TMI Tax Updates - e-Newsletter
February 28, 2013
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Registration u/s 12AA (1)(b)(ii) - it was premature for CIT to judge the activities of the Trust by just glancing through the statement of accounts of the trust of such a short period of 3 months - AT
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Income Tax:
TDS on fees for technical services - When a particular technology was made available to the assessee by Xennia exclusively, it cannot be said that the agreement was only for sale of printer. - AT
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Income Tax:
Notional gain on conversion of foreign exchange deposit placed with its wholly owned subsidiary company relying on AS-11 - non-monetary item - Order of CIT(A) deleting the addition confirmed - AT
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Income Tax:
Order of Reassessment u/s 147 - it has been passed without any application of mind - AO has not even bothered to change the words such as “we”, “us”, etc. - In favor of assessee by way of remand - HC
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Indian Laws:
Economic Survey 2012–13 presented as on 27-2-2013
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Service Tax:
Attachment orders - As Tribunal had passed an order granting interim stay on the matter till the disposal of the stay application the department is not allowed to issue an attachment notice to the banker - AT
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Service Tax:
Franchise service - right to collect toll - the arrangement between the appellant and the subsidiary-company would fit in the definition of "franchise" - prima facie against the assessee - AT
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Service Tax:
Suo motu credit of the differential amount of service tax - lesser payment made by the customers - merely minor infraction of the rule - adjustment allowed - AT
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Central Excise:
Valuation of the goods under Sec. 4A - non-mentioning of correct assessable value as per Notification No.2/05 is clearly a willful mis-statement by the appellants and the extended period under Sec. 11A is clearly invokable - AT
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Central Excise:
Condonation of delay - Negligence of employee cannot be considered as sufficient cause for not filing the appeal within the normal period. - AT
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Central Excise:
CENVAT credit on storage and warehousing charges - If depot is the place of removal, service tax paid on services received upto the place of removal is an eligible input service - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2013 (2) TMI 608
Period of limitation for rectification u/s 154(7) - stay of the demand raised by the petitioner - Held that:- The entire demand of Rs.92,54,79,604/- in respect of the assessment year 2004-05 is time barred because the notice itself under section 154 was issued after four years from the end of the financial year in which the assessment had been originally framed. In the year 2005-06 the demand had been initially quantified at Rs.225.86 crores which has been reduced by a sum of Rs.30 crores because the petitioners have paid the said sum in March 2012. The balance is, therefore, Rs.195,86,36,433/-. The original demand of Rs.225.86 crores comprised of two components i.e. Rs.114 crores towards the alleged principal tax liability and Rs.110 crores towards the purported interest liability. Rs.110 crores interest liability can be broken up into three components first being an amount of Rs.75 crores raised as per the demand notice under section 156 dated 16.03.2012 for a period prior to the date of notice, thus this demand is ex facie bad inasmuch as section 220(2) contemplates charging of interest for nonpayment of a demand raised under section 156 and that, too, after 30 days thereof. In the present case the demand itself was raised on 16.03.2012 therefore there cannot be any interest charged for a period prior to it. Interest demanded of Rs.15 crores u/s 234B - As decided in Abdul Wahid and Company case [2010 (6) TMI 85 - MADRAS HIGH COURT] when the liability for payment of additional tax itself was created for the first time, based on the subsequent amendment, in the year 2005, with retrospective effect from 01.04.1998, it would be incongruent to expect the assessee to have satisfied the requirement of payment of advance tax as prescribed under Section 234 (B) of the Income Tax Act – interest u/s 234B can not be imposed Sum of Rs.30 crores has been demanded on the basis of disallowance of the annual licence fee amount on the issue of whether the same was capital or revenue in nature. The Tribunal, in the case of the assessee itself decided in favour of the assessee. The petitioner sought to set off this sum of Rs.54 crores against a payment of Rs.87 crores for the assessment year 2008-09 which cannot be accepted inasmuch as focus is on the two assessment years 2004-05 and 2005-06 and this was not the issue when the impugned order dated 03.01.2013 was passed. Consequently, there is an outstanding alleged demand of Rs.54 crores on account of tax and Rs.20 crores on account of interest which is, prima facie, recoverale from the petitioner - a demand of Rs.74 crores would possibly be sustainable at the present stage the petitioner should deposit 75% of this figure of Rs.74 crores which would roughly come to Rs.55.5 crores round off to Rs.56 crores.
