TMI Tax Updates - e-Newsletter
October 21, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
Income Tax
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TDS on interest paid on compensation - requirement of spreading it over the number of period for which the payment was made - the matter reffered to the Larger bench of the Tribual - HC
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Since the claim of taxation at special rate was made under the specific provisions of sec. 111 A, the appellant was indeed not entitled for taking the benefit of the normal provisions regarding computation of capital gains – Expenses claimed by assessee is not allowed - AT
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Penalty u/s 271(1)(c) - The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. Absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. - No penalty - AT
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Assessing officer has not applied his mind to the issue raised by the assessee; therefore, the non application of mind to the issue raised by the assessee with regard to carried forward losses and depreciation is an error within the meaning of section 263 - AT
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Deduction u/s 54F of the Income Tax Act – construction of new house property / flat - since the construction took place prior to the date of transfer, Assessee is not eligible for deduction u/s 54F - AT
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The CIT(A) without pointing out the non-payment of admitted tax to the assessee is not justified in dismissing the appeal of the assessee in limine - AT
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Disallowance u/s 40(a)(ia) of the Income Tax Act – affluent treatment charges - Whether TDS is deductible u/s 194C or u/s 194J of the Income Tax Act - No TDS u/s 194J - AT
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Nature of payment (expenses) made to bank for converting rupee loan into foreign currency loan - The assessee was benefited as the interest rate was reduced - held as revenue in nature - AT
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Transactions in respect of which the impugned payments were made was purely on account of services and there is no transfer of right to use the goods - No TDS u/s 195 as as the same is not royalty - AT
Customs
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Valuation of goods - Transaction value and enhancement of the value - the department took recourse to the theory of preponderance of probability to prove the case. The said theory cannot be a substitute for lack of investigation and absence of evidences - AT
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Import of Sterile Absorbable Haemostatic material as life saving bandages and claiming exemption in terms of notification No. 21/02-Cus - stay granted partly - AT
Corporate Law
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Increased in authorized capital - Change in registered office - CLB has declared the action the company as illegal - If the conduct of the appellant before the Board was fair and if they had any respect to the law and to the Company Law Board and they had co-operated in conducting the proceedings, the Company Law Board could have exercised its discretion in the order - HC
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Applicability of SICA to the 'foreign companies' - the company can no longer fall within the ambit of the expression “sick industrial company” as defined in Section 3(o) of the Act - applicability of SICA to the respondent company does not arise. - SC
Service Tax
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The fact that payment to employee is made by one company and there is inter-company payment of the share of the cost of the employees utilised by the other company cannot be interpreted to mean one company was providing service to the other - demand set aside - AT
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CENVAT Credit - Renting of immovable property services - 35% of Cenvat credit availed on input services is not required to be made as pre-deposit - Appellant directed to pre-deposit 35% of the Cenvat credit denied and attributable to inputs and capital goods alone - Tri-LB
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Clearing and Forwarding Agent - Coverage under definition depends on nature and activity – Word “include” mentioned in definition clause indicating legislative intention to give extended and enlarged meaning - AT
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Valuation - Maintenance and repair service - demand in respect of 70% of the total value of ‘maintenance and repair service’ on which VAT has been paid - stay granted - AT
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Residential Complex - Section 65(91a) – the houses constructed are owned by the State Government and were allotted to police personnel by the Government - stay granted - AT
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Whether or not the appellant is required to discharge any service tax on the activities of Salt Harvesting, Salt lifting, salt loosening, salt loading & slat transportation - stay granted - AT
Central Excise
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100% EOU - credit based on a formula prescribed under Rule 3(7) - inclusion of additional duty leviable u/s 3(5) (SAD) along-with CVD u/s 3(1) (CVD) of the Customs Tariff Act - prima facie case is in favor of assessee - AT
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Cenvat Credit - Inputs are tangible goods and input services are intangible and therefore the degree of nexus that can be proved for inputs will be on a different footing as compared to input services - AT
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CENVAT Credit on Input Services – branding of goods is similar to sale promotion - services being intangible the standard for proving nexus cannot be same as that in the case of inputs which are tangible - stay granted - AT
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Benefit of Closing Balance of RG-23A and PLA post fire accident - goods lost in fire - reversal of credit on inputs not used in the manufacturing - Decided partly in favour of Assessee. - AT
VAT
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When the nature of work involved not only manufacture but also laying of pipes thereafterwards, we do not find any ground to accept with the reasoning of the Tribunal that the nature of the contract is one of sale and not of composite nature - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2013 (10) TMI 788
Addition made on account of unverifiable expenses made to subcontractors – Addition of Rs. 53,59,150/- - Held that:- Book results of the appellant have improved considerably during the current year as compared to the earlier years and that the appellant has fully discharged the onus of proving the sub contract expenses and the AO has no proper ground or corroborative evidence and making ad-hoc disallowance of 25% out of the total sub contract expenses - Ad-hoc disallowance of Rs.53,59,150 @ 25% out of sub contract expenses as made by the AO is incorrect and the same is hereby deleted – Decided against the Revenue.
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2013 (10) TMI 787
Penalty u/s 271(1)(c) of the Income Tax Act – Held that:- In the instant case, there was no concealment on the part of the assessee as AO has not collected independent material. Bonafide and inadvertent mistake is genuine. In the instant case no attempt to concealment was made as per the ratio laid down in the case of Price Water vs. CIT, JT [2012 (9) TMI 775 - SUPREME COURT] - To this effect, there is concurrent finding of both the appellate authorities and in the absence of any adverse material, no penalty for concealment to be levied – Decided against the Revenue.
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2013 (10) TMI 786
TDS on interest paid on compensation - Whether the TDS under the Income Tax Act, 1961 has to be deducted at the source at the rate of 10% or the TDS can only be deducted after spreading it over the number of period for which the payment was made –Held that:- As per the decision of the Apex court in the case of Bikram Singh and others v. Land Acquisition Collector and others [1996 (9) TMI 6 - SUPREME Court], appellants are entitled to spread over the income for the period for which payment came to be made so as to compute the income for assessing tax for the relevant accounting year - As per division bench of Gujarat High Court in the case of Hansaguri Prafulchandra Ladhani and others v. Oriental Insurance Co. Ltd [2006 (10) TMI 383 - GUJARAT HIGH COURT], it is necessary to obviate such a situation in future for other claimants who may be awarded compensation with interest thereon, and the amount of interest being deposited exceeds Rs. 50,000 but who may not be liable to have any tax deducted at source as per the interpretation placed by us on the provisions of section 194-A of the Act - If the interest for any particular financial year exceeds Rs. 50,000, separately deposit before the Tribunal the amount liable to be deducted at source under the provisions of section 194-A(3)(ix) of the Income Tax Act, 1961 - In view of the conflicting opinion expressed in the two Division Benches, the matter is reffered to the Larger bench of the Tribual.
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2013 (10) TMI 785
Allowability of expenses claimed against the short-term capital gains on sale of shares – Held that:- Since the claim of taxation at special rate was made under the specific provisions of sec. 111 A, the appellant was indeed not entitled for taking the benefit of the normal provisions regarding computation of capital gains – Expenses claimed by assessee is not allowed – Decided against the assessee.
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2013 (10) TMI 784
Disallowance u/s 14A of the Income Tax Act - Assessee has advanced an amount of Rs.8,08,81,458/- to MPCPL. The assessee company has borrowed money from HDFC Bank and others and the assessee claimed that the borrowed amount was used for business purpose - Assessee has paid interest at 12% on secured loan taken by the company and the Assessing Officer worked out the disallowable interest at 12% on funds utilized outside business works which works out to Rs.97,05,775/-. However, he limited disallowance to the extent of interest actually paid of Rs.56,18,466/- - Held that:- Assessee submitted that operation of the company the assessee has entered into a joint venture with MPCPL for construction of commercial complex, hotel and purchase of property and therefore, advance of such amount is as its share. The assessee has not brought out evidence to substantiate that the advance has been given for business purpose of the assessee company – Issue remitted to the file of the Assessing Officer to give one more opportunity to the assessee to place on record the material to show that such advance was given for commercial expediency. Principle of res-judicata for disallowance of expense – Held that:- Assessee has not been able to produce all bills and vouchers in respect of the claim of expenditure. The assessee has not brought out any evidence to prove that 10% of expenditure should not be disallowed as in the preceding year. Since, no new proof has been given for this year distinguishing the situation from earlier year, no any infirmity in the Order of the Assessing Officer in following the predecessor's order in the preceding year i.e., 2004-2005 – Decided against the Assessee. Disallowance u/s 40(a)(ia) of the Income tax act – Held that:- Assessee has to share 15% of the gross maintenance receipts collected during the year with the owner of the building i.e., Deep Corporation Pvt. Ltd. and taking into account the stipulation made in the agreement it is a diversion of income at source and not an expenditure in the hands of the assessee – Disallowance u/s 40(a)(ia) to be deleted – Decided in favor of Assessee.
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2013 (10) TMI 783
Adjustment of arm's length price - Adjustment made on account of notional interest on Optionally Convertible Debenture to Foreign Subsidiary - Held that:- CIT(A) while deleting addition has noted that as per agreement, interest was payable only if conversion option was not exercised on expiry of 5 year period. If at any time during 5 year period conversion option was exercised and lowas converted into equity, no interest accrued or become payable. He further noted that funds were provided by Assessee as per RBI guidelines and in immediately next year, entire logiven to subsidiary was converted into equity shares of Zydus International Pvt. Ltd. He has further held that since Assessee has converted lointo equity in immediate next year, there was no question of taxing notional interest. He has further held that Assessee had not granted interest free lobut invested in optionally convertible lowith clause of interest in case, Conversion option was not exercised and further held Assessee’s transaction with subsidiary was at arms length. Before us, Revenue could not controvert findings of CIT(A) by bringing any contrary material on record - Decided against Revenue. Product Registration Expenses and reimbursement of Product Registration Support Services expenses - Trademark Registration Fees and Patent Registration Fees - capital v/s revenue - Held that:- Assessee has not acquired any new right of permanent character. licenses or registrations are required to be renewed and therefore part of day to day running expenditure of business. [ACIT v. Vodafone Essar Gujarat 2010 (1) TMI 941 - ITAT, AHMEDABAD]. If expenditure cgive benefit which is said to be endured for one year or even annually year after year then it is unreasonable to hold that any enduring benefit taken place to assessee. [Comsat Max Limited. 2009 (1) TMI 314 - ITAT DELHI-H]. expenditure incurred in existing line of business in order to run business smoothly in years to come but in absence of creation of "any new asset we hereby held that such enduring benefit may not tantamount to rendering of capital expenditure. [DCIT v. Core healthcare 2008 (10) TMI 74 - GUJARAT HIGH COURT]. Also as decided in CIT v. Finley Mills Ltd. [1951 (10) TMI 1 - SUPREME COURT] that expenditure incurred in registering for first time its trademark, then by registration owner is merely absolved thereafter from obligation to prove his ownership of trademark. Thus expenditure is neither for creation of asset nor advantage for ever - in favour of assessee. Weighted deduction for expenditure on Scientific Research u/s. 35(2AB) in respect of Clinical Trial and Bio-equivalence Study disallowed - Held that:- From contents of explanation of Section 25(2AB) it is found that not only expenditure incurred on clinical drug trial but expenditure incurred for obtaining approval from any regulatory authority under any Central, State or Provincial Act and also expenditure incurred for filing application for patent under Patent Act 1970 are stated to be covered within definition of expenditure on scientific research. For clinical drug trial, first stage is to enroll volunteers and/or patient into small pilot studies and subsequently large scale studies are carried out on patients and such clinical drug trial may be in one country or in multiple countries. Carrying out drug trial is essential for approval of drug in question to be sold in public and hence, clinical drug trial cannot be carried out inside in-house research facility i.e. usually laboratory. Hence, this explanation to Section 35(2AB)(1) does not require that these expenses which are included in this explanation are essentially to be incurred inside in-house research facility because in our considered opinion, it is not possible to incur these expenses inside in-house research facility - in favour of assessee. Disallowance u/s. 14A - Held that:- Matter be restored back to file of A.O. for fresh decision as was done by tribunal in assessment year 2006-07 because as per this judgement of Godrej & Boyce Manufacturing Co. Ltd. v. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] as Rule 8D is applicable from assessment year 2008-09 - in favour of assessee. Restricting deduction u/s. 80IC & 80IB - Held that:- stand of A.O. cannot be approved because it is not reasonable basis for computation of profit of eligible unit. profit has to be computed on basis of selling price less cost of goods produced along with various overheads and only where there is some inter unit transfer of goods or service between various units of same assessee, then it has to be ensured that recording of such transfer of goods or services should be at market value of such goods or services on date of transfer and even if such recording of transfer is not as per market value, A.O. cbring it to market value and he cannot proceed to estimate profits and gains on reasonable basis unless he establishes that there is any exceptional difficulty in adopting market value and even then, basis adopted by A.O. to compute profits and gains, should be reasonable basis. In present case, we have seen that neither pre requirement of sub-section (8) or its proviso to section 80-Ihas been fulfilled by A.O. nor basis adopted by him is reasonable basis and, therefore, we do not find any basis to confirm or approve action of A.O. - in favour of assessee. Addition as upward adjustment on international transactions - Transfer Pricing adjustment - Held that:- Since in earlier year [2013 (1) TMI 655 - ITAT AHMEDABAD], similar issue was restored back to file of A.O. for fresh decision, we restore this mater back to file of A.O. for fresh decision for this year also with similar directions - in favour of assessee. Adjustment on account of 'Expenses disallowed u/s. 14A' for purposes of computation of book profit u/s. 115JB - Held that:- Following decision of Goetz (India) Ltd. v. CIT [2009 (5) TMI 615 - ITAT DELHI ] & there is no contrary decision on this issue till date - Decided in favour of assessee.
