TMI Tax Updates - e-Newsletter
January 30, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Expenses as NPV of compensation paid to the Forest Department for utilization of forest land for non-forest purpose - Though NPV payment is a one-time payment, the same was not made to acquire any asset - allowed as revenue expenditure - AT
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Income Tax:
Disallowance u/s 40(a)(ia) - The training was given to the pilots and other staff as per the requirement of the DGCA Rules thus, it was only a part of the eligibility of the pilots and other staff for working in the industry of aviation and such training would not fall under the term "service make available" - AT
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Income Tax:
TDS u/s 194I - Whether the assessee is required to deduct tax at source from the payment of lease premium made to CIDCO during the years under consideration u/s 194I - Held no - AT
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Income Tax:
Disallowance u/s 40A(2)(b) - there should be some material available before the AO for invoking section 40A(2)(a) to initiate action to disallow or refuse to deduct the excessive or unreasonable expenditure mentioned thereunder - AT
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Income Tax:
The deduction u/s 10A, has to be given effect to at the stage of computing the profits and gains of business - This is anterior to the application of the provisions of section 72 which deals with the carry forward and set off of business losses - HC
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Income Tax:
Exemption u/s 54F - provision says that within two years of sale the sass should have constructed the house but it does not mean that the construction should necessarily be complete within two years - HC
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Income Tax:
Merely that the assessee followed cash system of accounting does not mean that any sum received as advance for his future use becomes his income - The addition made by CIT(A) deleted - AT
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Income Tax:
TDS u/s 194J - Disallowance under section 40(a)(ia) can be made only in respect of an amount which is sought to be deducted under section 30 to 38 and not in respect of reimbursement simplicitor which is profit neutral and routed through the Profit & Loss Account - AT
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Income Tax:
TDS u/s 194A - Interest on unpaid purchase price was not treated as interest on loan - discount / factoring charges do not come within the purview of section 194A - not liable to TDS - AT
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Income Tax:
Deduction of indexed cost of acquisition - appellate authorities have jurisdiction to consider the additional claim made for the first time before them - AT
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Customs:
Denial of conversion of 3 Shipping Bills from DEPB scheme to Drawback - exporter cannot be penalized for the inaction of the department at the time of allowing the shipment and thereafter - AT
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Customs:
Car should have been put to use for activities which earn foreign exchange though the argument that the entire export obligation should be discharged by earning from fare charges of the cars was not accepted - AT
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Corporate Law:
Winding up of company - Inability to pay debts - ZIL and its promoters/directors employed a device or artifice to fraudulently divert the sale proceeds of its MSD Division - HC
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Service Tax:
Confirmation of service tax demand by invoking proviso to Section 73 (1) and waiver of penalty by invoking Section 80 do not go hand in hand- AT
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Service Tax:
Service tax on Reverse change basis - the agreement is made between the applicant and the foreign service provider. Therefore, it cannot be said that the Foreign Service provider has provided service to Dubai office and not to the present applicant - AT
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Service Tax:
Refund claim - Bar of limitation - appellants refund claim was maintainable and tax paid by the appellant under misconception of law was to be refunded - AT
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Central Excise:
Reasonable steps / care to be taken before availing Cenvat Credit - The assessee, in the present case, was found to have duly acted with all reasonable diligence in its dealings with the first stage dealer - HC
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Central Excise:
If the Tribunal had to reverse this view regarding invocation of the extended period of limitation, it was necessary for it to indicate some reasons why the factual findings contained in the order of the Additional Commissioner and the Commissioner (Appeals) were being overruled - HC
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Central Excise:
Availment of suo moto credit which was reversed earlier - eligible cenvat credit credit under Rule 6(5) of CCR - legally speaking there is no impediment in the asseesee taking suo motu credit - HC
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Central Excise:
Appropriation of the rebate claims with duty demand on the expiry of a stay - Revenue allowed to appropriate the duty amount with rebate but not allowed to adjust penalty amount, the balance would be released to the assessee - HC
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Central Excise:
In the absence of any provision in the Act or Rules specifically prohibiting restoration of appeal dismissed on the ground of non-deposit of penalty, the learned Tribunal has a power and jurisdiction to recall its order, if ends of justice require such course of action - HC
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (1) TMI 1515
Expenses as NPV of compensation paid to the Forest Department for utilization of forest land for non-forest purpose - Held that:- Decision on T.N. Godavaram Thirumalpad vs.- Union of India [2005 (9) TMI 591 - SUPREME COURT] followed - Though NPV payment is a one-time payment, the same was not made to acquire any asset - Forests are vital components to sustain life support system on the earth - There is an absolute need to take all precautionary measures when forest lands are sought to be directed for non-forest use - The User Agency be required to make payment of Net Present Value (NPV) of such diverted land so as to utilize the amounts so received for getting back in long run the benefits which are lost by such diversion - The Ministry of Environment and Forests formulated a scheme providing that whenever any permission is granted for change of use of forest land for non-forest purposes, there should be compensatory afforestation - The responsibility of the same should be that of user agency - The money so received towards NPV should be used for natural assisted re-generation, forest management, protection, infrastructure development, wildlife protection and management, supply of wood and other forest produce saving devices and other allied activities. Such payments of NPV as compensation were levied for rendering service which the state considers beneficial in public interest - It is a fee which falls in entries 47 of List-III of 7th Schedule of the Constitution - The fund set up is a part of economic and social planning which comes within Entry 23 of List III and the charge which is levied for that purpose would come under Entry 47 of List III - Levy of NPV is a fee that means every mining agency using and converting forest land to non-forest purpose has to pay a fee for continuing carrying on of the business. The said payment is not a voluntary one and it is a payment on the basis of the direction given by the Government of India, Ministry of Mines, under which the assessee-company comes - When a payment is made as per specific direction of Government of India, it is in the business interest of the assessee-company - This payment is a statutory requirement and the expenditure has been considered wholly and exclusively for the purpose of business and has got a direct connection with the business activity of the Company - The same was allowable as business expenditure under section 37(1) of the Act Decided against Revenue.
