TMI Tax Updates - e-Newsletter
February 13, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Deduction of tax at a lower rate - It is therefore clear in the statutory provision of deduction of tax at source at lower rate is “person specific” and cannot be extended to the amounts specified by the recipient of the payment while making an application for grant of certificate u/s 197 - Levy of interest u/s 201(1A) cannot be sustained - AT
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Income Tax:
Revision u/s 263 - neither detail in respect of financial charges was also asked by the Assessing Officer nor any information was filed by the assessee - CIT is correct in holding that further enquiry was necessary to examine the sundry creditors, financial charges, liability of TDS on freight charges. - AT
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Income Tax:
Interest for defaults in furnishing return of income - credit of only self-assessment tax paid before the due date of filing of return has to be allowed while computing interest under section 234A of the Act - AT
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Income Tax:
Penalty u/s 271(1)(c) - claim of entire interest as deduction u/s 24 under the head income from house property - assessee had filed the revised return of income by paying the balance due tax on the amount excessive claimed against the restriction of deduction to the extent of ₹ 1.50 lacs - No penalty - AT
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Income Tax:
Deduction towards license fee, external development charges and conversion charges - the appellant was under no obligation to make any payments to the original allottee - The payment is of its free volition and under no legal obligation under any of the documents relied upon by the appellant - deduction of exependiture not allowed - HC
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Income Tax:
The Gotanagar truck terminus is a plant and not building, for the purpose of claiming depreciation under section 32 read with section 43 of the Income-tax Act. Consequently the assessee is held entitled to depreciation at the rate of 25 per cent. as prescribed for plant and not at 10 per cent., as applicable for building - HC
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Customs:
Detention of goods - foreign bike - smuggling - detention on the ground that the appellant could not produce any documents evidencing the legal import of the bike - demand of duty confirmed - AT
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Customs:
Inland Air Travel Tax - refund claim - refund sought contending that it was not liable to pay the said amount towards the IATT dues - The monies deposited by a third party could not be deemed to have been adjusted against the aforesaid dues of the tax as well as the penalty - HC
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Indian Laws:
Professional misconduct - default of audit party - Chartered Accountants - The obligation of the auditor concerning transactions which are merely book entries was highlighted i.e. the duty of the auditor to enquire whether the transactions were prejudicial to the interest of the company being not discharged by the auditors - respondent is guilty of committing professional misconduct - HC
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Service Tax:
Construction of petrol pumps - the classification adopted in the impugned order Erection Commissioning and Installation Service is not tenable and palpably wrong - the service rendered by the appellant is classifiable under Works Contract Service as defined u/s 65(105)(zzzza) - AT
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Service Tax:
Rent-a-cab - the educational body is using the said vehicles for bringing the students to schools and back to their houses and they are also rented - they are covered by the phrase rented for use by an educational body. Therefore, the vehicles are not covered by the definition of Cab u/s 65(20) - AT
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Central Excise:
CENVAT credit - denial on the ground that the Bill of entry was not in the name of the appellant - entire consignment had been transferred by the principal manufacture in favour of the appellant - credit allowed - AT
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Central Excise:
Though the assessee paid the excise duty at ₹ 80/- (after debiting ₹ 20/- paid on input, namely, Cut Tobaco) they recovered excise duty at ₹ 100/- from the customer. Thus, ₹ 20/- was recovered by the assessee in excess of the duty payable, and therefore, to that extent, ₹ 20/- can be said to be enrichment, which is not permissible, that is exactly for which Section 11D of the Act has been introduced - HC
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Central Excise:
When Section 11D of the Act is made applicable retrospectively with effect from 20/09/1991, show cause notice has been issued in the month of December, 2000, and therefore, it cannot be said that the same can be said to have been issued after unreasonable period. - HC
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Central Excise:
SSI exemption - use of brand name of others - It is not only the invoice which bear the description of sunflex brand goods but also the customers accepted that they were buying the products i.e. sunflex brand venetion blinds, vertical blinds, roller blinds - SSI Exemption denied - AT
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Central Excise:
Cenvat Credit - a mere minor loss in transit or a difference in the weight due to differences in weighing scale or in dip reading, would not lead to the conclusion that there was any illegal diversion - HC
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VAT:
The piston ring manufactured and sold by the appellant dealer as declared goods falling u/s 14(iv)(viii) on CST Act 1956 - HC
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VAT:
Anticipatory bail - The applicant is involved in making use of fake Firms by getting the Firms registered from the Commissioner of Commercial Taxes to get the tax credit benefits and the activities of the applicant with other persons are stated to have caused loss to the public exchequer to the extent of more than 100 crores - No relief - HC
Notifications
News
Case Laws:
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Income Tax
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2017 (2) TMI 515
Disallowance of payment of commission - Held that:- The assessee has established that the payment of commission was for services rendered by ACPL as well as IMACO. No contrary evidence has been brought on record by the AO to disallow the expenditure on account of commission. The observations of the AO in the order of assessment that the transactions is bogus or sham and was undertaken to camouflage some expenses which are not legally admissible being in contravention of the laws of the land, is purely a surmise. There is no evidence brought on record to come to this conclusion. On the other hand, the evidence on record as noticed by the AO in the order of assessment itself clearly goes to prove that the liaison activities were in fact rendered by ACPL. As rightly held by CIT(A) in his appellate order for A.Y.2009-10, the AO seems to have proceeded on the basis that the payment of commission was not commensurate with the services rendered by the recipients. The CIT(A) has rightly placed reliance on the decision of the Hon’ble Supreme court in the case of Sassoon J.David & Co.P.Ltd. vs CIT. (1979 (5) TMI 3 - SUPREME Court) to come to the conclusion that the revenue cannot assume the role of ascertaining how much the is reasonable expenditure having regard the circumstances of the case. The CIT(A) has also duly taken note of the fact that ACPL and the assessee were not related parties and that all the payment have been made through banking channels after due deduction of tax at source. - Decided against assessee
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2017 (2) TMI 512
Application for stay - Section 10B exemption denied as return filed beyond the due date specified in Section 139 (1) - Held that:- As in the earlier round, the exemption claimed under Section 10 B of the Act had been allowed by CIT (A) against which no appeal was preferred by the Revenue, would demonstrate that the petitioner has a good prima facie case, thus the operation of the order dated 23.09.2016 is stayed, subject to deposit of 15% of the disputed tax, within a period of four weeks from the date of receipt of a copy of this order.