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2013 (10) TMI 782
Reassessment u/s 147 - validity of reassessment proceedings where period of limitation for issuance notice us/ 143(2) did not expire - Held that:- The return of income was processed under section 143(1)(a) on March 9, 2001. However, the Assessing Officer issued a notice under section 148 of the Income-tax Act on April 30, 2001. Such a notice was objected to as time barred. In spite of that the Assessing Officer has not withdrawn the notice and he has issued notice under section 143(2) of the Act and completed the assessment on March 28, 2003. That was carried on appeal before the Commissioner of Income- tax (Appeals), who held that the assessment was ab initio void, inasmuch as the Assessing Officer had issued notice under section 148 of the Act when he had sufficient time to issue notice under section 143(3) of the Act Aggrieved by the order of the Commissioner of Income-tax (Appeals), the Revenue filed an appeal before the Income-tax Appellate Tribunal. The Tribunal, following the decision of this court in the case of CIT v. K. M. Pachayappan has dismissed the appeal filed by the Revenue. Dismissing the appeal, that the Tribunal was right in holding that notice under section 148 of the Act could not be issued for making an assessment under section 147 of the Act, when time limit was available for issue of notice under section 143(2) of the Act for making an assessment under section 143(3) of the Act - Following decision of COMMISSIONER OF INCOME-TAX Versus TCP LTD. [2009 (4) TMI 396 - MADRAS HIGH COURT] - Decided in favour of assessee.
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2013 (10) TMI 781
Penalty u/s 271(1)(c) - assessee providing multi-disciplinary management consultancy services and having worldwide reputation - claimed deduction of provision towards payment of gratuity in its return of income, when the same was not allowable as provision towards payment of gratuity was not allowable as per Statement of Particulars filed by the assessee in Form 3CD - assessee contended it to be genuine mistake - Held that:- Contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. Absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Imposition of penalty on the assessee is not justified - Following decision of PricewaterhouseCoopers Pvt.Ltd. Vs. CIT and Another [2012 (9) TMI 775 - SUPREME COURT] - Decided in favor of assessee.
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2013 (10) TMI 780
Revision u/s 263 - Disallowance of expenditure - Carried forward loss and depreciation - Held that:- issue with regard to carried forward losses and depreciation was not discussed by the assessing officer in the assessment orders. In fact the application of mind by the assessing officer to the issue of carried forward losses and depreciation is not reflected in the assessment order. The only contention of the assessee before this Tribunal is that the assessing officer has called for all the details and allowed the claim after satisfaction. This Tribunal is of the considered opinion that assessment order is a quasi judicial order and the proceedings before the assessing officer are judicial proceedings. Therefore, the conclusion reached by the assessing officer with regard to carried forward losses and depreciation has to be supported by his own reasoning in the assessment order itself. Mere calling for explanation / details is not sufficient. If the assessing officer expressed his reasoning one way or the other for the conclusion reached, then it would enable the appellate / revisional authority to appreciate the reasons for the conclusion reached. If the assessing officer does not express any reason in the assessment orders, the very purpose of providing appellate / revisional remedy in the Income-tax Act would be defeated. Therefore, an assessment shall speak for itself. In other words, it shall contain all the reasons for the conclusion reached therein - assessing officer has not applied his mind to the issue raised by the assessee; therefore, the non application of mind to the issue raised by the assessee with regard to carried forward losses and depreciation is an error within the meaning of section 263 of the Act - Decided against assessee.
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2013 (10) TMI 779
Addition on account of In-Patient Credit – Held that:- Assessee has generated two bills, one at the time of admission of the patient for utilities and another at the time of discharge of the patient. The claim of the assessee that the bills generated at the time of admission for utilities was also included in the discharge bill of the patient. This contention of the assessee needs to be examined after verifying the bills generated at the time of admission of the patient and the bill generated at the time of discharge from the hospital and the total receipt claimed by the assessee - Assessing officer is also an officer empowered to verify the bills and complete the assessment under the Income-tax Act. Therefore, if there is any specific allegation against the assessing officer it is open to the assessee to bring the same to the notice of the higher authorities in the Income-tax department. In the assessment proceedings, the services of the assessing officer can not be excluded. The assessing officer is also an authority established under the provisions of Income-tax Act. This Tribunal being a second appellate authority cannot verify each and every bill, unless the same is verified by the original authority, i.e. the assessing officer. Since the assessee has not filed any reconciliation statement with regard to in-patient credit either before the assessing officer or before the CIT(A), this Tribunal is of the considered opinion that the matter needs to be verified by the assessing officer - Assessing officer is directed to verify the entire bills and vouchers, that may be produced by the assessee in a fair manner, without any bias and undue influence.
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2013 (10) TMI 778
Deduction u/s 54EC of the Income Tax Act – Classification of heads of Income – Whether the income from sale of land will fall under the head ‘Income from the head Capital gain’ or ‘Income from the business’ – Held that:- Reliance has been placed upon the case of CIT Vs. Suresh Chand Goyal, [2007 (1) TMI 90 - MADHYA PRADESH HIGH COURT] - The facts of the above case are similar to the case of Assessee in the present case wherein the land instead of receiving as a gift was received by way of inheritance. Thus, this activity cannot come within the purview of adventure in the nature of trade and commerce so as to treat it as business. Therefore, respectfully following the said decision in the case of CIT Vs. Suresh Chand Goyal (supra), earnings on sale of land in this case was in the nature of capital gain and, therefore, not assessable as income from business. AO and the CIT(A) have erred in treating the entire capital gain as business income, both on facts as well as on law - Assessee is not in the activity of business and, more so, not in the adventure in the nature of trade - Grounds raised by Assessee are allowed and directed the AO to treat the capital gain offered by Assessee as such and allow deduction u/s 54EC, as claimed by Assessee – Decided in favor of Assessee.
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2013 (10) TMI 777
Addition u/s 68 of the Income Tax Act – Held that:- Cost of vehicles bearing Regn. No. GJ-21T-9565 and GJ-21-T-953, which were sold during the year have been properly recorded in the books of the appellant in the year of its purchase and has been reflected in the books of accounts as well as computation of WDV in depreciation working as well as computation of income. Based on the factual matrix and evidences on record it can be inferred that typographical error made by the accountant can in no way be starched to imagine and hold that unexplained investment in vehicles has been made by the appellant. In order to charge unexplained investment as income, the burden is upon the Revenue to conclusively establish by evidence or material the fact of investment and in the instant case no such investment has been established by the AO. Section 69 does not empower the AO to assess the income merely on the basis of suspicion. Allowance for expenditure made for improvement in vehicle of Rs. 373080/- - Held that:- On verification of the depreciation chart attached with the return of income, it is revealed that the assessee has firstly added the capital expenditure in the written down value of the vehicles and then she deducted the sale consideration form it. In this way, it is absolutely clear that the assessee has decreased the value of capital gain. Further it is pertinent to mention here that the assessee has failed to produce any documentary proofs in regard of capital expenditure made towards the vehicles. In the absence of any documentary evidence, how can it is justified that the assessee has made capital expense – Decided against the Assessee.
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2013 (10) TMI 776
Deduction u/s 54F of the Income Tax Act – Construction after the date of transfer of capital asset – Held that:- Transfer with respect to 4 flats by means of registered sales deed took place in FY 2008-09 relevant to AY 2009-10 - Building was constructed between 1.2.2007 and 23.10.2008 and the BU permission was granted by AMC on 23.10.2008 meaning thereby that no construction activity took place after 23.10.2008. For grant of deduction u/s 54F in case of construction of a residential house, the condition is that the assessee has within a period of three years after the date of transfer of long term asset, constructed a residential house. In the present case, since the construction took place prior to the date of transfer, CIT(A) has rightly appreciated the facts and by his well reasoned order held that Assessee is not eligible for deduction u/s 54F - Ld. A.R. could not bring any decision of any High Court in support of his contention where it has been held that even the construction of residential house before the date of transfer would be eligible for deduction u/s 54F – Decided against the Assessee.
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2013 (10) TMI 775
Addition made in respect of alleged inflated labour charges - Appellant had paid consolidated charges to the contractors towards Godown charges, inward transport, octroi, warpins, sizing, beam setter, dropin charges, weaving, jobber, clipping, folders, outward transport, Electricity, Mill stores spares, Lubricant and hamal charges which were claimed under the head labour charges – Held that:- The labour expenses in order to quality for allowance had to be incurred wholly and exclusively for the purpose of business. This is a typical case where the manufacturing was done by the concern using its own workforce but labour charges were paid to persons specified u/s 40A(2)(b) and or its employees who facilitated the assessee’s design. Thus, the expenditure was done to inflate the expenses and bring down the profit margin. The net profit percentage for various assessment years varies in a narrow range of 0.5% to 2%. Thus, it is inevitable to infer that there was indeed inflation of expenses. To ascertain the quantum of such inflation, it is pertinent to take into account that actual wage rate paid to the workers and the labour charges shown in the books of accounts. It is again an admitted position that the labour charges paid per meter of grey cloth were Rs.1.5 to 2 whereas the amount debited in the books was @ Rs.6.5 - Following the earlier orders of Tribunal restore the matter of inflated labour /job work charges to the file of the AO for his fresh consideration after giving due opportunity of hearing to the assessee.
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2013 (10) TMI 774
Scope of assessment u/s 153C of the Income Tax Act – Held that:- Determination of income consequent to search action by framing assessment u/s. 143(3) r.w.s. 153C of the Act is different from regular assessment and it is not a substitute for regular assessment. Being so, the Assessing Officer shall frame the assessment on the basis of incriminating material found during the course of search action u/s. 132 of the Act and other material gathered subsequent to search action. In the present case, unable to appreciate on the basis on which seized material the AO came to the conclusion that the assessee has not earned agricultural income - It is appropriate to remit the issue back to the file of the AO to specify the basis on which seized material or material collected consequent to search action was used for the purpose of framing assessment. While framing the assessment he has to consider the judgement of jurisdictional High Court in the case of Gopal Lal Bhadruka, Avadesh Bhadurka and Ahura Holdings vs. DCIT [2012 (6) TMI 657 - ANDHRA PRADESH HIGH COURT], wherein the Hon'ble High Court observed that, "Sections 153A, 153B and 153C were inserted in the Income-tax Act, 1961, with effect from June 1, 2003, in Chapter XlV. These sections are applicable to search operations or requisitions made after May 31, 2003. Simultaneously section 158BI was inserted in Chapter XIV-B. By virtue of section 158BI of the Act, the various provisions of Chapter XIV-B of the Act are made inapplicable to proceedings under sections 153A and 153C of the Act. The effect of this is that while the provisions of Chapter XIV -B of the Act limit the inquiry by the Assessing Officer to those materials found during the search and seizure operation, no such limitation is found in so far as sections 153A and 153C of the Act are concerned. Therefore, it follows that for the purposes of sections 153A and 153C of the Act, the Assessing Officer can take into consideration material other than what was available during the search and seizure operation for making an assessment of the undisclosed income of the assessee" and decide the matter in accordance with law. Due payment of admitted tax by the assessee for assessment year – Held that:- The CIT(A) without pointing out the non-payment of admitted tax to the assessee is not justified in dismissing the appeal of the assessee in limine. Accordingly, remitted the entire issue back to the file of the CIT(A) to decide the issue raised by the assessee in his appeal on merit.
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2013 (10) TMI 773
Penalty u/s 271(1)(c) of the Income Tax Act - The sum of Rs. 6,86,939/- was levied as penalty u/s. 271(1)(c) of the Act in respect of disallowance of bad debts of Rs. 11,58,112/-, disallowance out of membership fee of Rs. 4,80,000/- and addition of Rs. 2,76,700/- in respect of non moving sundry creditors. On appeal Ld. CIT(A) deleted the aforesaid penalty – Held that:- No specific error in the order of Ld. CIT(A) could not be pointed out by Ld. DR - No material was brought on record to show that the payment of Rs. 5 lacs as membership fee by the assessee was not genuine. The issue whether expenditure is a capital or a revenue expenditure is largely debatable issue and only because a different view in respect of nature of expenditure was adopted by the Department does not entitle the AO to levy penalty u/s. 271(1)(c) of the Act. Further no material was brought to show that non moving sundry creditors balance of Rs. 2,76,700/- was bogus or even any material to show that the same was income of the assessee of the year under consideration - In absence of any material to show that the said amount was actually income of the assessee of the year under consideration, in our considered, view levy of penalty u/s. 271(1)(c) in respect of the said amount was not justified. Further in respect of amount of Rs. 11,58,112/- which was claimed by the assessee as bad debt, no material was brought before us to show that the claim was false. Reliance has been placed upon the judgment in the case of Reliance Petroproducts [2010 (3) TMI 80 - SUPREME COURT], wherein it was held that merely because a deduction claimed by the assessee was found to be not allowable, does not entitle the Department to levy penalty u/s. 271(1)(c) - Decided against the revenue.