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2013 (2) TMI 607
Reference made to Transfer Pricing Officer - determination of the ALP by rejecting the TP study made by the assessee - as per TPO assessee is to be considered as Service Provider, working on Research and Development and not as Software Development as claimed by the assessee - Held that:- Assessee is a service provider for research and development in various fields of engineering (including computer software) as enumerated in the agreements between the assessee and its associated enterprises and the result of such research and development is being delivered to the clients/associated enterprise in the form of customized computer data through network/internet. Thus, even as per the assessee's submissions, it is conducting the research and development through its multi-disciplinary R&D centre JFWTC and its activities are for several streams/areas including Information Technology. Thus it can be seen that it is catering to nearly all of GE's diverse business worldwide touching nearly every scientific discipline across the spectrum therefore rightly held by the TPO that the assessee is not into simple software development but is engaged in research and development in technical and engineering services on contract basis. Therefore, the TPO has rightly rejected the TP study conducted by the assessee and has rightly proceeded to select his own comparables in the field of Research and Development and redetermine the ALP - against assessee. Whether the comparables adopted by the TPO are relevant and comparable to the assessee - Held that:- As rightly pointed out by the TPO and the CIT(A)/DRP for the relevant assessment years, the assessee is not in the business of software development but it is in the business of research and development in various fields of engineering including the computer software. The outcome of the research and development conducted by the assessee is delivered to the customers/AE through electronic media. The mode of delivery of result of research and development cannot determine the nature of the functions/activities of the assessee. Therefore, the TPO was right in conducting search on the data base 'prowess' using the word 'research and development' Adoption of Vimta Labs as a comparable - Held that:- The relative risk profile of the comparable company, particularly on the factors of human involvement in the clinical trails needs to be evaluated and a determination made whether such differences in risk needs to be adjusted or whether such risks are not amenable for adjustment at all, as claimed by the assessee. In view of the observations and also inconsistencies in the approach of the assessee and also in view of the fact that the assessee was not given an opportunity of hearing for A.Y 2006-07 against adoption of Vimta Labs as a comparable and also in view assessee's submissions that there has been a change in the classification of the Vimta Labs in the database in AY 2006-07, and also additional evidence filed before us with regard to the risks encountered by Vimta Labs and Celestial Labs, it is deemed fit and proper to remand the issue to the file of the AO/TPO for reconsideration of the issue de novo for all the A.Ys. Computation of deduction u/s 10A - Held that:- As decided in Yokogawa India case [2011 (8) TMI 845 - KARNATAKA HIGH COURT] for computing the deduction u/s 10A of the Act, the profit of eligible units have to be deducted at source and do not enter into the computation of income and as a consequence of which, the losses suffered by non eligible units cannot be set off against the profits of eligible units. Further it has been held that the depreciation and business loss of eligible units relating to the assessment year 2000-01 onwards is eligible for set off and carry forward for set off against the income post tax holiday as per the amended provision of sec. 10A(vi) amended with retrospective effect from 1/4/2001. Thus Losses of non-10A units cannot be set off against profit of 10A unit. TP adjustment to the ALP on account of interest on external commercial borrowings - Held that:- The interest rate is depending upon the credit rating of the borrowings and also on the prices and economic conditions prevailing at the time of advancing the loan. The assessee has obtained the loans in the year 2001 and the issue has been considered by the TPO for the assessment years 2004-05 and 2005-06 and also for the assessment year 2008-09. After considering the assessee's submissions, the TPO accepted the rate of interest fixed in the loan agreements. In view of rules of uniformity and consistency interest rate on ECB should be taken as fixed in loan agreement in computation of ALP. Exclusions of telecommunication expenses and travelling expenses incurred in foreign currency from the export turnover but not making the corresponding reduction from the total turnover for the purpose of computation of deduction u/s 10A - Held that:- As decided in Tata Elxi Pvt. Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] when any expenditure is reduced from the export turnover, then the same should also be reduced from the total turnover for the purposes of computation of deduction u/s 10A.
