moreover, when the main object of the member is well defined, and he is working in accordance to the same, it needs to be concluded that he is working as in his ordinary course of business as such member. Perusal of this shows that loss incurred by appellant, a member of MCX, a forward market exchange, due to jobbing to guard against loss from future price fluctuation arising in the ordinary course of its business as such member surely fell within the purview of exception contained in Cl. (c) of proviso to S. 43(5), hence could not be said to be speculative loss and should be considered as business loss.
Perusal shows that after appraising the fact, it was concluded that transactions under consideration are of jobbing nature but same have not incurred during the regular course of business. In this regard, already submitted that said inference of regular course of business has been drawn without reading the entire sentence as whole as the word “as such member” is also there and it is undoubted fact that transaction have been entered as member and it is regular course of his business as member to entered such transactions, further it is important to note that only upon sale or purchase, there cannot be any loss or profit, only upon subsequent purchase or sale, loss or profit can be arrived. Therefore, saying that the details of transactions in the nature of jobbing is provided and details of transactions other than jobbing has not provided is factually wrong because only purchase or sales cannot be jobbing, academically sale and purchase or purchase and sale cumulatively complete the transactions and same can be considered as jobbing and details of which has admittedly been provided during the assessment proceedings. Therefore, to that extent, finding is incorrect.
Relying on Komal Exports Vs. Assistant Commissioner of Income Tax [2007 (11) TMI 437 - ITAT DELHI] & CIT Vs. Shri Sharwan Kumar Agarwal [2000 (12) TMI 70 - ALLAHABAD HIGH COURT] frequency of transaction which have been done by the assessee and loss incurred establish that the transactions were in the nature of jobbing and loss incurred establish that the transactions were in the nature of jobbing and loss was incurred in the course of business by a member of forward commodity market. In the facts and circumstances of the case of the assessee squarely falls within the purview of cl. (c) of proviso to s. 43(5). Hence the loss incurred by the assessee connote be said to be speculative loss.
It is an admitted fact that AO has already considered the transaction is in the nature of jobbing, in this regard relying upon the decision in the case of First Securities Pvt. Ltd. Vs. ACIT [2009 (5) TMI 798 - ITAT BANGALORE] wherein held that as per proviso (c) to sec 43(5) the transactions in nature of jobbing not to be treated as speculative transaction and once a transaction is not speculative, any loss arising out of such transaction is business loss which can be set off against business profits. Thus case of assessee falls under clause (c) of section 43(5) and, therefore, the loss incurred by assessee has to be treated as business loss eligible for set off against other business income of the year - in favour of assessee.
Speculative loss not allowed to be set off against the business income - loss under consideration is not covered under proviso (c) of section 43(5) - assessee derived income from share of profit from firm, loss from speculation, income (Loss) from trading on MCX and income from other sources - Held that:- In the instant case, assessee is a dealer by virtue of membership and buys and sells the commodity on every movement of the price of the commodity, which makes his activity as jobbing activity. Trading-cum-clearing member means a person who is admitted by the Exchange as the member of the Exchange conferring a right to trade and clear through the Clearing House of the Exchange as a clearing member and who may be allowed to make deals for himself as well as on behalf of his clients and clear and settle such deals only. Since, his ordinary course of business as a member is to trade in MCX market along with acting as clearing house for his clients, as per the rules of MCX, he is trading in the same market, and therefore it is his ordinary course of business as such a member. Moreover, when the main object of the member is well defined, and he is working in accordance to the same, it needs to be concluded that he is working as in his ordinary course of business as such member. Perusal of this shows that loss incurred by appellant, a member of MCX, a forward market exchange, due to jobbing to guard against loss from future price fluctuation arising in the ordinary course of its business as such member surely fell within the purview of exception contained in Cl. (c) of proviso to S. 43(5), hence could not be said to be speculative loss and should be considered as business loss.
