TMI Tax Updates - e-Newsletter dated: January 19, 2015 - with Direct Tax, Indirect Tax and GST Updates and Updates on FTP, FEMA, IBC & Corporate Laws etc. published on TMI with Latest Case Laws

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TMI Tax Updates - e-Newsletter January 19, 2015 Case Laws in this Newsletter: Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax TMI SMS Income from salary -Director claimed reimbursement of medical expenses -it is allowable expenses, can't be held as perquisite u/s 17(2) -Tri Highlights / Catch Notes Income Tax: One of the group companies of Marriott has received royalty payment @ 0.5% of gross revenue and the assessee company has received about 3% gross revenue towards marketing program. Thus it is clear tax planning by adopting colourable device - AT Visit to Get Source Income Tax: Exemption u/s 17(2)(vi) - income from salary - reimbursement of medical expenses claimed by the Director - it is allowable expenses and cannot be said to be perquisite u/s 17(2) of the Act - AT Visit to Get Source Income Tax: The vehicle in respect of which assessee seeks to claim depreciation @ 50% is a ‘light motor vehicle’ and therefore the claim for enhanced rate of depreciation is on a sound footing - AT Visit to Get Source Income Tax: Notice u/s. 153C - djudicated and decided in favor of the assesse by the High Court - AO does not have assumption for framing the assessment u/s. 153C read with section 153A of the I.T. Act. - AT Visit to Get Source Customs: Transfer of Residence Rules - Import of Cars - appellant had violated the provisions of Transfer of Residence Rules by returning to Dubai before completing the required period of stay in India - AT Visit to Get Source Central Excise: Extended period of limitation - Suppression of facts - appellant was under bonafide belief that food colour preparation shall fall under Chapter 21 while Revenue was claiming classification under Chapter 32 - demand set aside - AT Visit to Get Source Central Excise: 100% EOU - Non-utilization of yarn received without payment of duty under CT-3 certificate, in the manufacture of Terry Towel - allegation of revenue is not correct - demand set aside - AT Visit to Get Source Central Excise: Refund of Cenvat Credit - exempted goods can be exported under a Bond/Undertaking-1 in terms of Rule 19 of the Central Excise Rules, 2002 - HC Visit to Get Source Central Excise: Rebate claim - export of Gutkha under - applicant who commenced production w.e.f. 22.04.2011 rightly paid duty on pro-rata basis. - allegation of short payment by the respondent is not tenable - CGOVT Visit to Get Source VAT: TNGST - when the invoice of the petitioner contemplates interest on delayed payment, the Tribunal was justified in including the same in the taxable turnover - HC Visit to Get Source VAT: Where the choice of an assessee, as to the manner of payment of tax, is based on a particular provision of law as it stood at the time of the exercise of his option, and that basis is thereafter changed, the assessee must necessarily be given an opportunity to reconsider his option for the purposes of payment of tax in terms of the KVAT Act - HC Visit to Get Source Articles IS REVERSAL OF INPUT TAX CREDIT MAINTAINABLE WHEN THE SELLING DEALER’S RC IS CANCELLED? The Assessee is free to choose the most beneficial Exemption Notification where two Exemption Notifications are available DEPOSITORY RECEIPTS SCHEME, 2014 – AN OVERVIEW News Goods and Service Tax (GST) - PPT by Indirect Committee of ICAI Our Aim is to move Towards National Common Market for Agricultural Commodities and Improve the Supply Chain: FM Japan’s Official Development Loan Assistance to India for an Amount of Yen 50 Billion (Rs.2620 crore Approx.) for the PPP Infrastructure Financing Project of IIFCL Case Laws: Income Tax 2015 (1) TMI 664 Penalty u/s.271B - Tax Audit Report not submitted within the due date - Held that:- Appellant-assessee is a "sick unit" under the BIFR and could not finalize its Accounts and obtain the Tax Audit Report before 31.03.1994. The assessee had submitted the original Return on the basis of the provisional Balance Sheet and P & L Accounts and revised Return was filed on 04.10.1994 along with the Tax Audit Report. Therefore, there was sufficient cause behind the delay. Tribunal ought not to have reversed the order of CIT(A) whereby, the penalty u/s.271B imposed by the Assessing Officer was quashed and set aside. Therefore, the question of law as to whether the Tribunal is right in law in confirming the levy of penalty of ₹ 1,00,000/- u/s.271B of the Act is answered in the negative. - Decided in favour of the assessee. 2015 (1) TMI 663 Interest expenditure disallowed - ITAT deleted the addition - Held that:- If the Tribunal was satisfied that the expenditure was laid out or expended wholly and exclusively for the purpose of the business of the assessee there was no reason why the full amount expended should not have been allowed. It is open to the Tribunal to come to a conclusion either that the alleged payment is not real or that it is not incurred by the assessee in the character of a trader or that it is not laid out wholly and exclusively for the purpose of the business of the assessee and to disallow it. But it is not the function of the Tribunal to determine the remuneration which in their view should be paid to an employee of the assessee. Appeal dismissed. - Decided in favour of assessee, 2015 (1) TMI 662 Penalty under Section 271(1)(c) - ITAT deleted penalty on the ground that income is determined on estimate basis - assessment challenged - Held that:- Assessment made is just and proper. The statements made in the affidavits are not based on any record or corroborated with cogent evidence. The presumption raised by the papers which were seized from the custody of the appellant had not been rebutted. - Decided against assessee. Addition had been sustained purely on estimate basis and no positive fact or finding had been had been found so as to even make the addition which was a pure guess work, no penalty under section 271(1)(c) of the Act could be said to be leviable on such guess work or estimation. Thus penalty has been wrongly imposed under Section 271(1) (c). - Decided in favour of assessee. 2015 (1) TMI 661 Cash credit - ITAT deleted addition - Held that:- From a perusal of the order passed by the CIT (Appeals) as well as the Tribunal, we find that the issue as raised is a pure question of fact as has been concurrently found by the CIT (Appeals) and the Tribunal. Accordingly, there being no infirmity in the above order of the Tribunal, the first question of law is answered in favour of the assessee. - Decided against revenue. Rule 46A - whether ITAT is right in law in not considering the fact that Rule 46A had been violated by upholding the action of the CIT Appeals? - Held that:- Insofar as the second question of law is concerned, since the procedure prescribed under the Act has been complied with, the second question of law is also answered in favour of the assessee. - Decided against revenue. 2015 (1) TMI 660 Deduction u/s 80IB - Net interest exclusion while working out deduction instead of gross income as held by ITAT - Held that:- As decided in case of ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income Tax [2012 (2) TMI 101 - SUPREME COURT OF INDIA] ninety per cent of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profit of business of the assessee as computed under the head "Profits and gains of business of profession", was to be deducted under clause (1) of Explanation (baa) to section 80HHC for determining the profit of the business. - Decided in favour of the assesseee. 2015 (1) TMI 659 Indo-US DTAA - amounts received from the Indian Hotels under an agreement titled as “International Sales and Marketing Agreement” - whether are not reimbursement of expenses - taxability as “Royalty” or “Fee for included services” - Held that:- In the instant case, the assessee has undertaken the job of marketing the “Marriott / Rennaisance” brands. There is no doubt that the assessee company belongs to Marriott group. Further the claim of the assessee that it was undertaking the marketing work on cost to cost basis without any mark up defies the business logic or prudence. A commercial company shall never work without profit. The very fact that it was functioning on cost to cost basis or without profit motive itself proves that the assessee company is only an extended arm of “Marriott group company” owning the Brand name. Hence, we are of the view that the assessee company, being only an extended arm of “Marriott group company” owning the Brand name, can be considered as a facade of that company. We have already noticed that one of the group companies of Marriott has received royalty payment @ 0.5% of gross revenue and the assessee company has received about 3% gross revenue towards marketing program. Thus it is clear tax planning by adopting colourable device. Accordingly,as separate legal identity of the assessee company gets blurred and corporate veil should be lifted. Hence, the amount received by the present assessee company should be examined from the point of view of the original owner of the brand. We have already noticed that all the advertisement/marketing program are carried out in the name of “Marriot” and/or “Rennaissance”. Hence all of them go to swell the existing Brand names referred above. Hence they become taxable as royalty in terms of Article 12 of the Indo US DTAA. However as argued by ld. AR, the assessee in whose hands these amounts are to be assessed is the question that needs to be answered. In our view this question requires examination at the end of the AO. Accordingly, we restore this matter to the file of AO with the direction to consider the question of taxation of receipts as royalty in the hands of the assessee as representative assessee or in the hands of any other group company. The assessee should be given adequate opportunity in this regard. Decided partly in favour of assessee. Levy of interest u/s 234B for non-payment of advance tax - CIT(A) dismissed issue by holding that the assessee did not put forth any argument on that issue - Held that:- As A.R placed reliance on the decision rendered in the case of DIT Vs. NGC Network Asia LLC ( 2009 (1) TMI 174 - BOMBAY HIGH COURT), where in the High Court has held that the amount of tax deductible at source is to be taken into account to determine the liability to pay advance tax. Since the assessee is not liable to pay advance tax and accordingly the assessing officer was not justified in levying interest u/s 234B of the Act, said contentions are in accordance with the decision rendered by the jurisdictional High Court, we agree with his contentions. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the assessing officer to follow the decision of Hon’ble jurisdictional High Court referred above. Decided in favour of assessee. 2015 (1) TMI 658 Assessment u/s 143(3) r.w.s. 153A - Bogus gift - Search and seizure operations u/s 132 - concluded - Held that: - The admitted facts are that the assessee had duly disclosed the receipt of gift of ₹ 50.00 lakhs in the original return of income filed for this year well before the date of search. It is also an undisputed fact that the assessing officer, during the course of original assessment proceedings, has made enquiries about the gift not only with the assessee, but also with the donor directly. Both the assessee as well as the donor has duly replied to the queries raised by the AO. Having satisfied with the genuineness of the gift, the assessing officer did not make any addition. Thus the assessing officer is not entitled to disturb the concluded assessments in the absence of any incriminating material. Accordingly, we are of the view that the Ld CIT(A) was not justified in confirming the assessment of gift amount of ₹ 50.00 lakhs in this year. - Decided in favour of assessee. Undisclosed investment in purchasing flats - Sale consideration reduced by the vendors - AY 2007-08 - Held that:- The statutes generally provide three types of legal presumptions viz., “may be presumed”, “shall be presumed” and “conclusive proof”. It is a well settled proposition of law that a party can still rebut the first two presumptions by bringing materials contrary to the legal presumptions. Only in respect of the third type of presumption, all the parties do not have any option. When the law is settled in this manner even in respect of legal presumptions, we are of the view that it would be well within his right for an assessee to rebut the admissions made in the sworn statement, when the provisions of sec. 132(4) specifies that the said admission “may be” used as evidence. The admission made by the assessee is no doubt, best evidence, but there is nothing in law to prevent the assessee to show that the said admission was wrong. In the instant case, as noticed the assessee has narrated the events and also the circumstances which compelled the vendors to reduce the sale consideration at the time of registration of the flat though the parties had initially agreed for a consideration of ₹ 44.00 lakhs, yet the conveyance deed was not executed on the same rate due to existence of several encumbrances in the form of competitive claims over ownership, unauthorized constructions; objections from the Society and also from the Collector MSD. Ultimately, the flat was agreed to be sold for a lesser amount. Though the registration value was shown as ₹ 24.00 lakhs, yet it was more than the stamp duty value of ₹ 21.73 lakhs. Further, the assessee has incurred a sum of ₹ 32.16 lakhs in aggregate connection with the purchase of this flat and all the payments except the Registration fee and some small expenses were incurred by way of cheque through the bank accounts. He submitted that the tax authorities have placed reliance on a “receipt” given by the vendor, wherein he had acknowledged the receipt of advance amount of ₹ 2.00 lakhs. In that receipt the original consideration did find place. On the contrary, the assessee has brought on record adequate evidences to show that the originally agreed consideration has undergone change due to changed circumstances. Since the said evidences have not been shown to be wrong by the tax authorities, we are unable to sustain the addition of ₹ 21.00 lakhs made by the assessing officer in AY 2007-08. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the assessing officer to delete the addition. - Decided in favour of assessee. Addition of ₹ 28.09 lakhs towards undisclosed investment made in purchase of Flat No.6. - AY 2008-09 - Held that:- The facts and circumstances relating to Flat No.6 are identical to that relating to Flat No.5, which we have considered while dealing with the appeal filed by the assessee for AY 2007-08. Hence, for identical reasons discussed in AY 2007-08, we hold that the addition of ₹ 28.09 lakhs made in AY 2008-09 was not justified. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the said addition. - Decided in favour of assessee. 2015 (1) TMI 657 Penalty u/s 271(1)(c) - Computation of loss - addition made by the AO on the ground that expenditure were incurred prior to setting up of the business and are in nature of pre-operative expenses - Held that:- No penalty u/s 271(1)(c) of the Act can be justifiably be levied on the facts present assessee. We also found that the case of the assessee is not that case where the revenue authority has found any facts had not been disclosed by the assessee. The revenue authority has also failed to establish that in the return of income the assessee has either been shown as incorrect or inaccurate particulars of its income. Thus merely because the expenditure incurred has been disallowed does not lead to an inference that, it is a case of furnishing inaccurate particulars of income. If an assessee has been able to offer an explanation, which is not found by the Revenue Authorities to be false, and assessee has been able to prove that such explanation is bonafide and that all the facts relating to the same have been disclosed by him, the assessee shall be out of the clutches of Explanation 1 to section 271(1)(c) of the Act and in such cases no penalty shall be imposed. - Decided in favour of assessee. 2015 (1) TMI 656 Foreign currency transaction - Sale of business in Finland - non evidence as to the bringing of approx. US$ 25,196/- to India from Finland which is equivalent to ₹ 10,58,225/- CIT(A) deleted addition - Held that:- Before us the Assessee has filed fresh evidence in the form of bank statement showing that the Assessee has deposited sale proceeds of business of Euro 1,85,000 in the bank Nordea and the last instalment of 26,851 Euros was deposited on 11.4.2007. It was also submitted before us that the bank statement shows name of the Assessee’s company “As Oy Karhusuontie”. The ld. AR was fair enough to say that this statement was not produced before the authorities below. It was also submitted that this statement consists of not only the deposits out of the sale but also the transfer of the money from the account of other family members. The ld. AR even though submitted this bank statement but has not given us any equivalent rupee so that the amount deposited be the Assessee could be co-related. We, therefore, in the interest of justice and fair play to both the parties set aside the order of CIT(A) and restore this issue to the file of the AO with the direction that the AO should re-examine this issue afresh. - Decided in favour of revenue for statistical purposes. Loan from elder son - CIT(A) deleted the addition - Held that:- In view of the provisions of Sec. 68 the onus is on the Assessee to prove the identity, credit-worthiness of the parties and the genuineness to the transaction. In this case, we noted that the loan has been advanced by the elder son of the Assessee whose identity and genuineness of the transaction is not under doubt. The Assessee has explained the source of his elder son who was doing part-time job in Finland and helping family business and he was staying in Finland since childhood. He explained in his statement about the source but we also noted that there are cash deposits in the account of Shri Amit Bhatia to the extent of ₹ 30,000/-, ₹ 49,000/-, ₹ 45,000/- and ₹ 49,500/- and out of this, loan has been advanced to the Assessee. The source of these cash deposits is not available and even there is no plausible evidence in this regard. To that extent we confirm the addition of ₹ 1,73,500/-. - Decided partly in favour of assessee. Unexplained cash credit - CIT(A) deleted the addition - Held that:- The onus, lies on the Assessee to prove the identity and credit worthiness of the creditor. The ld. AR even though vehemently relied on the order of the CIT(A) but no cogent material or evidence was brought on record to disprove the finding of the AO that the dates of arrival of the loan creditor is different from the dates when the cash has been deposited in the bank account of the loan creditor. We noted that the CIT(A) without verifying and disproving this finding of the AO merely deleted the addition. Thus restore this issue to the file of the CIT(A) with a direction that the CIT(A) shall look into this issue afresh and verify whether the dates of arrival of Assessee’s son in India are different from the dates when the cash has been deposited and whether the cash has been deposited in the account of Shri Atul Kumar Bhatia subsequent to the date of his arrival in India. - Decided in favour of revenue for statistical purposes. Deposits in bank - realization of the travellers cheques - CIT(A) deleted the addition - Held that:- In Income Tax the onus lies on the Assessee, in case he makes a claim, to adduce the evidence to support his explanation. We do not agree with CIT(A) that the onus lies on the AO to write to the bank and procure the evidence. In case the Assessee was not having the evidence, the Assessee could have very well asked the AO to verify the transactions with the bank; whether the credit given to him is out of encashment of travellers cheque or not. We, therefore, set aside the order of CIT(A) on this issue and restore this issue to the file of CIT(A) with the direction that CIT(A) shall re-decide this issue in accordance with law after giving proper and sufficient opportunity to the Assessee to adduce evidence on which the Assessee may rely.