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2013 (2) TMI 606
Applicability of Sec 194C - TDS provision on machinery hire charges prior to 13.7.2006 - whether the addition made by the AO has rightly been deleted by the learned CIT(A), holding that the provisions of s. 194C are not attracted - Held that:- Provisions of section 194C are applicable when the contract is entered into (i) for carrying out any work and (ii) supply of labour to carry out any work. Therefore, the main condition prescribed in s. 194C is that there must be carrying out of any work whether tangible or intangible. In the instant case, the assessee was not under an obligation to carry out the work as it was not under the control of the lender and the possession of the machinery temporarily was passed to the assessee after entering into agreement with the lender. Therefore, in the present case, taking of the machinery and equipment on hire would not amount to a contract for carrying out any work as contemplated in s. 194C. The said contract i.e. taking of machinery and equipment on hire also cannot be treated with a contract for supply of labour. Therefore, the provisions of s. 194C were not applicable to the facts of the assessee's case, as such no disallowance was called for under s. 40(a)(ia) of the IT Act. See CIT Versus Poompuhar Shipping Corporation Ltd.(2006 (1) TMI 60 - MADRAS HIGH COURT) The provisions of section 194-1 are not applicable to the facts of the present case because the previous year relevant to the assessment year under consideration ends on 31st March 2006 while insertion of the words "machinery or plant or equipment" has been made effective from 13th July, 2006 i.e. much after the end of the previous year relevant to the assessment year under consideration. Therefore, the provisions of s. 194-1 of the Act are also not applicable to the facts of the present - in favour of assessee.
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2013 (2) TMI 605
Benefit of registration u/s 12AA (1)(b)(ii) disallowed - certificate of exemption under section 80G(5) was also denied - Held that:- It can be construed that the case of the assessee trust is squarely covered by the law laid down by Foundation of Ophthalmic & Optometry Research Education Centre [2012 (8) TMI 777 - DELHI HIGH COURT] as perusal of the order passed under section 12AA shows that CIT has not commented on the objects of the Trust. The CIT after examining the statement of accounts formed an opinion that since no expenditure towards any charitable activity is shown in the statement of accounts, therefore carrying out of genuine charitable activities is absent in this case. It would be relevant to mention here that the trust was formed on 11.1.2012, the application for registration under section 12AA was submitted by the appellant on 27.3.2012 i.e. within a period of three months of its creation. The school activities started in June, 2012, the appellant submitted its books of accounts upto September, 2012 before CIT. The CIT after examining the statement of accounts for such a short period, formed its opinion that the activities of trust are not charitable in nature. The CIT has not raised any objection on the objects of the trust. In our considered opinion, it was premature for CIT to judge the activities of the Trust by just glancing through the statement of accounts of the trust of such a short period. Therefore, set aside the order of the CIT and direct the CIT to grant registration to the assessee trust under section 12AA. Consequent to the registration under section 12AA also direct the CIT to consider the application of the assessee for grant of initial certificate of exemption under section 80G(5) - in favour of assessee.
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2013 (2) TMI 604
Fair market value for the purpose of computation of capital gain - assessee took it as at Rs. 5,588 per cent as on 01-04-1981 where as AO on the basis of the letter received from Sub Registrar has fixed at Rs.466 per cent - Held that:- For the purpose of estimating the fair market value as on 01-04-1981 consideration of the locality in which the land is situated, the accessability to infrastructure facilities, comparative sale instances in the locality, potentiality for future development, distance between the land and the bus stand, railways station, airport, etc has to be made. The guideline value fixed by the Sub Registrar is only a guideline value to ascertain the market value and may be one of the factors to be taken into consideration for estimating the fair market value, however, it cannot be the sole basis for fixing the fair market value as on 01-04-1981. As the taxpayers now claim that in the case of the neighbour the fair market value as on 01-04-1981 was fixed at Rs.2,300. Unfortunately, all these facts were not considered by the assessing authority therefore the assessing officer has to reconsider the issue in the light of all factors mentioned above and thereafter take a decision - in favour of assessee for statistical purposes. Exemption u/s 54, 54F and 54EC denied - as per AO the taxpayers have deposited the amount in the fixed deposit in State Bank of Travancore, Pettah Branch, Trivandrum - Held that:- Unable to accept the claim of the taxpayers as legislature has framed the scheme for the purpose of giving exemption from the capital gain tax by asking the taxpayer to deposit the amount in the capital gain bond scheme. Therefore, if the taxpayer wants to take benefit of the scheme the money has to be deposited in the capital gain bond. Deposit of money in the fixed deposit cannot be construed as deposit in the capital gain bond, therefore the taxpayers are not eligible for exemption at all - against assessee. Indexed cost of improvement declined - Held that:- As on the inspection of the land, the revenue authorities found that no improvement was undertaken by the taxpayers. No material is available on record to suggest that the taxpayer has undertaken any improvement in the land therefore no infirmity in the orders of the lower authority - against assessee.