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2013 (10) TMI 772
Disallowance u/s 14A of the Income Tax Act – Disallowance on account of interest – Held that:- Sufficient own funds in the form of share capital amounting to Rs. 193.98 lacs and in the form of reserves and surplus amounting to Rs. 1,795.65 lacs were available with the assessee at the relevant time to make the payment of advance tax liability - Profit of the assessee for the year under consideration before tax was Rs. 891.57 lacs which itself was sufficient to cover the advance tax liability. In the case of Commissioner of Income-tax v. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] cited by the ld. Counsel for the assessee, the Hon'ble Bombay High Court has held that when the own funds and borrowed funds are maintained in a mixed manner, a presumption can be drawn that the own funds are utilized by the assessee for making the investments etc. as per its own wish – Keeping in view the ratio of above judgment disallowance u/s 14A is not sustainable – Decided in favor of Assessee. Applicability of Rule 8D read with Section 14A of the Income Tax Act for computation of disallowability – Held that:- Reliance has been placed upon the judgment in the case of Godrej Boyce Mfg. Co. Ltd [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D is applicable only prospectively from A.Y. 2008-09 - Disallowance made by the A.O. u/s 14A of the Act is restriced to 5% of the exempt dividend income being fair and reasonable – Decided in favor of Assessee.
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2013 (10) TMI 771
Depreciation on goodwill u/s 32 of the Income Tax Act – Held that:- Reliance has been placed upon the judgment of Apex Court in the case of CIT v. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] – Depreciation on goodwill cannot be denied – Decided in favor of Assessee. Disallowance u/s 40(a)(ia) of the Income Tax Act – affluent treatment charges - Whether TDS is deductible u/s 194C or u/s 194J of the Income Tax Act – Held that:- Assessee agreed to deduct 2% tax under section 194C of the Act based upon an understanding reached by all the industrial undertakings in that locality and such understanding was accepted by the Revenue. It may be pointed out that in the subsequent years the Assessing Officer admitted that provisions of section 194J of the Act are not applicable in respect of payments, made by member industrial undertakings to VWEMCL, in the form of affluent treatment charges. On a conscpectus of the matter, impugned payments are not hit by the provisions of section 194J of the Act and consequently disallowance made by the Assessing Officer under section 40(a)(i) of the Act is not in accordance with law – Decided in favor of Assessee.
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2013 (10) TMI 770
Replacement of machines under Technological Up-gradation Fund (TUF) scheme of Ministry of Textile - Revenue or capital in nature - Held that:- Machine was being used for rewinding yarn from small plastic bobbins produced on pinning ring frame and making a big size bobbin. The Autoconer is a part of a spinning machine and is working together with other machines, it helps in carrying out the process. So, it was a supporting machine used for knotting the yarn from small contents on a plastic bobbin to big cones. This machine does not have independent functioning rather it was a part of the total plant, therefore it cannot be said that the assessee replaced an independent machine by acquiring a new one rather a part of the old machine was replaced for proper functioning. Therefore, expenses incurred by the assessee were revenue in nature and not the capital in nature - it cannot be said that the assessee replaced whole of the DG set rather only a part in the form of Crank Shaft was replaced. So, it was a revenue expenditure and not a capital expenditure – Decided in favor of Assessee. Nature of payment (expenses) made to bank for converting rupee loan into foreign currency loan - Held that:- The assessee was benefited as the interest rate was reduced and those expenses were incurred by the assessee during the year under consideration and related to the business exigency. order of CIT(A) confirmed - Decided against the revenue. Disallowance u/s 40(a)(ia) of the Income Tax Act – Held that:- Amount was paid by the assessee on account of sea freight, to the agents of non-resident ship owners. Therefore no TDS was to be deducted under section 194C or section 195 of the Act as such the disallowance made by the Assessing Officer by invoking the provisions of section 40(a)(ia) of the Act, was not justified and the learned CIT(A) rightly deleted the addition made by the Assessing Officer by considering the circular No. 723 dated 19/12/1995 issued by the CBDT. The present issue is also covered by the decision of this bench of the tribunal in the case of ACIT Vs. Minpro Industries [2012 (5) TMI 232 - ITAT, Jodhpur], wherein it has been held that reimbursement of the payment towards sea freight transport, CCI charges, steamer freight charges and REPO container charges made by the assessee to the C & F agents who have already made the payment on behalf of the assessee was covered by the provisions of section 172 of the Act and not by section 194C or section 195 and that the agent having already deducted TDS from the transportation charges and shipping bill before making these payments to the principal which have been reimbursed by the assessee, the assessee was not liable to deduct tax at source from such payments and consequently, same could not be disallowed by invoking the provisions of section 40(a)(ia) of the Act – Decided in favor of Assessee.
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2013 (10) TMI 769
Whether the remittances made by the appellant company to the foreign parties would fall within the purview of sec. 195(1) which requires deduction of tax at source - Bandwidth is bought and sold to consumers and it acts as a conduit only – Held that:- There are no equipments installed in its premises and the contract entered with the foreign parties is only for the services. Mere use of equipment in providing bandwidth services would not amount to transfer of right to use. As a matter of fact there are no goods involved in the transaction and the payments are made only for the use of services - Royalty means the payment of any kind received as a consideration for the use of' or the right to use, any copy right of literary artistic or scientific work but, does not include the words 'use' or right to use, industrial, commercial or scientific equipment. In the appellant's case there is no "right to use equipment. Therefore, the payments made do not fall under 'royalty'. Transactions in respect of which the impugned payments were made was purely on account of services and there is no transfer of right to use the goods - Assessing Officer was not justified in treating the payment as royalty and invoking the provisions of sec. 195 – Reliance has been placed upon the judgment in the case of Hon'ble Bombay High Court in CIT Vs. Godavari Devi Saraf [Smt] [1977 (9) TMI 24 - BOMBAY High Court] – Decided against the Revenue.
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2013 (10) TMI 768
Classification of head of Income – Income under the head Capital gain or as business income – Shares and securities held as Investment or as Stock in trade - As per the assessee's own admission, during the year he has dealt with 95 number of scrips of different companies. The Assessing Officer in the assessment order has mentioned specific instances where the assessee has sold shares either on the same day or within a very short period of 7 to 15 days. It is also a fact on record that the volume of turnover was because of the frequency and regularity of transactions and not due to huge investment – Held that:- Reliance has been placed upon the judgment in the case of PVS Raju [2011 (7) TMI 818 - Andhra Pradesh High Court] - Facts clearly show that the intention of the assessee in investing in shares is for the purpose of earning profit and not to earn dividend. It is also a fact on record that the dividend earned by the assessee during the relevant financial year is meager considering the quantum of turnover. If the intention of the assessee would have been to hold the shares as investment for the purpose of earning dividend, then the assessee would not have indulged in transactions of purchase and sale of shares in such frequency and regularity and in a systematic manner. This shows that the intention of the assessee is to earn profit. It is immaterial whether the assessee treats the shares as investments or stock in trade in its books of accounts. The assessee has not produced any material to prove that the finding of the Assessing Officer that the assessee has sold shares either on the same day or within very short period of purchase is not correct - activity of the assessee in purchase and sell of shares is in the nature of business and therefore the income derived from sale of shares has to be assessed as business income. The fact that the assessee has paid security transaction tax will not be determinative factor to hold that the income earned by the assessee is to be treated as short term capital gain – Decided in favor of Revenue.
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2013 (10) TMI 767
Payment exceeding Rs.20000 to fall within the exception of Rule 6DD of the Income Tax Rules – Disallowance u/s 40A(3) of the Income Tax Act - Assessee was a Pakka Arahtia and made purchases from Kachcha Arahtias - Kachcha Arahtia acted as agents in its true senses - i.e., it mediates between two constituents, i.e., on one side there are farmers and on the other there are purchasers (whole sellers/pakka Arahtias) - The Kachcha Arahtias in order to facilitate the sale of agricultural produce which farmers brought to the Mandi has taken commission from the Pakka Arahtia, i.e., the assessee – Held that:- Reliance has been placed upon the judgment in the case of Renukeshwara Rice Mills[2004 (8) TMI 319 - ITAT BANGALORE-B ] - . The Kachcha Arahtias have also filed their affidavits acknowledging that cash payments were made at their insistence as they did not maintain any bank accounts as well as farmers have not maintained bank accounts and in turn Kachcha Arahtia has to make payments to the farmers in cash – Thus, in the absence of proper banking facilities, the assessee was under business expediency to make cash payment to the Kachcha Arahtias - Certain payments were made directly to the farmers as well as on bank holidays. Reliance has also been place upon the Board's circular No. 220 dated 31.05.1977, in which certain conditions have been laid down for making cash payments and some of the conditions are that when payments are made on bank holiday and the seller has refused to accept the payment by way of crossed cheques/draft. Further, the seller, acting as a commission agent is required to pay cash in turn to the persons from whom he purchased the goods - Kachcha Arahtia obtained the agricultural produce from the farmers and have arranged to make sales to the assessee being Pakka Arahtia. Since Kachcha Arahtia insisted for cash payment from the assessee for making cash payments to the farmers, therefore, sub-rule (e) along with sub-rule (k) of Rule 6DD would also apply in the case of the assessee - Considering the facts and circumstances of the case, the case of the assessee is clearly covered by exceptions provided under Rule 6DD of the IT Rules – Decided against the Revenue.
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2013 (10) TMI 766
International transaction - Double addition of the same amount - Allowance of any expenditure arising from an international transaction shall also be determined having regard to the ALP Held that:- In the instant case the assessee has not claimed the expenditure of Rs. 7,42,20,575/- during the impugned assessment year and has itself disallowed the same while computing its taxable income Therefore, the provision of section 92 is not applicable - There cannot be double disallowance/addition of the same amount - Although the transaction between the assessee and its AE falls within the meaning of an international transaction still no adjustment on account of ALP can be made since the assessee has suo-moto added the amount while computing its taxable income for the impugned assessment year and no benefit of the same has been taken either by capitalising it and claiming depreciation on it or taken benefit in subsequent years Decided in favor of Assessee. No proper appreciation of facts presented by assessee, by the Assessing officer - Assessee company has undertaken international transaction valued at Rs. 36,98,134/- with Eaton Corporation on account of business support services Held that:- Assessee vide letter dated 03-09-2010 addressed to the TPO has categorically requested for adjustment for differential risk. He has also cited certain decisions In the said letter itself, the assessee has computed such risk adjustment - However, TPO in his order has observed that no such adjustments have been made by the assessee nor claimed during any time of the assessment proceedings - Restored the issue to the file of the Assessing Officer with a direction to decide the issue afresh and in accordance with law Decided in favor of assessee for statistical purpose.
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2013 (10) TMI 765
Denial of exemption u/s 11 of the Income Tax Act for a Trust registered u/s 12A of the Act – Trust hit by the provision of section 13(1)(b) of the Income Tax Act – Held that:- As per the judgment of Hon’ble Jammu & Kashmir High court in the case of Ghulam Mohidin Trust v. CIT [2000 (11) TMI 99 - JAMMU AND KASHMIR High Court], wherein it has been held that trust was a religious trust created exclusively for the benefit of persons belonging to a particular religious community, which is the Muslim community. Even the ex gratia grants and loans on easy terms for further studies and research are confined to Muslims - Trust was covered within the ambit of clause (b) of section 13(1) which denies exemption of income to such trusts under section 11 of the Act - Clause (a) of section 13(1) of the Act was also attracted because whole of the income from property held under the trust, which is a private religious trust does not enure for the benefit of the public – In the above mentioned Ghulam Mohidin Trust case, assessee-trust was not entitled to claim exemption under section 11 of the Act for the income derived by it from the property held under the trust – But this case is not applicable in the present case of the Assessee in hand – Reliance has been placed upon the judgment in the case of CIT v. Sun Engineering Works P. Ltd. [1992 (9) TMI 1 - SUPREME Court], wherein it has been held that the court must carefully try to ascertain the true principle laid down by the decision and not pick out words or sentences from the said judgment divorced from the context of the question considered by the court in that case to support their reasoning – Judgment of the Hon’ble J&K High Court in the case of Ghulam Mohidin is not applicable to the case of the assessee as none of the object of the trust has limited the application of the entire income to a particular community. In the present case, total expenditure incurred by the assessee at ₹ 5,53,27,631 the major expenses of the assessee is on conducting a peace conference which were to the tune of ₹ 4,84,61,830. It was a 10 day peace conference and the focus was to create communal harmony and awareness and understanding of Islam and its message of peace for entire humanity to help, remove misconception, false fear, hate of Islam globally to help realise that justice, human rights, moral values and peace be it on any individual or at world wide collective level are a must for effective human progress and realistic global unity - The said peace conference cannot be held to be a mere religious activity for the benefit of a particular community. Even if one has to go by the observation of the Assessing Officer in the assessment order that the assessee is a mixed trust, even then clause 13(1)(b) cannot be applied as it is applicable to purely charitable trust as held by the hon'ble Gujarat High Court in the case of CIT v. Barkate Saifiyah Society [1993 (11) TMI 13 - GUJARAT High Court] – Benefit of exemption u/s 11 is allowed to the Assessee – Decided against the Revnue.