Perusal shows that after appraising the fact, it was concluded that transactions under consideration are of jobbing nature but same have not incurred during the regular course of business. In this regard, already submitted that said inference of regular course of business has been drawn without reading the entire sentence as whole as the word “as such member” is also there and it is undoubted fact that transaction have been entered as member and it is regular course of his business as member to entered such transactions, further it is important to note that only upon sale or purchase, there cannot be any loss or profit, only upon subsequent purchase or sale, loss or profit can be arrived. Therefore, saying that the details of transactions in the nature of jobbing is provided and details of transactions other than jobbing has not provided is factually wrong because only purchase or sales cannot be jobbing, academically sale and purchase or purchase and sale cumulatively complete the transactions and same can be considered as jobbing and details of which has admittedly been provided during the assessment proceedings. Therefore, to that extent, finding is incorrect.
Relying on Komal Exports Vs. Assistant Commissioner of Income Tax [2007 (11) TMI 437 - ITAT DELHI] & CIT Vs. Shri Sharwan Kumar Agarwal [2000 (12) TMI 70 - ALLAHABAD HIGH COURT] frequency of transaction which have been done by the assessee and loss incurred establish that the transactions were in the nature of jobbing and loss incurred establish that the transactions were in the nature of jobbing and loss was incurred in the course of business by a member of forward commodity market. In the facts and circumstances of the case of the assessee squarely falls within the purview of cl. (c) of proviso to s. 43(5). Hence the loss incurred by the assessee connote be said to be speculative loss.
It is an admitted fact that AO has already considered the transaction is in the nature of jobbing, in this regard relying upon the decision in the case of First Securities Pvt. Ltd. Vs. ACIT [2009 (5) TMI 798 - ITAT BANGALORE] wherein held that as per proviso (c) to sec 43(5) the transactions in nature of jobbing not to be treated as speculative transaction and once a transaction is not speculative, any loss arising out of such transaction is business loss which can be set off against business profits. Thus case of assessee falls under clause (c) of section 43(5) and, therefore, the loss incurred by assessee has to be treated as business loss eligible for set off against other business income of the year - in favour of assessee.
Export against advance licenses - Shipping bills which were filed in connection with the exports were "drawback shipping bills" instead of "DEEC shipping bills" - Notification No.204/92-Cus. dated 19.5.1992 - Held that:- Though the shipping bills were filed as drawback shipping bills, the assessee did not press any claim of drawback and no drawback was sanctioned either. Only their claim under DEEC scheme was pursued. Accordingly, the assessee exported their final products and realized proceeds in foreign exchange. They could not produce proof of this in the form of EODCs because the customs authorities did not make the necessary entries in the DEEC book citing technical reasons. It is not the case of the department that the assessee was fraudulently claiming DEEC benefit exchange.Therefore to re-quantify the demand of duty licence wise proportionate to shortfall of exports remand back to Commissioner.
Export against advance licenses - Shipping bills which were filed in connection with the exports were "drawback shipping bills" instead of "DEEC shipping bills" - Notification No.204/92-Cus. dated 19.5.1992 - Held that:- Though the shipping bills were filed as drawback shipping bills, the assessee did not press any claim of drawback and no drawback was sanctioned either. Only their claim under DEEC scheme was pursued. Accordingly, the assessee exported their final products and realized proceeds in foreign exchange. They could not produce proof of this in the form of EODCs because the customs authorities did not make the necessary entries in the DEEC book citing technical reasons. It is not the case of the department that the assessee was fraudulently claiming DEEC benefit exchange.Therefore to re-quantify the demand of duty licence wise proportionate to shortfall of exports remand back to Commissioner.
