TMI Tax Updates e-Newsletter
Jan 04,2012

Waiver of penalty – non-violation of provisions of Section 269T - repayment under the Golden Bonds Scheme – Held that:- Payment under the Golden Bonds Scheme was not repayment of any deposit, but was repayment of a loan and there was no violation of Section 269T, as it stood at that time (before 1st June, 2002). Further, no payment by way of cash was made but book adjustments were made.- Decided in favor of assessee.

Deemed dividend – assessee received amount from its sister concern in oct 1997 claiming it to be business advance – advance to another sister concern transferred to assessee by book entry - assessee discontinued business from Oct 1997 – Held that:- On request of assessee the matter is remanded back to the CIT(A) with a direction to him to re-consider the matter afresh in the light of the Supreme Court decision in case of Commissioner of Income Tax Vs. Mukundray K. Shah (2007 -TMI - 6556 - SUPREME Court) and without in any way being influenced either by any observation made by him in the earlier order of revision or any observation made by court in this judgment and to pass appropriate orders in accordance with law.

Exemption u/s 10(23C) – Prescribed authority denied approval/ exemption - petitioner has to satisfy that it came within the expression “other educational institution” - Held that:- Merely on the ground that petitioner is not recognized by the UGC or any Board constituted by the Government of India for imparting formal education in the field of western music and that petitioner is not itself awarding any certificate or degree to the students, it cannot be said that it does not qualify to be an educational institution”. It is observed that the word education connotes the process of training and development of knowledge, skill, mind and character of students by normal schooling hence, petitioner meets the requirements of an educational institution within the meaning of Section 10(23)(c)(vi) of the Act. Therefore, the prescribed authority is guided to deal with the assessee’s application for approval afresh in accordance with law in the light of the observations made. The writ petition is accordingly allowed.

Deduction u/s 80-IB - DEPB/duty drawback - Held that: profits derived by way of such incentives do not fall within the expression “profits derived from industrial undertaking” in s. 80-IB” - Thus, the question has to be answered in favour of the revenue and against the assessee - The appeals are allowed.

Penalty - penalty in respect of the stamp duty and registration charges which was not disclosed in the returns filed by him - explanation offered by the assessee was that he had sufficient income, he is an individual and he is not expected to file the schedule showing these particulars and there was no intention to avoid payment of tax - assesses is a mining contractor He has purchased the property and got it registered - His returns did not disclose the source from which the registration charges was drawn - Though he is an individual and he is not expected to maintain accounts showing the current assets and liabilities, income etc., his explanation that he was innocent and he was not aware of the legal requirement cannot be accepted - it would not constitute a ground not to levy penalty and finally - it would not constitute a ground not to levy penalty - Appeal dismissed thus.

Revision u/s 263 - company offers Holiday Scheme to card members at a discounted/special price on account of advance Room Nights marketed through its agents - assessment order is passed prior to the date of final hearing on 15-5-2007 - Similarly, though the assessee claimed to have produced bills in respect of addition of fixed assets vide letter dated 26-04-2007, the Commissioner found that the claims are not corroborated by order sheet entries or the evidence on record - It is a fact that the details furnished by the assessee are voluminous and require sufficient time for examination. It is also true that certain details collected, contained vital aspect of assessments

Regarding accounting of advance sale of room nights - The undisputed fact is that the assessee has collected an advance, under promise to make available to its customers, rooms in at any of its hotels/Clubs owned by it or by its subsidiary as well as owned by the other affiliated destinations - More than 99 per cent of the customers surrender the room nights which is not only the amount paid but which is inclusive of a premium over and above the collected value - The CIT's direction that the receipt should be treated as income and keeping silent about repayment being treated as expenditure, gives a distorted picture and such a direction cannot be upheld - Decided in favor of the assessee

Regarding Holiday Membership Surrendered Value - The surrender value is nothing but the amount paid by the customer/member plus a certain amount which is in the form of a premium or compensation - When a member does not utilise room nights in any year, including the first year, he looses his right to certain quantity of room night and gets entitled to a certain amount of surrender value - Just collecting voluminous details and not perusing the same and completing the assessment in hurry by accepting the submission of the assessee at face value and without application of mind, is valid reason for invoking the powers under section 263 - Appeals are allowed in part

