TMI Tax Updates - e-Newsletter
November 15, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Merely because the CIT is of the opinion that the penalty levied by the Assessing Officer is on the lower side would not vest the Commissioner with the power of suo motu revision under Section 263 - AT
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Income Tax:
Computation of capital gain u/s 50 - No justificationi to deny the claim of the assessee to allow adjustment of cost of new premises acquired as he has not considered the provisions of section 50(1) of the Act correctly - AT
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Income Tax:
Assessment on amalgamated company – Assessment on a company which has been dissolved by amalgamation u/s 391 and 394 of the Companies Act, 1956 is invalid - AT
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Income Tax:
Allowability of interest relatable to the borrowed funds given by the company to its directors and its sister concerns for acquiring agricutural land - interest allowed - AT
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Income Tax:
Exemption u/s 54F - belated filing of return - extended period u/s 139(4) has to be considered for the purpose of utilization of the capital gain amount - AT
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Income Tax:
Assessment of share application money as unexplained income u/s.68 - if the evidence by way of book entries were to be itself sufficient to prove cash credits, section 68 would itself to be misconceived and redundant - AT
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Income Tax:
Claim of interest expenditure - during earlier years interest was capitalized as work in progress towards acquisition of property - later transaction could not materialized, the expenditure set-off as expenses - claime disallowed - AT
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Income Tax:
Valuation u/s 50C - whether deeming provision of section 50C are applicable where the entire capital gain is exempt u/s 54EC on investment - Held yes, however exemption u//s 54EC to be allowed to the extend valuation u/s 50C - AT
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Income Tax:
Transfer pricing adjustment - agreement was between the Indian PSU and the Indian subsidiary of two non resident companies - transaction, cannot be presumed to be international transaction, even when the revenue authorities have tried to include it as the deemed transactions, - AT
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Income Tax:
Transfer pricing adjustment - since the TPO did not adhere to the prescribed methods consciously, another innings to rectify the mistake cannot be allowed, as the TPO infringed the relevant provision of the Income Tax Act and Rules - AT
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Income Tax:
CIT(A) has no power to issue directions to AO for rectification when no appeal is filing u/s 246A against the order u/s 200A - error in computerized intimation as short deduction / short payment/ late payment and interest thereon - AT
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Income Tax:
Addition made during the assessment u/s 153A - there was no assessment pending in this case and in such a case there was no question of abatement of assessment. - AT
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Customs:
Benefit of Notification No.11/97-Cus. - Clearing ‘Sheet for making insole’ by filing Bills of Entry - CBE&C circular cannot put condition which were not found in the notification- - AT
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Customs:
Valuation - Export of consignment of Iron Ore - the price actually paid for the goods exported was the price realized by them as per the final invoice and as per the Bank certificate and that is the transaction value on which duty liability has to be discharged - AT
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Customs:
Classification of product Zircon Ore/Concentrate - the goods imported by the appellant are eligible for the benefit of Notification No. 4/2006-C.E. as the goods which are imported are nothing but Zirconium Ore - AT
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Service Tax:
Cenvat credit of service tax - Job worker paid under Business Auxiliary Services – In the absence of any action at the job worker’s end, Prima facie the CENVAT Credit sought to be denied is incorrect - AT
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Service Tax:
Valuation - exclusion of cost of goods – Board’s circular dated 20.06.2003 – Notification No. 12/2003-ST - The exemption notification is clear and admits of no restrictive clauses - AT
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Service Tax:
Valuation - inclusion of reimbursement of expenses - Storage & Warehousing - Cargo Handling Services - transportation charges shows separately in Invoice on actual basis not taxable - AT
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Service Tax:
Mandap keeper service - The Mandap Keeper means ‘a person who allows temporary occupation of a Mandap for consideration for organizing any official, social or business function' - Premises is not given for temporary occupation by Hotel Siddharth - not taxable - AT
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Service Tax:
Data and edit fees - appellant, the Indian entity, is required to collect and provide data - ‘Business Support Services' merit classification - stay granted - AT
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Service Tax:
A proprietorship concern is to be considered as commercial concern for the purpose of interpreting different clauses in Section 65(105) of the Finance Act, 1994 - stay granted partly - AT
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Service Tax:
Separate appeal for Separate show cause notice – a single appeal filed against an order cannot be held to be irregular only for the reason that the order had dealt with more than one show cause notice - AT
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Central Excise:
Valuation of re-treading materials – transaction value - addition of developing/designing charges of machines paid separately by customers should have been done after establishing their nexus with negotiated price of machine - AT
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Central Excise:
SSI Exemption - Logo and brand name did not used but the name of the manufacturer - When goods are sold using only the name of the manufacturing company, this would not disentitle an assessee from claiming small-scale exemption - AT
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Central Excise:
SSI Exemption - Clubbing of the value of clearances - Revenue clearly proves its case establishing total concern, control, nexus and inseparable link between the assessee and its other proprietary concern - AT
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Central Excise:
Undervaluation of goods or not – Profit accrued from transportation charges adopting average cost process is not determining factor while actual cost incurred in respect of each consignment under consideration needed testing to make an allegation of undervaluation. - AT
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Central Excise:
Undervaluation of goods - Information retrieved from laptop admissible or not - Revenue’s reliance on the retrieved data by GEQD cannot be held to be an admissible piece of evidence - AT
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VAT:
Rejection of books of accounts - It is incumbent upon the assessee to offer plausible explanation as to why they were not produced at the time of survey. The burden is on the assessee to show as to why no adverse inference should be drawn - HC
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2013 (11) TMI 684
Non-speaking order – sustainability - Additions u/s 69C made by the AO was deleted by the ITAT in part – Held that:- No reasons have been assigned at all while dismissing the appeal preferred by the revenue and partly allowing the appeal preferred by the assessee and sustaining addition of Rs.30 lac except observing that “On an overall examination of the facts, we are of the considered view that an addition of Rs.30,00,000/requires to be sustained to meet the end of justice”. Thus, as such the impugned judgment and order passed by the learned ITAT is absolutely a non-reasoned and nonspeaking order. Reliance has been placed on the judgment in the case of Ravi Yashwant Bhoir vs. Collector reported in [2011 (3) TMI 1489 - SUPREME COURT], the Hon’ble Supreme Court had an occasion to consider the rationale behind the requirement of recording reasons in order. In the said decision, it is observed and held by the Hon’ble Supreme Court that requirement of recording reasons is one of the principles of natural justice. It is further observed and held by the Hon’ble Supreme Court that right to reasons is an indispensable part of sound judicial system - in the case of Certified Area Committee vs. Additional Director, Consolidation reported in [2001 (5) TMI 921 - SUPREME COURT], wherein it was held by Hon’ble Apex court that “The reasons are the flesh and blood of Judicial adjudication and such reasons must be shown in the orders which are liable to be challenged in the Superior Court”. - matter remanded back for reconsideration and passing speaking order.
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2013 (11) TMI 683
Condonation of delay of 118 days – Held that:- Relying upon the judgment of Hon'ble Supreme Court in the case of Collector, Land Acquisition Vs. MST. Katiji and Others [1987 (2) TMI 61 - SUPREME Court], assessee was prevented by sufficient cause in filing the appeals in time. The assessee has filed ample documentary evidence in the form of medical certificates, prescription etc. in support of its claim that he is not keeping good health for the past few years – Delay condoned. Penalty under section 271(1)(c) on the entire amount of addition made by Revenue – Penalty orders passed under Section 271(1)(c), the assessee did not file any appeal but filed revision petition under Section 264 – During pendency, the CIT initiated proceedings under Section 263. In the order under Section 263, he set aside the matter to the file of the Assessing Officer and then he dismissed the assessee's petition filed under Section 264 holding the same to be infructuous - Penalty order under Section 271(1)(c) on entire additional income offered in the return filed in response to notice under Section 153A – Held that:- Order under Section 263 is not liable to be sustained because it is a settled position that penalty under Section 271(1)(c) is not to be levied on every income. The penalty is to be levied only when the conditions prescribed under Section 271(1)(c) are satisfied. Even when we see the language of Section 271(1)(c), even on concealed income, the levy of penalty is not automatic because discretion has been given to the Assessing Officer to levy or not to levy the penalty which would be clear from the use of the words "may" in Section 271(1)(c). Legality of order passed u/s 263 of the Income tax Act – Penalty u/s 271(1)(c) levied on lower side – Held that:- Reliance has been placed on the judgment of Hon’ble Bombay High Court in the case of Gabriel India Ltd.[ 1993 (4) TMI 55 - BOMBAY High Court] , wherein it was held that it would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. In the present case, the ratio of decision of Bombay High Court would be squarely applicable. The Assessing Officer had levied the penalty on substantial portion of the income assessed. Merely because the Commissioner is of the opinion that the penalty levied by the Assessing Officer is on the lower side and left to the Commissioner he would have levied the penalty on the entire income assessed would not vest the Commissioner with the power of suo motu revision under Section 263 – Decided in favor of Assessee. Restoration of the revisions petition U/s 264 which is dismissed as infructuous in consequence of the order passed U/s 263 of the Income Tax Act – Held that:- In the additional grounds, the assessee is claiming the relief against the dismissal of order passed under Section 264. Though the relief claimed is only consequential in nature but, Tribunal do not have any jurisdiction to give any direction with regard to order passed under Section 264 – Therefore, no any direction given with regard to order passed under Section 264 - Though, all natural consequences of quashing of the order under Section 263 would follow.