Validity of Show Cause Notice – Period of limitation - recovery of duty drawback - When rule 16 does not prescribe any period of limitation, whether action can be taken thereunder after any length of time, or whether the concept of reasonable period has to be read into it - Recovery of erroneously paid drawback - Duty Drawback u/s 75 - Rule 16 of the Drawback Rules for recovery of erroneously paid drawback - Sub-Serial No. 54.04 of the Drawback Schedule - Drawback recoverable u/s 142 of the Customs Act, 1962
Held that:- Though rule 16 of the Drawback Rules does not provide for any period of limitation, a reasonable period has to be read into the said rule. The SCN which have been issued after a period of more than three years from the date when the drawback came to be paid to the petitioners, cannot by any stretch of imagination be said to have been issued within a reasonable period of time.
The SCN in question came to be issued in February 2000 in respect of drawback paid prior to August 1996. Under the circumstances, by no stretch of imagination, can the show cause notices be said to have been issued within a reasonable time. Under the circumstances, the show cause notices have to be held to be bad on the ground of being time-barred. In favour of assessee
Validity of Show Cause Notice – Period of limitation - recovery of duty drawback - When rule 16 does not prescribe any period of limitation, whether action can be taken thereunder after any length of time, or whether the concept of reasonable period has to be read into it - Recovery of erroneously paid drawback - Duty Drawback u/s 75 - Rule 16 of the Drawback Rules for recovery of erroneously paid drawback - Sub-Serial No. 54.04 of the Drawback Schedule - Drawback recoverable u/s 142 of the Customs Act, 1962
Held that:- Though rule 16 of the Drawback Rules does not provide for any period of limitation, a reasonable period has to be read into the said rule. The SCN which have been issued after a period of more than three years from the date when the drawback came to be paid to the petitioners, cannot by any stretch of imagination be said to have been issued within a reasonable period of time.
The SCN in question came to be issued in February 2000 in respect of drawback paid prior to August 1996. Under the circumstances, by no stretch of imagination, can the show cause notices be said to have been issued within a reasonable time. Under the circumstances, the show cause notices have to be held to be bad on the ground of being time-barred. In favour of assessee
Refund of 4% additional duty paid - Notification No.102/2007-Customs - Writ of Mandamus - Held that:- Assessee has filed series of applications from 5.9.2011 onwards till 28.05.2012 and also a reminder dated 15.11.2012. Since the same has not been considered, the mandamus is filed.
Thus without going into the merits of the petitioner's claim, the third respondent is directed to consider and dispose of the petitioner's claim if not already disposed of on merits within a period of twelve weeks from the date of receipt of a copy of this order.
Refund of 4% additional duty paid - Notification No.102/2007-Customs - Writ of Mandamus - Held that:- Assessee has filed series of applications from 5.9.2011 onwards till 28.05.2012 and also a reminder dated 15.11.2012. Since the same has not been considered, the mandamus is filed.
Thus without going into the merits of the petitioner's claim, the third respondent is directed to consider and dispose of the petitioner's claim if not already disposed of on merits within a period of twelve weeks from the date of receipt of a copy of this order.
Ratification of the action taken by the Official Liquidator - Power of Official Liquidator to appoint 'Special Arguing Counsel' - Held that:- Referring to Rule 307 of the Companies (Court) Rules, 1959 the official liquidator is required to apply to the Company Court for sanction to employ an advocate, or advocates, to assist him. Nowhere in the rule is it mentioned that the sanction has to be granted after the appointment of an advocate by the official liquidator. The rule envisages prior sanction of the Court and not ex-post facto sanction, as is conveniently being misread and mis-construed by the official liquidator. It is an admitted fact on the part of the official liquidator that prior permission and approval of the court for engagement of the concerned advocate has not been taken, and that the concerned advocate is not on the panel approved by the Court. In such circumstances, the action of the official liquidator in entrusting the briefs to the concerned advocate as special arguing counsel without prior permission of the Court cannot be ratified.