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2014 (1) TMI 1501
Disallowance u/s 40(a)(ia) of the Act TDS not deducted on training expenses DTAA treaty between India and US - Scope of Article 12 of DTAA - Held that:- The Assessing Officer has disallowed the payment in question as per the provisions of section 9(1)(vii) without considering the provisions of DTAA - prior to the assessment year 2006-07 there is no disallowance by the AO u/s 40(a)(i) - the assessee cannot be expected to do something which were impossible to perform Relying upon Sterling Abraive Ltd. v. Asstt. CIT [2010 (7) TMI 803 - ITAT AHMEDABAD] - the assessee acted bona fide in conformity with the provision of act - At the relevant point of time it was impossible on the part of the assessee to deduct tax on the income of non-resident - up to the insertion of explanation vide Finance Act, 2007, the assessee was under bona fide belief not to deduct tax and accordingly he acted as per law - the assessee has acted under bonafide belief that no tax was to be deducted at source on these payments. Apart from the bonafide belief we further noted that as per para 4(b) of Article 12 of Indo-US DTAA fees for included services means if such services made available technical knowledge, experience, skill, know-how, or processes, or consists of the development and transfer of a technical plan or technical design. The training was given to the pilots and other staff as per the requirement of the DGCA Rules thus, it was only a part of the eligibility of the pilots and other staff for working in the industry of aviation and such training would not fall under the term "service make available" - the disallowance of u/s 40(a)(i) is not justified and accordingly the same is deleted Decided in favour of Assessee.
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2014 (1) TMI 1500
Eligibility for exemption u/s 11of the Act Investment of surplus fund in FDRs Whether the earning of interest on surplus funds can be treated as educational or charitable activity Held that:- The decision in DIT(Exemption) v. Dalmiya Shiksha Pratishthan [2008 (2) TMI 312 - DELHI HIGH COURT] followed - The assessee has invested its funds in FDRs on which the assessee earned interest, which is applied towards the objects of the assessee society - The funds invested in FDR have been shown in the balance sheet and is the property of the assessee-society - Merely because the assessee earns interest on its surplus/corpus funds would not lead to the fact that the assessee exists for profit purpose - The claim of the assessee has been correctly allowed by the CIT(A) Decided against Revenue. Claim of deduction u/s 10(23C)(iiiea) of the Act Held that:- The assessee's maternity hospital would have been facilitating the deliveries, i.e., a natural process of God thus, it can in no way be said to be any illness to be treated in the assessee's hospital as envisaged u/s. 10(23C)(iiiae) - the ingredients of section 10(23C)(iiiae) being not fulfilled - the CIT(A) has rightly disallowed the claim of assessee Decided against Assessee.
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2014 (1) TMI 1499
Revision u/s 263 of the Act Profits from sale of short term capital gain Held that:- Whether it can be said that the treatment given by the assessee to the profits arising from sale of shares as short term capital gain was accepted by the A.O. without making proper and adequate enquiry Held that:- The order passed by the AO u/s 143(3) of the Act without making proper and adequate enquiry, as required in the facts of the given case, is one which is erroneous and prejudicial to the interest of the Revenue and the CIT has the power to revise the same u/s 263 of the Act - The assessee had furnished the details and documents required by the A.O. which were inclusive of the details of short term capital gain arising from the shares sold after 1-10-2004 liable to tax at special rate. The details were sufficient to ascertain the number of transactions, frequency of transaction, the period of holding, the volume of transactions etc. for the purpose of deciding whether the treatment given by the assessee to the profit arising from purchase and sale of shares was business income or short term capital gain - The CIT had come to a prima facie conclusion on the merit of the issue on the basis of the details already brought on record by the AO during the course of assessment proceedings and this fact by itself shows that proper and sufficient enquiry on the issue was duly made by the AO before accepting the treatment given by the assessee to the profits arising from sale of shares as short term capital gain - there was no error in the order of the AO passed u/s 143(3) of the Act as alleged by the CIT calling for revision u/s 263 of the Act the order of the CIT(A) set aside and the matter remitted back to the AO Decided in favour of Assessee.
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2014 (1) TMI 1498
Liability to deduct TDS u/s 194I of the Act - Whether the assessee is required to deduct tax at source from the payment of lease premium made to MMRDA during the years under consideration u/s 194I of the Act Held that:- The decision in The ITO (TDS) 3 (5), Versus M/s. Wadhwa & Associates Realtors Pvt. Ltd. [2013 (9) TMI 261 - ITAT MUMBAI] followed - The payment to MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent - payment for acquiring leasehold land is a capital expenditure - the lease premium paid by the assessee to MMRDA not being in the nature of rent as contemplated in section 194-I of the Act, the assessee was not liable to deduct tax at source from the said payment and hence could not be treated as the assessee in default u/s 201(1) & 201(1A) of the Act Decided against Revenue.
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2014 (1) TMI 1497
Liability to deduct TDS u/s 194I of the Act - Whether the assessee is required to deduct tax at source from the payment of lease premium made to CIDCO during the years under consideration u/s 194I of the Act Held that:- The decision in The ITO (TDS) 3 (5), Versus M/s. Wadhwa & Associates Realtors Pvt. Ltd. [2013 (9) TMI 261 - ITAT MUMBAI] followed - The payment to MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent - payment for acquiring leasehold land is a capital expenditure - the lease premium paid by the assessee to MMRDA not being in the nature of rent as contemplated in section 194-I of the Act, the assessee was not liable to deduct tax at source from the said payment and hence could not be treated as the assessee in default u/s 201(1) & 201(1A) of the Act Decided against Revenue.
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2014 (1) TMI 1496
Disallowance u/s 40A(2)(b) of the Act Directors remuneration Held that:- The AO has to form an opinion having regard to the fair market value of the goods and services but, the AO has simply disallowed on the basis that the hike in remuneration is excessive and unreasonable the CIT(A) has also not given a proper finding with regard to the fair market value of the services rendered by the employees and how it can be termed as excessive or unreasonable Relying upon CIT vs. NEPC India Ltd [2006 (12) TMI 129 - MADRAS HIGH COURT] what section 40A(2)(a) contemplates is that there should be some material available before the AO for invoking section 40A(2)(a) to initiate action to disallow or refuse to deduct the excessive or unreasonable expenditure mentioned thereunder - But at the same time, before taking any final decision by invoking the power under section 40A(2)(a), either allowing or disallowing such expenditure incurred as excessive or unreasonable, such decision of the Assessing Officer should be based on reasons well- founded, which is judiciously acceptable and in which event the finding or decision arrived at stating that the expenditure is excessive or unreasonable and the same cannot be allowed or deducted. Both the authorities below have not given any finding with regard to the fair market value of the services rendered by Shri Vipul J.Ray - In the absence of such finding, the contention of revenue cannot accepted that the hike in remuneration is excessive or unreasonable - the authorities below ought to have given a clear-cut finding about the fair market value of the services rendered by the Director prevalent during the year under consideration - the assessee brought to notice the orders of the CIT(A) passed in respective assessment years 2007-08 & 2008-09, the CIT(A) had accepted the remuneration even higher than Rs.24 lacs as claimed by the assessee-company the AO was not justified in disallowing the remuneration as claimed by the Director of the assessee, without giving a finding in respect of the fair market value prevalent for the services rendered by the assessee thus, the AO is directed to delete the disallowance as made u/s.40A(2)(b) of the Act Decided in favour of Assessee.