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2017 (2) TMI 508
Reopening of assessment - unexplained investment - procedure followed for affixture of notice not followed - Held that:- The address on which the notice was affixed was not the address of assessee, neither in the past nor later. As seen from the written submissions and the copies placed on record of returns filed, the address of assessee was 8-2-686/8/2, Road No. 12, Banjara Hills, Hyderabad. The same address was also stated in the sale deeds placed on record. From where the AO got the address of 195/A, Road No. 13, White House, Jubilee Hills, Hyderabad was not known. How it was the last known address was not answered by the Ld.CIT(A), who examined the record as stated in para 8.2, while confirming on merits. Since the procedure followed for affixture of notice is not proper, assessment completed in pursuance of an invalid note is not valid. Even on merits, it is not clear how the information was received, the basis of the same as assessee was not given any opportunity. Neither the so called statement was furnished nor the cross-examination of the person was provided. Even the Ld.CIT(A) did not examine how the said ‘Manasa Estates’ came into picture when the document indicates that the monies were received through ‘Janmabhoomi Estates’. Since the very basis for addition is not reliable, the addition per se cannot be sustained. - Decided in favour of assessee
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2017 (2) TMI 507
Rejection of books of account - fall in the G.P rate - Held that:- The assessee has given proper reason for the fall in the G.P rate, i.e., there was increase in the raw material cost and the assessee could not make corresponding increase in the selling price due to acute competition. The above said submission of the assessee is corroborated by the fact that the sales turnover of the assessee has increased by about 40% during the year under consideration. We notice that the assessee has given detailed notes to the AO explaining the reasons for the fall in the G.P rate. We notice that the assessee has also substantiated the explanations by furnishing the copies of purchase invoices to prove that the raw material cost has increased during the year under consideration vis-à-vis in the immediately preceding year. The assessee has given an additional “Note on Gross profit” before the AO which show that the average cost of raw material has increased from ₹ 40,932/- per MT to ₹ 56,535/- per MT resulting in an average net increase of ₹ 15,603/- per MT. However, the average selling price has increased from ₹ 52,960/- per MT to ₹ 67,153/- per MT resulting in a net increase of ₹ 14,192/- per MT. Thus there is mismatch of ₹ 1,411/- (Rs.15603/- less ₹ 14,192/-) between the net increase in purchase rate and selling rate. This difference of ₹ 1,411/- on the purchase of 1,04,952 MT of raw material has dented the Gross profit by ₹ 14.80 crores. The assessee has further submitted that other direct costs and depreciation have also increased during the year to the tune of ₹ 1.96 crores. Thus, we notice that the assessee has reconciled the fall in gross profit rate with facts and figures. However, we notice that the AO has simply rejected the same without finding fault with the explanations so given by the assessee. Thus CIT(A) was justified in holding that the AO has not made out a proper case for rejecting the books of accounts. On the contrary, we notice that the assessee has convincingly explained the reasons for the fall in G.P rate. Accordingly we uphold the order of Ld CIT(A) in setting aside the order of rejection of books of account. - Decided in favour of assessee
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2017 (2) TMI 499
Addition u/s 68 - correlation between the amount surrendered in A.Y. 2007-08 and bogus credits/deposits shown in A.Y. 2009-10 - Held that:- The amount surrendered by the assessee is represented in the form of cash deposits in the books of accounts and not any other tangible assets. So, it is the cash pool which is available with the assessee and what is required to be investigated by the Revenue in order to hold its ground is that the assessee has exhausted the cash pool and was not in possession thereof at the beginning of the financial year under consideration. However, we donot see any findings given by the ld CIT(A) and the contention of the assessee that it was in possession of sufficient cash balance out of income offered in AY 2007-08 and which was circulated in AY 2009-10 remain uncontroverted. In light of above discussions we hold that the assessee shall be eligible to claim benefit of amount surrendered in AY 2007-08 amounting to ₹ 47,10,000 and to this extent, the addition stand deleted. The remaining addition of ₹ 18,36,664 is not disputed and the same is hereby sustained. - Decided partly in favour of assessee
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2017 (2) TMI 497
Penalty u/s 271(1)(c) - Held that:- A perusal of the notice demonstrated that the Assessing Officer has not specified as to which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated, i .e. , whether for concealment of particulars of income or furnishing of inaccurate particulars of income. - Decided in favour of assessee
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2017 (2) TMI 496
Entitlement for exemption u/s 11 - Held that:- The price of the goods is not fixed by the assessee at the time of its supply but it is fixed by the Govt. of A.P. depending on the expenditure incurred by the assessee and also its overhead which is also evident from the fact that the assessee suffered losses in certain years while it has excess of income over expenditure in certain other years. The excess of income over expenditure alone cannot be a determining factor as to the nature of the assessee’s activities. The exemption u/s 11 depends on the nature of the activities carried on by the assessee and not as to whether the assessee is making profit out of such activity. The establishment of factories for manufacturing of the food articles is also one of the ancillary activities of the assessee. Therefore, we agree with the finding of the CIT (A) that the assessee is an institution engaged in the activities for relief of the poor and therefore, whether it is making profit or otherwise becomes irrelevant while granting exemption u/s 11 of the Act. Further, the CIT (A) had also called for a remand report from the AO about the application of income and has observed that it has complied with the provisions of section 11(4a) of the Act. Therefore, we see no reason to interfere with the order of the CIT (A) for all the A.Ys. - Decided against revenue
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2017 (2) TMI 505
Penalty under section 271B - not getting accounts audited under section 44AB - Held that:- The penalty under section 271B is imposable under the Act if the assessee fails to prove that there was a reasonable cause for failure on the part of the assessee for not complying the mandatory provision of section 44AB in terms of 273B of the Act. In our view, the assessee was required to get its accounts audited at the time of filing of the return of income at the first instance i.e., on 30.07.2007 and in any case the assessee was having an opportunity to file the audited reports after receipt of the notice under section 153A of the Act when the assessee was called upon to file the return of income. However, despite receipt of notice issued under section 153A, the assessee had failed to file the audited accounts report. The claim of the assessee that the assessee was following the project completion method, therefore the assessee had bonafide belief for not getting its accounts audited, is not sustainable as the application of section 44AB is independent and is not depended upon the method of accounts adopted by the assessee under section 145 of the Act whether it is project completion method or percentage completion method. The requirement under section 44AB is based on the total sales, turnover or gross receipt as the case may be of the assessee and . If it exceeds the threshold limit as provided under the Act, then the assessee is required to compulsorily get its accounts audited before the specific date. Since, the assessee has failed to do so, therefore, we have no other option but to confirm the order passed by the CIT in imposing the penalty. - Decided against assessee.
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2017 (2) TMI 498
Penalty u/s 271(1)(c) - claim of entire interest as deduction u/s 24 under the head income from house property - AR of the assessee submitted that the AO has not pointed out this mistake but it was detected by him - Held that:- The assessee filed the revised return by paying the balance tax and brought to the notice of the AO during assessment proceedings by letter dated 21-10-2010. It is also noted that the AO in the assessment order mentioned that on perusal of the reply of the assessee, it is found that the assessee has wrongly claimed interest on housing loan u/s 24(b) of ₹ 2,39,832/- on self occupied property. It thus appears that the AO has not detected the mistake but it is noticed by the AO only after perusing the reply of the ld. AR of the assessee. It is further noticed that the assessee had filed the revised return of income by paying the balance due tax on the amount excessive claimed against the restriction of deduction to the extent of ₹ 1.50 lacs under head income from house property. It is also noticed that this is the first year of the assessee claiming such deduction u/s 24(b) of the Act. CIT(A) is not justified in confirming the penalty u/s 271(1)(c) which is directed to be deleted. - Decided in favour of assessee
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2017 (2) TMI 516
Reopening of assessment - Determination of income chargeable to tax from and out of the Composite Income - whether miscellaneous income would form part of the composite income for the purpose of section 33AB of the Act was fully investigated by the AO while concluding the assessment proceedings u/s 143(3)? - Held that:- Admittedly prior to the initiation of re-assessment proceedings u/s 147 of the Act an order of assessment for the relevant assessment year had been passed u/s 143(3) of the Act. The re-assessment proceedings were initiated admittedly beyond the period of four years from the end of the relevant assessment year. In these circumstances for valid initiation of re- assessment proceedings u/s 147 of the Act the conditions laid down in the proviso to section 147 of the Act had to be satisfied, viz., escapement of income should be as a result of the assessee’s failure to disclose truly and fully material facts necessary for assessment/income for the relevant assessment year. Since this condition has not been satisfied in the present case, the CIT(A) was fully justified in concluding that re- assessment proceedings were not validly initiated. Since the initiation of re- assessment proceedings have been held to be invalid and therefore the reassessment order is liable to annulled, we do not wish to deal with other grounds with regard to the re-assessment proceedings having been initiated on a change of opinion and the arguments that no notice u/s 143(2) of the Act in the re-assessment proceedings were issued and therefore re-assessment proceedings are invalid. We also do not wish to go into the question as to whether the disputed items of income could form part of the composite income of the assessee or not for the purpose of Rule 8(1) of the Rules. - Decided against revenue
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2017 (2) TMI 514
Penalty u/s. 271(1)(c) - income offered after the search but in the return filed u/s 153A - Defective notice - Held that:- We find from the perusal of the show cause notice issued u/s 274 read with section 271(1)(c) of the Act, the ld AO had merely made a tick mark without mentioning the specific charge of offence and without strucking off the relevant portion in the show cause notice as to whether the assessee had concealed his income or furnished inaccurate particulars of income. Thus the show cause notice u/s.274 of the Act is defective. The the penalty levied u/s 271(1)(c ) of the Act deserves to be cancelled on all counts. - Decided in favour of assessee
