TMI Tax Updates - e-Newsletter
January 18, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax
De-recognized interest on accrual basis on Non-Performing assets (NPA) - interest income from NPAs should be recognised only on actual receipt. - AT
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Lease rent - Business income OR income from house property - It is not a case that the assessee had to let out the hotel building for a temporary period due to some adverse business conditions. - lease rent is liable to be assessed under the head "Income from house property" - AT
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Central Excise
Abatement of duty in case of non-production of goods - Rule 10 of Pan Masala Packing Machines Rules - an assessee is entitled to abatement provided there has been no production in the factory for a continuous period of 15 days. - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2013 (1) TMI 381
Quantification of relief u/s 10A - interest income with respect to FDs placed as margin money with banks for obtaining credit facilities - Income From Business or Income From Other Sources - Held that:- Following the decision of CIT vs. Indo Swiss Jewels Ltd. (2005 (9) TMI 47 - BOMBAY HIGH COURT) & Jewelex International P Ltd. [2010 (9) TMI 906 - ITAT MUMBAI] wherin held that the interest earned on the short-term deposits of the money kept apart for the purpose of business has to be treated as income earned on business and cannot be treated as income from other source. As decided Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] the purposes of sub-ss (1) and (1A) of s. 10A, that the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking - As decided in Mysodet (P) Ltd. v/s CIT [2008 (9) TMI 7 - SUPREME COURT] wherein held that if assessee is doing export business exclusively hence “export turnover & total turnover” would be identical, if the entire sale proceeds are brought into India in convertible foreign exchange within the prescribed time limit - against revenue . Exclusion of expenditure incurred on account of insurance, internet charges, telephone charges, from the term “export turnover” for the purpose of computation of relief u/s 10A - Held that:- this ground is misconceived, as the Commissioner (Appeals) has directed that the expenditure in question are required to be reduced both from export turnover as well as from total turnover in line with the judgment of Gem Plus Jewellery India Ltd [2010 (6) TMI 65 - BOMBAY HIGH COURT] - appeal decided in favour of assessee.
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2013 (1) TMI 373
Unaccounted investments - survey u/s 133A - statement of confession on additional income from the Managing Partner - Jurisdiction power u/s 263 by CIT(A) as felt that the additional income disclosed for each each year should have been taken into account separately while making the assessment - set aside the assessment and directed the AO to re-frame the assessment afresh - reopening of assessment - Held that:- There was a change of incumbent in the office of the Assistant Commissioner twice. The ACIT who conducted the survey, got transferred and the notice under Section 143(2) was issued by another Assistant Commissioner. He also got transferred out. The assessment was completed by his successor, the Deputy Commissioner of Income Tax. Moreover, it is stated that consequent to the survey, the assessee informed the ACIT of their willingness to offer additional income of Rs.1.5 Crores to cover up the unexplained investments and this offer was in addition of the projected income of Rs.1 Crore. There is no mention that it is subject to verification of accounts which is the case set up by the appellant now. The request was only that not to again tax the income in the hands of the partners and that the same should not result in complication in sales tax cases. Thereafter, a letter was issued by the appellant stating that the offer of additional income during the survey was mistaken and the correct investment would not exceed Rs.35 lakhs. It is also stated that the income has escaped assessment, in that, the disclosure made was neither considered by the new incumbent assessing officer, nor disclosed by the assessee in the return filed and there was failure to declare the true and full facts. The matter relates to the assessment year 2006-2007 where the assessment was completed on 22.12.2008. Ext.P6 impugned notice(reopening assessment) is dated 09.12.2011, i.e. issued after the expiry of four years from the end of the assessment year. As held in Sowdagar Ahmed Khan v. Income-Tax Officer, Nellore (1967 (11) TMI 10 - SUPREME COURT) the duty is not discharged by production of the books of account or other evidence and the assessee has a duty to bring to the notice of the officer the particular items in the books of account or the portions of the documents which are relevant. Established fact of escaped income, is not the legal requirement at the initiation stage as held by the Apex Court above. It is in the realm of subjective satisfaction.Therefore, it may not be justified in this proceedings to hold that Ext.P6 notice is without jurisdiction because the learned Single Judge has permitted the appellant to file objections to Ext.P6 notice and it is for the assessing officer to take a decision after considering the objections. It is not open for this court to veto further action pursuant to Ext.P6 on the basis of the Writ Petition filed by the appellant. This is a case where the appellant had not cared to file any objection to Ext.P6. It was in the exercise of discretionary jurisdiction that the Single Judge permitted the appellant to file objections. In fact, the stand of the the Revenue is that the objections will certainly be considered in such circumstances, we only observe that the objections which the appellant has filed must necessarily be considered and reasons must be given but do not deem it necessary that we should direct that a separate order must be passed.
