TMI Tax Updates - e-Newsletter
October 11, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Expenses on establishing Green Belt and depreciation - expenditure incurred for arranging the Green Belt by the assessee be treated under the heading of plant and machinery - HC
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Income Tax:
Before ordering the valuation of any property by independent Valuer in respect of an assessee, who maintained books of account, the AO must express his lack of confidence in the books of account - though Section 142A of the Act was amended in the year 2004 with retrospective effect from 1972, it is difficult to sustain the exercise undertaken by the AO on the touch stone of that provision - HC
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Income Tax:
Withdrawal of registration of Trust – For cancellation of registration, the specific provision U/s 12AA is provided - CIT was no right to withdraw the registration of the appellant from AY 2009-10 - AT
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Income Tax:
Association of persons (AO) or co-ownership – It needs verification as to how the refund is granted to the individual with the same PAN Card when the PAN card is issued in the name of ‘Firm’ - AT
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Income Tax:
Penalty levied u/s 271(1)(c) – the disallowance of carry forward of the long term capital loss was on technical ground and not on account of any concealment of any particular of income - no penalty - AT
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Income Tax:
Accrual of interest - if the assessees had advanced interest bearing funds as interest free advances, the interest paid by the assessees towards such borrowed funds would have to be disallowed and treated as the income of the respective assessees - AT
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Income Tax:
Royalty u/s 9(1)(iv) – Article 13 of Indo-French DTAA – Consideration received from distribution agreement - Whether news reports and photographs could be subject matter of copyright in terms of Section 13 of the Copyright Act, 1957 - Held Yes - AT
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Income Tax:
Solely relying upon the seized document marked as Annexure addition could not have been made by the AO when the evidences brought on record clearly indicate that the sale was neither effected to the assessee nor payment has been made by the assessee - AT
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Income Tax:
The fixed deposit receipts being business assets, there was no reason as to why interest income earned from such fixed deposit receipts could not be assessed as business income of the assessee. - AT
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Customs:
Seizure of goods - Unlawful import of goods - When they did not claim the ownership of the goods, their plea that the goods were not of Chinese origin is of no avail to them - AT
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Customs:
Classification - the basic material of the so called carpet is nothing but plastic and the said wastes and scrap is consumed by the appellant for crushing them into granules for re-exporting - goods which are imported cannot be classified under 5702.32 but can be classified under Chapter 3915.00 only - AT
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Service Tax:
Business Auxiliary Service - Suppression of facts - Merely uttering the words 'bonafide belief' is not enough for its quasi judicial acceptance. The appellants have to show the basis/grounds for entertaining such belief - AT
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Service Tax:
Waiver of pre deposit - services provided in a SEZ by sub-contractor - On perusal of notification no.09/2009-ST, we find that the said notification grants exemption to the services rendered in a special economic zone and does not distinguish between a contractor and sub-contractor. - AT
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Central Excise:
Imposition of penalty - when the demand gets dropped on any account, penal provisions cannot survive against the assessee, and for the same reason, confiscation of the goods, which is penal nature, cannot be upheld - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (10) TMI 226
Validity of notice for reopening of assessment u/s 148 – Failure on the part of assessee disclosed or not - AO was of the view that the interest paid on borrowings was business expenditure to be allowed as revenue expenditure – Held that:- The notices having been issued beyond a period of four years from the end of relevant AY, the reasons in support do not indicate any failure on the part of the petitioner to submit fully and truly all material facts necessary for assessment - it is submitted that income chargeable to tax has escaped assessment - However, the reasons nowhere indicate any failure on the part of the petitioner to disclose truly and fully material facts necessary for assessment - the reopening of assessments u/s 148 of the Act beyond the period of four years from the end of the relevant AY has to specify the failure on the part of the assessee to disclose fully and fully all material facts necessary for assessment - Revenue has to justify the notices only on the basis of the reasons recorded at the time of issuing the notices - The reasons as recorded and furnished to the petitioner, do not disclose even remotely any failure on the part of the assessee to disclose truly and fully material facts necessary for assessment during the relevant AYs 1998-1999 and 1999- 2000 – the notice is without jurisdiction cannot be sustained – Decided in favour of assessee.
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2014 (10) TMI 225
Expenses on establishing Green Belt and depreciation - The AO refused to treat it as capital investment, much less as part of plant and machinery and disallowed depreciation – Tribunal allowed the same as revenue expenditure - Held that:- The Tribunal was of the view that the expenditure incurred for the arrangement of Green Belt answers the description of revenue expenditure and since it was incurred before the commencement of production and business, it can be capitalized - The Tribunal has undertaken extensive discussion regarding the nature of the expenditure that is incurred for arranging the Green Belt - once it is not in dispute that the expenditure for arranging Green Belt was incurred before the commencement of production and in the process of creating asset, it deserves to be capitalized. The Tribunal, in a way, accepted the contention of the assessee that the Green Belt was treated as plant and machinery in the insurance policies and the same analogy can be adopted in the context of taxation also - when the field of income tax is governed by its own norms, in the form of rules and notifications, if not the provisions of the Act itself, for classification of items of expenditure and the like, there was absolutely no basis to adopt the one, which was indicated in an insurance policy, which has absolutely nothing to do with taxation – thus, the order of the Tribunal is set aside which directed that the expenditure incurred for arranging the Green Belt by the assessee be treated under the heading of plant and machinery - Decided partly in favour of revenue.
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2014 (10) TMI 224
Notice for reopening of assessment u/s 148 – Notice issued on the basis of CBDT circular - Change of opinion – Held that:- Following the decision in Hindustan Lever Ltd. v/s. R.B. Wadkar, Asst. Commissioner of Income Tax & Others [2004 (2) TMI 41 - BOMBAY High Court] - the reasons for reopening of an assessment are required to be tested/examined as recorded at the time of issuing of notice u/s 148 of the Act - No substitution, deletion or addition to the reasons recorded at the time of issuing notice can be made to support the impugned notices either by affidavit or in the order disposing of objections - The reopening notices would stand or fall by the reasons recorded at the time when the notices were issued - the submission of Mr. Pinto that there is a failure on the part of the Petitioner to disclose truly and fully all material facts necessary for assessment cannot be accepted. The notice have been issued in reasons in support only on the basis of CBDT circular dated 8th September, 2004 which is merely an opinion on the statutory provisions – AO has to apply his own mind to form a reasonable belief that income chargeable to tax has escaped the assessment - the question of opinion on statutory provision is an issue which would only arise, if the statutory jurisdictional requirement of failure to disclose fully and truly all material facts necessary for assessment is satisfied – thus, the notice for reopening of assessment is to be set aside – Decided in favour of assessee.
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2014 (10) TMI 223
Value of the building constructed by assessee-firm – Reference made to DVO - Held that:- The books of account maintained by an assessee have their own significance and importance in the context of the assessment under the Act - It is on account of the availability of books of account, that the assessee is relieved from the burden of maintaining the other evidence - An AO is conferred with the power to satisfy himself about the correctness of the books of account - it is only when the AO did not take the contents of the books of account, on their face value, that he could have resorted to an independent valuation - the Tribunal maintained the subtle distinction and held that even before ordering the valuation of any property by independent Valuer in respect of an assessee, who maintained books of account, the AO must express his lack of confidence in the books of account - That is not been done in the present case, the reference to the Valuation Officer cannot be sustained in law - though Section 142A of the Act was amended in the year 2004 with retrospective effect from 1972, it is difficult to sustain the exercise undertaken by the AO on the touch stone of that provision – Decided against revenue.
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2014 (10) TMI 222
Grant of registration u/s 12A – Any activity not commenced even after one year of existence of Trust – Held that:- The Tribunal had rightly followed the decision in Director of Income-tax (Exemptions) Versus Meenakshi Amma Endowment Trust [2010 (11) TMI 853 - KARNATAKA HIGH COURT] - CIT had rejected the registration of the Trust at the threshold - The reasons given by the Original Authority are not in consonance with the provisions of the Income Tax Act - when there is an ample power under the law to rectify the error by cancelling the registration of the trust if there is any breach of the objects of the Trust, the Tribunal is right in setting aside the order of the CIT – Decided against revenue.