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2014 (1) TMI 1495
Unaccounted investment - Held that:- The assessee had entered into an agreement with HUF to incorporate a company on the plot of lan belonging to the said HUF - Later on the company shall be run in partnership by both the assessee as well as HUF in which the contribution of the parties shall be the cost of construction and plot of land respectively - The expenses for construction were being managed by the assessee by borrowing the funds from the HUF - The expenses made by the assessee has been adopted by the company - The company has not even obtained the certificate of commencement of business up to 2nd January, 1976 and up to 31st March, 1976 the company had no source of income - The company had no income at the time when the expenditure towards construction was undertaken - The unaccounted investment cannot be assessed at the hands of the company - There being no income of the company at the relevant period when unaccounted investment was made, the same has to be assessed in the hands of assessee - The Tribunal fell in error in applying the judgment of this Court in Commissioner of Income Tax, U.P. vs. The Bijli Cotton Mills Ltd., Agra - Decided against Revenue.
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2014 (1) TMI 1494
Validity of reopening of assessment u/s 147 - Held that:- In the earlier order of the court directing the Tribunal to reconsider the reasons recorded for reopening of assessment - The Tribunal failed to apply its mind whether the reasons recorded constitutes change of opinion - The issue has been restored for fresh adjudication by the Tribunal.
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2014 (1) TMI 1493
Validity of order passed by ITAT - allegation of non-existent or bogus transaction. - Held that:- The ITAT cannot be faulted in its approach in rendering the findings of fact The order of the ITAT and the discussion shows that the ITAT took note of the materials before the AO and the CIT (A), which included the assessees books of accounts as well as the Sales Tax records of Shree Laxmi Industrial Corporation - These established firmly and conclusively that the claim of the assessee that it had purchased goods from Shree Laxmi Industrial Corporation were borne out - The ITAT also noted that the income-tax authorities had not even rejected the books of the assessee even while finding the claim as genuine transaction to be bogus There was no error in the order of the Tribunal - No substantial question of law arises Decided against Revenue.
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2014 (1) TMI 1492
Whether deduction u/s 10A be allowed without adjustment of losses of other units and without adjustment of brought forward losses and/or its depreciation - Held that:- Decision in Commissioner of Income Tax Vs. Black and Veatch Consulting Pvt. Ltd. [2012 (4) TMI 450 - BOMBAY HIGH COURT] followed - Deduction section 10A under of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years is to be allowed from the total income of the assessee - The deduction under section 10A, has to be given effect to at the stage of computing the profits and gains of business - This is anterior to the application of the provisions of section 72 which deals with the carry forward and set off of business losses - Decided against Revenue. Whether the income and expenditure of eligible undertaking u/s. 10A be allowed while computing the book profit u/s 115JB - Held that:- As per the provisions existing prior to 1st April 2007, the explanation to Section 115JB referring to the term Book Profit included the expenditure and income relatable to any income to which section 10A or section 10B applied for the purpose of increase in the book profit and the income itself for the purpose of decreasing the book profit - It is precisely therefore that the CIT [A] has given a direction for working out the book profit of the assessee by applying the said formula - This is in consonance with the provisions of Section 115JB as it stood at the relevant time - The said provision was materially changed, by the Finance Act, 2007 w.e.f. 1st April, 2008 Decided against Revenue.
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2014 (1) TMI 1491
Exemption u/s 54F - Held that:- Decision in Shashi Sharma vs. CIT [1996 (3) TMI 65 - MADHYA PRADESH High Court] followed - As per the Central Board of Direct Taxes Circular No. 471 issued dated October 15, 1986 - Section 54 of the Act says that within two years of sale the sass should have constructed the house but it does not mean that the construction should necessarily be complete within two years - If substantial investment was made in the construction of the house, it amounted to sufficient steps being taken, thus satisfying the requirements of section 54 - The Tribunal was not justified in denying exemption under section 54 to the assessee. The assessee made substantial investment for acquisition of flat at Bangalore the total cost of which was Rs.65 lacs and the assessee paid Rs.60 lacs on 6.9.2008 within 8 months from the date of sale of the old asset before the due date of filing of return of income - The new asset (Flat at Bangalore) was made available well before December, 2009 which was sold through a registered sale deed - The assessee cannot be denied benefit u/s 54F - Decided against Revenue.
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2014 (1) TMI 1490
Disallowance u/s 36(1)(iii) - Held that:- The rate of interest which was paid to the Bank was between 15% to 18% while interest on the loans which were advanced out of borrowed funds was charged at the rate of 18% - The CIT (A) held that the business expediency for furnishing the loan was duly established with reference to Shree Krishna Ship Breaking Industries - No disallowance was required to be made. In regard to M/s Neuromed Imaging Centre (P) Ltd., it was found that an amount of Rs.1 crore was paid by way of loan at a rate of 12% immediately after a loan of Rs.77.50 lacs was taken at a much higher rate - There was no business expediency and the amount which was obtained at a higher rate of interest was passed on to the sister concern at a lower rate of interest without utilizing it for its own business - The Tribunal has not considered this part of the order of the Tribunal - The issue has been restored for fresh adjudication.