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2017 (2) TMI 509
Deduction of tax at a lower rate - levy of interest u/s 201(1A) - submission of the Assessee that the certificate issued by the AO u/s 197(1) clearly specifies that the assessee was authorised to pay any sum by way of interest other than interest on securities as referred to in section 194A after deducting the tax at source @ 1% plus surcharge and education cess thereon - Held that:- Provision of section 197(2) of the Act does not make any reference to any income specified in such certificate. A perusal of Rule 28AA(2) of the Rules also shows that the certificate issued u/s 197 of the Act will be valid for the assessment year specified in the certificate. Even in the rules there is no reference to the payment without TDS or at lesser rate should be on the sums specified as payable in the certificate. It is therefore clear in the statutory provision of deduction of tax at source at lower rate is “person specific” and cannot be extended to the amounts specified by the recipient of the payment while making an application for grant of certificate u/s 197 of the Act in Form No.13. AO has annexed the details in Schedule-II of Form No.13 to the certificate issued u/s.197 of the Act. By doing so, the AO cannot treat the assessee as a person who has not deducted tax at source to the extent of the payments made by the assessee over and above the sum specified in the certificate u/s 197 of the Act. We therefore agree with the arguments of assessee that certificate u/s 197 of the Act is with reference to the person to whom the income is paid and is not with reference to any sum as may be specified in the certificate. Assessee cannot be treated as a person who has not deducted tax at source on the difference between the amounts specified in the certificate issued u/s 197 of the Act and the amounts actually paid by the assessee. Consequently the levy of interest u/s 201(1A) of the Act cannot be sustained and the same is directed to be deleted. - Decided in favour of assessee
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2017 (2) TMI 506
Rejection of books of accounts - estimation of profit at a certain percentage of the gross receipts - Held that:- The defect as pointed out by the Assessing Officer regarding the failure of the assessee to furnish the complete details of sundry creditors not being material or sufficient enough to justify the rejection of books of account maintained by the assessee as held by the Hon’ble Guwahati High Court in the case of Madnani Construction Corporation P. Limited (2006 (12) TMI 79 - GAUHATI HIGH COURT), we are of the view that the ld. CIT( Appeals) is fully justified in deleting the addition made by the Assessing Officer by estimating the income of the assessee from the business of execution of works contract by applying higher G.P. rate of 5.15%. Accordingly, we uphold the impugned order of the ld. CIT( Appeals) giving relief to the assessee on this issue and dismiss this appeal filed by the Revenue. - Decided in favour of assessee
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2017 (2) TMI 504
Disallowance of claim for exemption under section 10B - Held that:- Similar issue in the assessee’ s claim for deduction under section 10B in the context of interest income had come up for consideration before the Bangalore Bench of this Tribunal in the case of ACIT – vs.- Motorola India Electronics (P) Limited [2006 (11) TMI 541 - ITAT BANGALORE ] and after taking into consideration the methodology provided in sub-section (4) for arriving at the export profits of the business of the Undertaking, it was held by the Tribunal that the entire profits derived from the business of Undertaking should be taken into consideration while computing profit eligible for deduction under section 10B by applying the mandatory formula given in sub-section 4. Thus the ratio laid down by the Coordinate Bench of this Tribunal is squarely applicable in the present case and since the receipts or income on account of provision for bad and doubtful debts written back, excess provision written back, sale of scrap and sundry balances written back clearly formed part of the business income of the assessee, it is of the view that the same should be taken into consideration while computing the profit of the assessee eligible for deduction under section 10B - Decided in favour of assessee. Disallowance on account of prior period expenses - Held that:- The prior period expenses claimed by the assessee in the year under consideration are disallowed by the Assessing Officer as well as by the ld. CIT( Appeals) as the assessee failed to establish on evidence that the same had crystallized during the year under consideration. Even at the time of hearing before us the ld. counsel for the assessee has not been able to do so. Therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT (A) confirming the disallowance - Decided against assessee. MAT - Disallowance made u/s 10B while computing the book profit under section 115JB - Held that:- It is observed that such adjustment to the book profit on account of disallowance under section 10B is not permissible as per Explanation to section 115JB as rightly pointed out by the assessee. Even the ld. D.R. has not been able to dispute this position. Also as the addition made by the Assessing Officer s deleted and confirmed by the ld. CIT( Appeals) on account of disallowance of deduction under section 10B substantially while deciding Ground No.1 raised by the assessee in this appeal. Accordingly direct the Assessing Officer to delete the addition made on account of disallowance of deduction under section 10B while computing book profit under section 115JB - Decided in favour of assessee
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2017 (2) TMI 503
Disallowance of fee paid to Registrar of Companies for increase in authorized capital of the company - Held that:- Hon’ble Supreme Court in the case of Punjab State Industrial Development Corporation Limited vs CIT [1996 (12) TMI 6 - SUPREME Court ] and Brooke Bond India Limited vs CI (1997 (2) TMI 11 - SUPREME Court ) held that fees paid to ROC for increase in authorised share capital is a capital expenditure. As far as the question of allowing deduction of the expenses in question u/s 35D of the Act is concerned, the list of expenses allowable for deduction u/s 35D(1) of the Act are set out in section 35D (2) of the Act. The list of expenses set out in section 35D(2) of the Act does not include fees paid to ROC for increase in the authorised share capital. Under section 35(2)(c)(iv) of the Act expenses in connection with the issue of shares to the public is allowable as deduction. Admittedly in this case there was no public issue of shares and therefore the expenses in question does not fall within the ambit of aforesaid clause. We are therefore of the view that order of CIT(A) on this issue does not call for any interference. - Decided against assessee Disallowance of prior period expenses - Held that:- The said maintenance expenses relate to March, 2008 for which a bill dated 04.04.2008 was received by the assessee only in the month of April, 2008 and was booked as expenses pertaining to A.Y.2009-10. It has been claimed by the assessee that all the other expenses given in the annexure are of similar nature. Keeping in view the submissions of the ld. Counsel for the assessee and also the ratio laid down by the Hon’ble Delhi High Court in the case of CIT vs Modipon Ltd. (2010 (12) TMI 836 - Delhi High Court ), we are of the view that expenses in question accrued or arose as liability to the assessee only during the previous year relevant to A.Y.2009-10. The claim of the assessee for deduction of the aforesaid sum deserves to be accepted. Accrual of income - Assessee in the present case follows mercantile system of accounting - Held that:- The parties by an agreement cannot alter the time of accrual of income under the mercantile system of accounting. Income under the mercantile system will accrue and arise when the right to receive the sum in question is determined. Such right to receive the sum in question and its accrual under the mercantile system cannot get postponed by agreement between the parties. The argument that the Assessee followed percentage completion method or completion contract method of Accounting, is again not acceptable, because the income in question, in so far as the Assessee is concerned, does not arise from execution of any construction contract by it. It arises out of the Assessee’s action of trading the built up space which it was to get by virtue of its agreement for building new market with KMC. The argument that even BBMPL recognised income only on the basis of completion of construction, is again irrelevant when it comes to determining income of the Assessee. The fact that the Assessee was offering to tax income as and when bare construction was completed is again not relevant. It was argued by the learned counsel for the Assessee that the revenue has taxed income offered in the subsequent years by the Assessee and taxing the same income in the present AY would amount to double taxation of the same income. We are of the view that these factors cannot decide the accrual of income in the hands of the Assessee. If there is double taxation of the same income then it is for the Assessee to work out its rights in a manner known to law. - Decided against assessee
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2017 (2) TMI 495
Deduction towards license fee, external development charges and conversion charges - computation of sale consideration - Held that:- Clauses (1) and (2) of MOU clearly state that the transfer of expenses shall include all expenses such as, license fee, external development charges, conversion charges. Instead the expenses made towards conversion and development of the commercial complex were to be transferred to the books of accounts of UHSL the appellant Significantly, it does not stipulate reimbursement of any monies by the appellant to the original allottee. Therefore, the appellant was under no obligation to make any payments to the original allottee. Hence, its payment of ₹ 13.67 crores to the latter on 29.09.2007 is of its free volition and under no legal obligation under any of the documents relied upon by the appellant. The said amount could not be claimed as against the costs etc. for development of the said land. The Sale Deed was executed between the UBPL and the appellant on 25.03.2008, however, in the absence of any obligation under any agreement between the appellant, the UBPL and UDHPL to pay monies of any sort to the original allottee, the appellant could not claim the sum of ₹ 6.75 crores towards deduction from income. The AO had further disallowed and disputed the addition of such costs on the ground that no such expenses had at all been incurred by the assessee and the perusal of the Sale Deed showed that the sale consideration was inclusive of all rights. Hence, the costs of transfer of rights alongwith all developments/constructions thereon were included in the sale consideration - Decided against assessee
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2017 (2) TMI 494
Income from shares transaction - capital gain or business income - frequency of transaction - Held that:- CIT(A) has considered in detail the duration of the transactions, holding period etc. and has specifically held that the transactions cannot be said to be frequent transactions of purchase and sale with a view to earn quick profit. The learned CIT(A) as well as the learned tribunal has taken note of the fact that the profit was earned by the assessee only in one scrip. The learned CIT(A) and the learned tribunal have also taken note of the Clauses in the partnership agreement /deed by which the partners /partnership firm were debarred from doing trading activities in the shares /mutual funds. The learned CIT(A) as well as the learned tribunal have also taken note that wherever the assessee has earned /incurred losses the assessee has never claimed it as business losses. Considering the aforesaid facts and circumstances of the case, it cannot be said that both the learned CIT(A) as well as the learned tribunal have committed any error in directing the Assessing Officer to treat amount for the Assessment Year 2008-09 as short term capital gain and consequently to levy the tax under Section 111A of the Act.