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2013 (11) TMI 682
Computation of capital gain u/s 50 - sale of depreciable assets - block of assets - AO rejected the claim of assessee of deducting actual cost of new office premises acquired during the previous year relevant to the assessment year under consideration from the full value of consideration received on sale of office premises at Prasad Chamber (ibid) while computing the capital gain on the ground that the new office premises cannot form part of block of assets (i) that the assessee failed to take possession of the new office premises (ii) that the said premises were residential property and required to be utilized for that purpose only and thereby not forming part of block of assets – Held that:- No justificationi to deny the claim of the assessee to allow adjustment of cost of new premises acquired as he has not considered the provisions of section 50(1) of the Act correctly - As per Clause (iii) to section 50(1) of the Act, only requirement is that the assessee must acquire the assets which form part of the block assets during the previous year and if so the actual cost of the said acquired assets has to be deducted from the sale proceeds received by assessee on transfer of the assets while computing the capital gains u/s 50 of the Act. Reliance has been placed on the Special bench judgment in the case of Chhabria Trust V/s ACIT [2003 (5) TMI 479 - ITAT MUMBAI], wherein it was held that for the purpose of section 50, it is not necessary that the newly acquired assets must be used for the purpose of business during the year under consideration – Again, reliance has been placed on the judgment in the case of Oceanic Investment Ltd. v. Asstt. CIT [1996 (9) TMI 581 - ITAT MUMBAI], wherein held that use of an asset which has been acquired out of transfer proceedings of the depreciable assets forming part of block of assets is not condition precedent for making adjustment in Block of assets – Following the above decisions, assessee is entitled to take actual cost of new premises aggregating to Rs.54,82,500/- which falls within the block of asset during the previous year to be deducted from the value of consideration received of Rs.67,68,750/- on transfer of earlier business premises whose WDV was NIL, while computing the capital gains u/s 50 of the Act – Decided in favor of Assessee. Whether exemption u/s 54EC is available only for long term capital gain – Held that:- Reliance has been placed on the decision in the case of CIT V/s ACE Builders Pvt Ltd [2005 (3) TMI 36 - BOMBAY High Court ], wherein it was held that even if the assets were depreciable, but held for more than 36 months, the sale proceeds could be invested under the provision of the sec 54EC of the IT Act, 1961 – Decided in favor of Assessee.
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2013 (11) TMI 681
Rectification of order u/s 254 [2013 (6) TMI 352 - ITAT Hyderabad] - Deduction of TDS u/s 194J of the Income tax Act - Payment to NSDL/CDSL is in the nature of professional services, the provisions of sec. 194J are attracted and tax was deductible at source – Held that:- Reliance has been placed on the judgment in the case of CIT vs. Kotak Securities Ltd. [2011 (10) TMI 24 - Bombay High Court] - In the present case, while adjudicating the issue, the Tribunal considered the entire facts of the case and observed, that the assessee has availed managerial services from NSDL/CDSL for which the assessee has paid the fees. Taking support from the judgement of Bombay High Court, it was held by the Tribunal that the assessee is liable to deduct TDS on the impugned payment. Power of Tribunal u/s 254(2) of the Income Tax Act – Held that:- Reliance has been placed on the judgment in the case of CIT vs. Pearl Woollen Mills [2009 (11) TMI 48 - PUNJAB AND HARYANA HIGH COURT], wherein it was held that Tribunal could not re-adjudicate the matter under section 254(2). It is well settled that a statutory authority cannot exercise power of review unless such power is expressly conferred. There was no express power of review conferred on the Tribunal. Even otherwise, the scope of review did not extent to rehearing a case on the merits. Scope and ambit of application of section 254(2) is very limited. The same is restricted to rectification of mistakes apparent from the record - Recalling the entire order obviously would mean passing of a fresh order. That does not appear to be the legislative intent. The order passed by the Tribunal under s. 254(1) is the effective order so far as the appeal is concerned. Any order passed under s. 254(2) either allowing the amendment or refusing to amend gets merged with the original order passed. In the instant case, the Tribunal while deciding the appeal of the assessee vide order dated 28th March, 2013 not only considered the elaborate arguments advanced by the Authorised Representatives of both the parties but also took into consideration the written synopsis filed by the AR for assessee before it. Generally the main purpose of the Tribunal for calling for written synopsis from the parties is that nothing is ignored or any point in issue which was raised during the course of arguments or which could not properly be noted by the Members in the log book while hearing the arguments of the parties, is left unconsidered – Decided against the Assessee.
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2013 (11) TMI 680
Benefit of exemption u/s 11 and 12 of the Income tax act - Urged that Ld. CIT(A) erred in allowing the claim of expenditure of Rs. 184,77,745/- when the assessee has failed to furnish complete documentary evidence to substantiate the claim to fulfill its objective – Held that:- Complete details of the donations received is not on record. The donations and the income so generated has been held by the Ld. CIT(A) to have not been applied for charitable purposes. In these circumstances, it is contradictory on the part of the Ld. CIT(A) to hold that the donations are disclosed and exempt and at the same time hold that assessee is not entitled for exemption u/s. 11 & 12 of the Act in as much as it is not engaged in any charitable activity. Ld. CIT(A) has held that the assessee should be allowed the claim of expenditure of Rs. 18477745/-. This is quite contradictory approach as when it has been held by the Ld. CIT(A) that assessee is not engaged in any charitable activity, there is no question of allowing any expenditure incurred in this regard - It is clear that the ld. CIT(A) has passed a contradictory order – Reliance has been placed on the Apex court judgment in the case of Kapurchand Shrimal Vs. CIT, [1981 (8) TMI 2 - SUPREME Court], wherein it was held that it is the duty of the Appellate Authority to correct the lacunae in the order of the authorities below and if needed remand the matter - Remitted the issue raised in the Cross Appeals to the file of the Ld. CIT(A) to consider the issue afresh.
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2013 (11) TMI 679
Assessment on amalgamated company – Held that:- A company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with incorporation and it dies with the dissolution as per the provision of the Companies Act. On amalgamation, the company seizes to exist in the eyes of the law. Thus, assessment upon a dissolved company is impermissible as there is no provisions in Income Tax Act - Assessment on a company which has been dissolved by amalgamation u/s 391 and 394 of the Companies Act, 1956 is invalid – Decided against Revenue.
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2013 (11) TMI 678
Power of CIT(A) to give directions to AO for rectification when no appeal is filing u/s 246A against the order u/s 200A - computerized intimation u/s 200A – short deduction / short payment/ late payment and interest thereon. – Held that :- Reliance has been placed on the judgment in the case of ITO vs. Govt. Co- Ed Secondary School, New Delhi [2013 (11) TMI 666 - ITAT DELHI], wherein it was held that CIT(A) has no power to issue direction to AO for rectification when there is no appeal - Decided in favor of revenue.
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2013 (11) TMI 677
Assessment u/s 153A after search - No assessment is pending u/s 143(2) - whether addition/disallowance can be made to the income of the appellant u/s 153A of the Act which is not based on any incriminating material found and seized during the search - Held that:- In keeping with the Special Bench decision in 'Alcargo'[2012 (7) TMI 222 - ITAT MUMBAI(SB)], as considered in 'Kusum Gupta' [2013 (11) TMI 665 - ITAT DELHI], particularly in the absence of any judgement to the contrary having been brought to our notice, following the said decisions, since undisputedly in the present case, no incriminating material was recovered during the search against the assessee, as is also evident from the assessment orders for the all the concerned six assessment years, copies whereof have been placed on record, no addition was called for in the assessment u/s 153A of the Act – Decided against the Revenue.
