TMI Tax Updates - e-Newsletter
November 11, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
TMI SMS
Highlights / Catch Notes
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Income Tax:
The profits of the Sec.10AA unit of the Assessee should be excluded for the purpose of computing book profits u/s.115JB of the Act from the profit as per Profit and Loss account referred to in that section - AT
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Income Tax:
There can be mixed objects of religious and charitable nature - if the trusts are partly religious and partly charitable, so long as no part of the income or corpus can be utilised for a purpose which is not either charitable or religious, exemption under s. 11(1)(a) will be applicable to the assessee - AT
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Income Tax:
Disallowance of purchase of consumable goods, i.e., cotton, gauze and bandage, etc. - ingenuine and unverifiable purchases - the books of account being not rejected and consumption of cotton having comparatively decreased - AO directed to restrict the disallowance to 15 per cent. of purchases- AT
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Income Tax:
Revision u/s 263 - CIT has merely directed the Assessing Officer to make an elaborate inquiry. - revision is not valid - AT
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Income Tax:
Addition on account of benefit/perquisite u/s 2(24)(iv) - the interest free advance/loan to assessee from AHS also does not attract provisions of section 2(24)(iv) of the Act because this provision is only applicable to the cases wherein a company provides benefits/perquisites and this provision is not applicable in the case of partnership firm such as AHS. - AT
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Income Tax:
Disallowance u/s. 14A - There will definitely be an expenditure incurred towards administrative and management cost etc. towards planning, executing and maintaining these investments - AO has rightly invoked the provisions of section 14A read with Rule 8D(2)(iii) - AT
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Income Tax:
In making an assessment after rejecting books of accounts and results therefore, the Assessing Officer has to make an honest estimate and having done so he must take into account the past assessment records of the assessee but the Assessing Officer of the present case miserably failed in discharging his functions while framing assessments - AT
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Income Tax:
CBDT lays down an institutional mechanism to quickly resolve the taxpayers' grievances arising on account of high-pitched and unreasonable additions made by the Assessing Officers
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Customs:
100% EOU - DTA clearance of manufactured carpets to EPCG licence holders - the appellant have not fulfilled his obligation under the law. - the appellant had cleared the goods without ensuring that his customers submit themselves to the jurisdictional authorities and fulfill pre-clearance conditions. - duty is to be demanded from the appellant alone. - AT
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Customs:
Te goods exported by the Appellant declaring Alloy Steel Forging (Machined) for use of rings of Bearing and Gear Blank in their shipping bills, require further operation and such goods when not fit for being ready to use, would appropriately classifiable under tariff item No.732615 of Drawback Schedule - AT
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Customs:
Valuation of goods - Related person - it is established beyond doubt that the discounts offered are exclusive discounts only to the appellant who is 100% subsidiary of the principal company. Therefore, the appellant's contention that they are eligible for discount of upto 30% for the transfer price is not acceptable - AT
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Customs:
Relinquishment of title to the goods under Section 68 - the demand of duty in respect of time expired warehoused goods - Mere quoting of another Section in the show cause notice when the appropriate Section has also been quoted does not make the confirmation of interest and penalty illegal - demand of duty with interest and penalty confirmed - AT
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Customs:
Classification of proximity sensor / switching device - whether the product is classified under Chapter 85 or under Chapter 90 would be of no consequence inasmuch as the duty which is to be paid under both the Chapters is the same. - SC
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Customs:
Valuation - Inclusion of value of technical know how fees - all these services are post-importation and, therefore, could not be added to the value of the goods imported. - SC
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Customs:
Benefit of Notification No. 160/92-CUS dated 20.04.1992 - third party export - It is specifically taken note of by the Tribunal in the impugned judgment that the exports which were purportedly shown did not bear any such EPCG licence and, therefore, rightly rejected the contention of the assessee even on this aspect - SC
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Service Tax:
Works contract service - Payment of tax under Composition scheme without prior opting the scheme - it was never the appellant who opted to pay under works contract but the Revenue required them to pay the tax under the works contract. In such a scenario, the question of assessee exercising any option before discharging the tax under the category of works contract does not arise at all - AT
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Service Tax:
Business Auxiliary service - appellant has been given restricted money exchange agency by Thomas Cook India Ltd. (from the authorization they have received for engaging in money exchange). - undisputedly appellant are acting as an agent of Thomas Cook India Ltd. - appellant has no case on merits - AT
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Service Tax:
Import of services - reverse charge - payment of arrangement fees, underwriting fees, agency fees and legal fees as also out of pocket expenses - demand of service tax confirmed - penalty waived - AT
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Service Tax:
Waiver of penalties - Site formation & clearances, excavation and earth moving and demolition - Bonafide belief that service covered under supply of tangible goods service - entertainment of bonafide belief by the them is proper and they have made out a case for waiver of penalties by invoking Section 80. - AT
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Service Tax:
Cenvat credit - if services are utilised by the service provider Cenvat credit can be availed by such service provider and not any other assessee - Credit cannot be allowed - on merit decided against the assessee - however, demand set aside on the ground of period of limitation - AT
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Service Tax:
Denial of refund claim - refund of unutilized Cenvat credit of Service Tax - nexus with output services (export) - the refund can be allowed of credit accumulated in the past period and claimed in a subsequent quarter - AT
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Central Excise:
Reversal of CENVAT Credit - Rule 6 of CCR - prior to 1/4/2008 the 10% reversal is required to made on “price” of the goods and subsequent to 1/4/2008 it was amended and according to which 10% reversal was to be made on the “value” of the exempted goods. - AT
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Central Excise:
Refund of education cess - area based exemption - appellant is entitle for the refund of education cess and secondary and higher education cess paid on clearances of the goods under Notification No. 56/2002-CE. - AT
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Central Excise:
Failure to pay duty - Clandestine removal of goods - Penalty u/s 11AC - it is not a case of clandestine removal of goods; it is a case of delay in monthly payment of duty. - lower authority neither should have issued any show cause notice nor should have imposed penalty. - AT
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Central Excise:
Job work - if any duty liability that arises on the goods manufactured on job work basis under the said Notification, is to be demanded from the supplier of the raw material. - AT
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Central Excise:
Reversal of CENVAT Credit - provisions of Rule 6(3)(i) of the Cenvat Credit Rules, 2004 would not be applicable in the facts of this case for payment of amount equal to 5% for value of the waste product i.e. slag removed from the factory. - AT
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Central Excise:
Availment of CENVAT Credit - Capital goods - Jumbo electric /battery operated platform truck, hot metal transport vehicle, trailer assembly and ladle transfer car are specially designed for operational use inside the appellant's factory - credit allowed - AT
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Central Excise:
Denial of refund claim - Unjust enrichment - There is no prohibition/restriction in section 11B of the Act that credit note cannot be issued at a later date than the date of supply of the goods. In absence of any prohibition in the statute, denial of refund benefit to the appellant is contrary to the statutory mandates. - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (11) TMI 437
Addition on receipt of on-money - CIT(A) deleted the addition on the ground that there was no such admission by any of the directors regarding receipt of on-money. He had offered an amount of ₹ 1.91 crores only to cover up any omission, deficiencies and to maintain harmony with department - whether no documentary evidence was found during the course of search or post search enquiry evidencing receipt of on-money by the assessee company - Held that:- From the copy of the assessment order we find the basis of addition of ₹ 50 lakhs by the AO is merely on presumptions and surmises without any evidence whatsoever found during the course of search or post search enquiries that the assessee has infact received any such on-money. There is also no corresponding discussion in the assessment order regarding the statement of the owners admitting payment of on-money or any alleged incriminating evidence establishing such payments. Therefore, when there was no evidence found during the course of search or post search enquiries that the assessee has received any on-money on account of sale of flat No.A-202 and since neither the statement of the owners of flat No.A-202 was provided to the assessee nor the request of the assessee to cross examine the owners of flat No.A-202 was provided despite repeated request during the assessment proceedings and since the entire addition is based on presumptions and surmises, therefore, we do not find any infirmity in the order of the Ld.CIT(A) deleting the addition of ₹ 50 lakhs made by the AO on account of on-money received in respect of flat No. A-202. In this view of the matter and in view of the detailed reasoning given by the Ld.CIT(A) deleting the addition, the same is upheld and the grounds raised by the Revenue are dismissed. - Decided in favour of assessee.
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2015 (11) TMI 436
Eligibilty for claim of deduction u/s 80I & 80HH - Held that:- The distinction between the commercial production and trial run needs to be established. This distinction has to be proved by the assessee to the satisfaction of AO. We do not find any disparity on facts. Therefore, following the order of the ITAT Ahmedabad in earlier A.Y. on identical issues, we are of the considered view that the issue be restored to the file of AO for verification so as to whether there was only trial run of the machinery as claimed by the assessee or the assessee carried out any commercial production from the new unit during AY 1988-89, 1990-91. Ld. AO shall decide the issue in accordance with law after providing due opportunity of hearing to the assessee. He shall keep in mind the finding of ITAT in A.Ys. 1991-92, 1993-94 to 1995-96. Decided in favour of assessee for statistical purpose.
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2015 (11) TMI 435
Eligibility for exemption u/s.11 - Held that:- In the light of the examination of the facts of the case, we direct the Assessing Officer to redo the assessments in the following lines : (1) The tied-up grants received from the donor, Bread for the World, will be taken out of the computation of income from the income-side. (2) All the money spent under the tied-up programmes directed by the donor also will be taken out of the computation of income from the expense-side. (3) Any non-refundable credit balance in the personal account of Bread for the World will be treated as income in the year in which such non-refundable balance was ascertained. (4) The expenses incurred by the assessee for house construction, reclamation of land, non-formal education programme (other than covered by the tied-up grants) will be deducted as revenue expenses. Further, we make it clear that if the assessee already considered above grant as income of the assessee in its income and expenditure account, then the finding of the Tribunal above is not applicable. These appeals are remitted back to the file of the Commissioner of Income Tax (Appeals) for fresh consideration.
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2015 (11) TMI 434
Revision u/s 263 - direct the Assessing Officer to make fresh assessment after keeping in view the law relating to charity in provisos to section 2(15) of the Income-tax Act with effect from April 1, 2009 and issue of application of accumulated income of the assessment year 2004-05 within the stipulated period up to March 31, 2008 - Held that:- The Commissioner of Income-tax (Administration) cannot sit on the order of the Commissioner of Income-tax (Appeals) to decide the same issue differently. If the Department is having any grievance it would have filed an appeal before the higher forum. It is not appropriate to the Commissioner of Income-tax (Administration) to comment on the order of the Commissioner of Income-tax (Appeals). In our opinion, the issue relating to treating the income from kalyanamandapams, auditoriums, working hostel is subject-matter of appeal by the assessee before the Commissioner of Income-tax (Appeals). The said issue in assessment order merged with the order of the Commissioner of Income-tax (Appeals) as a whole hence the order was no more amenable to revisional jurisdiction of the Commissioner of Income- tax in view of Explanation (c) of section 263 of the Act and to that extent we are not agreeing with the order of the Commissioner of Income-tax passed under section 263 of the Act. It is mentioned in Form 10 that amount would be accumulated till the previous year ending March 31, 2008. The assessee was required to utilise the accumulated amount during such period. In case of non-application of the said accumulated sum for the purpose specified in Form 10, section 11(3) gets triggered and it would be taxed in the next year in which such period expired. But in this case, the Assessing Officer has failed to examine this aspect. There was no enquiry with regard to this issue. The order of the Assessing Officer is "erroneous" and "prejudicial to the interests of the Revenue" on the reason that there is wrong assumption of facts. We are inclined to agree with the findings of the Commissioner of Income-tax that the Assessing Officer is required to examine this issue afresh and gave a finding on this. Accordingly, to this extent, we confirm the order of the Commissioner of Income-tax. The issue of application of accumulated income of the assessment year 2004-05 within the stipulated period, i.e., up to March 31, 2008 is to be examined while framing the fresh assessment and decide fresh as directed by the Commissioner of Income-tax in his order. - Decided partly in favour of assessee for statistical purposes.
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2015 (11) TMI 433
Interest under Sections 234B and 234C - contention of the assessee was that the interest should have been charged with reference to the income tax return and not the assessed income and further that the assessee also challenged the inclusion of demand notice with reference to the same in the assessment order - Held that:- There is a clear distinction made by the Income Tax Act in the provisions of Section 234B and 234C: with regard to interest under Section 234B, the calculation is to be made not on the returned income but on the tax as may be finally assessed and determined by the assessment whereas under Section 234C, what is to be determined is tax due on the returned income for the purpose of calculation of the shortfall in the advance tax paid. It is further clear that both the provisions are in mandatory terms and would apply automatically, as has been held by the Apex Court also in the Bhagat Construction Company case (2015 (8) TMI 621 - SUPREME COURT), the moment there is any shortfall in deposit of advance tax in terms of the provisions of Sections 234B and 234C of the Act. Thus, we are of the view that the present matter is squarely covered in favour of the appellant revenue by the decision of the Supreme Court in Kalyan Kumar Ray's case (1991 (8) TMI 291 - SUPREME COURT ). The first substantial question of law is, accordingly, answered in favour of the Revenue and it is held that the Tribunal should have held the computation sheet and demand notice as integral parts of the assessment order and thus charging of the interest was legal and valid. With regard to second substantial question of law it is held that the decision in Ranchi Club Limited case ( 2000 (8) TMI 79 - SUPREME Court) would not be applicable in the present matter as the amendment of the provisions of Sections 234A and 234B of the Finance Act, 2001 having retrospective effect from 1.4.1989, has the effect of making chargeable interest mandatory and not directory. - Decided against assessee.
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2015 (11) TMI 432
Validity of assessment under section 158BC - non recording of proper reasons - Held that:- In the present case, the Tribunal after considering the entire material on record correctly noticed that since the Assessing officer of the searched person had not recorded any satisfaction as contemplated under section 158BD of the Act, the satisfaction recorded by the Assessing Officer of the assessee on 24.8.2001 before issuing notice under section 158BD on 4.8.2001 could not be said to be legally valid requisite satisfaction. - Decided in favour of assessee.