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2017 (2) TMI 513
Reopening of assessment - assessee is not entitled to benefit of cost of acquisition of land as claimed by the petitioners during the regular assessment proceedings - Held that:- The jurisdiction to issue a reopening notice would arise if the Assessing Officer has reasonable belief that the income chargeable to tax has escaped assessment. This belief cannot be based on mere change of opinion i.e. the issue of reopening notice as recorded in the reasons was subject matter of consideration in the regular assessment proceedings. This for the reason that the power to reopen an Assessment is not a power to review an order. The Supreme Court in CIT vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA ] has held that 'reason to believe' in Sections 147/148 cannot include power to reopen assessment on mere change of opinion. The Court observed that reassessment is different from Review. We find that both CIT (A) as well as the Tribunal have on facts held that the issue raised in reopening notice was subject matter of consideration in the regular assessment proceedings leading to an order under Section 143(3) of the Act. Therefore, it is clear case of change of opinion. Nothing has been shown to us that the concurrent findings of the CIT (A) and the Tribunal is perverse.
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2017 (2) TMI 476
Jurisdiction - Whether on the facts and in the circumstance of the case and in law, the Tribunal is correct in law in holding that the Commissioner of Income TaxIII, Pune has wrongly assumed jurisdiction u/s. 263? Held that: - the entire basis of exercising jurisdiction under Section 263 of the Act is on the basis of assumption of incorrect fact that the Respondent-Assessee is a share broker. This, in fact, is not so. Where the basic facts have been misunderstood by the CIT, the exercise of powers of Revision is not sustainable. This for the reasons that one does not know if on correct understanding of the basic facts, whether the CIT would have still exercised his powers of Revision under Section 263 of the Act. It is not for any of us to even attempt to hazard a guess, as to the likely view of the CIT on correct facts - appeal dismissed - decided against appellant-revenue.
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2017 (2) TMI 502
Addition made u/s 35(2AB) in respect of research and development expenditure - Held that:- When the R&D centre at Chennai has been established by assessee company on 11.08.2005 and R&D expenditure have been continuously allowed on the basis of approval accorded by DSIR, no material has come on record to depart from the rule of consistency by the AO. When the AO has himself admitted that the R&D centre at Chennai approved by DSIR is carrying out its research and development activities, by disallowing the weighted deduction at 50%, the remaining expenditure of ₹ 34,57,130/- cannot be disallowed. Moreover, the conjoint reading of section 35(2AB) and Rule 6(7A)(a) leads to the conclusion that the fulfillment of the conditions to carry out R&D activities are to be examined by DSIR and it is not within the purview of AO. So, in case, there is escalation of sales of the product produced by the assessee company, it may be due to the consequence of research and not because of the fact that R&D facilities have been used for market research and sales promotion. So, we are of the considered view that the CIT (A) has rightly and validly deleted the addition Disallowance of provision for warranty in excess of actual warranty claims being the same as unascertained liability - Held that:- Following the order passed by the coordinate Bench in assessee’s own case for AY 2009-10 by following the judgment in case of Rotork Controls (2009 (5) TMI 16 - SUPREME COURT OF INDIA) wherein held that estimated provisions for warranty are allowable for deduction, thus we find no illegality or perversity in the deletion of disallowance Disallowance u/s 14A computation - work out the disallowance under Rule 8D - Held that:- The entire exercise to work out the disallowance under Rule 8D done by the AO is on the basis of imagined expenditure based upon the average value of the investment whereas the expression “expenditure incurred” refers to actual expenditure and not imagined expenditure. AO without recording his dissatisfaction of the correctness of the claim of expenditure made by the assessee and without arriving at the conclusion that the claim of assessee that “no expenditure has been incurred is incorrect” proceeded to invoke the provisions of section 14A read with Rule 8D. At the same time, AO has not disputed the audited books of account of the assessee in respect of investment and earning dividend income. So, when from the balance sheet produced before AO as well as CIT(A), it has come on record that assessee has sufficient cash flow during the year under assessment; the AO has failed to prove any nexus of borrowed funds with various investments held by the assessee; the AO without recording his dissatisfaction of correctness of the claim of expenditure made by the assessee nor AO has rejected the claim of the assessee that no expenditure has been incurred in earning the dividend income, the provisions contained under section 14A read with Rule 8D are not attracted. Thus AO as well as CIT (A) have erred in disallowing / confirming the disallowance of normal expenses of ₹ 26,97,608/- while computing the book profit u/s 115JB of the Act. - Decided in favour of the assessee.
