TMI Tax Updates - e-Newsletter
February 1, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Reopening of assessment - no notice under section 143(2)- Section 292BB - notice u/s 143(2) is mandatory in reassessment proceedings and it is not a procedural requirement. - in favor of assessee - AT
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Income Tax:
Amount received after deducting retention money and revenue was recognized accordingly - TDS was deducted including retention money - Addition on the basis of TDS certificate is incorrect - AT
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Income Tax:
CIT(A) has no power to hear appeal against an assessment under section 143(3) read with section 263 of the Act - AT
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Income Tax:
Gross total income of the assessee has first got to be determined after adjusting losses etc., and if the gross total income of the assessee is 'Nil' the assessee would not be entitled to deductions under Chapter VI-A. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2013 (1) TMI 688
Deduction u/s 80-IA - Treating the year of first generation of power from the ‘Windmill Undertaking’ i.e. AY.02-03 as the ‘initial assessment year’ - Reducing the amount of profits derived from the said undertaking in the year under appeal by the amount of unabsorbed losses and depreciation relating to all the assessment years beginning AY 2002-03 - Held that:- Following the decision of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT [2010 (3) TMI 860 - MADRAS HIGH COURT] wherein held profits are to be computed as if such eligible business is the only source of income of the assessee. When the assessee exercises the option, only the losses of the years beginning from the initial A.Y. are to be brought forward and not the losses of the earlier years which have been already set off against the income of the assessee - no notional brought forward and set off against the profits of the eligible business as no such mandate is provided in section 80-IA(5). When the assessee exercises the option, only the losses of the years beginning from the initial A.Y. are to be brought forward and not the losses of the earlier years which have been already set off against the income of the assessee. As DR has not brought to the notice of the Bench any decision contrary on the issue in question it is to be held that the assessee is eligible for claim of deduction u/s 80-IA for the year under consideration in a manner whereby the initial assessment year referred to in section 80-IA(5) is to be taken as the A.Y. 2004-05 as the assessee has opted to claim this deduction only in this assessment year - in favour of assessee.
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2013 (1) TMI 681
Amount received from DTTI in terms of release agreement - capital receipt or revenue receipt - assessee a firm of chartered accountants entered into understanding with Chartered Accounts of Calcutta referred to them by Deliotte Haskins & Sells (DHS)part of the chartered accountants firm by name “Deliotte Touche Tohmatsu International” (DTTI), based in USA - release agreement entered into on 14.11.1996 under which the assessee firm was to no longer represent DHS in India & thereafter DHS would not refer any work to the assessee-firm - Held that:- As decided in Kettlewell Bullen & Co. Ltd. v. CIT [1964 (5) TMI 4 - SUPREME COURT] where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated) the receipt is revenue & where by the cancellation of an agency the trading structure of the assessee is impaired, or such cancellation results in loss of what may be regarded as the source of the assessee’s income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt. Also see Oberoi Hotel Pvt. Ltd. Versus Commissioner of Income-Tax [1999 (3) TMI 2 - SUPREME COURT] CIT v. Best & Co. (P) Ltd case [1965 (11) TMI 23 - SUPREME COURT] as relied upon by revenue will not apply here as the facts of the case are not in pari materia with it the assessee in Best & Co, case had innumerable agencies in different lines and it only gave up one of them and continued to do business without any apparent mishap and that the correspondence showed that the assessee gave up the agency without any protest “presumably because such termination of agencies was part of the normal course of its business” . Thus answer the substantial question of law by holding that the amount of ₹ 1,15,70,000/- received by the assessee in terms of the release agreement dated 14.11.1996 represents a capital receipt, not assessable to income tax. The appeal of the assessee is allowed - against revenue.
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2013 (1) TMI 680
Deduction u/s 80M on the 'gross dividend' - CIT(A) held that only the financial expenses incurred could be taken into consideration for working out the deduction and not the personnel and administrative & miscellaneous expenses - ITAT restricted the disallowance to the extent of Rs. 1,00,000/- instead of upholding the total disallowance of Rs. 6,66,035/- made by the A.O. - Held that:- No authority taking a contrary view that the Revenue is entitled to reduce from 'gross dividend' received, the presumptive expenditure in the absence of actual expenditure for determining the 'net dividend' income, has been cited. The Revenue did not conduct an enquiry to determine the actual expenditure incurred in earning the dividend income by the assessee, which is a manufacturing concern and also deals in trading of the hosiery goods. It is not an investment company. It has been the categorical stand of the respondent-assessee that the investment, on which the dividend income is earned, was old and the total dividend warrants received by the assessee were only 2 to 3 on the shares held of the sister concern. The appellant's counsel urged that the ITAT or for that matter CIT(A) had no basis before them to determine the expenses incurred in earning dividend income by approximation but we find that for that matter the grievance could be raised by respondent assessee and not the Revenue which has come in appeal - no substantial question of law arises in these appeals.