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2013 (2) TMI 603
TDS on fees for technical services - DTAA between India and UK - whether the agreement entered into by the assessee and Xennia was about purchase for machinery only or it dealt with something more than that ? Held that:- Referring to the terms of the agreement clearly prove that Xennia had supplied the technology to the assessee. Not only the assessee was using it, it had the right over the Intellectual Property also. Agreement entered in to by the assessee-company allowed it 'to file patent application, design application or any such application for intellectual property rights arising out of foreground IP'. In these circumstances, the view of FAA is to be agreed that the transaction was not for sale of printer only & it included the technology also. When a particular technology was made available to the assessee by Xennia exclusively, it cannot be said that the agreement was only for sale of printer. Therefore, upholding the order of the FAA, effective Ground of appeal i.e. Ground No.1 decided against the assessee. @ 15% or 10% as prescribed in section 115A(1)(b)(BB)- Perusing the provisions of the Act to be covered u/s. 115A(1)(b)(BB) as per the said provisions, tax on dividends, royalty and technical service fees in case of foreign companies has to be computed in a particular manner, if it is entered in to after a particular date. As neither the AO nor the FAA had any occasion to deal with the issue. Assessee had also not raised it before the FAA. So, in the interest of justice be restored to the file of the AO for the limited purpose of deciding the question of applicability of lower rate of tax for the transaction-in-question - in favour of assessee by way of remand.
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2013 (2) TMI 602
Disallowance u/s 14A r.w.r. 8D - assessee-company engaged in the business of investment in shares and securities - assessee contested the disallowance exceeding the amount of income earned - Held that:- Finding force in the assessee's argument that 'share application money', to the extent it is actually so, so that it only represents amount/s paid by way of application for allotment of shares, the same cannot be regarded as an investment in shares, or an asset (or asset class) yielding tax-free income, and neither is it capable of yielding any tax-free income. The same would, therefore, have to be excluded in working out the disallowance u/r. 8D. Thus the exclusion of 'share application money' is not in the least for the reason that it did not yield any tax-free income for the relevant year, but for the reason that it is incapable of any such income. The same is only in the nature of application (offer) money, which would though, on allotment, get adjusted against the cost of the said shares, and only whereupon any rights in the investee company inure to the allottee. No rights, not even inchoate, in the share capital of the issuing company arise on the payment of the share application money, irrespective of the time period for which it may outstand. The same may at best yield interest income (for which a special procedure though has to be followed by the company concerned), which is in any case taxable, so that there is no scope for application of sec. 14A thereon. As such, upon verification of the assessee's claim with regard to the share application money as on 31.03.2007 and 31.03.2008, as appearing in its balance-sheet/books of account, so that no shares had actually been allotted in its respect as at the relevant dates, the same shall be excluded by the AO from the qualifying amount in reckoning the average investment in working out the disallowance under rules 8D (ii) and 8D(iii). The A.O. will decide the matter per a speaking order, allowing the assessee a reasonable opportunity to present its case before him.