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2014 (10) TMI 221
Addition made on adhoc basis - Nature of payment ignored – Undisclosed income - Held that:- There was search and seizure operation under Section 132 of the Act in the case of Capital Meter group - The assessee is a director and CEO of Capital Power Systems Ltd., one of the companies in Capital Meter group - the income in the individual capacity of Shri Pawan Kumar Bansal is disclosed for the first time by the statement dated 12th September, 2006 - In this statement also, he does not say that the income of ₹ 3,55,00,000/- is the income of AY 2007-08 but says that it is the additional income of different years during the block period - the cumulative effect of the letter dated 1.9.2006 and statements dated 8.9.2006 and 12.9.2006 is to be seen and whether as per the cumulative effect of all the above three documents can it be said that the undisclosed income of ₹ 7 crores is required to be assessed in the hands of the assessee i.e. Shri Pawan Kumar Bansal for AY 2007-08 - it cannot be said that the income is liable to be assessed in the hands of the assessee for the AY - CIT(A) adopted the right course of action i.e., to determine the undisclosed income on the basis of loose papers found and seized from the assessee’s premises - CIT(A) to the extent wherein he held that the income of the assessee i.e. Shri Pawan Kumar Bansal is to be determined on the basis of undisclosed income as per the noting on the loose papers – Decided against revenue. Income determined on the basis of loose papers – Held that:- The entry relates to some transaction dated 24th December, 2003 - the transaction cannot be said to be pertaining to the accounting year relevant to the AY under consideration - the only addition which can be sustained on the basis of loose papers found and seized during the course of search is ₹ 7,90,000 - the addition of ₹ 7,90,000/- in the case of the assessee i.e. Shri Pawan Kumar Bansal is upheld – Decided partly in favour of assessee.
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2014 (10) TMI 220
Penalty u/s 271(1)(c) – Voluntary disclosure or not - Concealment of income and inaccurate particulars furnished – Held that:- the assessee had shown trade liabilities in the balance sheet, that the AO had directed the assessee to produce the parties in whose names liabilities were shown outstanding, that on seven occasions the assessee had made submission before the AO between 12. 02. 2008 to 28. 08. 2008, that on 15. 10. 2008 it surrendered ₹ 52 lakhs, that before that the AO had issued commission to one of the officers of Bareli to make inquiries about some of the suppliers, that the AO levied penalty after invoking the provisions of Expl. 1 B to section 271(1)(c) of the Act and the FAA had confirmed the penalty. Voluntary disclosure does not release the assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he has to be absolved from penalty. The Assessing Officer should not be carried away by the plea of the assessee such as "voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement", to explain away its conduct. The assessee has not produced cogent and reliable evidences, as desired by the Hon’ble Apex court in the case of Mak Data [2013 (11) TMI 14 - SUPREME COURT], to explain the difference about the trade liability that were part of his books of accounts - penalty confirmed - Decided against assessee.
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2014 (10) TMI 219
Withdrawal of registration of Trust – Activities charitable or not - scope of section 2(15) – The JDA was established in October, 1982 by JDA Act - Purpose of JDA is for planning, coordinating and supervising for proper, orderly and rapid development of the areas in Jaipur region, in which several government departments, local authorities and other organization are at present engaged within their own jurisdictions to provide also that such authority be enabled either itself or through other authority to formulate and execute plans, projects and schemes for the development of Jaipur region - housing, community facilities, civic amenities and other infrastructure are properly created for the population of Jaipur region in the prospective of 2001 AD or thereafter including the intermediate stage and to provide for matters connected with the purpose - The intention of the institution is not to earn profit but recover the cost of the establishment as well as other expenditure to implement the object of the JDA - The State Government also give the grant to it - The intention and manner of the assessee was not to earn profit. Held that:- the amendment made in Section 2(15) is effective from 2011-12 as clarified by the CBDT in its circular - in case where the predominant object of the activity is to carry out charitable purpose and not to earn profit, it does not lose its character of charitable purpose merely because some profit arises from such activities - money earned from business held under trust or otherwise, to feed the charity would not disentitle or negate the claim of engagement in charitable purpose defined u/s 2(15) of the Act - CBDT circular No. 11/2008 emphasized that 2008 amendment is only applicable to residual category, charitable entity when it carries on any activity in the nature of trade, commerce or business, on any activity and to determine whether such activity is commercial will be decided on its own facts and no generalization is possible. Keeping in view of the charitable activity test, it was held that business activity of the assessee is integral to its charitable purpose and question of requirement of separate books of account for the business activity seems redundant – Following the decision in M/s GS1 India Versus Director General of Income Tax (Exemption) And Another [2013 (10) TMI 19 - DELHI HIGH COURT] - proviso to Section 2(15) of the IT Act is to cover those, which under the garb of general public utility carry on business on commercial activities to escape the liability under the Act gaining exemption U/s 11 of the Act, the section applied on such type of trust or institution who get registration U/s 12A of the Act for claiming the exemption U/s 11 of the Act - assessee is a government agency and engaged in the coordinate and planned development of Jaipur region and which is predominant object of it - CIT also erred in applying the provisions of Section 293(c) of the Act, which applied withdrawal of approval granted under any provision of this Act, notwithstanding that a provision to withdraw such approval has not been specifically provided for in such provision - For cancellation of registration, the specific provision U/s 12AA is provided - CIT was no right to withdraw the registration of the appellant from AY 2009-10 – thus, the order of the CIT(A) is to be set aside and the Registration is granted to JDA – Decided in favour of assessee.
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2014 (10) TMI 218
Unexplained investment u/s 69 – Held that:- The AO made addition by holding that the assessee had neither furnished returns of income for the preceding years nor any details and evidences regarding past savings were furnished by the assessee - CIT(A) has rightly confirmed the addition by holding that average yearly withdrawal from bank during February 2000 to March 2005 comes to ₹ 1,41,800/-, thus entire pension income and other funds were consumed by the assessee during the earlier 5 years and there was a balance of ₹ 1,209/- only as on 31st March, 2005 - the pattern of withdrawal shows that the assessee was solely depended on the pension income and the moment pension income was credited to her bank account, the same was withdrawn in small amounts reflecting the actual consumption rather than the savings - had there been any surplus funds or savings, the same could have been in the form of bank deposits or FDRs but nothing of this kind of evidence was available with the assessee, therefore, it could not be believed that the assessee collected a sum of ₹ 1,35,000/- from her past savings during preceding period of 5 years. The assessee had not furnished details of withdrawals for household expenses neither during the assessment proceedings nor during the appellate proceedings, therefore, considering the old age of the assessee and other relevant factors like medical expenses etc. it can safely, be hold that the receipts from family pension as well as agricultural income were consumed by the assessee on household expenses and other day to day livelihood needs - it cannot be accepted that the assessee was actually in a position to accumulate savings from family pension and agricultural income - Therefore, the source of income of ₹ 1,35,000/- remained unexplained and the AO was fully justified in making addition to the assessee’s income u/s 69 of the Act – Decided against assessee. Advance receipt for sale of plots – Income treated as income from other sources - Nexus between the date of purchase of new property and the amount received by the assessee as advance - Held that:- Assessee purchased land from Smt. Subhadra Tyagi wife of Dr. S.C. Tyagi on 18.11.2005 and purchase price was ₹ 14,00,000 – all the sale deeds have been executed by the assessee after execution of sale deed in her favour (the assessee) i.e. after 18.11.2005 - In all the sale deeds executed by the assessee (seller) in favour of the purchasers it has been stipulated that the assessee (seller) has received sale consideration before respective witnesses, but the detail and date of receipt has not been clearly mentioned - there are some credit entries in their saving bank account reflecting some receipts but in absence of relevant detail of depositor and other documents such as cheque, demand draft or pay order, it cannot be ascertained that the amount so credited in the account of Dr. S.C. Tyagi and Smt. Subhadra Tyagi has been made by either the assessee or on the direction of the assessee by the said purchasers of plots - there was regular withdrawals of money ranging between ₹ 1,000/- to ₹ 15,000/- but during the financial year 2005 there is major withdrawal and the assessee has not submitted - the authorities below have not properly examined the claim and the submissions of the assessee that the assessee made investment of ₹ 12,50,000/- out of advance amount received from various purchasers as an advance which was directly deposited to the account of seller of the land to the assessee i.e. Smt. Subhadra Tyagi and her husband Dr. S.C. Tyagi – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of revenue.