Reassessment u/s 147 - Book profits u/s 115J - Since the issue on jurisdiction and limitation touch on the very reopening of the assessment, we feel, the proper course herein would be to set aside the order of the Tribunal, remand the matter back to the Tribunal with a direction to consider the issue of limitation and the jurisdiction under Section 147 to reopen the assessment - It is open to the parties herein to raise such contentions as are available to them, before the Tribunal - Decided in the favour of the assessee by way of remand

Penalty u/s 271(1) - Undisclose cash - search was conducted and unaccounted cash belonging to the assessee was found during the course of search, the assessee later on made a surrender of cash of Rs. 20,00,000 which cannot be said to be bona fide action on the part of the assessee because the assessee despite having ample opportunity from the date of search in July, 2004 till the date of filing of the original return on 14-10-2005 had been claiming it to be accounted cash for which no evidence was filed at any stage - For what purpose the assessee was waiting for making a surrender on 3-1-2007 is not clear - Therefore, would show that the learned CIT(A) was not justified in deleting the penalty - Decided against the assessee.

Revision u/s 263 - Interest on refund u/s 244A - Assesment u/s 143(3) - Rectification of mistakes - Tax credit u/s 115JAA - According to the DIT(IT) because of the MAT credit allowed by the Assessing Officer as a pre-paid tax, the same resulted in excess allowance of interest u/s 244A to the extent of Rs.1763.78 lacs for which the order is erroneous and prejudicial to the interest of revenue - Representations were received to the effect that the tax credit allowed u/s 115JAA is not different from the tax paid in advance and consequently credit for the payment of minimum alternate tax should be allowed - Having regard to the background in which the amendment was brought into force, it must be regarded as being clarificatory in nature - In the I T Form I in Schedule G the tax credit to be allowed u/s 115JAA was to be reckoned after computing the interest liability u/s 234B - Held that: various judicial pronouncements that for invoking the provisions of sec. 263, the twin conditions i.e. order must be erroneous and it must be prejudicial to the interest of revenue have to be satisfied - Since in the instant case the Assessing Officer has taken a view which is permissible and which is held to be correct in view of the ratio of the decision of the jurisdictional High Court; therefore, in our considered opinion, the DIT(IT) was not justified in the invoking provisions of sec. 263 of the I T Act

Addition - Valuation of closing stock - Applicability of As-1 or As-7 - The assessee company was in the business of Market Research, and it is not the case of department that the work in progress as shown by the assessee was incurred in relation to construction activities - Therefore, Accounting Standard-2 is applicable in the present case and not the Accounting Standard-7, dealing with accounting of construction contracts - The assessee had filed its opening and closing WIP based on direct cost - The interest was not included in the valuation of WIP - Since, the valuation had been done as per Accounting Standard-2, the same was required to be accepted in view of the provisions of section 145(2), wherein Accounting Standard-2 has been notified to be followed - Decided in favour of assessee.

Bad debts - After 1st April, 1989, 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." There is no dispute about the amount having been actually written off - Decided in favour of assessee.

Interest on work in progress - This issue has already been considered in assessment year 2004-05 vide ITA No.7257/Mum/2008 and for the reasons contained therein, dismiss this ground of appeal - Decided in favour of assessee.

Search and seizure - Undisclosed income - Share application money, Gift, Set off of loss and cash credit - During the course of search and seizure operation, certain assets and documents including cash, jewellery etc. were found - Held that: company had received share application money to the extent of Rs. 25 lakhs. In the instant case, money has been withdrawn by the assessee being director of the said company from company’s bank account - There is no material available on record that the amount of Rs. 20 lakhs was utilized or invested elsewhere by the assessee - Decided in favor of the assessee

Regarding gift - In the instant case, the identity of the alleged donor has not been proved. The alleged gift deed does not disclose complete address of Shri Naveen Khera, the alleged donor - The assessee did not produce alleged donor for examination before the lower authorities for the reasons best known to him. There is no evidence on record to show the capacity of the donor in making the alleged gift - Decided against the assessee