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2013 (2) TMI 601
Proportionate interest attributable to the advances given to subsidiary/group companies at concessional interest rate or interest free - disallowance - Held that:- As decided in assessee's case in [2004 (6) TMI 589 - MUMBAI BENCH ‘B’ (THIRD MEMBER)] the relevant advances having been made by the assessee to its subsidiary company wholly and exclusively for the purpose of its business, the disallowance of interest attributable to the said advance was not justified - in favour of assessee. Disallowance of interest on share application money - CIT (A) allowed the claim - Held that:- As decided in assessee's own case for previous years there being no diversion of interest bearing funds for non business purpose as alleged by the AO, there was no justification in making any disallowance on account of interest paid on the borrowed funds. It was also noted that the share application money was finally refunded to the assessee with interest at the rate of 19% and the interest so received was duly offered to tax by the assessee in the relevant year - in favour of assessee. Addition on account of notional gain on conversion of foreign exchange deposit placed with its wholly owned subsidiary company relying on AS-11 - Held that:- As per the classification made in AS-11, monetary items mainly include amounts held on current account, such as, cash receivables, payables etc. while non-monetary items include amounts held on capital account, such as, fixed assets, investment in shares etc. In the present case, the shareholders’ deposit represented the amount held by the assessee on capital account inasmuch as it was convertible into equity shares within a period of 10 years and if not so converted, it was liable to be refunded to the assessee company only after a period of 10 years thus the said amount thus was in the nature of non-monetary item which was required to be reported/recognized at the exchange rate prevailing on the date of relevant transaction even as per AS-11 as rightly held by the CIT(Appeals) - no infirmity in the impugned orders of the CIT(Appeals) deleting the additions made by the AO on this issue and upholding the same -in favour of assessee. Deduction u/s 80HHC with regard to meals supplied by its flight kitchen units to foreign airlines - Held that:- Claim of the assessee for deduction allowed holding that the same constituted export eligible for deduction u/s 80HHC relying on earlier year case. Claim for deduction on account of expenditure incurred on replacement of carpets - Held that:- Decided in favour of assessee relying on CIT vs. Lake Palace Hotels and Motels [2002 (4) TMI 29 - RAJASTHAN HIGH COURT] - in favour of assessee. Interest levied u/s 234D cancelled by CIT(A) - Held that:- As section 234D has been amended by the Finance Act, 2012 with retrospective effect from 01-06-2003 whereby Explanation 2 has been inserted declaring that the provisions of section 234D shall also apply to assessment year commencing before the first day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date. In the present case, the assessment year involved in assessment year 2001-02 which is commencing before the first day of June, 2003 and since the assessment for the same has been completed on 22-03-2004 i.e. after 1st June, 2003, the provisions of section 234D are clearly applicable and the assessee is liable to pay interest u/s 234D as per the amendment made by the Finance Act, 2012 with retrospective effect from 01-06-2003 - set aside the impugned order of the CIT(Appeals) cancelling the interest levied by the AO u/s 234D and restore that of the AO charging such interest - against assessee. Addition made on account of reversal of interest claimed in the earlier years by crediting the same in the books of account for the year under consideration - Held that:- The accounting entries passed by the assessee in its books of account reversing interest debited in the earlier year and including the same in the cost of relevant fixed asset did not result in any remission or cessation of any liability and it cannot be said that there was any such remission or cessation of any liability by universal act by the assessee so as to invoke Explanation 1 to section 41(1). It is just a case of capitalizing the interest expenditure to comply with the monetary requirements of AS-10 by passing the necessary entries in the books of account which has not resulted in any advantage or benefit to the assessee either by way of remission or cessation of any liability or in any other manner. The addition made by the AO and confirmed by the CIT(Appeals) on this issue thus is not sustainable and deleting the same, allow assessee’s appeal.
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2013 (2) TMI 600
Sale of shares - ITAT affirmed the deletion of a sum by the CIT(Appeals) on account of long term capital gains assessed by the AO on sale of shares - survey u/s 133A - Jamil A. Khan had admitted that the additional income of Rs.10 cores surrendered by him included an income of Rs.6.29 crores being the amount paid by M/s Samiah International Builders Pvt. Ltd. for the purchase of the shares during the financial year 2005-06 - Held that:- Both the CIT (A) and also the Tribunal have founded their conclusion essentially on the premise that the respondent-assessee had requested for an opportunity of cross-examining Jamil A. Khan and that such an opportunity had not been provided by the assessing officer. However, from the record no finding that there was any such request made by the respondent-assessee for cross-examining Jamil A. Khan. In fact, found rather intriguing as to why would the respondent-assessee request for cross-examining Jamil A. Khan when the respondent-assessee himself had furnished affidavits to Jamil A. Khan in support of his case. The observations of the CIT (Appeals) as also of the Tribunal that despite the request of the respondent-assessee, the assessing officer had not provided opportunity of cross-examining Jamil A. Khan, are contrary to the record. The Tribunal had completely overlooked the fact that Jamil A.Khan had filed a revised return after he had made a surrender of Rs.10 crore during the survey operation. In that return an amount of Rs.6.29 crores has been shown as the cash component of the purchase of shares of R.S. Builtwell Pvt. Ltd. from the assessee and his relatives. That aspect of the matter has been ignored by the Tribunal. Consequently, having answered the question in favour of the revenue,the impugned order and remit the matter to the Tribunal for considering the same afresh on all grounds - against assessee.
