TMI Tax Updates - e-Newsletter
January 9, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Revision u/s 263 - Just by throwing allegation on the assessment proceedings on suspicion and presumptions, the assessment order is held to be erroneous and prejudicial to the interest of revenue - order set aside - AT
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Income Tax:
TDS u/s.194-I - lease premium and additional Floor Space Index (FSI) charges, paid by the assessee-company to Mumbai Metropolitan Regional Development Authority (MMRDA) toward leasehold land - The payment is not in the nature of rent - not liable for TDS- AT
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Income Tax:
If the assessee denies that he is in receipt of income from a particular source, it is for the AO to prove that the assessee has received income as the assessee cannot prove the negative. - AT
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Income Tax:
Transfer pricing adjustment deleted - the comparables adopted by the assessee are uncontrolled parties and can be considered for the purpose of determining the Arms' Length Price as per CUP method - AT
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Income Tax:
Penalty u/s 272A(2)(c) – when the assessee did not remit the tax deducted at source, then it would not be in a position to file the annual return prescribed in sec. 206 of the Act - there was reasonable cause for the assessee for the failure to furnish the annual returns for all the years - AT
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Income Tax:
Depreciation on leased premises - there being no user in any earlier year, the same does not qualify to be depreciable asset, for the provision of section 32(1)(iii) to apply, i.e., on it being sold, discarded, destroyed, etc. - AT
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Corporate Law:
Power of Debts Recovery Appellate Tribunal to condone delay - Section 29(2) of the Limitation Act does not apply to an appeal under Section 18 of the SARFAESI Act and therefore Section 5 of the Limitation Act cannot be pressed into service to condone the delay in filing such appeal - HC
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Service Tax:
CENVAT Credit - credit allocated to it by its head office as input service distributor - ISDs was not registered - procedural law should not dominate over the substantial law to deprive the litigant from the process of justice - credit allowed - AT
Articles
Notifications
News
Case Laws:
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Income Tax
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2015 (1) TMI 317
Revision u/s 263 - assessee had set off the loss on sale and purchase of cotton yarn from the interest income - it was observed by the CIT that there was no such business in the earlier years - Held that:- A perusal of the order of the ld. CIT passed under sect ion 263 shows that there is no specific finding by the ld. CIT as to how the order is erroneous and prejudicial to the interest of revenue. All that is being said is that the assessee “very likely” has tried to reduce its income by booking fictitious loss and that non-verification appeared to be “highly suspicious”. CIT’s powers under section 263 admittedly cannot be invoked on mere presumptions and surmises nor on suspicion. Just by throwing allegation on the assessment proceedings on suspicion and presumptions, the assessment order is held to be erroneous and prejudicial to the interest of revenue. No enquiry has been done by the ld. CIT. This is not permissible. This view of ours also finds support to the decision of the Hon’ble Jurisdictional High Court in the case of CIT –vs. J.L. Morrison reported in [2014 (6) TMI 154 - CALCUTTA HIGH COURT]. In these circumstances, we are of the view that the order passed under section 263 by the ld. CIT is unsustainable on the facts mentioned and consequently the same stands quashed. - Decided in favour of assessee.
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2015 (1) TMI 316
TDS u/s 194C - reimbursement of expenses - non deduction of TDS against clearing charges paid to clearing and forwarding agent - Held that:- assessee did not deduct any TDS on the said amount. Before the Assessing Officer the assessee has not given the convincing explanation for non deduction of TDS. However, before the CIT(A), the assessee has submitted that the major part of this amount is for reimbursement of expenses incurred by the Clearing Agent regarding payment of Octori, Custom duty and other charges. We find that neither the Assessing Officer nor the CIT(A) has examined or verified the nature of actual payment made by the assessee. - matter remanded back to the Assessing Officer for proper verification regarding the nature of the payment made by the assessee and then decide the issue afresh as per law. Depreciation - Car was a business asset and depreciation was allowed in the earlier years then any loss on account of sale of the said asset has to be adjusted as per provisions of section 32 because the block of assets did not cease to exist when the assessee purchased a new car during the year. Accordingly, we set aside this issue for limited purpose for allowing the claim u/s 32 on account of loss on sale of car. As regards the loss on account of furniture, cellular phone and water filter, since the block of assets ceased to exist, therefore, the same is not allowable as per provisions of section 32. Accordingly, this ground of the assessee’s appeal is partly allowed for statistical purpose - Decided partly in favour of assessee.
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2015 (1) TMI 315
TDS u/s.194-I - lease premium and additional Floor Space Index (FSI) charges, paid by the assessee-company to Mumbai Metropolitan Regional Development Authority (MMRDA) toward leasehold land during the relevant year - Held that:- as found by the ld. CIT(A), the amount charged by MMRDA as lease premium is equal to the rate prevailing as per the stamp duty ready reckoner for the acquisition of commercial premises. There is no provision in the lease agreement for termination of the lease at the instance of the lessee and, hence, for refund of lease premium under regular circumstances. Even the additional floor space index (FSI), given for additional space, is as per the ready reckoner rate only. The whole transaction is thus for grant of leasehold rights, and only a transfer of property; the lease premium being the consideration for the leasehold rights, which comprise a bundle of rights, including the right of possession, exploitation and its' long term enjoyment. The charges for FSI also partake the character of a capital asset in the form of Transferable Development Rights (TDRs), so that the owner (of land) had transferred the rights of development and exploitation of land, which are again capital in nature. The restrictive convents toward excavation seek to retain the right of the State to any minerals from land. Excavation is permitted for the purpose of construction of the foundation of the building, or for executing any work in pursuance of the terms of lease. Similarly, restriction with regard to erection beyond building line was only in conformity with DC Rules, civil aviation rules, BMC and coastal regulations, etc., i.e., are regulatory, and do not define the character of the transaction per se . The same in fact would apply, i.e., be imposed by a local authority while granting permission for construction on free-hold land. The payment is not in the nature of rent - not liable for TDS - Decided against Revenue.
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2015 (1) TMI 314
Unexplained investments - purchase of immovable properties - AO’s enquiry regarding the source of investment as reflected in the information received, the assesses informed that they were out of drawings from partnership firm - investments were not reflected in the assessee’s books - CIT(A) partly allowed the assessee’s appeal - Held that:- important aspect of the explanation of the assessees in this regard is that assessee have made the investments after making necessary drawings from the partnership firm M/s.Deco De Trend. Now the bank statement of M/s.Deco De Trend and the concerned accounts of the firm are relevant for proper adjudication in this case. We find that it is not clear from the records as to whether the assessee has submitted these documents or as to whether these documents were requisitioned and examined by the appellate authorities. We further find that in the appellate order the ld. CIT(A) has simply affirmed AO’s remand report without giving a proper finding of his own. In these circumstances in our considered opinion interest of justice will be served if the issues raised in this appeal are remitted to the file of AO. Accordingly the issues raised in these appeals are remitted back to the file of AO. The AOs are directed to consider the case afresh after giving the assesses proper opportunity of being heard. - Matter remanded back - Decided in favour of assesees.
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2015 (1) TMI 313
Ascertaining Income from commission business - Addition of unaccounted cheque deposit - Held that:- With respect to the addition of ₹ 3,84,734 and ₹ 3,98,750, the assessee had explained the transactions when a show-cause notice was issued to the assessee and had clearly brought to the notice of the AO about the nature of mistakes that were committed by the accountants of the assessee. The accountants had by oversight wrongly recorded the names of the firms from whom the assessee had received. As the assessee deals with a number of traders and the volume is large, the mistakes committed by the accountants of the assessee seem to be genuine. Further, mere wrong recording of names of the persons/firms who issued cheques does not ipso facto warrant addition thereof when the AO has enquired with M/s. Vamshi Parboiled Rice Mill and M/s. Manikanta Concerns. Since the errors committed by the accountants are clerical and inadvertent in nature, we delete the addition of ₹ 3,84,734 and ₹ 3,98,750. CIT(A) has observed that the sales and purchases effected by the assessee on which commission was earned was quantified at ₹ 8,53,68,651. However, the CIT(A) held that the amount which was taken as wrong credits in the books to the extent of ₹ 30,26,904 is to be increased and the turnover would be ₹ 8,83,95,556 and the gross turnover would be ₹ 8,83,95,556 on which the commission is to be calculated by at 3%. Taking note of the submissions of the learned counsel for the assessee that he had wrongly stated in the written submission that the rate of commission is at 2% of the turnover whereas actually it should be 0.2%, we are of the opinion that the order of the CIT(A) estimating the commission at 3% on the gross turnover cannot be accepted. We find the actual extract for the commission received in the present assessment year has been produced by the assessee at pages 31 to 62 of the Paper Book. We also find that the commission received is recorded in the statement is about 0.5%. Hence in these circumstances, we deem it fit to restore the issue to the file of the AO to factually verify the commission payment received & determine the rate of commission on the turnover as per the books of the assessee - Decided partly in favour of assesse.