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2013 (1) TMI 679
Reopening of assessment - Incorrect allowance of deduction in respect of royalty received from foreign enterprise, deduction in respect of export profits,profit and gains from newly established undertakings, profit and gains from newly established industrial undertakings & non-business expenditure - Held that:- Insofar as all the purported reasons other than the reason pertaining to club expenses are concerned, specific queries had been raised and the AO had considered the material placed by the petitioner before him as claim in the return supported by a relevant certificates has been submitted by assessee. As regards club expenses, Mr Maratha appearing on behalf of the respondents states that since no specific query had been raised, Explanation 1 would get triggered. But no agreement with this submission this is so because the club expenses were specifically mentioned at serial No. 17(d) of the tax audit report in Form No. 3CD which was annexed along with the return. This was a clear statutory disclosure on the part of the assessee with regard to the claim of club expenditure. It was not a piece of evidence which was hidden in some books of accounts from which the Assessing Officer could have possibly, with due diligence, discovered the same. On the contrary, this was material which was placed before the Assessing Officer along with the return which the Assessing Officer was duty bound to go through before completing the assessment. Clearly this does not fall in the category of material which is referred to in Explanation 1 to Section 147 of the said Act. Thus this is clearly not a case of failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment. This is of material significance because the notice under Section 148 has been issued after expiry of four years from the end of the relevant assessment year. Therefore, the notice is time barred. Apart from this,it amounts to a mere change of opinion - in favour of assessee.
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2013 (1) TMI 678
Re opening of assessment - no notice under section 143(2) has been issued - DR argued that Section 292BB comes to the rescue of revenue whereby the requirement of issuing notice u/s 143(2) can be dispensed with - Held that:- ITAT vide its order dated 11th Feb. 2011 had already given a finding that 143(2) notice was mandatory & CIT (A) has recorded a finding of fact that notice u/s 143(2) of the IT Act, was not issued. Rescue under Section 292BB is not allowed as the said ection was inserted by Finance Act 2008 w.e.f. 1.4.2008 and Hon’ble Delhi High Court in the case of CIT Vs. Mani Kakar (2008 (10) TMI 565 - HIGH COURT OF DELHI) had held that provisions of Section 292BB are applicable from assessment year 2008-09 and the cases under consideration relates to assessment years 2005-06 and 2006-07. Similarly in the case of ITO Vs. Nasemen Farms P. Ltd. (2010 (9) TMI 903 - ITAT DELHI) has held that provisions of Section 292BB are applicable only from assessment year 2008-09 and also do not apply where there is failure to issue notice as jurisdiction to assess arises only after the notice has been issued. Moreover in the case of Alpine Electronics Asia P. Ltd. Vs. Director General of Income Tax [2012 (1) TMI 100 - DELHI HIGH COURT] held that notice u/s 143(2) is mandatory in reassessment proceedings and it is not a procedural requirement. Thus reassessment proceedings completed in above cases without issuing of necessary notice u/s 143(2) were bad in law and hence were void ab initio - appeals filed by assessee are allowed.
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2013 (1) TMI 677
Penalty u/s 271(1)(c) - excess deduction u/s 10A on account of unrealized export proceeds - Held that:- Assessee along with the return of income has filed its Audit Report and Form No. 56, intimating the realized and unrealized portions of export proceeds. Also found from the papers appended by the assessee in its APB that before the finalization of assessment for the current year, the assessee had realized substantial export proceeds and, dutifully, it was submitted before the AO, as to how much unrealized export proceeds have been received by it and for which unit. In these circumstances, since the assessee had made adequate disclosure in its return with respect to the unrealized export proceeds at the time of filing its ROI, no fault on the conduct of the assessee found. Thus respectfully following the decision in the case of DSL Software Ltd. (2012 (4) TMI 360 - ITAT DELHI) and the Circulars issued by the competent authority, i.e. RBI, with regard to receipt of export proceeds, and also the fact that the AO himself had dropped the penalty proceedings on same facts in the subsequent year penalty under section 271(1)(c) is not exigible in the instant case - in favour of assessee.