Where Official Liquidator appointed a special arguing counsel whose name was not on panel of advocates without taking prior permission of Company Court, said action of Official Liquidator could not be subsequently ratified by Company Court
Ratification of the action taken by the Official Liquidator - Power of Official Liquidator to appoint 'Special Arguing Counsel' - Held that:- Referring to Rule 307 of the Companies (Court) Rules, 1959 the official liquidator is required to apply to the Company Court for sanction to employ an advocate, or advocates, to assist him. Nowhere in the rule is it mentioned that the sanction has to be granted after the appointment of an advocate by the official liquidator. The rule envisages prior sanction of the Court and not ex-post facto sanction, as is conveniently being misread and mis-construed by the official liquidator. It is an admitted fact on the part of the official liquidator that prior permission and approval of the court for engagement of the concerned advocate has not been taken, and that the concerned advocate is not on the panel approved by the Court. In such circumstances, the action of the official liquidator in entrusting the briefs to the concerned advocate as special arguing counsel without prior permission of the Court cannot be ratified.
Where Official Liquidator appointed a special arguing counsel whose name was not on panel of advocates without taking prior permission of Company Court, said action of Official Liquidator could not be subsequently ratified by Company Court
Reverse charge u/s 66A - Import of service - Appellant did not discharge the service tax liability - Interest and penalty levied - Intention to evade the tax - Appellant contended that whatever tax they paid on reverse charge basis, they were eligible to take credit - In view of the revenue neutral situation
Held that:- On account of revenue neutrality, service tax need not be paid is a proposition which cannot stand to any common sense or logic. It completely nullifies the levy of service tax u/s 66A and therefore, such a proposition should be rejected outright. The law cannot be interpreted in such a way so as to negate the very objective of taxation.
When a tax liability arises it should be discharged in time. If there is a default, then liability to interest is automatic and consequential and therefore, if there is a delay in payment of service tax which is the position in the present case, the appellant is liable to pay interest on delayed payment of tax. Direct to deposit pre-deposit of interest
Reverse charge u/s 66A - Import of service - Appellant did not discharge the service tax liability - Interest and penalty levied - Intention to evade the tax - Appellant contended that whatever tax they paid on reverse charge basis, they were eligible to take credit - In view of the revenue neutral situation
Held that:- On account of revenue neutrality, service tax need not be paid is a proposition which cannot stand to any common sense or logic. It completely nullifies the levy of service tax u/s 66A and therefore, such a proposition should be rejected outright. The law cannot be interpreted in such a way so as to negate the very objective of taxation.
When a tax liability arises it should be discharged in time. If there is a default, then liability to interest is automatic and consequential and therefore, if there is a delay in payment of service tax which is the position in the present case, the appellant is liable to pay interest on delayed payment of tax. Direct to deposit pre-deposit of interest
Waiver of pre-deposit - Manpower Recruitment Agency - Applicant is a Management Institute - Employers came to their Institute for recruitment - Revenue contended that applicants are charging same amount from the students against the placement services - Held that:- Following the decision in case of MOTILAL NEHRU NATIONAL INSTITUTE OF TECH. (2010 (11) TMI 599 - CESTAT, NEW DELHI) the pre-deposit of dues are waived. Stay granted
Waiver of pre-deposit - Manpower Recruitment Agency - Applicant is a Management Institute - Employers came to their Institute for recruitment - Revenue contended that applicants are charging same amount from the students against the placement services - Held that:- Following the decision in case of MOTILAL NEHRU NATIONAL INSTITUTE OF TECH. (2010 (11) TMI 599 - CESTAT, NEW DELHI) the pre-deposit of dues are waived. Stay granted
Condonation of delay - Delay of 29 days - Waiver of pre-deposit - Commission paid to the foreign agents - Signatory director of the applicant company was abroad during the time when the orders were received from the superintendent - Held that:- Appellant has paid of the entire amount of the service tax liability along with interest. Hence allow the application for the waiver of the pre-deposit and condone the delay