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2015 (1) TMI 312
Capital Gains - Joint development agreement (JDA) with brothers - AO has observed that the assessee has not shown any long term capital gains and short term capital gains in the return of income - Deduction u/s. 54F - Held that:- CIT(A) has got the cases mixed up between the brother and the assessee herein and has wrongly concluded that the AR has not pressed these grounds of appeal. In these circumstances, we set aside the order of the CIT(A) and remit the issue to the file of the CIT(A). The assessee is free to raise any issue including the application of judgement of jurisdictional High Court in the case of Potla Nageswara Rao (2014 (8) TMI 636 - ANDHRA PRADESH HIGH COURT). The CIT(A) has to consider additional grounds and deduction u/s. 54F of the Act, following the decision of the Tribunal in the case of Sri Nand Kishore Yadav (2015 (1) TMI 288 - ITAT HYDERABAD), who is the brother and partner of the assessee. - Decided in favour of assessee.
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2015 (1) TMI 311
TDS u/s 195 - Disallowance under section 40(a)(i) - overseas agencies commission paid to non-residents without deduction of tax at source - Held that:- From the scope of services of the agreement, we do not find any managerial/technical services are to be provided to the assessee by the overseas agent M/s. James Druchas, USA so as to attract the provisions of section 195 of the Act. However, this agreement which was entered into on 5.6.2008 is relevant to the assessment year 2009-10 and the assessment year under appeal now before us is 2007-08. Neither the assessee nor the Revenue placed an agreement relevant for the assessment year under consideration. In such circumstances, we are not able to decide the issue. Therefore, we are of the considered view that this matter has to be re-examined by the Assessing Officer with reference to the agreement prevailing for the assessment year 2007-08 and the conditions mentioned thereon for the relevant assessment year i.e. 2007-08. Therefore, we restore this issue to the file of the Assessing Officer to examine afresh with reference to the agreement and the case laws relied on this issue. - Decided in favour of Revenue.
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2015 (1) TMI 310
Disallowance of depreciation in case of Trust - Whether CIT(A) erred in allowing the claim of depreciation to the assessee in spite of the fact that the entire cost of depreciable assets had been allowed to the assessee as an application of income towards object of the Trust and therefore, again allowing of the depreciation in same assets holding it as application if for charitable purposes amounts to double deduction - Held that:- assessees are AOP Trusts and registered u/s 12AA of the Act. While computing income u/s 11 of the Act, the assessee, M/s Kongunadu Arts and Science College Council claimed depreciation of ₹ 1,76,82,258/- and the assessee, M/s Ramanandha Adigalar Foundation claimed depreciation of ₹ 8,21,52,114/- as deduction. The claim of depreciation was disallowed by the Assessing Officer on the ground that as the cost of the assets was itself allowed as application of income, therefore, allowing depreciation on the very same assets would amount to double deduction. - Held that the assessee is not claiming double deduction. - Following decision of M/s Great Lakes Institute of Management [2012 (9) TMI 179 - ITAT, CHENNAI] - No reason to interfere with decision of the CIT(A) - Decided against Revenue.
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2015 (1) TMI 309
Validity of order passed by DRP - Objections of assessee not properly dealt by DRP - Held that:- where the DRP has directed the AO u/s 144C(5) to pass the assessment order in consonance with the draft order made by the AO without adjudicating the objections and contentions of the assessee in a proper manner, then the order of the DRP suffers from the bias of being contrary to the record as well as non-application of mind - DRP has not decided and adjudicated the objections of the assessee as per letter and spirit of the provisions of the Act as well as procedural requirement of proper adjudication for a quasi-judicial authority. The order of the DRP suffers from lack of application of mind as the DRP has not passed any speaking order and the objections of the assessee have been rejected at the threshold without any proper reasoning thereon. In this situation, we are inclined to hold that the DRP has passed a cryptic order which is not a speaking one and which has been passed without application of mind. Therefore, the impugned order of the DRP and consequential assessment order passed by the AO deserve to be quashed and we quash the same.- Case restored to DRP - Following decision of AIA Engg. Ltd. vs Dispute Resolution Panel & Others [2010 (8) TMI 743 - Gujarat High Court] - Decided in favour of assesse.
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2015 (1) TMI 308
Non deduction of TDS u/s 194J relied upon certificate issued u/s 197 - Admission of additional evidence - Held that:- CIT(A) allowed the appeals of the assessee based on the certificates issued by the AO u/s 197 of the Act. In view of the certificate issued by the AO u/s 197 of the Act, the assessee was not required to deduct tax at source as per provisions of section 194C and 194J in respect of impugned payments. The CIT(A), in order to verify the authenticity of certificate issued u/s 197 of the Act called for a remand report from the AO. Since the remand report was not received, the CIT(A) allowed the case of the assessee. Even before us the revenue has not called in question the authenticity of the certificate issued u/s 197 of the Act by the concerned AO. Hence we see no reason to interfere with the order of the CIT(A). Therefore we uphold the order of CIT (A) as correct and in accordance with law - Decided against Revenue.
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2015 (1) TMI 307
Validity of re-opening of assessment - Change of opinion - Held that:- assessee vide letter enclosed the documents which are available on the letter and vide document No.5 product-wise break-up of unearned commission was furnished, the explanation of which was made available at Page-2 of the paper book. The product wise break-up is further available at page-5 of the paper book which was made available to the AO during original assessment proceedings. The AO raised various queries to which the assessee vide letter dated 26/12/2005 furnished a detailed reply - The totality of facts are clearly indicating that during original assessment proceedings the material facts were produced and satisfactorily explained by the assessee which were duly examined by the AO. - Even during original proceedings the AO did not make any addition/disallowances, meaning thereby, he was satisfied with the explanation of the assessee. When the primary facts necessary for assessment are fully and truly disclosed, the ITO is not entitled to re-open the proceedings merely on the basis of change of opinion. Having second thought on the same material and omission to draw the correct legal presumption during original assessment do not warrant the initiation of proceeding u/s. 147 of the Act. Provisions of section 147, as amended with effect from 1.4.1989 are contextually different and the cumulative conditions spelt out in clauses (a) and (b) of sec. 147, prior to its amendment, are not present in the amended provision. The only condition for action is that the AO should have reason to believe that income has escaped assessment. Viewed in that angle, power to re-open the assessment is much wider under the amended provision. However, such power is not unbridled one. It is hedged with several safeguards conceived in the interest of eliminating room for abuse of this power by the AO. - undisputedly the material facts were available before the AO during original assessment proceedings itself. Therefore, in our humble opinion the ld. AO was unjustified to re-open the assessment which was framed on due application of mind after examining the facts. - Decided against Revenue.
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2015 (1) TMI 306
Addition on the basis of information from the Annual Information Report (AIR) - Reconciliation of professional receipts - Held that:- Professional fees shown by the assessee in its P&L account far exceeds than the amount shown in the AIR information. Even the assessee has reconciled the major portion of the receipts. It has not been denied by the Revenue Authorities that full and complete details of the parties are not mentioned in the AIR information. The addition in this case has been made by the lower authorities solely on the basis of AIR information. In our view, the addition, made solely on the basis of AIR information, especially in the absence of full details of parties and when the professional receipts declared by the assessee far exceeds than the amount mentioned in the AIR information, is not sustainable in the eyes of law. - If the assessee denies that he is in receipt of income from a particular source, it is for the AO to prove that the assessee has received income as the assessee cannot prove the negative. Reliance can also be placed on the decision of Mumbai Bench of Tribunal in the case of Shri S. Ganesh vs. ACIT" in [2010 (12) TMI 851 - ITAT, Mumbai] wherein the Tribunal has held that in the absence of any material brought by the revenue authorities that the assessee has received amount more than the professional fees which has been declared by him in the P&L account and when the professional income declared by the assessee far exceeds the professional fees shown in the AIR information, then additions solely based on the AIR information are not sustainable. - Same are hereby ordered to be deleted. - Decided in favour of assesse.
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2015 (1) TMI 305
Rectification u/s 154 - Default in TDS statement - defaults are due to error in data entry and/or missing information, the same should be corrected by filing the 'correction statement' and if the defaults are otherwise than above, then, the amount of default be paid within 30 days of the receipt of this intimation - Held that:- Following decision of ITO vs. Maruti Insurance Agency Network Ltd. [2015 (1) TMI 291 - ITAT DELHI] - Decided against Revenue.
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2015 (1) TMI 304
Unexplained cash deposits - Additions u/s 68 – Held that:- Huge amount of cash was found to have been deposited in assessee's bank account - during the assessment proceeding apart from claiming that the amounts were received from the buyers of real estate to be given to the sellers of real estate which was temporarily parked in the bank account, assessee has not produced any other supporting evidence - However, assessee has not furnished any supporting evidence to substantiate claim by way of confirmation letters either from the buyers of real estate or from the sellers - Assessee has not even furnished a single name and address of either buyer or seller of the property or particulars of property transacted through him - assessee's explanation cannot be accepted on the face value in absence of supporting evidences - it is not understood why and how the buyers were handing over the sale consideration, that too in cash, to assessee instead of paying directly to sellers. It is hard to believe that when assessee is carrying out transactions of the magnitude of ₹ 2,78,44,000 he has failed to remember a single name and address of the person on whose behalf he has carried out such Shri Ramishetty Nageswar Rao transaction or who has paid money to him - CIT(A) was not justified in accepting assessee's explanation with regard to cash deposits made in the bank account in absence of any supporting evidence by putting the onus on AO - When cash deposits are found in the bank account of the assessee, onus is on the assessee to prove the source of such deposits with adequate evidence - Merely, because AO did not find any other investment in the name of the assessee cannot be the only reason to conclude that deposits in the bank accounts do not belong to the assessee even in absence of any other supporting evidence - as the CIT(A) has deleted the addition without proper supporting evidence, the order of the CIT(A) is set aside and the matter is remitted back to the AO for verification of claim – Decided in favour of revenue.