- Decided in favour of revenue for statistical purposes. Unexplained investment - CIT(A) deleted the addition - Held that:- The addition which has been deleted by the CIT(A) in the appellate order for A.Y 2007-08 relates to A.Y 2007-08 though detail does not relate to A.Y 2006-07. During the course of proceedings for A.Y 2007-08 the Assessee has filed copy of bank statement dt. 10.3.2010 for the period 1.4.2007 to 30.4.2007 relating to Nordea bank but no copy of the bank statement was filed for the period relevant to the impugned assessment year. Although relates to 1,85,000 Euros but states that the residual tenure is transferred to the purchaser on 23.4.2007. The sale deed does not show that the Assessee has received any money during the impugned assessment year. It refers to sale brochure dt. 14.3.2007, 16.6.2006, 2.4.2007. If the money has arisen out of sale of the property, then, the sale deed should relate to the impugned period. As already set aside the order of CIT(A) and restored this issue to the file of CIT(A) with the direction that this ground be disposed off afresh after appreciating the evidence relating to the impugned assessment year not relating to A.Y 2007-08. Each assessment year is independent.- Decided in favour of revenue for statistical purposes. 2015 (1) TMI 655 Unaccounted receipt on the allotment of plots - CIT(A) confirmed the addition - block assessment proceedings - Held that:- CIT(A) has erred in confirming the addition of ₹ 12,44,06,000/- made on account of alleged unaccounted receipts on the allotment of plots in Ardee City, Gurgaon as the same additions made by the AO during reassessment proceedings u/s 143(3)/147 of the Act have not been found to be acceptable and sustainable by the Tribunal and the orders of the Tribunal have attained finality, thus, additions made on the same set of facts and circumstances on the same issue in the order passed by the AO in block assessment proceedings u/s 158BD/158BC for block period of 1.4.1996 to 20.9.2002 are not sustainable. The additions made in the hands of purchasers about alleged investment from undisclosed sources have also not been found to be unsustainable thus no adverse inference about undisclosed income can be drawn.- Decided in favour of assessee. 2015 (1) TMI 654 Part disallowance of depreciation on cars - allowing it at 20% of the written down value (WDV) of the relevant block of assets, as against the appellant’s claim for the same at 40% - luxury cars’ v/s ‘commercial vehicles' - Held that:- We have perused the said decision, to find that the said reasoning to have also found favour with the hon’ble high court. When a ‘commercial vehicle’ has been defined under the Act as well as the Rules, which definition is satisfied by the vehicle/s under reference, we are unable to see as to how the claim could be denied by importing a presumed meaning or condition with regard to the user thereof. In view of the same, subject to the verification and consequent finding with regard to the date of purchase and put to use of the car/s under reference, qua which we observe no finding by the authorities below, we allow the assessee’s claim. We decide accordingly. - Decided in favour of assessee. Disallowance of club membership fees and club expenses - Held that:- Club facilities could also, and may well be used for availing the different services, including for entertainment or as a platform for social interaction, by the directors or officers of the company, so that the expenses attributed to such user would be, or could contended to be, a non-business purpose of the assessee-company. The expenditure on such user would qualify as a perquisite in the hands of the individual directors/employees, being only in pursuance of a benefit extended to them, in whole or in part, by it. No disallowance in the hands of the assessee-company would thus ensue even on a user of the club membership by the concerned person/s for their personal purposes. The same is accordingly deleted.- Decided in favour of assessee. Part disallowance of the remuneration paid to the Managing Director of the assessee-company - Held that:- Revenue has not impugned the commercial expediency or the assessee’s obligation under the terms and conditions of the payment. So, however, to the extent the same was required by law to be approved by the competent authority (Central Government), and which has subsequently been not, the payment to that extent cannot be said to in pursuance to a valid contract in-as-much as the law would prevail, being even otherwise against public policy. The excess claim would have, therefore, to be allowed in the year of its claim/payment, on the basis of the provision, while the amount found in excess liable for inclusion as a part of the income on being so found. The same though thus does not fall strictly within the purview of section 41(1) inas- much as, as it appears, there has been no remission or cessation of liability, with we not observing any finding by the authorities below, would stand to be considered as income on general principles, i.e., as a provision for an expenditure written back on being found to have been made in excess. We are though, we may add, not in agreement with the assessee that not so doing would result in double taxation. Each assessment year is an independent unit of assessment, so that the taxing of an income in a year other than for which it is liable to be taxed, would not result in it being not taxed in the right year. - Decided in favour of assessee. Computation of the profit on export of the trading goods - computing the deduction u/s.80- HHC - Held that:- In-as-much as the export incentives and other incomes, required to be excluded under Explanation (baa) to the provision, is at 90% of such income, 10% thereof stands imputed as their cost, so that the said cost, attributed to the export incentives and other income (i.e., at 10% thereof) would stand to be excluded in arriving at the indirect costs attributable to the assessee’s exports, whether of trading or manufactured goods, for computing the deduction u/s.80- HHC. The same would also therefore require being given effect to. As, however, we have directed for the exclusion of the interest cost, which would also stand to be included in the statutorily imputed cost of 10%, the same would have to be proportionately reduced, i.e., in the ratio of the finance cost to the total indirect cost, which we observe at 4.4%, so as to eschew allowance of double benefit to the assessee. - Decided partly in favour of assessee. Treatment of scrap sales in computing the deduction u/s.80-HHC - Held that:- The receipt by way of sale of scrap is certainly not an income of such nature. On the contrary, it, generated in and through the manufacturing operations, arises directly out of the assessee’s principal operations of production, giving rise to turnover of manufactured goods. The same, goes as it does to abate the cost of raw material out of which the same is generated, can, therefore, be conceptually considered as toward a reduction in the raw material or production cost. The same, therefore, would not warrant being excluded in computing the profits of the business under Explanation (baa) to section 80-HHC. - Decided partly in favour of assessee and the Revenue. Computation of ‘profit of business’ u/s.80-HHC. - commission, interest, duty draw back and sales-tax set off - Held that:- Only the interest paid is to be excluded and no further limitation, in-as-much as the statute provides for exclusion @ 90%, deeming 10% as implied cost, would be made, even as observed by the Bench during hearing. The matter is accordingly restored back to the file of the A.O. for the purpose. No infirmity in the direction by the ld. CIT(A) to exclude 90% of the said receipts [commission and duty draw back] in computing the ‘profits of the business’ under Explanation (baa) to section 80-HHC. Sales tax refund forms part of the operational income and, therefore, liable to be assessed as part of the assessee’s business income u/s.28 and not as ‘income from other sources’ u/s.56. Admittedly, however, no income has been offered by the assessee for the year of lodging the claim for sales tax refund, being clarified during hearing by the ld. AR himself. The same, therefore, relates to the transactions of the purchase and sale (by way of exports) during earlier years. The same is thus for the current year only a prior period income and, accordingly, though assessable as business income, cannot be considered as relatable to the export income for the current year. The same, therefore, is liable for exclusion. - Decided partly in favour of assessee for statistical purposes. Modvat element added to the closing stock - CIT(A) deleted addition - Held that:- The inclusion of the taxes, levies, etc. incident on the purchase and sale of goods would not only be on the closing stock, but on the opening stock, purchases and sales as well. The assessee’s claim is unexceptional, so that we observe no dispute in principle, which could thus only be with regard to its application. No prima facie case, disputing the same, has however been made before us. We, nevertheless, in the interest of justicerestore the matter back to the file of the A.O. The onus to exhibit that the profit, on a proper application of section 145A, works to the same amount as disclosed by the assessee’s accounts, prepared on exclusive basis, is strictly on the assessee, who so contends. Decided in favour of assessee for statistical purposes. Disallowance of the provision for warranty - Held that:- When the assessee’s own accounts disclose the relevant provision to be far in excess to what needs to be provided toward the actual cost. Even if the assessee adopts the same basis for making the provision, i.e., that it did for the earlier years, if on account of technical or other factors, the warranty claims have declined considerably, it would be a sufficient ground to restrict or lower its charge to the operating statement by way of provision. The same, it is to be appreciated, only a provision, toward costs, in respect of sales for the year, which are likely to be incurred in future in complying with the terms and conditions of the sale and, therefore, provided for on an estimated basis. The same, therefore, would have to be determined on empirical basis. Restore this matter as well as with regard to the disallowance of provision for after sales cost on sales, which forms the subject matter of the assessee’s appeal for A.Y. 2005-06, back to the file of the A.O. for enabling the assessee to present its case in the matter. Decided in favour of assessee for statistical purposes. 