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2015 (11) TMI 431
Computation of deduction u/s.10A - profits derived from development and export of computer software - AO excluded telecommunication expenses and travelling expenses incurred in foreign currency - Held that:- As decided by the Hon’ble High Court of Karnataka in the case of Tata Elxsi (2011 (8) TMI 782 - KARNATAKA HIGH COURT) wherein it has been held that whatever is excluded from export turnover should also be excluded from the total turnover. Thus exclusion of the aforesaid items of expenditure both from the export turnover and also from the total turnover confirmed - Decided in favour of assessee. Set off loss of non-STPI units against the profits of the STPI units while computing deduction u/s.10A of the Act in respect of the profits of the STPI Units disallowed - Held that:- Assessee is eligible for deduction u/s. 10A of the Act in respect of the profits of STPI units without setting off the loss of non-STPI units. The relevant grounds of appeal of the revenue are accordingly dismissed. See CIT Vs. Yokogawa India Ltd. [2011 (8) TMI 845 - Karnataka High Court] - Decided in favour of assessee. Transfer pricing adjustment - Held that:- Bodhtree Consulting Ltd cannot be regarded as a comparable. In this regards, the fact that the assessee had itself proposed this company as comparable, in our opinion, should not be the basis on which the said company should be retained as a comparable, when factually it is shown that the said company is a software product company and not a software development services company. See Nethawk Networks case [2013 (11) TMI 967 - ITAT MUMBAI] Infosys Ltd be excluded from the list of comparable companies as it is not functionally comparable since it owns significant intangible and has huge revenues from software products. It is also seen that the break up of revenue from software services and software products is not available. KALS Information Systems Ltd. has been considered as not comparable to a pure software development services company, thus we hold that KALS Information Systems Ltd. should not be regarded as a comparable. Tata Elxsi Ltd. - in assessee’s own case for the A.Y. 2007-08, this company was not regarded as a comparable in its software development services as are functionally different from that of the assessee and hence they deserve to be deleted Persistent Systems Ltd. be excluded from the final list of comparable companies chosen by the TPO. as it is in product designing services and into software product development. We direct the AO / TPO to correctly work out the PLI of the final comparables after giving due adjustment for the working capital on actual basis. Related ground of the assessee is therefore allowed. Infosys BPO Ltd be excluded as a comparable as it is an established player who is not only a market leader but also a company employing sheer breadth in terms of economies of scale and diversity and geographical dispersion of customers. Accentia Technologies Ltd is directed to be excluded from the list of comparables as pursuant to the scheme of amalgamation of the erstwhile Asscent Infoserve Private Limited (subsidiary of the company) with the company as approved by the shareholder in the court convened meeting held on the 25th day of April, 2009 and subsequently sanctioned by the honorable high court of Judicature at Mumbai vide order dt 21st August 2009 and Honorable high court of Karnataka at Bangalore vide order dt 6th February 2010, the assets and liabilities of the erstwhile company was transferred and vested in the company with effect from 1st Apr, 2008 and the scheme has been given effect to in the accounts of the year. Cosmic Global Ltd. - assessee prayed for exclusion of this company as a comparable on the ground that this company makes abnormal profits. He was however unable to furnish any evidence to substantiate his claim. Accordingly, the prayer for rejection of this company as a comparable is rejected. Eclerx Services Ltd. should be excluded from the final list of comparables as this company was functionally different and was accordingly engaged in providing high end services involving specialized knowledge and domain expertise in its field Disallowance of full credit in respect of TDS and foreign tax credit - Held that:- If credit was not given for the reason that the same was not appearing in Form 26AS, than the CBDT Instruction No.5/2013 dated 8.7.2013 whereby it had directed all the Assessing Officers to verify the TDS certificate and not go only on the basis of entry in Form 26AS, will apply. We are of the view that it would be just and appropriate to direct the AO to verify the claim of assessee for credit of TDS and foreign tax paid in light of the CBDT Instruction referred to above. The AO will afford opportunity of being heard to the assessee in this regard.
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2015 (11) TMI 430
Deduction u/s.10AA - CIT(A) allowed the claim - Held that:- 10AA was brought in along with the consolidation and quick development of export initiatives in all the units, past, present and future, located in SEZ’s or which were in existence in all parts of India even prior to the promulgation of the SEZ Act, 2005. It is important to note that, for the first time, this section extended the exemption coverage to “Computer IT ES” besides computer software. The SEZ Act itself was brought into effect from 10th Febtruary, 2006, and was made applicable for and from AY 2006-07 and in respect of units set up and which commenced manufacture after 1.4.2005. It is to be noted that Sec.10AA was telescoped with the earlier Sec.10A, as that section was excluded for application from AY 2006-07 for the reason that Sec.10AA was made to continue to apply to the remaining span of the “left over” years of relief under Sec.10A and which would spill over to the remaining assessment year after 2006-07. The unit to claim benefits of SEZ Act, 2005 need not be physically located within an SEZ, especially an “existing unit” such as the Assessee. As already discussed under the scheme of coverage, the existing EPZ’s are included as SEZ’s and the definitions of the term “Entrepreneur” includes the unit recognized as such by the STP Director who has been equated with the “Development Commissioner” for this purpose. The Assessee’s license sets out three points. In addition the Directorate in charge of STPI, Kolkata, come within the EPZ/SEZ of Falta and this has also been confirmed in his letter dated 3.5.2011 that the Assessee’s unit is an existing unit and has all the necessary accreditations from the Ministry of Information Technology with regard to the setting up of the unit as per the licence issued to it. By notification F.No.114/10/2003 FTT, existing “Export Processing Zone” (EPZ) were to be renamed as “Special Economic Zone” (SEZ’s). we have already seen, Sec.10AA was telescoped with the earlier Sec.10A, as that section was excluded for application from AY 2006-07 for the reason that Sec.10AA was made to continue to apply to the remaining span of the “left over” years of relief under Sec.10A and which would spill over to the remaining assessment year after 2006-07. Moreover, section 4(1) of SEZ Act provides that an existing SEZ unit shall be deemed to have been notified and established in accordance with provisions of SEZ Act and the provisions of Special Economic Zones Act shall apply to such existing SEZ units. The above intent of the relevant statutory provisions also supports the conclusions which we have arrived at as above. The second reason given by the AO for denying the benefit of deduction u/s.10AA of the Act to the Assessee was that as per Sec.10AA(4)(i) of the Act the unit has to begin manufacture or produce articles or things or provide services during the previous year relevant to AY commencing on or after the 1st day of April, 2006 (i.e., financial year 2005-06 or any subsequent year) in any Specialized Economic Zone and that the Assessee had begun production of article or thing prior to 1.4.2006 and has been claiming exemption u/s.10A of the Act, the deduction u/s.10AA of the Act cannot be allowed to the Assessee will not apply to the Assessee as in view of our conclusion that the Assessee was an “existing unit”. The Assessee is already an existing unit. The deduction u/s.10AA of the Act is claimed for the period within 10 years contemplated by Sec.10AA of the Act even after considering the exemption already availed by the Assessee. Even M/S.Last Peak BPO Pvt.Ltd. had not availed Sec.10A deduction for period beyond 10 years before amalgamation with the Assessee. In such circumstances, the very basis of application of Sec.10AA(4)(ii) & (iii) of the Act is flawed. We are of the view that the objection of the AO in this regard is without any merit. The fifth objection of the AO that the Assessee did not operate from SEZ and therefore did not export goods from SEZ and derive income therefrom and therefore not entitled to deduction u/s.10AA of the Act, is not sustainable in view of our conclusion that the Assesssee was an “existing unit”. The sixth objection with regard to non-filing of Form No.56F is a valid objection. But on this ground the Assessee cannot be denied the benefit of deduction u/s.10AA of the Act. The non-furnishing of Form No.56F along with the return of income is not mandatory. The Assessee is directed to file the report in the prescribed form for AO’s consideration. The non-furnishing of Form No.3CEB report in respect of international Transaction which the Assessee had with it’s Associated Enterprise in terms of Sec.92 of the Act, has nothing to do with allowing deduction u/s.10AA of the Act. This objection of the AO is therefore held to be unjustified. The last objection of the AO for not allowing deduction to the Assessee u/s.10AA of the Act was that the Assessee did not claim deduction u/s.10AA of the Act in the return of income. The CIT(A) has not commented on this issue. The Revenue in ground No.4 of the grounds has not chosen to take objection on this aspect. Nevertheless, the appellate authorities can take note of claim not made in a revised return of income, more so in the present case where a claim had been made in a revised computation of total income before the AO. This objection of the AO in our view is therefore devoid of any merits. Besides the above reasons, it is also seen that the AO, ought to have considered the claim of the Assessee for deduction u/s.10B of the Act, as made in the original return of income. He has chosen to ignore the same and sought to deny the benefit of Sec.10AA of the Act alone. The order of the AO is silent on the claim of the Assessee u/s.10B of the Act. This approach of the AO in our view is nor proper. We therefore reject this objection raised by the AO. - Decided in favour of assessee. MAT computation - deductibility of the amount allowable as deduction u/s.10AA of the Act while computing book profits u/s.115JB(6) - Held that:- The profits of the Sec.10AA unit of the Assessee should be excluded for the purpose of computing book profits u/s.115JB of the Act from the profit as per Profit and Loss account referred to in that section.- Decided in favour of assessee. Disallowance of expenditure incurred to increase the authorized share capital - Held that:- The issue in question is no longer res integra and has been settled by the Hon’ble Supreme Court in the case of CIT Vs. General Insurance Corporation Ltd. (2006 (9) TMI 116 - SUPREME Court ) wherein it was held that expenditure incurred in connection with issuance of bonus shares, constitutes revenue expenditure. It was held that issuance of bonus shares does not result in any inflow of fresh funds or increase in the capital employed, the capital employed remains the same. Issuance of bonus shares by capitalization of reserves is merely a reallocation of company’s fund. That being so, it cannot be held that the company acquires a benefit or advantage of enduring nature. Therefore, the expenditure on issuance of bonus shares is revenue expenditure.- Decided in favour of assessee. Disallowance of depreciation - reworking the WDV of the assets of Last Peak BPO Pvt.Ltd., which got amalgamated with the Assessee during the previous year by invoking the provisions of Explanation 2 to Sec.43(6) - Held that:- hough the Assessee raised a specific ground challenging the action of the AO in this regard, the CIT(A) has not adjudicated the same. The revenue has raised a ground on the presumption that the addition made by the AO in this regard was deleted by the CIT(A). On a careful perusal of the order of the CIT(A), we find that the CIT(A) has not adjudicated the issue at all. We are therefore the view that it would be just and appropriate to direct the CIT(A) to adjudicate this issue. Set off of brought forward loss - Held that:- Sec.10AA(6) of the Act provides that Loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, being the Unit shall be allowed to be carried forward or set off. The loss that is sought to be set off and carried forward in the present case is not that of the 10AA unit on which the Assessee has claimed deduction u/s.10AA of the Act. The loss in question is that of Last Peak BPO Pvt.Ltd. This loss pursuant to the order of amalgamation by the Hon’ble Kolkata High Court has to be considered as loss of the Assessee not relating to the business of the undertaking of the Assessee. Such loss is covered by the provisions of Sec.70 & 71 of the Act and not by the provisions of Sec.72(1) or Sec.74(3) of the Act. They are therefore to be allowed to be set off against the income of the Assessee under any other source.The CBDT in File No.279/Misc./M-116/2012-ITJ dated 16.7.2013 circulated to the Assessing officers has after referring to conflicting views on whether section 10A and 10B provisions are deduction provisions or exemption provisions, has expressed its view that section 10A/10B provisions are deduction provisions. The said circular becomes a benevolent circular when there is loss in the 10A/10B unit against taxable income of non- 10A/10B unit. Even on the basis of the circular to the extent it is benevolent in the facts and circumstances of the present case, has to be followed. Interest income on call money - treated as “Income from other sources" - Held that:- We are of the view that the dispute in this appeal is only on the head of income. There is no tax implication because the claim of the Assessee for set off of this income against the carried forward business loss has already been accepted. We therefore leave the question open without adjudication and uphold the conclusions of the CIT(A). - Decided against revenue
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2015 (11) TMI 429
Addition on account of credits against non-existent sales - accommodation entries - CIT(A) deleted the addition - Held that:- Shri Ravinder Hadav has been held to be the beneficial owner of the transactions routed in his various bank accounts and the peak credit in the bank accounts, along with the profits of the business and the accruals to/increases in the balance sheet of M/s R.V.Traders, was brought to tax in his hands. Being satisfied by the reasoning and finding arrived at therein, the departmental ground is dismissed. While coming to the said conclusion we have take into consideration the explanation offered by the assessee at the assessment stage and the fact that it was similarly argued before the CIT(A). The explanation along with evidences have been confronted to the AO who also agrees that nothing new is being said. The fact remains that genuineness of the transaction stands un-assailed on record. The drafts/pay orders received against sales made stands consistently accepted by the assessee. In these peculiar facts and circumstances of the case where the CIT(A) gives a finding that these transactions stand already taxed in the hands of the Ravinder Yadav which fact remains un-assailed on record. In these peculiar facts and circumstances we find no infirmity arrived at in the impugned order. The departmental ground is accordingly dismissed. - Decided in favour of assessee.
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2015 (11) TMI 428
Registration sought by it u/s.12AA denied - mixed objects of religious and charitable nature - Held that:- No doubt some of the objects are charitable in nature, whereas some others are religious in nature. However the class of beneficiaries are undoubtedly public or a wide section of public. We find that a similar issue had come up before the Cochin Bench of this Tribunal in the case of Calicut Islamic Cultural Society v. ACIT [2008 (7) TMI 621 - ITAT COCHIN] wherein held once the registration is granted to the assessee by the CIT, AO cannot go into probing the objects and the purposes of the trust or institution and that is within the exclusive domain and jurisdiction of the CIT. What AO can do that he can at the most investigate the matter within the four corners of s. 13 of the Act. In this case the AO has gone with investigating and probing the basic objects of the trust by entering into shoes of the CIT and such exercise is not permissible. There can be mixed objects of religious and charitable nature - if the trusts are partly religious and partly charitable, so long as no part of the income or corpus can be utilised for a purpose which is not either charitable or religious, exemption under s. 11(1)(a) will be applicable to the assessee. See CIT v. Barkate Saifiyah Society [1993 (11) TMI 13 - GUJARAT High Court] - Decided in favour of assessee.
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2015 (11) TMI 427
Disallowance of purchase of consumable goods, i.e., cotton, gauze and bandage, etc. - ingenuine and unverifiable purchases - Held that:- The authorities below have relied on the statements of managing director, accountant and proprietor of SKS Shri Jayant Khandelwal. Statement of Shri Khandelwal was neither supplied nor the cross-examination was given to the assessee, consequently the statement of Shri Khandelwal may not be held as reliable evidence against the assessee. However the statements of the managing director and accountant have neither been retracted nor effectively controverted, consequently they remain valid piece of evidence in this behalf. The assessee has endeavoured to demonstrate that the copious consumption of cotton gauze, bandages, etc., has not been disputed ; books of account are properly maintained and not rejected by the lower authorities. As compared to the assessment year 2009-10 the assessee's gross receipts, gross profit and net profit percentage have gone up and at the same time percentage consumption of cotton has gone down ; this data also has not been disputed in any manner by the Revenue, the assessee claims that no cotton was purchased from SKS in 2009-10. In this circumstance an alternate plea is advanced that a suitable estimate of disallowance be adopted instead of total disallowance. Reliance is placed on our consolidated order in the case of Anuj Kumar Varshney (supra) ; in this case the addition qua unverifiable purchases of semi-precious stones has been held to be at 15 per cent. of such unverifiable purchases. Looking at the entirety of facts and circumstances, i.e., the books of account being not rejected and consumption of cotton having comparatively decreased, we are inclined to follow our judgment in the case of Anuj Kumar Varshney (2015 (4) TMI 533 - ITAT JAIPUR) and direct to restrict the disallowance to 15 per cent. of purchases from SKS. Thus the assessee's appeals are partly allowed. Claim of interest under section 36(1)(iii) disallowed - Held that:- The assessee had at its disposal sufficient funds available in the form of share capital, reserves and other interest-free funds, etc., which are more than alleged advances/investments.The nature of such advances/investments as explained and considered by the learned Commissioner of Income-tax (Appeals) leave no room for any doubt that the alleged advances/investments were for the purposes of the assessee's hospital activities and medical professions. Thus no disallowance of interest under section 36(1)(iii) is justified. - Decided in favour of assessee.