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2013 (11) TMI 676
Allowability of interest relatable to the borrowed funds given by the company to its directors and its sister concerns - On the total borrowed funds of Rs.622,47,92,446/-/-, the assessee has paid interest of Rs.39,80,73,293/- during the year. The total amount of funds given by the assessee to the directors and the sister concerns,(amounts) amounting to Rs.259,06,79,783/-. The proportionate interest relatable to this borrowed fund amounts to Rs.16,56,73,063/-. Therefore, out of the total interest of Rs.39,80,73,293/- claimed by the assessee, interest of Rs.16,56,73,063/- is disallowed – Held that:- The main purpose of the assessee's business was to carry on real estate operations. In the process of acquiring and dealing with properties, monies were advanced to its sister concerns and individuals for acquiring properties which at that relevant time were categorised as agricultural lands. The assessee being a company was prevented by the State law to buy any agricultural lands for exploitation of the same for non-agricultural purposes. To outsmart such restrictions imposed by the State Government, the assessee had indulged by roping in the individuals by advancing monies to buy agricultural lands on its behalf and get them converted into non-agricultural purposes etc. Assessee had entered into agreement on 3.5.2002 with Shri Raja Bagmane, Managing Director of the assessee, his wife Smt Vasundhara Raja and Shri V Veerappa [father-in-law of Shri Raja Bagmane] to purchase the agricultural lands in their names, convert them for non-agricultural use and subsequently transfer them to the assessee – Reliance has been placed on the judgment of the Hon'ble Supreme Court in the case of S.A. Builders v. CIT reported in [2006 (12) TMI 82 - SUPREME COURT], wherein it was held that "the interest-free loan was given to the sister company (which is a subsidiary of the assessee) as a measure of commercial expediency, and if it was, it should have been allowed. The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency – Also, reliance has been placed on the Delhi High Court judgment in the case of CIT vs. Dalmia Cement (Bharat) Ltd. [2001 (9) TMI 48 - DELHI High Court] – Decided against the Revenue. Allowability of deduction of bribes - Expenditure of Rs.15.5 lakhs entered in its cash book and paid as alleged bribes – Held that:- For the current year, the P &L account was not completed as on the date of search and the assessee did not take into consideration the said sum of Rs.15.5. lakhs as deduction while computing the taxable income. On a perusal of various expenses, it is very evident that the said sum has not been claimed as a deduction and was not debited in the P & L account. Under the head 'Misc. expenses', the amount debited in P & L account was only a sum of Rs.52,932/- on a total turnover of Rs.52,78,53,632/- and, therefore, the impugned amount of Rs.15.5 lakhs was not an expenditure that was claimed as an expenditure - Thus, the disallowance of Rs.15.5 lakhs will not arise while computing the assessee's taxable income
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2013 (11) TMI 675
Exemption u/s 54F - belated filing of return - Whether extended period as per section 139(4) has to be considered for the purpose of utilization of amount of capital gain for the purpose of claiming exemption u/s 54F of the Act – Held that:- Issue is squarely covered by the decision of Hon'ble Punjab and Haryana High Court in the case of CIT V/s Ms. Jagriti Aggarwal [2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT], wherein, their Lordships have held that provision of section 139(4) is not an independent provision, but is related to time contemplated under the provision of section 139(1) of the Act. Accordingly, section 139(4) had to be read along with sub-section (1) of section 139 and the due date for furnishing the return of income u/s 139(1) is subject to the extended period provided u/s 139(4). Hence, extended period u/s 139(4) has to be considered for the purpose of utilization of the capital gain amount – Following the above judgment, assessee is entitled to claim deduction u/s 54F of the Act for utilization of sale consideration for investment in new residential property within due date as stipulated u/s 139 of the Act – Decided in favor of Assessee.
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2013 (11) TMI 674
Assessment of share application money as unexplained income u/s.68 - Revenue had followed the money trail up to fourth layer, i.e., whereat the cash was found deposited in the bank accounts of persons with no credibility - directors of the investors companies, admitting to the transaction beign bogus inasmuch as they are only providing accommodation entries for a commission - Held that:- Reliance has been placed on the judgment in the case of CIT vs. Youth Construction P. Ltd. [2012 (11) TMI 595 - DELHI HIGH COURT], wherein it was observed by the Hon’ble Court that Section 68 of the Income-tax Act, 1961, applies equally to share application monies received by an assessee and, therefore, the burden is on the assessee to prove the nature and source thereof, to the satisfaction of the Assessing Officer. It involves there ingredients, namely, the proof regarding identity of the share applicants, their creditworthiness to purchase the shares and the genuineness of the transaction as a whole. In the instant case, assessee has done little excpect raising a legal plea of non production of the said directors or deponents for cross examination. The same has been disregarded by the Revenue on the ground that sufficient opportunity is toward the same were granted during the course of the proceedings before the investigation wing and which had deliberately evaded by the assessee on pretext or the other - Furnishing of the documentary evidences, viz. the share application money, balance-sheet of the creditor companies is of little evidential value in the facts of unearth and late bear by the Revenue. Rather, it needs to be appreciated that if the evidence by way of book entries were to be itself sufficient to prove cash credits, section 68 would itself to be misconceived and redundant inasmuch as it is only based on the credit appearing in the books of account – Decided against the Assessee. Whether assessee's loss is a speculation loss in view of the provisions of explanation to section 73 o the Act - Assessee's principle business being trading in shares and securities, the A.O. has invoked the said provision and which has found confirmation by the ld. CIT(A) on the same ground – Held that:- There has been no business activity during the year and the impugned loss is on account of valuation of the inventories, would make no difference in the value of of stock is an integral part o the process of determination of business income – Reliance has been placed on the decision of the case CIT vs. Lokmat Newspapers Pvt. Ltd. [2010 (2) TMI 94 - BOMBAY HIGH COURT] – Decided against the Assessee.
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2013 (11) TMI 673
Jurisdiction to issue notice u/s 147 in question – Material available at the time of assessment u/s 143(3) but not considered by AO – Reasons to be recorded for re-opening of assessment – Held that:- Reliance has been placed on the judgment in the case of Titanor Components Ltd. Vs. Asstt. CIT & ors [2011 (6) TMI 138 - Bombay High Court], wherein it was held that if there is no failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment for that assessment year and the assessment is made u/s 143(3) and the initiation of reassessment proceedings beyond 4 years from the end of the relevant assessment year is not justified if there is no allegation in the reasons recorded for reopening the assessment that there was any failure on his part to fully and truly disclose material facts necessary for assessment year. Since the above case squarely applies to the facts of the case, in the reasons recorded by the AO there is no such facts mentioned by the AO that the income chargeable to tax has escaped assessment on account of failure on the part of the assessee to fully and truly disclose material facts necessary for assessment of the year under consideration and the reassessment proceedings is also initiated beyond four years from the end of the assessment year and the earlier assessment was also made u/s 143(3) of the Act, initiation of reassessment proceedings is barred by limitation as per proviso to section 147 of the Act. Therefore, we hold that initiation of reassessment proceedings is not valid – Decided against the Revenue.
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2013 (11) TMI 672
Bad debts claimed u/s. 36(1)(vii) - Assessee has advanced a sum of Rs.30.00 lakhs to another public limited company in the financial year 1996-97. According to the assessee, it has accounted for interest income arising from the above said advance fom financial year 1996-97 to the financial year 2005-06 and offered the same as business income. The aggregate amount of interest so offered works out to Rs.23,76,274/-. The contention of the assessee is that the bad debt claim of Rs.30.00 lakhs is allowance u/s 36(1)(vii) of the Act, since it has advanced the said amount of Rs. 30 lakhs in the regular course of its business as required u/s 36(2)(i) of the Act – Held that:- Assessee has not furnished any material to show that the amount of Rs. 30.00 lakhs was advanced in the regular course of business activity of lending money. The agreement, if any, entered between the assessee company and M/s Peermade Tea Company Ltd was not furnished to prove that it was a loan transaction. Assessee has simply placed reliance on Clause 22 of the object clause to contend that it is authorised by Memorandum of Association to carry on money lending activity. However, the Tribunal in the case of Poysha Oxygen (P) Ltd. [2007 (12) TMI 304 - ITAT DELHI] has held that the object clauses mentioned in the Memorandum of Association are not relevant for considering whether the activity undertaken by the limited company amounts to business activity or not - In the instant case, as stated earlier, no material was placed before us to show that the amount of Rs. 30.00 lakhs was advanced with the intention of lending money in the ordinary course of business and not as investment. The assessee has also not shown that he was carrying on this kind of transactions repeatedly. Hence, in the facts and circumstances of the case, the condition laid down u/s. 36(2)(i) has not been satisfied by the assessee in this regard - Decided against the Assessee. Bad debt claim of interest amount of Rs. 23,76,274/- - The contention of the assessee is that it has accounted for the accrued interest in all the years and offered the same for taxation – Held that:- This aspect has not been examined by the tax authorities. They have rejected the claim of the assessee only for the reason that the assessee could not substantiate that the interest amount was offered for tax in the earlier years. Since the assessee has filed the copies of the interest received account for various years, this matter requires fresh examination at the end of the Assessing Officer – Decided partly in favor of Assessee.