2015 (1) TMI 653 Gains from sale of shares - ‘Income From Business’ OR ‘Capital Gain’ - Held that:- The totality of facts, indicates that the intention of the assessee was making the investment, thus gains arising out of sale of shares should be assessed as capital gain and not business income as has been canvassed by the ld. CIT-DR. Admittedly, no borrowed funds were utilized for making the investment, frequency of transactions, intention of the assessee making investments main through IPOs, being best possible mode of acquiring shares at lowest price and sold the same at initial period, being the best possible opportunity to sell at the pick price, as is evident from page 67 of the paper book, wherein, we find that the assessee held the investment till the accounting period i.e. 31/03/2008 and sold the shares at prevailing price as on that date earning short term capital gain of ₹ 50,73,057, which is at the rate of 13.71% of returned income as against actual short term capital gain of ₹ 1,53,51,497/- which fetched returned income at the rate of 41.48%. It is also not worthy, the assessee retained 41% of the total sales acquired during the year and sold in subsequent years and the capital gains earned there from has been accepted as capital gains by the Assessing Officer in scrutiny assessment. So far as, manner of accounting is concerned, it has been shown as investment (page-13 of the paper book) in his financial statement and consistently followed in all the years and accepted by the Department. So far as, method of valuation is concerned, the assessee valued at “cost” and not at “cost are market price whichever is less”. Therefore, the assessee is having merit in its contention. - Decided in favour of assessee. Exemption available u/s 17(2)(vi) restricted while calculating income under the head “income from salary” - reimbursement of medical expenses - Held that:- The assessee was admitted in the hospital to carry out angioplasty (angiography). The assessee also submitted the bills of hospital in support of its claim. The expenses were first incurred by the assessee for treatment of Coronary Angiography cost in ₹ 90,090/- and claimed as medical reimbursement as per the provision of section 17(2), while computing the salary income. In view of these facts, it is allowable expenses and cannot be said to be perquisite u/s 17(2) of the Act. This ground of the assessee is allowed. - Decided in favour of assessee. 2015 (1) TMI 652 Rectification of order u/s 254 - Deduction u/s 10B - Suppression of vital material facts setting up of the EOU units of Amona and Chitradurga - apparent mistakes on the issue of manufacturing for the purpose of Sec. 10B in the Tribunal's order - Held that:- From the submission of the Revenue it is apparent that the material and information on which the Revenue relied by putting up the miscellaneous application has been procured subsequent to the passing of the order not only by the Hon'ble Tribunal but also after dismissing the various questions by the Hon'ble High Court vide its order dt. 23.9.2013. Rule 18(6) of the Appellate Tribunal Rules explicitly mentions that only the documents that are referred to and relied upon by the parties during the course of the argument shall alone be treated to be part of the record of the Tribunal. Sec. 254(2) empowers the Tribunal to rectify mistake which is apparent on record within 4 years from the date of the order suo moto or on application by the Assessee or Revenue. The provisions of Sec. 254(2) can not be construed in a manner that produces an anomaly or otherwise produces irrational or illogical result. The ld. DR even though vehemently argued, but could not bring to our knowledge that this Tribunal failed to consider the case law as cited before the Tribunal or the Tribunal has not considered the contentions, pleas and arguments raised before the Tribunal by both the sides. The power u/s 254(2) does not contemplate re-hearing which would have the effect of re-writing the order affecting the merit of the case. If the power given u/s 254(2) is read in that manner, then, in our opinion, there will not be any difference between the power to review and the power to rectify the mistake. The legislature has not deliberately conferred the power of review on the Tribunal and the Tribunal cannot review its order under the garb of power given u/s 254(2). Thus we are of the view that the decision of the Tribunal is based on the appreciation of the facts and the case laws. Therefore, the Miscellaneous Application filed by the Revenue, does not relate to mistake apparent on the record rectifiable u/s 254(2) of the Act. - Decided against revenue. 2015 (1) TMI 651 Determination of the assessment year in which the Capital gains is assessable - whether date of MOU cannot be considered as date of transfer? - Held that:- The finding given by the tax authorities that the assessee had given possession of the property upon entering into the MOU has not been controverted by the assessee. Further, it is a fact that the assessees have been receiving the monetary portion of the consideration in instalments and the said fact was also not denied by the assessees, though the developer did not give the instalments at the agreed point of time at the agreed amount. We notice that the tax authorities have made reference to sec. 2(47)(v) of the Act and the assessees are disputing about the applicability of that section to them. However, in view of the decision of Hon’ble jurisdictional Bombay High Court rendered in the case of Chaturbhuj Dwarkadas Kapadia (2003 (2) TMI 62 - BOMBAY High Court), we are inclined to reject the said contentions of the assessee. Even otherwise, we notice that the assessee’s case would also fall u/s 2(47)(vi) of the Act. Hence, we are of the view that the Ld CIT(A) was justified in upholding the action of the assessing officer in assessing the Capital gain in assessment year 2000-01. - Decided in favour of assessee. Validity of reassessment proceedings - Held that:- Notice from the order of the Ld CIT(A) that the first appellate authority has given a finding that the assessing officer has explicitly discussed about assessing Capital gain in the assessment order relating to AY 2004-05 and has also recorded the same reasons before issuing notice u/s 148 of the Act for AY 2000-01. Before us, the assessee could not produce any material to contradict the findings given by the Ld CIT(A). Accordingly we do not find any merit in the grounds relating to validity of reassessment and accordingly dismiss them. - Decided against assessee. Determination of sale consideration - Held that:- Set aside the order of Ld CIT(A) on this issue passed in the hands of both the assessees and restore the matter to the file of the assessing officer with the direction to compute the sale consideration by following the decision rendered in the case of G. Raghuram [ 2010 (4) TMI 712 - ITAT, HYDERABAD] wherein held the Real consideration received by the assessee in lieu of the land foregone by him is only the cost of construction of proposed building to the extent of which falls to the assessee in the ultimately constructed area and not the market value of such share of constructed area which may be available after the completion of construction.- Decided in favour of assessee for statistical purposes. Determination of FMV of the property as on 1.4.1981 - Held that:- AO did not examine the valuation report obtained by the assessee from a Registered Valuer. In our view, the AO should have examined the same and should have given reasons for not accepting the same. In the absence of the same, we are of the view that this issue also requires fresh examination at the end of the assessing officer.- Decided in favour of assessee for statistical purposes. Deduction claimed u/s 54 - Held that:- As decided in Jatinder Kumar Madan Vs. ITO [2012 (5) TMI 316 - ITAT MUMBAI] the flats obtained under development agreement is eligible for deduction u/s 54 of the Act if the new flat had been constructed within a period of 3 years from the date of transfer. Thus, we notice that the view entertained by the tax authorities have been rejected by the Tribunal. Hence, this issue also requires examination at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on this issue passed in the hands of both the assessees and restore the same to the file of the AO with the direction to examine the same afresh by duly considering the decision rendered in the case of Jatinder Kumar Madan (supra). - Decided in favour of assessee for statistical purposes. 2015 (1) TMI 650 Addition invoking the provisions of section 40(a)(i) - fee for technical services - Held that:- The insistence of the Revenue to say that the amount has been paid in this year and therefore it is covered within the prescription of section 40(a)(i) of the Act is quite otiose to the requirements of section 40(a)(i) of the Act. There is no dispute to the proposition that the said payment has not been claimed as a revenue expenditure while computing the income chargeable under the head ‘Profits and gains of business or profession’ in this year and therefore the same would not fall for consideration in section 40(a)(i) of the Act. Thus do not find any justification to uphold the addition of ₹ 2,78,20,447/- made by the lower authorities by invoking section 40(a)(i) of the Act. The order of the CIT(A) is set-aside and the Assessing Officer is directed to delete the addition of ₹ 2,78,20,447/- . - Decided in favour of assessee. Depreciation disallowed in respect of Honda Motor Car @50% - Held that:- The vehicle in respect of which assessee seeks to claim depreciation @ 50% is a ‘light motor vehicle’ and therefore the claim for enhanced rate of depreciation is on a sound footing. Ostensibly, the provisions of the Depreciation Table annexed as Appendix-I to the Rules clearly apply and therefore the lower authorities were not justified in denying assessee’s claim for allowance of depreciation @ 50% on the vehicle in question, subject to the fulfillment of other conditions. Thus set-aside the order of the CIT(A) and direct the Assessing Officer to re-compute the depreciation allowable on the impugned vehicle as per aforesaid direction and in accordance with law. - Decided in favour of assessee for statistical purposes. Deduction u/s.80IB - date of completion of construction of the housing project - Held that:- No reason to interfere with the ultimate conclusion of the CIT(A) in allowing assessee’s claim for deduction u/s.80IB(10) of the Act amounting to ₹ 23,87,480/- as CIT(A) has called for information u/s.133(6) of the Act from the PMC and its response did not reveal any objection on the part of the PMC that the construction was not complete with respect to the sanctioned plans. Therefore, factually speaking, there is no controversion to the assertions of the assessee that it’s project was otherwise complete as per the sanctioned plans within the stipulated date. As a consequence, the order of the CIT(A) is hereby affirmed and Revenue fails in its appeal. - Decided against revenue. 