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2013 (1) TMI 372
Long-term capital gain on transfer of leasehold rights - non consideration for transfer of building or reducing the said amount from sale consideration of rights in land - CIT (A) uphold invocation of Section 50C to the transaction of transfer of capital asset made by the appellant - assessee contested against non referring the valuation of the capital asset to the District Valuation Officer - stamp duty rate applicable on April, 2007 i.e. the date of the Memorandum of Understanding or stamp duty rate as on February 2008 - Assessee’s contented that since this plot of land was a leasehold right only, it was neither a land nor a building - Revenue stated that Assessee has substantial right in the property as can be seen from the MoU entered with M/s Unnati Technology (P) Ltd as clearly mentioned in agreement that under section 20 of the urban land (Ceiling & Regulation Act) 1976 (ULC) the competent authority has granted exemption to the Assignor to hold the excess vacant land admeasuring 10536.53 sq. meters on the terms and conditions therein - Held that:- A complete conclusion whether assessee had complete rights over the land and to what extent the valuation has to be determined u/s 50C is not to be arrived in the absence of complete details like the application made to ULC, the copy of the ULC order and further the agreements entered by M/s Unnati Technology Pvt. Ltd subsequent to construction of building with third parties for sale or assignment of rights therein. Nothing was brought on record either by assessee or by the Revenue to examine whether the said M/s Unnati Technology Pvt. Ltd has only constructed the building for development or has transferred further rights to some other parties - direct AO to obtain the complete information and examine of facts and also to make further inquiries to establish assessee’s rights over the properties. Reduction of value of the building and adjusting in the block of assets - Held that:- AO was not correct in excluding the value altogether. He has not examined the issue in its entirety. Since already observed that the building was also transferred, it is necessary for AO to examine how much property was transferred and whether the same has to be adjusted under the provisions of section 50 or under section 43(6) in the block of assets - restore the matter to the file of AO to examine this and do accordingly. The contention of cost of acquisition is also restored to the file of AO. Just because assessee has not claimed at the time of filing the return, statutory obligation of deducting the cost of acquisition cannot be brushed aside. There is information on record that assessee did pay premium at the time of acquiring property by way of lease and assessee has filed a valuation report before the AO claiming the value as on 01.04.1981 and subsequent indexation as per the provisions of law. AO is directed to examine this claim and allow the cost of acquisition as per the facts and law. The other contention about date of adopting valuation (whether date of MOU or date of Registration) has become academic as the application of Section 50C itself was restored to AO in its entirety - in favour of assessee for statistical purposes.
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2013 (1) TMI 371
Rectification of mistake - assessee seeks to get the order of the Tribunal recalled - Held that:- The mistake to be rectified must be one apparent from the record. A decision on the debatable point of law or undisputed question of fact is not a mistake apparent from the record. The plain meaning of the word 'apparent' is that it must be something which appears to be so ex facie and it is in capable of argument or debate. Section 254(2) of the Income Tax Act, 1961, empowers the Tribunal to amend its order passed under section 254(1) to rectify any mistake apparent from the record either suo moto or on an application. The assessee has not been able to point out any apparent mistake in the order passed by the Tribunal and in case application of the assessee is accepted, it would tantamount to review of the order of the Tribunal, as has rightly been pleaded by the DR which is not permissible under law as all the points raised in the appeal has duly been considered and decided while arriving at the conclusion as drawn. See CIT v. Gokul Chand Agarwal [1992 (4) TMI 19 - CALCUTTA HIGH COURT] & CIT v. I.T.A.T [1993 (3) TMI 25 - ANDHRA PRADESH HIGH COURT] - misc. application filed by the assessee gets dismissed.
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2013 (1) TMI 370
Jurisdiction power u/s 263 by CIT(A) - disallowing depreciation granted by the A.O. consequent to R&D expenses being assessed as being capital in nature - Held that:- The assessee had claimed this expenditure as revenue expenditure however, the A.O. added it being treated this expenditure as capital expenditure on which depreciation @ 25% was allowed. The appellant has carried this matter before the CIT(A), which is pending. Thus, the order of the A.O. had been merged with CIT(A). Therefore, CIT does not have any jurisdiction to consider this aspect. The ld. A.O. has inquired and gone through the details of expenses which has been found by him as enduring nature on which even depreciation @ 25% has been allowed by him. Therefore, it is tantamount to change of opinion. The addition made in original order by A.O. had been disputed by the assessee before the CIT(A). The order of A.O. had been merged with CIT(A) on these issues. Thus, we set aside the order of CIT-III, Baroda. It is clarified that we have not expressed any view on nature of expenses whether it is capital or revenue and also whether depreciation is allowable or not. Therefore, the lower authorities are free to take decision as per law.