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2013 (11) TMI 671
Claim of interest expenditure - during earlier years interest was capitalized as work in progress towards acquisition of property - later transaction could not materialized, the expenditure set-off as expenses – Held that:- Assessee is not in the business of construction of building and therefore, the monies were not borrowed for obtaining development rights in respect of land unlike in the case relied upon by ld. AR in the case of Lokhandwala Construction Inds. Ltd.[ 2003 (1) TMI 93 - BOMBAY High Court]. The assessee borrowed money to acquire capital asset and the interest on borrowed capital was capitalized by the assessee in the relevant assessment years. In view of above, the said interest expenditure is related to assessment years 1997-98 to 1999-2000 and not to the assessment year under consideration, the assessment year in which the assessee is claiming the interest as revenue expenditure. There is no dispute that the assessee is following mercantile system of accounting and therefore the expenditure on account of interest should have been claimed by assessee in the concerned relevant assessment years – Decided against the Assessee. Disallowance of interest on account of use of interest bearing funds for non-business purposes - Assessee paid a sum of Rs.7,18,35,000/- to Saraldisha Investments in the Financial Year 1999-2000 as an advance to acquire shares of one of its subsidiary company Atco Healthcare Ltd. It is observed that the assessee could not get shares, the said amount was treated as loan – Held that: - Assessment were completed u/s 143(1) of the Act. Further, the assessee could not establish the link that the advance was given by assessee out of its own funds and no borrowed monies were used. Ld. AR also fairly conceded that the assessee could not furnish the requisite details to establish that borrowed monies were used by assessee for its business purposes and only own money was used to give advance to purchase shares of its subsidiary company – Decided against the Assessee.
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2013 (11) TMI 670
Penalty u/s. 271(1)(c) - Onus of proving bonafides transaction - excessive or unreasonable payments to a person specified u/s.40A(2)(b), - Held that:- The assessee’s only defense is that the disallowance as finally sustained by the tribunal is on an estimate basis. There is no law that penalty cannot be levied where the income or the disallowance under reference involves estimation. - The tribunal in the instant case made the estimation in the absence of any specific data or information being led by the assessee in explanation of his case The burden to prove that the price paid is not excessive or unreasonable, particularly where made to a person specified u/s.40A(2)(b), and more so once a prima facie case is made out by the Revenue, as in the instant case, is on the assessee - If it is presumed that the assessee entered the distribution arrangement as there were no takers for distribution, that itself would be reason enough for him to become guarded and make an informed decision on a proper consideration of all the facts, i.e., acting independent of APPL, the producer, in which he is a director. In fact, as observed earlier, being a part of APPL, he would only be well aware of the market rates being quoted for the film. The assessee, has been clearly unable to make out any case in this regard. He, in fact, enters the agreement on MG basis, rather than on a revenue sharing basis, assuming all the risk. That the assessee had earned confirmed profits from another project/business, further indicts his case qua bona fides, vindicating the Revenue’s stand. The assessee has thus failed to make a case on both the parameters - decision in the instant case, based on the well settled jurisprudence in the matter, rests on the finding of the fact of the assessee having not furnished any explanation, much less a valid one, qua the reasonableness of the purchase price in the facts and circumstances of the case. Further, he has also not explained his conduct, which clearly, given the surrounding facts and circumstances, indicts the bona fides of the transaction - Decided against Assessee.
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2013 (11) TMI 669
Valuation u/s 50C - whether deeming provision of section 50C are applicable where the entire capital gain is exempt u/s 54EC on investment - Held that:- Where a transaction calls for a computation specified under clause(b) of section 54EC(1), then it is necessary to find out the quantum of capital gains that could be claimed as exempt. For working out such capital gains, section 50C of the Act, which is mandatory in nature cannot be ignored. Said Sec.50C requires substitution of the consideration mentioned in the deed with the value fixed by Stamp Valuation Authority for the purpose of stamp duty. In the given case, assessee had disputed the valuation and the matter was referred by Assessing Officer to DVO as provided under section 50C(2) of the Act. Once the DVO had given the report, Assessing Officer was bound to apply sub-clause (3) of Sec.50C for working out the capital gains. The said section stipulates that full value of consideration should be taken as the value adopted by Stamp Valuation Authority or the value fixed by the District Valuation Officer (DVO) whichever was lower. When the value fixed by the DVO exceeded the value fixed by the Stamp Valuation Authority, then value fixed by the Stamp Valuation Authority alone had to be considered. Here, the value fixed by the Stamp Valuation Authority was Rs.3,61,84,512/- whereas the value fixed by DVO was Rs.1,95,33,000/-. Assessing Officer, in our opinion, therefore, had proceeded in accordance with law, in considering the fair market value at Rs.1,95,33,000/-. Nevertheless, for working out the exemption under section 54EC available to the assessee, Assessing Officer was required to apply the proportion mentioned in sub clause (b) of Sec.54EC(1) of the Act, which has not been done - matter remanded back - Decided partly in favour of Assessee.
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2013 (11) TMI 668
Adjustment of arm's length price - Purchases made from Associate Enterprise - For justifying the costs, assessee had used Transaction Net Margin Method (TNMM) using its operating margin to total cost as Profit Level Indicator - Denial of benefit of plus/minus 5% range - Held that:- arm's length price of the cost has been worked out by the Assessing Officer at Rs. 103.11 Crores by erroneously applying the percentage on the cost, whereas the percentage ought have been applied on operating income. Even if we take the figure worked out by the TPO as correct, difference between the total operating cost of the assessee Rs. 103.90 Crores and arm's length price of such cost, worked out by the TPO at Rs. 103.11 Crores, is 0.79 Crores. Instead of doing this direct work out, TPO endeavoured to go a step further and assign such difference to the purchase cost of the components from the Associate Enterprise - when calculating the non-AE cost, reducing the cost of raw material imported alone from the total cost, will not lead to a logical conclusion. When cost is distributed, it has to be so done evenly. TPO attributed the difference is ALP of cost entirely to the purchase of components made by the assessee from its Associate Enterprise which, in our opinion, will not give fair results. Adjustment that can be carried out at the best is only on the proportionate sale that are relatable to the components imported by the assessee from its Associate Enterprise and not on the whole of the operational income - the issue of determining the arm's length price with respect to the imported components from Associate Enterprise requires a fresh look by the Assessing Officer - Decided in favour of assessee. Capital or revenue expenses - Disallowance of royalty - Whether the assessee has acquired a right to use the 'technology and licence' during the assessment years - Held that:- From the perusal of the agreement it is found that KMC granted the assessee an exclusive right to manufacture and sell the products in India using the licenced technology provided. An exclusive right has been conferred on the assessee for manufacturing and selling the products in India - it is a case where royalty was paid initially and also running expenses towards royalty are being paid year after year. As per this agreement for transfer of know-how as technical aid, initial royalty of 9 lakhs US Dollar has to be paid, and thereafter running royalty at the rate of 3.5% of the net sales is required to be paid by the assessee - The assessee-company has entered into a technical licence agreement with KMC, which had a 50% shareholding in the assessee-company, to manufacture and sell the contract products in India using licenced technology. The assessee-company paid a lump sum amount of 9 lakhs US Dollars to KMC to get this technology. This amount was paid in three instalments of 3 lakhs US Dollars from financial year 1996-97 to 1998-99. Apart from this, the assessee-company has been paying royalty @ 3.5% for products manufactured by using licenced technology supplied by KMC This royalty is paid @ 3.5% of net sales less imported components. As per this agreement, if there is no sales, no royalty is payable by the assessee. Technical assistance contemplated in the agreement covered the establishment of the factory and the operation thereof for the manufacture of transformers of all kinds and types. Thus, the property in that case, i.e, the drawing, was transferred to Indian company and the technical know-how transferred was also for the setting up of the factory which are all in the capital field. In those circumstances, 25% of the payment had been held to be capital because only 25% of the initial lump sum and royalty payment was considered as capital. In the given case, no such property has been transferred to Indian Company nor is the technical data provided to set up the plant - Therefore, royalty has to be allowed as revenue outgo for the impugned assessment year - Following decision of Jonas Woodhead & Sons Ltd. v. CIT [1997 (2) TMI 4 - SUPREME Court] and assessee's own case in [2013 (11) TMI 570 - ITAT CHENNAI] - Decided in favour of assessee.
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2013 (11) TMI 667
Transfer pricing adjustment - Nature of transaction - agreement was between the Indian PSU and the Indian subsidiary of two non resident companies, which become one company - Sale of the health imaging division - Domestic transaction or international transaction - Meaning and scope of Associated Enterprises (AE) - Held that:- to come within the purview of section 92(1), 92A(1) the transaction must go through the needle hole definition provided in section 92B(1). This, transaction, cannot be presumed to be international transaction, even when the revenue authorities have tried to include it as the deemed transactions, as the case made out by the TPO/AO in the instant case. - there was no international element involved in the sale of imaging segment by the assessee of its business to Carestream Health Ltd. and hold it was a purely a domestic transaction. - Decided in favour of assessee. Determination of arm's length price - Alien method - Purchase parity – Interpretation of Section 92C(1) - Held that:- It cannot be accepted that the word “any” has been used in section 92C(1), which could give leeway to the TPO to ascribe to a non specific method. Word “any”, is founded on the suffix, "of the following methods being the most appropriate method". Therefore, the ambit of the word “any” in section 92C(1) has been restricted within the precinct of the five specific methods. This gathers strength from the fact that even in the Rules, relevant Rule 10B provides with the similar wordings - issue cannot be restored to the TPO because the methods, as prescribed by the legislature are mandatory, not directory. When mandatory provision is either superseded or ignored, it straightaway affects the jurisdiction. It was a case of suo moto reference to the TPO and it is the case of the revenue authorities, to import the provisions of Chapter X. In this circumstance, since the TPO did not adhere to the prescribed methods consciously, another innings to rectify the mistake cannot be allowed, as the TPO infringed the relevant provision of the Income Tax Act and Rules - entire case both on legality and on facts, as developed by the AO/TPO/DRP were initiated on wrong footings and were void and without jurisdiction - Decided in favour of assessee. Disallowance u/s 14A - Application of Rule 8D - Held that:- Bald statement, made by the AO that he has referred to the accounts, does not give him an automatic jurisdiction to invoke the provisions of section 14A read with Rule 8D. Disallowance, made on such basis is not permissible. In order to give quietus to the impugned issue, where no expenditure has been attributed to wards the exempt income by the assessee, we, restore the issue of disallowance to the AO for computing the disallowance in accordance with the provisions of section 14A(2), if at all, by giving detailed reasoning and speaking order, needless to say that the AO shall give adequate and reasonable opportunity to the assessee to present its case - Decided in favour of assessee.