Condonation of delay - Delay of 29 days - Waiver of pre-deposit - Commission paid to the foreign agents - Signatory director of the applicant company was abroad during the time when the orders were received from the superintendent - Held that:- Appellant has paid of the entire amount of the service tax liability along with interest. Hence allow the application for the waiver of the pre-deposit and condone the delay
Franchisee service - Business auxiliary service - Consideration received for the services rendered as cum tax - Appellant has not collected service tax from the recipient of the services – Held that:- The entire consideration received has to be treated as cum tax and the amount received should be apportioned between the assessable value and the service tax liability. In favour of assessee
Penalty u/s 76 - failure to pay service tax in time – Assessee argues that imposition of penalty u/s 76 is quite harsh, especially when there is no intention to evade service tax on the part of the assessee - Held that:- Following the decision in case of Krishna Poduval (2005 (10) TMI 279 - KERALA HIGH COURT) that there can be a situation where even without suppressing value of taxable service, the person liable to pay service tax fails to pay. Penalty can certainly be imposed on erring persons. Therefore, for failure to pay service tax in time, the appellant is liable to penalty u/s 76. In favour of revenue
Franchisee service - Business auxiliary service - Consideration received for the services rendered as cum tax - Appellant has not collected service tax from the recipient of the services – Held that:- The entire consideration received has to be treated as cum tax and the amount received should be apportioned between the assessable value and the service tax liability. In favour of assessee
Penalty u/s 76 - failure to pay service tax in time – Assessee argues that imposition of penalty u/s 76 is quite harsh, especially when there is no intention to evade service tax on the part of the assessee - Held that:- Following the decision in case of Krishna Poduval (2005 (10) TMI 279 - KERALA HIGH COURT) that there can be a situation where even without suppressing value of taxable service, the person liable to pay service tax fails to pay. Penalty can certainly be imposed on erring persons. Therefore, for failure to pay service tax in time, the appellant is liable to penalty u/s 76. In favour of revenue
Waiver of pre-deposit - Stay of recovery - Held that:- When the department wanted the tax liability of the assessee to be revised, it was incumbent on the appellate authority to record a clear finding and to spell out in quantitative terms what should be the correct tax liability of the assessee. Further, when the department wanted the assessee to be penalised under the provisions invoked in the show-cause notice, again, it was incumbent on the appellate authority to consider the plea and, in the event of the assessee being found liable to any such penalty, determine the quantity of the penalty. None of these is forthcoming in this case. With request to the Commissioner (Appeals) to pass fresh speaking order hence remand back.
Waiver of pre-deposit - Stay of recovery - Held that:- When the department wanted the tax liability of the assessee to be revised, it was incumbent on the appellate authority to record a clear finding and to spell out in quantitative terms what should be the correct tax liability of the assessee. Further, when the department wanted the assessee to be penalised under the provisions invoked in the show-cause notice, again, it was incumbent on the appellate authority to consider the plea and, in the event of the assessee being found liable to any such penalty, determine the quantity of the penalty. None of these is forthcoming in this case. With request to the Commissioner (Appeals) to pass fresh speaking order hence remand back.
Penalty u/s 11AC - Penalty on directors - Rule 26 of the Central Excise Rules - Rule 26 of the Central Excise Rules is prima facie ultra vires of Section 11AC of the Central Excise Act, 1944 - It is well settled that no penalty can be levied save by authority of law. Rule 26 is prima facie in excess of the Rule making power conferred under the Central Excise Act, 1944
Penalty u/s 11AC - Penalty on directors - Rule 26 of the Central Excise Rules - Rule 26 of the Central Excise Rules is prima facie ultra vires of Section 11AC of the Central Excise Act, 1944 - It is well settled that no penalty can be levied save by authority of law. Rule 26 is prima facie in excess of the Rule making power conferred under the Central Excise Act, 1944
Waiver of pre-deposit - Stay of recovery - Extended period of limitation - Excisability of structures - Applicants are manufacturing aluminum sliding windows & aluminum doors - under Chapter 76 - Availing SSI exemption - Items were directly comes to the site where the structure was erected and glass was fixed - Applicant contended that aluminum assembly of Glazing Systems, the glazing is of glass which comes into existence at site and it is immovable property - Held that:- There are divergent views on the issue as decided in case of MAHINDRA & MAHINDRA LTD.(2005 (11) TMI 103 - CESTAT, NEW DELHI).