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2014 (10) TMI 217
Association of persons (AO) or co-ownership – Whether confirming assessment in the hands of co-ownership would amount to double taxation of same income - AO was of the view that the return of income was filed merely to indicate the amount of income to be computed of collective co-ownership to determine allocable income amongst respective co-owners/members wherein the shares of all members of AOP were definite and determinate and the income from property earned by all joint co-owners was to be taxed mandatorily in the hands of respective co-owners as per provisions of section 26 of the I.T. Act - Held that:- The FAA and the role played by the Tax Consultants while advising the assessees - while applying for PAN Card it is duty of the assessee to tick the status in which the assessee is likely to be assessed and if there is any dispute the same has to be brought to the notice of the AO - these two assessees filed Form No. 49A in the name of “Ritesh Ramesh Shah & Others” and “Praful Ramesh Shah & Others” which would clearly indicate that they are not claiming the status as ‘individual’ - There cannot be any doubt that the assessees would have taken sufficient care to apply for PAN Card through some Tax Consultants but still the applications are made specifically in the name of “and Others” but in the status of ‘individual’. Each of them has a specific share in the property - It is not known as to what is the common action taken by all of them together - There cannot be any dispute that if income is earned by virtue of joint action, it has to be assessed as ‘Association of Persons’ and not in the hands of each co-owner - the AO has to take proper care and analyse the facts of each case and on examination he should have recorded an appropriate finding as to whether the share of each individual is determinate and whether it is assessable as AOP or in the hands of each individual under section 26 of the Act - It also needs verification as to how the refund is granted to the individual with the same PAN Card when the PAN card is issued in the name of ‘Firm’ - It is intriguing that from year to year not only proceedings were completed under section 143(1) but also under 143(3)/CIT(A) but this aspect was not examined – thus, the order of the CIT(A) is to be set aside and the matter is remitted back to the AO for fresh adjudication – Decided partly in favour of assessee.
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2014 (10) TMI 216
Search and Seizure u/s 132 – order u/s 153C r.w. section 153A - Held that:- The matter is set aside and restored to the file of the AO for re-examination of the issue in the light of the decision of Hon'ble Jurisdictional High Court in SSP AVIATION LTD. [2012 (4) TMI 335 - DELHI HIGH COURT] i.e., the AO will first verify the years to which the seized documents belonged - There would be no justification for continuation of the proceedings under Section 153C to which the seized documents do not belong – AO will drop the proceedings initiated u/s 153 of the years to which the seized documents do not belong - For the year to which the seized documents belonged, he will verify whether the transaction reflected by the seized documents are duly accounted for in the books of account - If the transactions are duly accounted for in the books of account, as contended by the learned counsel, the AO will drop the proceedings initiated u/s 153C - if for the year to which the seized documents belonged, the transaction reflected by the seized documents is not recorded in the books of account, the proceedings u/s 153C will continue and the AO will make the assessment afresh in accordance with law - the Revenue’s appeals do not require any adjudication and they are also deemed to be allowed for statistical purposes - The AO will proceed to make the assessment afresh only in the year where proceedings u/s 153C can validly continue.
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2014 (10) TMI 215
Penalty levied u/s 271(1)(c) – AO specifically mentioned that carry forward of long term capital loss is allowed but since there was a change in the majority shareholding in the previous year, the loss was disallowed to be carried forward under the provision of Section 79 - Held that:- The assessee rightly contended that the carry forward of long term capital loss for AY 2005-06 and 2006-07 had been duly accepted as correct as per returns filed and assessment orders passed by the AO in the relevant years - the assessee had furnished any inaccurate particulars of income or had made any wrong claim of carry forward of long term capital loss - the disallowance of carry forward of the long term capital loss was on technical ground and not on account of any concealment of any particular of income - relying upon Mak Data P Ltd. vs. CIT-II [2013 (11) TMI 14 - SUPREME COURT] - section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income - the assessee’s conduct cannot be said to be contumacious so as to warrant levy of penalty – thus, the levy of penalty is not justified – Decided in favour of assessee.
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2014 (10) TMI 214
Accrual of interest - Chargeability of interest – uncertainty - Money given as advance - dispute between parties – Held that:- Following the decision in DEPUTY COMMISSIONER OF INCOME TAX Versus M/s MANASLU AGRO FARMS PVT LTD AND OTHERS [2014 (6) TMI 499 - ITAT HYDERABAD] - The assessees have advanced the loans/temporary advances, the assessees have also issued legal notices for the repayment of the loans and also filed civil suits for recovery of the loan amounts along with interest in the City Civil Court, Secunderabad - the assessees have stated before the CIT(A) that the amounts advanced are from out of the share application monies and temporary advances - It is so stated on the basis of entries in the Balance Sheet and the Profit & Loss Accounts of the respective assessees filed along with their returns of income. There is no certainty with regard to the said rate of interest - it cannot be presumed that the interest accrued to the assessee at the rate of 18% p.a. as claimed by the assessees in the suits filed for recovery of advances - unless and until the liability to pay the advances and the rate of interest at which the temporary advances are to be repaid is determined by the Civil Court, it cannot be said that the same has accrued or arisen to the assessees - if the assessees had advanced interest bearing funds as interest free advances, the interest paid by the assessees towards such borrowed funds would have to be disallowed and treated as the income of the respective assessees – the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of revenue.
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2014 (10) TMI 213
Determination of ALP – Selection of comparables - CUP method and TNMM method – Held that:- The TPO rejected the comparables given by the assessee on the ground that the Annual Reports are not available - certain companies selected by the TPO were not considered as comparables on the ground that annual report of those companies were not available - the assessee has filed the financial summaries of those 9 companies and annual reports in case of 7 companies out of the 9 companies - Helios and Matherson Information Technology Ltd. whose turnover is ₹ 213 crores, i.e. above ₹ 200 crores is not a comparable case - KALS Information System Ltd. cannot be considered as a comparable – thus, the matter is to be remitted back to the TPO to pass appropriate order after giving due opportunity of being heard to the assessee and determine the adjustment to the Arm’s Length Price – Decided in favour of assessee.
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2014 (10) TMI 212
Application for admission of additional evidence - whether the application for admission of additional evidence dated 13.06.2014 as filed by the revenue before us in terms of Rule 29 of the ITAT Rules, 1963, should be allowable or not – Held that:- The information adduced by the Revenue Department particularly that of case details pertaining to assessee’s case against Google Inc. before U.S. District Court, Colombia were time and again solicited from the Assessee/ Appellant at different stages of litigation i.e. both by AO as well as CIT(A) - the assessee was provided with sufficient opportunities to submit relevant details/ documents pertaining to Google Inc. case etc. but, such details/ documents were not submitted before AO and CIT(A) for consideration - the additional evidence as adduced by the revenue particularly the case-papers relating to assessee’s case against Google Inc. before US District Court, Colombia had always remained within the exclusive knowledge and possession of the assessee and not produced before the AO as well as CIT(A) despite insistence by the respective authorities for reasons best known only to the assessee. The copy of complaint which could not be considered at any prior stage of proceedings in the instant case and could only be brought to light from the internet domain before us hence, the same needs to be considered - it would be prudent to state that in absence of any direct evidence to the contrary with respect to case-details/ complaint by the assessee, it is important to point out that, admission of the same shall cause no prejudice to the assessee as the same pertains to assessee’s own case and even none of its contents have been controverted by the assessee – thus, the Application for Additional evidence made by the revenue in terms of Rule 29 of the ITAT Rules, 1963 and admitted – Decided in favour of revenue. Royalty u/s 9(1)(iv) – Article 13 of Indo-French DTAA – Consideration received from distribution agreement - Whether news reports and photographs could be subject matter of copyright in terms of Section 13 of the Copyright Act, 1957 and whether the consideration received by the assessee under the distribution agreements qualify as “royalties’ in terms of Article 13 of Indo-French DTAA and also Section 9(1)(iv) – Held that:- AFP exercises a great degree of control and strictly regulates its news-content supplied by it to Indian news agencies and most of its information is proprietary-in-nature and copyrighted inasmuch as access to archived data, distribution rights, commercial rights, credit to AFP alongwith copyright symbol “AFP©’ or without copyright symbol “AFP’ (as may be determined by AFP in terms of its internal policy), which can be used except as per terms of AFP - the news that is distributed by the assessee to various news agencies are obtained from different sources including AFP’s own personnel, domestic as well as international news correspondents, and other agencies etc. who have a good amount of experience in news reporting - Such news stories as obtained by AFP is further evaluated and processed by its editorial team which comprises of a network of senior journalists who are the best journalistic minds in news business possessing specialized skills and are capable of coming out with news-stories having a distinct feature and innate quality. It is for this very distinct feature and innate quality that AFP news is preferred and is revered to as one of the most reliable news agencies in the world since its year of inception i.e. 1835. News-reports as well as archived data being in the nature of “original literary works’ does not fall foul to the doctrine of de minimi and meet at statutory requirements for copyright outlines under Section 13(1)(a) of the Indian Copyright Act, 1957 - copyright subsists in such news item/ news story under consideration - taking cue from Section 2(c)(i) of the Indian Copyright Act, 1957 categorically includes photographs as artistic work - it cannot be denied that it has an intrinsic value of its own and when used for “news items’ it helps assist in conveying the message in the news story - on a reading of Section 2(C)(i) of the Indian Copyright Act 1957 which deems “photographs’ as “artistic works’ keeping in view of the terms of use of such photographs vis-a-vis subscription agreement as discussed above as well as separate commercial value being ascribed to such photographs the same very clearly fits into the sweep of section 13(1)(a) of the Indian Copyright Act 1957 hence it could be concluded that copyright subsists in such photographs/ image under consideration. The assessee by way of grant of licence to its users obtained a commercial value for distribution of its news which cannot come into the public domain except by virtue of a license agreement - the question of “fair dealing’ by the user of information covering bundle of first, second as well as third category of information does not come into play as it is strictly governed by the terms of the subscription agreement and comes for a commercial value hence, the reference to “fair dealing’ in terms of Section 52(1)(b) is misplaced to this extent – Decided against assessee. Charging of interest u/s 234B – Obligation to deduct TDS u/s 195 – Held that:- Following the decision in DIT-I, International Taxation Versus Alcatel Lucent USA, Inc., Alcatel Lucent World Services Inc. [2013 (11) TMI 734 - DELHI HIGH COURT] - even though there may not be any positive or direct evidence to show that the assessee did make a representation to its Indian telecom dealers not to deduct tax from the remittances, such a representation or informal communication of the request can be reasonably inferred or presumed - The Tribunal ought to have accorded due weightage to the strong possibility or probability of such a request having been made by the assessee to the Indian payers since otherwise the denial of its tax liability on its Indian income would have served little purpose for the assessee - the Indian payers did not deduct the tax u/s 195(1) because of the request made by the assessee, consistent with its stand that it was not liable to be taxed in India – Decided against assessee.