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2017 (2) TMI 493
Initiation of reassessment proceeding under section 147 - attribution of income from collection of parking fee from the trucks - maintainability of proceeding under section 260A - Held that:- The reason to believe to conclude that tax has escaped assessment is not at all reflected, in the order passed by the Assessing Officer. The Assessing Officer has not said that income from collection of parking fee from the trucks is attributable to building and not to the parking facility provided for the trucks. Even if the order recorded by the Assessing Officer on April 10, 2007 is liberally construed, we do not find the requisite material or the nexus on the basis of which, the reasonable belief is reached, for ordering the reassessment proceeding. Therefore in our understanding, the action initiated against the assessee under section 147/148 appears to be without any jurisdiction and it is declared so accordingly. The jurisdictional question of law arises from the fact found by the Income-tax authority, i.e., earning from parking fee collected from truck terminus and since tax liability of the assessee is dependent on this very issue, the contention raised by the learned counsel for the Revenue that this question cannot be examined by us in this proceeding under section 260A of the Income-tax Act is rejected. The ratio in National Thermal Power Co. Ltd. v. CIT reported in [1996 (12) TMI 7 - SUPREME Court] supports our decision. Substantial questions of law are answered in favour of the assessee and we further declare that the Gotanagar truck terminus is a plant and not building, for the purpose of claiming depreciation under section 32 read with section 43 of the Income-tax Act. Consequently the assessee is held entitled to depreciation at the rate of 25 per cent. as prescribed for plant and not at 10 per cent., as applicable for building. - Decided against revenue
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2017 (2) TMI 501
Revision u/s 263 - addition claimed by the assessee for loss on account of machinery - Held that:- No query in respect of sale of machinery was made by the Assessing Officer. In absence of any stamp of acknowledgement by the Department on the letter dated 15/11/2010 and 25/11/2010, it cannot be treated that same were filed before the Assessing Officer. Even if it is considered that the assessee filed reply dated 15/11/2010 and 25/11/2010 before the Assessing Officer, the Assessing Officer was required to carry out Inquiry in respect of the claim of loss on sale of machinery, however, no such enquiry was made by the Assessing Officer, and, therefore, the case of the assessee falls in the category of complete lack of Inquiry on the issue of loss from sale of machinery. In view of above, we are of considered opinion that the assessment order on the issue is erroneous insofar as prejudicial to the interest of the Revenue and the learned Commissioner of Income Tax is right in assuming jurisdiction under section 263 of the Act. Correctness of the claim towards financial charges, correctness of unsecured loan and sundry creditors and provisions of TDS and disallowance under section 40(a)(ia) of the Act in respect of the freight expenses - Held that:- The submission of the assessee that no confirmation were filed in respect of the sundry creditors. Similarly, it is clear from the queries raised by the Assessing Officer that no details in respect of deduction of TDS on freight charges was examined by the Assessing Officer. Similarly, neither detail in respect of financial charges was also asked by the Assessing Officer nor any information was filed by the assessee. In view of the above, the learned Commissioner of Income Tax is correct in holding that further enquiry was necessary to examine the sundry creditors, financial charges, liability of TDS on freight charges. The Hon’ble jurisdictional High Court in the case of Meerut Roller Flour Mills Ltd (2013 (6) TMI 11 - ALLAHABAD HIGH COURT) held the assessment order as erroneous and prejudicial to the interest of the Revenue when the Assessing Officer had not conducted a proper Inquiry to verify cash credits and trade creditors and the matter remanded to the Assessing Officer under section 263 of the Act. Thus Commissioner of Income Tax was justified in cancelling the assessment order by holding it as erroneous and prejudicial to the interest of the Revenue. The impugned order is accordingly upheld. - Decided against assessee
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2017 (2) TMI 500
Interest for defaults in furnishing return of income - whether the taxes paid under section 140A by the assessee are to be reduced from the assessed tax for the purpose of computing interest under section 234A? - Held that:- As in the judgment of the Hon’ble Delhi High Court in the case of Dr. Prannoy Roy (2001 (12) TMI 68 - DELHI High Court) it is clearly held that interest would be payable in a case where tax has not been deposited prior to the due date of filing of the income tax return. Further, Hon’ble Supreme Court also in the case of Dr. Prannoy Roy (2008 (9) TMI 150 - SUPREME COURT ) clearly held that when the tax due had already been paid, which was not less than the tax payable on the returned income which was accepted, the question of levy of interest does not arise. Thus, both the Hon’ble Delhi High Court and Hon’ble Supreme Court has held that credit of only self-assessment tax paid before the due date of filing of return has to be allowed while computing interest under section 234A of the Act. Interest under section 234A of the Act would be payable by the assessee, on the assessed tax of ₹ 1,57,58,192 /- reduced by the self-assessment tax of ₹ 95,00,000/- paid before the due date of filing of return, for the period from 01/10/2010 to 25/03/2011. Accordingly, the ground of the appeal is allowed partly.
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2017 (2) TMI 463
Treatment of Long Term Capital Gains as undisclosed income - exemptions of Long Term Capital Gains on sale of shares denied - Held that:- There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn. In the light of the decisions in the case of Andaman Timber Industries (2015 (10) TMI 442 - SUPREME COURT) and considering the facts in totality, the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account. The Assessing Officer is directed to treat the surplus as Long Term Capital Gains and allow the exemption as claimed by the assessees. - Decided in favour of assessee
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2017 (2) TMI 510
Assessment of interest on enhanced compensation - enhanced compensation under Section 28 of the Land Acquisition Act, 1894 and interest thereon has attained finality and the amount has been paid to the assessee - nature of income - Held that:- The interest component on enhanced compensation under Section 28 of the 1894 Act is liable to be taxed under Section 56 of the 1961 Act and is not covered by Section 45(5)(c). Section 45(5)(c) of the 1961 Act does not apply to the case before us for it was introduced by an amendment w.e.f. 01.04.2004. However, the judgement squarely applies even in respect of cases under Section 45(5)(b) as well for it is expressly observed that interest on enhanced compensation is not treated as compensation. See Commissioner of Income Tax. Versus Shri Prem Singh [2010 (12) TMI 460 - PUNJAB AND HARYANA HIGH COURT ] - Decided in favour of revenue.
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2017 (2) TMI 511
Deemed dividend u/s 2(22)(e) of the Act – Advance/loan paid - Held that:- The matter is already covered by the decision of this Court in Chief Commissioner of Income-tax -III and ACIT Versus Sarva Equity (P.) Ltd. [2014 (4) TMI 788 - KARNATAKA HIGH COURT] if the intention of the Legislature was to tax such loan or advance as deemed dividend at the hands of deeming shareholder, then the legislature would have inserted deeming provision in respect of shareholder as well. The legislature has not done so - It is only the person whose name is entered in the Register of the shareholders of the Company as the holder of the shares who can be said to be a shareholder qua Company and not the person beneficially entitled to the shares - it is only where a loan is advanced by the Company to the registered shareholder and the other conditions set out in Section 2(22)(e) of the Act are satisfied, that amount of loan would be liable to be regarded as deemed dividend – Decided against Revenue.
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Customs
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2017 (2) TMI 471
Narcotics laboratories - Re-testing provisions - it is imperative to define re-testing rights, if at all, as an amalgamation of the above-stated factors. Further, in light of Section 52-A of the NDPS Act, which permits swift disposal of some hazardous substances, the time frame within which any application for re-testing may be permitted ought to be strictly defined. - Decision in the matter of Thana Singh Vs. Central Bureau of Narcotics [2013 (1) TMI 590 - SUPREME COURT] followed
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2017 (2) TMI 470
Inland Air Travel Tax - refund claim - refund sought contending that it was not liable to pay the said amount towards the IATT dues - Held that: - the aircraft which was in possession of the carrier was first distrained and then released to the Lessor upon the deposit of an amount near equivalent of the dues then outstanding. Therefore, the deposit would represent only the aircraft and not such amounts as were to be recovered from the carrier. The Lessor was, obviously interested in release of the aircraft which had far greater value than the amount required to be paid for its release and de-registration from the authorities. Subsequently, the lessor had also sought refund of the said amount from the Government. However, the responsibility of the carrier to pay the IATT dues subsisted. The recovery is to be made from the carrier until tax, interest, penalty so determined is paid. The distrainment was only for the purpose of ensuring recovery of the monies then due. The monies deposited by a third party could not be deemed to have been adjusted against the aforesaid dues of the tax as well as the penalty. Financial constraints of the carrier do not constitute a valid reason for either waiver of any dues under Section 42 and 43-A of the Act or under Section 46 of the Act. Penalty - Held that: - The deliberate withholding of monies (taxes) by the petitioner from such statutorily sanctioned collections and diversion of it by the carrier for its own private use, instead of crediting it into Government’s account was in blatant disregard to statutory provisions. This omission – in depositing the collections was illegal and dishonest - the non-imposition of penalty in such case would dilute and indeed render ineffective the deterrence envisaged under Section 46 of the Act. The reduction of the penalty amount from the maximum to a third was justified. Petition dismissed - decided against petitioner.
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2017 (2) TMI 473
Modification of interim order - Held that: - in order to give sanctity to the order passed by the judicial forum, interim order, though may not operate for all time to come, but once interim order is passed, unless there is change in the circumstances, the judicial forum cannot modify or review its own order. Such change in the circumstances should be the circumstances rather more on facts. Subsequent change in law, in our opinion cannot be said to be a valid ground for modification of the earlier interim order, which is accepted by the parties and remained challenged before any forum. Even in the p resent appeal also, the appellant has not challenged the order dated 06.08.2015 but the challenge is to subsequent order, whereby, the application for modification was rejected - we do not find that the Tribunal having committed any jurisdictional error in rejecting the application. The litigation appears to be a frivolous litigation to delay the recovery of the revenue. If the appellant was dissatisfied with the first conditional order for deposit of 50%, nothing prevented the appellant to approach the higher forum. The appellant has merrily enjoyed the time. The application filed for modification has been rightly rejected by the Tribunal - application for modification rejected - appeal dismissed.