2015 (1) TMI 649 Sale of four plots - Assessment under the head 'business' / 'adventure' V/S 'Long term Capital Gains' - Held that:- The facts and circumstances of the case made out by the assessee establish that the intention of the assessee for acquiring the aforesaid property was to hold it as ‘Investment’ and not as ‘stock-in-trade’. Therefore, in our view, the CIT(A) made no mistake in holding that the gain on sale of such property is liable to be assessed as income from capital gains and not as a business income. Thus, we affirm the order of the CIT(A) on this issue and accordingly Revenue fails in its appeal. - Decided in favour of assessee. Capital gains on the transfer of land - assessment year selection - Held that:- ‘Transfer’ for the purpose of accrual of capital gains takes place only on execution of the transfer deed by the owner, which in the present case was not done. As find that the instant year is neither the year in which the impugned agreement has been entered into and nor it is the year in which possession has been given or any consideration received. Therefore, we find no justifiable reason with the Assessing Officer to bring to tax the impugned sum in the instant assessment year. Thus, for all the aforesaid reasons, we affirm the conclusion drawn by the CIT(A) and as a result Revenue fails on this aspect also. - Decided against revenue. 2015 (1) TMI 648 Search and seizure operation u/s. 132 - Notice u/s. 153C - Jurisdiction of AO to issue notice u/s 153C and, assessment framed u/s 153A/143(3) - Held that:- Issue in dispute has already been adjudicated and decided in favor of the assesse by the Hon’ble Jurisdictional High Court in the case of Pepsico India Holdings (P) Ltd Vs. ACIT (2014 (8) TMI 898 - DELHI HIGH COURT). Therefore, respectfully following the said decision we are of the view that the AO does not have assumption for framing the assessment u/s. 153C read with section 153A of the I.T. Act. The AO lacks the jurisdiction to initiate the proceedings u/s. 153C against the assessee and therefore, the issuance of notice itself is null and void as well as the impugned order passed by the Ld. CIT(A) is also nullity and hence, the same is quashed as such.- Decided in favour of assessee. 2015 (1) TMI 647 Unexplained share capital introduced - CIT(A) deleted part addition made u/s 68 - Held that:- Merit in the arguments of assessee that after a period 7 years it was not possible to procure bank statements of earlier periods from the share applicants. We are of the view that the issue has rightly been considered by the ld. CIT(A) on the material available on record. Rebuttal of ld. AO in terms of Section 68 has to be effective and meaningful and not to call on the assesse to comply with difficult and nearly impossible compliance. Thus assessee has discharged its initial onus in terms of Section 68 of the Act which has not been effectively rebutted by ld. AO in meaningful terms.Therefore, the additions were rightly deleted by the ld. CIT(A). Apropos addition retained by the ld. CIT(A) in respect of M/s. A.K. Fabrics (P) Ltd., M/s. B.P. Buildtech (P) Ltd. and M/s. B.P. Infotech (P) Ltd same evidence has been filed by the assesse. Ld. CIT(A) has drawn an adverse inference from the fact that in his view these applicant companies were given PAN subsequently and their paid up share capital is low. Following our order on revenue appeal, we are of the view that earlier confirmations, transactions being through banking channels, Company share record, ROC record etc. cumulatively demonstrate that the assessee had discharged its initial onus in terms of decision of Hon'ble Rajasthan High Court in Barkha Synthetics [2005 (8) TMI 67 - RAJASTHAN High Court ], Delhi High Court in the case of CIT vs. Dwarkadhish Investment (P) Ltd. (2010 (8) TMI 23 - DELHI HIGH COURT). Thus no addition can be made in respect of these three applicants also. - Decided in favor of assessee. 2015 (1) TMI 646 Revision u/s 263 - directing the Assessing Officer to reframe the assessment order de novo - incorrect allowance of deduction u/s 80IA - receipts from the sale of carbon credit - whether it has been derived from the eligible industrial undertaking for qualifying the grant of deduction u/s 80IA? - Held that:- As the nature of the receipt from sale of carbon credit is concerned, it is available from the assessment stage. It is not disputed even by the learned Commissioner, the dispute is, whether it has been derived from the eligible industrial undertaking for qualifying the grant of deduction u/s 80IA. The learned Commissioner felt that this receipt has not been derived from the industrial undertaking which will be eligible for grant of deduction u/s 80IA and the Assessing Officer committed an error in including the receipt in the eligible profit. Those facts are already on the record. It is to be seen, whether the receipt is of capital nature or of a revenue nature. Even in case the order of the CIT is upheld, then, in law, it will affect the computation of income, ultimately because the receipt will not be taxable, it will not come under the ambit of computation of income. Simultaneously it will be excluded from the deduction u/s 80IA as well as of the total income. The result will remain as it is. It is a revenue neutral case. Therefore, in view of the ratio laid down by the Hon'ble jurisdictional High Court in the case of Gopala Gowda (2013 (5) TMI 46 - KARNATAKA HIGH COURT), the second condition for taking action u/s 263, does not exist. The assessment order is not prejudicial to the interests of the Revenue. In view of the above discussion, we allow the appeal of the assessee and quash the impugned order of the learned CIT passed u/s 263 of the Income Tax Act. - Decided in favour of assessee. 2015 (1) TMI 645 Long Term Capital Gain on Transfer of land - deduction in respect of payment made to his sister for allegedly settling the dispute in the property/land denied - Held that:- Even if the assessee has made the payment to his sister Mrs. Aarti Sameer Nimgaonkar the said payment was not for removing any encumbrance. Moreover, as per the WILL and other documents the said Mrs. Aarti Sameer Nimgaonkar was not having any interest in title of any property. We, therefore, hold that the Assessing Officer has rightly denied ₹ 16,00,000/- to the assessee. Accordingly, Ground No. 1 is dismissed. - Decided against assessee. Index Cost of Acquisition - partly allowing the cost of trees standing in the property - Held that:- As per the valuation report filed by assessee there were 169 mango trees and also other trees. The approved valuer is having the PHD in the Horticulture who has made the valuation of the trees as on 01-04-1981 at ₹ 11,60,000/-. It is also seen that the said property was given the name of “Ambarai”. When the assessee has filed the valuation report from the Govt. approved agricultural valuer then the matter should have been referred to the Govt. Valuer for valuation if the valuation report was not accepted. Nothing has been discussed by the Assessing Officer as well as the Ld. CIT(A) why the valuation made by the approved valuer is not correct. We, therefore, allow the Ground No. 2 and direct the Assessing Officer to accept the valuation of the trees as made by the approved valuer as on 01-04-1981 and accordingly worked out the capital gain. - Decided in favour of assessee Customs 2015 (1) TMI 672 Confiscation of goods - Imposition of redemption fine - Held that:- Based on records that charge of mis-declaration made against appellant and later on in de-novo proceedings, Collector (Appeals) dropped those charges. In the mean time, the goods were kept in the warehouse. Investigations were undertaken by the department. It was clear case of section 49 of Customs Act. Ld.JCDR also pointed out that a request was made by the appellant for conversion of warehousing bill of entry into home consumption of bill of entry. I find the basic issue in this case is regarding section 49, department has alleged mis-declaration which was later on dropped by the department themselves. It was not case of section 59 as goods were not kept in the warehouse after assessment pending clearance after payment of duty. - case has been all through under section 49 as goods were kept pending completion of proceedings relating to mis-declaration. However, later on all charges were dropped. Once charges were dropped, goods initially kept in warehouse under section 49 continued under same set of proceedings. In view of this, strong case is made by the appellant. - Decided in favour of assessee. 2015 (1) TMI 671 Demand of differential duty - Pre deposit ordered - Appeal dismissed for non-compliance with the provisions of Section 129E of the Customs Act, 1962 - Held that:- Neither in the interim order nor in the final order passed by the lower appellate authority, there is any finding or reasoning given as to why the appellant was directed to make a pre-deposit of ₹ 5 lakhs by the proprietor and the entire differential duty liability by the proprietary firm. There is only one single sentence by way of which the appellate authority has come to the decision to order pre-deposit - Inasmuch as the lower appellate authority has not given sufficient reasons for ordering the pre-deposit, the matter has to go back to the said authority for disposal of the appeal on merits - Matter remanded back - Decided in favour of assesse. 