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2013 (1) TMI 369
Transfer pricing adjustment made by the TPO - operating margin to be taken at 11.96% or 9.47% as taken by assessee - assessee is a domestic company formed by a shareholding between Sitel Group & TATA group with 50% stake each - Assessee in the TP study used TNM method to benchmark its ALP for its transaction with AE - CIT (A) has not only shifted the method adopted by assessee and the TPO but also changed the "tested party" - Held that:- Assessee's TP study has not been considered by the TPO as vide Annexure-D to the TP study assessee has selected ten comparable companies and summary of net cost + margin varies from -6.04% to 19.06%. Mean arrived at assessee's TP study was at 9.47%. How this amount was rejected and why it is fixed at 11.96% could not be discerned from the order of the TPO, as it is very brief without any discussion. Further when assessee raised arguments on various issues and submitted that the total profits earned by the AEs and assessee put together and furnished the information how the profits are apportioned between the AE and assessee, the CIT (A) shifted tested party from assessee to AE and that too only two AEs were accepted in which there were profits, ignoring the AEs which incurred losses on various projects. Even after considering the profit companies, the CIT (A) arbitrarily fixed the margin at 6% without there being any basis and arrived at the TP adjustment restricting to Rs. 54,56,479. Therefore, neither the TPO's order can be considered as appropriate nor the order of the CIT (A) on the given facts of the case - even though the method of TNM was accepted, the CIT (A) went by profit split method and further restricted to two AEs by shifting the tested party from assessee to AE, in view of this, the matter should be restored to AO for fresh consideration by the TPO. Treatment of interest on term deposit receipts and miscellaneous income - Held that:- Undisputedly the assessee is not in regular business of lacing various deposits and therefore, the interest income has no direct or live connection with the business undertaking of the assessee and particularly, the export articles or things and computer software. Thus in view of the decision in the case of Liberty India (2009 (8) TMI 63 - SUPREME COURT) interest earned by the assessee on surplus funds deposit in the bank does not come under the first degree of source of profit derived from profit of business of undertaking. Accordingly, this issue is decided against assessee. Deduction under section 10A - Held that:- As decided in Sak Soft Ltd's case [2009 (3) TMI 243 - ITAT MADRAS-D] & CIT v. Gem Plus Jewellery India Ltd.[2010 (6) TMI 65 - BOMBAY HIGH COURT] whatever is excluded from the export turnover has to be excluded from the total turnover also while computing the deduction under section 10A. In view of this, AO is directed to exclude the communication line charges from the total turnover as well.
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2013 (1) TMI 368
De-recognized interest on accrual basis on Non-Performing assets (NPA) - assessee company has been regularly maintaining its accounts on mercantile system - Held that:- The assessee company is incorporated under the Companies Act, 1956 as a registered Non-Banking Finance Company secured a licence from the RBI u/s 45-I of the RBI Act, to carry on the business of non-banking finance, including micro-finance services. It was in accordance with directives of the RBI also in accordance with the Accounting Standards issued by the ICAI, that the assessee de-recognised the interest on NPAs. Apropos interest de-recognition of NPAs, in accordance with the RBI directions, once the NPAs are identified as such, interest recognition thereon is stopped. This is so, for when the principal is not likely to be recovered, where a default has occurred, the question of accounting interest is otiose. It is in accordance with this that the interest has been stopped. Then, as per the Accounting Standards, any income accruing on assets already matured, is to be stopped. Further, the RBI directions also state that income from NPAs will not be recognized merely on the basis of accrual and it should be recognized only when actually received, i.e., on cash basis. Where no income has resulted, no income can be said to have accrued, just because the mercantile system of accounting is being followed. Following decision of CIT v. Motor Credit Co. (P.) Ltd. [1980 (4) TMI 64 - MADRAS HIGH COURT] CBDT Circular No. 491 dated 30.06.1987 it has been held that interest income from NPAs should be recognised only on actual receipt. Interest on sticky advances is to be allowed if the assessee is following the mercantile system of accounting and has changed the method of accounting to cash basis for recognizing the interest on sticky loans. Though this Circular is applicable to State Finance Corporations, it applies equally to NBFCs too - issue in favour of the assessee. Provision for doubtful debts - Held that:- This matter stands concluded against the assessee and in favour of the department as decided in Southern Technologies Ltd. v. Jt. CIT [2010 (1) TMI 5 - SUPREME COURT OF INDIA] holding that provision for non-performing assets debited to the Profit Loss Account by an NBFC, made under the RBI Prudential Norms, can be treated as income, and that it is not expense deductible u/s 36(1)(vii) or (viia)of the IT Act. No decision to the contrary has been relied on before us by the assessee - against assessee.