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2013 (10) TMI 764
Scope of assessment u/s 153A - Assessment u/s 153A on the basis of materials outside search – Held that:- The company is represented through its Directors, therefore, material found at the residence of the Director is relevant and has to be considered for making the assessments u/s 153A - Wherever the issues have been considered u/s 143(3) and the assessment has been concluded prior to the initiation of the search the scope of assessment remains limited to the search material and other issues not considered at the time of making the assessment u/s 143(3) of the Act. In the instant case, assessment was made u/s 144 of the Income-tax Act, 1961 on 09.12.2009. The same was held invalid as there was a search operation at the premises of the assessee on 31.07.2008. In view of the provisions of section 153A, the pending assessments abate. The order passed u/s 144 was against the law – Decided against the Revenue. Non-admission of additional evidence u/r 46A of the Income Tax Rules – Held that:- All seized material was available to Assessing Officer - Evidences relied upon by the CIT (A) were also available in seized material which was in the possession of the Assessing Officer - Thus, there was no fresh evidence filed before the CIT (A) which could be considered for violation of Rule 46A of Income-tax Rules – Decided against the Assessee.
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2013 (10) TMI 763
Interpretation of Total Turnover & Export Turnover under 10A - Held That:- In the case of ITO v. Sak Soft Ltd.(2009 (3) TMI 243 - ITAT MADRAS-D), There should be uniformity in the ingredients of both the numerator and the denominator of the formula, Section 10-A is a beneficial section. It is intended to provide incentives to promote exports. If the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. The reason being the total turnover includes export turnover. The components of the export turnover in the numerator and the denominator cannot be different - Following decision of Commissioner of Income-tax Versus Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] - Decided against Revenue. Deduction u/s 10A - Whether Commissioner of Income-tax (Appeals) has erred in holding that the claim under sec.10A shall be allowed before adjusting brought forward losses and unabsorbed depreciation - Held that:- Following decision of Changepond Technologies (P) Limited. Versus Assistant Commissioner Of Income-Tax [2008 (2) TMI 486 - ITAT MADRAS-A] - Decided against Revenue.
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2013 (10) TMI 762
Waiver of loan amount is liable to taxation - Assessee had entered into 'One Time Settlement' (OTS) with its bankers, M/s State Bank of India and M/s Industrial Development Bank of India, as a result of which, it got waiver of loan amount of ₹ 3,83,98,703/- - Waiver represented benefit to the assessee and became income of the assessee – Held that:- Remanded back to the Assessing officer with direction to examine whether the claim of the assessee that "under the normal provision if in respective years in which the interest liability were debited to the P&L a/c, and not allowed as deduction in the assessment then now upon the waiver of the interest the same cannot be brought to tax u/s 41(1) or u/s 43B of IT Act – Reliance has been placed upon the judgment in the case of CIT Vs. T.V. Sundaram Iyengar & Sons Ltd., [1996 (9) TMI 1 - SUPREME Court]. Revision u/s 263 of the Income Tax Act on the view taken by assessing officer – Held that:- View taken by the Assessing officer should be a judicial view consciously based upon proper inquiries and appreciation of all the relevant factual and legal aspects of the case – If the view taken by assessing officer is erroneous view, then the case will be amenable to revisional jurisdiction under Section 263 – Secondly, if the Assessing officer has not taken any view then also the case falls under the jurisdiction of section 263 – But, if the view taken by assessing office is view in vaccum and not based upon the proper enquiry, then the matter to be restored to the assessing officer for proper enquiry – Reliance has been placed upon the case of Sun Minerals [2012 (12) TMI 195 - ITAT HYDERABAD].
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2013 (10) TMI 761
Classification of head of income – On sale of shares and securities, whether the income accrue as ‘Long term capital gain’, ‘short term capital gains’ or as ‘business income’ - The assessee is a private family trust - The Assessing Officer found enormous volume, periodicity, frequency and multiplicity of transactions of purchase and sale in shares and securities – Held that:- For the method of valuation of stock of shares reflected in the balance sheet, the admitted position is that the assessee has not adopted the method of valuation as being generally adopted by a business concern. A business asset is valued at the cost or market price whichever is less but in the assessee's case, it is not so. The assessee has not adopted the prevalent method rather the investments have been shown at cost price only - The most important factor which has been ignored by the lower authorities is that there are no borrowed funds. The entire investments have come out of the corpus fund of the assessee – Therefore, to say that assessee is carrying on business activities in the guise of share investment does not hold any water - Considering the nature of transaction through Portfolio Management Services providers, the transactions have resulted into capital gains, STCG and LTCG as returned by the assessee – Decided in favor of Assessee.
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2013 (10) TMI 760
Addition u/s 68 of the Income tax act in the banking business – Assessee is engaged in the business of banking - Computerized sheets of the Fixed Deposit accounts contained only the account number, member's name, opening balance, debit, credit and balance amount, but not addresses of the depositors, which were not made available - Difference between the closing balance as on 31.3.2009 of Rs.160,24,48,937 and opening balance as on 1.4.2008 of Rs.121,70,76,143, viz. Rs.38,53,72,794 be treated by the assessing officer as representing the income of the assessee – Held that:- Remitted the matter back to the file of Commissioner(A) , who shall bring on record, the facts relating to the assessment year under consideration. The assessee is directed to file the relevant details, including the names and addresses of the depositors with PAN number, as per the KYC Scheme, as collected by the assessee. Reliance has been placed upon the judgment in the case of ACIT Vs. Citizen Urban Cooperative Bank Ltd [2008 (2) TMI 531 - ITAT AMRITSAR], wherein it has been held that the bank, for all its banking activities, is strictly governed by the Banking Regulations Act, 1949. The said Act defines a banking company as a company which transacts the business of banking. 'Banking' is described as accepting, for the purpose of lending or investment of money, due from the public repayable on demand or otherwise and withdrawal by cheque, draft order or otherwise. Thus, the deposits held by the assessee are its stock-in-trade. The amounts in the accounts maintained by the assessee bank were not in the control of the assessee bank. They are the deposits in the savings accounts of the customers of the assessee bank. To these deposits, s. 68 of the Act is not attracted. In the cases of banking companies like the assessee, the customer's identity is required to be taken by the bank with proper introduction, photographs and address, etc. This is so, because any person from the general public can open the account with the bank. The other cases of acceptance of deposits cannot be equated with that of the bank. In those cases, normally, deposits are accepted from the people connected with or known to the depositees. It is in accordance with the terms of s. 131 of the Negotiable Instruments Act that this requirement is there. As such, if introduction of the customer had been duly taken by the bank, the bank would not be liable in case of a fraud. Moreover, pertinently, if the customer seeks to operate the account with cash only, the bank can open an account without introduction and without proper identification. Further, the bank is not obliged to question the source of deposits made by its customers. Also, the customers can retain the amount in his savings bank account with the assessee bank for any period. The amount has to be repaid by the bank to its customers immediately on demand. These features distinguish the case of the bank from other ordinary assessees. Therefore, the provisions of s. 68 of the Act are not applicable to the bank as they are in the cases of the other assessees. Still further, under s. 35 of the Banking Regulations Act, 1949, a banking company is subject to periodical inspections and audit by the RBI and in case any default is found, the bank is liable for heavy monetary penalty, besides cancellation of its license. This is not the case with other assessees. Relying upon the decision in the above mentioned case, it is held in the present case that amounts in the accounts maintained by the assessee are deposits of the customers and/or not under the control of the assessee, and therefore, provisions of S.68 are not applicable to the Bank. Further, Society/Bank not required to go for detailed verification of address/whereabouts of the customers and therefore, addition u/s 68 cannot be made merely because the address of the customers are incomplete – Decided against the Assessee.
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2013 (10) TMI 759
Re-opening of case u/s 147 of the Income Tax Act - The words used in Article 12(1) of DTAA was "paid to a resident of other contracting state". The term royalties also means "payment of any kind received" – Held that:- Relying upon the Hon’ble Bombay High Court judgment in the case of DIT (IT) vs. M/s Siemens Aktiengesellschaft [2012 (12) TMI 737 - BOMBAY HIGH COURT], it is held that taxation of Assessee regarding the royalties income will be done on receipt basis as far as recipient is concerned who is a resident of the other contracting state. No reason to re-open the assessment under section 147 as per the satisfaction recorded by AO - Entire information was furnished and was available with AO at the time of assessment, AO made inquiries particularly with reference to the claim of TDS of part amount when certificates were filed to an extent of ₹ 7.81 crores and also the fact that assessee's taxation on receipt basis was accepted and the order of the CIT (A) in assessment year 2003-04 was already on record by the time the re- assessment proceedings were initiated - Reopening the assessment can only be considered as change of opinion from that of his predecessor who inquired and accepted assessee's return under section 143(3) – Decided in favor of Assessee. The payee's credited the amount to assessee, deducted the tax as per the provisions of the Act, remitted to the Govt. of India and issued certificates. What assessee has claimed was only offering the income which it received and also taking credit only to the extent of income offered as per the provisions of Section 199 of the I.T. Act. Failure on the part of AO in not giving credit to the entire TDS made when he brought the entire amount to tax on accrual basis gave rise to the demand afresh with unnecessary implications – Therefore, credit of TDS allowed – Decided in favor of Assessee.
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2013 (10) TMI 758
Deduction u/s 80IB of the Income Tax Act – Built-up area of certain residential units is more than 1500 Sq.ft. - Built-up area of 17 flats is beyond the limit prescribed in clause (c) to section 80-IB(10) of the Act - Plea of the assessee is that the entire project could not be held ineligible for deduction u/s 80-IB(10) of the Act – Held that:- Relying upon the judgment of Bombay Bench of the Tribunal in the case of Ekta Housing Pvt. Ltd [2013 (9) TMI 115 - ITAT MUMBAI], it is held that merely the assessee has violated the condition u/s 80- IB(10)(c) of the Act in relation to 17 flats, it cannot be denied the deduction u/s 80-IB(10) of the Act on entire profits of the project which pertinently include profits in relation to residential units which comply with the limits prescribed in sec. 80-IB(10)(c) of the Act - Deduction u/s 80-IB(10) of the Act shall be denied on the profits proportionate to 17 flats which are in violation of sec. 80-IB(10) of the Act – Decided in favor of Assessee.
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2013 (10) TMI 757
Disallowance of Rs. 100000 out of Rs. 200000 of cash balance as opening balance – Held that:- Taxpayer has purchased land admeasuring 83 cents for Rs.5 lakhs and constructed a building by investing Rs.3,61,915 - The taxpayer is in the business of purchase and sale of scrap. Therefore, maintaining proper bills and vouchers for purchase and sale of scrap may be a little difficult - The taxpayer is doing business from the year 1992 and has shown an opening cash balance of Rs.2 lakhs for the year 2000 – He invested Rs. 5 lakhs for purchase of land and investment of Rs.3,61,915 in construction of house property. These facts show that the taxpayer is earning sizeable income in the course of his business activity – No reason to disallow any part of the amount shown as opening cash balance in the cash flow statement filed before the assessing officer – Decided in favor of Assessee. Addition of 50000 as household expenses – Held that:- The very fact that the taxpayer has not incurred any expenditure separately shows that he was under the care and custody of someone else. When the taxpayer claims that he was under the care and custody of parents and brothers, it is natural that in a joint family system the elder brother or parents would incur the expenditure. Therefore, this Tribunal is of the considered opinion that addition of Rs.50,000 towards household expenses may not be warranted in the facts and circumstances of the case – Decided in favor of Assessee. Addition of loan amount taken from the private persons – Taxpayer has filed confirmation letters from the creditors – Held that:- Relying upon the judgment in the case of P Mohanakala [2007 (5) TMI 192 - SUPREME Court], it has been held that before dismissing the confirmation letters from the creditors, proper investigation needs to be done regarding the creditors s.a. the paying capacity of the creditors regarding loan amounts etc. – Decided in favor of Assessee.
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2013 (10) TMI 756
Depreciation on goodwill - Goodwill acquired on the retirement of a partner – Held that:- Though the partner retired, the partnership firm continued as such with new partners. The partnership firm being a separate and independent assessable unit, it continued its business through its new partners. Therefore, the assets and liabilities of the firm continued as such. The tangible and intangible asset including all its commercial rights, like goodwill, trademark, etc. continued with the partnership firm. What was paid to the retiring partner is his share of capital and not a cost for acquisition of any right from him - No part of the goodwill was acquired by the partnership firm while making payment to the retiring partner. In fact, the right of the partner on the partnership asset is ceased to exist on settlement of his capital account – Therefore, goodwill has no value and hence, no question of any depreciation – Decided against the Assessee. Profit on the sale of vehicle – Held that:- The taxpayer has not shown the profit or loss arising out of sale of the vehicles in the profit & loss account. The details of the persons to whom the vehicles were sold are not available on record – Therefore, addition made @10% as profit over and above the book value, by A.O. is confirmed – Decided against the Assessee. Whether the payment of interest @18% to the relatives of the partners is fair or excessive – Held that:- This excessive rate of interest payment to be adjudged on the basis of the rate of interest prevailing in the market - When the banks are charging interest at 16% to 25% for providing loans to the citizens, this Tribunal is of the considered opinion that paying interest @18% to the relatives of the partners cannot be considered to be excessive or unreasonable. The matter may be different if the rate of interest charged by the taxpayer exceeds the bank interest – Rate of payment is reasonable – Decided in favor of Assessee. Concealment of income – Penalty under section 271(1)(c) of the Income Tax Act – Held that:- The details of the borrowed funds which were given to the sister concern of the taxpayer are available on record. What was found during the course of survey is the investment made by the sister concern in the capital asset - This does not amount to concealment of any part of income or furnishing inaccurate particulars. It is a difference of opinion between the assessing officer and the taxpayer with regard to a claim made.