2015 (1) TMI 670 Confiscation of gold - Search of premises of assessee resulted in seizure of huge quantity of gold - conscious possession - Tribunal vide judgment [2006 (9) TMI 473 - CESTAT, MUMBAI] held that the primary gold in the form of 12 gold slabs and 13 gold rods were not in conscious possession of the appellant. However, the Tribunal upheld the confiscation of 18 gold foils weighing 49.300 g. and allowed to be cleared on payment of redemption fine - Whether, in terms of criteria/guidelines laid down by the Hon’ble High Court in paragraph 18 of its remand order [2006 (4) TMI 167 - HIGH COURT OF JUDICATURE AT BOMBAY], this Tribunal was right in holding that there was no reason to disagree, on the question whether the respondent (accused) was in conscious possession of primary gold, with the findings arrived at by the Chief Judicial Magistrate - Held that:- If the answer to all the laid down questions for determining liability is in the affirmative, then the Revenue Authorities would have no other option but to follow the finding given by the learned Criminal Court. In that view of the matter, we find that the learned Tribunal on remand was justified in holding that there was no reason to disagree on the question whether the respondent accused was in conscious possession of primary gold with the findings as arrived by the learned Chief Judicial Magistrate - Decided against Revenue. 2015 (1) TMI 669 Transfer of Residence Rules - Import of Cars - Assessee contends that he declared the particulars based on the invoice given by the dealer and there was no attempt to mis-declaration with an intention to evade payment of Customs duty - Demand of differential duty u/s 125 - Interest u/s 28AB - Confiscation of goods under Sections 111 (d), 111(m) and 111 (o) - Redemption fine - Penalty u/s 114A - Held that:- It is not in dispute that the appellant had violated the provisions of Transfer of Residence Rules by returning to Dubai before completing the required period of stay in India. It is also not in dispute that the year of manufacture is May 2003 as the same has been certified by the manufacturer of the car on the basis of the chassis and engine number. Therefore, violation of Transfer of Residence Rules, and mis-declaration of material particulars, that is, the year of manufacture is clearly established. As regards the 15% trade discount on the list price, there is no evidence led by the appellant that the said discount is available uniformly to all purchasers. Since the cars are sold through the dealers, it is the dealer who gets the discount and not the retail purchaser and therefore, adopting the list price for determination of the assessable value cannot be said to be incorrect. There is no time limit specified for demand of duty under Section 125. - in the present case since the goods have been seized and confiscated under the provisions of under Section 111 (m) and 111 (o), liability to differential duty would automatically arise. In view of the said position, the liability to pay differential duty as demanded in the impugned order is clearly sustainable in law. Appellant had not intended to sell the car and the car is still in the custody of the of the appellant and therefore, considering the total cum duty value of about ₹ 59 lakhs, the redemption fine of ₹ 10 lakhs appears to be much on the higher side. Accordingly we reduce the redemption fine to ₹ 5 lakhs from ₹ 10 lakhs as confirmed in the impugned order. Demand of interest of ₹ 9,50,316/-, Section 125(2) does not provide for payment of interest. Further in the present case, interest has been demanded under the provisions of Section 28AB; the said Section 28AB will come into picture only when the duty demand is confirmed under Section 28 of the Customs Act and therefore, the provisions of Section 28AB has no role to play in the present case. Similarly, we notice that penalty has been imposed under Section 114A; the said Section applies only when duty demand is confirmed under Section 28A (1) of the Customs Act. In the present case the duty demand has been confirmed under Section 125 and therefore, the question of invoking Section 114A for imposition of penalty on the appellant is clearly unsustainable in law. Accordingly, we set aside the same. - Decided partly in favour of assessee. 2015 (1) TMI 668 Penalty u/s 117 - appellant's shipping agent's denial or refusal to move the containers to the CFS of the importer’s choice - contravention of the Facility Notice dated 5-2-2011 - Cancellation of registration of the appellant - After perusing of copy of the Facility Notice No. 69/2011, I find that it nowhere refers to the Section 141(2) of the Customs Act. Further, in the facts and circumstances, I find that the show cause notice is vague, as the gist of allegation and period is not found mentioned. The whole proceedings vitiated for lack of proper show cause notice. Thus, I hold that the notice is vague and I set aside the impugned order as well as the Order-in- Original imposing the penalty on the appellant. - Decided in favour of appellant. Service Tax 2015 (1) TMI 687 Waiver of pre deposit - Banking and Other Financial Services - Held that:- decision of HUDCO [2011 (11) TMI 95 - CESTAT, AHMEDABAD] cannot be straight away applied to the present case in view of the difference. Taking into account the fact that for the earlier periods, Commissioner himself had taken a view and dropped the proceedings, we consider it appropriate that at this stage, the appeal can be heard without any pre-deposit. Accordingly the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted. 2015 (1) TMI 686 Waiver of pre dpeosit - construction of a residential apartment complex - Held that:- Even though learned AR argued and relied upon the decision in the case of LCS City Makers Pvt. Ltd. Vs. CST, Chennai - [2012 (6) TMI 363 - CESTAT, CHENNAI], we find that the decision in the case of Krishna Homes Vs. CCE, Bhopal [2014 (3) TMI 694 - CESTAT AHMEDABAD], Maharashtra Chamber of Housing Industry Vs. UOI [2012 (1) TMI 98 - BOMBAY HIGH COURT] are more proper and we have already relied upon previous final orders where this Tribunal was considering the refund claims of the buyers of flats and allowed the same. Further in the case of G.S. Promoters Vs. UOI [2010 (12) TMI 34 - PUNJAB AND HARYANA HIGH COURT], Hon’ble High Court of Punjab & Haryana took the view that the amendment made on 01.07.2010 cannot be given retrospective effect. Prima facie we find that the appellant has made out a case on merits for complete waiver of pre-deposit. Accordingly the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted. 2015 (1) TMI 685 Denial of refund claim - services consumed only in SEZ - notification No.15/2009-ST dt. 20.5.2009 - Held that:- intention of the Revenue is that if anybody has paid the service tax and same has been consumed by SEZ, he is not entitled for the refund claim. If it is so, a person who has paid service tax but is not entitled to pay the service tax shall not be entitled to take the refund of the same which is not the intention of the legislation. It is only the intention of the Revenue officer - Following decision of Tata Consultancy Services Ltd. Vs. Commr. Of Ex. & S.T. (LTU), Mumbai reported in [2012 (8) TMI 500 - CESTAT, MUMBAI] - Commissioner (Appeals) has passed the correct order and sanctioned the refund claim which was entitled to the respondents. - Decided against Revenue. 2015 (1) TMI 684 Waiver of pre deposit - Business of construction or execution of infrastructure projects - Works contract service - Held that:- Appellants have undertaken only work relating to part of the pipeline and therefore it is difficult to call them Turnkey or EPC projects. Moreover it is also not clearly coming out that the design and engineering part of the project was completely executed by the appellant especially in view of the fact that only part of the pipeline was constructed by them. As regards civil construction work also, the contention of the appellant that just because a contract is termed as EPC or Turnkey project, the same cannot be held conclusively against the appellant. The contract has to be examined to see whether it is in reality an EPC project or not. Terms used in the contract should not be looked at in isolation or interpreted literally. If the contract is accepted literally and no examination is done in a holistic manner, it is quite possible that contracts can be termed in such a manner so as to ensure that appropriate terms are used so that tax liability is avoided. In view of the fact that two decisions of the Tribunal [2012 (6) TMI 165 - CESTAT, Bangalore] and [2014 (10) TMI 132 - CESTAT BANGALORE] prima facie have taken a view in favour of the assessees referred to by the learned counsel, we consider it appropriate that the same should be followed in this case also. As regards GTA service the appellants have deposited an amount of ₹ 30,00,000/- but we feel that this would not be sufficient for hearing the appeal. - Partial stay granted. 