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2015 (11) TMI 426
Revision u/s 263 - lack of verification in respect of 11 share and premium applicants to the tune of ₹ 56 lacs - Held that:- As find from the case file that the Assessing Officer issued section 142(1) notice dated 25-05-2011 assessee placed on record necessary details. The CIT himself acknowledges the very fact. A perusal of the reassessment framed on 29-08-2011 states these facts. That being the case the question that arises for our consideration as to whether the present case can be treated as that of no inquiry by the Assessing Officer or not. In view of the above said facts and circumstances and specific inquiry of the Assessing Officer and equally elaborate assessee’s reply, we hold that this case does not fall in the above stated category. We notice from the case file that the assessee’s details forming part of discussion in reassessment led to addition of ₹ 26 lacs being made on account of bogus share application and premium. We observe in these facts that the Assessing Officer examined this issue and confirmed this addition of ₹ 26 lacs only. The hon’ble Bombay high court in case of CIT vs. Garbiel India (1993 (4) TMI 55 - BOMBAY High Court) deals with a similar situation wherein the CIT revised an assessment on the ground that the same did not contain discussion in regard to a deduction claim which alleging non application of mind. Their lordship observe that the Assessing Officer had made inquiries in view of all necessary explanation. It is held that the Assessing Officer had allowed the claim on being satisfied with assessee’s version and the same cannot be held erroneous merely because the assessment sought to be revised did not contain an elaborate discussion. The hon’ble Delhi high court in case of (.2009 (9) TMI 633 - Delhi High Court) CIT vs. Sunbeam Auto Ltd has also rejected Revenue’s arguments in identical facts and holds that the Assessing Officer in assessment order is not required to give detailed reasons in respect of each and every item. Their lordship draw a fine distinction between lack of inquiry; and inadequate inquiry and hold that if there was an inquiry even inadequate that would not by itself give an occasion to the Commissioner to invoke jurisdiction u/s. 263 of the Act. We reiterate the facts of the instant case making it amply clear that the present is not a case of lack of inquiry. The CIT is of the opinion that no proper verification appears to have been made. We accept assessee’s arguments accordingly and reject those of the Revenue’s that the ld. CIT has merely directed the Assessing Officer to make an elaborate inquiry. Our these findings render the assessee’s arguments propounding merger theory in view of the CIT(A)’s order (supra) and merits to be academic. The CIT’s order under challenge is accordingly reversed. - Decided in favour of assessee.
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2015 (11) TMI 425
Disallowance out of fees and legal expenses - CIT(A) deleted the addition - Held that:- As in earlier year similar disallowance was made and predecessor of the CIT(A) in A.Y. 2007-08 had deleted the disallowance. This fact has not been disputed by the Revenue. No material was brought on record to show that the consideration for services received by the assessee was so excessive as to warrant any disallowance out of the same. It is also observed that the amount of consideration paid was as per Memorandum of Understanding entered into by the assessee with the payee company. In view of the above facts and circumstances, we do not find any good reason to interfere with the order of the Ld.CIT(A) - Decided against revenue. Disallowance of employees contribution to Provident Fund u/s.36(1) - CIT(A) deleted the addition - Held that:- This issue has been decided against the assessee in A.Y. 2007-08 following the judgment of CIT Vs. Gujarat State Road Transport Corporation (2014 (1) TMI 502 - GUJARAT HIGH COURT -) as held that with respect to the sum received by the assessee firm from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees’ account in the relevant fund or funds on or before the “due date” mentioned in explanation to section 36(1)(va). - Decided against assessee. Disallowance u/s.14A read with Rule 8D - Held that:- First requirement of law is that the expenditure should be related to the exempt income. In case, where the assessee makes a claim that ‘x’ amount is related to the exempt income or otherwise no expenditure is related to the exempt income, in that event, the AO has to satisfy himself about the correctness of the claim having regard to the accounts of the assessee before proceeding to apply Rule 8 D of the Income Tax Rules, 1962 for computing disallowance. Hence, another requirement of law is that the AO has to satisfy himself about the correctness of the claim of the assessee having regard to the accounts of the assessee. The provision of section 14A mandates the AO to examine the accounts of the assessee before proceeding to apply Rule 8D of the IT Rules. In the present case, the AO has made disallowance on account of interest expenditure and administrative expenses. Since on both the counts, the AO has failed to record his finding, we are of the considered view that disallowance as made by the AO cannot be sustained. - Decided against revenue.
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2015 (11) TMI 424
Deduction u/s.80IB(10) in respect of its housing project namely “Treasure Park” - AO denied the benefit of deduction u/s.80IB(10) on the ground that the project consisted of commercial area of 12,325 sq.ft. - Held that:- It has been held by the Hon’ble Bombay High Court in the case of CIT Vs. Pruthvi Brokers and Shareholders reported in [2012 (7) TMI 158 - BOMBAY HIGH COURT] that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. The appellate authorities have the discretion to permit such additional claims to be raised. The appellate authorities have jurisdiction to deal not merely with additional grounds which became available on account of change of circumstances or law but with additional grounds which were available when the return was filed. The words “could not have been raised” must be construed liberally and not strictly. There may be several factors justifying the reason of a new plea in an appeal and each case must be considered on its own facts. Therefore, the first ground of the revenue that when the claim of deduction u/s.80Ib(10) was not made for the entire project in the return of income filed or in the course of assessment proceedings or in Form 10CCB filed before the AO, the CIT(A) erred in allowing the claim of deduction u/s.80IB(10) of the Act to the project is devoid of any merit and accordingly the same is dismissed. Where housing projects were sanctioned before the amendment but have been completed after 01-04-2005 when the amended provisions came into operation the assessee would be entitled to the deduction u/s.80IB(10)and the conditions mentioned in clause (d) would not apply. Thus, the benefit restricted to cases where the area utilized for shops and commercial establishments does not exceed 5% of aggregate built up area of housing project or 2000 sq.ft which was less does not to apply to projects where approval of local authority was granted prior to 01-04-2005 even if project is completed thereafter.Since in the instant case admittedly, the project has been sanctioned prior to 01-04-2005 and the project has been completed after 01-04-2005, therefore, the restriction on the area of commercial building is not applicable to the facts of the present case. Therefore, this objection of the Revenue being devoid of merit is dismissed. So far as the objection of the AO that the built up area of all the flats in building F exceeded 1500 sq.ft., we find the Ld.CIT(A) has given a categorical finding that after exclusion of the balconies and terraces none of the flats of building F exceeded 1500 sq.ft. could not be controverted by the Ld. Departmental Representative. It is an admitted fact that the commencement certificate is dated 17- 12-2004 which is prior to 01-04-2005. Section 80IB(14)(a) w.e.f. 01-04-2005 is not applicable to housing projects approved prior to 01-04-205. Since in the instant case the built up area of all the units of building F are less than 1500 sq.ft. after excluding the balconies and terraces, therefore, the CIT(A) was fully justified in allowing the claim of deduction u/s.80IB(10) in respect of building F. See CIT Vs. Prime Properties [2015 (11) TMI 341 - BOMBAY HIGH COURT] So far as denial of deduction u/s.80IB(10) in respect of the 2 units of building D are concerned, we find the assessee has not claimed deduction in respect of the above 2 units in the return of income on the ground that the combined area of the adjoining flats exceed 1500 sq.ft. However, before CIT(A) the assessee took an additional ground and claimed the deduction in respect of the above 2 units on the ground that assessee has sold independent units to the respective customers which were less than 1500 sq.ft. It is the customers who have combined the flats and therefore the assessee is entitled to deduction u/s.80IB(10). We find the Ld.CIT(A) admitted the additional evidence and on the basis of the declaration of the customers held that it is the customers who have combined the units and the assessee has sold separate units to the customers where the built up area of each unit is less than 1500 sq.ft. When the two adjacent flats were approved by the local authority as separate units and the completion certificate issued on that basis the 2 flats cannot be treated as one unit to compute the built up area for the purpose of section 80IB(10). Since in the instant case the Ld.CIT(A) has categorically given a finding that the assessee has sold the residential units to different individuals, the individual ownership is legally enforceable, the individuality of the ownership exists before the different authorities/organisations like PMC for corporation tax, MSEB for electricity meters and housing society for membership etc. and since he has also given a finding that it is the customers who have combined the adjacent units for their own requirements, therefore, in view of the decision of the Hon’ble Bombay High Court in the case cited supra and in absence of any contrary material brought to our notice, the assessee cannot be denied the benefit of deduction u/s.80IB(10) in respect of the 2 units of building D. In view of our above discussion, we are of the considered opinion that the order of the Ld.CIT(A) is in consonance with law. We accordingly uphold the same and the grounds raised by the revenue are dismissed.
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2015 (11) TMI 423
Unexplained investment - CIT(A) deleted the addition - Held that:- The addition is on account of alleged nondisclosure of the debit balance ₹ 14,91,448/- appearing in the assessee's ledger account in the books of the broker, SSKI Securities Pvt. Ltd. as on 01/04/04. The assessee in her books in the said broker's personal ledger account shows no opening balance of that sum. The AO was under wrong belief that this receipt from the said party has been suppressed and he has thus made the addition. But it was explained to the AO that at the end of the earlier financially year the said party wrongly issued a cheque to the assessee for the amount which the assessee surrendered on the very opening day of the instant year vide our submitted ledger account. Therefore, in the assessee's account this does not appear as opening balance. The Assessing Officer failed to appreciate. Reference to earlier year's ledger account of the broker account could have resolved the question not entailing any addition. It is an uncleared cheque received at the end of the earlier year and returned at the vey opening day of the year without any transmission of the value on either side. In view of these facts and circumstances, we are of the considered view that the CIT(A) has rightly deleted the addition and we confirm the same - Decided in favour of assessee. Addition made on account of anomaly of bank deposits - this addition is also based on the wrong allegation of bank account having been tampered - CIT(A) deleted the addition - Held that:- The AO has failed to appreciate as in the other case that this particular document, as already said, is only a partial representation showing only this specific parameter of investment and varying of investment during the year. It is quite apparent that the original copy of the Bank account received from UCO Bank offers a complete tally with the copy of the Bank ledger account in the assessee's books of account showing that there is no concealment of any payment/receipt. The payment of first cheque of ₹ 6 lac appeared in the ledger copy against 10/05/2004. Therefore, the inference of the two payments being unaccounted for is on account of confused approach to the whole matter. The AO is singularly mistaken. there is no ground for the addition for the mere clerical error in the broker's account. Irrespective of the error, the inexorable fact is that this very sum of ₹ 3,25,000/- forms part of the assessee's revenue receipt entering the profit and loss account. However, the CIT(A) has deleted the addition of ₹ 12 lac but sustained the addition of ₹ 3.25 lac on the reasoning that this ₹ 12 lac has been explained vis-à-vis the original bank pass book of Uco Bank and that the ledger account copy of the assessee's books of account. The CIT(A) confirmed the addition of ₹ 3.25 lac being the profit of the assessee and assessee has not challenged the order of CIT(A) on this account. Accordingly, the order of CIT(A) deleting the addition of ₹ 12 lacs is confirmed.- Decided in favour of assessee. Undisclosed credit in bank account - CIT(A) deleted the addition - Held that:- For want of circumspection and for non-appreciation due to obsessive suspicion he failed to see that what he condemns as tampered bank account is, in fact, not the entire bank account but contains one parameter of the bank account related to investment in securities meant for correlation of assessee's investment in securities with the force of the money in bank so invested and to prove that the investments are from within the assessee's disclosed bank account. This segmented bank account being mistaken for the copy of the assessee's full bank ledger, the adverse inference is drawn as to suppression of the receipts of ₹ 20,72,715.43. Its remissness is too obvious when pitted against the bank ledger in the assessee's accounts which discloses both the sums. There is no cause for any inference of suppression and the resultant error of adding the sum. The same is straightway wrongful disallowance in view of the patent state of accounts steering on the face. Accordingly, this addition has rightly been deleted by CIT(A) and we confirm the same. - Decided in favour of assessee. Addition made by AO on account of gift - CIT(A) deleted the addition of gift after taking remand report from the AO on the additional evidences - Held that:- Assessee submitted a notarized declaration of gift from Dr. Ashok Shroff, copy of donor's bank account with Key Bank, inwards remittance on Oriental Bank of Commerce, copy of Passport of Sri Jayant Shroff showing him to be son of Sri Vasudev Shroff and husband of the assessee and also copy of passport of Sri Ashok Shroff, donor. The said documents being in the nature of additional evidences were admitted as they had a material bearing on the case and could not be submitted earlier as not all of these were in the possession of the assessee at the time of assessment. In view of these documents, the CIT(A) concluded, after taking remand report from the AO, that the credit entries on account of gift received from Dr. Ashok Shroff are genuine and the identity and creditworthiness of Dr. Ashok Shroff is proved. Accordingly, he deleted the addition as made by AO by invoking the provisions of section 68 of the Act. We find no infirmity in the order of CIT(A) and hence, the same is confirmed. - Decided in favour of assessee. Unexplained investment - CIT(A) deleted the addition - Held that:- Payment to Shilpa Stock Broker (P) Ltd was made by cheque from the Bank A/c and this is reflected in the Bank Statement and also mentioned in the confirmation filed. It was also mentioned that in the confirmation the PAN No. of the party is also provided. It was submitted that since the payment was made through disclosed bank account and the investment was reflected in the balance sheet and thereby in the books of a/cs., the same could not be considered as undisclosed investment of the assessee. It was submitted that no addition could be made under these circumstances. It was further mentioned that the amount paid to Shipla Stock Brokers Pvt. Ltd. was out of loan of ₹ 4,00,000/- received form Apeksha Jaggi and ₹ 2,00,000/- received from SSKI Securities Pvt. Ltd. It was submitted that the amount was refunded to Apeksha Juggi along with interest. This interest has been claimed in the P & L a/c. and allowed by the AO. It was submitted that while making the assessment the AO never raised any doubt regarding the source. It was also submitted that the bank statement of Oriental Bank of Commerce was field with the AO. The assessee also filed confirmation from Apeksha Jaggi. Bank statement and I.T return of Apeksha Jaggi in support of its claim. In view of these facts, we find that the CIT(A) has rightly deleted the addition - Decided in favour of assessee.