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2013 (1) TMI 367
Disallowance u/s 43B – Late deposit of employees contribution to PF – Held that:- As decided in case of P.I. Drugs & Pharmaceuticals Ltd.(2010 (8) TMI 768 - ITAT MUMBAI) that as long as even employees' contribution to PF and ESIC are paid by the assessee before the due date of filing the income tax return, the same are to be allowed as deduction in computation of income of the assessee. In favour of assessee Disallowance u/s 43B - Octroi charges and interest accrued but not due to UTI – Held that:- The assessee had paid the octroi due in the shape of advance payment and there is no outstanding or default; the disallowance u/s 43B on this account is not justified. In favour of assessee Disallowance u/s 43B - Interest accrued but not due to UTI – Held that:- As per the agreement between the parties, interest was not become due for payment, even till the due date of filing of the return of income, the provision of Section 43B would not be attracted. As decided in case of Gujarat Toll Road Investment Company Limited (2009 (5) TMI 582 - ITAT AHMEDABAD-C) decided in favour of assessee Expenditure on scientific research u/s 35 – AO disallowed on ground that the project was not completed and not capitalized as on 31.3.2003, then the amount is not used for the purpose of scientific research – Held that:- Section 35 does not require that the assessee's excess assets should aloe be capitalized in the books of account or put to use. Further A.O. has allowed the claim u/s 35 in the subsequent year; but only on the balance cost because the claim for the AY under consideration is under dispute. In favour of assessee Whether share in the loss of AOP can be set off against the other business income - Held that:- As decided in case of Ramanlal Madanlal (1978 (2) TMI 54 - CALCUTTA HIGH COURT) when the loss is eligible for carry forward and set off as per the provisions of Chapter VI of the I T Act in the hands of the AOP, then no such claim can be allowed in the hands of the member of the AOP. In favour of revenue Deduction u/s 80IA(4) – work contract or not – Held that:- Status of the assessee can be determined from the terms and conditions of the contract whether it is a rate contract or even a labour contract or a lump-sum contract or the assessee is a developer. Nothing has been produced before us by the assessee to controvert the finding of the Commissioner of Income Tax (Appeals); even the assessee has not produced a single contract/agreement under which the project, which is the subject matter of the controversy are carried out by the assessee. In favour of revenue Deduction u/s 80M – allocation of interest expenditure - Held that:- A.O. while allocating the pro-rata interest attributable to the dividend income has not disallowed the corresponding amount of interest expenditure from the business income of the assessee u/s 36. When the A.O. has accepted the entire expenditure as business expenditure u/s 36, then the apportionment of the interest without establishing the nexus between the borrowed funds and the investment is not justified. In favour of assessee Computation of book profit u/s 115JB – MAT - Adjustment in respect of share of loss in the AOP – Held that:- There is no quarrel on the point that other than the adjustments as provided u/s 115JB, the A.O. cannot make any adjustment in the book profit arrived at as per the accounts prepared in accordance with Schedule VI. However, in the earlier years, the assessee itself has claimed that the shares in the AOP should be excluded while computing the book profit as per the provisions of sec. 115JB and on the similar analogy, the assessee itself has added back the amount of share in the loss of AOP for the year under consideration while computing the book profit u/s 115JB. In favour of assessee Software expenditure – Revenue v/s capital nature – A.O. disallowed the claim of the assessee by treating the same as capital in nature and allowed 25% depreciation on the same - Held that:- As decided in case of Datacraft India Ltd. (2010 (7) TMI 642 - ITAT, MUMBAI) that the expenditure has been laid out for acquiring the intangible assets to be used by the assessee for a number of years and therefore, the same will have an enduring benefit. However, since this intangible asset is part and parcel of computation. In favour of assessee Disallowance of general expenses – payment for pooja - donation for local festivals - benevolent activities – Held that:- As decided in case of Shahzada Nand And Sons (1977 (4) TMI 4 - SUPREME COURT) that the requirement of commercial expediency must be judged in the context of current socioeconomic thinking. It is an undisputed fact that no business can be conducted in hostile, socioeconomic environment. The expenses incurred on the activities which create a suitable environment and impression with reference to image and smooth functioning of the business activity of the assessee by gaining the trust of the employees as well as the local public in the affairs of the assessee company. In favour of assessee Disallowance of relief u/s 91 – DTAA – Relief of double tax paid in the country outside India as well as in India - Tax paid in Bhutan – There is no agreement under section 90 for the relief or avoidance of double taxation - Held that:- Since the average rate of tax in India is higher than the Bhutan; therefore, the relief u/s 91 is allowable at the rate of average tax paid in Bhutan being lower rate of tax than in India. The computation of relief by the A.O. is contrary to the relevant provisions of the Act as provided u/s 91 of the act. The A.O. has computed the income from Bhutan operations at Rs. 68.63 Crores and included the same in the total income of the assessee, then the relief u/s 91 is allowable @ 8.53% on the said income, which is subjected to tax in both the countries. - Remand back to AO in favour of assessee Interest u/s 234D - Interest on excess refund – Held that:- since the assessee has contended that the assessee has not received any amount of refund granted u/s 143(1); therefore, no interest is chargeable u/s 234D; even when the amount of refund is reduced at the time of assessment passed u/s 143(3). – Matter remitted back for fresh decision. Disallowance of old debit balance written off - write offs pertain to old debit balances of closed projects which are not recoverable – Held that:- The assessee has not produced any records to show that this amount has already included in the income of the assessee in the earlier year. Therefore, in the absence of the relevant details to show the compliance of mandatory conditions as prescribed u/s 36(2) In favour of revenue Computation book profit u/s 115JB - Adjustment in respect of the amount of disallowance u/s 14A – Held that:- There is no dispute that as per the clause (f) of Explanation I to sec. 115JB the expenditure debited to P&L Account incurred in relation to the income exempt u/s 10 is to be added for computation of book profit. As decided in case of GODREJ AND BOYCE MFG. CO. LTD. (2010 (8) TMI 77 - BOMBAY HIGH COURT) that any expenditure which is disallowed u/s 14A and attained the finality has to be added back while computing the book profit. Remand back to AO Fresh claim without filling revised return - Exemption u/s 10(35) has not been claimed in return of income – Held that:- Since the bar for entertain the fresh claim without filing the revised return is only with the jurisdiction of the A.O. and not the jurisdiction of the appellate authorities. The Tribunal as taken this view in series of decisions that such claim can be entertain by the appellate authority even without filling the revised return. Therefore, in the interest of justice, we remit this issue to the record of the A.O. to decide the same on merit. In favour of assessee