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2013 (1) TMI 676
Determination of annual value of properties - Addition made AO u/s 23(4) - calculation of notional rent - case of the assessee that according to section 23(1)(c) annul value of those properties are nil - Held that:- Neither the Revenue authorities nor the assessee has brought on record any material or evidence in support of the determination of annual value of properties, however, the assessee has furnished evidence in respect of annual value determined by municipal/local authority, Agra Nagar Nigam in support of annual value of concerned properties. Such material is relevant for determination of annual value is in accordance with section 23(1)(a) as there are various consideration which are relevant for determination of Annual value under section 23(1)(a) out of which, one of the consideration is annual value as taxed by Municipality or Local Authority for the purpose of municipal or local tax. Therefore, the annual valuation taken by the local authority is one of the basis under the peculiar facts and circumstances of these cases for determining the annual value under section 23(1)(a). Since additional evidence is admitted by us first time, therefore, the A.O. is directed to verify the annual valuation determined by the local authority/Agra Nagar Nigam and determine the annual value for the purpose of section 23(1)(a) - it is relevant to state that the annual value determined by the municipal/local authority has been considered in the case under consideration is one of the basis of determination of annual value for the purpose of section 23(1)(a) but under the peculiar facts and circumstances of the case under consideration, as neither the assessee nor the Revenue has brought on record any other material based on which the annual value of these properties can be determined in accordance with section 23(1)(a) therefore, the ratio of this order is not applicable to other cases as annual value under section 23 is to be determined in accordance with facts of each case - in favour of assessee for statistical purposes. Addition on account of house hold expenses - Held that:- The estimation made by the A.O. on account of house hold expenses are arbitrary also sustained by CIT(A). In A.Y. 2003-04 the assessee has shown house hold expenses of Rs. 3,71,500/-, whereas the CIT(A) has estimated at Rs. 4,80,000/-. The addition of Rs. 8,500/- has been sustained in A.Y. 2003-04. Similarly, in A.Y. 2008-09 the CIT(A) has estimated the house hold expenses at Rs.10,80,000/-against the house hold expenses shown by the assessee at Rs. 8,91,000/-. The addition of Rs. 1,89,000/- has been sustained by the CIT(A). The facts of the case regarding family status and other for A.Y. 2003-04 and 2008-09 are same whereas the addition sustained in A.Y. 2003-04 was Rs. 8,500/- and in A.Y. 2008-09 it was Rs. 1,89,000/- which clearly establishes that the estimation made by the Revenue authorities on account of house hold expenses are arbitrary without any basis particularly under the circumstances where during the course of search no such material was found in this regard. Further, confirming the additions in respect of bills related to house hold appliances which were found at the time of search in A.Y. 2002-03,2005-06 & 2007-08 while deciding separate grounds of those appeals in subsequent paras of this order. In the light of the facts, the arbitrary addition made on account of house hold expenses are not sustainable therefore deleted - in favour of assessee. Unexplained investment in purchase of Washing Machine & Air Conditioner - Held that:- CIT(A) confirmed the addition as the bill was found at the time of search and the assessee did not furnish any explanation. The assessee has failed to explain the source of the said amount except general submission that it has been purchased out of household withdrawals. Since the addition on account of low house hold withdrawals which was made by the A.O. on adhoc are deleted and estimation basis without any basis and since this addition is supported by the bill which was found at the time of search, in the light of the fact, no infirmity in the order of CIT(A).