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2015 (11) TMI 422
Addition on account of benefit/perquisite u/s 2(24)(iv) - receipt of loan/advance - CIT(A) deleted the addition - Held that:- We are inclined to agree with the conclusion of the CIT(A) that no amount of loan/advance was actually received by the assessee from AIPL but it was only a journal entry passed on 31/03/2010 debiting the assessee s account and correspondingly crediting the UHCPL account to enhance the promoters contribution in the Joint Venture object between AIPL and UHCPL. Hence, estimated notional addition made by the AO u/s 2(24)(iv) of the Act on both the count could not be held as sustainable and the same was rightly deleted by the CIT(A). The said conclusion also gets support and strength from the ratio of the order of Hon ble Jurisdictional High Court of Delhi in the case of Sohan Singh vs. CIT (2001 (8) TMI 68 - DELHI High Court ). We also hold that the interest free advance/loan to assessee from AHS also does not attract provisions of section 2(24)(iv) of the Act because this provision is only applicable to the cases wherein a company provides benefits/perquisites and this provision is not applicable in the case of partnership firm such as AHS. We are unable to see any infirmity or perversity or any other valid reason to interfere with the order of the first appellate authority and we uphold the same. - Decided against revenue.
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2015 (11) TMI 421
Interest levy u/s 234B - can the assessee be held to be in default in payment of advance tax arising from the above stated interest income? - assessee’s stand claiming spread over of the enhanced compensation income - Held that:- It transpires from the case law of Ghanshyam HUF [2009 (7) TMI 12 - SUPREME COURT] itself that the hon’ble Punjab & Haryana high court in its lead judgment reported as CIT vs. Karanbir Singh (2007 (1) TMI 167 - PUNJAB AND HARYANA HIGH COURT) had accepted spreading over by following decision of hon’ble supreme court in Bikram Singh’s case (1996 (9) TMI 6 - SUPREME Court). The picture that emerges is that before the hon’ble apex court cleared this air of confusion as to whether the enhanced compensation is taxable by following principle of spread over or year of receipt, the assessee’s case was covered by above stated decisions. We hold in these facts that the assessee’s default in question was very much justifiable. He proceeded as per the law as it prevailed at the relevant time. A co-ordinate Bench of the tribunal in Intas Exports (2013 (7) TMI 926 - ITAT AHMEDABAD) considered issue of similar interest levy u/s 234B wherein the assessee had defaulted in AY 2003-04 based on amendment in section 80HHC of the Act introduced by the Finance Act, 2005 with retrospective effect from 01.04.2001. It holds that default giving rise to section 234B interest is not attributable to the concerned assessee. The Revenue does not point out any exception on facts. We follow the very decision and conclude that the present assessee could not have foreseen the hon’ble apex court decision holding assessment of the enhanced compensation in the year of receipt as against that of spread over. The assessee’s arguments challenging section 234B interest succeed. The impugned interest levy u/s 234B is deleted. - Decided in favour of assessee.
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2015 (11) TMI 420
Sale of shares - LTCG or STCG - Held that:- Taking a consistent view The assessee is an investor not engaged in the business of sale purchase of shares and mutual funds. The question is accordingly decided against the Revenue both assessment year. The Assessing Officer is directed to treat her income from sale of shares and mutual funds in the two assessment years as short term capital gains and pass a consequential order. - Decided in favour of assessee. Disallowance of interest - CIT(A) allowed the claim - Held that:- There is no dispute with regard to the position of law that the expenditure not being in the nature of capital expenditure made out or extended wholly or exclusively for the purpose of earning interest income is allowable for deduction u/s.57 of the Act. The contentions of the assessee is that the interest paid to the banks in respect of over draft accounts was extended wholly and exclusively for the purpose of earning of the interest income. Therefore, it was required to be allowed. On the contrary, the Assessing Officer disallowed the claim on the basis that the facilities were not used for making investment in FD and sum was not wholly or exclusively for the purpose of earning of interest income of FDs. On the contrary, the ld. CIT(A) had given the finding that so far interest paid on bank overdraft with HSBC Bank, ICICI Bank and, PNB. The nexus has been established between the interest paid and interest earned. Therefore, we do not see any reason to interfere into this finding of ld. CIT(A). This ground of Revenue's appeal is rejected. - Decided in favour of assessee. Disallowance of deduction of total outgo for interest - Held that:- The assessee has demonstrated through accounts that the FD and OD facility was utilized for the purpose of making FDs only. Under these facts, we are of the considered view that the assessee is entitled for deduction of the interest income. Moreover, in the light of ratio laid down by the Hon'ble Apex Court in case of Keshavji Ravji & Co. vs. CIT (1990 (2) TMI 1 - SUPREME Court) and Hon'ble Gujarat High Court in case of CIT vs. Wintex Mills Ltd.(1999 (9) TMI 24 - GUJARAT High Court ), on the basis of principle of netting, the assessee was entitled for deduction in respect of the interest paid on overdraft account. Therefore, we hereby direct the Assessing Officer to delete the disallowance - Decided in favour of assessee.
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2015 (11) TMI 419
Disallowance u/s. 14A - CIT(A) deleted the addition - Held that:- We have observed that assessee company has its own funds amounting to ₹ 41.64 crores and the investment are to the tune of ₹ 20.41 crores. We have also observed that assessee company has duly demonstrated that the interest bearing funds to the tune of ₹ 12.20 crores on which the assessee company has paid interest have been raised from the banks towards the acquisition of fixed assets, car loan, book debts and stocks .The assessee company has also raised during the financial year , fresh equity capital of ₹ 9.86 crores and free reserve of ₹ 2.07 crores were utilised to make fresh investments of ₹ 11.93 crores during the assessment year. Thus , we hold that assessee has sufficient own funds to make investment and the assessee has also proved by cogent evidences that no interest bearing funds are utilized for making investments as the assesee company has demonstrated that the interest bearing funds are bank loans raised by the assessee company for specific purposes and also utilised for the said purposes from which diversion of fund is not permitted and hence the disallowance of the interest expenditure of ₹ 35,21,564/- under Ruled 8D2(ii) by the revenue is hereby deleted and order of the CIT(A) is upheld. - Decided in favour of assessee. Disallowance towards administrative and indirect expenses @0.5% of the average investments held by the assessee company - disallowance u/s 14A of the Act read with Rule 8D(2)(iii) - Submission of assessee that these are strategic investments and no disallowance made towards the administrative expenses - Held that:- In these type of strategic investments, the investor has to normally devote significant time to plan, execute and monitor these investments regularly and periodically to ensure that these strategic investments are turned viable and profitable. These Investment decisions are very complex in nature. They require substantial market research, day-to-day analysis of market trends and decisions with regard to acquisition, retention and sale of shares at the most appropriate time. They require huge investment in shares and consequential blocking of funds. Besides, investment decisions are generally taken in the meetings of the Board of Directors / Shareholders for which administrative and management expenses are incurred and in some businesses regulatory approvals are required before setting up the same. There will be regular monitoring of these investments which also may require participation in the meetings of committees, Board of Director and Shareholder meetings. There will definitely be an expenditure incurred towards administrative and management cost etc. towards planning, executing and maintaining these investments AO has rightly invoked the provisions of section 14A of the Act read with Rule 8D(2)(iii) of Income Tax Rules, 1962 for disallowing the expenditure of ₹ 7,22,027/- towards administrative and other indirect expenses which was affirmed by the CIT(A ) and the same is also hereby affirm by us as we have found no infirmity in the orders of the authorities below. - Decided against assessee.
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2015 (11) TMI 418
Penalty u/s 271(1)(c) - concealment of particulars of income as well as furnishing of inaccurate particulars of income - Held that:- On perusal of the penalty order, it is clear that the penalty was levied for furnishing inaccurate particulars of income and thereby concealed the particulars of income which means that this finding, in our considered opinion, is confusing and is not clear whether the Assessing Officer holding the assessee guilty of furnishing the inaccurate particulars of income or concealing the particulars of income. This goes to prove that the Assessing Officer had not arrived at the satisfaction as to the guilty state of mind of the assessee. Further, we find that the statement of surrender is the sole basis for making the addition of ₹ 22,51,000/-, while surrendering this amount, the assessee clearly stated that the surrender is made with the intention of buying peace and avoiding unnecessary litigation and the amount surrendered cannot be co-related with incriminating materials found as a result of survey operations. Though the Assessing Officer and the CIT(A) recorded the finding that the assessee promised to produce the vouchers, which were not accounted in the books of account, failed to do so. It is a trite law that the onus always lies on the person who alleges in this case that it is the department who made an allegation that some vouchers found which were not accounted in the books of account. Therefore, it is the duty of the Revenue to prove that which vouchers were not accounted in the books of account. The Assessing Officer never brought any such vouchers on the record except making ipse dixit statement that some vouchers are found that apart, the Hon’ble Madras High Court in the case of CIT Vs. S. Khader Khan Sons, (2007 (7) TMI 182 - MADRAS HIGH COURT ) and the Hon’ble Kerala High Court in the case of Paul Mathews and Sons Vs. CIT, (2003 (2) TMI 25 - KERALA High Court) had clearly held that no addition can be made based on the mere statement. The decision of the Hon’ble Madras High Court was approved by Hon’ble Supreme Court in the case of CIT Vs. Khader Khand Son, (2013 (6) TMI 305 - SUPREME COURT) after granting the leave. That apart, the CBDT which is the apex body in administering the provisions of Income Tax Act had issued Circle dt. 10th March, 2003 to its officers that no addition can be made on mere statement of assessee without bringing any independent incriminating material on record. Therefore, in the light of the above decision, the very addition made by the Assessing Officer is not free from doubt. The mere disallowance cannot be a sound basis for imposition of penalty. In the light of the above legal position, we have no hesitation to quash the penalty levied under Section 271(1)(c) of the Act. Hence, the appeal filed by the assessee is allowed in full. - Decided in favour of assessee.
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2015 (11) TMI 417
Treatment of hedging loss as speculation loss or business loss - Held that:- Assessee is not a dealer in foreign exchange but an exporter of commodities and assessee had entered into forward contracts with banks in respect of foreign exchange but some of these contracts could not be honoured by the assessee for which it has to pay and which was debited to the P&L Account and claimed the same as business loss/hedging loss. In order to hedge against losses, the assessee had booked foreign exchange in the forward market with the bank but the export contract entered into by the assessee for export of commodities in some cases failed, the assessee is entitled to claim for deduction of loss as a business loss. Accordingly, respectfully following Hon’ble jurisdictional High court in the case of Soorajmull Nagarmull [1980 (9) TMI 69 - CALCUTTA High Court ] we allow the claim of the assessee. - Decided in favour of assessee.
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2015 (11) TMI 416
Bogus purchases - addition made u/s 69C - addition u/s 41(1) - rejection of books results - estimation of income - Held that:- AO has accepted returned income and impliedly rejected book results by making two additions. The AO grossly committed error on fact and also against the well settled principles of the accounting while he disbelieved purchases to be genuine without making and consequent adjustment to sale and that too the AO again made additions regarding three trade creditors alleging the transactions as bogus u/s 41(1) of the Act. These additions made on contradictory observations and baseless action of the AO have been deleted by the CIT(A) and she proceeded to estimate net profit by taking higher percentage of NP in comparison to earlier two years inferring that the AO rightly rejected the book results. This conclusion of the CIT(A) is a sustainable and in accordance with the provisions of the Act which require no interference at our end in view of dicta in the case of CIT vs. Banwarilal Bansidhar [1997 (5) TMI 37 - ALLAHABAD High Court] and Amitabh Construction (P) Ltd. (2011 (5) TMI 821 - Jharkhand High Court). In making an assessment after rejecting books of accounts and results therefore, the Assessing Officer has to make an honest estimate and having done so he must take into account the past assessment records of the assessee but the Assessing Officer of the present case miserably failed in discharging his functions while framing assessments. On the other hand, the CIT(A), enjoying coterminous powers with the Assessing Officer estimated the net profit in the proper manner as contemplated by the Act and on the basis of sound and well accepted principles. We may further point out that for subsequent assessment year 2009-10 the returned income of the assessee has been accepted in the order u/s 143(3) of the Act without disputing the amount of purchases and creditors. Finally hold that the CIT(A) neither exceeded her jurisdiction nor adopted a view against the interest of revenue rather she adopted higher percentage for estimation of net profit, in the eventuality of rejection of book results and accounts, as against lower percentage of net profit shown by the assessee and accepted by the revenue. The CIT(A) was fair enough when she upheld the implied rejection of book results, despite noticing some contradictions in the view taken by the Assessing Officer, because of the facts and circumstances surrounding the purchases particularly the reluctance of the sellers to comply with the notice issue to them u/s 133(6) of the Act and consequently making another addition in regard to trade creditors. In this situation, the CIT(A) was justified and correct in estimating net profit @5% of turnover and directing the Assessing Officer to delete other two additions. We are inclined to hold that the Assessing Officer made addition without making any express adjudication stating rejection for book results and the CIT(A) was right and justified in inferring rejection of book results and consequently directing the Assessing Officer to estimate net profit @5% of turnover which is certainly higher than the book results of past/preceding two years, The CIT(A) was correct in allowing relief to the assessee and thus we are unable to see any ambiguity, perversity or any other valid reason to interfere with the same and hence we uphold the conclusion of the CIT(A). - Decided against revenue.
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2015 (11) TMI 415
Addition on account of suppression of profit by the assessee by way of client code modifications by the borkers in a large number of commodity transactions - CIT(A) deleted the addition - Assessment was framed u/s. 153A (1)(b) r.w.s. 143(3) - Held that:- CIT(A) while deleting the addition has noted that the A.O had calculated notional profits on the assumption as if Client Code Modifications were not carried out and the transactions were closed on the expiry date. Ld. CIT(A) has further noted that addition on the basis of Client Code Modifications was on the basis of assumption and surmises and was not on the basis of concept of real income. - Decided in favour of assessee.