Find merit in the contention of the applicant that extended period of limitation is not available to the Revenue. On the basis of decision in case of ALUMAYER INDIA PVT. LTD. (2012 (8) TMI 690 - CESTAT, BANGALORE) applicant failed to make out a case of total waiver of duty.
Taking into facts and circumstances of the case, the demand for the normal period and the availability of credit on the inputs, the applicants are directed to further deposit an amount of Rs. 50 lakhs.
Waiver of pre-deposit - Stay of recovery - Extended period of limitation - Excisability of structures - Applicants are manufacturing aluminum sliding windows & aluminum doors - under Chapter 76 - Availing SSI exemption - Items were directly comes to the site where the structure was erected and glass was fixed - Applicant contended that aluminum assembly of Glazing Systems, the glazing is of glass which comes into existence at site and it is immovable property - Held that:- There are divergent views on the issue as decided in case of MAHINDRA & MAHINDRA LTD.(2005 (11) TMI 103 - CESTAT, NEW DELHI).
Find merit in the contention of the applicant that extended period of limitation is not available to the Revenue. On the basis of decision in case of ALUMAYER INDIA PVT. LTD. (2012 (8) TMI 690 - CESTAT, BANGALORE) applicant failed to make out a case of total waiver of duty.
Taking into facts and circumstances of the case, the demand for the normal period and the availability of credit on the inputs, the applicants are directed to further deposit an amount of Rs. 50 lakhs.
Refund claim - Pursuance of the order-in-appeal no. SDK(178)178/AUR/2000 dated 20.07.2000 passed by the Commissioner (Appeals) in favour of the Respondent - Adjudicating authority sanctioned refund - Revenue's appeal filed before the Tribunal which is pending - Revenue argued that issue has not been settled, the sanction of refund is not sustainable - Held that:- The Tribunal vide Final Order dated 23.11.2005 has already dismissed the appeal no. E/3229/00 filed by Revenue against order-in-appeal no. SDK(178)178/AUR/2000 dated 20.07.2000. As the appeal against the Order-in-Appeal dated 20.07.2000 has already been dismissed by the Tribunal, decides against revenue
Refund claim - Pursuance of the order-in-appeal no. SDK(178)178/AUR/2000 dated 20.07.2000 passed by the Commissioner (Appeals) in favour of the Respondent - Adjudicating authority sanctioned refund - Revenue's appeal filed before the Tribunal which is pending - Revenue argued that issue has not been settled, the sanction of refund is not sustainable - Held that:- The Tribunal vide Final Order dated 23.11.2005 has already dismissed the appeal no. E/3229/00 filed by Revenue against order-in-appeal no. SDK(178)178/AUR/2000 dated 20.07.2000. As the appeal against the Order-in-Appeal dated 20.07.2000 has already been dismissed by the Tribunal, decides against revenue
Power to remand the matter by Commissioner (Appeals) u/s 35A(3) - back to the adjudicating authority – Held that:- Following the decision in case of MEDICO LABS. (2004 (9) TMI 108 - HIGH COURT OF GUJARAT AT AHMEDABAD) held that Commissioner (Appeals) continues to have power of remand even after the amendment of Section 35A(3) of the Central Excise Act, 1944 by Finance Act, 2001 w.e.f. 11-5-2001. Therefore despite of amendment in Section 35A(3), the Commissioner (Appeals) continues to have power of remand. Against revenue
Power to remand the matter by Commissioner (Appeals) u/s 35A(3) - back to the adjudicating authority – Held that:- Following the decision in case of MEDICO LABS. (2004 (9) TMI 108 - HIGH COURT OF GUJARAT AT AHMEDABAD) held that Commissioner (Appeals) continues to have power of remand even after the amendment of Section 35A(3) of the Central Excise Act, 1944 by Finance Act, 2001 w.e.f. 11-5-2001. Therefore despite of amendment in Section 35A(3), the Commissioner (Appeals) continues to have power of remand. Against revenue