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2014 (1) TMI 1489
Retraction of admission / statement - at the time of assessment the assessee did not retract the aforesaid admission making voluntary disclosure - Held that:- We fail to understand from where the case of retraction has been discovered by the Commissioner of Income Tax (Appeals) when the appellant has not stated in the grounds of appeal before it that it has retracted. - there must be distinction between the admission and the evidence collected during the course of survey. Admission is a very important piece of evidence, unless it is explained or retracted - The assessee has not made any attempt to explain before the Commissioner of Income Tax (Appeals) suggesting not to accept the same - Instead of retracting the assessee called upon to act upon the same to pass assessment order and accordingly it was done and the tax was duly paid - The learned Tribunal has taken a correct decision that the same is without any factual basis and further unsupported by law - When a case is not made out before the Commissioner, the assesee should not have made out so to say his own case basing on a lawyer's argument - A lawyer cannot improve the case of the litigant on fact unlike in case of law - Such an act is without jurisdiction - Decided against assessee.
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2014 (1) TMI 1488
Disallowance u/s 40(a)(ia) - Held that:- The TDS on various expenditure was deducted by the assessee but an amount of Rs.30,71,212/- was credited to the government account on 06/04/2006 - According to the amendment under Section 40(a)(ia) by Finance Act, 2010 with effect from 01/04/2010 - If the tax deducted is deposited by the assessee before the due date of filing the return, the same is required to be given credit in the very assessment year - Decided against Revenue.
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2014 (1) TMI 1487
Undisclosed income Held that:- The Tribunal noted that the Assessee has furnished documentary evidence and details of the transactions - Apart from an e-mail which was seized during the course of search action, there was no supporting evidence available to come to the conclusion that an amount of Rs.3,80,00,000/- represented additional undisclosed income - Even as regards addition of Rs.3,65,07,000/-, the CIT(A) had, after due consideration of the material, deleted the addition on the ground that the Assessing Officer had acted without any material justifying the addition Decided against Revenue.
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2014 (1) TMI 1486
Activity of share trading - Business income or capital gains - Held that:- AO has treated the entire investment accounts as trading account treating the transactions as business transactions but the assessee treated capital gains either short term or long term - The assessee has never invested any borrowed funds rather it has invested her own funds - The assessee has disclosed the purchase and sale and gains arising out of sale as capital gains - CIT(A) has rightly treated the gains as LTCG and STCG Decided against Revenue. Disallownace of general expenses on printing and staionery, staff welfare expenditure etc. - Held that:- The AO has made disallowance on ad hoc basis and there is no reason for the same - Only expenditure of Rs.6560/- incurred on account of income tax is to be disallowed apart from disallowance restricted at Rs.5000 - Partly allowed in favour of assessee.
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2014 (1) TMI 1485
Depreciation on books and periodicals - Held that:- The computation of depreciation on books and publications has to be made in accordance with the provisions of the Act using the correct WDV - As the assessee has produced complete and correct WDV, there is no reason to disbelieve calculation done by assessee in respect of depreciation - The issue has been restored for fresh adjudication. Payments made to Advocates - Held that:- The assessee is an Advocate and in the course of his profession assessee received advances from his clients and in turn hired Advocates for dealing the cases assigned to the assessee by his clients Decision in Sharma Kajaria & Co. Vs. DCIT [2012 (4) TMI 495 - ITAT, KOLKATA] followed Disallowance under section 40(a)(ia) can be made only in respect of an amount which is sought to be deducted under section 30 to 38 and not in respect of reimbursement simplicitor which is profit neutral and routed through the Profit & Loss Account - The amounts paid by assessee to the lawyers without deducting tax at source u/s. 194J were reimbursed by its clients - The amounts paid to the lawyers were never claimed as deduction - The issue has been restored for fresh adjudication. Addition on account of advances received in cash - Held that:- The assessee is an advocate who maintains cash system of accounting and has received advances from clients - Advances received from clients do not become his income unless assessee renders his professional services and bills for the same are raised - Merely that the assessee followed cash system of accounting does not mean that any sum received as advance for his future use becomes his income Decision in CIT Vs. Sandersons & Morgans [1968 (4) TMI 17 - CALCUTTA High Court] followed - When a solicitor receives money from his clients, he does not to do so a trading receipt but he receives the money of the principal in his capacity as an agent and that too in a fiduciary capacity - The money thus received does not have any profit making quality about it when received - It remains money received by a solicitor as "clients's money" for being employed in the clients cause The addition made by CIT(A) deleted - The solicitor remains liable to account for this money to his client Decided in favour of assessee.
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2014 (1) TMI 1484
Disallowance at 1% of exempted income u/s 14A - Held that:- Rule 8D is apllicable w.e.f. 24.03.2008 i.e. 2008-09 onwards whereas the A.Y. in appeal is 2007-08 - As laid down in other decisions of the Tribunal CIT(A) held that out of the administrative expenses, expenses to the tune of 1% of the exempt income can be disallowed u/s. 14A - Decided against Revenue. Whether factoring charges liable to TDS - Held that:- Interest is a term relating to a pre-existing debt, which implies a debtor creditor relationship. According to us, unpaid consideration gives rise to a lien over goods sold and not for money lent - Decision in Bombay Steam Navigation Co. Pvt. Ltd. Vs. CIT [1964 (10) TMI 12 - SUPREME Court] followed - Interest on unpaid purchase price was not treated as interest on loan - Before any amount paid is construed as interest, it has to be established that the same is payable in respect of any money borrowed or debt incurred - Discounting charges of Bill of Exchange or factoring charges of sale cannot be termed as interest. The assessee has assessed the income as Del Credere being trading in goods and merchandise and also dealing in securities and which is assessed as income from business and not income from other sources - The expenditure incurred is also on account of business expenditure and not interest expenditure in the nature of interest falling u/s 194A of the Act - These discount/factoring charges do not come within the purview of section 194A and assessee is not liable to TDS on these charges - Decided against Revenue.
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2014 (1) TMI 1483
Disallownace of expenses on advertising, traveling, printing and stationery etc - Held that:- These expenses though called provision, actually represents utilization of money and is pending verification/ classification by the Central Payment Unit of the Head Office of the assessee bank - The liability of Rs.82,56,319/- is not a contingent liability as made out by the Assessing Officer, but the liability actually incurred out of the imprest account - Deisallowance was deleted. Amount written off - Held that:- The said expenditure is nothing but bad debts which has been written off in the books of accounts of the assessee and the same is allowable as a deduction u/s 36(1)(vii) of the Act - The wrong classification of the expenditure is immaterial and the same cannot change the nature of the expenditure - Decided against Revenue.