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2013 (10) TMI 755
Deduction u/s 80IA of the Income Tax Act for development, operation and maintenance of an industrial part under the Industrial Park Scheme, 2002 – Held that:- Assessee is entitled for deduction u/s 80IA (4) of the Act if it develops the Industrial Park. Being so, the assessee has to show that it has actually developed the Industrial Park during the relevant assessment year under consideration for claiming deduction u/s 80IA (4) of the Act by bringing on record contemporaneous documents like Electricity connection, water connection, connected documents like copies of approval, fire safety certificate from the competent authority along with complying the conditions laid down by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India vide their letter No.15/24/04-IP & ID dated 22-9- 2004 - Except the lease agreement with M/s Satyam Computers, no other document has been furnished to establish the fact that the Industrial Park has been developed during the relevant assessment year - Remitted the matter back to the file of the Assessing Officer for fresh consideration.
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2013 (10) TMI 754
Evidence and explanation regarding source of deposit – Addition made on account of unexplained expenditure – Partner has brought in Rs. 11,00,000 on 12/04/2004 and Rs. 60,000 on 11/03/2005 from the OD account with Karnataka Bank. It was further observed that the partner account is also credited with cash on 30/03/2005 at Rs. 6,12,883/- and Rs. 1,32,500 on 31/03/2005 - Held that:- Assessee was of the view that the above amounts have been deposited out of the OD account of Karnataka Bank, however, the source of the OD account was not explained - In these circumstances, to meet the ends of justice, one more opportunity given to the assessee to provide necessary evidence in support of its claim – Decided in favor of Assessee for statistical purpose. Addition on ground of unexplained destination of the withdrawals and unexplained payee - Assessee had filed account copies of the said withdrawals and also explained that the amounts withdrawn from capital account of one of the partners Sri Vemireddy Prabhakar Reddy cannot be considered something uncommon in view of the fact that the assessee firm was almost closed down during the previous year relevant to the assessment year since the assessee also did not have any business and the income admitted for the assessment year under consideration is NIL – Held that:- The CIT(A), deleted the addition on the ground that the withdrawals made by the assessee's partner Sri Vemireddy Prabhakar Reddy cannot be construed as unexplained withdrawals - In view of the controversial findings by the AO and CIT(A), matter remitted to the file of the AO to examine the account copies filed before the CIT(A) and decide the issue in accordance with law – Decided in favor of Assessee for statistical purpose.
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2013 (10) TMI 753
Whether the assessee had Permanent Establishment in India – Assessee claim that installation activity continued for a period of less than 9 months, therefore, there is no installation PE in India - Assessee calculated the period starting from date of entry into India of barges – Held that:- As per Article 5 of the relevant DTAA, PE includes (h) a building site or construction or assembly project or supervisory activities in connection therewith but only where such site project or activity continues for a period of more than nine months - Assessee's plea is that PE existed only after barges landed in India is not correct - PE existed since the notification of award as the site was available to the assessee since then, for surveys at various stages of work progress – Assessee has installation of PE in India. Whether the contract is divisible – Held that:- Contract may be construed as an umbrella contract yet is a divisible contract since under the same contract, the consideration for various activities have been stated separately – Further, as per the terms and conditions of the contract, it is revealed that it is the discretion of ONGC to take only the platform erected by the assessee in Abu Dhabi, as it has a right to terminate on its own volition, without having installation thereof. The assessee in such an event, will not be entitled for any amount towards installation and commissioning but will be entitled for the contract price properly attributable to the erection of fabricated platform actually carried out by the assessee in accordance with the contract i.e. the pricing schedule (Schedule C) and milestone payment formula. Erection and fabrication can not be attributable to PE in India – Held that:- Reliance has been placed upon the judgment in the case of Ishikawajma-Harima Heavy Industries Ltd. vs DIT reported in [2007 (1) TMI 91 - SUPREME COURT]- Erection and fabrication cannot said to be attributable to PE in India. All the activities prior to installation and commissioning are carried out in UAE and thus having regard to Article 7 of the DTAA, no income can be attributed to the PE in India - Profits can be attributed to the PE in India only in respect of installation and commissioning activities. The profits attributable to the supplies i.e. erection and fabrication of the platforms cannot be brought to tax in India. Applicability of provision of Section 44BB – Held that:- assessee is not in the business of providing services, neither any plant or machinery has been supplied on hire basis. The assessee is under the contract engaged in successful installation of off-shore platform. This activity cannot be characterized as facility provided by the assessee. Thus, business activity of the assessee does not fall within the meaning of section 44BB. Chargeability of interest u/s. 234B, 234C & 234D - Section 234B of the Act is attracted where in any financial year an assessee is liable to pay advance tax under sec. 208 and he has failed to pay such tax or where the advance tax paid by the assessee under sec. 210 is less than 90% of the assessed tax. Similarly, section 234C is attracted wherein in any financial year, an assessee is liable to pay advance tax under section 208 and he failed to pay such tax or the advance tax paid by the assessee and its current income on or before the specified dates is less than the specified percentage of the tax due on returned income – Held that:- Entire income is subject to tax at source under section 195 of the Act. The payer has also taken certificate from the Assessing Officer under section. 195(2) of the Act and thus, there was no liability to pay the advance tax under section 208 of the Act and in the absence of any liability, Sec. 234B and 234C and also consequentially section 234D could not be applied – Decided in favor of Assessee.
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2013 (10) TMI 752
Assessment done outside the search material – Held that:- Scope of assessment remains limited to the search material and other issues not considered at the time of making the assessment u/s 143(3) of the Act - The company is represented through its Directors, therefore, material found at the residence of the Director is relevant and has to be considered for making the assessments u/s 153A – Decided in favor of Revenue. Disallowance of commission paid out of books of accounts – Applicability of section 69C of the Income Tax Act - Amount paid for commission during the year is less than the amount of bills of commission seized by the department at the time of search and therefore an addition of difference amount was made by the AO – Held that:- CIT (A) has granted part relief by deleting the addition of Rs.2,72,21,668/- - There was mistake in addition by way of duplication of same amount on account of various seized papers. There was also overlapping of addition among various financial years - No fresh evidence was filed. Assessing Officer had failed to consider the seized material in its entirety - Assessee has failed to explain the reasonable explanation with regard to the commission, therefore, confirmed the order of Commissioner(A). The issue of estimation of the profit by Revenue Authorities - Assessing Officer has not made any addition but estimated the profits - The assessee has recognized the sales of the plot when the possession of the plot is transferred to the customer and full consideration for the plot had been received. The assessee was following the project completion method which has been accepted by the department in the earlier years – Held that:- The Assessing Officer adopted percentage completion method while assessee is adopting project completion method - The plots are being sold and the payment is being received within a period of 45 days to six months. The assessee is adopting project completion method regularly. The only presumption of the Assessing Officer is differing the payment of taxes and on that basis, the Assessing Officer has adopted the percentage completion method - There was no sufficient material with the Assessing Officer which could establish that the assessee was differing the payment of taxes by adopting the project completion method. Assessee was consistently following this method which is a recognized method of accounting income in the business of real estate development – Decided against the Revenue.
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2013 (10) TMI 751
Fee for technical services under Article 12(4) of the Double Taxation Avoidance Agreement between India and Singapore - Assessee made available technical knowledge, skill or know-how to Indian customer and as such, the payments made to it were to the nature of fee for technical services Held that:- Reliance has been placed upon the judgment in the case of Raymond Ltd. v. Deputy CIT [2002 (4) TMI 891 - ITAT MUMBAI], wherein it has been held that word 'which' occurring in the article after the word 'services' and before the words 'make available' not only describes or defines more clearly the antecedent noun ('services') but also gives additional information about the same in the sense that it requires that the services should result in making available to the user technical knowledge, experience, skill, etc. Thus, the normal, plain and grammatical meaning of the language employed, in our understanding, is that a mere rendering of services is not roped in unless the person utilising the services is able to make use of the technical knowledge etc. by himself in his business or for his own benefit and without recourse to the performer of the services in future - The fruits of the services should remain available to the person utilising the services in some concrete shape such as technical knowledge, experience, skills, etc. In the present case, assessee provided testing services and issued test reports. These reports cannot be said to make available any technical knowledge, experience, skill, know-how or processes which enabled the Indian company to acquire the services to apply the technology contained therein. Therefore, these receipts cannot partake the fees for technical services as defined in the Double Taxation Avoidance Agreement with Singapore. The samples were sent by Indian company, M/s. Effem India for testing in Singapore. These samples were comprising of broken rice, maize, pet food, wheat gluten sodium caseinate, poultry meal, soya protein isolate, copra press cake, etc. These samples were tested to detect the presence of mycotoxin - No substantial question of law arises for our consideration, particularly, because Revenue was unable to point out any perversity in finding Decided in favor of Assessee.
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2013 (10) TMI 750
Lack of evidence for implicating Assessee - Assessee was alleged to be running a refund racket, wherein the assessee would solicit the refund in the cases of salaried employees with private organization in connivance with some CAs and trusts. According to the deposition made u/s 131 dated 17.01.1994, the assessee explained the modus operandi for such fraudulent refunds – Held that:- Search u/s 132 did not indicate anything adverse against the assessee with regard to the fraudulent refunds - There was no evidence despite the search operation against him - Only evidence that is the formation of basis of addition was statement recorded u/s 131, wherein the assessee had only explained the modus for claiming of fraudulent refund. In this statement also, the assessee had not admitted to have been the real beneficiary – Addition made is deleted – Decided against the Revenue. Additions u/s 69A and 69C - AO has added Rs.5,50,036/- on account of jewellery found at the time of search, Rs.90,000/- as unexplained cash found and Rs.5,00,000/- on account of furniture and fixtures inventorised at the time of search – Held that:- For Jewellery: On the date of search, assessee was still a bachelor and the only lady in the house was his mother and since the entire jewellery found and seized were ladies, it actually belonged to his mother. Even in the remand report, the AO could not controvert this fact – Cash: Cash was duly reflected in the books of the firm and the books are with the department, therefore no addition can be made as the cash is not unexplained – Investment in furniture and fixtures: Submission by Assessee that flat belonged to the parents of the assessee, which was purchased in 1986 and the furniture & fixtures was also purchased around the same time or immediately thereafter. No separate evidence, indicating that the furniture & fixtures belonged to the assessee or the assessee spent his undisclosed money to acquire the same – Decided against the Revenue. Addition on account of salary and commission - Assessee was a partner in M/s Aggarwal Trading Company and as per the Deed of Partnership, the assessee would receive Rs.48,000/- as salary and commission @ 2% of turnover (Rs.4,00,000/-, being 2% of Rs.2,00,00,000/- turnover) – Held that:- As per the arguments and on the basis of remand report of A.O., it has been held that salary be added @ 37500/- in place of 40000/- and no addition on account of commission be made – Decided against the Revenue. Addition on account of commission out of Hawala loans – Held that:- Commissioner(A) concluded to tax 10% of Rs.89,602/- being alleged commission, out of hawala loan transactions earned by the appellant - The addition has been based primarily on the statement recorded under section 132(4), wherein the assessee has accepted to be having hawala business - Assessee has not been able to bring out any evidence, which could prove otherwise – Order of Commissioner(A) confirmed.
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2013 (10) TMI 749
Nature of receipts, whether a capital receipt or revenue receipt - Assessee-company had purchased on slump-sale basis the Non-Synthetic Pyrethroid division (NSP) of the Mitsu Industries Ltd. Simultaneously, a development took place according to which M/s. Hoechst Schering AgrEvo, a foreign company, acquired controlling interest of Mitsu Industries Ltd. vide JV Agreement dated 03/07/1999 – Held that:- Once a division has been siphoned out by Mitsu Industries Ltd. which was purchased as a slump sale by the assessee, then why a non-compete fees was paid to the assessee – In the present case, there was no transfer of any trade-mark or any asset for which the assessee in question has received any consideration. There was no agreement between the assessee and the Hoechst AgrEvo. Most importantly, there was no restrictive covenant for not carrying on the business of manufacturing of Pesticides by the assessee - In the absence of any loss of income on account of existence of a restrictive covenant, there was total absence of holding the receipt in question as capital receipt. TDS on the gift made by the assessee – Held that:- Value of articles distributed by the assessee to its employees comes within the ambit of ‘perquisites’ employed in Section 17(2)(iii)© of the IT Act which is covered under the definition of ‘Salaries’ as provided in Section 17(i)(iv) of the Act. Therefore, before distributing articles to the employees, the assessee ought to have deducted the tax at source on the value of such articles - Ld.Assessing Officer has rightly charged the interest u/s.201(1A) of the Act – Decided against the Assessee. Allowability of foreign travel expense – Commissioner (A) deleted addition on account of foreign travel expenses amounting to Rs.1,81,130/- - Expenditure towards foreign travel was for the purpose of the assessee’s business - Various Executives are necessarily required to travel to abroad to study the market and development of the market - Assessee is having export business and requires it employees to go abroad – Deduction of foreign travel expense allowed – Decided in favor of assessee.