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2013 (1) TMI 675
Loss on sale of shares – Capital loss or business loss - Assessee engaged in business of trading and investment - AO assessed the same as short term capital loss instead of business loss – Held that:- the frequency & number of transactions are undisputedly too low, earning of dividend appears to be a dominant intention in acquisition of the two units of MFs, obviously the scrips are few, figures appear of high value, it does not appear that the assessee has the intention of holding on to the units as investment, the conduct of the assessee in dealing with the shares over the years is also relevant factor and adequate facts for determining the same are not brought on to the records etc. Therefore, assessee is required to file adequate data for establishing the claim. AO is directed to admit evidences or additional evidences that may help for substantiating the claims – Remand back to AO Loss on F&O contracts - Assessee has claimed loss on open position of F&O contract - did not offer the profit for taxing on similar open position of F&O contact on the last day of the previous year – Held that:- The notional loss is allowable as long as there are no contingencies are attached and the notional gains should be allowed in the year of realization based on the principle of prudence. The question is what if there is difference between the anticipated profits quantified in an year and the actual profits realized thereafter. On finding that there is no dispute on the fact that the appreciated value of stocks is realized and afforded to tax in the next year – In favour of assessee Disallowance u/s 14A – Rule 8D – Expense in relation to exempt income - Earned dividend income and claimed exemption in view of the provisions of section 10(34) – Reckoning of units of MF as stock in trade or as investment - Held that:- Following the decision in case of India Advantage Securities Ltd. (2012 (11) TMI 458 - ITAT, MUMBAI) that assessee had not retained the shares with the intention of earning dividend income which was incidental due to his sale of shares which remained unsold by the assessee therefore disallowance u/s 14A did not upheld. AO needs to collect additional facts for deciding the principle of res judicata and the rule of consistency. Till the time, the actual nature of the transaction is decided; the quantification issues u/s 14A has to wait for sake of harmony in adjudication. – Remand back to AO
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2013 (1) TMI 674
Assessee contended that The order appealed against, though made in pursuance to a section 263 order, is nevertheless an assessment under section 143(3) and, accordingly, the first appeal there-against would lie only before the first appellate authority – Held that:- in no uncertain terms, that even though the assessment under reference is titled as an assessment under section 143(3) read with section 263 of the Act, the same is in essence and substance only an order giving effect to the revisionary order, inasmuch as the ld. CIT has given clear directions to the assessing authority for carrying out specific additions/disallowances, leaving no room for verification or adjudication by the assessing authority. - CIT(A) has no power to hear appeal against such orders. Depreciation – Claim of higher depreciation - Assets used to running them on hire - The assessee having claimed it at 40%, i.e., as against the normal 25% – Held that:- The assessee admittedly letting out tractors, i.e., presuming so, only when the same are not required for its construction purposes, no case for charge of depreciation at the higher rate on own tractor/s, is, under the circumstances made out for us to interfere with the order – In favour of revenue Deduction in respect of Sales Tax – Assessee paid Rs 40.53 lakhs as sales tax – Paid excess of Rs. 5.91 lakhs adjusted against liabilities against earlier years - Held that:- Under the circumstances, and in the interest of justice, we, therefore, only consider it fit and proper to restore the matter back to the file of the A.O. to undertake the necessary examination and verification, and decide the issue on the basis of the facts determined by him in accordance with law - Remand back to AO Addition on account of Retention money - Retention of a part of the value of a contract sub-contracted by the assessee to another - assessee had shown retention of the stipulated 8% - additional work done by the sub-contractor – Held that:- TDS certificate/s is issued for the total value of the contract (Rs.194.75 lakhs), the assessee could recognize income in its accounts only for the value for which work is certified, and for which it can be claim to be paid. unable to say as to how and on what basis ld. CIT has found the impugned amount to be unaccounted for, directing for its addition. In our view, that survives the assessee’s explanation, however, is if the amount claimed by way of TDS is on the entire amount of Rs.194.75 lakhs, i.e., for which the TDS certificate stands issued to it, or is restricted to the amount proportionate to the amount accounted and claimed by it as its income for the year, i.e., Rs.179.31 lakhs. In favour of assessee
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2013 (1) TMI 673
Unaccounted stock – Undisclosed income - Excess stock found at the time of Survey u/s 133A - Assessee engaged in selling sceneries/potteries received from various artists - whatever articles were sold she used to pay the artist after deducting her commission - unsold items she used to return back the items to the respective artists – The additions were made by Assessing Officer on the basis that assessee did not provide the evidences during course of assessment proceedings - Held that:- The assessee had also submitted the confirmations from 13 artists who had confirmed of their being owner of the items found at the premises of assessee and they have confirmed that they have not sold these to the assessee. Therefore, excess stock found at the time of survey necessarily belonged to the various artists who had got their work of art displayed at the gallery of the assessee and these were meant to be sold by the assessee on commission basis. In favour of assessee