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2014 (1) TMI 1482
Deduction of indexed cost of acquisition - Power of appellate authorities to consider the claim first time before them - Held that:- The AO refused to entertain the claim as the same has not been made by the assessee through filing of revised return - Decision in Goetze (India) Ltd. Vs. CIT [2006 (3) TMI 75 - SUPREME Court] followed - The appellate authorities have jurisdiction to consider the additional claim made for the first time before them - If the claim of the assessee on this issue is to be entertained by the Tribunal, an opportunity may be given to the A.O. to verify the same as neither the A.O. nor the ld. CIT(A) has examined this issue on merit - The issue has been restored for fresh adjduication.
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Customs
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2014 (1) TMI 1481
Denial of conversion of 3 Shipping Bills from DEPB scheme to Drawback - Expired license - Held that:- Held that:- shipment had taken place in the year 1999 and the department took about 7 years to decide the request of the appellant and in this manner 14 years had lapsed since the shipment was made. IF the case is remanded to the ld. Commissioner for deciding the issue it is not certain as to how much more time it would take the matter. It is pertinent to mention here that DEPB shipping bill has to undergo higher amount of rigour in comparison to Drawback shipping bill. The shipping bill was passed without any objection at the time of the shipment. Further it is not the case of the department that the goods have not been exported and reached to destination and the export proceeds has not been realized nor it is the case of the department that the appellants are claiming double benefit under two different schemes. The exporter cannot be penalized for the inaction of the department at the time of allowing the shipment and thereafter. In these circumstances I allow the conversion of shipping bill from DEPB to Drawback and direct the concerned authority to decide the Drawback claim as per law expeditiously - Decided in favour of assessee.
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2014 (1) TMI 1480
Demand of duty - Confiscation of cars - Registration of vehicle not obtained - whether the seizure of the goods as on the date of seizure is legally valid and the adjudication proceedings, consequent thereon, is sustainable - Held that:- in spite of the specific condition in the license that the car should be registered as a tourist taxi it was not so registered for more than 6 months. The circumstances under which the car was seized also indicates that the car was being used for purposes other than that for which it was stated to be imported - car should have been put to use for activities which earn foreign exchange though the argument that the entire export obligation should be discharged by earning from fare charges of the cars was not accepted by the Court - bank guarantee is not sufficient form of pre-deposit - Conditional stay granted.
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2014 (1) TMI 1479
Whether enhancement was basing on any cogent evidence and reason - Held that:- How Revenue has plea as to admittance at the time of clearance while such pleadings is not backed by evidence nor by appropriate acknowledgment by Respondent. When there is no evidence to support the contention of Revenue in the present case, no order can be passed on mere suspicion or surmise - Decided against Revenue.
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2014 (1) TMI 1478
Revocation of CHA license - Fraudulent export under Buy Back System were affected - Availment of excess ineligible Drawback - Held that:- When a person is not having a customs pass and a trainee employee as contended by the appellant, in that situation, the clearance were conducted is against the provision of CHALR, 2004, as the same was done without any authority of the appellant that the act was within the knowledge of the appellant - work has been brought by one Shri Mahesh Pande to Shri Sumit V. Ghatkamble to whom the appellant has allowed to use their CHA licence for some consideration - no permission has been obtained and that Shri Sumit V. Ghatkamble was not holding custom pass in the name of charged CHA while undertaking customs clearance of the subject export goods under the ten shipping bills of M/s. Leevon Overseas. Therefore, the charge under Article 12 has been proved against the appellant is beyond doubt - export clearance was held by Shri Sumit V. Ghatkamble and no clearance work was attended by any of the Director of the CHA firm or their employee having the custom pass - charges alleged against the appellants under CHALR, 2004 are stands proved - Decided against assessee.
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2014 (1) TMI 1477
Benefit of exemption under Notification No. 203/92-Cus., dated 19-5-1992 - Whether it was a requirement for the assessee to produce end use certificate to claim the benefit of exemption under Notification No. 203/92-Cus., dated 19-5-1992 in respect of the goods imported by them in June 1998 - Held that:- one of the conditions attached to the notification was that, where the benefit of exemption was sought by a person other than the licensee, the benefit should be allowed against the licence and the certificate only if the transferability of the licence was endorsed thereon by the licensing authority. Obviously, the appellant is a person other than the licensee and the said condition was also applicable to them. Even at this stage, the appellant has not been able to show that the goods in question had been imported under an advance licence with its transferability endorsed by the licensing authority - The question whether any end use certificate was produced by the importer is, in our view, subsidiary to the fundamental condition - Decided against assessee.
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Corporate Laws
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2014 (1) TMI 1476
Winding up of company - Inability to pay debts - Failure to pay the amounts due under the bonds - Held that:- advertisements have been placed in the two local newspapers as well as in the Maharashtra Government Gazette. Furthermore, though the returnable date of hearing the Company Petition was scheduled as 21st October, 2013, in fact, the Company Petition was ultimately taken up by this Court for final hearing only on 11th November, 2013 (i.e. beyond a period of 14 days). Thus the hearing of the Company Petition finally took place more than a month after the advertisement was published in the newspapers and the Maharashtra Government Gazette. No person, creditor or contributory has come forth to oppose or challenge the winding up of the Company. In the facts and circumstances of the case, it cannot be gainsaid that the Company did not have notice of the returnable date of the Company Petition. ZIL and its promoters/director through their decision and announcement dated December 27, 2010 made a promise to the shareholders without intending to perform the same. They diverted the monies realized from the sale of the MSD Division for the benefits/interests of promoters and/or Directors and subsidiaries
I also do not see any compelling reasons to use the monies realized from sale of MSD Division for any purpose not the least for paying to group entities for various purposes other than for redemption of FCCBs, which was not only the sole purpose for which approval of shareholders was taken but was also very crucial for protecting the shareholders value - prima facie, ZIL and its promoters/directors employed a device or artifice to fraudulently divert the sale proceeds of its MSD Division. Promoters/directors of ZIL have in a devious manner attempted to take away the assets of a listed company directly and indirectly for their own benefit or for benefit of entities owned and controlled by them. Such conduct of promoters/directors not only defeats the whole purpose of seeking shareholders approval for crucial decisions but also jeopardizes the integrity of the securities market - Company has failed to rebut the presumption of its insolvency and is therefore liable to be wound up. In the present case where the Company is unable to pay its debts as and when due, has admittedly committed a default in the payment of the amounts due under the 2011 Bond and the 2012 Bonds and is admittedly insolvent, an order for winding up of the Company must follow as a matter of course - it is futile for the Company to distance itself from the actions of the Promoters and Directors who admittedly hold almost 65% of the shareholding of the Company and who have been found by the SEBI and this Court to have diverted large sums of the money realized from the sale of MSD Business to corporate entities situated in Dubai and Singapore. Consequently the illegal and mala fide acts of the Promoters and the Directors of the Company are relevant and material to determine whether to pass an order for winding up of the Company. Administrator receiving claims which along with the claim of the Petitioner exceeds the amount received by way of sale consideration of the sale of the CC Business and the sale of the immovable properties and fixed assets of the Company, then the present order of winding up of the Company shall forthwith be made operative without any further orders and the Official Liquidator shall forthwith take charge of the affairs of the Company. However, if the Petitioner's present claim along with the other claims received can be satisfied from the sale proceeds of the CC Business and the sale proceeds of the immovable properties and fixed assets of the Company, the same shall be disbursed to the Petitioner as well as other creditors to the extent of their claim, and the order of winding up of the Company shall stand set aside and the surplus if any shall be handed over to the Company - Decided in favour of Petitioner.