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2013 (10) TMI 748
Utilization of services of non-residents outside India - Whether the fee for technical services paid to divers by the assessee was covered by the exception provided in section 9(1)(vii)(b) of the Act - Therefore, there was no requirement for the assessee to deduct tax at source at the time of payment made to the divers and hence, no disallowance can be made by invoking the provisions of section 40(a)(i) of the Act - The assessee is in the business of providing underwater diving services in Saudi Arabia under a contract with M/s Mashhor Covus SDB BHD, Brunei and M/s Khalifa A Algosaibi Diving and Marine Services Co., and paid divers fees outside India – Held that:- Assessee has paid fee for technical services to non-residents of Rs. 74,63,768/- during the year under consideration - Assessee is a resident in India - Except in two circumstances, firstly, where the fee is paid in respect of services utilized in a business carried on by the assessee outside India or secondly, fee is paid for the purposes of earning any income from any source outside India, in all other circumstances, the assessee is liable to deduct tax on the amount of technical fee paid to non-residents – Section 9(1)(vii)(b) itself provides the exception. If the Resident-assessee utilizes the services of the Non-resident, in its business outside India, it is covered under the exception given in the section itself and the payment received by the non-resident cannot be deemed to accrue or arise in India - Assessee company, utilized the services of two non-resident in its business outside India, i.e. in Nigeria - Services were provided by the assessee outside India and for this business the services of non-residents were utilized to whom technical fee in question was paid – Following the decision of the Hon’ble Tribunal in the Assessee’s own case for the year 2007-08, it is held that the services of non-residents to whom the technical fee of Rs. 74,63,768/- was paid by the assessee were utilized for the business which was carried out outside India for earning income from a source outside India – Appeal allowed – Decided in favor of Assessee.
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2013 (10) TMI 747
Selection of comparable for computing ALP in Transfer Pricing transaction – Held that:- Excluded companies whose turnover is more than Rs. 100 crores – It is not applicable the 'employee cost to sale' filter as relevant data/information for this filter are not available - Employee cost is included by many companies under different other heads. Selection of comparables applying the 'onsite income' filter also stands on the same footing as relevant data/information are not available in respect of all the companies in the database - Loss making companies and companies having super normal profits cannot be considered as comparables in view of the ratio laid down in case of Mentor Graphics (India) (P.) Ltd. [2013 (5) TMI 49 - DELHI HIGH COURT]and Philips Software Centre (P.) Ltd. v. Asstt. CIT [2008 (9) TMI 466 - ITAT BANGALORE-B] – Decided against the Revenue. Benefit of (+)/(-) 5% under the proviso to section 92C(2) of the Act to the Assessee – Held that:- The Provision of section 92C(2A) makes it clear that an assessee shall not be entitled to exercise its option as referred in the proviso to sub-section (2) if the variation between the arithmetical mean and the price at which such transaction has actually been undertaken exceeds 5% of the arithmetical mean – As per the retrospective operation of the aforesaid provision, the benefit of (+)/(-) 5% as a standard deduction cannot be allowed. Allowance of risk adjustment of 1% while computing the adjusted average PLI – Held that:- There are divergent decision in this regard – Therefore, in the facts and circumstances of this case, accepted the view favorable to the assessee - Allowed the benefit of risk adjustments at 1% - Decided against the Revenue. Selection of method for computation of arm’s length price – Held that:- Assessee has itself accepted that TNMM is similar to CPM excepting that CPM is based on gross margins whereas TNMM is based on net margins - The assessee has also accepted that if proper selection criteria are adhered to application of TNMM would also result in the fact that the price at which the assessee has undertaken the international transactions are at arm's length – Also, reliance has been placed upon the judgment of Hon'ble Punjab & Haryana High Court in the case of Coca Cola India Inc v. ACIT [2008 (12) TMI 67 - PUNJAB AND HARYANA HIGH COURT] has held that merely because the assessee has chosen one of the methods, it does not take away the discretion of the TPO to select any other method which may be considered to be more appropriate for the purpose of determining the true income – Moreover, assessee has not disputed adoption of TNMM by the TPO in the earlier assessment years - Applied TNMM as the most appropriate method – Decided in favor of Revenue.
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2013 (10) TMI 746
Benefit of exemption u/s 54F of the Income Tax Act - In order to avail the exemption in respect of a sum of Rs. 1,22,23,250/- u/s. 54F(4) of the Act, the assessee on 30.7.2008 issued instruction to the Syndicate Bank, Hauz Khas, New Delhi to transfer the aforesaid amount of Rs. 1,22,23,250/- from the savings bank account maintained by the assessee in the aforesaid branch to the special capital gain account maintained with the same branch of the said bank - Assessee has furnished a certificate issued by the bank on 15.12.2010 wherein it has been confirmed that instruction has been received from the assessee on 30.7.2008 for transfer / deposits of funds to the special capital gain account - Evidence of deposits was not filed alongwith the return of income – Held that:- Return of income was filed in electronic form. The return in electronic mode does not permit filing of any documents/ annexures therewith and accordingly, the assessee was prevented by law to file a certificate of deposits alongwith return of income - Evidence of deposits was filed by the assessee during the course of assessment proceedings - The bank had acted upon the instruction of the assessee on 31.7.2008 to deposit the money in special capital gain account - Assessee has duly complied with the requirements of law - Return of income was furnished in electronic form. The return of electronic mode does not permit filing of any documents/ annexures therewith. Denial of claim of deduction/exemption under the Act merely because the return of income was not accompanied by the prescribed documents / certificate, is not appropriate - Requirement is only directory and filing of necessary document/certificate in the assessment proceedings would be in compliance with law – Decided in favor of Assessee. Denial of exemption u/s 54F on the ground of payment made by M/s Capital Advertising Pvt. Ltd. wherein the assessee was Director and not by the assessee himself – Held that:- Assessee has duly made the arrangement for booking of the flat and necessary documentation were made by the assessee in his individual capacity. Only the payment of Rs. 55,70,800/- was done on behalf of the assessee by M/s Capital Advertising Pvt. Ltd. and subsequently, the assessee had duly reimbursed the company amount involved - Section 54F does not require one to one correlation between the capital gain arising out of transfer of long term capital asset and utilization thereof for purchase/construction of residential house - Exemption to the extent of Rs. 55,70,800/- cannot be denied on the facts and circumstances of the case – Decided in favor of Assessee.
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2013 (10) TMI 745
Even after registration given u/s 12AA of the Income tax act, A.O. is can enquire about the details to provide exemption u/s 11 & 12 of the act – Held that:- Case laws relied upon by the learned first appellate authority arc relating to granting registration under s. 12AA of the Act and not relating to exemption provided under ss. 11 and 12 of the Act - When the registration is granted, it does not mean that the AO is barred from examining the details of various activities/work undertaken by the trust to achieve the object of the assessee-trust. The AO is within his power to call complete details of income and expenditure of the assessee whether these have been spent on the activities to achieve the objects of the trust or not - In spite of various opportunities given by the AO, the assessee, nor his Authorized Representative filed details as required by the AO - Learned counsel for the assessee has not filed any details specifically asked - Assessee-trust has not proved its case for seeking exemption under s. 11 of the Act by producing various details of expenditure incurred by the assessee-trust on various activities undertaken to achieve its objects before any Revenue authorities - Learned first appellate authority has wrongly deleted the additions in dispute by passing the impugned orders which deserves to be cancelled – Order of the A.O. is upheld – Decided in favor of Revenue.
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2013 (10) TMI 744
Purchase of Audio rights, a revenue expenditure of an expenditure of capital nature – Held that:- Reliance has been placed upon the judgment in the case of Super Cassettes Industries P. Ltd. v. CIT[1992 (3) TMI 123 - ITAT DELHI-A], wherein it has been held that royalty paid for obtaining rights of reproduction of audio sound and music from master plate was allowable as revenue expenditure - The concern purchased master plate by way of assignment of copyrights which contain original sound-track and songs, reproduced the same into blank cassettes with the help thereof and sold the same in market. The concern here had paid the consideration money partly in shape of a fixed sum initially and partly by way of percentage of sale value of the recorded cassettes - The plate cannot be termed as of capital nature. The initial lump sum payment and subsequent reimbursement in the form of royalty on sales will not change the character of its expenditure being revenue in nature - Respectfully following the ratio laid down by this Tribunal in the abovecited case, expenditure in purchase of Audio rights are revenue in nature – Decided against the Revenue.
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Customs
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2013 (10) TMI 809
Valuation of goods - Transaction value and enhancement of the value - Held that:- department could not show any evidence that the transaction value declared by the appellant was not price actually paid and that buyer and seller of the goods are related persons and the price was not a sole consideration. No investigation what so ever has been carried out beyond the point that director of the appellant a NRI was residing at Taiwan for 25 years. Further the rejection of transaction value is not supported by evidence of contemporaneous import. However the department took recourse to the theory of preponderance of probability to prove the case. The said theory cannot be a substitute for lack of investigation and absence of evidences - Rejection of the transaction value and enhancement of the value by the department in this case are not sustainable in law - Following decision of EICHER TRACTORS LTD. Versus COMMISSIONER OF CUSTOMS, MUMBAI [2000 (11) TMI 139 - SUPREME COURT OF INDIA] and Pushpanajali Silk Pvt. Ltd. vs. Commissioner of Customs [2008 (8) TMI 310 - CESTAT CHENNAI] - Decided in favour of assessee.
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2013 (10) TMI 808
Recalling of order - Held that:- There is no scope to recall the order when the appellant has again abused the process of law by the present Miscellaneous Application and failing to appear to explain his case and has simply tried to explain his conduct from the outcome of the vigilance inquiry. We make clear that conclusion of one court does not bind to other court for no provision in law in that regard. Therefore, Customs Act, 1962 deals with consequence on its own merit without mechanical adoption of vigilance inquiry observations. If the present application is entertained it shall amount to review of the order dated 10/1/13 which is not permissible in law. Tribunal having no power to review and it become functus officio after passing of the application, the Miscellaneous Application is dismissed - Decided against assessee.
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2013 (10) TMI 807
Waiver of pre deposit - Import of Sterile Absorbable Haemostatic material as life saving bandages and claiming exemption in terms of notification No. 21/02-Cus - Held that:- both the sides have relied upon the certificate of the experts in the field. Whereas some of the certificates are in favour of the assessee and the others are against them. We have also seen the technical material on record placed by the appellant which prima facie tilt the evidence in favour of the assessee. The appellants have also assailed the impugned order on the point of limitation by submitting that they have been making the imports of the said products right from 2001 and were availing the benefit of notification which was being allowed by the Revenue authorities and as such, there was no malafide, suppression or mis-statement on their part so as to justifiably invoke the longer period of limitation - issue of exemption requires consideration of lot of technical opinion on the evidence, which can be gone through only at the time of final disposal of appeal. However, we are, prima facie with the appellants on the point of limitation. Learned advocate informs us that total demand falling within the limitation period is around 5.83 lakhs. Since the issue on merits is contentious and arguable and on limitation we find prima facie favour with the appellant, we direct the appellant-applicant to deposit a small amount of Rs.2,50,000 as a condition of hearing of their appeal within a period of 8 weeks from today and report compliance on 5.8.2013.. - stay granted partly.
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2013 (10) TMI 806
Waiver of pre deposit - Import of certain food supplements in retail packs - Wrong retail price - Held that:- applicants are directors of the company on record and therefore penalty liability would be fastened to them. In view of that, we direct both the applicants to deposit a sum of Rs.10,000 each within 6 weeks and report compliance on 27.6.2013. Upon such deposit, predeposit of balance penalty on both the applicants is waived and its recovery is stayed till pendency of appeal - stay granted partly.
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2013 (10) TMI 805
100% EOU - Waiver of pre deposit - Import of elite component sets which was not declared - Jurisdiction of commissioner - Held that:- prima facie, the jurisdiction point could not be sustainable in view of Board Circular No. 16/2004-Cus. dated 16.2.2004. As regards the demand of duty is barred by limitation, it is seen that the audit party detected the non-declaration of the machineries and therefore the limitation issue cannot be considered at this stay stage. Further, the policy issue would be looked into at the time of appeal hearing at length. Prima facie, we find that in Appeal No. C/129/2012 the applicant has obtained EPCG licence. It is also noted that after detection of the irregularity, they have paid the differential duty of about Rs. 11 lakhs. The learned counsel placed the order dated 28.7.2010 of the Joint Director General of Foreign Trade imposing penalty of Rs. 12 lakhs and Rs. 1 lakh in the present case for the irregularity. In Appeal No. C/130/2012, the applicant’s failed to produce the EPCG licence and hence the applicants are unable to make out a prima facie case for waiver of predeposit of entire amount of dues - stay granted partly.
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2013 (10) TMI 804
Waiver of pre deposit - Export of certain leather products - Held that:- It is seen from the records that the applicant has not diligently done the export. The question whether absence of one process can lead to the conclusion that goods were not finished leather will be looked into at the stage of final hearing. Considering the opinion of CLRI, we direct the applicant to make a pre-deposit of Rs.1,20,000 within six weeks for admission of appeal. Upon deposit of the same, the balance dues adjudged shall remain waived and recovery thereof stayed till the disposal of the appeal - stay granted partly.
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2013 (10) TMI 803
Confiscation - Import of old and used photocopiers - import of restricted items - commissioner (appeals) reduced the redemption fine and penalty - Held that:- At this stage, I do not find any merit to stay the operation of the order of Commissioner (Appeals). Therefore, the stay application filed by the Revenue is dismissed. The learned counsel submits that the respondent has also filed an appeal in this matter which is numbered as C/117/2010 which may be linked with this appeal.