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2013 (1) TMI 672
Transfer Pricing – Computation of Arm's Length Price - International transaction – Arm’s Length Price - Assessee provided software research & development support services to its Associated Enterprise - Remunerated on a 'cost plus' basis - assessee adopted the Transactional Net Margin Method TNMM - Comparable - Comparability of the comparable relied upon by the TPO – Turnover filter is an important criterion in choosing the comparables - Inappropriate computation of operating margins of comparables and that of the Assessee - Treating foreign exchange gain or loss and provision for bad debts as non-operating in nature and fringe benefit tax as part of operating cost Abnormal margins - Held that:- Factors for abnormal profits have not been highlighted by the Assessee. In such circumstances it is not possible to accept the submission of the Assessee to exclude this company for the purpose of comparison. In favour of revenue Segmental Margin – Unusually high profit of comparables - Held that:- The growth rate of this company was double the industry average. Comparable company has made unusually high profit during the financial year 06-07. The operating revenues increased 63.03% which indicates that it was an extraordinary year for this company. The reasons given by the Assessee for excluding this company as comparable are found to be acceptable. In favour of assessee TPO has observed that "market conditions" are different for on-site and offshore work – Held that:- TPO fails to substantiated how market conditions differ. The fact is that in onsite development of computer software, the Assessee does not employ assets nor does the Assessee assume many risks which the offshore software developer assumes. Even the Assessee accepts that the per hour rate will be different in the case of offshore software development and onsite software development. R & D expense – Revenue or capital expenditure – Expenditure on website development – Assessee contended that these expenses were for exploring the possibility of domestic market through pilot projects – Held that:- Unless the nature of the expenses is examined it is not possible to decide as to whether the same were revenue in nature and that it relates to existing business of an Assessee. The contention of the assessee that the claim should be examined u/s 35 also cannot be decided unless the correct description of the expense is considered. We therefore set aside the order of the AO – Remand back to AO Disallowance of provision – Provision for building registration charges - AO has disallowed the same on the ground that it is a provision – Held that:- The assessee submitted that the provision has been reversed and offered to tax during the AY 2009-10 and therefore same should not be taxed in the year under consideration. The limited plea of the Assessee before us is that if the sum is disallowed in this year the same should not be taxed in AY 09-10. We are of the view that it would be appropriate to direct the AO not to tax the same sum in AY 09-10 as the sum has already suffered tax by disallowance in the present AY – In favour of assessee Disallowance of Travel expense - Expenditure cannot be claimed on the basis of provision and that the liability in respect of the expenditure has not accrued to the Assessee during the previous year – Held that:- Expenses which were claimed as a provision, the Assessee has the system of reversing expenses wherever the same was not incurred by the Assessee, in the succeeding Assessment years. AO examine as to whether the Assessee reverses excess provision when the actual expenses details are available and also see if the Assessee follows the method of accounting consistently – Remand back to AO
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2013 (1) TMI 671
Determination of Gross Total Income - whether ITAT was justified in allowing deduction u/S 80HH and 80I by considering the gross income from the two units of the appellants, namely, flour mill unit, Itarsi and solvent extraction plant, Khandwa in violation of section 80AB - Held that:- As decided in Synco Industries Ltd. v. Assessing Officer (Income-tax) [2008 (3) TMI 13 - SUPREME COURT] Gross total income of the assessee has first got to be determined after adjusting losses etc., and if the gross total income of the assessee is 'Nil' the assessee would not be entitled to deductions under Chapter VI-A. Remand the case for deciding the factual and legal issue involved in this appeal afresh in the light of the law laid down by the Supreme Court referred to supra as undoubtedly, this decision was rendered after the impugned decision of the Tribunal was passed in this case and, therefore, the Tribunal did not. have an occasion and nor the benefit to examine the question involved in this appeal.
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Customs
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2013 (1) TMI 670
Refund of the excess anti-dumping duty - denial as refund claim as pre-mature - refund was filed on 16.1.2007, namely within 17 days after the date of final notification issued under Section 9A(2) of the Customs Tariff Act, 1975 - Held that:- The words in pursuance of an order of assessment only indicate the party/person who can make a claim for refund. In other words, they enable a person who has paid duty in pursuance of an order of assessment to claim refund. These words do not lead to the conclusion that without the order of assessment having been modified in appeal or reviewed a claim for refund can be maintained. In the case on hand, the wrong payment of duty is not sought to be refunded. The payment of provisional anti-dumping duty is subject to the finalization of the anti-dumping duty in terms of Section 9A(2)(b) of the Customs Tariff Act, 1975 and refund becomes automatic after the final notification is issued. There is no necessity for filing an appeal or seeking modification of the order, so as to seek refund. For the foregoing reasons, the writ petition is allowed and the impugned proceedings dated 25.4.2007 is set aside and the respondents are directed to process the petitioner's application for refund forthwith.