2015 (1) TMI 683 Penalty u/s 78 - Works Contract Service - Held that:- In this case it can be seen that the definition itself excludes works contract undertaken in respect of (which means in relation to) dams is excluded. In the case of lift irrigation also, there is a reservoir from which the water is lifted and the reservoir can be considered as a dam and therefore prima facie an assessee is entitled to consider that he is not rendering any taxable service. Further when the works contract is executed for turnkey project including EPC projects, it comes under Clause (e) of the definition to the meaning of works contract given in the definition of ‘works contract’. - appellant cannot claim any relief. Here again we find that there was a clarification issued by the Board in Circular No. 116/10/2009-ST dated 15.09.2009 wherein it was clarified that when Government undertakes work in relation to irrigation projects, they are exempted. - appellant has made out a prima facie case for complete waiver. Accordingly the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted. Central Excise 2015 (1) TMI 680 Clandestine clearance of goods - Bogus invoices - Goods cleared but not exported - Held that:- The fact that M/s DFL did not even make an attempt to get the copies of documents submitted by them (as proof of export) authenticated from Customs (when they could not produce the originals thereof) is ample proof that the said copies were not of genuine documents. In these circumstances, M/s DFL clearly attract penal provisions as their action of clearance of goods duty free unauthorisedly and consigning them to Surat to M/s Super Fabrics, made them liable to confiscation, more gravely so in the given circumstances when they also failed to produce the proof of export. Indeed as has been brought out, wilful mis -statement/ suppression of facts with a view to hoodwicking Customs and evade duty are writ large in this case. That M/s DFL claimed to have exported the impugned goods without having done so itself is a huge misstatement to evade duty. Thus there is no infirmity in the impugned order as regard imposing penalty on M/s DFL is concerned. It may incidentally be mentioned though that for recovery of duty on the impugned goods which were cleared without payment of duty but not exported, there is no time-bar as such clearances are covered by the bond which was executed by M/s DFL under which also such duty is recoverable. M/s DFL is a legal person, it is evident from the foregoing that this entire operation was done with the knowledge and connivance of Shri Vijay Vishwaroop , Director . He has not denied this fact at all and has only said that the goods were exported through merchant exporter M/s Super Fabrics. He has admitted that the impugned goods were covered under the B-17 bond executed by M/s DFL, they were cleared without payment of duty under ARE-1s not for transport directly to the port for export as is the requirement, but for transport to Surat for M/s Super Fabrics and M/s DFL/ Shri Vijay Vishwaroop had no reason whatsoever to believe that M/s Super Fabrics had any locus standi to source/receive goods duty free. He allowed the goods to be cleared on ARE-1s of Surat while under ARE-1s the goods have to be directly sent to port. He was aware that S/ Bs were got processed about five months after the date of ARE-1s (i.e. the date of clearance of goods duty free) and he has admitted that he does not have the valid proof of export for the impugned goods. He has not questioned (and rightly so) the documentary evidence of non-export in the form of Export General Manifests which were part of the RUDs (though as made clear earlier, the onus was on the appellants to produce valid proof of export and not on the department to prove that the goods were not exported). Thus while Shri Vishwaroop's involvement and abetment is clearly evident. His submission that the valid proof of export may be with M/s Super Fabrics is also completely untenable, because, as already brought out, M/s Super Fabrics were not, nor did they qualify to be, 'merchant exporters' and Shri Vishwaroop had no basis/ reason to believe them to be so. Thus penalty imposed upon him in the impugned order is unexceptionable keeping in view the gravity and nature of this blatant fraud. Shri Suresh Gupta's (sic) statement is ex- culpatory . No direct evidence of his involvement in this fraud is unearthed. He was a nobody in M/s DFL at the time of clearances of impugned goods under ARE-1s. He has been implicated by Shri Sheikh in his statement but Shri Sheikh's statement cannot be relied upon to hold Shri Gupta guilty as he was not allowed the opportunity to cross-examine him. ( i.e . Mr. Sheikh) Merely because he continued to be an authorised signatory for one of the bank accounts of M/s DFL at Surat , even if true, cannot be stretched to be sufficient evidence of his involvement in the (improper) duty free clearances of the impugned goods under the said ARE-1s and their subsequent non-export. Therefore, we are of the view that sufficient ground/evidence to penalise Shri Suresh Gupta do not exist. Therefore penalty on him cannot be sustained. - Decided partly in favour of assessee. 2015 (1) TMI 679 Extended period of limitation - Suppression of facts - appellant was all along under bonafide belief that due to dispute of M/s. Roha Dychem before various forums ‘food colour preparation’ shall fall under Chapter 21 while Revenue was claiming classification under Chapter 32 of Central Excise Tariff Act, 1985 - Mis declaration of goods - Penalty u/s 11AC - Malafide intention - Bar of limitation - Held that:- Revenue relied on the circular dated 23-5-1997 and dated 19-12-1997. The circular dated 6-1-1998 is the one on which appellant places reliance. Undisputedly, CEGAT in Continental Foundation Joint Venture case (2007 (8) TMI 11 - SUPREME COURT OF INDIA) was held to be not correct in a subsequent larger Bench judgment. It is, therefore, clear that there was scope for entertaining doubt about the view to be taken. The Tribunal apparently has not considered these aspects correctly. Contrary to the factual position, the CEGAT has held that no plea was taken about there being no intention to evade payment of duty as the same was to be reimbursed by the buyer. In fact such a plea was clearly taken. The factual scenario clearly goes to show that there was scope for entertaining doubt, and taking a particular stand which rules out application of Section 11A of the Act. As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word ‘wilful’, preceding the words ‘mis-statement or suppression of facts’ which means with intent to evade duty. The next set of words ‘contravention of any of the provisions of this Act or Rules’ are again qualified by the immediately following words ‘with intent to evade payment of duty.’ Therefore, there cannot be suppression or mis-statement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Mis-statement of fact must be wilful. - there was no malafide in the show-cause notice and confusion of classification persisted in the industry having led the appellant to be in confusion, the adjudication can be said to be time-barred - Decided in favour of assessee. 2015 (1) TMI 678 100% EOU - Levy of interest on payment of duty made after wrong Availment of exemption under Notification No. 8/97-CE dated 01.03.1997 - Held that:- in respect of wrong availment of Notification No. 8/1997-CE dated 01.03.1997 and Notification No. 15/2012-CE dated 01.03.2012, the appellants admitted the duty liability before the adjudicating authority and paid the duty before issue of show cause notice. They only contended the demand of interest in both the issues and penalty in respect of Notification No. 15/2012. The appellants are liable to pay the interest on demand confirmed and already paid by them on both the issues. However, the penalty imposed on the demand of ₹ 70,204/- is liable to be set aside, as there is no suppression of facts. Non-utilization of yarn received without payment of duty under CT-3 certificate, in the manufacture of Terry Towel - Held that:- while dyeing and bleaching the terry towels, the weight of the finished products gets reduced to the extent of PVA content, which is dissolved in the water. If the above fact has taken into account, the wastage gets reduced to below 25%. We also find that the department has not adduced any findings for removal of excess yarn or excess clearance of yarn or finished goods without payment of duty. - The department accepted the fact that the appellants have used PVA in the manufacture of Terry Towel. We are of the considered view that without producing adequate evidence on the excess utilization of cotton yarn or diversion of yarn, the duty cannot be demanded purely on the input-output norms without any corroborative evidence. We also find that the Board s circular referred above clearly supports that the appellants being 100% EOU, they are allowed wastage upto 25% and in the present case the percentage of waste is well below the prescribed limit after excluding PVA content. Therefore, we hold that the demand of ₹ 48,50,530/- confirmed by the adjudicating authority is set aside. Consequently, the penalty imposed on the appellants and Mr. K. Jayaraj is also liable to be set aside. - Decided partly in favour of appellants. 2015 (1) TMI 677 Rectification of code of assessee wrongly mentioned while taking credit - Held that:- Refusal to correct the assessee’s code and to insist on payment of ₹ 18,60,000/- and thereafter seek a refund of the same, is ex facie erroneous and untenable. There is absolutely no justification for calling upon the petitioners to pay the sum and which they otherwise are entitled to take credit of. In these circumstances and in the facts peculiar to the petitioners, so also without creating any precedent for future cases - Decided in favour of assessee. 2015 (1) TMI 676 Evasion of excise duty - Suppression of production - Held that:- challenge before the Tribunal is to the actual amount of duty said to be evaded and the appellant has been asked to deposit 25% of the duty amount. Appellant is not required to make any pre-deposit on account of penalty etc. Looking at the factual findings recorded by the tribunal, we are not inclined to interfere with the quantum, i.e., 25% of the duty amount. - However, time period to make the deposit is extended - In case the payment is made, the appeal will be restored and taken up for hearing - Appeal disposed of. 2015 (1) TMI 675 Waiver of pre deposit - Reversal of CENVAT Credit - Held that:- Considering the fact that the amount alongwith interest required to be deposited has been already deposited by the Assessee and the case of the Assessee has not been decided on merits, it would be appropriate to set aside the order of the Tribunal, as well as the Commissioner (Appeals), and send the matter back to the Commissioner (Appeals) for deciding it on merits. - Matter remanded back - Decided in favour of assessee. 2015 (1) TMI 674 Order of attachment - Pre deposit made by assessee - Held that:- The records before the Court would indicate that the order of attachment was passed on 29 May 2012 by the Assistant Commissioner. Subsequently, the Tribunal has taken note of the fact that the petitioner has already deposited an amount of ₹ 10,00,000/- as against a total demand of ₹ 21.97 lacs and has granted, on that basis, a dispensation of the balance of the deposit. - in view of the order passed by the Tribunal, the attachment cannot be allowed to continue and ought to be lifted. Once the Tribunal has granted a stay on the recovery of the balance of the duty, the attachment of the properties which is a step in aid of the realisation of duty cannot be allowed to stand. - Decided in favour of assessee. 