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Customs
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2015 (11) TMI 448
100% EOU - DTA clearance of manufactured carpets to EPCG licence holders - export obligations - extension of time limit - procedure not followed by the appellant - Held that:- appellant is a 100% EOU and they themselves are procuring the goods under Central Excise (Removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001 and the said rules are general rules and can be followed whether or not prescribed a particular notification and in the present case the appellant should have asked his customers to follow the said rules and for this purpose, the customers should have approached their jurisdictional authorities and produced the EPCG licence along with invalidation certificate and thereafter executed the bond as required under Notification No.44/2002 or 55/2003. Once these details steps were completed and after obtaining the relevant permission, appellant could have cleared the goods to his customers availing the benefit of exemption Notification Nos.44/2002 & 55/2003. Further, the appellant should have every month produced the copies of invoices and other deails including the copy of the letter received from the jurisdictional authorities of his customers to his jurisdictional AC/DC and it is only in this situation, the responsibility of the appellant would have been over and the assessment of the goods would be in order. Since the appellant has cleared the goods without following any of the above procedure, the benefit of above mentioned notification cannot be extended. - Decided against the appellant. The appellant did not produce the end use certificate in time and the Revenue proceeded to recover the differential duty. The appellant thereafter produced the end use certificate and it is in these circumstances, the Hon'ble Supreme Court has taken the view. In the present case, the situation is entirely different. The appellant have not cleared the goods as per the conditions of the notification. No bond was executed. Invalidation certificate, EPCG import licence, etc. were not produced at the time of clearances of the goods to the jurisdictional authorities and after the issuance of the show-cause notice at this stage, the EODC certificate is being produced and now none of the conditions of the notification can be monitored and checked. There can be no doubt that this Tribunal can look into the documents produced in the proceedings Regarding extension of time limit - Held that:- The appellant cannot be permitted not to apply for extension of time and producing the certificate at any point of time and take the plea that the AC/DC was competent to extend the time limit. Such an interpretation will make the time limit redundant. Similar is the position in respect of the block-wise export obligation to be fulfilled. - Decided against the appellant. Who is liable to pay the duty - the appellant (100% EOU) or its customers - Held that:- the appellant have not fulfilled his obligation under the law. In, this case, the appellant had cleared the goods without ensuring that his customers submit themselves to the jurisdictional authorities and fulfill pre-clearance conditions. The obligation included that their customers executes the bond with the jurisdictional authorities in terms of Notification No.44/2002 and 55/2003and also produce the EPCG licence, invalidation certificate, etc. which were required to be debited by the jurisdictional authorities after examining the validity of such licence. Under these circumstances duty is to be demanded from the appellant alone. - Decided against the appellant. Rate of CVD for levy and collection - Held that:- The carpets are also chargeable to two rates of duty vide Notification No.29/2004-CE and 30/2004-CE. The appellant is a 100% EOU and as per proviso to Section 5A(1) of the Central Excise Act, the above mentioned exemption notifications are not applicable to 100% EOUs. However, for the purpose of computing countervailing duty when the goods are being cleared from the DTA, the benefit of such notification is extended. However, since the appellant is 100% EOU, in our view as per Explanation 1 after clause (ii) of proviso to Section 3 (1) of the Central Excise Act, since there are two rates, viz., 8% and NIL rate highest of the two i.e., 8% will be chargeable. - in case of 100% EOU when the goods are being cleared, they are required to pay countervailing duty corresponding to the highest/normal rate of duty of 8% under Notification NO.29/2004-CE. Appellants have been denied the benefit of Notification No.2/95-CE and Notification No.23/03-CE - prima facie the appellant will be entitled to the benefit of the said notification. However, the Commissioner has denied due to non-submission of evidence. We consider it appropriate to remand the matter back to the Commissioner for re-examining the same and the appellant will submit permissions given by the Development Commissioner including the ones produced before us within one month from the date of receipt of this order. The appellant may be informed of any further details required, so that they can produce the same in support of their claim. The Commissioner may examine and thereafter decide the eligibility or otherwise. Another issue raised in the impugned order is the denial of benefit of Notification No.52/2003-Cus (earlier NO.53/97-Cus) for imported inputs and Notification No.22/2003-CE dated 31/03/2003 (earlier No.1/95 dated 01/04/95). The said notifications are relating to exemptions on inputs imported or procured locally for the purpose of manufacture. - This dispute is already decided by us in this order and appellant is required to pay additional duty. Under the said circumstances, we do not find any substance for denying the benefit of said notifications and demanding duty on the inputs. Matter remanded back for decided certain issues raised first time. - Decided partly in favor of appellant.
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2015 (11) TMI 447
Availment of concessional rate of duty under Notification No.21/2002-Cus. dt. 1.3.2002 - adjustment of amount of customs duty - import of goods misdeclared as "waste paper" containing plastic waste/scrap, metal scrap and cloth scrap (rags) - Held that:- The period of imports in the present case is from 3.9.2002 to 14.10.2004 whereas the above letter is of 2006 and the same is not applicable. Further, the said communication was issued by Ministry of Environment & Forests in the context of pollution control measures where garbage or municipal waste are brought into India in the name of waste paper. Further, we find the Customs issued standing order dt. 18.2.2006 and subsequently issued addendum to the said standing order on 31.3.2006 based on Ministry of Environment & Forests letter wherein at 6(i) of the said standing order, it is categorically stipulated that the plastic and metallic waste found in the waste paper are to be assessed to merit rate of duty. Therefore the appellants relying the Ministry of Environment & Forests communication is of no relevance for classifying the plastic & metallic waste under respective chapter heading and assessing on merit rate of duty. As per the condition of the notifications in question, the appellant themselves executed an undertaking before the Customs before clearance of goods, binding themselves that the goods shall be used for the manufacture of paper and paper board and they also undertook that in the event of non-compliance they shall pay customs duty on such quantity. Therefore, it is established beyond doubt that the above quantity of plastic waste/scrap, Metallic scrap and cloth waste imported in the guise of waste paper are not eligible for exemption under Sl.No.152 of the Notfn. 21/2002. Therefore, appellants are liable to pay appropriate customs duty on the above items. Condition (ii) (b) of Notfn. 203/92 is similar to condition 20 of Notfn 21/2002. On perusal of the Advance Licence No.0910028933/2/03/00 at page 99 of the paper book, we find that the advance licence was issued to import items as per the list attached to the licence. Sl.No.2 of the list attached covers ITCHS code 47079000 with description of imported item as waste paper . As already discussed above, the goods were cleared as waste paper under advance licence whereas quantity of plastic waste and metallic waste and cloth waste (rags) were not declared by the assessee. Therefore, such items are not covered under advance licence as what was permitted for import under advance licence is waste paper and not plastic waste and scrap and metallic waste and scrap etc. and not covered under the said Advance Licence. Therefore, in terms of condition (ii) (b) of the notification 203/92 and as per the undertaking executed by the appellant before Customs the appellants are liable to pay appropriate Customs duty on the quantity of plastic waste, metallic waste and cloth waste and cleared under 23 Bills of Entry. - concessional rate of duty availed by the appellants under Notification No.21/2002 as well as full exemption availed under 203/92 Cus. is not eligible on the quantity of plastic scrap, metallic scrap and cloth scrap (rags) and these goods are chargeable to appropriate Customs Duty and the duty demand of ₹ 1,06,10,668/- is confirmed. Term used outthrows represents only paper unsuitable for consumption and does not relate to plastic scrap & metallic scrap etc. Similarly, as per European Standards Mixed Paper Grade 5.01 relates to unsorted paper & paperboard. Therefore, we find that as rightly held by the adjudicating authority the plastic scrap and metallic scrap etc. cannot be treated as mixed waste paper and the appellants failed to declare these items before customs clearance. Further, on perusal of the contract/purchase order P.O.No.32/302921 dt. 20.3.2003, enclosed in pages 143 to 152 of Vol-II of Paper Book, we find the appellants have entered into contract with overseas supplier for supply of imported waste paper/ pulp, waste paper co-mingled krebside super mix. Appellants have violated their own terms and conditions of the contract and deliberately not declared non-fibre contraries, plastic scrap and other scraps in their Bill of Entry. Further, on perusal of Bill of Entry No.636370 dt. 31.5.2004, the appellants imported "Mixed Paper" and on examination it contained waste paper and plastic waste/scrap and the same was classified under Chapter Heading 47079000 and Chapter 39159029 respectively and appellants themselves had paid appropriate duty on plastic scrap whereas in all the subsequent imports of 17 Bills of Entry which are annexed as Sl.No.31 to 52 in the SCN they failed to declare the non-contraries i.e plastic waste and scrap. Therefore, appellants have not only flouted their own terms and conditions of contract and imported the goods by not declaring it as plastic waste and scrap and they are fully aware that the consignments contained plastic scrap and other scrap but they have deliberately declared the goods as waste paper and not paid appropriate duty on the non-fibre contraries and availed the concessional rate of duty under the above notifications. Appellants failed to intimate the Customs authorities on their activity of sorting of the imported goods into fibre and non-fibrous contents through M/s.White Star Fibres Ltd. and the quantity of plastic scraps and other scraps recovered and sold in the domestic market. But for the detection by the investigation agency, this would not have come to the light. Appellant s contention that they have intimated the Central Excise authorities about the quantity of plastic waste and scrap for issuing end-use certificate is not relevant. As per the condition of the notification appellants failed to inform the customs authorities where the appellants availed the benefit. Therefore, the adjudicating authority has rightly restricted the exemption benefit only to the quantity of fibre content of 17,901 MTs of fibre contraries and correctly demanded duty on the non-declared items of plastic waste and metallic scrap and cloth waste (rags) by invoking Section 28 of the Customs Act. - demand confirmed by the adjudicating authority is liable to be upheld. Since the plastic waste and scrap is otherwise a restricted item under Foreign Trade Policy the same are liable for confiscation. The order of confiscation of the seized goods under section 111 (d) of the Customs Act and imposition of redemption fine and penalty under Section 114A of the Customs Act is liable to be upheld. - Decided against assessee.
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2015 (11) TMI 446
Availment of DEPB benefit under Sr.No.68B of the DEPB Scheme - Classification of Alloy Steel Forgings (Machined) / goods for use Gear Blanks - Classification under Tariff Item 732616 of the Drawback Schedule or under Tariff Item 848221 and 8708099 of Drawback Schedule - Held that:- There is no dispute that the list appended to the Circular clarified that the Sr.No.68B of DEPB Scheme is corresponding to Tariff Item 722616 of Schedule. The Hon ble Supreme Court in the case of Ranadey Micronutrients Ltd [1996 (9) TMI 124 - SUPREME COURT OF INDIA] held that the circular issued by CBEC is binding on the officers of Revenue Department and consistency and discipline are of greater importance than winning or loosing the court case. The foreign buyers categorically certified that the impugned exported goods are not useable as such and subjected to various processes. This is supported by the certificates of Central Excise officers and officers of Special Economic Zone. Hence, the said case law is not applicable herein. The goods exported by the Appellant declaring Alloy Steel Forging (Machined) for use of rings of Bearing and Gear Blank in their shipping bills, require further operation and such goods when not fit for being ready to use, would appropriately classifiable under tariff item No.732615 of Drawback Schedule. Therefore, the demand of differential amount of drawback alongwith interest and penalties cannot be sustained. Extended period of limitation - Held that:- Appellant has a very strong case in their favour on limitation, as is evident from the analysis of facts herein earlier. When the Department had repeatedly examined the issue earlier and assessments were final, demand can be raised only for normal period. Demand of differential duty set aside - Decided in favor of assessee.
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2015 (11) TMI 445
Valuation of goods - Related person - whether the appellants are related persons to the suppliers of imported goods within the scope of Rule 2 (2) (vi) of CVR - Held that:- the appellant and all the 7 subsidiaries group companies are fully owned and controlled by M/s.Ansoldo Signals NV and all the imports are made only from the said group companies and there is no outside translation. Therefore, the transaction between supplier and appellants cannot be at arms length or normal transaction. - their principal holding company decides the corporate policy, design, specification, quality control, marketing, sub-licensing of patent, franchise etc. In view of the above undisputed facts, the appellants and suppliers are related persons - Decided against the assessee. Whether the denial of special discount offered to the supplier and loading of value of the imported goods as per the list price for each of import items in terms of Rule 4(2) of CVR is correct or otherwise - Held that:- it is established beyond doubt that the discounts offered are exclusive discounts only to the appellant who is 100% subsidiary of the principal company. Therefore, the appellant s contention that they are eligible for discount of upto 30% for the transfer price is not acceptable. - the rejection of discount and loading of invoice price to different % for each imports made from their related suppliers is liable to be upheld. - Decided against the assessee. Whether the addition of lump sum fee and royalty paid to value of goods in terms of Rule 9 (1) (c) of CVR is correct or otherwise - Held that:- Supreme Court in the case of CC (Prev.) Ahmedabad Vs ESSAR Gujarat Ltd. [1996 (11) TMI 426 - SUPREME COURT OF INDIA] clearly held that Technical Knowhow and lump sum shall be includible in the value of imported goods - The ratio of the Apex Court decision is squarely applicable to the present case as the technical knowhow, lump sum payment, royalty are part of condition of executing the contract with Railways and certainly it is a condition of sale of imported Microlock-II components to the appellant falls within Rule 9 (1) (c) of CVR and includible in the invoice price of imported goods. - the lump sum fee, royalty paid to U.S.S.CSEE are includible in the invoice value. - Decided against the assessee. Whether the loading ordered for previous imports of 1999 to 2002 based on price list of 2002 is valid or otherwise. - Held that:- We are surprised to know that the appellant being a multinational company knowing the legal requirements failed to disclose the facts before importation nor filed any declaration on the related party transactions and imported goods from 1999 to 2001 which are mandatory requirement for assessment and clearance of goods but chose to suppress the above facts and paid customs duty on the declared value. It is abundantly clear that but for the department's efforts, this could not have been brought to light. Therefore, we have no hesitation in holding that since the appellants had suppressed the facts of their related party transaction the adjudicating authority had rightly ordered for determination of value of all the imports made in 1999 to 2001 based on the Transfer price list of 2002. - Decided against the assessee.
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2015 (11) TMI 444
Relinquishment of title to the goods under Section 68 - the demand of duty in respect of time expired warehoused goods - Penalty u/s 117 - Held that:- Apex Court certainly decided in the case [1996 (8) TMI 109 - SUPREME COURT OF INDIA] that the “Goods which are not removed from a warehouse within the permissible period are treated as goods improperly removed from the warehouse. Such improper removal takes place when the goods remain in the warehouse beyond the permitted period or its permitted extension. The importer of the goods may be called upon to pay Customs duty on them and, necessarily, it would be payable at the rate applicable on the date of their deemed removal from the warehouse, that is, the date on which the permitted period or its permitted extension came to an end” . - first proviso to Section 68, which allowed relinquishment, was introduced on 14.5.2003, that is well after the expiry of warehousing periods in respect of all Bonds in the present case. plea that interest and penalty have been wrongly demanded under Section 47 and 117 is unacceptable. Mere quoting of another Section in the show cause notice when the appropriate Section has also been quoted does not make the confirmation of interest and penalty illegal. - Decided against assessee.
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2015 (11) TMI 443
Implication of Respondent - Respondent a CHA challenged order of High Court - Held that:- Reason for implicating the respondent was that he was not only Customs House Agent of M/s. Gold-en Plastics Company but had signed security bond as a surety. In view thereof he was surely an aggrieved person. We, thus do not find any error in the order of the High Court. - Decided against Revenue.
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2015 (11) TMI 442
Classification of proximity sensor / switching device - whether these products are classifiable under Heading 85.36 or 90.31 of the Indian Customs Tariff - Held that:- Revenue accepts that the product in question does the function of switching as well. In fact, these are designed to sense and then switch on or switch off the particular machine to which the product is installed. Therefore, we are satisfied that primarily switching device and sensor is only a means to achieve the same. That was explained by the assessee through its Managing Director Mr. Thampy Mathew and Mr. S. Manjunath, the Assistant General Manager. Herein, it was categorically stated (which is not disputed as well) that without switching on and switching off, the product is of no use at all. - Revenue has issued Notification No. 21/2002-Cus., dated 01.03.2002. It is a general Exemption Notification prescribing effective rates of duty for goods of various chapters / headings. Entry 244 thereof relates to the goods specified in List 26 and a uniform duty of 15 per cent is prescribed therein. - Decided against Revenue.