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2013 (1) TMI 669
Recovery towards the duty drawback and a fiscal penalty of Rs.5 lakhs on the Director - assessee contested against breach of principles of natural justice as report submitted by the Office of the Commissioner of Central Excise and Customs, Nagpur not supplied inspite of demand on whose bases SCN was issued - Held that:- The manner in which both the authorities have dealt with the case is thoroughly unsatisfactory, there being an apparent violation of the principles of natural justice. The charges against the Petitioner are serious involving a fraudulent claim of duty drawback, but that does not obviate the need to comply with either the principles of natural justice or for that matter, the need for the Appellate Authority to write a proper reasoned order. A failure to comply with the principles of natural justice results in a situation where, in a challenge under Article 226 of the Constitution, this Court is constrained to set aside the order and to remand the proceedings back to the adjudicating authority. The fact that the report has been disclosed in the affidavit in reply would indicate that there was no reason or justification not to do so at the earlier stage. Thus without this Court expressing any view on the merits of the allegations against the Petitioner set aside the impugned order of the Appellate Authority which in turn confirmed the order of the adjudicating authority - restore the proceedings back to the Development Commissioner, SEEPZ for passing a fresh order in accordance with law.
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2013 (1) TMI 668
Dismissal of appeal on non obtaining necessary clearance from COD - Held that:- On and from 17.02.2011, there was no necessity for obtaining any clearance from the Committee on Disputes. The order dated 18.02.2011 restoring Customs Appeal which had been dismissed by virtue of a final order on the ground of non obtaining clearance from COD, was passed in ignorance of the Supreme Court decision of 17.02.2011 of Electronics Corporation of India Ltd. versus Union of India & Ors [2011 (2) TMI 3 - SUPREME COURT]. There are justifiable reasons as to why the Tribunal passed that order because it was just one day after the decision of the Supreme Court(supra). However, the fact remains that on and from 17.02.2011, there was no requirement for obtaining a clearance from the Committee on Disputes. Therefore, as the law declared by the Supreme Court stood on 18.02.2011, the Tribunal was not correct in dismissing the revenue’s appeal. The Tribunal has only rectified that mistake by allowing the revenue’s said Customs ROA Application No. 41/2011 by reviving the appeal for hearing on merits - no infirmity in the impugned order dated 30.04.2012 - no substantial question of law arises for our consideration.
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Corporate Laws
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2013 (1) TMI 667
Winding up petition - amount lying in the account of Defaulters’ Committee whether be remitted to the OL in the winding up proceedings or not? - Held that:- Although the company was expelled as a trading member on 27th July 2009 from NSEIL, prior to the order of winding up, resulting in the deposit made by it with NSEIL vesting in the Defaulters’ Committee, the claims of the investors had not been met out of that fund by the Defaulters’ Committee. It, in fact, set aside Rs. 83,91,000 pursuant to the letter written to the NSEIL by the OL. It has met the claims of 68 investors in part out of IPFT. Therefore, the deposit made by the company with NSEIL, which constitutes its property under Section 456 (1) of the Act, remains intact. With the process of liquidation of the company already in progress, the scheme of Section 456 of the Act will have to be followed. The inevitable result would be that wherever any property of the company is available, the possession of such property would have to come to the PL appointed by the Court. Investors, who are before the Defaulters’ Committee, will now have the option of pursuing their claims before the OL in accordance with law. Consequently, the plea of NSEIL that its Defaulters’ Committee should be allowed to continue to be in possession and control of the deposits of Rs. 1.10 crores lying with it to the credit of the company cannot be upheld - thus directing NSEIL to remit to the OL the sum of Rs. 1.10 crores together with interest, if any accrued thereon within a period of four weeks from today.