Regarding set off of loss - assessee submitted a return of income under section 153A of the Act disclosing additional income of Rs. 25 lacs on estimate basis on account of loose papers found during’ the course of search - Held that: ld.A.M. was not correct in stating that the assessee is not entitled to set-off of Rs. 5,28,302 against the addition of Rs. 12 lakhs confirmed by the ld.CIT(A) on account of blank cheques found with the assessee - assessee has discharged the onus of proving the identity of the creditor, the capacity of the creditor and the genuineness of the transaction - Decided in favor of the assessee

Regarding addition of Rs. 2 laks, I find that Shri Shri Dataram Tehlani is regularly assessed to Income-tax - It seems that the Assessing Officer had made the addition without proper verification and without giving finding in respect of the creditor. In my opinion, the assessee has discharged the onus of proving the identity of the creditor, the capacity of the creditor and the genuineness of the transaction - Decided in favor of the assessee

Accrual of Interest income - Deep Discount Bond - AO observed that interest accrues year after year and not accrue all of a sudden at the time of redemption/maturity. - Held that the assessees are entitled to recognize the interest income attributable to 8 per cent Reserve Bank of India Bonds on cash basis to be reckoned at the time of redemption of the Bonds - Decided in favour of assessee.

Whether duty draw back can be considered as income derived from the industrial undertaking itself for the purpose of computing relief u/s 80I - Held that:- duty draw back and DEPB cannot be considered as income derived from industrial undertaking for the purpose of computing relief u/s 80I. [Liberty India (2009 - TMI - 34471 - SUPREME COURT)]

Rectification of mistake u/s 254(2) - held that:- In this case on hand, the Hon'ble Supreme Court has laid down the principle of law which is applicable across the Board Application of these principles of law needs no factual verification as there is no dispute on facts. Thus, even going by the decision of the Apex Court in the case of Mepco Industries Ltd. (2009 -TMI - 35015 - SUPREME COURT), the Miscellaneous Application of the Revenue has to be allowed.

Special audit - Assistant Commissioner of Income Tax (Central Circle), passed under Section 142(2A) of the Income Tax Act directed the petitioner to get its accounts audited for the financial years 2001-02 to 2007-08 - Held that:- reasons must be recorded in the order to show that there is application of mind on the part of the officer concerned on the basis of the material available on record and in the absence of reasons in the order for the direction as contemplated under Section 142(2)(a), the order vitiates in law and is not sustainable, order set aside, appeal allowed.

Penalty u/s 271 (1) (C) of the Income Tax Act - disallowances on account of Foreign Usance Bill Interest and Prior Period expenses - claim of prior period expenses was disallowed on the ground that the expenditure does not pertain to the instant assessment year - Held that:- interest paid on Usance Bill through the bankers is not allowable whereas the assessee is under bonafide belief that the expenses are allowable. assessee was followed with full disclosure in the tax audit report and therefore there was no furnishing of inaccurate particulars. The particulars were properly disclosed in the tax audit report as well as during the assessment proceedings. The AO has not been able to prove that the explanation offered by the assessee was false. In such circumstances even under explanation 1 to section 271(1)(C) penalty is not leviable, appeal dismissed.

Refund - Provisional assessment - assessments were finalised after the amendment and therefore the ratio of the above decision is not applicable on the facts of the present case - Before claiming a relief of refund, it is necessary for the petitioner/appellant to show that he has paid the amount for which relief is sought, he has not passed on the burden on consumers and if such relief is not granted, he would suffer loss - Held that: finding of the Commissioner (Appeals) that in the present case the principles of unjust enrichment are not sustainable is set aside - Decided in favour of the assessee by way of remand

Imported goods - Royalty payable - The assesses contention is that the refund amounts represents SVB deposit and not duty, that as per the Circular No.1/98-Cus., dated 01.01.1998, amount of extra deposit presently kept at 5% of the value of the goods and henceforth be reduced to 1% of the value, which clearly shows that the amount paid, which has been claimed by way of refund is only a deposit and that after setting aside of the loading, the provisional assessment of the goods has not been finalised and on finalisation if the amount paid is in excess of the duty finally assessed, the assessees were automatically entitled to a refund, have not been considered by the authorities below - Interests of justice therefore require that the impugned order be set aside and the goods be remitted to the adjudicating authority for fresh decision in the light of the pleas raised by the assessees.