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2015 (11) TMI 441
Valuation - Inclusion of value of technical know how fees - Held that:- Court have also gone through the details of the services which were to be provided under the agreement. From the reading it becomes apparent that all these services are post-importation and, therefore, could not be added to the value of the goods imported. The matter is squarely covered by the judgment delivered by this Bench in the case of Commissioner of Customs,Ahmedabad vs. M/s. Essar Steel Ltd. [2015 (4) TMI 486 - SUPREME COURT]. - Decided against Revenue.
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2015 (11) TMI 440
Undervaluation of goods - Misdeclaration of goods - Held that:- There is a detailed and elaborate discussion on various aspects and after taking the material that was placed on record into consideration, a finding of fact is arrived at that the goods in question were in fact the components and not the complete set of television. We entirely agree with the majority decision of the Tribunal and do not find that this is a fit case for interference. - Decided against Revenue.
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2015 (11) TMI 439
Benefit of Notification No. 160/92-CUS dated 20.04.1992 - third party export - Extension of time for fulfillment of obligations of Notifications - Non furnishing of Bank guarantee - Held that:- Certain exports made by the third party in terms of said para were sought to be included by the assessee in order to show that it had fulfilled the entire export obligations. However, the condition in this para is that the export has to be in the name of EPCG licence holder. It is specifically taken note of by the Tribunal in the impugned judgment that the exports which were purportedly shown did not bear any such EPCG licence and, therefore, rightly rejected the contention of the assessee even on this aspect. - No error in the main order of the Tribunal or in the order dismissing the rectification application. We may record that in the present appeal, the assessee had challenged the order only passed in the application for rectification - Decided against assessee.
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Corporate Laws
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2015 (11) TMI 438
Oppression - dilution of the equity of Jamal from 50% as originally proposed to 28.33% which it was brought down to as a result of divestment in favour of Nilesh and Doshi - whether act was illegal and constituted oppression? - ouster of Jamal from the management is claimed to be another act of oppression - Held that:- The first stage of reduction of Jamal’s agreed shareholding, i.e. allotment of 100 instead of 250 out of 500 shares of the Company initially, is adequately explained. Ms. Sethna tried to show some corrections and interpolations in the register of members. The CLB noted in this behalf that not only in the Folio of Akkadian (the Company of Jamal through whom he held the Company’s shares), even in other Folios there were corrections and alterations. Secondly, there were no supporting documents to show that Jamal had originally acquired 250 shares of the Company, but that by manipulation of records his shareholding was brought down to 100 shares. The CLB observed that when there was no proof of any consideration paid for even 100 shares by Jamal, merely on the basis of errors and alterations in the register of members, no grievance could be made about reduction of Jamal’s shareholding from 250 to 100 allegedly by way of a manipulation. Besides, this aspect of the matter is hardly of any relevance, since, as rightly observed by the CLB, Rajan has neither taken any advantage of denying those 150 shares to Jamal nor any extra benefit to himself and in the end, at any rate, the agreed shareholding of 28.33% was actually allotted to Jamal. No error of law can be found in the analysis of the CLB or its conclusion in this behalf. Second stage of reduction of Jamal’s shareholding, i.e. when Nilesh was inducted, is also adequately explained. As observed by the CLB, Jamal was a party to this arrangement. He actually signed a Supplementary Agreement for the purpose. Nilesh’s commitment as against 28.33% shareholding to be allotted to him was to get the House of Tata’s on board for development of Phase2 and 3. Tatas did after all enter into an agreement with the Company after Nilesh’s induction. The CLB noted that Tata’s association at that stage had greatly benefited the Company inasmuch as the Company could raise a loan from ICICI Bank for making the balance payment of ₹ 44.4 crores to Parke Davis. Tata’s also took space in the existing building (Phase 1) for their sister concern, Sitel. The Tata’s, noted the CLB, had their own reason for leaving the project. Merely because Tata’s, having first associated themselves with the project postinduction of Nilesh (whose commitment was to get them on board), left the project later, it cannot be said that Nilesh’s induction was vitiated for any reason or that it was not bona fide or for a genuine purpose. No fault can be found per se with 28.33% shareholding offered to Nilesh in a duly signed Supplementary Agreement between Rajan, Jamal and Nilesh. The CLB also found that at the relevant time, i.e., when Nilesh resigned from the Board in 2001, or when the board of the Company noted in its meeting of 18 September 2003, which was attended by Jamal, that Tata’s had expressed their intention to exit from the project, or even when Tata’s actually left in 2004, Jamal did not raise any issue about Nilesh. In the premises, the CLB did not find anything wrong about 28.33% shareholding meant for Nilesh. This part of the impugned order is clearly sustainable and gives rise to no question of law. The third stage of reduction was when Doshi was inducted. Again, his induction was accepted with open eyes by Jamal, though there was no written agreement with Doshi unlike in the case of Nilesh. There is certainly material on record to suggest that Doshi played a meaningful role, justifying his induction into the Company. That itself should be sufficient to sustain the CLB's conclusion in this behalf. But what is more important is Jamal’s own admission contemporaneously made before the disputes arose between the parties, when, on 4 March 2005, in the wake Doshi’s proposed exit from the Company, he (Jamal) categorically asserted that he had no complaint against Doshi, who, Jamal himself agreed, had played his role and assisted the project. Jamal even suggested that the parties should convince Doshi to stay on till the conclusion of the project. In the face of all this material, if the CLB concludes that Jamal was not justified in making any grievance about the association of Doshi after the disputes arose, surely it is a plausible conclusion and does not give rise to any question of law. According to Jamal, he agreed to reduce his shareholding from 50% to 28.33% only on the consideration that he would not be required to fund the project; the admitted fact was that he actually did not contribute any funds for the project besides his initial contribution of ₹ 2.45 crores; and Jamal had nowhere averred or even conveyed through Counsel during arguments that had he been aware that the shares meant for Nilesh and Doshi were to go to Rajan, he (Jamal) would have undertaken the obligations under which the shares were to be allotted. Secondly, there is nothing on record to show that Jamal had any objection to the allotments per se to Nilesh and Doshi. If that is so, the complaint, if any, as noted by the CLB, could only be made by Nilesh and Doshi, according to whom their respective obligations were complied with, if shares were not allotted to them despite such compliance. And finally, the percentage of shareholding, in the ultimate analysis, hardly had any bearing on the order that the CLB actually made. (This aspect will be dealt with later in this order.) There is, thus, no merit in Jamal’s case concerning linkage of Rajan to the allottee entities. In the face of the Shareholders' Agreement, the Supplementary Agreement and the Minutes of Meeting, the conclusion that there was no oppression of Jammal on account of reduction of his shareholding from 50%, as originally proposed, to 28.33%, as finally brought down to, is clearly sustainable and does not give rise to any question of law. Mismanagement - Jamal in regard to the transaction with Ashwamegh, where 18000 sq. ft. of constructed area was sold - Held that:- The CLB, was, however, of the view that interest ought to have been recovered from Ashwamegh for delayed payment of consideration, but did not accept the Appellants' case that the agreement with Ashwamegh should have been cancelled. The basis of upholding the transaction notwithstanding acceptance of the case of delayed payment of consideration was that the Board being a court of equity, could not ignore business realities and inquire into the correctness or otherwise of a decision other than for examining if the same was mala fide or resulted in enrichment of the decision makers at the cost of the Company. In the face of its observations that the property was not sold at an undervalue, that there was nothing to suggest either than Rajan and Ashwamegh were related parties or that the decision was against the interest of the Company or enriched Rajan, the CLB refused to order cancellation of the transaction. Besides, the CLB held that Ashwamegh was not a party to the petition and in its absence the agreement could not have been cancelled, in terms of Section 402(e) of the Act. For the same reasons, as in the case of Ashwamegh, the CLB did not find a case made out for cancellation of the Fine Plaza transaction under Section 402(e) of the Act. In Ecstacy, though the CLB found that the payment of ₹ 28.11 crores paid to Ecstacy was, in the absence of any particulars forthcoming, a diversion of funds, it noted that this amount had come back. What the CLB found amiss was the fact that it came back sans any interest. It accordingly ordered recovery of interest from the party and in default, restitution of the Company by Rajan to the extent of the amount of interest. In Stylus, the CLB found that the decisions were duly taken in board meetings of the Company, which were not objected to by Jamal. Though the CLB found some substance in Jamal's contentions regarding lack of full transparency in the Stylus matter, since the draft agreement was not placed before the board, it observed that merely for that reason, the agreement could not be cancelled unless it was found to be against the interests of the Company. The CLB did not find any substance in the alleged association of Stylus with Rajan and found the royalty received to be commensurate with the market rates. None of these conclusions can be faulted. No question of law can be said to arise in connection with these conclusions. On the allegations of rotation of funds, the CLB held that it could not examine day to day transactions; that in a private company engaged in construction work, it was not uncommon that when the company was in need of short term funds, the promoters would bring in money and then when funds are available with the company later, would take the same out; that what was to be examined was whether funds were provided when the Company was in need of them; that it was an admitted position that the project had progressed well, the Company had earned profit of over ₹ 14 crores as on 31.3.2007 and Rajan could manage to save about ₹ 11 crores payable towards penal interest. The CLB found that there was no instance brought to its notice by the Appellants where money was taken out of the Company without accounting for the same. The CLB found no siphoning of funds, but merely found fault with noncharging of interest to certain parties such as Ecstacy, Millennium and Parshaw and ordered recovery of interest. As for the remuneration paid to Rajan, the CLB did not find the same to be excessive or unreasonable. None of the conclusions of the CLB noted above concerning Jamal's case of mismanagement can be described as perverse. They are all supported by evidence on record; no irrelevant material is considered to arrive at the same; and they are all possible conclusions. No question of law arises therefrom for the consideration of this Court under Section 10F. Validity of the relief granted by the CLB - after acknowledging 28.33% share of the Appellants in the first Respondent Company (if not 50% as claimed by Jamal), the consideration for the Appellants' exit from the Company is not the market value of 28.33% share, but 4.35% of the profits arising out of the value of the land, which, with addition of 50% to take care of the pendency of the petition for nearly three years, works out to 6.6%. On a closer scrutiny, however, it not only appears to be a legitimate relief, and therefore, not giving rise to any question of law, but also a reasonable and adequate relief in the facts of the case. There were various allegations of oppression and mismanagement including about alleged attempts on the part of the company to sell the land at an undervalue. In these facts, the land was directed to be sold under orders of the CLB and proceeds distributed between shareholders. These facts were clearly distinguishable from the facts of our case. The CLB found that the Company, here, was actively engaged in the business for which it was established, was making profits after being brought up single handedly by Rajan to the present level, and it would really be oppressive to Rajan if the project were now to be sold and proceeds distributed. That is perfectly reasonable. The reasons cited are cogent and acceptable. No error of law can possibly arise.
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Service Tax
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2015 (11) TMI 478
Penalty u/s 78 - Business Support Service - Misdeclaration - Held that:- Appellant had mis-declared the taxable receipts in respect of the transactions which were declared by them to the authorities while filing ST-3 returns, is not disputed. This act itself indicates that the appellant had ulterior motive in suppressing and mis-declaring the taxable transactions. The argument by the learned Counsel before us that the services rendered by them are not taxable is also mis-directed in as much it is on record that the services rendered by them are taxable under some category or others but the appellant despite receiving an amount for the said services, mis-declared the amount to the authorities in order to discharge less service tax which itself is suppression and mis-statement of the tax liability to the authorities. This conduct of the appellant is unbecoming of an assessee who supposed to comply with the provisions of law and more so in this case as the appellant was a registered unit with the authorities. - impugned order which imposes penalty under Section 78 is correct and does not require any interference. - Decided against assessee.
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2015 (11) TMI 477
Imposition of penalty - Benefit of Section 80 - Malafide intention - Invocation of extended period of limitation - Held that:- Respondent was an individual photographer who was providing photography service by clicking photographs and getting them developed and printed outside. It is not the case of Revenue that he was registered under State or Municipal law relating to shop and establishment or any other laws of State for carrying out commercial activity. So Shri Gupta qualified for coverage within the scope of Notification No.6/2001-ST when read with CBEC circular dated 27.12.2001 making the demand unsustainable. - in the absence of any evidence to the effect that the act of not taking registration and not paying tax was deliberate, extended period cannot be invoked. Consequently the demand pertaining to the period 1.5.2003 to 28.2.2005 is clearly barred by time as the show cause notice was issued in the month of October, 2006. (and w.e.f.1.3.2005, the appellant is eligible for small scale exemption under Notf.No.6/2005-ST). Thus, not only the appeal of the revenue is devoid of any merit, the demand itself needs to be set aside - Decided in favour of assessee.
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2015 (11) TMI 476
Commercial or industrial construction service - Works contract service - Payment of tax under Composition scheme without prior opting the scheme - Held that:- Appellants were not discharging their service tax liability under the category of works contract. The provisions of Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 is to the effect that the provider of taxable service who opts to pay service tax under these Rules shall exercise such option in respect of a works contract service provided to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works contract and shall not be withdrawn until the completion of the said works contract. As such, it is seen from the said Rule that the option has to be exercised by the assessee who wants to discharge the service tax liability under the said category. In the present case, it was never the appellant who opted to pay under works contract but the Revenue required them to pay the tax under the works contract. In such a scenario, the question of assessee exercising any option before discharging the tax under the category of works contract does not arise at all. Such an view adopted by the adjudicating authority is neither appropriate nor legal inasmuch as the same cannot be adopted as a bar to the Revenue's own stand of requiring the appellant to pay tax under the category of works contract. - during the adjudication proceedings, had placed on record a detailed quantification showing the value of the materials used by them and the resultant value of the services. If the adjudicating authority was of the view that the appellant should also place relevant bills/invoices etc. on record, he was within his rights to call for the same instead of confirming the demand on the total value of the works contract, without any notice to the appellant - Impugned order is set aside - Decided in favour of assessee.
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2015 (11) TMI 475
Rectification of mistake - Restoration of appeal - Availment of CENVAT Credit - Tour service - Maintenance of separate accounts - Tribunal consider the issue of penalty only and did not consider the eligibility of Cenvat Credit - appellants utilized Cenvat Credit on those input services which were used for providing non-taxable output service - Held that:- An error cannot be said to be apparent if it is not self evident. In the present case there is no error manifest and the Tribunal by its Final Order has passed a detailed order on merits. The Counsel for appellant contends that the issues raised were not considered. The so-called errors pointed out and contentions raised by the appellants counsel are not obvious and are such that they cannot be discovered without detailed argument of the entire appeal. In a catena of decisions, the Apex Court has laid the proposition that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions can hardly be said to be an error apparent on the face of the record. - applications before me are an ROA application and a Misc. application to convert the ROA into an ROM by causing amendments in the ROA. The learned Counsel for appellant has not put forward any explanation as to why he has filed an ROA - While an application for restoration is to be filed under Rule of 20 of the CESTAT, (Procedure) Rules, 1982, Section 35C(2) of the Central Excise Act, 1944 provides for Rectification of mistake apparent from record. The amendments sought for by the appellants are to the effect of converting not only the nature, but also the very basis of the applications. Such amendments are not permissible. It would cause much prejudice to the other side. The Revenue is unnecessarily put into several rounds of litigations and is also a burden to the public exchequer. - Decided against assessee.