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2013 (1) TMI 366
Validity of notice u/s 148 - Reopening of assessment u/s 147 – Escaped assessment – Change of opinion - Assessee was engaged in the business of development and construction of real estate – Reason of belief - Deduction u/s 80-IB(10) was wrongly claimed - Held that:- The assessee disclosed the factum of housing project, the construction of shops and the profit derived therefrom. These were the primary facts sufficient for the A.O. to proceed in its assessment process. He had undertaken such process and applied the facts to the provisions of law by applying his mind. An error, a slip, an omission or a mistake on part of the assessing officer in that regard would not furnish a ground to reopen. For, the reopening proceedings are not rectification proceedings. Nor the concluded assessment can be reviewed under the garb. Conditions of section 147 of the Act and in particular the First proviso thereto, which is applicable in the present case, having not been complied with on facts, the reopening of the assessment was not permissible. The assumption of jurisdiction by the respondent-Income Tax Officer seeking to reopen the assessment for the A.Y. 2005-2006 was, therefore, beyond his powers and, was illegal. As a result, the impugned notice dated 18.03.2011 under section 148 issued by the respondent is hereby set aside. In favour of assessee
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2013 (1) TMI 365
Validity of re-assessment u/s 147 – Notice u/s 148 - Re-opening of assessment - AO have specific and credible information from his counter-part - AO had reason to believe that the consideration received by assessee from the transfer of her property was liable to be taxed – Under the head “long term capital gains” - Escaped assessment in lieu of non-disclosure of LTCG in her return of income – Held that:- There was no trace of any objection worth the name for the reasons recorded for reopening of the assessment. Following the decision in case of Rajesh Jhaveri Stock Brokers P. Limited (2007 (5) TMI 197 - SUPREME COURT) that to confer jurisdiction u/s 147(a), two conditions were required to be satisfied, firstly, the AO must have reason to believe that income profits or gain chargeable to income-tax have escaped assessment and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year Hence, decides in favour of revenue Capital Gain – Sale of Land – Bringing to tax by way of LTCG - Held that:- Following the decision on identical issue in case of the assessee’s husband Shri V. S. Balasubramanyam. The issue raised by the assessee is akin to the issue considered in the case of the assessee’s husband. Accordingly, this issue goes against the assessee.
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2013 (1) TMI 364
Lease rent received - business income OR income from house property - Held that:- The assessee has given only license to operate the hotel. However, on a specific query from the bench, whether the assessee herein is accounting for daily collections made from the guests occupying the rooms and also the expenses on running the hotel, the assessee fairly conceded that the assessee is receiving only the fixed licence fee mentioned in the agreement and the licensee is accounting for the daily collections and expenses in his books of account. Intention of the assessee in leasing out the hotel building along with furniture, furnishings, equipments etc. - The assessee had been running the business of hotel, but incurred huge losses. Hence, it has decided to lease out the hotel building. Though in the agreement, it is mentioned that the operation of hotel is leased out, in substance, it is only leasing out of the hotel building along with the furniture, furnishings, equipments etc. The hotel is being operated by the licensee with his own funds and staffs, which is clear from the agreement, where it is stated that the licensee shall operate the hotel by appointing his own staff with the working capital funds brought in by him. The assessee has also fairly conceded that the assessee is receiving the monthly lease rent as determined in the agreement. It is a well settled proposition of law that the substance will prevail over the form. Accordingly, though the agreement entered by the assessee is titled as "Agreement of Licence", yet on reading the various clauses of the agreement, the impugned agreement has to be considered as lease agreement for letting out the hotel building with furniture, furnishings, equipments etc. The various conditions have been imposed upon the licensee only to ensure that the hotel premises should continue to be operated as only hotel. It is not a case that the assessee had to let out the hotel building for a temporary period due to some adverse business conditions. The decision to lease out the hotel building has been taken, since the assessee was incurring of huge losses in the operation of the hotel. Under these circumstances, it cannot be held that the assessee has leased for a temporary period. In fact, the lease period is 7 years, which is quite a long period.As per clause III under Article XV of the agreement entered into between the assessee and the licensee, the lease period shall be automatically extended, if the licensee is constrained to pay the loan liabilities on behalf of the assessee herein and the extension shall be till such time the entire amount paid by the licensee is recovered. Thus, it cannot be categorically stated that the lease period is only seven years. Clause numbered as 'Item-IV' under Article XV of the agreement states that this agreement is not an agreement for creation of a "managing agency", which falsifies the contention of the assessee that it has entered into this agreement only to give the operation of the hotel. Further, under this clause, it is made very clear that the intention of the parties is only to create a license, i.e., the intention is only to lease out the hotel building along with furniture, furnishings, equipments etc - thus applying the est suggested by the five judges' Bench in the case of Sultan Bros. (P.) Ltd. [1963 (12) TMI 4 - SUPREME COURT] the intention of the assessee was to let out the hotel building and hence it cannot be considered that the assessee was exploiting the property for its commercial business purposes and the lease rent is liable to be assessed under the head "Income from house property" - in favour of revenue.