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2013 (11) TMI 666
Power of CIT(A) to give directions to AO for rectification when no appeal is filing u/s 246A against the order u/s 200A - computerized intimation u/s 200A – short deduction / short payment/ late payment and interest thereon. – Held that:- Since no appeal is provided u/s 246A against the intimation issued u/s 200A, therefore, Ld. CIT (A) having so held could not have given any direction. An Appellate Authority derives its jurisdiction from statutory provisions and, therefore, can act only as per provisions of law bestowing power upon him. If no such power is there, he cannot give any direction. - Decided in favor of revenue.
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2013 (11) TMI 665
Addition made during the assessment u/s 153A of the Income Tax Act - Addition u/s 68 of the Income tax act – No incriminating documents found during search – Assessment has not been abated – Held that:- In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately - In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means- (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. In the present case, the assessment had been completed under summary scheme u/s 143(1) and time limit for issue of notice u/s 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement of assessment. Therefore, addition in the assessment u/s 153A could be made only on the basis of incriminating material found during search – Reliance has been placed on the judgment in the case of Alcargo Global Logistic Ltd. [2012 (7) TMI 222 - ITAT MUMBAI(SB)] In absence of incriminating material recovered or statement recorded during the search, showing non-genuineness of gifts was beyond jurisdiction, hence addition so made at ₹ 20,00,000/- on account of non-genuineness of the gift which was not made in the original assessment u/s 143(3) of the Act, was rightly deleted by the Ld. CIT(A) – Decided in favor of Assessee.
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Customs
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2013 (11) TMI 704
Modification of part of final order - 32 appeals bearing Nos. C/325-356/2011 were stated to have been dismissed as infructuous even though no such appeals were filed by the appellant inasmuch as they have no grievance before this Tribunal with regard to assessment of 32 Bills of Entry - Held that:- The Registry appears to have gone by the way in which the Commissioner (Appeals) numbered his order which was a common order passed in relation to all the 38 Bills of Entry. The Registry thus happened to consider that 38 appeals were filed by the assessee. In the result, the appeals were numbered as C/319-356/2011. After considering the submissions of both sides, we have got to retain only 6 appeals viz. C/319-324/2011 and to dispose of the remaining appeals for the record. The dismissal of the remaining appeals as infructuous will, therefore, be modified accordingly. In the result, the expression dismissed as infructuous appearing in the second and third sentences of para-2 of Final Order No.28-59/2012 is deleted and the expression disposed of for the record is substituted. The Registry is directed to issue certified copies of the amended final order in accordance with law. Out-of-turn disposal - Held that:- the total amount of refund claimed on the 6 Bills of Entry is about Rs.3.97 crores, therefore considering the high stakes involved in the case, we accede to the second prayer also and, accordingly, the 6 appeals are directed to be listed for out-of-turn hearing - Decided in favour of assessee.
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2013 (11) TMI 703
Stay application - Refund claim - Import of diagnostic equipments - Refund of SAD in terms of Notification No. 102/2007-Cus., dated 14-9-2007 - Unjust enrichment - Held that:- Commissioner (Appeals), by passing the impugned order, was implementing the purport of Notification No. 102/2007-Cus., as clarified in the circular of the Board. In this view of the matter, there can be no stay of operation of his order - Prima facie case not in favour of Revenue - Stay on refund denied.
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2013 (11) TMI 702
Benefit of Notification No.11/97-Cus. - Clearing ‘Sheet for making insole’ by filing Bills of Entry - Held that:- On perusal of Notification No.11/97-Cus, we do not find any condition prescribed for the purpose of availment of benefit of notification. We also find strong force in the submissions made by ld. Counsel that CBE&C circular, which has been relied upon by the first appellate authority, cannot put condition which were not found in the notification - Following decision of case in Inter-Continental (India) [2008 (4) TMI 23 - Supreme court] - Appellants have made out the case for waiver of the pre-deposit of the amounts involved. Accordingly, the applications for waiver of pre-deposit of balance amounts involved are allowed and recovery thereof stayed till the disposal of appeals - Stay granted.
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2013 (11) TMI 701
Valuation - Stay application - Export of consignment of Iron Ore - Additional duty confirmed against the appellant on the ground that duty liability is to be discharged on the basis of load Port analysis - Lower appellate authority, directed the adjudicating authority to finalize assessment on the basis of final invoices and the Bank Realization Certificate - Held that:- buyer and seller are not related. It is also not a case of the department that the respondent has realized any amount more than what is indicated in the final invoice price, which has been received by them through the Bank. In other words, the price actually paid for the goods exported was the price realized by them as per the final invoice and as per the Bank certificate and that is the transaction value on which duty liability has to be discharged - Stay denied.
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2013 (11) TMI 700
Stay application - Benefit of notification No. 32/97-Cus dated 01.04.97 - Dealing in Polished granite slabs - Violation of conditions of Notification - Held that:- prima facie, there is no reason why the benefit of notification No. 32/97-cus should be denied to the importer of the granite slabs - Commissioner (Appeals), on the facts of this case, allowed amendment of the relevant Bills of Entry substituting Swathi Enterprises for New Karunai Granites as importer. To our mind, this is a rational decision taken by the Commissioner (Appeals) to obviate the minor procedural infraction found in the transaction. It is to be noted that Swathi Enterprises whose name has been allowed to be substituted for New Karunai Granites as importer in the relevant Bills of Entry has been given the benefit of notification in respect of two consignments of identical goods imported by them in November ‘2011 and the Customs authorities have no objection in this regard. Perhaps, the only factual difference between the transaction of November2011 and the transaction in question is that Swathi Enterprises did not have Central Excise registration, when they imported the past consignments, for the sake of complying with condition No.(v) of the notification. But, this is too minor a procedural defect to be projected by the appellant, given the fact that New Karunai Granites undisputedly complied with the said condition No.(v) of the notification - Stay granted.
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2013 (11) TMI 699
Stay application - Exemption available to STPI unit - Under valuation of goods - Demand of differential duty - Held that:- assessee is not serious about challenging the orders passed against them. May be, they are content with the exemption available to STPI unit. Before us, they have asserted that, given an opportunity, they can demonstrate a case for setting aside the loading ordered by the SVB. It has been claimed that, given an opportunity, evidentiary materials can be brought on record. Nevertheless, no evidence is forthcoming, nor even a feeble attempt has been made to demonstrate the so-called case of the appellant. Much was argued about the policy of the supplier, but nothing was pleaded before the Deputy Commissioner (SVB). It appears, this plea was made for the first time before the learned Commissioner (Appeals), who appears to have considered it and rejected it. In the appeal and stay application before us, the point is sought to be made emphatically. In fact, the main grievance of the appellant is said to be one based on the supplier's pricing policy. But this grievance prima facie has not been substantiated. In this view of the matter, we are not inclined to stay the operation of the impugned order. In taking this view, we have also considered the assessee's conduct. Admittedly, the SVB's decision has effect till November 2013. Two-thirds of the period of validity of the SVB's order has elapsed. There is no evidence of the assessee having taken any step before the lower appellate authority for any stay. The present attempt seems to be haphazard. The exemption available to STPI units is yet another factor which makes the assessee take the matter in a light vein. With such conduct, the assessee cannot claim to get an order of stay - Stay denied.
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2013 (11) TMI 698
Classification of product Zircon Ore/Concentrate - Benefit of Notification No. 4/2006-CE - Imported raw material is Zircon Concentrate or Zircon ore - Assessee manufacturing the Zicronium Silicates - Principal raw material is Zircon sand - Classified the same under CTH 2615 10 00 - Whether import of goods and declared the same as Zircon sand (Zircon Ore) and claimed the benefit of non-payment of CVD by availing the benefit of Notification No. 4/2006-C.E., is correct or not – Held that:- Since the experts in the field like Indian Rare Earths Ltd. Research Centre, Kollam and Indian Bureau of Mines has opined categorically that the goods which were imported i.e. Zircon sand are nothing but the Zircon Ore, and the said expert opinion having been not rebutted by any other opinion from any other expert, and specifications of imported goods seems to match with specification of the ISI standard for Zirconium Ore. Therefore the goods imported by the appellant are eligible for the benefit of Notification No. 4/2006-C.E. as the goods which are imported are nothing but Zirconium Ore - Following decision of CLASSIC MICROTECH PVT. LTD. Versus COMMISSIONER OF CUS. . AHMEDABAD [2013 (1) TMI 469 - CESTAT, AHMEDABAD] - Decided in favour of assessee.