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Corporate Laws
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2013 (10) TMI 801
Increased in authorized capital - Change in registered office - CLB has declared the action the company as illegal - Held that:- share-holding of the rival factions is not in dispute. An attempt is made by the respondents, who were in management of the company to increase their share by increasing the authorized share capital of the company and allotting the shares in their favour. When an opportunity was given to them in the proceedings to explain their conduct, except filing the statement denying all the allegations, they were not able to justify their action. On the contrary, neither did they co-operate with the Chartered Accountant appointed by the Company Law Board nor did they appear before the Board and contested the claim in spite of several opportunities being given. This conduct clearly demonstrates, who is the cause for break-down in the administration of the Company. Therefore, the Company Law Board had no option except to pass an ex parte order which is passed in accordance with law. Therefore, no case for interference is made out - If the conduct of the appellant before the Board was fair and if they had any respect to the law and to the Company Law Board and they had co-operated in conducting the proceedings, the Company Law Board could have exercised its discretion in the order - Appeal dismissed.
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2013 (10) TMI 800
Arbitration agreement - Whether Clause 30 of B-1 Agreements entered into between the Government of Maharashtra and the appellant is in the nature of an arbitration clause - Held that:- neither of the judgments relied upon by appellant help the case. In Mallikarjun Vs. Gulbarga University [2008 (8) TMI 798 - SUPREME COURT] case, this Court noted that Superintending Engineer, Gulbarga Circle, Gulbarga was not an officer of the University and he did not have any authority or jurisdiction either to supervise the construction work or issue any direction to the contractor in relation to the project. The Court also emphasized that the parties had agreed that any dispute arising from the contract would be referred to the decision of the Superintending Engineer. These factors are missing in the instant case. Likewise, Clause 4 of the work order which came up for interpretation in Punjab State v. Dina Nath (2007 (5) TMI 564 - SUPREME COURT) contemplated resolution by the Superintending Engineer of any dispute arising between the department and the contractor. Therefore, the relevant clause of the work order was rightly treated as an Arbitration Agreement - High Court had rightly held that Clause 30 of B-I Agreement is not an Arbitration Agreement and the trial Court was not right in appointing the Chief Engineer as an Arbitrator - Appeal dismissed.
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2013 (10) TMI 799
Applicability of SICA to the 'foreign companies' registered in India under the provisions of Section 591 of the Companies Act, 1956 Held that:- Keeping in view the object and scheme of the Act and the virtual consensus of the contesting parties with regard to the present financial health of the respondent company it was clear that the company can no longer fall within the ambit of the expression sick industrial company as defined in Section 3(o) of the Act - Further applicability of SICA to the respondent company does not arise. If the respondent company no longer falls within the ambit of a sick industrial company as defined by Section 3(o) of the Act and the Act had ceased to apply to the company and the rehabilitation package worked out by the Board had not yet been implemented, the question(s) arising in the present appeals have surely become academic and redundant - If that be so - Instead in fitness of things, we should leave the question open for determination in an appropriate case and as and when the occasion would arise. With regard to the management of the company was concerned we have already found that none of the said issues arise from the order of the High Court under appeal before us - Even otherwise, we will not be justified to go into any of the said issues and express any opinion thereon inasmuch as this Court exercising jurisdiction under Article 136 of the Constitution was not the appropriate forum to adjudicate grievances/claims with regard to the right of management of the affairs of the company by one group of shareholders or the other - It had been urged before us that several contentious issues with regard to the rights of one group of shareholders or the other to be in control of the management of the Company had been raised and some of such claims are still pending before the High Court - Coupled with the above was the pendency of several other proceedings with regard to permanent stay of the winding up of the Company - Taking into account all that had been stated above we are of the view that it would be just, proper and equitable to leave the contesting parties to pursue their remedies before the High Court or such other forum as may be competent in law - For the present, the Management of the Company as on date will continue until orders, if any, varying the current position were passed by any forum competent in law - It was made clear that the above was a mere working arrangement that we have considered appropriate for the present and the same should not be understood as any expression of opinion by us on the entitlement of any particular group of shareholders to run and manage the affairs of the company which issue is left open.
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Service Tax
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2013 (10) TMI 821
Manpower Recruitment Agency u/s 65(105)(k) - Sharing of expenses / cost between two companies - Whether the appellant would fall under the definition of Manpower Recruitment and Supply Agency - Held that:- Following M/s. Paramount Communication Ltd. Vs. Commissioner of Central Excise, Jaipur [2013 (3) TMI 38 - CESTAT NEW DELHI ] - service tax liability is on a commercial concern engaged in providing any service, which is recruitment or the supply of man power - the appellant is a composite textile mill and is not a commercial concern it engaged in primarily in recruitment or supply of man power. The service is by the personnel to the two companies in question and not one company providing service to the other company - So there is no taxable activity on the part of the appellant to the other to be taxed under manpower supply service taxable as 65(105)(k) and therefore, the stay petition as well as appeals are allowed - The fact that payment to employee is made by one company and there is inter-company payment of the share of the cost of the employees utilised by the other company cannot be interpreted to mean one company was providing service to the other – order set aside – Decided in favour of Assessee.
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2013 (10) TMI 820
CENVAT Credit - Renting of immovable property services - cenvat credit of input services utlized for construction of Mall and Excise duty on inputs and capital goods consumed in construction of Mall - Waiver of pre-deposit - difference of opinion - third member decision - Held that:- Difference between the Members therefore now narrows down to some services which are utilised by provider of Work Contract Service in construction of Mall. These services are like Architect Service, Design Service and Consulting Engineering Service etc. I find the Tribunal in case of Navaratana.S.G. Highway Prop. Pvt. Ltd. (2012 (7) TMI 316 - CESTAT, AHMEDABAD) has allowed the Cenvat credit of service tax in respect of such input services to the owner of property. It is owner of the property who engages architect for preparing design of the building, he takes services of design engineer for preparation of design and contractor is required to execute the work as per design of Architect, Design engineer and consulting engineer. Moreover, under Cenvat Credit Rules, credit can be taken by service recipient on the basis of invoices issued by the service provider. If invoices issued in respect of Architect Services, design service, consulting engineers service are in name of owner of property, prima facie there is no reason to deny the credit to the appellant. - 35% of Cenvat credit availed on input services is not required to be made as pre-deposit. Appellant directed to pre-deposit 35% of the Cenvat credit denied and attributable to inputs and capital goods alone - stay granted partly.
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2013 (10) TMI 819
Clearing and Forwarding Agent - Appellant appointed as consignment agent by principal as per agreement – appellant authorized by principal to appoint stockists/dealers/distributors on its behalf - it is not a mere case of commission agent but, on the other hand it is the responsibility fixed on the assessee to carry out the activity of getting the goods stored by clearing it and then forwarding it to the stockists and dealers – appellant is covered under C & F Agent Service - In certain circumstances there may be a situation where only commission agency work is carried out and in a situation as is existing in the present case the assessee may also indulge or carry on with not only with the work of commission agent but also with the clearing and forwarding as a Consignment Agent and thus both these activities might overlap and on account of such overlap it cannot be said that the assessee would fall only under the category of commission agent and claim to distance himself from coming within the ambit and purview of clearing and forwarding agent. – Coverage under definition depends on nature and activity – Word “include” mentioned in definition clause indicating legislative intention to give extended and enlarged meaning – Following decision of C.C.E., Bangalore I vs. Mahaveer Generics [2009 (11) TMI 104 - KARNATAKA HIGH COURT] - Decided in favour of Revenue.
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2013 (10) TMI 818
Valuation - Maintenance and repair service - demand in respect of 70% of the total value of ‘maintenance and repair service’ on which VAT has been paid - Whether deemed sale can be considered as sale or not for the purpose of levy of service tax - Held that:- The decision of the commissioner to collect service tax on the value on which the assessee had already paid State Vat was contrary to the principal of fiscal federalism adopted in the constitution. Thus the demand is not sustainable - Following decision of Sobha Developers Ltd. Versus Commissioner of Central Excise and Service Tax, Bangalore [2009 (9) TMI 342 - CESTAT, BANGALORE] - stay granted.
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2013 (10) TMI 817
Demand of service tax - Service of repair of roads - Exemption u/s 97 - Held that:- retrospective exemption benefit has been extended in respect of Management, Maintenance or Repair Service of roads. Prima facie, we are unable to accept the findings of the Commissioner that the said benefit of exemption is available only for repair or relaying of public roads. On plain reading of Section 97(1) of Finance Act, 2012, it is clear that no service tax is leviable in respect of repair of roads for the period 16.6.2006 to 26.6.2009. It is well settled that the language of the exemption notification should not be strained in order to impose tax and if the legislation intended, it would be covered by appropriate words. There is no room for intendment. It is also noticed that the demand in respect of JCB / Dipper charges are also under the category of Management, Maintenance and Repair Service of roads which is included in the above exemption benefit. Section 97 of Finance Act, 2012 had extended benefit of retrospective exemption for certain period particularly for repair of roads only and it cannot be compared with the definition of ‘Commercial or Industrial Construction Service’ - Decided in favour of assessee. Waiver of pre deposit - Held that:- applicant has made out a prima facie case for waiver of predeposit of demand of tax under the category of ‘Management, Maintenance and Repair Service’ of roads. However, the applicant is liable to predeposit Rs.6,73,598/- demanded under the category of ‘Site Formation and Maintenance’. Accordingly, we direct the applicant to predeposit Rs.6,73,598/- (Rupees six lakhs seventy three thousand five hundred and ninety eight only) within a period of six weeks and report compliance on 6.9.2013. Upon such deposit, predeposit of the balance dues stands waived and recovery thereof stayed during the pendency of the appeal.
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2013 (10) TMI 816
Demand - Sevice tax on construction of residential complexes - Held that:- Prima facie, it appears that applicant has discharged full liability in respect of the Majestic Orchard Project. Therefore, we take a slightly lenient view in the matter of pre-deposit required in the case of Le Orchard and we order the applicant to make a pre-deposit of Rs.30,00,000 within 6 weeks and report compliance by 13.9.2013. Upon such deposit, pre-deposit of balance dues arising from the impugned order is waived. - stay granted partly.
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2013 (10) TMI 815
Residential Complex - Section 65(91a) – whether Construction of Complex Service is chargeable to service tax – Held that:- The houses that were constructed should be considered to be in the personal use of the State Government – relying upon the judgement of Khurana Engineering Ltd. Vs CCE, Ahmedabad – (2010 (11) TMI 81 - CESTAT, AHMEDABAD)- the houses constructed are owned by the State Government and were allotted to police personnel by the Government - The Police Housing Corporation appears to have worked as an extended arm of the Government - Following decision of S KADIRVEL VERSUS COMMISSIONER OF CENTRAL EXCISE, SERVICE TAX, TIRUCHIRAPALLI [2013 (8) TMI 262 - CESTAT CHENNAI], stay granted.
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2013 (10) TMI 814
Whether or not the appellant is required to discharge any service tax on the activities of Salt Harvesting, Salt lifting, salt loosening, salt loading & slat transportation - waiver of pre-deposit - Held that:- Salt fields and evaporation area was considered as a factory as per definition given in Sec. 2(j) and the process of evaporation and collection of salt was considered as a process of manufacture as given in sec. 2(f) before 28/02/1986. This aspect whether the stage of salt supplied to M/s. Tata chemicals Ltd. has reached the Stage of marketability or not is required to be gone into detail. Even if this aspect is decided against the appellant then also it has to be decided whether the movement of salt within the factory attracts services Tax liability under ‘Cargo handling Services’ in view of the judgments relied upon the appellant. No segregation of value of service wise and service tax liability has been provided to the appellant which are required to be provided. It has been held by CESTAT Bangalore in the case of United Telecoms Ltd Vs. Commissioner Service Tax Hyderabad [2010 (10) TMI 730 - CESTAT, BANGALORE] that show cause notice should bring out precisely the service tax liability so that appellant could defend the allegations effectively. In view of the above appellant has made out a strong case for complete waiver of the confirmed dues and penalties. Accordingly, there will be a stay against recoveries of these dues till the disposal of the appeal - Stay granted.
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2013 (10) TMI 813
Waiver of pre-deposit - service tax on advance received from foreign customers - denial of cenvat credit for non-maintenance of separate accounts - Rule 6(3) of CCR - Held that:- it appropriate to grant waiver of pre-deposit and stay all further proceedings for realization of the adjudicated liability, on condition that the petitioner deposits Rs.30 lakhs, to the credit of Revenue within six weeks from today and reports compliance by 25.9.2013. - stay granted partly.
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2013 (10) TMI 812
Saty application - Waiver of pre deposit - Held that:- Tribunal not inclined to grant total waiver of the pre-deposit of penalty imposed under Section of the Act since the petitioner had collected service tax from its service recipients but failed to remit the same to the credit of Revenue - Accordingly, we grant waiver of pre-deposit of penalty and stay all further proceedings pursuant to the adjudication order on the condition that petitioner remits the balance service tax liability assessed plus interest thereon, and in addition remits 25% of the penalty assessed under Section 78 of the Act, within four weeks from today and reports compliance on 16.9.2013. In default, there shall be failure of pre-deposit and consequently the appeal shall stand dismissed.
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2013 (10) TMI 811
Extension of operation of the orders - Section 35F and 35C - Held that:- there is no specific provision authorising grant of stay of realisation of the adjudicated liability. However the power to grant of stay pending the hearing of an appeal being an inherent power of an appellate forum/quasi judicial forum, such power is exercised as integral to the appellate jurisdiction. It is this exercise of the power to grant of stay that is the subject matter of the sunset clause in the proviso to Sub Section (2A) of Section 35C. The sunset clause does not apply to grant of waiver of pre-deposit, an exercise conditioned by the provisions of Section 35F - orders of the Tribunal in the stay application in the two appeals, notwithstanding the observations that the grant of waiver shall operate during the pendency of the appeal - stay to continue till disposal of appeal.