Gift to dealers - Whether includible in assessable value - Whether in the nature of promotional activity or for benefit of appellant - The appellants are the manufacturers of ‘Automotive Electric Horns’ - The appellants procure diaries for their dealers and charge 50% of the cost of such diaries if the name of the dealer is to be printed on it - Department is of the view that as free distribution of diary is nothing but publicity/advertisement to the product of the appellants - Held that:- There is no evidence on record to show that these diaries have been provided by the appellants for their exclusive benefit or promotion of their business. Following the decision in case of MEDICO LABS (2007 (7) TMI 561 - CESTAT, AHMEDABAD) the value of such of those diaries recovered by the appellants from their dealers is not includible in the assessable value of the final product. In favour of assessee
Gift to dealers - Whether includible in assessable value - Whether in the nature of promotional activity or for benefit of appellant - The appellants are the manufacturers of ‘Automotive Electric Horns’ - The appellants procure diaries for their dealers and charge 50% of the cost of such diaries if the name of the dealer is to be printed on it - Department is of the view that as free distribution of diary is nothing but publicity/advertisement to the product of the appellants - Held that:- There is no evidence on record to show that these diaries have been provided by the appellants for their exclusive benefit or promotion of their business. Following the decision in case of MEDICO LABS (2007 (7) TMI 561 - CESTAT, AHMEDABAD) the value of such of those diaries recovered by the appellants from their dealers is not includible in the assessable value of the final product. In favour of assessee
Waiver of pre-deposit - Stay petition - SSI exemption – Notification No. 8/2003-C.E. - Brand name or Trade name of other - Appellant manufacture various types of electric insulators - under heading 8546 of the Central Excise Tariff - Order placed by M/s. TDPL on the appellant for supply of ceramic insulators - the insulators were to strictly confirm to ISI specifications IS-731/1971. M/s. TDPL had obtained ISI certification in respect of the goods - For ISI certification it is necessary that the goods must be affixed with the brand name or trade name – Held that:- Prima facie view that the words TDPL affixed on the goods have to be treated as a brand name of M/s. TDPL and since this brand name does not belong to the appellant, the appellant would not be eligible for SSI exemption. Following the decision in case of AVADH POLYTUBES (P) LTD. (2010 (11) TMI 622 - CESTAT, NEW DELHI) that the goods would have to be treated as bearing brand name or trade name of another person and would not be eligible for SSI exemption. Direct ot deposit pre-deposit and amount dues.
Waiver of pre-deposit - Stay petition - SSI exemption – Notification No. 8/2003-C.E. - Brand name or Trade name of other - Appellant manufacture various types of electric insulators - under heading 8546 of the Central Excise Tariff - Order placed by M/s. TDPL on the appellant for supply of ceramic insulators - the insulators were to strictly confirm to ISI specifications IS-731/1971. M/s. TDPL had obtained ISI certification in respect of the goods - For ISI certification it is necessary that the goods must be affixed with the brand name or trade name – Held that:- Prima facie view that the words TDPL affixed on the goods have to be treated as a brand name of M/s. TDPL and since this brand name does not belong to the appellant, the appellant would not be eligible for SSI exemption. Following the decision in case of AVADH POLYTUBES (P) LTD. (2010 (11) TMI 622 - CESTAT, NEW DELHI) that the goods would have to be treated as bearing brand name or trade name of another person and would not be eligible for SSI exemption. Direct ot deposit pre-deposit and amount dues.
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