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2015 (1) TMI 303
Addition of contract receipts – difference in profit and loss account and 26AS figures - Held that:- The assessee has not produced its books of account, bills vouchers, etc. either before AO or before CIT(A) - there is a difference of ₹ 8,16,92,576 between the contract receipts shown by assessee in the P&L A/c and as mentioned in 26AS statement - Assessee has tried to reconcile the difference by explaining that the amount represents the provision entry made by the main contractor M/s Vishwa Infrastructures and Services Pvt. Ltd. – assessee contended that the amount received from the entire contract works has been shown in the AY 2010-11 and 2011-12 - If the claim of assessee is found to be correct, then, there will be no justification in including the amount of ₹ 8,16,92,576 in the contract receipts for the AY as such inclusion would result in taxing the same income twice - a search and seizure operation was conducted in case of M/s Vishwa Infrastructures and Services Pvt. Ltd. – thus, the matter is to be remitted back to the AO for verification of actual amount received by assessee towards sub-contract work entrusted by M/s Vishwa Infrastructures and Services Pvt. Ltd. – Decided in favour of assessee. Estimation of profits @ 8.5 % - Held that:- Assessee though in the ground has mentioned that net profit rate of 8.5% has been estimated, however, on perusal of the order of first appellate authority, it is quite evident that he has directed to estimate the profit at 8% - not only during the survey operation but also during the assessment proceeding, assessee itself made a request to estimate the profit at 8.5% on the gross contract receipts - AO while completing the assessment has estimated profit at 8.5% by accepting assessee's request but the CIT(A) has reduced it to 8% - the order of the CIT(A) is upheld – Decided against assessee.
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2015 (1) TMI 302
Transfer pricing adjustment deleted - Medical transcription services provided by assessee – CUP method correct method or not for computation of ALP - Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee has adopted the CUP method for computing the Arms' Length Price for the international transaction entered into by it with its AE for the medical transcription service rendered by it to the AE - the assessee has considered two external comparables and three internal comparables - The service rendered by the assessee to its AE as well as to the other overseas customers and the services rendered by the other two Indian companies to CBay systems is also same, i.e. medical transcription work - the comparables adopted by the assessee are uncontrolled parties and can be considered for the purpose of determining the Arms' Length Price as per CUP method - the finding of the TPO that the assessee has not given the quantitative details is without any basis. The assessee has submitted the agreements between the assessee and its AE as well as the agreements entered into by the AE with the other Indian companies and the agreements between the assessee and its other overseas customers - the price charged by the assessee to its AE on each line of medical transcription work at 0.063 US$ is almost equal to the similar rate charged per line on medical transcription work by the other uncontrolled parties, considered as comparable by the assessee - The observation of the TPO that the comparables cannot be considered to be uncontrolled is without any basis, and it is based on mere presumptions and surmises - When the comparables considered by the assessee are in no way connected either with the assessee or with its holding company, and all the information/data relating to their transactions are available, the TPO was not justified in rejecting the computation of ALP made by the assessee by applying the CUP method - CIT(A) has passed a well reasoned order, and ultimately came to a conclusion that the CUP method is the most appropriate method for computing the ALP for the international transactions entered into by the assessee with its AE – Decided against revenue.
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2015 (1) TMI 301
Disallowance u/s 14A - disallowance made by AO was much more than the expenditure incurred by assessee in its profit and loss account - Held that:- in addition to exempt income there was also other taxable income during the year in the form of profit on sale of shares of ₹ 8.64 lakhs, profit on redemption of debentures of ₹ 80.02 lakhs – The year under consideration is assessment year 2007-08, whereas Rule 14A was made applicable from Assessment Year 2008-09 as as held in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - even in earlier years reasonable disallowance is required to be made - there is no reason to compute disallowance as per Rule 8D during the relevant AY 2008-09 - the AO is directed to disallow 50% of total expenditure of ₹ 4.65 lakhs in addition to disallowance of interest expenditure of ₹ 230 lakhs, attributable to earning of exempt income out of total interest expenditure of ₹ 236.73 lakhs. Redemption on debenture to be treated as capital gain or not – held that:- the AO has not treated the amount received on redemption as capital receipt on the plea that there was no transfer within the meaning of Section 2(47) - redemption of debenture amount to transfer within the meaning of Section 2(47), therefore, the lower authorities were not justified in not treating redemption on debenture as capital gain - the AO is directed to tax the gain under the head capital gains in place of income from other sources – Decided partly in favour of assessee.
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2015 (1) TMI 300
Transfer pricing adjustment - Information Technology Enabled Services - Rejection of comparables - Genpact India ltd. - Held that:- The TPO has included this comparable on the ground that the company is engaged in similar activity - the ratio of related party transaction to operating income for the year is 98.96% and does not satisfy the TPO’s own filter of rejecting companies having more than 25% RPT - the turnover of Genpact India is ₹ 2683.82 crores as against assessee’s turnover of ₹ 80.4 crores - the services rendered by Genpact india are high end services and even the turnover filter do not match with that of the assessee – there was no error in the directions of the DRP to reject the company from the final list of comparables. Excel Infoways ltd. – Super normal profit - Held that:- This company has a super normal profit and showing margin of 203.80% - the TPO in its order u/s. 92CA(3) has himself removed this company from the final list of comparables giving reasons “extreme outlier” - Considering the super normal profit and also the rejection by the TPO in A.Y. 2010-11, there was no error in rejection of this company - the ratio of employee cost to turnover is only 10.02% as against assessee’s employee cost of 62.83%. M/s. Crossdomain Solutions Ltd. – Held that:- This company has been rejected by the DRP on the ground that it is indulged in high skill IT services which are not comparable to the routine I.T. Enabled services – in M/s. Market Tools Research Pvt. Ltd. Versus Dy. Commissioner of Income-tax [2014 (9) TMI 43 - ITAT HYDERABAD] it has been held that this company is providing services which are in the nature of KPO - the company is engaged in providing Niche services as well as developed its own brand ‘Exdion’ to target the insurance industry in US - the directions made by the DRP is upheld for the rejection of this company from the final list of comparable - Decided against revenue. Nature of foreign exchange gain/loss – Operating revenue or not – Held that:- While computing the operating margin of the assessee, the TPO included the foreign exchange loss of ₹ 2.48 crores as part of operating cost but has not considered the foreign exchange gain of ₹ 1.09 crores as part of the operating revenue - This amounts to inconsistent approach of the TPO – thus, the TPO is directed to consider foreign exchange gain as part of the operating revenue while determining the operating margin of the assessee – Decided partly in favour of revenue.
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2015 (1) TMI 299
Addition su/s 68 - Burden to prove - cash credit - genuineness of creditors – Held that:- The assessee furnished before CIT(A) certain details relating to the loan creditors for each of the year under consideration - In the remand report, the AO has pointed out that there were differences between the details so furnished and the Balance Sheet of the assessee - it was pointed out by the AO that the Statement of accounts claimed to have been obtained by the assessee from the creditors have been signed by the director of the assessee company - CIT(A) has also noticed that the assessee has failed to prove the credit worthiness of the creditors - the assessee company has failed to prove the cash credits in terms of sec. 68 of the Act - the initial burden of proof to prove the cash credits is placed upon the assessee u/s 68 of the Act, i.e., the assessee is required to prove three main ingredients viz., the identity of the creditors, the credit worthiness of the creditors and the genuineness of transactions - the assessee has failed to discharge the initial burden placed upon it – thus, the order of the CIT(A) is upheld – Decided against assessee. Orders passed u/s 201(1) & 201(1A) – Held that:- The assessee could not controvert the findings given by the ITO(TDS) except pointing out certain computational error - Hence the ld CIT(A) has confirmed the orders subject to verification of the errors pointed out by the assessee - the assessee did not furnish any material for giving reason to interfere with the orders of CIT(A) - Though the assessee has submitted that the recipients have paid the tax on the income received by them, yet no material was furnished to substantiate the same – the order of the CIT(A) is upheld - Decided against assessee. Levy of penalty u/s 271C – Held that:- The financial problem, i.e., lack of money may be considered reasonable cause, since the financial problem has made the staffs and Chartered Accountant to leave the assessee company - Hence, there is merit in the submission of the assessee that it did not get proper assistance to comply with the tax laws - the assessee has shown that there was reasonable cause for his failure to deduct tax at source – the order of the CIT(A) is set aside and the penalty levied u/s 271C is to be set aside. Penalty levied u/s 272A(2)(c) – failure to submit TDS return in time - Held that:- The provisions of sec. 272A(2) is subject to the provisions of sec. 273B of the Act - As per the provisions of sec. 273B of the Act, the penalty u/s 272A(2) is not imposable if the assessee proves that there was reasonable cause for the said failure - the “reasonable cause” has to be examined from the point of view of a common man with reasonable mind - While dealing with the appeals relating to the penalty levied u/s 271C of the Act, the financial crisis faced by the assessee coupled with the fact of no staffs and lack of help from Chartered Accountant may be considered to be reasonable cause - The assessee has offered identical explanations for non-furnishing of annual return prescribed in sec. 206 of the Act in time - the assessee did not file the annual return for all the four years under consideration - The reason for the same is understandable, i.e., when the assessee did not remit the tax deducted at source, then it would not be in a position to file the annual return prescribed in sec. 206 of the Act - there was reasonable cause for the assessee for the failure to furnish the annual returns for all the years – thus, the order of the CIT(A) is set aside and the ACIT is directed to delete the penalty u/s 271A(2)(c) – Decided in favour of assessee.