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2014 (10) TMI 211
Deductibility of the sums paid to banks/financial institutions by the assessee-company as guarantor – Interest on loan - Held that:- The denial of the claim in respect of the sums advanced by the assessee-company as a guarantor towards one time settlement, as well as the interest thereon, as not deductible as business expenditure either u/s.36 or 37(1) of the Act is upheld - With regard to the principal sum, the AO has without prejudice, also stated that the amount actually paid during the year is below that being claimed, so that the claim would have to be limited thereto - the company also states of the interest disallowed being notional qua which again there is no finding by the first appellate authority, nor any argument in its respect assumed before us, finding mention only in the written statement which the assessee was asked to furnish at the conclusion of the hearing, so as to capsule the gist of the arguments - The claim is factual and, in any case, the rule of law is to obtain - If and to the extent the interest is notional and not actually incurred, no disallowance in its respect could obtain - The matter to this limited extent is, remitted back to the AO for adjudication – Decided partly in favour of assessee. Pre-operative expenses incurred for expansion of manufacturing facilities disallowed – Held that:- The expenditure is toward enlargement of the capital structure of the firm is not in doubt, the enhancement or improvement in fact being both in quantitative and qualitative terms inasmuch as the programme under implementation is for both expansion and diversification - the expenditure results, along with other expenditure, in creation or bringing into existence fixed assets – the profit making apparatus, to be deployed in business, is again not in doubt, having been in fact allocated by the assessee toward the relevant assets – following the decision in Assam Bengal Cement Company Limited Versus Commissioner Of Income-Tax, West Bengal [1954 (11) TMI 2 - SUPREME Court] - Chapter XIV-A of the Act provides for a procedure to avoid repetitive appeals - The plea in any case cannot be conditional, or made alternatively, concern as it does a rule of judicial precedence - the interest expenditure to be capital expenditure though allowable u/s.36(1)(iii), only the revenue expenditure could be allowed u/s.37(1), which is even otherwise trite law – Decided in favour of assessee. Addition on inflation in purchases – Held that:- In applying the test of commercial expediency for determining whether an expenditure is wholly or exclusively laid out for the purpose of business, reasonableness of the expenditure has to be adjudged from the point of view of the businessman and not of the Revenue - the assessee being a bulk purchaser should presumably be able to bargain a lower rate - the issue is factually indeterminate – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee. Foreign exchange loss incurred and claimed made through debit to the profit and loss – Held that:- The purchase of the raw material stood completed on the delivery of the relevant goods to the assessee as per the relevant contract/s. Any subsequent increase (or decrease) in the corresponding purchase liability, would be independent of the purchase cost, which gets crystallized on the date of purchase, i.e., on it being completed - The premise is clear that the exchange fluctuation is ordinarily not factored into the cost of purchase in-as-much as the same does not add value to the goods, since purchased, and neither in bringing them to their present location and condition - the liability incurred on purchase is a trade liability, so that any increase therein would be only revenue expenditure, deductible u/s. 37(1) – Decided in favour of assessee. Modvat attributable to the closing stock – Held that:- The opening stock was directed by the FAA to be valued at inclusive of excise duty, even as the closing stock for the immediately preceding year was not, and which found acceptance throughout - it was not concerned with the correctness (or otherwise) of the method (of valuation) adopted for determining the cost price, observing that that was not an issue at any stage of the proceedings, nor dealt with by the tribunal - further clarifying that for the year for which s.145A is applicable, the same would necessarily have to be in terms of the non obstante provision, which would apply equally to all the elements/determinants of the trading profit – the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of assessee.
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2014 (10) TMI 210
Method of valuation of closing stock of securities - Loss on valuation of closing stock – Held that:- Assessee asserted that there was no double claim by pointing out that the yearend valuation has been arrived at after considering the reduced cost of the securities shifted from AFS to HTM category - the reduced cost of securities is compared with the market value on the last date of the financial year and the lower of the two is considered as closing stock - Therefore, the year end valuation loss of ₹ 359,24,58,508/- is over and above the shifting depreciation loss of ₹ 213,92,63,435/- and therefore there is no double claim - in any case the deduction on account of shifting depreciation loss will not amount to double deduction for the AY 2005-06 since the assessee bank has changed the method of valuation of closing stock only as on 31.03.2005 – these assertions of the assessee have not been assailed by the Revenue - The explanation of the assessee obviates a situation where a double deduction is allowed to the assessee. In the books of account following the RBI guidelines HTM investments are valued at cost and in respect of AFS and HFT investments, the valuation is carried out basket-wise and within the prescribed basket any appreciation in security is adjusted against the depreciation of other any security - the change in the method of valuation has been partly accepted by the Revenue and for the reason that qua the investments classified as AFS and HFT there is no dispute and, the valuation of such closing stock at lower of cost or market value, has been accepted - Relying upon Commissioner Of Income-Tax Versus Corporation Bank Limited [1988 (8) TMI 90 - KARNATAKA High Court] - there are no statutory rules for the valuation of closing stock but the ordinarily accepted method of commercial accounting support the valuation of closing stock based on the lower of the cost or market value - the method of valuation of the closing stock adopted by the assessee i.e. cost or market value, whichever is lower is fair and proper and the income-tax authorities have erred in not accepting the same. The stand of the assessee is upheld to value the stock of its investments / securities at lower of cost or market value - By application of such method of valuation of its stock of securities / investments in AY 2005-06 assessee claimed deduction for a loss - The effect of the change in method of valuation on the computation of income for the purposes of income tax is a matter of factual appreciation, which is liable to be verified by the AO appropriately - the AO is directed to consider the stand of the assessee stated and thereafter re-work the income of the assessee accordingly – Decided in favour of assessee. Depreciation on plant and machinery – Bad debts written off by non-rural branches u/s 36(1)(vii) – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that in the case of a banking company, for allowing depreciation in respect of lockers, counters, steel equipment, electrical fittings, etc., their functional utility has to be evaluated - the AO is directed to re-work the claim of the depreciation on the assets – so far as bad debts are concerned, following the decision in Catholic Syrian Bank Ltd. Versus Commissioner of Income Tax, Thrissur [2012 (2) TMI 262 - SUPREME COURT OF INDIA], the AO is directed to consider the claim afresh - Decided in favour of assessee. Restriction of claim of deduction u/s 36(1)(viia) - Whether the deduction allowable u/s 36(1)(viia) of the Act is to be restricted to the actual amount of Provision made in the books of account for bad and doubtful debts or to the claim otherwise computed by the assessee in terms of section 36(1)(viia) of the Act – Held that:- Following the decision in Shri Mahalaxmi Co-op Bank Ltd. Versus ITO, Ward 1 (1), Kolhapur [2014 (1) TMI 1366 - ITAT PUNE] Creation of provision for bad and doubtful debts equal to the amount mentioned in section 36(1)(viia) is a must for claiming deduction - As the assessee has not made a Provision for bad and doubtful debts in the books of account equal to the amount of deduction sought to be claimed under Section 36(1)(viia) of the Act, the lower authorities were justified in restricting the deduction, being the amount of Provision actually made in the books of account - Decided against assessee. Applicability of section 115JB – MAT provisions – Held that:- Following the decision in M/s. Canara Bank Versus Commissioner of Income-tax (LTU), Bangalore [2012 (11) TMI 139 - ITAT BANGALORE] - section 115JB of the Act is not applicable to a banking company - the amendment does not negate the ratio of the precedents, which hold the field so far as the present AY is concerned - assessee, being a banking company, does not fall within the purview of section 115JB of the Act – Decided in favour of assessee. Deduction on amortization of public issue expenses u/s 35D – Held that:- The alternative plea of the assessee deserves to be considered for the purposes of determining the quantum of amount disallowable with respect to the assessee's claim for amortization of expenditure u/s 35D of the Act – thus, the matter is remitted back to the AO to re-compute the net expenditure incurred on public issue carried out by the assessee, and the disallowance shall be limited to such 'net' expenditure – Decided in favour of assessee. Invocation of section 14A – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that following the decision The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - since the interest-free funds available with the assessee were in excess of the investments which yielded the exempt income - therefore, no interest could be disallowed by invoking section 14A of the Act - the contention of the assessee is accepted that if the investments which have yielded the tax-free income are out of interest-free funds generated or available with it then no part of interest expenditure can be said to have been incurred in relation to earning of such exempt income for the purposes of section 14A of the Act - the quantification of such expenditure done by the assessee is ₹ 3,76,53,360/-, which is the amount disallowed by the CIT(A) u/s 14A of the Act – there is no reason to discard the working which the assessee itself furnished and accordingly in so far as the disallowance of ₹ 3,76,53,360/- u/s 14A of the Act made by the CIT(A) is concerned, the same is affirmed – Decided partly in favour of assessee. Application of Rule 8D(2)(iii) – Held that:- There was no justification in the assertions of the assessee that no expenses have been incurred to earn the tax-free incomes - the factum of the Treasury department of the assessee carrying out such activities itself shows that expenses in the nature of salaries, overheads, etc. are being incurred in relation to earning of the exempt incomes - The quantification of such expenditure done by the AO does not require any interference – Decided against revenue.