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Customs
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2013 (1) TMI 363
Writ of Certitorarified Mandamus - petitioner was the owner of the goods carrier - Commercial Tax Officer on routine inspection found it carrying huge quantity of foreign liquor - goods were detained - Commercial Tax Department intimated the Customs Department to seize the foreign liquor bottles under a mahazar dated 28.6.2011 in the presence of two witnesses - SCN issued - Held that:- Plea taken by assessee that the Customs Department has not discharged its burden in proving the illicit importation of the goods, does not arise in this case, as the burden is on the person who claims to be the owner of the goods so seized. Therefore, the plea that Section 123 of the Customs Act is not attracted and goods are not liable for confiscation cannot be sustained - against petitioner. Delay in issuance of show cause notice from the relevant date - Held that:- The goods were seized under the mahazar by the Customs Department on 28.6.2011 and the show cause notice was issued on 23.12.2011, to wit within six months. In any event, Section 110 of the Customs Act, which has been referred to by the petitioner, has nothing to do with the show cause notice, as it relates to detention of the goods beyond the period specified. Thus, that provision does not render the show cause notice bad. The second plea taken by the petitioner is therefore unsustainable in law. Materials given at the time of enquiry have not been considered in the show cause notice and the action should have been dropped - Held that:- At the stage of show cause notice, the authority gathers the materials and issues notice for proceeding under the Customs Act. It is at the stage of adjudication the relevant materials will be considered by the competent authority and confiscation or penalty, as the case may be, will be ordered on the merits of the case. There is no substance in pleading that at the stage of enquiry the authority should have dropped the proceeding as against the petitioner. That will amount to prejudging the issue by an authority, who does not have the jurisdiction to do so. Goods in question have not been seized by the Customs Department therefore no penalty on the petitioner as registered owner - Held that:- This fact can be brought to the attention of the adjudicating authority at the time of hearing the case and the authority is bound to consider the said plea in the light of the mahazar drawn by the Customs Department. This Court is not inclined to go into the factual aspects of the case . Admittedly, the goods in question are foreign liquor bottles and no document appears to have been produced. The vehicle stands in the name of the petitioner, which however is denied by the petitioner stating that she has sold the vehicle based on a sale receipt and delivery note. These are all factual aspects of the case which have to be considered by the adjudicating authority to come to a conclusion regarding the involvement of the petitioner in the alleged offence. All the plea taken by the petitioner on facts are issues to be decided in adjudication in the result, finding no merits the writ petition is dismissed giving liberty to the petitioner to submit her reply to notice and participate in the adjudication process, which will be conducted in accordance with the provisions of the Customs Act.
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2013 (1) TMI 362
Penalty u/s 116 of the Customs Act, 1962 - Short landing of goods - Petitioner contended that Tally-sheet would show that the quantity actually discharged is in consonance with the Bill of Lading and there is no short landing - Held that:- Since the Adjudicating Authority as also Revisional Authority have not considered the Tally-sheet, it would be just and proper to set aside the order - Remand back to pass fresh order-on-merit
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2013 (1) TMI 361
Release of confiscated goods - Mis-description - Petitioner claims a direction to the respondent to release a consignment - Goods are of perishable nature and subject matter of SCN – Held that:- The order of the Tribunal reveals that the confiscation directed by the Commissioner of Customs was set aside. Tribunal’s order was delivered on 12-6-2012, the customs authorities should have taken action upon the request of respondent and allowed it. The goods are perishable in nature; the respondent is hereby directed to ensure that the goods which are subject matter of appeal before CESTAT in Customs Appeal. Goods released at the earliest. In favour of assessee
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Corporate Laws
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2013 (1) TMI 360
Writ filed in public interest by an Advocate practicing in this Court - questioning the functioning of the Tribunal without the Presiding Officer - Held that:- Public interest litigation affecting the administration of justice, at the instance of the Advocates practicing in the court/fora and representing litigants before that court/fora can be entertained in as much as those lawyers would have locus to the extent of being directly affected by the functioning of the said courts/foras. However the petitioner herein who is represented through another counsel who is registered with the Bar Council of Rajasthan and has given the address of his Jaipur office also are indeed strangers and not concerned with the Tribunal qua functioning whereof grievance has been made. Therfore not inclined to entertain the present petition, which appears to be for the benefit of persons interested in delaying the proceedings before the Tribunal, rather than in public interest. The reliefs claimed in this petition, aimed at bringing the functioning of the Tribunal to a standstill to be in public interest. Thus following guidelines in relation to public interest litigations as stated in Guruvayoor Devaswom Managing Committee v. C.K. Rajan [2003 (8) TMI 470 - SUPREME COURT] the present is not a fit case for being entertained any further, in public interest.