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2015 (1) TMI 298
Disallowance u/s.14A – Held that:- The validity or otherwise of the assessee's claim of the expenditure incurred by it in relation to income not forming part of the total income, which is limited to direct expenditure of ₹ 1.52 lacs, is under law to be with reference to the assessee's accounts - if the assessee's accounts are not maintained activity-wise, it would presumably bear expenditure incurred both in relation to incomes forming part of, and not so, of the total income, so that that incurred, commonly for the latter, would require being estimated - an estimation toward expenditure, therefore, would have to be made, and for which the prescription of rule 8D would have to be followed - the estimation mandated by law does not provide any exception in the matter, i.e., in estimating the expenditure, which is essentially a matter of fact, so that it would in fact vary with each fact situation and, perhaps, from year to year even from the same assessee – the matter is remitted back to the CIT(A) to decide the same in accordance with the law – Decided in favour of assessee. Non-allowance of the set off of the LTCL against the LTCG – Held that:- The loss for AY 2005-06 has not been accepted by the Revenue, so that it is in appeal before the tribunal - There is as such no question of it being allowed carry forward of the same for set off against the income for the subsequent years, which could only be in terms of the specific provision of law, i.e., section 74, falling under Chapter VI of the Act - The assessee's plea of being in appeal for A.Y. 2005-06 is though not without merit - But that by itself would not give rise for a claim for the current year inas-much as the relevant order is only that for A.Y. 2005-06, i.e., as modified by the appellate order (by the first appellate authority) for that year, which continues to be the operative order/s. Depreciation on leased premises disallowed - Held that:- The decision in Assistant Commissioner of Income-tax Versus Rishiroop Polymers P. Ltd. [2005 (9) TMI 587 - ITAT MUMBAI] would apply in the facts and circumstances of the case - the discarding of the asset has to be in the year other than the previous year in which the asset is first brought to use - the asset has not been brought to use in any earlier year - there is no question of the same being allowed with reference to the provision - there being no user in any earlier year, the same does not qualify to be depreciable asset, for the provision of section 32(1)(iii) to apply, i.e., on it being sold, discarded, destroyed, etc.- Decided partly in favour of assessee.
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2015 (1) TMI 297
Allowability of claim of bad debts – Held that:- The AO noted that the bad debts claim allowed in the assessment order was much higher than those shown by the bank in NPA return furnished to RBI - The AO noted that the bad debts claim by the assessee were ₹ 86.68 crores while the bad debts shown in the NPA return filed with the RBI were of ₹ 16.91 crores - the CIT(A) has considered the reconciliation of the amounts shown in the NPA return with the RBI as well as annual accounts and return of income and found that the figure tallied with the amount in the audited P&L account and balance sheet – CIT(A) rightly found that there is no reference of the figure of ₹ 16.91 crores in the return - There is no evidence anywhere in the record from which it can be ascertained as to how the figure of ₹ 16.91 crores has been arrived at by the AO - Revenue has not pointed out any error in the facts recorded by the CIT(A) in the order – the order of the CIT(A) is upheld – Decided against revenue.
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Customs
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2015 (1) TMI 327
Jurisdiction on the Settlement Commission - Confiscation of Goods – Interest and Penalty – the applicant moved the Settlement Commission under Section 127B – Held that:- In Ashok Kumar Jain (2013 (8) TMI 317 - DELHI HIGH COURT), the passenger had brought the goods with him and he was required to fill in the disembarkation card which he did and, in it, he declared the value of the goods imported as “baggage”. In the present case, the respondent had also filled the disembarkation card, but he had left the description and value of the goods as blank. So, the two cases, that is, the case in the present writ petition and the one in Ashok Kumar Jain (supra) are quite similar and the issue raised is identical - plea raised by the petitioner is entirely covered against the petitioner by the decision of the Division Bench in Ashok Kumar Jain (supra). Consequently, we hold that the Settlement Commission had the jurisdiction to settle the case - Decided against Revenue.
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2015 (1) TMI 326
Waiver of pre deposit - Classification of coal - Held that:- A plain reading of the provisions make it abundantly clear that the Tribunal or Commissioner (Appeals) shall not entertain any appeal under section 128, unless the appellant has made a pre-deposit of 7.5% of the duty in such cases, where duty and penalty is in dispute and appeal is filed before tribunal. Therefore, in terms of amended section 129E with effect from 06/08/2014, this tribunal is barred from entertaining any appeal unless the pre-deposit as mentioned in section 129E is complied with. The law is very clear and there is no ambiguity in the matter. In view of the above, we hold that the appeal is not admissible before this Tribunal, inasmuch as the appellants have not complied with the pre-deposit requirements envisaged in section 129E - Decided against assesse.
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2015 (1) TMI 325
Classification of goods - Drawback claim - Held that:- Tariff Heading 8301.02 deals with base metal mountings with brass builder hardware under sub-heading 8302.01. This clearly makes that other builder hardware fall under the Tariff Entry No. 8302.02. Therefore Revenue’s contention is merited for which the appeal is dismissed - Decided against assessee.
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2015 (1) TMI 324
Stay application - Enhancement in value of betel nut - Commissioner (Appeals) has set aside the assessment order of the lower authority enhancing the value of betel nut from US $660 per MT - The contention is that Section 17(5) provides for time limit of 15 days for assessment and passing order. The contention is that the assessment order was passed on 10-3-2012 whereas the ld. Commissioner (Appeals) has passed the Order-in-Appeal dated 15-3-2012. The contention is that the Commissioner (Appeals) should have waited for expiry of 15 days time limit provided under Section 17(5) of Customs Act, 1962 - Held that:- 15 days time limit prescribed is not the minimum time limit prescribed under Section 17(5) of Customs Act, 1962 and in their assessment, the value was enhanced without following the procedure prescribed under Section 17(5) of Customs Act, 1962. The contention is that subsequently, the bills of entry are being assessed at the value declared by asking them to furnish Indemnity Bond of differential value/differential duty. The ld. Advocate stated that they have furnished the Indemnity Bond of differential value. The contention of the ld. Advocate is that their assessment is made on the provisional basis and the Revenue’s interests are safeguarded by furnishing Indemnity Bond by the applicant. The impugned consignment is part of the consignment of 7000 MT. In this case also, they have furnished Indemnity Bond. - Decided against Revenue.
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2015 (1) TMI 323
Application of stay on refund - Denial of them the benefit of Notification No. 102/2007-Cus., dated 14-9-2007 - Held that:- Special CVD is as per sub-section 5 of Section 3 of CETA, 1985. The Special CVD is levied for counter-balancing for Sales Tax/VAT. Undisputedly, the Sales Tax/VAT is exempted in this case. In this regard, learned Commissioner (Appeals) has found that the element of CVD is a tax in lieu of Sales Tax/VAT and that once the Importer fulfils the obligation of paying both the CVD and the Sales Tax/VAT, then he is entitled to refund of the CVD he had paid. It is pertinent to mention here that what is abated cannot be taken away indirectly. In these circumstances, we do not find any reason to stay the operation of the impugned Orders-in-Appeal. - Refund not to be stayed.