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Service Tax
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2013 (1) TMI 686
Valuation – Short payment of Service tax – Penalty u/s 78, u/s 76, u/s 77 - Misstatement - Suppression of facts - Intent to evade payment of duty - Commercial training or coaching centre – Exclusion of the value of materials sold from the value of the taxable services - Notification No. 12/2003-ST dated 20.6.2003 - Circular No. 59/8/2003-ST dated 20.6.2003 – Two types of bills were being issued one for training and coaching classes run by assessee and the other as a consideration for providing study material to the students by another firm which is run by assessee’s wife in same premises – Entire receipts are being divided into two parts Whether M/s Soni Patrachar was independently selling the books to their students or whether the same was created on paper and the total consideration received for providing coaching services by M/s Soni Classes was being artificially bifurcated, so as to avoid payment of service tax Held that:- The bills was not able to produce any literature issued to the public or the invoices issued for enrolling the candidates. There is no material on record to show that M/s Soni Patrachar was an independent proprietary firm. On the other hand, a lot of evidence appears on record to reflect upon one fact that though the value of coaching classes being provided by M/s Soni Classes to their students was collected as such, the same was being projected under two different categories. Providing study materials, test papers etc. is a part of coaching services and is required to be included in the value. At the cost of repetition it may be observed that it is only the extra text books or extra material, which is admittedly being sold to the students and is also available for sale to outsiders and students or procured from the outside and sold to the candidates, which will not form part of the taxable coaching services The appellant was aware of the fact that it is the entire consideration for the coaching services which has to be taxed. It was only with a mala fide view to save the service tax that he bifurcated the consideration into two different parts and indulged in diverting a part of the consideration to the sale of the study material – In favour of revenue
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2013 (1) TMI 685
Recovery proceedings against a deceased assessee – Whether SCN issued against non-existent firm is valid in law - Death of sole proprietorship - Cancellation of Excise registration – Wrongly availed Cenvat credit in respect of the inputs not received in the factory – Held that:- Sole proprietorship concerned has no legal entity independent of its proprietor. On death of sole proprietor respondent company ceased to exist. Therefore notice issued was bad in law as it was issued against any non-existent firm. In favour of assessee Recovery from legal heir - legal heir of the deceased sole proprietor had undertaken to pay all the pending central excise liability of the firm – Held that:- As the SCN raising demand was issued almost three years after the undertaking on 2.4.2009. This imply that the dispute pertaining to the demand in question was raised much after the undertaking as such the demand which is subject matter of the SCN cannot be termed as pending as covered by the undertaking given by the legal heir. Therefore, demand confirmed on the basis of aforesaid SCN cannot be sustained. In favour of assessee
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2013 (1) TMI 684
Denial of refund claim – Relevant date for refund claim - Period of limitation – Unjust enrichment – Duty paid under protest - Section 11B of the Central Excise Act, 1944 - Hire purchase finance – Assessee pay duty under protest - Dispute of liability of service tax have been settled by the Commissioner (Appeals) vide his order dated 27.8.2010 in favour of assessee - Refund claim filled on 22.9.2010 – Department argue that appellants were required to file refund claim within one year from the date of tax paid Held that:- As per the provision of Section 11B of the Central Excise Act, 1944, refund claim has to be filed within one year from the relevant date. Section 11B provides that if the duty is paid under protest, then the date relevant to be the date when the dispute is settled. Therefore, relevant date is 27.8.2010 and the appellant has filed the refund claim within one year from the relevant date. Therefore, it is held that refund claim is within time – In favour of assessee Unjust enrichment – Amount of service tax in interest - Amount of finance is added by interest and divided by the period thereafter the installment comes – Held that:- Service tax element is nowhere mentioned in the instalment, the same has been confirmed by the C.A after verifying the records. Although the appellant paid the service tax to the department by calculating the instalment as cum-service tax, but it does mean that they have collected / included the service tax amount in their instalment. They have also explained that the instalment is only principal plus interest divided by period – In favour of assessee
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2013 (1) TMI 683
Penalty u/s 76 - u/s 78 - Activity of technical testing of the LPG tankers - Technical Testing and Certification Services - Rule 18 and Rule 44 of the Explosives Act - Held that:- Following the decision in case of Harshita Handling (2010 (4) TMI 122 - CESTAT, NEW DELHI) that technical inspection and testing under the Indian Explosive Act, 1884 is a statutory obligation, therefore the same is not liable to service tax and therefore penalties under Sections 76 and 78 of the finance Act, 1994 are not warranted - In favour of assessee
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2013 (1) TMI 682
Penalty u/s 77 and 78 - Service Tax collected but not deposit - Business Auxiliary Services - Renting of cranes to their clients - After certain period of time, the respondent paid the service tax along with interest - Assessee files ST -3 Return - Held that:- The respondent has filed the ST -3 Return showing the service tax collected but not deposited. Therefore, as per provision of Section 73 (3) of the Finance Act, 1994 when the assessee has paid the service tax along with interest of their own and intimated to the department, therefore Show Cause Notice is not warranted - In favour of assessee
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Central Excise
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2013 (1) TMI 666
Rule 5 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 - whether applicable where a manufacturer proposes to make some change in the installed machinery in terms of Rule 4(2) of the 1997 Rules - Held that:- As decided in CCE, Chandigarh vs. Doaba Steel Rolling Mills [2011 (7) TMI 10 - SUPREME COURT OF INDIA] Rule 5 of the 1997 Rules will be attracted for determination of the annual capacity of production of the factory when any change in the installed machinery or any part thereof is intimated to the Commissioner of Central Excise in terms of Rule 4(2) of the 1997 Rules.