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FEMA
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2013 (1) TMI 374
Penalty imposed upon the partners of firm - Whether Tribunal was justified in deleting the penalty imposed upon the partners of the firm on the ground that the penalty against the firm has been confirmed - Held that:- Following the decision in case of Overseas Textiles Corporation (2012 (9) TMI 388 - BOMBAY HIGH COURT) that in absence of lapses/negligence/mala fides on the partners of the firm in realizing the export proceeds, imposition of penalty, against the partners is unjustified especially when the penalty imposed against the firm has been confirmed - In favour of assessee
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Service Tax
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2013 (1) TMI 379
Recovery of interest - Commissioner(Appeals) has directed that interest should be charged only w.e.f. 05.04.2008 even though PAN based Service Tax registration was granted to the Appellant from 12.05.2008 - Held that:- As before the Commissioner(Appeals), no argument was advanced citing the provisions of law now mentioned in the grounds of appeal by the department, and as there was no Show Cause Notice issued by the Appellant directing payment of interest for the month of February, 2008 and March, 2008, except a remark by the assessing officer, thus the Commissioner(Appeal) has no occasion to refer and record his finding on the relevant provisions. In these circumstances it is necessary that the case be remanded to Commissioner(Appeals) to which the A.R. has no objection. The department is free to raise all the grounds now raised before this Tribunal and the Commissioner(Appeals) is directed to consider the said grounds and decide the issue afresh with a reasonable opportunity be afforded to both sides. Appeal of the Revenue is allowed by way of remand.
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2013 (1) TMI 377
Service tax on GTA services - availing the abatement of 75% on the gross taxable value in terms of Notification No.1/2006-ST dated 01.03.2006 - denial of abatement on general declaration filed by GTA service provider - period from April, 2007 to December, 2007 - Held that:- Recently, the Hon ble High Court of Gujarat in the case of CST, Ahmedabad vs. Cadila Pharmaceuticals [2013 (1) TMI 353 - GUJARAT HIGH COURT] has allowed the abatement of CENVAT Credit to the extent of 75% on the basis of the general declarations filed by the respective Goods Transport Agencies. Also see CCE, Rajkot vs. Sunhill Ceramics Pvt. Ltd.[2007 (12) TMI 24 - CESTAT, AHMEDABAD], CCE, Vapi vs. Neral Paper Mills P. Ltd [2008 (12) TMI 121 - CESTAT AHMEDABAD] - in favour of assessee.
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2013 (1) TMI 376
Demand of Service Tax - Extended period of limitation - Photography services - non-inclusion of cost of goods and materials - Circular F. No. 233/2/2003 CX-4 dated 7.4.04 - Held that:- Following the decision in case of SHOBHA DIGITAL LAB. (2011 (8) TMI 721 - CESTAT, NEW DELHI)wherein it was observed that due to divergent views of various judicial /quasi-judicial authorities on the issue of inclusion of cost of goods in the assessable value of photography services, there could be a bonafide doubt on the part of the assessee. Therefore demand raised in 2009 for the period 2003-2006 is hopelessly barred by limitation. In favour of assessee
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2013 (1) TMI 375
Validity of Order - Non-consideration of relevant evidence – Order without following the direction of High Court - Whether order of Tribunal stands vitiated since the hearing was concluded on 17-8-2011 and the order was passed on 14-2-2012 with a delay of nearly six months in passing the order from the date of conclusion – Held that:- The Tribunal has not specifically dealt with some of the aforesaid vital issues in spite of the directions given to that effect by this Court. The order of CESTAT (2012 (4) TMI 456 - CESTAT, MUMBAI) is quashed and set aside. CESTAT is directed to pass fresh order.
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Central Excise
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2013 (1) TMI 359
Cenvat Credit on the excise duty paid on Cement, MS Angles, MS Channels, TMT/CTD bars, MS rounds, MS Squares, Joists, Beams etc. - assessee challenged the show cause notice on the ground that the contents thereof indicate that the respondent had predetermined the liability of the petitioner company - Held that:- The impugned show cause notice by use of the words "it is clear" at various places as pointed out clearly suggests predetermination by the respondent of the liability of the petitioner. The fact that it even quantified the amount of Cenvat Duty wrongly availed of by the petitioner allegedly, corroborates this view. Following the decision of Oryx Fisheries (P.) Ltd v. Union of India [2010 (10) TMI 660 - SUPREME COURT OF INDIA], Siemens Ltd v. State of Maharashtra [2006 (12) TMI 203 - SUPREME COURT OF INDIA] and Rajam Industries (P.) Ltd v. Dy. CTO [2010 (6) TMI 249 - MADRAS HIGH COURT] set aside the impugned show cause notice issued by the respondent with a direction to the respondent to issue a fresh show cause notice clearly indicating the issues on which prima facie the petitioner appears to have availed of the Cenvat Credit allegedly without justification . While issuing such show cause notice, the respondent should ensure that it does not indicate any premeditation or prejudgment by the respondent. In case any such fresh show cause notice is issued by the respondent, the respondent shall also furnish the material on the basis of which the show cause notice is issued and give reasonable opportunity to the petitioner to file its objections with supporting material apart from personal hearing (if sought by the petitioner) and then pass a reasoned order in accordance with law.