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2015 (11) TMI 474
Demand of service tax - Business Auxiliary service - Bar of limitation - whether the appellant is required to discharge service tax liability under the ‘Business Auxiliary Service’’ for the commission received by them from M/S Thomas Cook for the purpose of restricted money changing business in their premises - Held that:- Agreement is termed as an agency agreement and the appellants are appointed as an agent. The duties which have been cast upon the appellant are very clear that they should surrender the amounts collected in foreign exchange to M/s Thomas cook India Ltd. and in turn Thomas Cook will pay the appellant the amount equivalent in Indian rupees on the date of transaction and appellant will also get incentive on Indian rupee transaction, as per agreement. We find that the activity as is in transaction of the appellant would be covered under the category ‘Business Auxiliary services’, as the appellant is acting as agent of Thomas Cook, and it is very clear from the closure of agreement that appellant has been given restricted money exchange agency by Thomas Cook India Ltd. (from the authorization they have received for engaging in money exchange). - undisputedly appellant are acting as an agent of Thomas Cook India Ltd. We find that appellant has no case on merits. Appellant could have had a bona-fide belief that they are not liable to service tax under the category of ‘Business Auxiliary Services’. The service tax liability was first indicated by the officers of audit team. We find that the appellant has taken the point of limitation before the lower authorities but both the authorities did not record any finding, which leads to inference that the challenge on limitation is accepted. We also find that the appellant could not be faulted for any bona-fide belief that the amount received as incentive is taxable under the ‘Business Auxiliary Services.’ - Decided in favour of assessee.
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2015 (11) TMI 473
Denial of CENVAT Credit - Capital goods - GTA service - credit on the basis of ISD invoice issued by the Gajambuja Cement Muldwaraka, the contention of the Revenue is that they are a separate unit - services were used beyond the place of removal - Held that:- goods transport agency service used for transportation of finished goods upto the service place of delivery of the buyer, would be eligible for input service credit. The Hon’ble Karnataka High Court [2011 (3) TMI 248 - KARNATAKA HIGH COURT] upheld the decision of the Larger Bench of the Tribunal [2009 (5) TMI 48 - CESTAT, BANGALORE] and restricted credit upto 1.3.2008. Asstt. Commissioner of Service Tax, Bhavnagar Division, has issued certificate of Registration ISD to M/s GujAmbuja Cements Muldwaraka (a unit of Gujarat Ambuja Cements), Ambujanagar, Dist. Junagadh. In the present appellant M/s Amuja Cement is also unit of Gujarat Ambuja Cement Ltd. Hence, the appellant had rightly availed the credit on the basis of ISD invoices issued by the GajAmbuja Cement Muldwaraka. Bombay High Court in the case of Deepak Fertilizers and Petrochemicals Corpn Ltd., vs CCE [2013 (4) TMI 44 - BOMBAY HIGH COURT] held that definition under Rule 2(l) of the Cenvat Credit Rule 2004 is not restricted to input services used only for procurement and inward transportation of inputs. It was also more so as this broad and comprehensive meaning had to be read with Rule 2(i). In the present case, there is no material available that the services were not used in relation to the business of the appellant. So, we do not find any reason to deny input service credit. - Impugned order is set aside - Decided in favour of assessee.
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2015 (11) TMI 472
Waiver fo pre deposit - Consulting Engineer's Services - exemption from service tax under Notification No.45/2010/ST dated 20.07.2010 - Bar of limitation - Held that:- Proportionate cost of existing infrastructure, which has been separately shown and collected in the respective invoices along with supervision charges, cannot be considered as taxable service under the category of "Consulting Engineer's Services". Thus, on this count, the Applicant could able to make out a prima-facie case for total waiver of predeposit of service tax demand. Regarding confirmation of demand on the credit availed on input services, namely, security and telephone services, we are not impressed with the argument of the ld.Advocate for the Applicant. The Applicants are rendering both the taxable and non-taxable service, hence it is difficult to appreciate that the security and telephone services, are rendered in connection with only the taxable output services i.e. "Consulting Engineer's Service. Prima-facie, on going through the impugned order, we find that the ld. Commissioner was not convinced with the evidences placed before him and rejected the claim of the Applicant that these input service are used in rendering the taxable service. - Considering, the Applicant is a Public Sector Undertaking and also keeping in view the interest of Revenue, it would be appropriate, at this stage, to direct the Applicant to deposit ₹ 5.00 lakhs - Partial stay granted.
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2015 (11) TMI 471
Demand of service tax - import of services - reverse charge - payment of arrangement fees, underwriting fees, agency fees and legal fees as also out of pocket expenses - Imposition of penalty - Held that:- Appellant has received the service from consortium of Mandated Lead Managers in respect of facility arrangements in relation to raising of external commercial borrowings - service tax liability on an amount paid to the lead managers i.e. service providers, who have raised the external commercial borrowings in form of external commercial borrowings as to fee of arrangement and underwriting fee plus agency fee is undisputedly taxable under the category of banking and other financial service and taxable as per the provisions of Section 66A of the Finance Act, 1994, in hands of the appellant. To that extent, we uphold the service tax liability and interest thereof. Extended period of limitation and levy of penalty - held that:- appellant is having a good case on the revenue neutrality, inasmuch any service tax paid by them under reverse charge mechanism is eligible as Cenvat credit as the external commercial borrowings are for the purpose of business activity of the appellant. Keeping this in mind, we find that the appellant had made out a case for non-imposition of penalty; invoking the provisions of Section 80 of the Finance Act, 1994, we set aside the penalties imposed on the service tax liability. Inclusion of reimbursement of expenses - Held that:- As regards the service tax liability on an amount paid by the appellant for legal fees and out of pocket expenses, we find that the appellant has not been able to produce any documentary evidence before us to show that these amounts were in fact paid on actual basis. In the absence of any such documentary evidence, we are unable to accept the plea of the appellant. - Matter remanded back - Impugned order is set aside - Decided partly in favour of assessee.
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2015 (11) TMI 470
Demand of service tax - Manpower Recruitment or Supply Agency service - Respondent is engaged in work-wise carrying out lifting and storing of sugar bags - Held that:- Impugned order has categorically recorded that the respondent had received an amount towards "Hamali charges" as a lumpsum value and not for the individual worker wise, who are employed for undertaking the work of lifting and storing of sugar bags in the sugar factory. The entire tenor of the order seems to be that the activity undertaken by the appellant is one of the lumpsum activity. We find that the issue involved in this case is now squarely covered by the judgment of the Hon'ble High Court in the case of CCE & ST vs. Godavari Khore Cane Transport Company Pvt. Ltd. - [2015 (3) TMI 483 - BOMBAY HIGH COURT]. - issue involved is now squarely covered by the judgement of the Hon'ble High Court; accordingly, we hold that the impugned order is correct - Decided in favour of assessee.
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2015 (11) TMI 469
Waiver of penalties imposed under Section 76, 77 and 78 - Site formation & clearances, excavation and earth moving and demolition - Bonafide belief that service covered under supply of tangible goods service - Held that:- From the work order and description of the work, it shows that work order was for number of tippers and charges for supply of number of tippers. The charges also fixed for each tipper. From these details I agree that anybody can have belief that services falls under head of “supply of tangible goods”. Therefore the appellant’s submission that they entertained bonafide belief regarding the classification of the services, found reasonable. Moreover the appellant, though, in my prima facie view, the issue on merit also contentious, without contesting the demand they discharged entire service tax liability alongwith interest. They only sought waiver of penalties in this appeal. - facts and nature of service provided by the appellant, I agree with the appellant that entertainment of bonafide belief by the them is proper and they have made out a case for waiver of penalties by invoking Section 80. I therefore waive penalties imposed under Section 76, 77 and 78. Since appellant have not contested the service tax demand and interest confirmed and paid by them, the same is maintained - Decided in favour of assessee.
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2015 (11) TMI 468
Business Auxiliary Service - Receipt of commission - small service provider exemption upto ₹ 10 lakhs - brand name belongs to another person - Held that:- Appellant has received commission from Amway India in connection with multi level marketing, which was held to be liable to service tax under BAS. The appellant has contended that he is not covered under the scope of BAS as the transactions involved sale and purchase of goods. Ld. counsel for the appellant fairly conceded that the issue has since be decided by CESTAT in the case of Mr. Charanjeet Singh Khanuja & Others Vs. CST, Indore & Others [2015 (6) TMI 585 - CESTAT NEW DELHI] and that these appeals can be remanded to the original adjudicating authority for deciding the matter in accordance with the said judgement. - Impugned order is set aside - Decided in favour of assessee.
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2015 (11) TMI 467
Denial of Cenvat credit - services received for training of persons in dispensing of CNG in retail outlets - Invocation of extended period of limitation - Held that:- Dispensing activity of CNG in the retail outlet is undertaken by personnel who are the employees of service provider and not of appellant. This service provider is discharging service tax under the category of business auxiliary services; Cenvat credit availed by the appellant is of the service tax paid on the services rendered for training of the personnel. - if services are utilised by the service provider Cenvat credit can be availed by such service provider and not any other assessee. - Credit cannot be allowed - on merit decided against the assessee. Extended period of limitation - appellant had availed Cenvat credit on the months of March and April 2009, the said availment of credit has been informed to Department when they filed monthly returns. In my considered view, appellant could have entertained a bona fide belief that having paid for the training of personnel, they can avail the Cenvat credit of the service tax paid and I do not see any element of suppression or misstatement of facts on the part of the appellant that too with intent to evade duty in a situation as is in this case. Entertaining a bonafide belief of availment of Cenvat credit of the service tax paid that too, when assessee pays for such services, is a rational interpretation that would be taken by any assessee, in a situation as is the case before me. In my view, show cause notice dated 14th October 2010 invoking the extended period is incorrect and impugned orders confirming the demands on the grounds of suppression and misstatement are unsustainable and liable to be set aside when it is on records and undisputed that appellant has been filing monthly returns with the authorities indicating therein the availment of Cenvat credit on the invoices raised by the service provider for training of personnel. - Impugned order is set aside - Decided in favour of assessee.
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2015 (11) TMI 466
Denial of refund claim - refund of unutilized Cenvat credit of Service Tax - nexus with output services (export) - Held that:- The ground on which the refund is denied is that the accumulated input service credit did not pertain to the period during which output services were exported for which the refund claim is made. - appellants had taken the credit on receipt of the input service invoices of PWC and thereafter, the services were exported and then, the refund claim was filed. From the Boards Circular No. 120/01/2010 dated 19/01/2010 it is abundantly clear that accumulated input service credit, not pertaining to services exported during the quarter for which claim is made can be refunded as there is no bar in Notification No. 5/2006 C. E. (N. T.). The issue has been considered in CCE, Mysore vs. Chamundi Textiles (Silk Mills) limited [2011 (3) TMI 193 - CESTAT, BANGALORE] and Amdocs Business Services Pvt. Ltd. [2013 (9) TMI 31 - CESTAT MUMBAI] wherein it was held that the refund can be allowed of credit accumulated in the past period and claimed in a subsequent quarter . Therefore, in terms of the Board Circular stated above and also the decisions of the tribunal in Chamundi Textiles (Silk Mills) Ltd. and Am Docs Business Services (P) Ltd., (supra), I am of the view that the impugned order is unsustainable. - Decided in favour of assessee.
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Central Excise
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2015 (11) TMI 465
Reversal of CENVAT Credit - determination of price of exempted goods under Rule 6 of CCR - For the purpose of reversal of 10% whether the basic contract price should be taken or price plus 10% reversal collected should be taken - Held that:- From the contract documents that there is specific price fixed for sale of the goods and in that price there is no addition of this 10% in the form of the price. There is clause in the purchase order that against all the reversal of 10% customer shall pay the same amount to the appellant. In view of this fact contract price is the price and the same should be taken for calculation of 10% reversal required under 6(3)(b). As regard the 10% reversal made by the appellant and even though the same was collected from the customer the same was not retained by the appellant as the same was debited in their Cenvat credit account, therefore in this fact, it could not be said that 10 % reversal is part and parcel of the price of the goods. - in Rule 6(3) of CCR, 2004, prior to 1/4/2008 the 10% reversal is required to made on “price” of the goods and subsequent to 1/4/2008 it was amended and according to which 10% reversal was to be made on the “value” of the exempted goods. It was also clarified that value which is determined as per Section 4 or 4(A) of Central Excise Act, 1944, read with Rule made under. Prior to 1/4/2008 the price of which 10% reversal was to be made had no relevance to the Section 4 or 4(A) and it is also fact that term “price” mentioned in the Rule 6(3)(b) it was not defined in the Cenvat Credit Rules. In this position, I am of the view that price is to be taken as provided in the contract and as per contract; price does not include 10% reversal and collection thereof. Therefore 10% reversal made by the appellant on basic contract price is correct and legal. - Decided in favour of asssessee.
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2015 (11) TMI 464
Refund of education cess - area based exemption - whether the appellants are entitle for refund in respect of Education cess and Secondary and Higher Education Cess paid through cash under Notification No. 56/2002-CE dated 14/11/2002 - Held that:- Education Cess is in nature of piggy back of duty which could not operate in respect of excise duty exempted under the relevant law. When the entitlement to exemption of duty of excise or additional duty of excise which would otherwise being payable under 3(x) in Notification No. 56/2002-CE is undisputed, no duty of education Cess arises in nature of excise duty under section 93 of Finance Act, 2004. Education cess not to be refunded as no provisions or it returns in notification ibid is not sustainable. In view of the above settled legal position, I am of the considered view that the appellant is entitle for the refund of education cess and secondary and higher education cess paid on clearances of the goods under Notification No. 56/2002-CE. Therefore orders in appeal are set aside - Decided in favour of assessee.
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2015 (11) TMI 463
Denial of refund claim - interest paid under protest - Held that:- interest amount of ₹ 1,23,369/-was paid under protest as per the records available, also undisputed is that appellant was sanctioned the refund of CVD which was wrongly paid by them by an order No RGD/MHD/RFD-487/06-07 dated 12.03.2007 and the same is not challenged by the revenue.- It can be seen that the adjudicating authority has correctly recorded the facts and sanctioned the refund claim which is in accordance with the law - order of commissioner (appeals) rejected the refund is incorrect and liable to be set aside - Decided in favour of assessee.