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2015 (1) TMI 322
Demand of differential duty - Confiscation of goods - Exemption of Notification No. 21/2002-Cus., dated 1-3-2002 - Since, the appellant has paid C.V.D. and they were not manufacturing newsprint, the adjudicating authority has decided that the goods imported under exemption was not used for intended purpose and denied the exemption of Notification No. 21/2002-Cus., dated 1-3-2002 availed by the appellant - Held that:- Appellant have not approached to the jurisdictional Assistant Commissioner of Central Excise for the required certificate but the preventive officers of Central Excise have searched the premises of the appellant as well as SPPML drawn panchnama, withdrawn records for investigation, recorded the statements and even recovered the Cenvat credit on the goods cleared to SPPML by the appellant. After in-depth investigation they found that the appellant have not complied with the condition (b) referred above and also diverted the 1275.201 MT of segregated white waste paper to SPPML a newsprint manufacturer. It was not found in the investigation that SPPML has further diverted the 1275.201 MT of ‘Waste Paper’ received by them from the appellant. There is no allegation that SPPML has not manufactured newsprint from the 1275.201 MT of ‘Waste Paper’ received by them from the appellant. The appellant has submitted a certificate dated 9-4-2014 duly certified by Chartered Accountant; certifying that the impugned goods of 1275.210 MTS of waste paper was received by SPPML and consumed in the activity of making newsprint. The substantive condition of the notification is the specified use of the imported goods and to verify the compliance of this substantive condition procedural condition of Sr. No. 20(b) was specified. It is proved beyond doubt that the appellants have complied the substantive condition of the notification. The show cause notice of the present case itself stands as certificate in this regard. Therefore, exemption of the Basic Customs Duty provided by the Notification No. 21/2002-Cus., dated 1-3-2002 as amended cannot be denied. Goods are not liable for payment of differential customs duty and confiscation. Since, there is no confiscation of goods and demand of differential duty is also not sustainable, penalties under Section 114A and 112 are also not imposable. - Decided in favour of assessee.
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Corporate Laws
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2015 (1) TMI 321
Validity of order for cancellation of sale deeds registered with the Sub-Registrar, Mumbai whereas the property was situated at District Ranchi, Jharkhand – Cancellation of sale deeds on property belonging to the company in liquidation - Whether the order dated 30.11.2011 is required to be recalled as the order was passed in the absence of the applicants and without notice to them – Held that:- An opportunity of being heard before an adverse order is passed in judicial proceedings is an integral part of principles of natural justice and Article 14 of the Constitution of India - the order cancelling the subject sale deeds, which were executed in favour of the applicants and a direction for the applicants to be dispossessed of the property, is an order adverse to the applicants - the order could not be passed without due notice to them and without a fair opportunity of being heard - although, the Official Liquidator had sought orders adverse to the applicants, they were not made parties to the proceedings - this fundamental flaw in the procedure would vitiate the impugned order dated 30.11.2011 and the same is liable to be recalled on this ground alone. Validity of registration made - Whether registration of a sale deed relating to a property situated in Bihar, with the office of Sub-Registrar - Mumbai would be valid - Whether the registration of the subject sale deeds could be cancelled on account of the subject property being situated in Ranchi, which at the material time was a part of the State of Bihar, and the registration being effected by the Sub-Registrar, Mumbai – Held that:- The Registration Act, 1908 occupies the field falling under Entry 6 of the Concurrent List, thus, by virtue of Article 246(2) of the Constitution of India, the Parliament as well as the State Legislature would have the power to legislate in respect of the subject matter - the Registration Act, 1908 as amended by the Registration (Bihar Amendment) Act, 1991, would prevail over the existing law (i.e pre-constitutional legislation) as applicable to the State of Bihar - the same does not imply that the law as amended by the Bihar Legislature would have extraterritorial application - The last four words of Article 254(2) of the Constitution of India - "prevail in that State" clearly restrict the applicability of the amendment to the state of Bihar - the Registration of the sale deeds by the registering authorities in Mumbai by virtue of Section 30(2) of the Act are not flawed. Whether by virtue of Section 30(2) of the Registration Act, 1908 an immovable property situated in Bihar could be registered by the Registrar of Assurances, Mumbai – Held that:- In the event a document was registered under Section 30(2) of the Act by a Registrar, a copy of same would be required to be forwarded to the Registrar in whose district the immovable property is situated - Section 66(1) of the Act mandates the Registrar to forward the memorandum of the document received by him to each Sub-Registrar subordinate to him in whose sub-district any part of the property is situated - In the event the legislative intent was to disregard any document that was registered by a Registrar of the district in which the erstwhile Presidency towns are located or by the Registrar of Delhi then the provisions of Section 67 of the Act would also have been omitted. In this regard it is relevant to note that the 'The Registration and Other Related Laws (Amendment) Act, 2001 enacted by the Parliament, which finally omitted section 30(2) of the Registration Act, 1908 also deleted section 67 - the Registration effected by the registering authority at Mumbai cannot be cancelled on account of the amendment brought about by the Registration (Bihar Amendment) Act, 1991. In the un-amended Section 28, even the Sub-Registrar within whose sub-district, a portion of the property was situated, was entitled to register the document - The amendment of Section 28 is not germane to the question, whether the Registrar of assurances of erstwhile Presidency towns and Delhi, by virtue of Section 30(2) of the Act, could register the document conveying immovable property in Bihar - an order cancelling the registration of the subject sale deeds only on the ground that the same were registered by the office of the Registrar in Mumbai, is not warranted – thus, the order is recalled and the matter is restored and the OL is permitted to file a fresh application to challenge the subject sale deeds and the transaction recorded therein on all grounds as available – Decided partly in favour of appellant.
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2015 (1) TMI 320
Jurisdiction of DRT - Territorial jurisdiction - Section 17 - petitioners being residents of Meerut - Held that:- The reason which prevailed with the Division Bench in Smt. Indira Devi (2010 (8) TMI 886 - DELHI HIGH COURT) to hold that an appeal under section 17(1) of the SARFAESI Act can be filed in any of the DRTs where the bank under section 19(1) of the DRT Act could initiate proceedings, was predicated on the DRT Act making a departure from section 16 of the CPC in enabling the bank to initiate proceedings not necessarily within the jurisdiction of the DRT where the mortgaged property is situated but in any of the DRTs. The Division Bench was also guided by the consideration of giving the same opportunity of choosing jurisdiction to the borrower, as available to the bank. Division Bench fell in error in assuming the debt/money recovery proceedings to be initiated by the bank under the DRT Act as equivalent to legal proceedings subject whereof is a mortgaged property, within the meaning of section 16 of the CPC. The proceedings referred to in section 19(1) of the DRT Act are merely proceedings for recovery of debt and not for enforcement of mortgage. Even prior to coming into force of the DRT Act, the bank, even if a mortgagee, was not mandatorily required to enforce the mortgage and which under section 16 of the CPC could be done only within the territorial jurisdiction of the court where the mortgaged property was situated and the bank was free to institute a suit, only for recovery of money and territorial jurisdiction whereof was governed by section 20 of CPC, containing the same principles as in section 19(1) of the DRT Act. We are, therefore, unable to accept that any departure qua territorial jurisdiction has been made in the DRT Act, as has been observed by the Division Bench Smt. Indira Devi (supra). The proceedings in the DRT for recovery of debt, culminate in a 'Certificate of Recovery' which is equivalent to a money decree of a civil court. Just like a money decree of a civil court, can be transferred for execution to another court where the assets of the judgment debtor from which recovery is to be effected are situated, under section 19(23) of the DRT Act also, where the property from which recoveries are to be effected, is situated outside the local limits of the jurisdiction of the DRT which has issued the Certificate, the DRT is required to send a copy of the certificate for execution to the DRT within whose jurisdiction the property is situated. Section 25 provides for modes of recovery of the debts specified in the certificate, including by attachment and sale of property. The recovery proceedings under the DRT Act are, thus, equivalent to a suit for recovery of money before a civil court and cannot be said to be for enforcement of mortgage. Thus, it cannot be said that the DRT Act has made any departure from section 16 of the CPC. For enforcement of the mortgage, the SARFAESI Act was enacted. While the Preamble of the DRT Act describes the same as to provide for establishment of Tribunals for expeditious adjudication and recovery of debts due to the banks and financial institutions, the Preamble to the SARFAESI Act describes the same as an act, inter alia, for enforcement of security interest. The Supreme Court in Transcore (supra), on analysis of provisions of DRT Act in juxtaposition to SARFAESI Act, held the DRT Act to be providing for adjudication of disputes, as far as debt due is concerned, whether it be a secured or an unsecured debt - Once it is held that an appeal under section 17(1) of the SARFAESI Act cannot be equated with an application by the bank/financial institution for recovery of debt under section 19 of the DRT Act, the limits of territorial jurisdiction described under section 19(1) of the DRT Act cannot be made applicable to section 17(1) of the SARFAESI Act. Provision for territorial jurisdiction under section 19(1) of the DRT Act is only qua the applications to be made by the bank or financial institution for recovery of its debt. However, a proceeding under section 17(1) of the SARFAESI Act is initiated not by the bank or the financial institution but by a person including the borrower aggrieved from the measures taken by the bank or financial institution under section 13(4) of the SARFAESI Act. We are, thus, of the view that notwithstanding section 17(7) of the SARFAESI Act providing for the disposal of the proceedings under section 17(1) of the SARFAESI Act in accordance with the provisions of the DRT Act and the Rules made thereunder, the same cannot make the provisions of section 19(1) of the DRT Act applicable to proceedings under section 17(1) of the SARFAESI Act. As aforesaid, section 19(1) of the DRT Act is n6t an omnibus provision qua territorial jurisdiction. It is concerned only with providing for territorial jurisdiction for applications for recovery of debts by the banks/financial institutions. The same can have no application to the appeals under section 17(1) of the SARFAESI Act which are to be preferred, not by the banks/financial institutions, but against the banks/ financial institutions. Principles of section 16 of the CPC are reflected in sections 14 and 17A of the SARFAESI Act. Assistance to the secured creditor has not been provided of any court but only of the court within whose jurisdiction secured asset is situated. This is not without reason. It is only the CMM/DM within whose jurisdiction such secured asset is situated who can render such assistance. Court does not concur with the second reasoning given by the Division Bench in Smt. Indira Devi (supra) of any need to provide parity to the borrower with the bank, in the matter of territorial jurisdiction. Principles of parity do not apply to territorial jurisdiction. Merely because the defendant if were to sue, can sue at the place of the residence of the plaintiff, does not entitle the plaintiff to sue at the place of his residence if that place would otherwise not have territorial jurisdiction. We re-emphasise that the scope of the proceedings under section 19(1) of the DRT Act is entirely different from a proceeding under section 17(1) of the SARFAESI Act and no need for parity exists. Division Bench judgment in Smt. Indira Devi (supra) is set aside and an appeal/application under section 17(1) of the SARFAESI Act can be filed only before the DRT within whose jurisdiction the property/secured asset against which action is taken is situated and in no other DRT. - No error in the order of the DRT, Delhi impugned in this petition holding it to have no jurisdiction to entertain the appeal/application under section 17(1) of the SARFAESI Act, the mortgaged property against which action is to be taken being situated at Meerut. - Decided against Petitioners.