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2014 (10) TMI 209
Unexplained investment in land - Search u/s 132 – Held that:- The lands were in the name of Shri S. Vijaya Kumar stated to be an employee of the assessee, but, it is also a fact that the investment in land was not only recorded in the books of assessee but also reflected in the balance sheet furnished along with the return of income filed in response to notice u/s 153A of the Act - AO without properly examining the books of account and the balance sheet has added the amount by simply observing that the amount has not been reflected in the return of income, which is not correct - CIT(A) sustained the addition by simply observing that the assessee has updated the books of account by incorporating such investment after search - the conclusion drawn by the AO as well as the CIT(A) are without any basis - as the assessee has reflected the investment in its books of account as well as in the balance sheet furnished along with the return of income, there is no reason to consider the investment made as unexplained – the AO is directed to delete the addition of ₹ 2,10,800 – Decided in favour of assessee. Addition treated as gifts – Held that:- The gifs consist of small amounts received from close relatives of the assessee - all the donors have furnished affidavits not only confirming the gifts but have also furnished their source of income from agriculture with supporting evidences like Pahani and certificate from the VRO - It cannot also be denied that assessee has shown gifts in the original return filed by him prior to the date of search - the addition made by observing that the creditworthiness of the donors have not been established appears to be merely on presumption and surmises - As the assessee has established the identity of the donors and their source of income as well as genuineness of transaction, which in any case has not been disputed by the CIT(A), addition of the gifts amounting to ₹ 1,99,227/- is not justified – Decided in favour of assessee. Addition towards unaccounted investment – Held that:- While the AO has added the amount in question with the remark that the assessee has not reflected them in the returns filed, the CIT(A) sustained part of the addition on the ground that though the assessee has reflected the investments in the books of account but the lands have been purchased by third parties – the observation of the AO is without any basis as Assessee has not only reflected the investments in its books of account but has also shown it in the balance sheet accompanying the return of income - The finding of the CIT(A) is also on the basis of presumptions and surmises considering the fact that merely because the investments have been made in the name of some other persons, the additions have been made by totally ignoring the fact that the assessee recorded the investments in its books of account as well as balance sheet furnished along with the return - the investments cannot be considered as unexplained – Decided in favour of assessee. Addition of ₹ 10 lakhs – Genuineness of transaction not proved - Held that:- The expenditure claimed by the assessee on various dates towards Gajalakshmi Nagar – II project, on account of gravel purchase, JCB hire charges, labour charges, land development charges, watering charges etc. - the entire expenditure has been incurred in cash and supported by only self-made vouchers - the expenditure has been recorded in the books of account, that cannot by itself prove the fact that the entire expenditure is genuine - it is incurred in cash and being supported by only self-made vouchers, some amount of inflation in the expenditure cannot be ruled out - search assessment u/s 153A of the Act cannot be confined to seized material alone - AO while making search assessment in a case where assessment has not been made in regular course can consider all aspects of income accruing to the assessee during the relevant AY - the assessee is required to prove the genuineness of the expenditure - as the assessee has not proved the genuineness of the entire expenditure claimed to have been incurred, the order passed by the CIT(A) in restricting the disallowance to 10% of the total expenditure debited to P&L A/c is reasonable – Decided against assessee. Addition of unexplained investment – Held that:- The document has not been signed by the assessee. Similarly, assessee has submitted the affidavits of original land owners as well as vendees before the AO as well as the CIT(A) - Original land owners in their affidavits have clearly stated that they have neither sold the property to the assessee nor received any consideration from the assessee in that regard - These evidences have not been controverted by bringing any other evidence on record either by the AO or by the CIT(A) - seized document raises a presumption with regard to the authenticity of the contents thereof in terms of section 132(4A) of the Act - assessee can prove the contents of such document incorrect by producing necessary evidence - apart from unregistered sale agreement (not signed by the assessee) there are no other evidence corroborating the fact that the assessee has in fact purchased the land or has paid any consideration to the original land owners - the statement of the vendors before the departmental authorities, affidavits filed by the vendors and vendees, copies of the registered sale deeds on actual sale of the property clearly establish that the unregistered agreement of sale found during search was never acted upon, nor assessee paid any consideration to the vendors - no addition can be made at the hands of the assessee purely relying upon unregistered sale agreement when the fact remains that land was ultimately sold to some other persons by the original land owners - addition made at the hands of the assessee cannot be sustained – Decided in favour of assessee. Unexplained investment in land – Held that:- The entire addition has been made solely relying upon the document found at the time of search indicating the sale of property to the assessee and his wife Smt. K.A. Aruna Kumari - the document does not bear any signature of the assessee and his wife - the vendors of the property in course of post search proceeding when confronted with the seized material categorically stated before the ADIT that they have not sold the property to the assessee nor received any consideration from the assessee - solely relying upon unregistered document, which is also not signed by the assessee and his wife, addition cannot be made at the assessee’s hands - the AO has not brought any corroborative material on record to prove that the transaction as mentioned in unregistered agreement of sale has fructified and the consideration referred to therein was actually paid by the assessee - since there are material to indicate that the consideration mentioned in the unregistered and unsigned document was actually paid by the assessee to land owners and when the materials on record otherwise prove that the land was sold to persons other than the assessee and his wife, no addition can be made at the hands of the assessee by solely relying upon the unregistered sale agreement – Decided in favour of assessee. Partial addition made – Held that:- The assessee has explained that the amount was received on behalf of Shri K. Harinath Reddy as GPA Holder towards sale of site on 23/08/2007 and the same were passed on to the Shri Harinath Reddy on 08/04/2007 - there is a credit entry of ₹ 36 lakhs with the noting that the amount was received on behalf of Shri Harinath Reddy being a GPA holder - assessee has referred to the returns of income of Shri K.Gopinath Reddy and K. Vishwanatha Reddy to substantiate that sale of land has been shown by the concerned persons by declaring capital gain - amount of ₹ 36 lakhs has been paid back to Shri K. Harinath Reddy - only because assessee has shown liability of ₹ 36 lakhs it cannot be inferred that the amount is the unexplained cash credit - This could have been established had Shri Harinath Reddy been examined - No enquiry has been taken up with shri Harinath Reddy to ascertain whether the assessee had repaid the amount of ₹ 36 lakhs as claimed by the assessee –the matter is to be remitted back to the AO for fresh consideration – Decided in favour of assessee. Amount of fictitious gifts deleted – Held that:- The AO has given absolutely no reason why he considers gifts to be unexplained inspite of the fact that the assessee has furnished confirmations/affidavits along with other details like land holding of the donors their source of income etc. - gifts are of small amounts of ₹ 30,000/- to ₹ 45,000/- from different donors and most of them are close relatives of the assessee - when the assessee has established the identity of the donors, their source of income and the donors have also confirmed of having gifted the amounts to the assessee, it is