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Service Tax
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2014 (1) TMI 1512
Intellectual property rights service - Service tax on Royalty amount not paid - Penalty u/s 76, 77 & 78 - Commissioner deleted penalty u/s 80 - Held that:- It is seen that the original Adjudicating Authority has confirmed service tax demand by invoking extended period under proviso to Section 73 (1) on the basis of finding that the non-payment of the service tax was attributable to their intention to evade the tax. This finding of the Additional Commissioner has not been challenged by the appellant. Once such finding is given, there would be no scope for the conclusion that the appellant did not discharge the service tax liability due to bonafide reasons. Confirmation of service tax demand by invoking proviso to Section 73 (1) and waiver of penalty by invoking Section 80 do not go hand in hand - Decided against assessee.
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2014 (1) TMI 1511
Waiver of pre deposit - Demand of service tax - Denail of CENVAT Credit - Credit taken on construction service - Held that:- The service considered for the purpose of denial of service tax credit is construction service - the construction service is one of the services listed in the 26 services on which service tax credit had been taken and was held to be admissible - Therefore appellants have made out a prima facie case and accordingly the requirement for pre-deposit is waived and recovery is stayed during the pendency of the appeal - Following decision of Navaratna S.G. Highway Prop. Pvt. Ltd. vs. CST [2012 (7) TMI 316 - CESTAT, AHMEDABAD] - Stay granted.
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2014 (1) TMI 1510
Denial of Cenvat credit on Input service tax Held that:-The appellant is not making any grievance about depositing the amount, there was no reason to grant waiver of pre-deposit of the CENVAT credit denied - The issue involved is one of interpretation - the appellant directed to make a pre-deposit of the entire amount of CENVAT credit denied stay not granted.
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2014 (1) TMI 1509
Waiver of service tax - Reverse change - Business Auxiliary Services - Two SCN issued for same period - Held that:- the agreement is made between the applicant and the foreign service provider. Therefore, it cannot be said that the Foreign Service provider has provided service to Dubai office and not to the present applicant. - in view of the provisions of Section 66A of the Finance Act, the applicants are liable to pay service tax in respect of the services received from the foreign service provider on reverse charge mechanism. There is a duplication of demand in respect of show-cause notices 1 and 2, we find that both the show-cause notices are for the same period and on the same ground. Therefore for the said purpose we find prima facie merit in the contention of the applicant. In respect of other show-cause notices after taking into consideration of the amounts paid as commission as shown in the balance sheet comes to approximately Rs. 1 lakh. In respect of show-cause notice for the demand of Rs. 1,89,22,265/- we find that the applicants had not make out a case for waiver - Conditional stay granted.
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2014 (1) TMI 1508
Refund of service tax - Bar of limitation - Notification No. 41/2007-ST dated 06/10/2007 - Held that:- refund claim pertains to the quarter October-December, 2008. The appellant have filed the refund claims on 30/07/2009 for the refund under Notification 41/2007-ST. The said Notification was amended vide Notification No. 17/2009 dated 07/07/2009 so as to allow filing of the refund claim within a period of one year from the date of export of the goods. Inasmuch as the appellant filed the refund claims in July, 2009 for the quarter ending October-December, 2008, the refund claims are within a period of one year from the date of export of the goods. Therefore, the appellant would be eligible for the benefit of refund under the aforesaid Notification subject to satisfaction of other conditions stipulated in the Notification. Appellant is eligible for the benefit of refund claim filed under Notification No. 41/2007 as amended by Notification No. 17/2007 and the time bar aspect is not attracted. However, the appellant has to satisfy that they have fulfilled the other conditions stipulated in the Notification. Therefore, the matter is remanded back to the original adjudicating authority only for satisfying that the appellant has fulfilled the other terms and conditions stipulated in Notification No. 41/2007 and the time-bar issue will have no application - Following decision of Uttam Steel Ltd. vs. Union of India [2003 (8) TMI 55 - HIGH COURT OF JUDICATURE AT BOMBAY] - Decided in favour of assessee.
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2014 (1) TMI 1507
Imposition of penalty u/s 76, 77 & 78 - Service tax not paid even after date of registration - Held that:- Appellant got their registration from the department as provider of taxable serviced on 28.11.2003 and had not filed any statutory returns nor paid any service tax to the department. It was only in December 2005 the appellant started paying service tax alongwith interest. The tabulated chart produced by the appellant shows upto August 2006 there was default in payment of service tax and the same has been paid subsequently though with interest. After August 2006 we find that the service tax was paid by the appellant by due dates regularly - As the appellant after getting the registration as provider of service tax appellant had not paid service tax on due dates prior to August 2006 and also not filed any statutory returns. This happened upto August 2006. As the appellant had not paid service tax nor filed any return, therefore we find no merit in the contention of the appellant that the appellants are not liable for penalties under Section 76 & 77 as imposed under the adjudicating order. In respect of the penalty under Section 78 of the Finance Act, 1994 we find that appellant started paying service tax by dues after August 2006 and prior to this date there was default of Rs.1,26,95,968/-. Therefore, the appellants are liable to penalty - However, appellant had paid part amount of the penalty, the same be adjusted against the above amount of penalty - Decided partly in favour of assessee.