2015 (1) TMI 673 Cenvat Credit - Export of exempted goods - The Revenue is in appeal against that part of the Tribunal’s order where under the Tribunal holds that the exempted goods can be exported under a Bond/Undertaking-1 in terms of Rule 19 of the Central Excise Rules, 2002. It has also been held by the Tribunal that in terms of Rule 6(6)(v) of the Cenvat Credit Rules, 2004, the provisions of Rule 6(1) and Rule 6(3) are not applicable in respect of excised goods cleared without payment of duty for export under Bond. Held that:- Following the judgment in Repro India Ltd. [2007 (12) TMI 209 - BOMBAY HIGH COURT], another Division Bench had rendered findings in the case of Union of India v. Sharp Menthol India Ltd. reported in [2011 (4) TMI 27 - BOMBAY HIGH COURT]. The view taken in Sharp Menthol India Ltd. was questioned by the Revenue by filing a Special Leave Petition in the Hon’ble the Supreme Court of India and it was dismissed by the Hon’ble Supreme Court holding that no question of law arises out of well reasoned judgment of this Court. - Therefore, the Tribunal’s order and view taken therein cannot be said to be perverse or vitiated by any error of law apparent on the face of the record. The Revenue’s appeal, therefore, cannot be entertained as it does not raise any substantial question of law - Decided against Revenue. 2015 (1) TMI 667 Waiver of pre deposit - Appeal dismissed for non compliance of pre deposit order - Held that:- Court vide its judgment [2005 (12) TMI 99 - HIGH COURT OF JUDICATURE AT ALLAHABAD] permitted the petitioners to deposit ₹ 5 lacs within one month and subject thereto his appeal was directed to be decided by Tribunal on merits but even this order was not complied with by depositing the amount of ₹ 5 lacs within one month. It is also evident from the record that application of modification was rejected and another application for recall of that order was dismissed. In these facts and circumstances, I do not find any error apparent on the face of record on the part of Tribunal in dismissing petitioner's appeal on the ground of non compliance of condition precedent. - Decided against assessee. 2015 (1) TMI 666 Rebate claim - export of Gutkha under - Revenue contested that the pro rata basis payment of monthly duty is in contravention of provision 3 of section 3(4) of the Central Excise Act, 1944 and Rule 8 of Pan Masala Rules,2008. The respondent has contested they were issued registration certificate on 15.03.2011 and commences production from 22.04.2011 and as such, he was the new manufacture within the meaning of proviso to sub-rule 3 of Rule 6 of the said Pan Masala Packing Machines rules, 2008 and for this reason-duty of April, 2011 was calculated on prorate basis. Such payment is as per proviso to rule 6(3) of the said Pan Masala Packing Machines Rules, 2008. Held that:- rule (8) of the said Pan Masala Packing Rules, 2008 is applicable to cases where there is alteration In number of operating packing machines. In this case respondent were issued registration on 15.03.2011 and hence, are to be treated as a new manufacturer and hence, their production of "Gutkha" shall be specifically' governed by the proviso to sub rule (3) of Rule (6) of the said Pan Masala PackingRules, 2008. The proviso of sub rule (3) of rule (6) allows payment of duty on pro-rata basis. As such, the applicant who commenced production w.e.f. 22.04.2011 rightly paid duty on pro-rata basis. Under such circumstances, Government concurs with observation of Commissioner (Appeals) that allegation of short payment by the respondent is not tenable. Trade Notice No. 20/2011 dated 20.09.2011 issued on the basis of CBEC Circular F.No.528/69/2011-STO(TI) dated 30.08.2011 clarifying distinction between sachets and carry bags, cannot have retrospective effect. The clarification issued by Chief Commissioner Lucknow was binding on the Central Excise officers and as such the rebate allowed for duty paid on exported goods at the relevant time cannot now attract the provisions of condition 3(g) of Notification No. 19/2004-CE(NT) dated 06.09.2004. Departmental authorities are bound by Circular/Instruction and they have to comply with the same. Hon’ble Supreme Court has held in the case of Paper Products Ltd. Vs. CCE [1999 (8) TMI 70 - SUPREME COURT OF INDIA] that Circular/Instructions issued by CBEC are binding on departmental authorities. They cannot take contrary stand and department cannot repudiate a Circular on the basis that it was inconsistent with the statutory provision. Apex court has further held that department’s actions have to be consistent with circulars, consistency and discipline are of far greater importance than, winning or losing court proceedings. In view of said principles laid down by Hon’ble Supreme Court, the instructions issued by Chief Commissioner Lucknow were rightly followed by departmental Central Excise officers. - No infirmity in impugned Orders-in-Appeal - Decided against Revenue. 2015 (1) TMI 665 Clandestine removal of goods - Imposition of penalty - Held that:- It is admitted fact that investigation into the case of Kailash Agarwal, Commission agent and Shree Bajrang transport resulted in recovery of incriminating evidence against the appellant company. None of the documents recovered imputing them to the charge in the adjudication order and allegation in Show Cause Notice could be disowned by any of the parties. The appellant Company failed to lead evidence in its defence and materials recovered could not be discarded. Kailash Agarwal and Shree Bajrang Transport provided cogent and credible evidence against the appellant company. All the parties were intimately connected with each other and proved removal of goods by appellant company from its factory without payment of duty. The seized register from Shree Bajrang Transport successfully proved date wise clearance of goods without payment of duty. That revealed questionable modus operandi of these appellants and link of the directors surfaced. - Considering the quantum of demand of duty of ₹ 1,08,98,297/- and equal amount of penalty, followed by interest against duty demand on the appellant company, we direct the appellant M/s. Shree Nakoda Ispat Ltd. to deposit ₹ 70 lakhs ( adjusting any amount if paid prior to this order) within six week. So far as the appellant Sri Anant Dave, Director of appellant company is concerned, he has faced penalty of ₹ 20 lakhs. We do appreciate that without human intervention a corporate solo does not function. Directors are regulator of business of the company. For breach of law and evasion, they are answerable to law. Therefore Sri Anant Dave is to make deposit ₹ 10 lakhs within six weeks So far as appellant Sri Sanjay Goel, Director is concerned, he has faced penalty of ₹ 20 lakhs. Prima facie, nothing has been brought to our notice about active involvement by this appellant. So this director is not directed to make any pre-deposit of penalty at this stage. So far as appellant Sri Kailash Agarwal, agent is concerned, we have already passed an order against this appellant appreciating his role in evasion. Keeping that in view and maintaining consistency, we are of the view that this appellant being contributory to the loss of Revenue, he is directed to deposit ₹ 1 lakh within six weeks - Decided partly in favour of appellants. CST, VAT & Sales Tax 2015 (1) TMI 682 Interest received on delayed payment to be added in taxable turnover or not - Whether the interest received by the petitioner from its customers for belated payment should be added in the taxable turnover for levy of tax – Held that:- Certain goods were sold and delivered by the petitioner based on the invoices raised - on these sales, payments were received by the petitioner belatedly from the buyer - therefore, interest was charged - the buyer agreed to pay interest for the belated payment in the very same invoice and there was no independent agreement – in L & T McNeil Limited Versus State of Tamil Nadu [1990 (6) TMI 195 - MADRAS HIGH COURT] it has been held that interest has to be linked to the payment of delivery and they would form part of sale consideration - the buyers have agreed to pay interest for the belated payment in the very same invoice and not under an independent agreement - there is no independent agreement on interest, as rightly pointed out by the Tribunal - when the invoice of the petitioner contemplates interest on delayed payment, the Tribunal was justified in including the same in the taxable turnover – thus, no substantial question of law arises for consideration – Decided against petitioner. 2015 (1) TMI 681 Option to change the scheme of payment of tax - from compounded levy scheme to general provisions of levy - Assessee opted for payment of tax at the compounded rate u/s 8(b) of the KVAT Act - single crushing machine - Held that:- Where the choice of an assessee, as to the manner of payment of tax, is based on a particular provision of law as it stood at the time of the exercise of his option, and that basis is thereafter changed, the assessee must necessarily be given an opportunity to reconsider his option for the purposes of payment of tax in terms of the KVAT Act - the orders passed by the assessing authorities have the effect of forcing upon the assessee, an option that he never contemplated, and in that sense, it affects the very understanding between the assessee and the department with regard to the payment of tax on compounded basis – thus, the order is set aside - as the petitioners have clearly expressed that they do not wish to opt for payment of tax at the revised compounded rates for the AY, the respondent assessing authorities in all the cases shall proceed to complete the assessment, for the AYs as per the regular provisions of the KVAT Act and not in accordance with the provisions of Section 8 of the Act – decided in favour of petitioner.
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