unreasonable on the part of the AO to ignore the evidences brought on record and make addition by treating the gifts as unexplained - the CIT(A) was justified in deleting the addition made by the AO – Decided against revenue. Unexplained investment in land – Held that:- CIT(A) rightly observed that the AO without properly verifying the facts has made the addition in a summary manner - the assessee has reflected the investment made in purchase of land in his books of account along with registration charges, the conclusion drawn by the AO that the assessee has not disclosed the investment in the return of income is without any basis - this fact has not been controverted by the department by bringing any other material on record – the order of the CIT(A) is upheld – Decided against revenue. Addition in construction of building – Held that:- As decided in assessee’s own case for the earlier year, it has been held that the seized material clearly indicates that the expenditure incurred was towards construction of assessee’s own house as well as the house of Shri V. Mallesh - even as per the seized material, it cannot be said that the assessee has invested more than ₹ 27,40,957/- as disclosed in the return of income for the AY 2003-04 and 2004-05 - the valuation made by the DVO also gives credence to the fact that the cost of construction disclosed by the assessee at ₹ 27,40,957/- is correct considering the fact that the DVO has arrived at the cost of construction at ₹ 30.04 lakhs - CIT(A) was justified in deleting the addition of ₹ 5,01,069/- as well as the amount of ₹ 2,63,043/- being the difference between the valuation as per the assessee and cost of construction determined by the DVO as the difference is negligible, which can be due to the fact of self supervision and procurement of materials by the assessee at lower cost – Decided against revenue. Addition of unexplained investment – Held that:- CIT(A) rightly noted that the document in question on the basis of which AO has made the addition is an unregistered document and not signed by the assessee - original land owners in the post search proceedings have categorically denied of having sold the property to the assessee or receiving any consideration towards proposed sale of the property - property in question has ultimately found to have been sold to various other persons and not the assessee and Smt. K. Aruna Kumari - solely relying upon the seized document marked as Annexure A/KCRN/05 addition could not have been made by the AO when the evidences brought on record clearly indicate that the sale was neither effected to the assessee nor payment has been made by the assessee - In absence of any other material brought on record to establish the fact that unregistered sale agreement was acted upon or the money actually changed hand it is not possible to sustain the addition – the order of the CIT(A) is upheld – Decided against revenue.
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2014 (10) TMI 208
Reopening of assessment u/s 148 – Reason to believe - Held that:- The assessee is a pharmaceutical drug manufacturing company - The company started manufacturing at Khatraj from 15-09-1997 - the assessee claimed deduction u/s. 80IB(10) of the Act in AY 2003-04, 2004-05 and 2005-06 which was allowed by the AO in the assessment orders passed u/s. 143(3) of the Act - Thereafter, the AO reopened the assessment for all the three years by issuing notice u/s. 148 of the Act on the ground that as per section 11 of the Industrial (Development & Regulation) Act, 1951 as amended vide SO 857(E) dated 10.12.1999, Small Scale Undertaking is an industrial undertaking in which investment in fixed assets in plant and machinery does not exceed ₹ 1 crore - the "alleged reasons to believe" were formed on the basis of balance sheet filed along with the return of income by the assessee which was available with the AO at the time of framing of the original assessment - It cannot be held that this material was not available – relying upon Parashuram Pottery Works Co. Ltd. Vs. ITO [1976 (11) TMI 1 - SUPREME Court] - in the alleged reasons as recorded, no material external to the record which was available has been brought on record for issuance of notice u/s. 148 of the Act - the issuance of notice u/s 148 for AY 2003-04, 2004-05 and 2005-06 cannot be upheld and are to be set aside – Decided in favour of assessee.
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2014 (10) TMI 207
Jurisdiction of the CIT u/s 263 – Deduction u/s 10AA - Whether the view adopted by the AO in the assessment order to the effect that such interest income forms part of profit and gains of business of SEZ unit and therefore qualifies for deduction u/s 10AA is a possible view or not – Held that:- The assessee besides others also has a SEZ Unit in which it is engaged in the business of re-export of bullion, import of bullion etc. - the income derived from business of SEZ Unit qualifies for deduction u/s 10AA of the Act - In the assessment framed u/s 143(3) of the Act by the AO for both the years allowed deduction u/s 10AA of the Act to the assessee as claimed by the assessee - the assessee imports bullion on credit of 360/90 days - for the purpose of above imports, the assessee has to open the Letter of Credit with bank and consequently the assessee is required to make FDRs with bank which gives right to interest income in the hands of the assessee - The assessee exports the imported bullion on immediate payment basis. As decided in assessee’s own case for the earlier assessment year, it has been held the interest income which were earned by the assessee were from fixed deposit receipts with bank which were made by the assessee in the course of its trading business of import for the purposes of re-export, for obtaining Letter of Credit for its purchases - the relevant fixed deposit receipts on which interest were earned were business assets of the assessee acquired in the course and for the purposes of its business - The fixed deposit receipts being business assets, there was no reason as to why interest income earned from such fixed deposit receipts could not be assessed as business income of the assessee. The view adopted by the Assessing Officer showing interest income under consideration is business income cannot be held as not a possible view and therefore, the Commissioner of Income Tax was not justified in interfering with the said view in the impugned order. Exemption u/s 10AA - exclusion of interest income - Held that:- The specific provision like explanation (baa) of section 80HHC which provides for exclusion of 90% of interest income from the profits of business to arrive at the profits of the business has not been provided by the legislature in section 10AA of the Act – in Sm. Tarulata Shyam Vs. CIT [1977 (4) TMI 3 - SUPREME Court] - there is no scope for importing in the statute words which are not there – there is no provision in the statute on the basis of which it can be held that the interest income which forms part of the profits of the business is to be excluded for arriving at profits derived from “export of articles or things or services” as prescribed under sub-section (7) of section 10AA of the Act - the CIT was not justified in interfering with the same in exercising the power u/s 263 of the Act – the order of the CIT is set aside – Decided in favour of assessee.
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Customs
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2014 (10) TMI 230
Seizure of goods - Unlawful import of goods - non production of relevant documents - Held that:- It is a proved case of finding of Chinese silk in Maruti van as well as in the premises of shri Sanjay Maheswari when the live link showing origin and movement thereof through the transporter Prakash Transport Company from Nepal supplied by Shri Anil Jatia to shri M.P. Goenka was on record and that could not be rebutted. Arrival of such goods in India through Prakash Transport Co. and release thereof from that transporter on instructions of shri M.P. Goenka through his person shri Monu Haldar also could not be ruled out by the appellants - None of the appellants claimed the goods. The connection among shri Anil Jatia, shri M.P. Goenka and shri Sanjay Maheswari brought out a close proximity to the deal of the Chinese origin silk found in Maruti van as well as in the premises of shri Sanjay Maheswari. When they did not claim the ownership of the goods, their plea that the goods were not of Chinese origin is of no avail to them since Revenue established live link between shri M.P. Goenka and shri Anil Jatia as to the movement and deal of the offending goods came from Nepal to India for delivery to shri Sanjay Maheswari - there is no necessity to deal with further arguments of the appellants as to the retraction of confessional statement and such cogent evidence calls for dismissal of both appeals - Decided against assessee.