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2014 (1) TMI 1506
Jurisdiction of Commissioner (appeals) - Power to remand - Held that:- impugned order on the issue sought to be agitated by the appellant before the Tribunal in the present appeal, is an order on merits. However, the limited ground raised in the appeal is that the appellate Commissioner remanded the substantive issue without power of remand. This ground is prima facie untenable - Decided against Revenue.
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2014 (1) TMI 1505
Refund claim - Bar of limitation - Held that:- appellants refund claim was maintainable and tax paid by the appellant under misconception of law was to be refunded. For testing eligibility of the appellant, to refund there was no scope left to re-adjudicate on different point. Only under misconception by both sides litigation cropped in to march to Tribunal in second round. Once the claim is maintainable and there is no direction for examining time-bar, nor there was any foundation in show cause notice - Decided in favour of assessee.
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2014 (1) TMI 1504
Waiver of pre deposit - Imposition of penalty - commercial or industrial construction service - Held that:- The Board clarified to the effect that if the construction of road is integral part of a composite contract comprising several pieces of construction works, the value of road construction should also be included in the gross taxable value. In the instant case, it has been claimed that the appellant undertook only construction of road along with allied works for the benefit of the service recipient. On a perusal of the work order available on record, we have found substance in this claim. If that be so, prima facie, a major part of the impugned demand is not sustainable - Stay granted.
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2014 (1) TMI 1503
Disallowance of CENVAT Credit - Insurance servicev - Held that:- The demand arose disallowing Cenvat credit availed by appellant in respect of the insurance service availed. Adjudication order makes clear how the insurance service was related to insurance covering issue of plant and machinery and inventories. Such coverage cannot be said to be not in relation to manufacture - Decided in favour of assessee.
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Central Excise
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2014 (1) TMI 1475
Availment of CENVAT Credit - Reasonable steps / care to be taken before availing Cenvat Credit - Duty paying documents - Violation of the provisions of Rule 3, 9(3) & Rule 7 of the Cenvat Credit Rules, 2004 - Held that:- both the Commissioner (Appeals) and the Tribunal have given cogent reasons to indicate that the assessee had taken reasonable steps to ensure that the inputs in respect of which he has taken the cenvat credit are goods on which the appropriate duty of excise, as indicated in the documents accompanying the goods, has been paid. Admittedly, in the present case, the assessee was a bona fide purchaser of the goods for a price which included the duty element and payment was made by cheque. The assessee had received the inputs which were entered in the statutory records maintained by the assessee. The goods were demonstrated to have travelled to the premises of the assessee under the cover of Form 31 issued by the Trade Tax Department, and the ledger account as well as the statutory records establish the receipt of the goods. In such a situation, it would be impractical to require the assessee to go behind the records maintained by the first stage dealer. The assessee, in the present case, was found to have duly acted with all reasonable diligence in its dealings with the first stage dealer - Decided against Revenue.
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2014 (1) TMI 1474
Penalty u/s 11AC - Availment of CENVAT Credit of CVD which was paid through DEPB - Invocation of extended period of limitation - Whether on the facts and in the circumstances of the case the CESTAT was justified in holding that although on merits the Respondent shall not succeed following Apex Court's decision in the case of Commissioner of Central Excise Vs. Sunwin Technosolution P. Ltd. reported in [2010 (9) TMI 71 - SUPREME COURT OF INDIA], the appeal filed by the Respondent only succeeds only on the point of time bar and not on merit - Held that:- Tribunal has given absolutely no consideration either to the reasons indicated in the order of the Additional Commissioner while confirming the duty demand or to those contained in the order of the Commissioner (Appeals). Both these orders take note of the fact that the ER-1 Returns and Cenvat Credit Returns submitted by the assessee did not disclose or reflect that the additional customs duty had been paid through DEPB adjustments, nor did the returns show that the Bills of Entry were submitted to the department. Moreover, it has been found that the payment of additional customs duty through DEPB adjustments was not incorporated in any of the returns and it was only in the course of audit that it was found that the additional customs duty had not been paid in cash. It was on this basis that the extended period of limitation was sought to be invoked. If the Tribunal had to reverse this view regarding invocation of the extended period of limitation, it was necessary for it to indicate some reasons why the factual findings contained in the order of the Additional Commissioner and the Commissioner (Appeals) were being overruled. There is absolutely no reasoning on that aspect - Therefore, proceedings should be restored back to the file of the Tribunal for a fresh consideration - Decided in favour of Revenue.
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2014 (1) TMI 1473
Availment of suo moto credit which was reversed earlier - eligible cenvat credit credit under Rule 6(5) of CCR - Refund claim under Section 11B - Whether the assessee was entitled to take credit to the tune of ₹ 3,21,308/- as per Rule 6(5) of the Central Excise Rules, 2004 in respect of those services specifically mentioned in the book, which was earlier reversed by the assessee - Held that:- assessee originally availed the Cenvat Credit on service tax for discharging its liability. However, for sound reasons, it reversed the credit. Strictly speaking, in this process, there is only an account entry reversal and factually there is no outflow of funds from the assessee to result in filing application under Section 11B of the Central Excise Act, 1944 claiming refund of duty - it was not a case of refund of duty falling under Section 11B of the Central Excise Act, 1944 and that the assessee was to comply with the provisions of Section 11B of the Act. The view of the Tribunal that the assessee should seek reversal in the appropriate judicial forum, if the assessee was aggrieved by the earlier order herein does not arise at all. Sum of ₹ 3,21,308/- for which suo motu credit was taken by the assessee was forming part of ₹ 5,38,796/-, which was earlier reversed by the assessee. On the admitted fact, ₹ 3,21,308/- represented the enumerated input services as given under Rule 6(5) of the Cenvat Credit Rules, 2004, we have no hesitation in accepting the plea of the assessee that on a technical adjustment made, the question of unjust enrichment as a concept does not arise at all for the assessee to go by Section 11B of the Central Excise Act, 1944 - order of the Tribunal is set aside and allow the appeal filed by the assessee and hold that legally speaking there is no impediment in the asseesee taking suo motu credit - Decided in favour of assessee.