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2015 (1) TMI 319
Power of Debts Recovery Appellate Tribunal to condone delay - whether the Debts Recovery Appellate Tribunal constituted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 has power to condone the delay in filing second appeal under Section 18 of the SARFAESI Act - Held that:- In case the provisions of the Limitation Act are not expressly excluded and the period of limitation prescribed under the Special Act is different from the period that prescribed under the Schedule to the Limitation Act, then Section 29(2) would apply. In short, it is the contention of the petitioners that Sections 4 to 24 of the Limitation Act would apply automatically to determine the periods under Special Law in case the provisions of the Limitation Act are not expressly excluded. Proviso to sub-section (3) of Section 20 of the RDDBFI Act gives a discretion to the appellate authority to extend the time for filing statutory appeal. On the other hand, while enacting the SARFAESI Act, the parliament very consciously excluded the application of the provisions of the Limitation Act to an appeal under Section 18 of the Act. The Legislature was aware of the factual position that in spite of constituting Special Tribunals to recover the public money, the Banks and financial institutions were not in a position to achieve the results on account of the time taken to complete the original and appellate proceedings and the ultimate execution proceedings. The Legislature therefore wanted a fast track method and machinery to recover the dues within a reasonable time. The failure to make a provision to extend the provisions of the Limitation Act cannot therefore be treated as an omission. Since the Supreme Court [1985 (7) TMI 347 - SUPREME COURT OF INDIA] has already made the position very clear that the Tribunal under RDDBFI Act is not a Court, the question of automatic extension of the provisions of the Limitation Act to an appeal under Section 18 of the SARFAESI Act would not arise. The proviso to sub-section (3) of Section 20 of RDDBFI Act indicates the legislative intent to extend the time limit for filing appeal. Similarly Section 24 of the said Act indicates the exclusion of the provisions of the Limitation Act 1963 to an application before the Tribunal. There are no such express provisions in the SARFAESI Act so as to enable the appellants to invoke Section 5 of the Limitation Act. - Section 37 of the SARFAESI Act is in the nature of a clarification that the operation of some of the other laws are not barred. This shows that SARFAESI Act is in aid and not in derogation of other laws. In view of Section 36 of the SARFAESI Act it is not correct to say that the Limitation Act would come as an aid to the SARFAESI Act to recover the amount due to the Banks and Financial Institutions. The statement of objects and reasons, the preamble and the scheme of the SARFAESI Act would make the position clear that the Legislature consciously and intentionally excluded the applicability of Section 29(2) of the Limitation Act and consequently Section 5 to an appeal before the Appellate Tribunal under Section 18 of the Act. - Section 29(2) of the Limitation Act does not apply to an appeal under Section 18 of the SARFAESI Act and therefore Section 5 of the Limitation Act cannot be pressed into service to condone the delay in filing such appeal. - Decided against Appellant.
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Service Tax
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2015 (1) TMI 350
CENVAT Credit - credit allocated to it by its head office as input service distributor - ISDs was not registered - held that:- Perusal of the substantial law in Rule 2(m) leads to the conclusion that appellant was entitled to the credit for no finding on the genuinity of the credit availed ad such credit allocated by the ISD. - As a result of which the substantial relief granted by rule making authority, deprived the appellant from its genuine claim of credit due to delay in registration process prescribed. We may state that procedure is not tyrant of the law but is servant thereof and justice cannot be denied for reasons attributable to the procedural law. Hon’ble Supreme Court in the case of Sambhaji Vs. Gangabai - [2008 (11) TMI 393 - SUPREME COURT OF INDIA] held that procedural law should not dominate over the substantial law to deprive the litigant from the process of justice. Therefore, the procedural law deserves to be construed as directory instead of mandatory for its application. - Decided in favor of assessee. Credit on the basis of xerox copies of invoices - Held that:- The appeal on the CENVAT claimed on the basis of xerox copies of invoice is dismissed. However, so far as penalty in respect of denial of credit of ₹ 4,74,233/- on such count is concerned, learned adjudicating authority has not dealt with the same as to whether such a penalty to its extreme dose is leviable. - Penalty waived. - Decided partly in favour of assesse. CHA service - held that:- So far as the credit availed on CHA service is concerned, there is no material fact and evidence on record to rule out the availment of such a service by the manufacturer-appellant. Therefore, in absence of disintegration between the service availed for use in the activity carried out by appellant, credit of ₹ 6,83,349/-is admissible. - Decided in favor of assessee.
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2015 (1) TMI 349
Stay application - Denial of CENVAT Credit - Held that:- Amount of ₹ 35 crore also includes an amount of ₹ 8.24 crore for the period April 2004 to March 2006 on Steel & Cement where an amount of ₹ 2 Crore deposited through Challan, ₹ 3.74 crore through Bank Guarantee and ₹ 2.5 Crore was kept as CENVAT Credit earmarked as per Gujarat High Court’s order. Remaining amounts pertain to input services and inputs, for which CENVAT Credit was either allowed by this bench, as per Mundra Port & Special Economic Zone Ltd Vs CCE Rajkot (2008 (9) TMI 117 - CESTAT AHEMDABAD). The admissibility of CENVAT Credit taken on various input services, inputs and capital goods needs to be examined in detail especially in the light of favourable judicial pronouncements brought to the notice of the bench. CENVAT Credit with respect to inputs (other than cement and steel), input services and capital goods is approx. ₹ 150 crore out of total demand of ₹ 185 crore, which prima facie appears to be either permissible or admissibility is arguable. Ld.A.R. fairly submitted that in the absence of documentary evidences furnished by the appellant it was not possible for the adjudicating authority to bifurcate between admissible and in-admissible CENVAT Credit on inputs, capital goods and services availed by the appellant - Stay granted.
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2015 (1) TMI 348
Extension of time - Pre deposit order - Held that:- appellant has not been able to make any further deposits and therefore appellant may not be able to make the payment even if extension is granted. Under these circumstances, the appeal has to be dismissed for non-compliance with the requirement of predeposit - Decided against assesse.
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2015 (1) TMI 347
Dismissal of appeal - Non compliance of pre deposit order - Held that:- It is the submission of the appellant that the order itself was dispatched much later and as a result the appellant could not make the payment. Further he also submits that on the very same issue for a different period, the matter had come up before the Tribunal and the Tribunal in [2015 (1) TMI 290 - CESTAT BANGALORE] had granted unconditional waiver of predeposit and stay against recovery. In view of the fact that in the case of the very same appellant for a different period on the very same issue, this Tribunal did not consider it is necessary to direct predeposit of any amount and granted the unconditional waiver of predeposit and stay, we consider that the Commissioner(Appeals) also can hear the appeal without insisting on predeposit. Accordingly, the impugned order is set aside and the matter is remanded to the Commissioner(Appeals) with a request to deposit the appeal without insisting on any predeposit - Decided in favour of assesse.
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2015 (1) TMI 346
Waiver of penalties - Hed that:- Following decision of Guntur Municipal Corporation, in [2015 (1) TMI 289 - CESTAT BANGALORE] penalties imposed on the appellants are waived subject to the condition that appellants pay the entire amount of service tax with interest within eight weeks and report compliance before the Tribunal on 09/02/2015 and also to the jurisdictional officer in-charge of the Revenue - Partial stay granted.