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2013 (1) TMI 665
Restoration of appeals dismissed - non-compliance of pre-deposit ordered - Held that:- As appellants have not filed any reply to the show cause notice nor they appeared before the adjudicating authority with no reason given for such callousness be that as it may, in the interest of justice, it is necessary that the appellant should be given an opportunity to file the reply and appear before the adjudicating authority in order to come to conclusion whether the appellant has the case on merit or not. Since it is the claim of the appellant that they have not been heard in the matter, it is necessary that the matter should be heard by the adjudicating authority right from the beginning and the appellant should be allowed to submit the evidences. Thus directed to file a reply to the show cause notice on or before 11.03.2013 & also to deposit an amount of Rs.15 lakhs within a period of eight weeks from today and report compliance to the adjudicating authority on 11.03.2013.
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2013 (1) TMI 664
Section 11A(2B) – Whether penalty can be levied, in case the duty is paid before the issuance of show cause notice –Held that:– Section 11A(2B) provides that if person in default makes payment of the escaped amount of duty before the service of notice then the Revenue will not give him the notice u/s 11A(1) – Explanation 2 to 11A(2B) makes it clear that if non-payment of duty is intentional and by reason of deception, penalty is leviable.– In the instant case escape of duty was not intentional or there was a reason of deception – No penalty shall be levied – Against the revenue.
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2013 (1) TMI 663
Excise duty erroneously made by assessee – Whether Excise duty erroneously made by assessee should be refunded or not – Assessee while making e-payment of duty liability for their Chennai unit had erroneously made it for their Podicherry unit whose registration was cancelled – Held that:- It is only an human error and duty liability which was remitted erroneously under erstwhile Podicherry code number a non-functioning unit and whose Central Excise Registration was cancelled – Since the duty by mistake is not duty due to the Government, the question of filing application under Section 11B also does not arise – Due to indifferent attitude of the officer, the appellant was put under irreparable monetary loss – Appellant is entitled for the refund of excess amount of duty paid along with interest – Decided in favour of the assessee.
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2013 (1) TMI 662
Captive Consumption – Is it compulsory to add the profit margin, to arrive at the assessable value of captively consumed goods – Assessee is the manufacturer of cigrates – Filed a price declaration of captively consumed goods – But did not include any profit margin while arriving at the value of the captively consumed goods – Show cause notices were issued demanding differential duty - Held that:- company has been making losses consistently since 1995-96 onwards up to 1999-2000 and the period of demand involved in the case is from April, 1997 to March, 1998. Therefore, it is not a case of the company making a loss for a given year and making profits in other years. As decided in the case of CCE, Aurangabad v. Raymonds Ltd. [2006 (10) TMI 7 SUPREME COURT OF INDIA] - Wherein it was held that profit margin has to be added taking into account the actual profits made in a given year. – Granted complete waiver of the pre-deposit of the dues adjudged and stay recovery thereof during the pendency of the appeal – In favour of assessee.
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CST, VAT & Sales Tax
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2013 (1) TMI 687
Benefit of Amnesty Scheme denied - KGST Act - Held that:- Although the petitioner was given an option in Ext.P5 judgment of the Division Bench to avail of the benefit of he scheme, the petitioner did not submit any application as prescribed. Instead of that petitioner submitted Ext.P6 representation which did not satisfy the requirements of the scheme. It was in those circumstances benefit of the Amnesty Scheme was not given - no fault with the assessing officer in denying claim - writ dismissed.
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