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2014 (1) TMI 1472
Appropriation of the rebate claims with duty demand - Held that:- revenue is not seeking to initiate recovery proceeding on the expiry of a stay. In this case, the revenue is seeking to exercise its power under Section 11 of the Act by adjusting the amount which is due (rebate claim) to the petitioner from the revenue against the amount payable by the petitioner to revenue as a consequence of the order dated 31 July 2006. It is to be noted that the so called stay which was granted to the petitioner on 15 December 2006 by the Tribunal was not in exercise of its inherent powers but was in exercise of powers under Section 35F of the Act which only dispenses with the requirement of pre-deposit of duty and penalty for entertaining the appeal on merits. The dispensing with the requirement of predeposit of duty and penalty under the proviso to Section 35F of the Act for the purposes of hearing the appeal could at the highest be said to restrain the revenue from taking any coercive action for recovery but would not estop the revenue from adjusting amounts which become subsequently due to the petitioner towards the amount payable by the petitioner to the department. Besides, introduction of the third proviso to sub-section (2A) of Section 35C of the Act introduced in 2013 would appear to dilute the applicability of the decision relied upon by the petitioner. Revenue allowed to appropriate the duty amount with rebate but not allowed to adjust penalty amount, the balance would be released to the assessee. - Decided partly in favor of assessee.
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2014 (1) TMI 1471
Restoration of appeal - Tribunal directed the respondent herein to make deposit of ₹ 4,00,000 within a period of 8 weeks and report compliance on 6th May, 2011 - Vide order dated 10th June, 2011 on account of non-compliance of order dated 4th February, 2011, the learned Tribunal dismissed the appeal - The respondent herein subsequently deposited an amount of ₹ 4,00,000 on 12th December, 2012 and filed an application for restoration of appeal purportedly under Rule 20 of the CESTAT (Procedure) Rules, 1982 - Tribunal vide order dated 15th April, 2013 allowed the application - Held that:- From the perusal of the rules, it can thus be revealed that though Rule 20 permits dismissal of an appeal on account of non-appearance of the appellant, proviso thereto enables the learned Tribunal to restore the appeal on the assessee making out a sufficient cause for his non-appearance when the appeal was dismissed. It can further be seen that apart from that, Rule 41 enables the Tribunal to make such orders or give such directions as may be necessary or expedient to give effect or in relation to its orders or to prevent abuse of its process or to secure the ends of justice. It can thus clearly be seen that under Rule 41, the learned Tribunal has ample powers which can be used to prevent the abuse of its process or to secure the ends of justice. Under Rule 41 the CESTAT has wide powers to prevent abuse of its process and to secure the ends of justice. As such, though the application was filed under Rule 20, it will have to be held that jurisdiction exercised by the learned Tribunal was under Rule 41 of the said Rules - in the absence of any provision in the Act or Rules specifically prohibiting restoration of appeal dismissed on the ground of non-deposit of penalty, the learned Tribunal has a power and jurisdiction to recall its order, if ends of justice require such course of action - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (1) TMI 1514
Violation of principle of natural justice - Exercise of Revisional jurisdiction - Opportunity of hearing not granted - Held that:- Sub-section 1 of Section 63A of the Act categorically states that before passing any order in exercise of revisional jurisdiction, the person concerned must be given an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment or directing a fresh assessment ought to be ordered - in response to the notice issued by the 1st respondent, the petitioners representative appeared and sought time for producing the details and records before the authority. It is also noted that 20 days time was granted. But no specific date for producing the necessary documents was fixed. In fact time was granted on 07.10.2013 and the impugned orders have been passed on 29.10.2013 whereas the petitioner had sought time till the end of October 2013 to produce the details and records before the authority. Possibly, if the matter was taken up for consideration on a particular date in October or later, by then, the petitioner would have appeared and produced the materials. As the impugned orders have been passed on 29.10.2013, petitioner was not in a position to put forth his case along with the details and records before the 1st respondent. Therefore, the impugned order have been passed without considering the case of the petitioner and neither looking into the records that were to be submitted by the petitioner and hence would have to be quashed - Decided in favour of assessee.
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2014 (1) TMI 1513
Rejection of application for issuance of Form-C - Held that:- Moreover, since the supply of form depends on the discretion of the Sales-tax Officer, guided by the genuine requirement of a dealer, we cannot compel the Sales-tax Officer to issue forms to the petitioner which in the opinion of the Sales-tax Officer are not genuinely required by him. Moreover, the petitioner has an alternative remedy by way of appeal in case he is not satisfied with the order of the Sales-tax Officer with regard to the number of forms to which he is entitled. If the petitioner can satisfy the appellate authority that his genuine need for the forms is greater than sanctioned by the Sales-tax Officer and also that the forms previously issued to him had been properly accounted for, the Appellate Authority can give him the necessary relief. proper course for the petitioner is to approach the Appellate Authority. We make it clear that in the meantime, if the petitioner bona fide utilises the forms already issued to him and if he genuinely needs more forms, he can make a demand from the Sales-tax Officer - petitioner's application for issuance of Form-C has been rejected. The petitioner was issued a show cause dated 11.04.2011, as to why its application for issuance of Form-C be not rejected. The petitioner submitted its reply on 11.04.2017, to the show cause notice, and rushed to the Court by filing the instant writ petition on 13.04.2011. The Assistant Commissioner, Commercial Tax, Sector-5, Sonbhadra - respondent no.2, has not taken any decision on the petitioner's reply so far - writ petition is premature as the Authority has not given any reason , on which the court may adjudicate the rights of the petitioner - Decided against assessee.
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Indian Laws
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2014 (1) TMI 1502
Request for information - Right to information - Held that:- Access to information, under Section 3 of the Act is the rule and exemptions under Section 8 the exception. Section 8 being a restriction on this fundamental right, must therefore is to be strictly construed. It should not be interpreted in manner as to shadow the very right itself - public authority can claim exemption from disclosure only as per the Section 8(1) of the RTI Act. In the present appeal before the Commission, the respondent has not claimed any exemption as per the RTI Act nor been able to explain how the information if revealed would attract any of the exemption as per the Act. In view of the above, the respondent is hereby directed to provide information on point Nos. 2 & 3 of the RTI application. With regards to point 5 it may be noted that it does not fall within the ambit of the definition of information as defined in Section 2(f) of the Act - Decided partly in favour of Appellant.
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