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Corporate Laws
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2013 (11) TMI 697
Violation of provisions of Regulations 3(a),(b),(c),(d), 4(1) and 4(2), (a) & (e) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 under Section 15HA of the SEBI Act, 1992 - Fraudulent and manipulative dealing in shares - Held that:- Adjudicating Officer himself has not found two main charges against the Appellant sustainable. However, Appellant appears to be having some connection with some of the promoter group members and only for this the Appellant has been held to be guilty of violating the law in this regard - No legal infirmity in the order passed by the Respondent against the Appellant but keeping in view the totality of the facts and circumstances of the case and submissions made at the Bar, we reduce the penalty to Rs. 1 lac while upholding rest of the order against the Appellant - Decided partly against assessee.
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Service Tax
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2013 (11) TMI 717
Waiver of pre deposit - Cable operator service - Held that:- Facts of the case are disputed - Hence Assessee is directed to make a pre deposit - Decided against assessee.
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2013 (11) TMI 716
Cenvat credit of service tax by Insurance Company on various insurances – Waiver of Pre-deposit – Held that:- Commissioner of Central Excise & Service Tax V/s Micro Labs Ltd. [2011 (6) TMI 115 - KARNATAKA HIGH COURT] - Amount of insurance premium of medical claim policies/accident policies, has been indicated as a package to the employee and in the salary slip, there is no deduction indicated as amount towards insurance premium - merely because these services are not expressly mentioned in the definition of input service it cannot be said that they do not constitute input service and the assessees are not entitled to the benefit of CENVAT credit - the appellant has made out a prima facie case for waiver of pre-deposit of amounts – stay granted.
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2013 (11) TMI 715
Eligibility of Cenvat credit - Service tax paid on rental premises – Waiver of Pre-deposit - Held that:- Residential premises is being also used for holding conferences and meetings and also used by director for residential purpose - whether residential premises used by the director can be considered in relation to business has to dealt at the time of disposal of the appeal – Prima facie the appellant has not made out a case for complete waiver of pre-deposit – appellant is directed to submit Rupees Fifty Thousands as pre-deposit – Upon such submission rest of the duty to be waived till the disposal – Partial stay granted.
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2013 (11) TMI 714
Cenvat credit of service tax - Job worker paid under Business Auxiliary Services – Waiver of Pre-deposit – Held that:- Prima facie, the denial of credit to the appellant would be incorrect as if the amount is paid to the consolidated fund of India as Service Tax liability - No show cause notice has been issued to the job worker holding that the amount paid by him would not amount to Service Tax - In the absence of any action at the job worker’s end, Prima facie the CENVAT Credit sought to be denied is incorrect - The appellant has made out a case for waiver of pre-deposit of the amounts involved – stay granted.
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2013 (11) TMI 713
Valuation - exclusion of cost of goods – Board’s circular dated 20.06.2003 – Notification No. 12/2003-ST - question in this appeal is whether the entire value of the services provided by the appellant herein (including the value of course material supplied) is to be included in the gross value of the service provided by the appellant and also whether the Government has exempted the whole of the value of goods and material sold, from the gross value of taxable service, vide the Notification issued under Section 93(1). - Held that: - The exemption notification is clear and admits of no restrictive clauses. Consequently, the assessee is entitled to relief - Following decision of M/s Cerebral Learning Solutions Pvt. Ltd. Versus CCE, Indore [2013 (4) TMI 527 - CESTAT NEW DELHI] stay granted.
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2013 (11) TMI 712
Valuation - inclusion of reimbursement of expenses - Storage & Warehousing - Cargo Handling Services - CBE & C vide Circular no. B-11/1/2002-TRU - Held that:- In case where the Cargo Handling Service and transportation services are rendered, and if in the bills raised for the services rendered, transportation is shown separately (on actual basis, verifiable by documentary evidence), the tax would be leviable only on the Cargo Handling Charges. This clarification issued by the Board applies even to the facts of the present appeal. Since the appellant has discharged the Service Tax liability on both these services, the question of leviability of Service Tax on whole amount under one taxable service of Cargo Handling is not sustainable in law - Decided in favour of assessee.
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2013 (11) TMI 711
Demand of service tax - Mandap keeper service - Held that:- Appellant has hired/leased out the premises to Hotel Siddharth in consideration for an interest free deposit of Rs.40 lakhs. The said transaction does not come under the purview of ‘Mandap keeper Service' under section 65(67) of the Finance Act, 1994. The Mandap Keeper means ‘a person who allows temporary occupation of a Mandap for consideration for organizing any official, social or business function' - Premises is not given for temporary occupation by Hotel Siddharth. Therefore, the impugned order is not sustainable in law - Decided in favour of assessee.
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2013 (11) TMI 710
Maintenance or Repair Services - Business Auxiliary Services - data and edit fees - appellant, the Indian entity, is required to collect and provide data for inclusion in the Reuters products. - as per the agreement, the services rendered is one of the collecting, collating, verifying data and transmission of the same to the foreign-sister concern of the appellant. The information has to be transmitted either electronically or otherwise and the consideration is paid on cost plus basis. - Held that:- the services rendered by the appellant does not seem to be of the nature of any management or repair services as alleged in the show cause notices and as concluded in the impugned order. The data furnished by the appellant is used by the foreign entity for inclusion in their products for dissemination to the customers situated world wide - appellant has received consideration for the services rendered in convertible foreign exchange. ‘Business Support Services' merit classification under Rule 3(1)(iii) of the Export of Service Rules and if the services were rendered from India and consideration is received in convertible foreign exchange, then the transaction would amount to exports. In the present case, there is no dispute that the appellant has rendered the services from India and the appellant has received the consideration in convertible foreign exchange. In view of the above factual position, the services rendered by the appellant would merit classification as ‘export of services' from India. On export of services, service tax liability is not attracted - strong prima facie case in favor of assessee - stay granted.
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2013 (11) TMI 709
Stay application - Demand of service tax - Commercial or non commercial activity - Manpower supply service - Held that:- Applicants were working in the name and style of proprietorship concerns and not in the name and style of each individual and it is already decided by the Tribunal in the case of Anuradha Jain Vs. CCE, Bhopal [2008 (7) TMI 43 - CESTAT, NEW DELHI] and CCE, Jaipur Vs. R.S. Financial Services [2007 (10) TMI 392 - CESTAT, NEW DELHI] that a proprietorship concern is to be considered as commercial concern for the purpose of interpreting different clauses in Section 65(105) of the Finance Act, 1994 wherever the expression commercial concern was used during the relevant period - Prima facie case not in favour of assessee - Stay granted partly.
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2013 (11) TMI 708
Stay application - input service distributor (ISD) - Interest and penalty imposed for procedural errors and committed by the appellant while availing the cenvat credit and debiting the amount of Education Cess and Secondary & Higher Education Cess - Held that:- Revenue's case is that service tax credit which has been distributed by the head office as an ISD, are the services which are not received by the current appellant herein which is the Silvassa factory. It is also recorded that the service tax credit which has been distributed is in respect of some other factory. In this case, the appellant has reversed the cenvat credit so availed by him and had not contested the issue before the lower authorities. At the same time, it is the claim of the counsel that they are eligible to avail the cenvat credit on such invoices issued by the ISD. Appellant had shown the debits of the amounts in the year 2006 and 2008 and when there was no balance in the Education Cess and Secondary & Higher Education Cess account. The same was made good by the appellant in the year 2010 on being pointed out by the audit party. In my view, prima facie, the appellant is liable to pay interest on such amount, which they were supposed to debit and pay to the government - Prima facie case not in favour of assessee - Stay granted partly.
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2013 (11) TMI 707
Separate appeal for Separate show cause notice – Held that:- Following EICHER MOTORS LTD. Versus COLLECTOR OF CENTRAL EXCISE, INDORE [1999 (12) TMI 87 - CEGAT, NEW DELHI] – There was no bar in the Act or in the Rules to the passing of consolidated orders by the adjudicating authority or the first appellate authority - a single appeal filed against an order cannot be held to be irregular only for the reason that the order had dealt with more than one show cause notice - one appeal against the order would suffice.
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2013 (11) TMI 706
Stay application - Availment of Cenvat credit - Service tax paid on housekeeping services which are used for hospital, guest house and Director’s bungalow and club - Held that:- Prima facie these services used outside the factory and therefore the applicant does not have strong case for waiver of pre-deposit - Stay denied.