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2013 (10) TMI 810
Stay application - Demand of service tax - Construction of residential complex - Held that:- applicant disclosed that the applicant engaged the contractor for construction of the flats. The facts of the case as narrated in the impugned order seem to have not been placed before the authority will be examined at the time of appeal hearing. The applicability of the Board circular would depend on the facts of the case after examining in detail with agreement. Prima facie, we find that it is not a case for waiver of entire amount of tax along with interest and penalty - Prima facie case not in favour of assessee - Stay granted partly.
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Central Excise
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2013 (10) TMI 802
100% EOU - credit based on a formula prescribed under Rule 3(7) - inclusion of additional duty leviable u/s 3(5) along-with CVD u/s 3(1) of the Customs Tariff Act - Waiver of pre-deposit – Held that:- From 1.3.05 if the inputs were imported, the manufacturer would be eligible for cenvat credit of duties paid under section 3(1) and section 3(5) of the Customs Tariff Act, 1975 - there is no warrant to treat the term CVD referred to in Rule 3 (7) of the Cenvat Credit Rules as applicable only to additional duty leviable under Section 3(1) of the Customs Tariff Act - The term CVD has not been specifically defined in the Cenvat Credit Rules, but it has been explained that "BCD & CVD denote advelorm rates in per cent, of basic customs duty and additional duty of customs leviable ". The additional duty levied under Section 3(5) has also been made eligible for credit, it would be proper to hold that the term CVD referred to in the formula would refer to both varieties of additional duties leviable under Section 3(1) and 3(5) of the Customs Tariff Act, 1975 - As per the General Clause Act, when the context requires the word used in singular can mean in plural and, the term CVD can mean the two CVDs - even after insertion of new proviso in Rule 3(7) of CENVAT Credit Rules, formula is still retained in the said Rules - Prima facie, the applicants are entitled to grant stay of recovery of dues till the disposal of appeals - Pre-deposit of the entire amount of duty, penalty and interest is waived during the pendency of the appeal – Stay granted.
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2013 (10) TMI 798
CENVAT Credit – manufacturing of by-products exempted from duty - reversal of cenvat credit - penalty - Held that:- Credit of the duty paid on inputs used in the manufacture of dutiable goods is given under the Cenvat Credit Rules so as to prevent the cascading effect of duty - Cenvat Credit is availed in respect of duty paid on the inputs used in the manufacture of final product - At the time of clearance of the goods, the amount of credit being availed would be used for the payment of excise duty - the credit availed at the first stage would stand recovered at the time of clearance of the exportable goods - Cenvat Credit would have been availed in respect of the input Hydrochloric Acid - The entire Hydrochloric Acid having been used for the manufacture of excisable goods being Gelatin, the credit availed in respect of the inputs would be duly recovered at the time of clearance of the excisable goods being Gelatin. There is no material to suggest that the respondent manufactured any subsidiary products with an intention to market them regularly and consistently and that it was also the case of the Department that in the process of manufacturing the principal product, certain waste/by-product came into existence - the value of such waste/by-product was minuscule and that therefore also no intention can be gathered on the part of the manufacturer to manufacture and market such products as subsidiary product - the respondents have voluntarily reversed the Cenvat credit utilized for manufacturing the by-product along with interest. - no penalty - decided against the revenue.
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2013 (10) TMI 797
Goods Transport Service – Waiver of Pre-deposit – Held that:- The services have very clear nexus with the manufacturing activity and are specifically covered by the definition of ‘input services’ at Rule 2 (l) of CENVAT Credit Rules, 2004 - Relying upon Ramala Sahkari Chini Mills Ltd. Vs CCE Meerut [2010 (11) TMI 34 - SUPREME COURT OF INDIA] - Inputs are tangible goods and input services are intangible and therefore the degree of nexus that can be proved for inputs will be on a different footing as compared to input services - the inclusive portion of the definition in Rule 2(l) that input services of the nature are of a kind specified in the inclusive part of the definition. The goods are sold by the applicant at the premises of the customers and they paid excise duty on the value inclusive of freight - the Tribunal had allowed credit on GTA services for outward transportation of goods from the factory to the buyers premises and the arrangement of selling the goods continued to be the same for the present period also and there has been no change in law either – waiver of pre-deposit of dues granted – Stay granted.
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2013 (10) TMI 796
Cenvat Credit – Waiver of Pre-deposit - bagasse' is generated as waste in the course of manufacture of sugar - Revenue is of the view that the applicant had not maintained separate record regarding inputs, therefore, the applicants are liable to pay 5% / 10% of the price of ‘bagasse' which was cleared without payment of duty – Held that:- Following Balrampur Chini Mills Ltd. vs. Union of India & others [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] - ‘bagasse' emerges in course of crushing of sugarcane which is necessary to extract cane sugar juice which in turn is processed for production of sugar and molasses - Bagasse is the waste product left after the crushing of sugarcane - the order is set aside after waiving the pre-deposit of dues and the appeal is allowed – Stay granted.
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2013 (10) TMI 795
Bogus Invoices – CENVAT Credit - Penalty under Rule 15 and 26 of the Cenvat Credit Rules – Waiver of Pre-deposit - Held that:- Prima facie when the appellant claim to have purchased the CR Strips from M/s. Ayushi Steel who claim to have purchased these goods from M/s. Pasondia Steel and on investigation in respect of M/s. Pasondia Steel, it had been found that during the period of dispute, there was no manufacturing activity in their factory and only bogus invoices had been issued to a number of dealer including M/s. Steel - Prima facie the invoices issued by the appellant were bogus invoices - Following V. K. ENTERPRISES Versus COMMISSIONER OF C. EX., PANCHKULA [2009 (9) TMI 362 - CESTAT, NEW DELHI] - even during period prior to 01.03.07 penalty would be imposable on such persons under Rule 25(1)(d), as the person who purports to have sold the goods, cannot say that he was not a person concerned with selling of the goods and merely issued invoices or that he did not contravene any provision relating to evasion of duty - this is not case for total waiver - The appellant are directed to deposit an amount of Rs. 20,000 – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.
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2013 (10) TMI 794
CENVAT Credit on Capital Goods – scope of the term 'Factory' - Waiver of Pre-deposit – Held that:- The water treatment plant can be said to be part of the factory since the land has been rented by them and water treatment plant has been purchased by them and consequently the power is also used by them and besides fuel, gases which are not usable by the appellant are fed into the boilers - there is considerable force in the submission that the appellant is eligible for the benefit of CENVAT credit on the capital goods on a prima facie basis. Ongoing through the diagram submitted by the appellant, the water treatment plant is located in the southern side of M/s Gayathri Agro plant, which can be easily separated by a wall or a compound - the matter requires more detailed consideration especially in view of the fact that it involved consideration of definition of ‘factory’, the ground plan of the factory submitted by the appellant, statutory provisions relating to availment of CENVAT credit on capital goods which can be done at the time of final hearing - the appellants have made out a prima facie case in their favour on merits as well as the appellants have also pleaded financial difficulty, there shall be waiver of predeposit and stay against during the pendency of the appeal – Stay granted.
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2013 (10) TMI 793
CENVAT Credit – Waiver of Pre-deposit - Whether the appellant is eligible for CENVAT credit of central excise duty paid on M.S. Angles, Channels etc. used for supporting structures of Machineries/equipments in their factory – Held that:- The issue is contentious and at the same time it cannot be said that a case has been made out for a total waiver - the appellant is directed to deposit 50% of the total CENVAT credit demanded – upon submission of the same there shall be waiver of pre-deposit of balance dues and stay against recovery during the pendency of appeals – Partial stay granted.
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2013 (10) TMI 792
CENVAT Credit on Input Services – nexus of input services with manufacturing - Waiver of Pre-deposit – Held that:- The demand is confirmed on a ground different from what was proposed in the SCN - during the relevant time there was no stipulation that the services cannot be assigned or transferred to any one factory for payment of duty on final products - there was no distribution but it was only transfer and that was the reason why the applicant was not registered as input service distributor – At any rate, this was not a ground in the Show Cause Notice - The inclusive part of the definition of input services that many services of same nature as the impugned services are specifically included - brand promotion is on the same footing as sales promotion - it is to be kept in mind that services being intangible the standard for proving nexus cannot be same as that in the case of inputs which are tangible - It is this aspect which comes out from the inclusive part of the definition - waiver of pre-deposit of dues granted during pendency of the appeals – Stay granted.
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2013 (10) TMI 791
Classification of the product - Interpretation of the Exemption Notification No.06/2002 – Waiver of Pre-deposit – Held that:- Prima facie, ice-cream and non-alcoholic beverages, prepared and dispensed by vending machines only would be eligible to the benefit of exemption - It is an admitted fact that the 'Softy Mix' is not directly dispensed by the Applicant through vending machines, but cleared in bulk from their premises. The condition of exemption against the said Notification is very specific saying that ice-cream and non-alcoholic beverages, prepared and dispensed by vending machines only, are eligible for the benefit – Following CCE, New Delhi vs. Hari Chand Shri Gopal [2010 (11) TMI 13 - SUPREME COURT OF INDIA] - The condition of a Notification be strictly fulfilled to avail the benefit - the Applicant could not able to make out a prima facie case for total waiver of pre-deposit of the dues - the Applicant are directed to deposit 25% of the duty – upon such submission balance would stand waived and its recovery stayed during pendency of the Appeals - Partial stay granted.
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2013 (10) TMI 790
Benefit of Closing Balance of RG-23A and PLA post fire accident - goods lost in fire - reversal of credit on inputs not used in the manufacturing - Held that:- The benefit of closing balance of RG-23A Part-II and PLA as on date of fire, the reasoning given seems to be very sketchy and unconvincing - The appellant were not able to put on record the closing balance of RG-23A Part-II and PLA as on 28.02.1996 - the best way to calculate the closing balance on 27.03.2006 would have been to take the balance of RG-23A Part-II and PLA as on 28.02.1996, and work out the closing balance, and could have been ascertained by the appellant from the monthly returns filed with the department - no exercise has been done by the appellant on this front - the balance as on 27.03.1996 i.e. on the day of fire as worked out by the appellant is unconvincing and the order to that extent which rejects such a claim by the appellant is upheld. Reversal of MODVAT Credit – Held that:- The amount of modvat credit that needs to be reversed on the bought out items - the first appellate authority has tried to work out actual modvat credit availed on the basis of average rate of duty - the calculation of duty on brought of the first appellate authority seems to be erroneous, if the value of the bought out items as worked out by the appellant is considered, then the calculation of modvat / cenvat credit on such items based upon percentage of modvat availed to the value of bought out items also needs to be accepted - Applying the law of average or applying the highest rate of duty in such a situation is inappropriate and incorrect, the subsequent amendment to modvat / cenvat credit rules indicate the liability of reversal of cenvat credit should be based upon the value or the proportion of the credit availed to the value – there was no reason for rejecting the claim of the assessee as to the modvat credit that needs to be reversed on the bought out items – Decided partly in favour of Assessee.
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2013 (10) TMI 789
CENVAT Credit – Waiver of Pre-deposit - Revenue was of the view that the items are neither inputs nor capital goods and hence are not eligible for Cenvat Credit - Whether the goods used for repair and maintenance of the plant and machinery are eligible for Cenvat Credit or not – MS Plates, Sections, Shapes, Channels, Roller Chains etc. - Held that:- The items have been used for repair & maintenance of the machinery and not for fabrication of capital goods, that the items used for repair & maintenance of plant and machinery are eligible for Cenvat Credit as input - denying the Cenvat Credit in respect of these items on the ground that the same have not been used for fabrication of capital goods is not connect - Following Ambuja Cements Eastern Ltd. Vs. CCE Raipur [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT] and Union of India Vs. Hindustan Zinc Ltd. [2006 (5) TMI 44 - HIGH COURT RAJASTHAN] - the appellant have strong prima facie case in their favour - the requirement of pre-deposit of Cenvat Credit demand, interest and penalty waived for hearing of the appeal and recovery stayed till the disposal of the appeal - stay granted.
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CST, VAT & Sales Tax
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2013 (10) TMI 822
Reopening of assessment u/s 16 - Nature of work - whether works contract or contract of sale - Held that:- assessee is a sub contractor to M/s.Larsen and Toubro, who was granted contract for manufacture and supply of GRP pipes with required diameter with couplings and all necessary fittings and the transportation to the site and for laying, jointing and hydro testing and commissioning of the sewage pumping main including labour, tools and tackles and other allied incidental works etc., for Tirupur Water Supply and Sewerage Project. Even though copy of the agreement that the assessee had with Larsen and Toubro Limited, is not produced before this Court, yet, a reading of the order of the first Appellate Authority shows that the agreement was placed for consideration before the first Appellate Authority and in the preceding paragraph we have already extracted the core of the agreement entered into between the assessee and Larsen and Toubro Limited - apart from lack of materials which support the order of reassessment, we further find from the order of the Tribunal, that practically it had agreed with the findings of the first Appellate Authority on the nature of the contract, however, it fell into error in its reasoning that the sale was completed when the goods were unloaded and delivered to Larsen and Toubro Limited. Such reasoning is contrary to the terms of the agreement which were extracted by the first Appellate Authority in its order, which in the preceding paragraphs, we have also extracted in our order. When the nature of work involved not only manufacture but also laying of pipes thereafterwards, we do not find any ground to accept with the reasoning of the Tribunal that the nature of the contract is one of sale and not of composite nature - Decided in favour of assessee.
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