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2014 (10) TMI 229
Classification of goods - import of Plastic Waste and Scrap - Classification under SH 3915.90 of Customs Tariff or under SG 5702.32 of the Customs Tariff Act 1975 - revenue contended that, the test result showed that the import goods were ‘Carpet of which pile are made of Polyamide Yarn. These yarns are woven with a woven based fabric made of polypropylene yarn and adhesioned on woven fabric of jute/polypropylene. It is not a plastic scrap. - Held that:- the Dy Chief Chemist has categorically stated that the product imported would fall under 5702.32 which itself indicates that the Dy Chief Chemist’s report is travelling beyond the duty and cannot be relied upon by the Adjudicating Authority or the First Appellate Authority to classify the product imported by the appellant. The appellant had produced certificate from the exporter which indicates that the material shipped to the main appellant is post processed industrial material from manufacturing process which is rejected. Such a certificate is accepted by the First Appellate Authority to come to a conclusion that the Carpet is sent to appellant for conversion into granule form for reuse in USA. If the certificate given by the exporter is accepted and the appellant being a unit situated in a SEZ, the question of duty liability, if any, may not arise. LOP permits the appellant to import various plastic materials for conversion and re-exporting. The said LOP also indicates that they can import any other category of plastic/wastes like flake, powders, pieces of irregular sheets. - the basic material of the so called carpet is nothing but plastic and the said wastes and scrap is consumed by the appellant for crushing them into granules for re-exporting. In our view, the goods which are imported cannot be classified under 5702.32 but can be classified under Chapter 3915.00 only. - Decided in favour of assessee.
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2014 (10) TMI 228
Condonation of delay - Whether the Tribunal was justified in declining to condone the delay of 159 days in filing the appeal against the order-in-original dated 5-6-2009 is the question raised in this appeal - Held that:- the appeal was filed on 23-2-2010 with an application seeking condonation of delay. By the impugned order dated 26-8-2010, the Tribunal has declined to condone the delay of 159 days on the ground that the reasons given for the delay are not satisfactory. While we agree with the decision of the Tribunal that the reasons for the delay given by the appellant are not satisfactory, in our opinion, in the facts of the present case, the interests of justice would be met if the delay is condoned subject to payment of costs. Accordingly, the impugned order dated 26-8-2011 is set aside [2011 (8) TMI 875 - CESTAT, MUMBAI]. The delay is condoned subject to payment of costs - Decided partly in favour of assessee.
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2014 (10) TMI 227
Whether the bunkers containing oil were to be treated as part of the vessel’s machinery so as to attract Entry No. 89.08 of the Schedule to the Customs Tariff Act, 1975 - Held that:- Tribunal after appreciation of the evidence on record has rightly arrived at the conclusion that the fuel and oil contained in the engine room tanks form part of the vessel’s machinery and engine and as such are classifiable along with the vessel under Heading No. 89.08. It was further pointed out that the Tribunal, while allowing the appeal, has placed reliance on its earlier decision in the case of Priya Holding (P) Ltd. v. Commissioner of Customs, Ahmedabad now reported in [2002 (12) TMI 431 - CEGAT, NEW DELHI], against which the Revenue had made a reference application before this Court being CECGR No. 14 of 2004 [2012 (11) TMI 532 - Gujarat High Court] whereby this Court, by a detailed order has answered the question in the affirmative - Decided against Revenue.
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Service Tax
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2014 (10) TMI 248
CENVAT credit - outdoor catering service - establishments which do not come under the purview of Factories Act, 1948 - Held that:- In the Ultratech Cement case (2010 (10) TMI 13 - BOMBAY HIGH COURT), relied upon by the Commissioner, the High Court never stated that catering service has to be rendered to factories governed by the Factories Act, 1948 so as to be eligible for the benefit of CENVAT credit. The High Court in that case only observed that there was also a statutory requirement of providing catering services to the employees under the Factories Act. This does not mean that in respect of other establishments which do not come under the purview of Factories Act, 1948, CENVAT credit can be denied. During the impugned period, there is no restriction placed in the CENVAT Credit Rules for availmentof CENVAT credit in respect of outdoor catering services. So long as the cost incurred is not recovered from the employees, the benefit of CENVAT credit has to be extended. In this view of the matter, I do not find any merit in the view taken by the adjudicating authority. Thus the appellant has made out a strong case for grant of stay - Stay granted.
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2014 (10) TMI 247
Business Auxiliary Service - Suppression of facts - Interest and penalties under Sections 76, 77 and 78 - Extended period of limitation - Held that:- Scope of the activity covered under the agreement entered into by the appellants with the ICICI HFL clearly stated that they were appointed for ‘marketing of and sourcing customers, for ICICI HFL’s products’. This does not leave any scope for any ambiguity/confusion as regards its coverage under the Business Auxiliary Service which specifically includes such promotion and marketing in its definition. Similarly they could not have been any confusion regarding the appellants being a commercial concern as they were clearly engaged in commercial activity. In these circumstances, when there was no ambiguity or confusion, the contention of bonafide belief advanced by the appellants is totally hollow and untenable. The appellants have not given any basis/ground for entertaining such belief. They have not shown as to how such a belief on their part could arise. Merely uttering the words 'bonafide belief' is not enough for its quasi judicial acceptance. The appellants have to show the basis/grounds for entertaining such belief. As is evident, the appellants have not given even a semblance of any basis/ground based on which such a ‘bonafide belief’ could arise on their part - Decided against assessee.
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2014 (10) TMI 246
Recovery of Refund of service tax - Revenue contended that refund in respect of SEZ operation was sanctioned erroneously - Held that:- Notification No. 9/2009, we find that according to Notification No. 9/2009, the exemption which is implemented in the form of cash refund of taxes paid is available when services are received and used ‘in relation to’ the authorized operations. The question that arises is whether the factory building can be considered as one constructed in relation to authorized operations. Since what was being constructed was factory building there cannot be any doubt, as regards service tax benefit used in construction of building. First of all in the ‘input service’ definition itself, services used in relation to construction of a factory building are considered as input services and further it cannot be said that services used in relation to factory building are not used in relation to authorized operation in view of the observation that building as such has to be considered as used in relation to authorized operations. Prima facie we find that appellant has a strong case on merits and therefore there will be waiver of pre-deposit and stay against recovery for a period of 180 days from the date of this order - Stay granted.
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2014 (10) TMI 245
Waiver of pre deposit - Levy of tax on various services provided - Held that:- As regards the service tax on airline commission, incentives and CCX fees, the appellant had already made a pre-deposit of ₹ 71 lakhs in terms of earlier order. As regards the freight rebate and BBF, the matter needs detailed examination in the content of the revised guidelines issued by the CBEC with effect from 2012. Further, there appears to be merit in the contention of the appellant that these demands are time barred. Thus, the appellant has made out a case for grant of stay. Accordingly, we grant unconditional waiver from pre-deposit of dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal - Stay granted.
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2014 (10) TMI 244
Waiver of pre deposit - Business Auxiliary Services, Industrial and Commercial Services, Works Contract Services, Erection, Commissioning and Installation Services, Intellectual Property Services - Held that:- It is observed that the issues raised by both sides are contentious ones which can be gone into at the time of final hearing. Both sides have relied upon several judgments in support of their contentions. As an amount of ₹ 1,17,36,640/- has been already paid by the appellant, the same is considered to be sufficient deposit for the purpose of granting stay on the remaining amount till the disposal of this appeal - Stay granted.
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2014 (10) TMI 243
CENVAT Credit - Video Tape Production Service - Held that:- appellant filed revised ST-3 returns availing CENVAT credit of the service paid on telecast fee which was not accepted by the adjudicating authority. The Tribunal by note order directed the learned AR for Revenue to verify the payment of tax through CENVAT credit. In this context, the learned AR placed a letter dated 29.11.2013 from the Assistant Commissioner, Chennai - Service Tax - IV Division. In the said letter, it is contended that the service tax calculation made by the appellant with reference to the demand raised in the show-cause notice is found to be tallied and the same was discharged by way of utilization of the CENVAT credit paid on the telecast fee - Matter remanded back - Decided in favour of assessee.
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2014 (10) TMI 242
Sale of sim cards - Whether the appellant herein is required to pay service tax only on the activation charges or has to pay the service tax on the entire amount collected - Held that:- service tax liability on the cost of the sim cards has been fastened on the appellant for the period April 2004 to March 2006 with interest and penalties. On the perusal of the judgment of the Apex Court in the case of Idea Mobile Communications Limited (2011 (8) TMI 3 - SUPREME COURT OF INDIA), we find that the issue is now squarely settled against the appellant herein - demand of service tax with interest confirmed - penalties set aside - Decided partly in favour of assessee.
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2014 (10) TMI 241
Waiver of pre deposit - services provided in a SEZ by sub-contractor - benefit of notification no.9/2009-ST, dt. 03.03.2009 as amended by notification no.15/2009-ST, dt. 20.05.2009 - Held that:- Appellant is a sub-contractor and the main contractor has provided services in relation to the contract executed in a special economic zone. We also find that the main contractor has given a certificate indicating that the appellant is a sub-contractor and has given the services which are consumed by the main contractor in a special economic zone. On perusal of notification no.09/2009-ST, we find that the said notification grants exemption to the services rendered in a special economic zone and does not distinguish between a contractor and sub-contractor. When there is no dispute as to the fact that the services are rendered to a unit in special economic zone, we find that appellant has made out a prima facie case of the waiver of the pre-deposit of the amounts involved - Stay granted.