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2017 (2) TMI 469
Jurisdiction - power of the Customs Authorities to issue SCN - validity of SCN - the SCN has been issued with the approval of the Commissioner of Customs and the petitioner has been asked to appear before the Commissioner of Customs and show cause as to why the goods should not be confiscated - Held that: - the petitioner presented the goods with the documents, at that time itself, the Customs Authorities informed the petitioner that goods will not be accepted, unless he produces the certificate from the Wild Life Authorities. The petitioner could have easily taken back the goods and gone, but he did not do so. The expression reason to believe is distinct from reasonable belief and 'suspicion'. In this case, only after obtaining a certificate from the Wild Life Authorities that the goods in question is made of Red Sanders, the Seizure Officer of the Customs Department had the reason to believe that it is liable for confiscation. Therefore, the act of the Customs Officers in waiting for opinion from the Wild Life Authorities before taking action under Section 110 of the Act cannot be said to be illegal. The case at hand was investigated by the Customs Authorities themselves and not by an officer of the DRI. The power of the Customs Authorities to issue show cause notice and proceed with the adjudication process is beyond any cavil. Petition dismissed - decided against petitioner.
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2017 (2) TMI 472
Detention of goods - foreign bike - smuggling - detention on the ground that the appellant could not produce any documents evidencing the legal import of the bike - quantum of redemption fine and penalty - Held that: - the appellant is liable to pay the duty and redemption fine. The plea of the appellant that he has to be given benefit of the duty already paid vide the bill of entry cannot be accepted for the reason that the description of the bike in the bill of entry is entirely different. There is no evidence to show that the bike described in the RC and seized from the possession of the appellant has suffered any customs duty - the duty of ₹ 13,55,578/- imposed upon the appellant upheld. The authorities below have imposed a redemption fine of ₹ 1,50,000/-and penalty of ₹ 40,000/. The appellant having purchased the bike for his own use, the Redemption fine is on the higher side. The same is reduced to ₹ 75,000/- - Moreover, there is no evidence to prove that the appellant was involved in the illegal import of the bike. He had purchased the bike taking into confidence the RC issued by a public office. The imposition of penalty ₹ 40,000/- is unsustainable and requires to be set aside. Appeal disposed off - decided partly in favor of appellant.
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Service Tax
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2017 (2) TMI 490
Construction of petrol pumps for Indian Oil Corporation Ltd. - classified under the head Erection, Commissioning & Installation Service or under the head Works Contract Service? - Held that: - the learned Commissioner have erred in holding that service tax is payable inspite of goods/material being used in execution of the contract for Indian Oil, supplied by the assessee contractor and admittedly VAT works contract tax have been paid - the classification adopted in the impugned order Erection Commissioning and Installation Service is not tenable and palpably wrong - the service rendered by the appellant is classifiable under Works Contract Service as defined under Section 65 (105) (zzzza) - appeal allowed - decided in favor of appellant-assessee.
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2017 (2) TMI 489
Rent-a-cab Scheme Operator Service - contract with two schools namely Delhi Public School and Jain International School for providing transportation service to the students enrolled in the said schools to bring students from their respective residences to school and back from school to residences - CBEC under letter F.No.137/70/2007-CX-4 dated 15.12.2008 - whether the said service is covered by the phrase rented for use by an educational body? Held that: - so long as the motor vehicles or cab which are rented by anyone and they are used by service receivers and such service is used by an educational body then such vehicles are not covered by definition of Cab in the said Section - In the present case the educational body is using the said vehicles for bringing the students to schools and back to their houses and they are also rented. Therefore, they are covered by the phrase rented for use by an educational body. Therefore, the vehicles are not covered by the definition of Cab under Section 65 (20) of the Finance Act, 1994 - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 488
Refund claim - Rule 5 of CCR, read with N/N. 5/2006 - CE (N.T.) dated 14.03.2006 - Held that: - The Tribunal in the appellants own case for a different period M/s. Virtusa (India) Pvt. Ltd. Versus CC, CE&ST, Hyderabad [2016 (6) TMI 678 - CESTAT HYDERABAD], had analyzed the issue in detail the nexus of these services with regard to output services of appellant and had held that the appellant is eligible for refund - appellant eligible for refund - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 487
CENVAT credit - input services - insurance, coal analysis, fabrication and erection, sealing turbine commissioning, vibration analysis, certification, legal consultancy and stevedoring services relating to coal import - denial on the ground of nexus - Held that: - The activities like Insurance Service, Repairs, modification and erection service, Servicing of Turbines, Vibration analysis, Legal Services etc., have been considered as eligible input services in decisions passed by various High Courts as well as the Tribunal. On perusal, I have to say that these services qualify as input services and are eligible for credit - credit allowed - appeal dismissed - decided against Revenue.
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2017 (2) TMI 492
Condonation of delay - delay of 28 days on the ground that the papers were misplaced in the appellant's office and also that the concerned official dealing with the appeal was on leave and therefore the appellant could not coordinate the matter with the appellant's advocate - Held that: - Though no hard and fast rule is laid, the Apex Court had advocated a liberal approach in condoning the delay of short duration and stricter approach where the delay is inordinate. The delay in the present case is only 28 days. The delay in filing the appeal can be condoned by putting the appellant on terms - the appellant shall pay cost of ₹ 5,000/- to respondent within one month - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 491
Imposition of penalty u/s 78 and 70 of the FA, 1994 - late filing of return - Held that: - the appellant has discharged the reduced penalty of 25% within one month of passing of the Order-in-Original - the appellant is eligible for reduced penalty of 25% of the service tax demand. Delay in filing 6 ST-3 returns - appellant liable to pay penalty for 6 delays. The equal amount of penalty imposed u/s 78 is set aside. The impugned order is modified to the extent of setting aside the equal amount of penalty and is modified by giving benefit of paying reduced penalty of 25% of the service tax demand, without disturbing the confirmation of service tax and the interest thereon - appeal disposed off - decided partly in favor of appellant.
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Central Excise
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2017 (2) TMI 479
100% EOU - Time limitation - Whether the Tribunal is justified in dismissing the appeals filed by the revenue following Larger Bench decision in the case of CCE v. LML Ltd., Scooter Division, [2002 (6) TMI 59 - CEGAT, COURT NO. I, NEW DELHI] without considering the appeal of the revenue filed within limitation on merits solely on the ground that the appeals were filed much after orders were passed in the appeal of the assessee? Held that: - when in respect of 100% EOU Permission to sell goods manufactured by them in DTA in accordance with paragraph 9.9 of the EXIM Policy, Government cannot go beyond such permission and dispute the value of clearance allowed by the competent authority, which in the case was the Development Commissioner. In view the decision in case of Commissioner of C. Ex. & Cus. Versus Sabnam Synthetics Ltd. [2010 (2) TMI 1136 - GUJARAT HIGH COURT], no fruitful purpose would be served in remanding the matter to the learned tribunal to consider the issue on merits which is already concluded against the revenue in view of the decision of the Hon'ble Supreme Court in the case of Virlon Textile Mills Ltd. Versus Commissioner of Central Excise, Mumbai, [2007 (4) TMI 6 - SUPREME COURT OF INDIA] as well as decision of the Division Bench of this Court in the case of very assessee and against the very impugned judgement and order passed by the adjudicating authority [2010 (2) TMI 1136 - GUJARAT HIGH COURT]. Appeal dismissed - decided against Revenue.
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2017 (2) TMI 475
MODVAT credit - Whether Tribunal substantially erred in law in holding that Modvat credit can be allowed in respect of quantity of inputs not actually received and accordingly not used in or in relation to the manufacture of final product? Held that: - there was no material on record to suggest that any illicit diversion of the Cenvated inputs had been made for uses other than use in the manufacture of the finished goods - The tribunal also recorded that there was no illegal diversion of the items received and a mere minor loss in transit or a difference in the weight due to differences in weighing scale or in dip reading, would not lead to the conclusion that there was any illegal diversion or that the assessee was claiming Cenvat credit on any item on which it sought the credit - credit allowed - appeal dismissed - decided in favor of assessee.
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2017 (2) TMI 474
Clandestine removal - Section 35-G of Central Excise Act, 1944 - Held that: - Revenue, at the outset, could not dispute that Commissioner (Appeals) as well as Tribunal both have recorded a finding of fact that there is no clandestine removal of molasses from Factory premises and that finding of fact recorded concurrently having not been shown to be perverse or contrary to record - appeal dismissed - decided against Revenue.