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2015 (1) TMI 345
Waiver of pre deposit - Renting out of immovable property - SSI Exemption - Held that:- Benefit of SSI Exemption Notification No. 6/2005-S.T., dated 1-3-2005 as amended vide Notification No. 8/2008-S.T., dated 1-3-2008, grants the benefit of exemption of Service Tax per year, provided that the assessee has not crossed the threshold limit of rupees ten lakhs in the preceding financial year. On perusal of the said notification, we find that the said notification talks about the aggregate value of the taxable services rendered, should be considered for the purpose of exemption and in this case if individually all the appellants be considered as provider of such service, their aggregate value does not exceed the threshold limit. Prima facie, we find that the appellants have made out a case for waiver of pre-deposit of amounts involved. - Stay granted.
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2015 (1) TMI 344
Consulting Engineer’s Service - Supply of technical know-how - import of services - Held that:- Transaction is one of supply of technical know-how and payment of royalty thereon. Supply of technical know-how does not fall under the category of ‘Consulting Engineer’s Service’ and, therefore, the classifications for levy of Service Tax adopted is incorrect. Secondly, the service provider is a foreign company and he has not authorized the respondent to pay Service Tax on his behalf and, therefore, the Service Tax liability cannot be fastened on to the appellant as decided by this Tribunal in the case of Navinon Ltd., cited [2004 (8) TMI 2 - CESTAT, MUMBAI]. Section 68 read with Rule 6 of the Service Tax Rules, 1994 would apply in the case of a service rendered in India by a non-resident who does not have any office in India. Rendering of service in India is distinct and different from receipt of service in India. In the present case, technical know-how has been provided by the foreign service provider. Therefore, the transaction is one of providing of service from abroad and receiving it in India, that is, import of service and, therefore, the provisions of Section 68 read with Rule 6 of Service Tax Rules, 1994 do not apply. In the case of service received from abroad, the said activity become taxable w.e.f. 18-4-2006 when Section 66A was inserted in Chapter V of the Finance Act, 1994, enabling the Government to levy Service Tax on reverse charge basis from the service recipient in India in respect of service provided from abroad as held by the Hon’ble Bombay High Court in the case of Indian National Shipowners Association - [2008 (12) TMI 41 - BOMBAY HIGH COURT], which was affirmed by the Hon’ble Apex Court [2009 (12) TMI 850 - SUPREME COURT OF INDIA]. - Decided against Revenue.
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2015 (1) TMI 343
Waiver of pre deposit - Held that:- Question that the appellant rendering any service to M/s. SABMiller Breweries Pvt. Ltd. does not arise as there cannot be any service to self, which can be taxed. In this connection, he relies on the decision of the Tribunal in the case of ITC Hotels Ltd. - [2011 (9) TMI 837 - CESTAT, NEWDELHI], wherein it was held that once the companies are amalgamated and they become one entity, the question of rendering any service would not arise. Appellant has made out a strong case for waiver of pre-deposit of dues adjudged against them. Accordingly, we grant waiver from pre-deposit of the dues adjudged against the appellant and stay recovery thereof during pendency of the appeal. - Stay granted.
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2015 (1) TMI 342
Condonation of delay - delay of two days - Held that:- Adjudication order was passed by the Joint Commissioner and the appeal was filed by Deputy Commissioner, who is below the rank of Joint Commissioner. On perusal of the order of the Committee of Commissioners passed under Section 86(2A) of Finance Act, 1994, it is seen that the Deputy Commissioner of Service Tax was directed to file the appeal. Section 86(2A) of Act, 1994 provides that Committee of Commissioners may direct any Central Excise Officer to file appeal to the Appellate Tribunal. The definition of “Central Excise Officer” under Section 2(f) of Central Excise Act, 1944 covers the Deputy Commissioner. In view of that the preliminary objection raised by the learned counsel is not sustainable. After considering the facts and circumstances of the case, we find that there is sufficient reason for condoning the delay of two days involved in filing of the appeal. - Delay condoned.
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2015 (1) TMI 341
Business Auxiliary Service - marketing of agro-chemicals in the United States of America - registration from United States Environmental Protection Authority - To obtain this registration, they were required to provide technical data/information about the products. They obtained such information from the various other companies in USA by paying Data Access Fee - Held that:- Appellant has bought/procured technical data readily available from the company situated in USA. It is not a case where the technical data was generated by testing the products of the appellant and studying their effects on environment. The said testing was conducted much before the product was manufactured and it was done not keeping in mind the appellant’s requirement. The data is available off the shelf to all for a price. Therefore, we do not agree with the findings of the adjudicating authority that the access of data by the appellant comes within the purview of “Business Auxiliary Service”. Prima facie appellant had made out a strong case in their favour. - Stay granted.
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2015 (1) TMI 334
Import of services - Consulting Engineer service - Inclusion of technical know how fees - Held that:- Circular F. No. 276/8/2009-CX8A is based on the decision of the Bombay High Court as confirmed by the Supreme Court in Union of India Vs Indian National Shipowners Association [2009 (12) TMI 850 - SUPREME COURT OF INDIA] - there is no tax liability on the assessee in respect of the transaction during the relevant period - service tax liability on any taxable service provided by a non resident or a person located outside India, to a recipient in India, would arise w.e.f. 18.4.2006 - Decided against Revenue.
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Central Excise
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2015 (1) TMI 337
100% EOU - Duty on DTA Clearances - Education Cess - Whether the petitioner is liable to pay education cess on the amount worked out by calculating the custom duty payable on the goods in respect of clearance made by 100% EOU to DTA - Supreme Court dismisses Revenue SLP against Gujarat High Court decision reported in [2013 (10) TMI 567 - GUJARAT HIGH COURT] on the ground of delay.
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2015 (1) TMI 336
Reversal of CENVAT Credit - Whether a manufacturer is required to reverse/pay the amount equivalent to the Cenvat credit taken by him in respect of inputs and capital goods which are proved to have been used in the manufacture of goods which are exempted from excise duty in view of the provisions of Rule 6(1) of Cenvat Credit Rules, 2004 which provide that no credit can be taken in respect of inputs which are used in the manufacture of exempted goods - Held that:- Since the language of Rule 9(2) of the Cenvat Rules is identical to that of Rule 57H( 5) of the Excise Rules, we feel that the interpretation given by the Apex Court[1999 (8) TMI 920 - SUPREME COURT OF INDIA] has to apply in the present case also and, therefore, even though the final product may be exempt from payment of excise, the assessee cannot be asked to reverse the Modvat credit already taken by it. - authority below, has upheld the order passed by the Commissioner (Appeals) holding that no reverse of Cenvat Credit is required to be given by the assessee. In view of law laid down by this Court, we see no reason to interfere with the impugned order. Substantial questions of law is answered accordingly - Decided against Revenue.
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2015 (1) TMI 335
Benefit of nil duty - Whether the assessee is entitled to the benefit of lower rate of Central Excise Tariff for the goods manufactured by it - Held that:- As evident from the objection as made by the assessee, the issue pertains to rate of duty that is payable by the respondent, but for the notification in question. Therefore, the objection as raised by the respondent is liable to be sustained, more so, in view of the decision of the Supreme Court in Navin Chemicals Manufacturing & Trading Co. Ltd. - Vs Collector of Customs (1993 (9) TMI 107 - SUPREME COURT OF INDIA), which decision has been followed by this Court in Commissioner of Central Excise Vs - Vadapalani Press [2015 (1) TMI 318 - MADRAS HIGH COURT] - while this Court is not inclined to deal with the matter, while disposing off the present appeal as not maintainable, is inclined to grant liberty to the appellant/department to pursue the matter before the Supreme Court, if so advised - Appeal not maintainable.
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2015 (1) TMI 333
Enhancement of penalty without issuing any SCN - Held that:- adjudicating authority has imposed penalty on the appellant under rule 25 of the Central Excise Rules, 2002. The first appellate authority has enhanced the penalty without issuing any show-cause notice to the appellant. We find that the first proviso to the provisions of section 35A(3) mandates for issuance of a show cause notice. In the absence of any such show cause notice, we are of the view that the impugned order is liable to be set aside. At the same time, since the appeal filed by the appellant against the order of the adjudicating authority needs to be decided, we remand the matter back to the first appellate authority to reconsider the issue afresh after following the principles of natural justice. - Matter remanded back - Decided in favour of assesse.
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2015 (1) TMI 332
CENVAT Credit - Availment before registration - Held that:- Commissioner (Appeals) in para 5.1 of his order has brought out that credit sought to be availed by the appellant pertains to the period prior to registration under Central Excise Act, 1944. He is correct in his decision in Para 5.3 of his order for the reason that credit which has never met scrutiny under law should not entitle the un-registered respondent to the credit who availed the same prior to registration - Decided against assesse.
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2015 (1) TMI 331
Small scale exemption notification - Revenue wants to deny the benefit of small scale exemption notification on the ground that the appellant manufacturer has not filed any necessary declaration for availing the benefit of the Notification - Benefit of the Notification No. 181/88-C.E., dated 13-5-1988 - Held that:- it cannot be said that non-filing of declaration will disentitle the appellant manufacturer for claiming the benefit of small scale exemption notification. Hence we find no merit in the appeal filed by the Revenue and the same is dismissed. In the appeal filed by the appellant manufacturer, the claim is only in respect of credit of duty paid on inputs utilized in the manufacture after crossing the limit of clearance under small scale exemption Notification. The appellant manufacturer is entitled for credit of duty paid on inputs by producing the duty paying document. The appellant manufacturer is directed to produce the duty paying document within a period of 8 weeks from the date of receipt of this order. On production of such document, the adjudicating authority will decide the admissibility of credit, after affording an opportunity of hearing to the appellant manufacturer - Matter remanded back - Decided in favour of assessee.