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Central Excise
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2014 (10) TMI 239
Waiver of pre deposit - Seizure of documents - Misdeclaration of goods - Held that:- applicant made clearances of cheese yarn in the guise of Plain Reel Hank yarn under the parallel invoices. It is noted that the number and date of the parallel invoices were also recorded in the annexure to the show cause noted. We find that the applicant removed dutiable yarn on cheese and cones without payment of duty in the guise of exempted plain reel hank yarn. Hence, it is required to examine the facts in detail at the time of appeal hearing. applicant failed to make out a prima facie case for waiver of predeposit of entire amount of duty along with interest and penalty - Partial stay granted.
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2014 (10) TMI 238
CENVAT Credit - applicant supplied raw materials to their job worker who manufactured Powerlite Combipack and Ridesect Challenge CDK and cleared the same on payment of duty to the applicant - applicant availed CENVAT credit on the duty paid by Job worker - Held that:- Applicant availed CENVAT credit on Combipack / CKD and after certain process cleared the same on payment of duty. It is noticed that the applicant cleared the goods on payment of duty in domestic market as well as for export. Prima facie, we find that the applicant paid the duty at the time of clearance of the goods. The Hon’ble Supreme Court in the case of CCE Vs. Narmada Chematur Pharmaceuticals Ltd. - [2004 (12) TMI 93 - SUPREME COURT OF INDIA] held that when amount of CENVAT credit wrongly availed is exactly equivalent to the amount of excise duty paid by not availing the exemption, the consequence is revenue neutral, hence demand of such wrong availment of credit has been rightly quashed by the Tribunal. In the present case, it is contended that the applicant paid duty of the same amount of CENVAT credit availed by them, at the time of clearance of goods from their premises and it is a case of revenue neutrality. We find that the applicant has made out a prima facie case for waiver of predeposit of the entire dues. - Stay granted.
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2014 (10) TMI 237
Waiver of pre-deposit of duty - SSI exemption Notification No.8/2007-CE, dated 01.03.2007 - Denial of CENVAT Credit - goods were cleared under the brand name of other person - Held that:- Adjudicating authority accepted that the inputs were received in their factory. But, the Cenvat credit was denied on the ground that the applicant failed to produce the proper records to show that the inputs were used in the manufacture of the final product. It is seen that after taking into consideration of the cum-duty benefit, the demand would be ₹ 69,72,687/-. The applicant also contended the demand is barred by limitation. We are not impressed with the argument of the Counsel for the applicant that the demand is barred by limitation. We find that since 2000, the applicant was clearing the goods under the brand name of another person and paying duty. In 2007, the applicant opted SSI exemption and suppressed the use of brand name to the Department. applicant is liable to pay duty of about ₹ 69 lakhs and out of this, they already deposited an amount of ₹ 12,95,239/-. We find that there is a dispute of the use of the inputs - Conditional stay granted.
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2014 (10) TMI 236
Condonation of delay - delay of 199 days - Held that:- Main ground for the Revenue is that the Commissioners note ‘accepted’ was mis-construed by the concerned person as acceptance of the order-in-appeal, whereas the Commissioner has accepted the recommendation of the officers for filing the appeal against the impugned order-in-appeal. Though we find that neither the name of the officer responsible for filing the appeal nor his explanation stand produced on record, but keeping in view that the appellant is a Government department, we accept the said explanation offered by the Revenue as “sufficient cause” for condoning the delay - stay petition filed by the Revenue has become infructuous as respondent has received the consequential refund arising out of the impugned order-in-appeal - Condonation denied.
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2014 (10) TMI 235
Waiver of pre deposit - ineligible Cenvat credit availed by the appellant - Held that:- On perusal of the said stay order and the records, we find that the appellant has made out a case for the waiver of the pre-deposit of the amounts involved, as there is no condition in Notification No. 2/2008 which restricts the application of the said notification in respect of the goods manufactured and cleared under the Notification No. 4/2006-C.E.; we also find strong force in the contention raised by the ld. Counsel that the order of this Bench in the case of Arvind Ltd. & Arvind Polycot [2011 (11) TMI 557 - CESTAT AHMEDABAD] is essentially on the same issue but the said stay order is in respect of textile and products wherein similar issue was involved. We are of the view that the appellant has made out a prima facie strong case for the waiver of the pre-deposit of the amounts involved. Application for waiver of the pre-deposit of the amounts involved is allowed and recovery thereof stayed till the disposal of the appeal - Stay granted.
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2014 (10) TMI 234
Imposition of penalty - appellant did not follow the procedures prescribed for procurement of motor spirit for blending with ethyl alcohol - Held that:- Rule 25 provides for imposition of penalty in certain situations specified therein and subject to the provisions Section 11AC of the Central Excise Act, 1944. In the present case, by dropping the demand for Central Excise duty, it is accepted that the assessee has discharged duty liability correctly. If that is so, question of violating any provisions of law would not arise at all - Tribunal’s Larger Bench in the case of Godrej Soaps v. Commissioner of Central Excise, Mumbai [2004 (10) TMI 112 - CESTAT, MUMBAI] has held that when the demand gets dropped on any account, penal provisions cannot survive against the assessee, and for the same reason, confiscation of the goods, which is penal nature, cannot be upheld. Similar views have been taken in various judicial pronouncements relied upon by the counsel for the appellant. Therefore, we are of the view that penalty under Rule 25 of the Central Excise Rules, 2002 cannot be imposed on the appellant for the alleged violation of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 - Decided in favour of assessee.
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2014 (10) TMI 233
Condonation of delay - delay of 265 days in filing the appeal - Held that:- admitted two partners were looking after the firm even if we ignore the DR submission that it was actually the husband of one of the partners who were running the factory. Even if we accept that one of the partners was not in a position to act, admittedly the other partner was. It has not been shown to us that Mrs. Shikka Agarwal was continuously on bed throughout her pregnancy period and was in such a bad shape so as not to take steps for filing of the appeal - Mrs. Sikha Agarwal gave birth to child in December, 2012 where appeal stands filed in June, 2013 that is almost after six months after the delivery. The appellant’s plea that mother was required to look after the child so as not to take steps to file the same in time cannot be held to be sufficient and justifiable reasons. We find the delay to be huge delay. - Condonation denied.
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2014 (10) TMI 232
Benefit of Cenvat credit of duty paid - Non receipts of inputs - Held that:- Commissioner has scrutinized the appeals records and found that the inputs received under the cover of invoice No. 13 and 14 both dated 5-5-2004 were entered in the RG 1 part 23A register and were issued for use either on the very same day or on the next date. However, he has observed that since the debit note for the lower quality goods was issued by the appellants, after a period of 4 months from the date of receipt and use of the inputs in the factory, and inasmuch as the raw materials received by the appellants were used in the factory without any complaint about the quality and as the appellant never lodged written complaint with the supplier, it has to be held that he has not received the inputs - no inputs were received by the appellant, has not been passed on any concrete evidence. There is nothing on record to show that the appellant has not received the goods. In fact the appellants have shown the receipt of the goods in their statutory RG 1 part 23A documents and has also shown the use of the same in the manufacture of final product and the final product stand cleared by them on payment of duty. As such, I find no merits in the Revenue’s stand that the appellant’s has not received the inputs. Accordingly, the impugned order is set aside - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (10) TMI 240
Seizure of goods - Goods released on security - Imposition of penalty - Held that:- it was obligatory on the part of the assessing officer, at the time of assessment, to establish that, in fact, the driver had stated that the goods were coming from Muzaffarnagar in order to prevail upon the documents, which suggested that the goods were coming from Roorkee. That having not been done, the assessing officer could not impose penalty. There is, therefore, no scope of interference. - Decided against Revenue.
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Indian Laws
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2014 (10) TMI 231
Levy of penalty for delay in providing information under RTI Act - Held that:- Main contention of the appellant is that the information was provided to Shri Sharan in July, 2012 whereas the appellant was provided information on the same subject matter in June, 2013 - Commission is of the view that the CPIO has prima facie caused a delay of more than 100 days in providing information to the appellant. A separate show cause notice under Section 20(1) of the RTI Act would be issued to the CPIO asking him to show cause why a penalty of ₹ 25,000/- should not be imposed upon him - Decided in favour of appellant.
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