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2017 (2) TMI 483
Recovery u/s 11D of amount collected by the assessee in the name of duty of excise - retrospective effect - Cigarettes - Whether Notification No.355/86-CE dated 24/06/1986 is a notification granting Set Off of the duty paid on the input viz., cut tobacco while paying duty on the finished product i.e. Cigarettes or is a notification granting exemption, simplicitor from payment of excise duty to Cigarettes? - Held that: - exemption Notification is required to be construed strictly and having regard to the language employed therein. Under the circumstances, we are of the opinion that no error has been committed by the learned tribunal in holding N/N. 355/86-CE dated 24/06/1986 as exemption Notification. It may be a different thing that while making the payment of excise duty on the final product – Cigarettes the assessee might use such credit of the duty of excise already paid on Cut Tobaco. However, by that, it cannot be said that Notification No.355/86-CE is a Notification granting set off of excise on the duty already paid on Cut Tobaco as sought to be contended on behalf of the assessee - decided in favor of Revenue. Whether the Board Circulars dated 06/07/1990 and 01/04/1981 and the Trade Notice dated 08/08/1986 did not establish that N/N.355/86 in effect conferred benefit on the manufacturer in the nature of Set Off and the same was not in the nature of an exemption notification simplicitor? - Held that: - the said Circular and the Trade Notices are clarificatory in nature with respect to the procedure to be followed while availing set off /claiming the set off with respect to the amount of excise duty paid on input – Cut Tobaco. The said Trade Notices, as such, cannot be said to be in conflict with the Notification No.355/86-CE dated 24/06/1986. As observed and held hereinabove, N/N.355/86-CE dated 24/06/1986 is a Notification granting exemption on excise duty payable on Cigarettes to the extent of duty paid on the input, namely, Cut Tobaco - decided in favor of Revenue. Whether by virtue of the operation of Notification No.355/86-CE dated 24/06/1986, the appellants had in fact paid the full effective duty on the final products and hence were within their rights to recover the full duty from their customers? - Held that: - As per exemption N/N.355/86-CE excise duty liability would be ₹ 80/- only. In the present case though the assessee paid the excise duty at ₹ 80/- (after debiting ₹ 20/- paid on input, namely, Cut Tobaco) they recovered excise duty at ₹ 100/- from the customer. Thus, ₹ 20/- was recovered by the assessee in excess of the duty payable, and therefore, to that extent, ₹ 20/- can be said to be enrichment, which is not permissible, that is exactly for which Section 11D of the Act has been introduced - decided in favor of revenue. Whether the provision of Section 11D of the Central Excise Act, 1944 could be invoked in respect of payment of duty under Notification No.355/86 when the duty collected from the buyer of the finished products was not more than the duty already paid on the input and the duty paid on the finished product at the time of removal cumulatively? - SCN - period of limitation - Held that: - the show cause notice came to be issued in the year 2000 for the alleged transactions for the period between 1993 to 1995, and therefore, the same has been issued after six years i.e. unreasonable period. The aforesaid seems to be attractive but has no substance. It is required to be noted that Section 11D of the Act came to be amended by the Finance Act, 2000 making it applicable retrospectively with effect from 20/09/1991, and therefore, the cause of action for the Department to invoke the provisions of Section 11D of the Act can be said to have been occurred on amendment of Section 11D of the Finance Act, 2000. When Section 11D of the Act is made applicable retrospectively with effect from 20/09/1991, show cause notice has been issued in the month of December, 2000, and therefore, it cannot be said that the same can be said to have been issued after unreasonable period. If the submissions on behalf of the assessee is accepted, in that case, the amendment in Section 11D by Finance Act, 2000 making Section 11D applicable retrospectively with effect from 20/09/1991 would become nugatory. If the show cause notice is issued after five or six years or unreasonable period from the amendment of Section 11D by Finance Act, 2000 then the assessee can justifiably make a grievance. However, after amendment in Section 11D by Finance Act, 2000, immediately show cause notice has been issued, and therefore, the same cannot be said to be either issued after unreasonable period or beyond the period of limitation - decided in favor of Revenue. Appeal dismissed - decided against assessee and in favor of Revenue.
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2017 (2) TMI 482
CENVAT credit - Business Auxiliary Services - Servicing of Motor Vehicles - common input services - denial on the ground that the same was not used in manufacture of dutiable goods - Held that: - the very identical issue has been considered by this Tribunal in the cases of Badrika Motors Pvt. Ltd. [2014 (1) TMI 316 - CESTAT NEW DELHI], where the Cenvat credit was denied on the GTA service on the ground that the GTA service has no nexus with the taxable service such as Authorized Service Station and Business Auxiliary Service. This Tribunal has held that no arithmetical correlation is required between the input and output services and accordingly the credit was allowed - the appellant is not required to reverse the Cenvat credit attributed to the trading activity of passenger cars. Extended period of limitation - Held that: - in the absence of ingredients such as fraud, collusion, suppression of fact, etc., with intent to evade payment of duty, the penalty is not imposable under Section 78 - Considering this finding which equally applicable in case of invocation of extended period in terms of proviso to Section 73, the demand is not sustainable on the ground of time-bar also. Impugned order not sustainable on merit as well as on limitation - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 481
SSI exemption - N/N. 8/2003-CE dated 1/3/2003 - use of brand name of other person - The claim of the appellant right from beginning is that the goods manufactured and sold by them do not bear the brand name of Sunflex , it is only mentioned on the invoice, whereas the same was not affixed on the product. Held that: - Reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE, CHENNAI-II Versus M/s AUSTRALIAN FOODS INDIA LTD. [2013 (1) TMI 330 - SUPREME COURT], where it was held that even if brand is not affixed on the product but the product is sold by using the identity of brand, then also SSI exemption is not available - In the present case as per the customer's acceptance agreement mention of brand on invoice clearly establishes that the goods with the identity of sunflex brand were being sold. The invoice itself is an evidence that sunflex branded goods were being manufactured and sold by the appellants. It is not only the invoice which bear the description of sunflex brand goods but also the customers in their statements accepted that they were purchasing sunflex range of products that again shows that the customers were buying the products i.e. sunflex brand venetion blinds, vertical blinds, roller blinds. The appellant is not entitled for the SSI exemption - Decided against the assessee.
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2017 (2) TMI 480
Intermediate goods - job-work - supply of the intermediate goods to the job worker and manufacturing by job worker - whether the appellant is required to make payment of duty on clearance of intermediate products to job-worker? - Rule 57F (2/4) of Central Excise Rules 1944 and/or notification No. 214/86-CE - Held that: - The only condition is that the final product is cleared by the principal manufacturer on payment of excise duty. In such case neither excise duty is payable on the removal of semi processed goods by the principal supplier nor on the job work goods manufactured by job worker. In the present case, the appellant has claimed that they have cleared the trade rubber on payment of duty. We find that the adjudicating authority has not verified any of the documents such as challans issued by the M/s. Emkay for sending of rubber compound/cushion rubber for job work to Kayji and the challans of Kayji for return of job work goods to M/s. Emkay and final clearance of the same on payment of duty by M/s. Emkay. This co-relation has to be verified by the adjudicating authority which was not done so - since the Tribunal had directed to the adjudicating authority to verify the documents and statements than the adjudicating authority should not have avoided such exercise on one or other pretext - appeal allowed by way of remand.
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2017 (2) TMI 486
CENVAT credit - denial on the ground that the Bill of entry was not in the name of the appellant - entire consignment had been transferred by the principal manufacture in favour of the appellant - Held that: - reliance placed in the case of Commissioner of Central Excise & Customs, Vadodara-II vs. Eupec-Welspun Pipe Coatings India Ltd [2009 (12) TMI 561 - GUJARAT HIGH COURT], where it was held that credit shall not be denied on the ground that the document does not contain all the particulars required to be contained under these Rules if the document gives details of payment of duty or Service Tax, Description of the Goods, Assessable Value, Name and Address of the factory of the receiver - the appellants are eligible to CENVAT credit on the CVD and Education cess paid in the said Bill of entry - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 485
Rectification of mistake - certain factual error crept into the said order, which needs to be rectified - Held that: - This Tribunal, after analyzing the case laws on the subject and the arguments advanced by both sides, arrived at the conclusion that payment of duty on the part of the applicant, while clearing the goods was appropriate and accordingly rejected their appeal. The conclusion of the Tribunal, whether correct in law or otherwise, cannot be considered again in the garb of rectification of mistake apparent on the record, which would tantamount to review of the order, an authority, in my view, is not vested with this Tribunal - application for ROM dismissed.