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2013 (11) TMI 705
Condonation of delay - Delay in receipt of order - Held that:- Appellant contends that no acknowledgement has been produced by the Revenue to the effect that appellant or his authorized representative have received the said order. Appellant is not going to gain in any manner by filing the appeal late if he has received OIA. Under the facts and circumstances of this appeal it has to be held that appellant first came to know about the OIA only on 11-1-2012 when the jurisdictional Range Superintendent contacted the applicant and the appeal in this case has been filed on 21-2-2012 and has to be considered as filed in time - Delay condoned.
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Central Excise
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2013 (11) TMI 695
Delay in the payment of duty as per Rule 8 of the Central Excise Rule 8(1) of 2002 - Penalty under Rule 27 – Held that:- The lapse admitted by the assessee and the duty was subsequent paid along with interest - Payment of interest is penal in action and is in the nature of compensation for the loss of Revenue - when the goods already stands cleared by the assessee and are no longer available for confiscation, imposition of redemption fine was neither justified nor warranted, as correctly held by first appellate authority - Relying upon COMMISSIONER OF C. EX. & CUSTOMS V/s SAURASHTRA CEMENT LTD. [2010 (9) TMI 422 - GUJARAT HIGH COURT] – there was no infirmity in the order – Decided against Revenue.
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2013 (11) TMI 694
Valuation of re-treading materials – transaction value - Price paid over and above - whether the compensation given by the buyers of the tread rubber to the appellants which is basically a non-interest free loan to the appellant, is required to be added in the assessable value of the tread rubber supplied by the appellant to their buyers. - Whether the price paid over and above has to be kept out of the assessable value of the goods – Held that:- the amount of compensation was not linked with quantity of tread rubber to be supplied and price of tread rubber fixed in the agreement was not depressed on account of compensation. - For example, if no tread rubber was supplied in 1996-97, even then compensation was to be received and in the absence of assessable value, the same would not have been includable. For this reasons, it was held by the Hon’ble Tribunal in the case of Mysore Kirloskar Ltd. [2002 (1) TMI 117 - CEGAT, BANGALORE] that addition of developing/designing charges of machines paid separately by customers should have been done after establishing their nexus with negotiated price of machine. - Decided in favor of assessee.
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2013 (11) TMI 693
Clearance from Committee of Disputes – Excess cenvat credit availed – Held that:- Following M/s. Burn Standard Co. Ltd Versus Commr. of Central Excise, Kol. II [2013 (11) TMI 615 - CESTAT KOLKATA] - Clearance from Committee of Disputes is necessary for appeals filed prior to 18/2/2011 or it should be shown that the application for permission was pending before Committee of Disputes as on that date - the appellant could not show either clearance from Committee of Disputes or proof of pendency of their application for permission before Committee of Disputes as on 18.02.2011 in pursing their Appeal filed before this Tribunal - the appeal filed by the appellant is not maintainable – Decided against Assessee.
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2013 (11) TMI 692
Third member decision - Compliance of the procedure under Chapter X of the Central Excise Rules or not – Clandestine removal of goods - Assessee manufactured branded goods - Goods captively consumed - Benefits of Notification Nos. 16/97, 8/98 or 8/99 for remission of excise duty – Held that:- Following CCE, New Delhi v. Hari Chand Shri Gopal [2010 (11) TMI 13 - SUPREME COURT OF INDIA ] - the compliance of the procedure under Chapter X of the Central Excise Rules, 1944 should be strict - the procedure laid down in Chapter X is meant to establish receipt of goods by the recipient unit and their utilization - the object and purpose of the procedure laid down in Chapter X is to ensure that goods are not diverted or utilised for some other purpose, under the guise of the exemption Notification - goods manufactured at the supplier’s end were excisable goods and if an assessee wants to claim remission of duty, he has to follow certain pre-requisities - the detailed procedures have been laid down to Chapter X so as to curb diversion and misutilisation of goods which are otherwise excisable - the plea of substantial compliance and intended use is misplaced and non-derogable compliance with the requirement of Chapter X of the 1944 Rules, is mandatory - appeals remitted to the appropriate Bench for determination.
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2013 (11) TMI 691
SSI Exemption - Logo and brand name did not used but the name of the manufacturer - Denial of Small Scale Exemption – Exemption under Notification No. 08/2003 – Assessee Manufactured Scented Chewing Tobacco –– Held that:- Following Commissioner of Central Excise Vs Mahaan Dairies [2004 (2) TMI 73 - SUPREME COURT OF INDIA ] - When goods are sold using only the name of the manufacturing company, this would not disentitle an assessee from claiming small-scale exemption – Decided in favour of Assessee.
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2013 (11) TMI 690
SSI Exemption - Benefit of Notification No.8/2003 – Medicaments cleared without payment of duty bearing the brand name of the appellant-company - COMMISSIONER OF C. EX., AHMEDABAD Versus RAMESH FOOD PRODUCTS [2004 (11) TMI 103 - SUPREME COURT OF INDIA] to be followed or not – Held that:- A judgement has to be understood as to what it decides and the facts in which the decision is taken - The ratio cannot be culled out ignoring the facts of the case - The pre-condition for availing the benefit of the Notification No.175/86 is abundantly clear that the manufacturer was given clear option to choose between the two benefits, one under the notification and another under the Modvat Scheme and not to avail both the benefits simultaneously - that is not the case under Notification No.8/2003-CE - there is no such restriction imposed under the said notification. Plain reading of Clause 3, 3A and 4 of the notification would disclose that the manufacturers are not debarred form availing the benefit under the said notification in relation to the goods other than the goods which are excluded from the benefit of the said notification while simultaneously seeking to avail the benefit of Cenvat credit or Modvat credit in relation to such excluded goods provided they are cleared on payment of full duty – Decided in favour of Assessee.
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2013 (11) TMI 689
SSI Exemption - Clubbing of the value of clearances - Whether value of clearances made by M/s. Parag Industries was required to be clubbed with the clearances made by the appellant – Held that:- The goods manufactured may be of different classification made by both the parties but the links between the two makes it clear that Parag Industries was a proprietorship concern of the assessee and both are integrally connected with each other - Because of such proprietary interest, operating result as well as assets and liabilities of both concerns were consolidated in the financial statement (Balance-sheet) of the appellant - Although they were located in different places within a radius of 1 k.m., accounts were maintained under the control of the appellant - the appellant had proprietary interest in Parag Industries clubbing of clearances was bound to occur - Revenue clearly proves its case establishing total concern, control, nexus and inseparable link between the assessee and its other proprietary concern viz., Parag Industries – there was no contradiction to the material facts and evidence to which attention was drawn – thus the clubbing of clearances sustained - Extended period of limitation – Jurisdiction to issue Show cause Notice - Held that:- The demand covered by all the four Show Cause Notice have been raised within six months only - there is no question of invoking extended period i.e. beyond the period of six months as contended by the assessee – the show cause notice issued by the department sustainable in law - Nowhere is the Show Cause Notice suppression, fraud etc. has been alleged not the extended period under proviso to Section 11 A (1) has been invoked – thus the Assistant Commissioner, has rightly adjudicated the Show Cause Notices as far as the point of jurisdiction is concerned – the order is perfectly sustainable as far as the issue of jurisdiction is concerned – Decided in favour of Revenue.
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2013 (11) TMI 688
Undervaluation of goods or not – inclusion of transportation charges since appellant has accrued profit from transportation charges - Held that:- Duty is payable in respect of each and every clearances and transportation cost necessary for making delivery under the term FOR destination is necessarily to be included in the assessable value without any average calculation method when such average cost of transportation is not permissible under law - What that is permissible in the law is that actual cost incurred for the delivery at the buyers point is necessarily to be included in the assessable value. Profit accrued from transportation charges adopting average cost process is not determining factor while actual cost incurred in respect of each consignment under consideration needed testing to make an allegation of undervaluation. While deciding the appeals of the assessee learned Commissioner has made observation that whatever transportation charges was paid that has suffered service tax - When this was available on records and service tax being levied on transportation cost from 2006 onwards, adjudicating authority should have considered that aspect to examine assessable value - But that was also not done – Decided in favour of Assessees and against Revenue.
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2013 (11) TMI 687
Issuance of invoice without supply of material - Waiver of pre deposit - Availment of credit in respect of the defective bars - Held that:- manufacturing unit was not clearing defective bars but issued only invoices for defective bars on the basis of which the applicant being registered dealer further issued invoices to dealer M/s Patiala Castings (P) Ltd. As such the manufacturer has availed credit on such invoices. Therefore, the applicants have not made out a total waiver of penalty - Prima facie case not in favour of assessee - Stay granted partly.
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2013 (11) TMI 686
Valuation - Whether the charges towards pre-delivery inspection and after-sale-service by dealers from buyers of the cars are to be included in the assessable value of cars in the light of the definition of "transaction value" given in Section 4(3) (d) of the Central Excise Act, 1944? Tribunal’s earlier order on same issue in respect of same appellant based on admitted facts and not on point of law. Held that – amount liable to be paid by buyer by reason or in connection with sale of goods including amount paid on behalf of assessee to dealer or person selling vehicle, includible - there is no financial difficulty faced by the appellants in depositing the amount in question. In view of the same, we direct both the appellants/applicants to deposit the entire amount of duty confirmed against them within ten weeks from the date of order - Stay denied.