Refund claim - Interest - Unjust enrichment - Duty paid under protest - dutiability of pan masala - the price of the impugned products before the levy and after the levy remained the same is significant for deciding whether there is unjust enrichment - When the respondent reduced the dealers' price, it is very clear that they have taken upon themselves the burden of excise duty - The fact that excise duty was shown in the invoice is not conclusive evidence to say that the excise duty burden has been passed on to the buyers - Hence, the inference of Commissioner is not correct - There are several decisions, which hold that when the Chartered Accountant certifies that the duty burden has not been passed on to the buyers, the same has to be accepted - On going through the impugned order and also the order of the lower authority we do not find any infirmity - Held that there is no unjust enrichment in the present case - Hence, Revenue's appeal is rejected. - the respondent-assessee is eligible for the refund of the amount, they are also eligible for the interest, after 90 days from filing of the refund claim, till the date it is settled, in accordance with law.

Appeal - Early hearing

Remand - Natural justice - Seizure - Smuggled gold

Classification

Plea for condonation of delay – rejection of appeal by Commissioner (Appeals) on the ground of limitation - Held that:- In this case, the delay is of 14 months and therefore the Commissioner has no powers whatsoever to condone the delay. Provisions of Section 85(3) are very clear and provide a specific time limit for filing appeal and therefore, if the provisions of Limitation Act are applied, the provisions of Section 85 of Finance Act, 1994 become redundant - Decided against the assessee.

Eligibility of availment of CENVAT credit of service tax paid on the services provided by the foreign person (Foreign Commission Agent) – Held that:- Board Circular F.No.345/1/2008-TRU dated 27.06.2008 clarifies that the recipient of the service is required to pay service tax under Section 66A though the service is not actually provided by the recipient but by the foreign person. Such taxable services, are not treated as 'output services' however, service tax paid under Section 66A is available as 'input credit' under CENVAT Credit Rules, 2004 provided the said services are used as input services by the manufacturer or producer of final products or a provider of output taxable service. - Decided in favor of assessee.

Penalty - Under Rule 15 of the CENVAT Credit Rules, 2004 - Disallowed total credit of Rs.21,360/- of service tax paid on (i) telephone service (ii) vehicle maintenance (iii) fixed telephones and (iv) courier agency -Held that telephone service having been used for sales promotion, this service is an eligible input service as it is a service used in connection with the activity of business of manufacture of final products - Since there is no bifurcation of the amounts denied in respect of four services, the duty demand has to be requantified after extending credit of service tax paid on telephone service, for which purpose remit the case to the adjudicating authority - Since credit is being extended in respect of tax paid on telephone service, penalty also is required to be requantified.

Waiver of pre-deposit - Demands have been confirmed under the category of "Manpower Recruitment or Supply Agency" - Revenue submits that the Board's Circular F. No. B1/4/2006-TRU dated 19.4.2006 has categorically clarified that if the service provider acts as an pure agent, he can claim the expenditure incurred by him as reimbursable expenditure - It is the submission that the concept of a 'pure agent' would not include the contractor for supply of labour, and in this case appellant is only a contractor, as can be seen from the agreements - Prima facie , the appellant cannot be construed as a 'pure agent' - This aspect of pure agent needs to be gone into details, which can be done only at the time of final disposal of the appeal - Find that the appellant has not made out prima facie case for complete waiver of pre-deposit of the amounts involved.

Demand - Cenvat credit - Goods Transport Agency (GTA) - It is fairly accepted that the issue relating to utilisation of credit for payment of service tax on GTA services as recipient stands decided by the Tribunal in favour of the assessee.