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2015 (1) TMI 330
Demand of differential duty - Appellants are clearing the goods at the factory gate and at the request of the customers, the appellants are also discharging the transportation charges and premium of transit insurance, which was separately mentioned in the invoices - Held that:- As per the contract, basic price including excise duty is available and, in addition to the same, the freight and insurance charges are separately mentioned and in the invoice also transportation charges and insurance charges are separately mentioned. In view of this, we find that inclusion of freight and insurance charges to the assessable value of goods manufactured is not sustainable. The impugned order is set aside - Decided in favour of assesse.
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2015 (1) TMI 329
Demand u/s 11D - collection of amount in the name of duty - allegation of Revenue is that before 28-2-1993 the appellant was showing excise duty distinctly on the gate passes and thereafter no such duty element was shown in such document, as a result of which appellant collecting excise duty after the 1993 Notification had not deposited the same in to the treasury - Held that:- In both the notifications, Government intended use of certain wastage to make pulp for use thereof in manufacture of paper so as to enjoy duty exemption. Scope of Notification of 1991 was widened by Notification No. 30/93-C.E., dated 28-2-1993 to grant exemption to paper industry - Examination and comparison of pages 59 and 60 with pages 61 and 62 of appeal folder indicates that the price before and after the exemption Notification No. 30/93-C.E., dated 28-2-1993 remained same. The appellant acting on the basis of 1993 Notification was not required under law to disclose excise duty element since paper manufactured using notified pulp by the appellant was exempted from excise duty. Such observations were also made in the stay order dated 21-12-2005 while hearing stay application and pre-deposit waived. At that time also the bench prima facie did not appreciate applicability of Section 11D to the present case. - Decided in favour of assesse.
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2015 (1) TMI 328
Valuation of goods - Manufacture of various castings - No dispute regarding inclusion of moulds costs in final product - before returning the said wooden pattern to the appellant, the appellant get the same repaired from outside and charged these repair charges from their customers - Revenues contends that such repayment to the appellant is additional consideration and the same is required to be added in the assessable value of the casting - Held that:- Absolutely no merits in the Revenue’s case. Admittedly, as cost of the moulds is being included by the appellant in assessable value of the castings and repairing activity are separate and different activities not associated with the manufacturing and casting. Such undertaking of repair activities by the appellant on behalf of their customers and reimbursement of repair charges by the customers to the appellant cannot, by no stretch of imagination can be held to be additional consideration so as to make the part of the assessable value. We accordingly set aside the impugned order - Decided in favour of assesse.
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2015 (1) TMI 318
SSI Exemption - Value of clearances - exemption under Notification No.8/2002-CE, dated 1.3.2002 - Maintainability of appeal - Held that:- The present appeal is filed under Section 35G of the Central Excise Act, 1944 and it is apposite to refer to Section 35G(1) of the Central Excise Act, 1944 - it is apparent that the question as to the applicability of a notification or a circular which has a bearing on the determination of the rate of duty is a question which has a direct and proximate relationship to the rate of duty and to the value of goods for purposes of assessment. In the circumstances, the present appeal which relates to the applicability of the referred circular, relates directly to the determination of rate of duty for the purpose of assessment and as such, in the light of the provisions of Section 35G read with Section 35L of the Act, this Court has no jurisdiction to entertain the appeal. - Following decision of Commissioner of Central Excise v. JBF Industries Ltd. [2010 (12) TMI 437 - GUJARAT HIGH COURT] - Appeal not maintainable.
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CST, VAT & Sales Tax
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2015 (1) TMI 340
Disallowance of claim of deduction u/s 4(2)(a)(v) - Whether the dealer exercise the ordinary business prudence and the transactions can be said to be in a normal course of business without recording a finding as to positive connivance or collusion of the dealer – Held that:- The name of the MMTC was written on the form - if in the utilization account, the dealer has shown his form as given to MMTC, it was clearly a mistake of the dealer and not of the petitioner - It was for the dealer to clarify that he could not correct the error crept in the utilization account - There was no fault on the part of the petitioner in accepting the form from the purchasing dealer - The Tribunal, has, in a very perfunctory manner, disallowed the claim of the petitioner overlooking the above – thus, the matter is remitted back to the Tribunal for fresh adjudication – Decided in favour of petitioner. Judgment delivered in Commissioner of Sales Tax, New Delhi Versus Hari Ram Oil Co. [1992 (2) TMI 326 - DELHI HIGH COURT] rightly distinguished or not – Purchasing dealer had returned his registration certificate prior to the date of transaction with the selling dealer - Held that:- The Tribunal was rightly of the view that the petitioner was complacent with the transaction without caring to see whether purchasing dealer was registered or not and whether the purchasing dealer was authorized to purchase goods against the statutory form - it was the case of the petitioner, that it had seen the registration certificate of the purchasing dealer in the year 1994 - the registration certificate of the dealer was cancelled on 02.04.1990 - even though, no gazette notification was issued, the ground of having seen the certificate and no gazette notification was issued are contradictory inasmuch as if the registration certificate was seen, then the same was not cancelled and no question of gazette notification having been issued arises – thus, the judgment of Hari Ram Oil’s case would not be applicable. The similar issue has been decided in Prince Plastics & Chemical Industries and others Versus Commissioner of Sales Tax and others (and other writ petitions) [2002 (7) TMI 770 - DELHI HIGH COURT] wherein it has been held that even if purchasing dealers have applied for ST-1 Forms but have not received them for any reason, the selling dealer is not automatically exonerated from liability, nay the statutory duty to collect tax, since the ST-1 Form is not forthcoming - Traders are apparently quite willing to run the risk of one amongst many transactions going sour, so far as supply of these forms is concerned - it is not uncommon for a purchasing dealer to renege on its assurance to supply ST-1 Forms to the selling dealer - The State does not thereupon forfeit its entitlement for sales tax - it is wholly illogical to place the State in such a position where it cannot recover its sales tax dues at all - the dealer who has chosen to trust the other dealer must suffer and can take action against the party - this is the risk an assessee runs and if for any reason, including a subsequent decision of the Sales Tax Department to withhold the supply of ST-1 Forms to a purchasing dealer they are put in an uncomfortable position of having to pay the tax and initiate appropriate legal action for recovering it from the Purchasing Dealer, so be it - The State is entitled to its tax, where the requisite ST-1 Form is unavailable for any reason - petitioner is not entitled to the deduction – Decided against petitioner.
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2015 (1) TMI 339
Assessment to be made u/s 12C of the TNGST Act or not – Held that:- The petitioner has filed his objections dated 27.05.2008, in which, they did not raise the contention that on account of insertion of Section 12-C of the TNGST Act, the assessment has to be made u/s 12-C of the TNGST Act, rather the petitioner resisted the Department's view by contesting the matter on merits - the petitioner fully participated in the assessment proceedings and the same has ultimately resulted in the impugned order - therefore, on the grounds raised by the petitioner stating that after the introduction of Section 12-C of the TNGST Act, the AO could not have passed the order is a submission, which deserves to be rejected - The case of the petitioner does not fall within the ambit of Section 12-C of the TNGST Act and it is a matter pertaining to AY 2002-03 and proceedings were initiated in 2004 - the petitioner also knowing fully well participated in the assessment proceedings by submitting their objections - therefore, it is too late for the petitioner to now come before this Court and contend that the assessment should have been done u/s 12-C of the TNGST, hence, the order of assessment cannot not be quashed – Decided against petitioner.
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2015 (1) TMI 338
Refusal to make reference regarding the question of law before the High Court by the tribunal – Invocation of power of Court u/s 61 of the Bombay Sales Tax Act, 1959 - Held that:- The application has been dismissed on 2nd May, 2014 and in dismissing it, the Tribunal has held that its order dated 1st October, 2012 does not raise any question of law - the order dated 1st October, 2012 allows the Appeal styled as Second Appeal of the Assessee against the revisional order only on the ground of limitation - The argument of merger has not been accepted by the Tribunal - once the Tribunal holds that the original assessment order is not merged with the Appellate order, then, it was duty bound to consider as to how the proceedings could be said to be barred by limitation - prima facie, the Tribunal could not have refused to refer the question of law which was squarely arising for this Court's opinion - That question is, if the doctrine of merger is inapplicable, the order of assessment is not sought to be revised but the order of the FAA, then, whether the Tribunal could have upheld the objection of limitation raised by the Assessee - This is the question of law and which could have been referred for opinion of this Court – thus, the order passed on 2nd May, 2014 is set aside and the Tribunal is directed to consider the refer on the question of law – Decided in favour of petitioner.
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