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2013 (11) TMI 685
Undervaluation of goods - Differential cost collected by cash – Unaccounted purchase of raw materials - Assessee is in the manufacture of decorative plywood - Revenue was of the view that the appellant had under invoiced their final product - Revenue relied upon the data retrieved from the seized personal laptop of Shri Jitendra Kejriwal – Held that:- The evidence relied upon by the department, does not lead to the inevitable conclusion of such clandestine activities of the assessees and on the other hand the evidence produced by the appellant M/s SBL, which is in the shape of the exculpatory statements of 16 distributors, the evidence of sale price of identical goods by the other plywood manufacturers, continuation of the sale of their final product at the same price post June, 2005, establishes the case in their favour - failure of the Revenue to investigate the matter, in detail as regards the cost structure of their goods, price factor of the other manufacturers, the availability of any evidence reflecting upon cash receipt by the appellant from the distributors and further cash sales by the distributor to their dealers, the ultimate sale price of the product etc. etc. demolishes the Revenues case against the assessee – there are no justifiable reasons to uphold the demand of duty against M/s SBL or to impose any penalty upon them – thus Penalty imposed upon the Managing Director set aside. Information retrieved from laptop admissible or not - Whether the information retrieved from the personal laptop of Shri Kejriwal, which was purchased only 4 months prior to the seizure, at his back by the GEQD after a period of one and a half years can be considered to be a sufficient evidence for confirmation of demand for the entire period of March 2002 to June 2005 – Held that:- Relying upon S. Namasivayam vs. CC, Chennai [2009 (1) TMI 238 - CESTAT, CHENNAI] - Jumbled up retrieved data, without any reference to the decoding of the same etc. by itself cannot be considered to be the relevant evidence, especially when the appellant has disowned the same, attributed the allegation of fabrication and the same being not clear entries in the records - the provisions of Section 36A readwith Section 36B of the Central Excise Act, 1944 are not invokable in respect of the computer printout, generated by the GEQD from the personal computer/laptop seized - the Revenue’s reliance on the retrieved data by GEQD cannot be held to be an admissible piece of evidence so as to rely upon the same for arriving on the findings of under valuation – Decided in favour of Assessee.
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CST, VAT & Sales Tax
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2013 (11) TMI 718
Rejection of books of accounts - Whether the account books maintained by an assessee in accordance with the provisions of section 12 (2) of the U.P. Sales Tax Act can be rejected merely on the ground that they were not produced at the time of survey - Rejection of books of accounts in previous assessment assessment years - Held that:- non-production of the books of accounts at the time of survey is an important fact, which can be taken into consideration by the Assessing officer while examining the return to find out whether the same is incorrect or incomplete. Non-production of books of accounts at the time of assessment does not take away the effect of non-production at the time of survey. Such non-production is a relevant factor which can be considered by the Assessing Officer while considering whether the books of accounts are to be accepted as to have been maintained in the regular course of business. It is incumbent upon the assessee to offer plausible explanation as to why they were not produced at the time of survey. The burden is on the assessee to show as to why no adverse inference should be drawn - books of account were already rejected in the earlier assessment years and no appeal was filed. So, the said books of accounts are useless for the assessment years under consideration - Decided in favour of Revenue.
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Indian Laws
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2013 (11) TMI 696
Removal from the post of Chairman of the Securities and Exchange Board of India - Non fulfillment of eligibility conditions under Securities and Exchange Board of India Act, 1992 - Lack of integrity - Suppression of facts - Validity of the recommendation made for the appointment - Held that:- functions performed by SEBI are such that any malfunctioning in the performance of such functions can disturb the economy of our country - Therefore, only persons of high integrity would be eligible to be appointed as Chairman/Member of the SEBI - Respondent was on deputation in UTI AMC when he filled up Form `L'. At that time, he held lien on the post of Additional Secretary, Government of India. His application for voluntary retirement had been processed. He was, however, required to obtain approval under Rule 26 for commercial employment-post retirement. Sr.No.5 of Form `L' requires the person seeking approval to state the pay scale of the post and pay drawn by the Officer at the time of retirement - deputationist would hold the lien in the parent department till he is absorbed on any post. Respondent No.4 had sought retirement from the IAS w.e.f. 15th May, 2008 to enable him to join UTI AMC on a regular basis as its CMD. Therefore, it cannot be said that at the time when he filled the Form for seeking VRS, respondent No.4 was not drawing the pay scale stated by him. We do not find much substance in the allegation that respondent No.4 had deliberately suppressed the information regarding his salary. The fact that emoluments paid to respondent No.4 w.e.f. 27th December, 2006 would not affect the statement made by respondent No.4 in Form `L' filled on 15th April, 2008. The Board of UTI AMC by resolution dated 12th April, 2008 approved that the CMD can draw revised compensation w.e.f. 27th December, 2006. Till that date, he was still placed in the scale of Additional Secretary, Government of India. Respondent No.4, he was already working as CMD-cum-CEO in the UTI AMC. Therefore, there was no question of respondent No.4 having been privy to any sensitive information with regard to UTI AMC at the time when he was posted as Joint Secretary/Additional Secretary in the Government of India. In fact, respondent No.4 in the same Form No. L at Sr.No.7-C had stated that he was earlier working as Director in UTI AMC and was appointed as CEO cum MD from 3rd November, 2005 and CMD from 13th January, 2006. The declaration is in fact in conformity with the 3rd proviso to Rule 26 of All India Service (DCRB) Rules which envisages that an Officer in deputation of an Organization under Cadre rules can be absorbed in the same Organization post VRS. Respondent No.4 had no role to play in the grant of approval of deputation, once he fully disclosed that he had been working as Joint Secretary Banking. He had no further role to play. It is a too farfetched submission that whilst respondent No.4 worked as Joint Secretary Banking that he can be said to have over-seen the Organization of UTI AMC. The petitioner had unnecessarily and without any basis tried to confuse that respondent No.4 would be disqualified for deputation in UTI AMC as he would have been privy to receiving some sensitive information with regard to its functioning. Such higher-level posts are generally not advertised. Keeping in mind the contribution made by him and the needs of the Company, the shareholders had made the offer to him - As such all the decisions are made by the Board of Directors. The shareholders are Life Insurance Corporation, PNB, BOP and SBI - it is the responsibility of the Board to ensure succession planning at the top. As a normal practice, nominations are made by the Board and share-holders, either directly or through a search firm and the post is rarely advertised. In any event, it would be the decision to be taken by the Board of Directors. Respondent No.4 would clearly have no say in the matter. The deputation of respondent No.4 was considered under Rule 6(2)(ii) which provides for deputation of a cadre Officer under an international organization, an autonomous body not controlled by the Government or a private body. The aforesaid deputation can be made only in consultation with the State Government on whose cadre the Officer is borne. We had earlier noticed that due procedure was followed when respondent No.4 was sent on deputation. Just for the sake of accommodating respondent No.4, the recommendations of the JPC were not concealed from the Government. This submission is fallacious on the face of it as the recommendations of the JPC were placed before the Parliament and Government of India directly. Respondent No.4 had no role to play in that procedure. In fact, the Government of India submitted action taken report in context of the recommendations from time to time and was fully aware of it. The Government of India never adopted the policy of not sending IAS Officer on deputation to UTI AMC and informed the Parliament in its 3rd action taken report submitted in December, 2004. The decision to grant approval of commercial employment post retirement under Rule 26 was taken by the Government of India. The post was filled up by Board of Directors and shareholders of UTI AMC. It was entirely for them to adopt such policy of appointment as they deem fit. We fail to understand that even upon respondent No.4 complying with all the conditions of deputation, it would render him a person of not high integrity. There is nothing surprising in respondent No.4 accepting the post of Chairman, SEBI which carried much lesser emoluments than he enjoyed as Chairman, UTI AMC. It is not abnormal for people of high integrity to make a sacrifice financially to take up the position of honour and service to the nation. In any event, we are of the opinion, the acceptance by Mr. Sinha of lesser salary as Chairman of SEBI cannot ipso facto lead to the conclusion that he accepted the position for the purpose of abusing the authority of Chairman, SEBI. It was incumbent on the petitioner not only to make specific allegations, but to produce very strong evidence to lead to a clear conclusion that the selection was actuated by mala fide. The 7 steps relied upon by the petitioner to establish conspiracy per se do not amount to conspiracy to mislead the ACC. It is unbelievable to expect such a coordinated overt and covert operation to have been even conceived, let alone successfully executed just to have Mr. U.K. Sinha appointed as Chairman, SEBI. The appointment of Mr. Sinha is strictly in conformity with the procedure prescribed by service rules, i.e, Rules 16 and 26 of the AIS (DCRB) Rules, 1958. The files were sent to PMO as and when required by rules of business. In matter of VRS and post retirement commercial employment, there is no requirement under the rules of business of sending the file to PMO/ACC Appointment to such a High Powered Position has actually been made fairly and in accordance with the procedure established by law - Decided against Petitioner.
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