Cenvat credit on inputs services - insurance services - Rule 2(l) of the CENVAT Credit Rules, 2004 - authority holding that such insurance services are not connected with the manufacture or sale of cement or with other business activities as defined under Rule 2(1) of Cenvat Credit Rules, 2004 denied the credit - Held that:- the insurance policy has been used to cover expenses relating to pay-roll when the production is stopped on account of damages of machinery or plant and, therefore, the insurance policy to cover loss of profit would come within the expression for ”activities relating to business” in the inclusive limp of the definition of input services - Decided in favour of assessee.

Credit of Service Tax in respect of courier services – period involved-April 2005 to October 2009 – Held that:- Courier services used for communication from factory to head office and the customers is definitely relatable to manufacture and thus admissible.

Appeal rejected on the ground of failure of assessee to pre-deposit the duty ordered in terms of Stay Order passed by the Commissioner (Appeals) – Held that:- The matter is remanded to Commissioner (Appeals) who shall decide the issue involved on merit after giving reasonable opportunity to the appellant to present their case without insisting on any pre-deposit.

Refund claim - No production for the period of 19 days - whether the respondent is eligible for refund when there was removal but no production - Appeal filed by the Revenue is on the ground that the period during which no production for two months and in both the months, the period had not exceeded 15 days and, therefore, the extension of abatement benefit was wrong - Prima facie it is quite clear that the Commissioner (Appeals) has gone on the assumption that both the Rule 96ZND of CER, 1944 and Rule 10 of the Rules are same when there is a difference between the two rules and according to the Revenue, it changes the whole situation - matter remanded back of ascertaining of facts correctly.

Waiver of pre-deposit - appeal was not gone into by the Commissioner (Appeals) on merits and inasmuch as the appellants have subsequently deposited the entire disputed amount of duty, it deem proper to set aside the order of the Commissioner (Appeals) and remand the matter for fresh consideration after granting a reasonable opportunity of hearing - The Commissioner (Appeals) shall hear the appeal without insisting on any further deposit of interest and penalty - All issues are kept open - The appeal is allowed by way of remand -

Penalty under Section 11AC - the lower authorities have not given any option to the appellant to deposit the entire dues along with 25% of penalty within a period of thirty days of the communication of their orders, in which case penalty shall stand reduced to 25% - where such no option stands extended by the lower authorities, the same can be granted by the higher appellate forum - Appeal is disposed off

Demand - Small scale exemption benefit - Use of others Brand name - The appellant is engaged in the manufacture of gear boxes and parts falling under Chapter 84 of the Central Excise Tariff Act, 1985 - They are using the brand name ADROL on the finished product, which brand name belongs to them - They have only used the said brand name in the sale invoices, in which case it cannot be held that the same were affixed on the goods - Therefore In the absence of any evidence to show the fixation of the said brand name on the goods, no duty can be confirmed against them - Matter remanded back.

Cenvat credit - whether the Welding Electrodes used for repair and maintenance of the plant and machinery are eligible for Cenvat credit or not as input or capital goods - Held that:- the Hon ble Rajasthan High Court in the case of Hindustan Zinc Ltd. [2008 -TMI - 30617 - HIGH COURT RAJASTHAN ] had held that welding electrodes used for repair and maintenance of the parts and machinery are eligible for cenvat credit as capital goods and inputs - Decided in favour of assessee.

Waiver of pre-deposit - The impugned order nowhere discloses any opportunity having been given to the appellants to satisfy the Commissioner (Appeals) against dismissal of the appeal in respect of non-deposit of said amount - Besides, the records regarding RG entries which, as sought to be argued, reveal compliance of the said requirement were available before the Commissioner (Appeals) prior to passing of impugned order - Hence, considering the law laid down by the Tribunal in the case Uniworth Textiles Ltd. vs. CCE, Raipur[2010 -TMI - 77318 - CESTAT, NEW DELHI], the impugned order is liable to be set aside and matter remanded to the Commissioner (Appeals) to deal with the same in accordance with the law.

Reference to High Court - Modvat

Classification

Classification

Classification

Classification

Nickel articles

SSI Exemption - Brand name

Classification

Classification of goods

Classification

Demand and penalty - Limitation - Valuation

Prosecution - Delegation of power