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2013 (1) TMI 358
Demand of duty on the CENVAT credit - Whether the Tribunal is justified in holding that there is a possibility of using of inputs inspite of respondents statement when the respondent contends that the same is unfit for use? - Held that:- Respondent contested that the goods were damaged during transit and as a result of which the inputs could not be used for manufacturing the final products. If it is so, the Tribunal did not consider the vital aspect of the matter on account of the damaged causes to the inputs, it cannot be used for final product and when the respondent has claimed the insurance, we are at a loss to understand how the claim of the appellant can be considered as premature. When the demand is in respect of the period from January 1997 to November 2000, when the appeal is disposed of in the year 2005, at least the Tribunal was required to examine, whether the respondent has used inputs for the manufacture of final products and duty has been paid by the respondent to the appellant and without ascertaining this factual aspect, the Tribunal has erroneously passed an order. In the circumstances, the matter is required to be reconsidered by the Tribunal afresh in accordance with law. Accordingly, this appeal is allowed and all the contentions are left open.
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2013 (1) TMI 357
Waiver of pre-deposit - Wrongly claiming abatement - Assessee is manufacturer of Portland Grey Cement – Availing SSI exemption - Cleared the goods on payment of duty beyond the limit of SSI exemption - After claiming abatement of 30% on MRP - Notification No. 14/2008-C.E. (N.T.), dated 1st March, 2008 - Notification No. 4/2006-C.E., dated 1-3-2006 – Held that:- It appears that the clearances made by the party from 23-9-2008 to 31-3-2010 (period during which Central Excise duty was paid by the party) are covered by Serial No. 1A of the Notification No. 4/2006-C.E., dated 1-3-2006, as amended. It is prima facie evident that vide show cause notice, the appellant was put on notice that during period in question he was required to pay excise duty on the goods cleared by him as per Notification No. 4/2006-C.E., dated 1-3-2006. Waiver denied
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2013 (1) TMI 356
Abatement of duty in case of non-production of goods - Rule 10 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty), Rules, 2008 – Whether continuous non-production of excisable goods for 15 days should be during a calendar month - Assessee is engaged in manufacture of Gutkha - Duty on the basis of packing machine - Excisable item, under Chapter 24 - Department argued that 15 days continuous period of non-production which entitle the assessee to abatement has to be in a given calendar month – Appellant’s factory was closed for the period 1-3-2011 to 10-4-2011 – Revenue denied for abatement of 10 days of April,2011 under Rule 10 Held that:- The plea taken by department misconceived and is based on incorrect reading of Rule 10. Bare reading of the Rule shows, an assessee is entitled to abatement provided there has been no production in the factory for a continuous period of 15 days. The rule nowhere provides that continuous non-production of excisable goods should be during a given calendar month. There was no production in the factory of the assessee for a continuous period of more than 15 days, the benefit of abatement shall be allowed also for 10 days for the month of April, 2011. Therefore, claim of the assessee for abatement is fully justified. In favour of assessee
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2013 (1) TMI 355
Compounded levy scheme - under Rule 96ZP - Annual capacity of production - Closure of unit - Non- intimation - of closing stock - Electricity meter reading - Held that:- Rolling mill was being run on diesel generator set. Therefore non- furnishing of latest meter reading of electricity before the closure of the unit is not of much consequence - Rejection of abatement As regards non-furnishing of information regarding closing stock position, However, the fact remains that the officials of the department were negligent in the duty inasmuch as they did not visit the factory of the respondent for verification, despite having received intimation about the closure of production. The department has not filed report regarding those three visits for the benefit of the Tribunal. Thus, this is not clear whether or not the officials of the department verified the stock position on 17-11-1997, 22-11-1997 and 26-3-1998. Though the rule cast an obligation on the assessee to furnish information regarding stock position but this does not mean the excise official have no duty to verify the stock position. When the excise officers, however, visited the factory of the respondent on three occasions, it was expected of them to verify the stock position and presumably they must have verified the stock position, the aforesaid information has been withheld by the department. In favour of assessee
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2013 (1) TMI 354
Classification - C.S. Casting of Frame Middle Section (part of coal charging car) - Under heading No. 8474.00 – Classification approved by the Asstt. Commissioner under sub-heading No. 8431 - The Zonal Office issued a SCN to the assessee who contested the show cause notice reiterating that the goods in question were classifiable under sub-heading No. 8484 - Held that:- It is evident that immediately after approval of classification under sub-heading No. 8431, the department served the respondent/assessee with the show cause notice raising demand based on the said classification which was contested by the respondent on the plea that the classification approved under sub-heading 8431 by the Deptt. was incorrect. Therefore, it cannot be said that the respondent had accepted the classification approval done by the Asstt. Commissioner and that approval has attained finality. In favour of assessee
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CST, VAT & Sales Tax
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2013 (1) TMI 380
Tamil Nadu Value Added Tax Act 2006 - Rule 12-A of the Tamil Nadu Value Added Tax Rules, 2007 – Petitioner seeking clarification about tax rate on coconut plucking equipment – Said product taxable at 14.5%, under Entry 69 of Part C of the First Schedule of the act – Commercial Tax Officer had passed the proceedings by way of a clarification - Opportunity of being heard - Held that:- No opportunity of personal hearing had been given to the petitioner before the impugned proceedings had been passed by the second respondent, on 27.7.2012. Therefore, it appropriate to set aside the impugned proceedings of the second respondent, dated 27.7.2012. The matter is remitted back to the second respondent, for passing an appropriate order. Set aside the order - Remand back to Commercial Tax Officer
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