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2015 (11) TMI 462
Availment of CENVAT Credit - sale of finished goods lower than the price of inputs (raw material) - While clearing the said goods, they treated the same as waste of ferrous of iron and steel and classified the same under sub-heading 7204.90 and paid the duty accordingly - department is considering the goods removed by them as input cleared as such - Held that:- the classification of the goods followed by the appellant is incorrect and is required to be rejected. The goods would be classifiable under the respective headings and would be chargeable to 15% duty as proposed in the show cause notice. Regarding valuation - When the goods were purchased by them, they were of bigger dimensions and the goods sold by them are of smaller dimensions and of varying sizes. In view of such position, such goods will fetch far less value compared to the goods purchased by them. The invoices of the goods sold by them are already available with the department and form part of the demand notice. We do not see any reason not to accept the value declared in such invoices. The Revenue has also not produced evidence that the appellant has collected any amount over and above the value declared in such invoices. In view of this position, the invoice value may be accepted and duty computed @ 15% on the declared value. Extended period of limitation - Held that:- whole case was made based upon an information and after visit to the unit. From the declaration filed by the appellant, it is not possible to make out that what they were selling was small sizes angles and plates. In view of the said position, in our view, invoking the extended period was correct. - invoice value may be accepted, the duty liability will required to be recomputed by the adjudicating authority. Further, the interest and penal liability will also change - Matter remanded back - Decided partly in favour of assessee.
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2015 (11) TMI 461
Denial of CENVAT Credit - Misdeclaration of goods - credit on various items of Chapter 72 and 73 in the guise of capital goods - Held that:- according to appellant various items of iron & steel were used for manufacture of supporing structures and foundation of the main paint shops. The main machines are rested on these structures in different floor without which the processes in the machines cannot function. - there is no definite finding on this issue - Matter remanded bact. Cenvat credit on input services - services received by him for use in or in relation to manufacture of the final product including the services used in relation to setting up of the plant. - Held that:- It is not in dispute that M/s. Tata Motors received the impugned services for the aforesaid purpose. - during the relevant period, the CENVAT Credit Rules did not preclude a manufacturer to take the credit at a later date in respect of the impugned services already received by them. Revenue s sole ground for denying the credit is that the appellant could not have utilized the impugned services for manufacture of the final product (as they dismantled their plant at Singur). We are of the opinion that as the input services were received by M/s. Tata Motors at Singur for manufacture of the final products, the said unit is eligible to take credit in terms of Rule 3 of CENVAT Credit Rules, 2004 read with Rule 2 (l) of the said Rules. - Tata Motors, Singur has taken the CENVAT Credit correctly on the input services - Matter remanded back - Decided in favour of assessee.
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2015 (11) TMI 460
Failure to pay duty - Clandestine removal of goods - Penalty u/s 11AC - Held that:- duty, which was not paid within stipulated time period, has been paid by the appellant on their own alongwith interest and the same has been declared in ER-1 return and informed separately vide letter dated 20/10/2007. The case of the appellant is squarely covered under sub section (2B) of Section 11AC. In view of this position, the department should not have issued any show cause notice on the appellant, consequently no penalty should not have been imposed either under Section 11AC or any other rule. - In both the cases facts were, that the goods were cleared clandestinely without payment of duty, whereas fact of the present case is the goods cleared under cover of invoices. Therefore it is not a case of clandestine removal of goods; it is a case of delay in monthly payment of duty. Both the judgments are not applicable in the facts of the present case. In view of this position, I am of the considered view that lower authority neither should have issued any show cause notice nor should have imposed penalty. Therefore, impugned order is not maintainable and hence the same is set aside - Decided in favour of assessee.
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2015 (11) TMI 459
Confiscation of goods - Clandestine removal - Imposition of redemption fine and penalty - Held that:- when appellant is manufacturing two types of goods and while counting ingots it is not coming out from the facts of the case that how much of ingots are 3-4 inches and how much ingots are 3.5x4.5 inches. Therefore, the weighment method on average basis cannot be correct. Therefore, there may be a variation while taking the stock. In these circumstances, the method of counting the stock is not correct in the case of M/s. Jaideep Ispat & Alloys P Ltd. Therefore, excess stock found may be due to this variance. In these circumstances, the excess stock found in the case of M/s. Jaideep Ispat & Alloys P Ltd. unit 1 & 3 are not liable for confiscation. Further, I find that in the case of M/s. Moira Steels Ltd. there is also excess stock found is less than 5%. There may be a variance of stock taking on average basis. In this case also the appellant is manufacturing two types of MS ingots. Therefore, allegation of excess stock on average basis cannot be alleged against the appellant. Allegation made against the appellant that these goods are meant for clearance clandestinely without payment of duty is correct. Consequently, I hold that in the case of M/s. Shivangi Estate Ltd. the goods are liable for confiscation. But I find that the duty involvement in the said goods is only ₹ 31,252/-whereas redemption fine and penalties are imposed are highly excessive i.e. redemption fine of ₹ 1,50,000/- and penalty of ₹ 75,000/- on M/s. Shivangi Estate Ltd. and penalty of ₹ 1,00,000/- on Pankaj Bansal, Director. - However, in the case of these three appellants mentioned in para 8 above goods are not liable for confiscation. Consequently, redemption fine and penalty on the manufacturer appellant are not imposable - Decided partly in favour of assessee.
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2015 (11) TMI 458
Job work - Valuation - whether the value of the jobwork undertaken by the appellant for Swojas is liable to be included in the value of clearances made by the appellant and deny him the benefit of Notification No.1/93 holding appellant as manufacturer - Held that:- appellant is manufacturer of various dairy equipments and claims benefit of small scale exemption No. 1/93 and also undertakes jobwork. It is seen from the records and more specifically the undertaking given by the Swojas to the jurisdictional authorities having jurisdiction over their office that they wished to get the dairy equipments manufactured on jobwork basis from the appellant herein. We specifically find that the said Swojas has informed and requested the Asst. Collector to forward one of the undertakings to the jurisdictional authorities of the appellants factory. Further we find that they had given a clear undertaking that any duty liability that arises on the dairy equipments manufactured as job work by the appellant, will be discharged by Swojas. On such categorical declaration and undertaking given by Swojas no demand is raised on Swojas. We find that the provisions of Notification No.84/94 are clear when read indicates that if any duty liability that arises on the goods manufactured on job work basis under the said Notification, is to be demanded from the supplier of the raw material. In the case in hand, the supplier of the raw material is Swojas and the demand of duty if any, should have been made on them and not on the appellant. The provisions of the said Notification are very clear to that extent and Revenue authorities were in error in demanding the Central Excise duty from the appellant. - impugned order is set aside - decided in favour of assessee,
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2015 (11) TMI 457
Benefit of small scale industry exemption under notification number 8/2003 CE - whether the first appellate authority has erred in setting aside the demands raised for the period beyond the limitation or otherwise - Held that:- Unit at Andheri filed the declaration as required and for availament of the benefit of the notification number 8/2003. At the time of the filing such declaration they had no intention to start new business at another unit hence availment of Cenvat credit and benefit of notification number 9/2003 need not have been submitted before the authorities having jurisdiction over Andheri unit. - revenue’s appeal is not bringing on record contrary evidence to hold that appellant had suppressed or mis-stated the information in order to evade Central Excise duty accordingly we hold that the demands dropped by the first appellate authority on limitation is correct and does not require any interference. - Impugned order is upheld - Decided against Revenue.
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2015 (11) TMI 456
Duty demand - Abatement claim - Penalty for abatement - Held that:- Products in question are considered as evasion prone goods hence the government brought in the legislation to tax the said goods based upon the production capacity. The legislative intent is very clear that though the duty liability is on production capacity ascertained, abatement was granted if the procedures are followed. Having not followed the procedure, which are required for an assessee to inform the authorities that there is closure of unit due to non availability of power and revenue authorities on inspection record the same and grant an abatement. In the case in hand, it is undisputed that appellant has not filed any declaration for abatement; they cannot claim the same belatedly even if there was no power connection during the specific period in a month. To that extent, we hold that appellant has no case on merits and the adjudicating authority was correct in confirming the demands with interest. - appellant could have entertained a bone fide belief that the abatement from the duty payment can be claimed subsequently, hence we find that the penalties are unwarranted. Accordingly, we set aside the penalties imposed - Decided partly in favour of assessee.
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2015 (11) TMI 455
Duty demand - Clandestine removal of goods - Imposition of penalty - Held that:- The records reveal that the whole case of clandestine removal is based merely on the entries found in the books of Commission agent and transporters. They were acting as agent and transporter not only for the Respondent but also for other manufacturers. The department has not conducted any physical verification of stock of finished goods or raw material. The allegation is not supported by data of purchase of excess raw materials or consumption of electricity during the relevant period. The details of payment and flow of cash from the buyer to Respondent is not established by any evidence. - there is no proof like parallel invoice, or other documents maintained by manufacturer corroborating the date collected from such commission agent and transporters. No investigation is conducted whether Respondent actually manufactured such large quantities during the relevant time. If Revenue wants to rely upon the entries of document seized from the premises of third party, it is for them to prove the genuineness of those entries with the Respondent. The proceedings and allegation of clandestine removal cannot be based on surmises and conjectures or mere suspicions. The appellant has not been able to demonstrate anything to disturb the findings made in the impugned order. - Decided against Revenue.
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2015 (11) TMI 454
Reversal of CENVAT Credit - Department initiated proceedings for recovery of the amount equal to 5% of the value of slag removed from factory in terms of Rule 6(3)(i) of the Cenvat Credit Rules, 2004 - Held that:- Appellant had set-up its factory with the intention to manufacture iron and steel products and slag generates involuntarily during such process. Since, the appellant never intended to manufacture the by-product namely slag and the same emerges as an unavoidable and inevitable waste, emergence of such waste product cannot be termed as "final product" for the appellant, in order to fall within the ambit of Rule 6 of the Cenvat Credit Rules. - provisions of Rule 6(3)(i) of the Cenvat Credit Rules, 2004 would not be applicable in the facts of this case for payment of amount equal to 5% for value of the waste product i.e. slag removed from the factory. Therefore, I set aside the impugned order - Decided in favour of assessee.
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2015 (11) TMI 453
Availment of CENVAT Credit - Capital goods - Held that:- Jumbo electric /battery operated platform truck, hot metal transport vehicle, trailer assembly and ladle transfer car are specially designed for operational use inside the appellant's factory. These items are part of overall machinery system critically contributing to manufacture of final product - are not transfer vehicles or trucks for common public transport of goods. As admitted in the proceedings, they are specially designed for industrial purpose and the operate within narrow scope of factory premises. In the case of Bhusan Steel Ltd. (2012 (10) TMI 306 - CESTAT, KOLKATA), this Tribunal held that diesel locomotive torpedo ladle car carrying molten metal not only enhances the effectiveness, but without it the handling and in turn production of finished goods would not be possible. The Tribunal upheld the lower authority's order holding that diesel locomotive as accessory of capital goods. - all these equipments are correctly be considered as accessories to various capital goods involved in the manufacture of final products as they are integrally connected in the process of manufacture. Accordingly, we hold that the denial of cenvat credit for these items is not sustainable - Decided in favour of assessee.
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2015 (11) TMI 452
Benefit of notification no.64/95-CE dated 16.03.1995 - Non production of certificate from an Officer not below the rank of a Rear Admiral of the Indian Navy or Coast Guard or Director General of Coast Guard or any other officer of Indian Navy or Coast Guard equivalent to the Joint Secretary to the Government of India - Held that:- Appellant has contested the imposition of penalty on them on the grounds that it is only an issue of interpretation of exemption notification, therefore, penalty is not imposable. The facts that goods which are in dispute have been supplied by the appellant to a supplier who ultimately supplied the goods for intended use for Indian Navy and any goods supplied to Indian Navy is entitled for exemption notification no. 64/95 ibid. The only default on the part of the appellant is that they have not obtained certificate from Indian Navy in their own name issued by proper officer. Same facts were before this Tribunal in the case of Hindustan Petroleum Corporation Ltd. (2014 (2) TMI 324 - CESTAT MUMBAI) - Demand of duty along with interest is confirmed - Penalty imposed by way of impugned order is set aside - Decided partly in favour of assessee.
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2015 (11) TMI 451
Rectification of mistake - Cenvat Credit - Duty paying document - input services - sr. no was not pre-printed but hand written on Invoice - Waiver of pre deposit - Mandatory pre deposit - Held that:- adjudicating authority disallowed CENVAT credit and confirmed the demand of ₹ 1.60 Crores alongwith interest and penalty, on the ground that the appellant had availed cenvat credit on the strength of invoices of the service providers, bearing hand written serial numbers. Both sides placed case laws in their favour. After hearing both the sides, the Tribunal followed the decision of the Hon'ble Himachal Pradesh High Court in the case of Chandra Laxmi Tempered Glass Pvt. Limited [2008 (7) TMI 257 - HIMACHAL PRADESH HIGH COURT]. - tribunal followed the decision of the Hon'ble High Court and therefore, the decision of Single Member Bench of the Tribunal was not considered. In view of that, we do not find any reason for rectification or modification of the stay order. - Period for making compliance is extended - Decided partly in favour of assessee.
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2015 (11) TMI 450
Interest in refund claim - whether the appellant is entitled to interest on the expiry of three months from the date of filing the application or on the expiry of this same period from the date on which the order of refund was made. - Held that:- refund claim was filed by appellant on 28/05/2010. According to the appellant they are entitled to interest from 28/08/2010 onwards as per the provisions of law. The Commissioner (Appeals) has taken the view that as the appellant was sanctioned refund by the order in Appeal No. 426/SVS/ GGN/2012 dated 23/10/2012 the appellant is entitled to interest on expiry of three months from of the date of order i.e.; from 31/01/2013 onwards. The Commissioner (Appeals) has interpreted section 11BB of the Central Excise Act, 1944 and held that as the refund claim was sanctioned vide order dated 23/10/2012 and the same was hand-delivered along with the request letter dated 25/10/2012 by the appellant in the office of the respondent on 31/10/2012, the date of receipt of application for a refund has to be treated as 31/10/2012 and not as 28/05/2010. - appellant had filed the claim for refund on 28/05/2010. Therefore as laid down by the Hon ble Supreme Court in the above decision the appellant is entitled to interest on the expiry of three months from the date of filing the application of refund. In such circumstances, the appellant herein is entitled to interest from 28/08/2010 to 14/02/2013 on which date the claim of refund was sanctioned/the crossed cheque was given. - Decided in favour of assessee.
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2015 (11) TMI 449
Denial of refund claim - Unjust enrichment - Demand of differential duty - issuance of credit note/ debit note in section 11B - Held that:- Since the credit notes issued by the appellant to its buyer and in turn debit notes were also issued by the buyer to the appellant showing that the excess duty has been borne by the appellant as well as the benefit of duty amount has not been claimed by the buyer, the presumption of not passing on the duty incidence has been satisfied in the circumstances of the present case and as such the responsibility of proving that the incidence has not been passed on, has been duly satisfied by the appellant. Thus, in my view, the amount of refund, instead of crediting to the consumer welfare fund, be allowed to the appellant as refund. There is no prohibition/restriction in section 11B of the Act that credit note cannot be issued at a later date than the date of supply of the goods. In absence of any prohibition in the statute, denial of refund benefit to the appellant is contrary to the statutory mandates. - incidence of excess paid Central Excise duty has not been passed on by the appellant to its buyer, and thus, the doctrine of unjust enrichment is not applicable, for denying the benefit of refund. Therefore, the impugned order is set aside - Decided in favour of assessee.
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