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2017 (2) TMI 478
CENVAT credit - denial on the ground that the quantity of imported scrap mentioned under the respective duty payment documents was not receive in their factory - whether the Appellants had received 103.824 MTs of brass scrap in their factory on which they availed CENVAT Credit during the relevant period? - Held that: - it is necessary to cross examined Shri Dubey to ascertain the facts; also, it is necessary to supply all the documents including the Daily Lorry Reports and Monthly Lorry Reports to the Appellants so as to make their submissions on the same - appeal allowed by way of remand.
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2017 (2) TMI 477
Natural justice - denial of cross examination - Held that: - The directive of the High Court has been completely misread. The assessee will be given the right to cross-examination. The matter is remanded to the adjudicating authority to give a proper opportunity of hearing after giving to the assessee an opportunity of cross-examination - appeal allowed by way of remand.
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2017 (2) TMI 484
CENVAT credit - recovery - Held that: - there are no allegations in the SCN that information required in ER-1 was deficient - I, therefore, set aside that part of the Show Cause Notice dated 01/02/2008 which deals with the proposal for the recovery of Cenvat credit amounting to ₹ 7,31,366/- - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (2) TMI 467
Anticipatory bail - Misuse of input tax credit - creation of the fake Firms and obtaining registration from the office of the Commissioner of Commercial Taxes on fake documents and by using registration of fake Firms - Held that: - The offences charged are of the criminal breach of trust, misappropriation, cheating and forgery under the Indian Penal Code, as also under Section 85 of the VAT Tax Act. The applicant is involved in making use of fake Firms by getting the Firms registered from the Commissioner of Commercial Taxes to get the tax credit benefits and the activities of the applicant with other persons are stated to have caused loss to the public exchequer to the extent of more than 100 crores - The Court, therefore, finds that this is not the case where the Court should exercise its discretion in favour of the applicant - bail not granted - application rejected.
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2017 (2) TMI 466
Detention of goods - detention on account of the variation in the weight - one time tax - Held that: - variation in weight occurred, inadvertently, and that, if regard had been had to the other documents, this discrepancy would have come to light - in order to expedite the release of detained goods, the petitioner, is willing to pay one time tax - respondent are directed to release the detained goods upon payment of one time tax - petition allowed - decided partly in favor of petitioner.
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2017 (2) TMI 468
Whether in the facts and circumstances of the case the Tribunal is right in law in holding that the piston ring manufactured and sold by the appellant dealer as declared goods falling under Section 14(iv)(viii) on CST Act 1956 and Exigible Tax in Section 4(1)(b)(i) of KVAT Act 2003? Held that: - reliance placed in the case of STATE OF PUNJAB Versus FEDERAL GOGUL GOETZE (INDIA) LTD. [2011 (3) TMI 416 - PUNJAB & HARYANA HIGH COURT], where it was held that Rings are specifically mentioned in Section 14 of the CST Act and mere fact that the same are used as automobile parts, is not enough to exclude the same from the said entry and invoke residue entry. The `piston rings’ fall in the category of wheels specified by sub-clause (viii) of clause (iv) of CST Act - petition dismissed - decided against petitioner.
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Indian Laws
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2017 (2) TMI 465
Professional misconduct - default of audit party - Chartered Accountants Act - wrong method of valuation of inventory - Held that:- At the time of hearing the stand taken by the respondent was that PCL was a trading company and followed Weighted Average Cost Method, which was in contravention of Accounting Standard-2 (AS-2), which specifically laid down the method of valuation of inventory as cost or market value whichever is less. But the committee held that it was not taking cognizance of the same since the method of valuation of inventory, albeit wrong, was consistently followed by the company. However the committee highlighted that classification of the inventory ought to have been disclosed in the notes to the accounts. The committee further noted that during the period January 01, 1996 to December 31, 1996 huge payments were made by PCL on behalf of AIL but no disclosure of the same was made by the auditor in the report as contemplated by law. Further, there were suspicious adjustment entries between AIL and PCL which ought to have raised a doubt about the genuineness of the transactions and ought to have been detected and reported by the respondent. Suffice it to highlight that in paras 26 and 27 of the report the Committee highlighted the modus operandi adopted by PCL and AIL to form a loop with no cash flow coming in, but sales, stocks and receivables increases. The obligation of the auditor concerning transactions which are merely book entries was highlighted i.e. the duty of the auditor to enquire whether the transactions were prejudicial to the interest of the company being not discharged by the auditors. The Committee also highlighted that as an auditor it was the obligation of the respondent to comment about the internal control procedures of the company. With reference to AAS-3 and AAS-4, the Committee further brought out the obligations of the auditor to be discharged in the course of the audit. The Committee has also highlighted the duties of the auditor to maintain the working papers and documents and noted that in spite of repeatedly directed to do so, the respondent did not produce the papers and took the plea that since the year 2003 he had surrendered the certificate of practice, therefore he was not keeping the past record. The report of the Disciplinary Committee is based on the accounting standards to be followed and breach thereof. Having not filed any response to the report of the Disciplinary Committee, and finding the report to be suffering from no infirmity, as did the Council accept the same, so do we. Indeed, the respondent is guilty of committing professional misconduct falling within clauses 5, 6, 7 and 8 of Part 1 of the 2nd Schedule to the Chartered Accountants Act, 1949. Keeping in view the scam which has taken place and the seriousness of the indictment of the respondent we accept the recommendation of the Council and levy the penalty of removing the name of the respondent from the register of members of the Institute of Chartered Accountants for a period of 5 years.
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2017 (2) TMI 464
E-Auction - forfeiting the EMD payment made by the petitioner and quash the same and consequently direct the respondents 2 and 3 to enlarge the time for compliance of the balance payment payable by the petitioner in accordance to the E-Auction - Held that:- he e-auction advertisement does not constitute and will not be deemed to constitute any commitment or any representation of the bank. The property is being sold with will the existing and future encumbrances whether known or unknown to the bank. The Authorised Officer/ Secured Creditor shall not be responsible in any way for any third party claims / rights / dues. The sale notice contained other terms and conditions of the e-auction. The auction sale is subject to rules / conditions prescribed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. This sale will attract the provisions of Section 194-1A of the Income Tax Act. The sale notice in the instant case has been issued on 25.07.2016. Request letter for participation was to be submitted on or before 03.09.2016 and the sale dated was fixed for 07.09.2016. It is important to note that the bank has filed W.P. on 29.08.2016. Therefore, there is sufficient time for intending purchasers to make their own independent inquiries regarding the defects in the property. The petitioner prayed for extension of time to make the balance payment. As it has been declared by the supreme court that Rule 8(3) of Security Interest (Enforcement) Rules, 2002 is mandatory, we hold that the petitioner is not entitled to extension of time for the balance payment. As per Rule 9(3) of Security Interest (Enforcement) Rules, 2002 if the buyer does not deposit 25% of the sale price immediately, the immovable assets shall be offered for e-auction on 25.07.2016. The Bank has already issued subsequent sale notice on 15.09.2016 and the sale was fixed for 24.10.2016 in terms of Rule 9(3) of Security Interest (Enforcement) Rules, 2002. Therefore, we are inclined to accede to the offer of the petitioner. The Bank has forfeited the earnest money deposit of ₹ 6,60,00,000/- paid by the petitioner. For the reasons stated above, the Writ Petition is allowed in part. In other aspects, the writ petition is dismissed. The Bank is directed to refund the earnest money deposit of ₹ 6,60,00,000/-to the petitioner within a period of six weeks from the date of receipt of a copy of this order as in the present case, the terms and conditions do not provide for forfeiture of the earnest money deposit.
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