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2013 (2) TMI 599
Reopening of assessment - assessee filed written submission against it - Held that:- Going through the order of reassessment it is seen that it has been passed without any application of mind. To say the least, it is a cut-and-paste job. This is apparent from the fact that the paragraph 3 is merely a repetition of the provisions of section 147 and 148 of the said Act. The respondent has not even bothered to change the words such as “we”, “us”, etc. which the petitioner had used in its objections/ reply. This shows that the respondent had not even applied his mind and not even bothered to correct the contents of paragraph 2 so as to put it into second person or third person in the grammatic sense. Thus such an order cannot be permitted to stand as it smacks of non-application of mind. The assessing officer has to apply his mind to the objections raised and has to deal with the objections in the order. The matter is remitted to the respondent to pass a fresh order after taking into account the objections filed by the petitioner as also after giving the petitioner an opportunity of hearing - in favour of assessee by way of remand.
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2013 (2) TMI 598
Penalty u/s 271D and 271E – Whether receipt of share application money and repayment thereof will violate the provisions of section 269SS and 269T – Assessee has accepted monies on account of shares/ debentures of Rs.20,000/- or more and also repaid monies otherwise than by account payee cheques or account payee Bank Drafts – Held that:- As decided in the case of Rugmini Ram Ragav Spinners Pvt. Ltd.[ 2007 (7) TMI 237 - MADRAS HIGH COURT] provisions of section 269SS and 269T have application only in a limited way in respect of deposits or loans. When it is neither deposit nor loan the provisions of sections 269SS and 269T have no application at all. The Court further held that even if there is repayment by cash, it could not be said to attract the levy of penalty automatically under section 271E of the Act. The advances of share application money or repayments of such advances have not flowed from any undisclosed income of the assessee or the concerned persons. In the present case also, the assessee was searched and these share application monies were never the subject matter of addition in the case of the assessee and accordingly the share application money and repayment of the same have not flowed from any undisclosed income of the assessee. Further even the penalty under section 271D and 271E is not automatic there is bonafide belief to the effect that the receipt of advances against allotment of shares and repayment of share money would not be termed as loans or deposits, which would be sufficient to drop the penalty levied in the present case – In favour of assessee.
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2013 (2) TMI 597
Jurisdiction of CIT(A) – CIT(A), to confirm the order of AO, followed the judgement of High court and ignored the direction of Tribunal – Grievance of the assessee is that the CIT(A) was not justified in confirming the order of the AO and CIT(A) exceeded his jurisdiction in rejecting the claim of the assessee in respect of deduction u/s 80HHC on the value of DEPB - Held that:- Decision of the Tribunal was reversed by the Hon'ble Bombay High Court in the case of CIT v Kalpataru Colours and Chemicals[2010 (6) TMI 63 - BOMBAY HIGH COURT ] and thereafter even the Hon'ble Punjab & Haryana High Court in a number of cases which have been mentioned by the AO in its assessment order have held that the said decision of the Hon'ble Bombay High Court should be considered by the Hon'ble Chandigarh ITAT and its earlier decision has been set aside – Thus, under the circumstances, the action of the AO is justified. DEPB credit – As decided in Kalaptaru Colours & Chemicals, DEPB credit being an export incentive received by the assessee in proportion to the FOB value of its export has no face value and the amount received on its transfer is to be considered while computing the profits allowable for deduction under section 80HHC of the Act - Therefore no merit was found in the stand of the assessee that DEPB credit has a face value and while determining the profits eligible for deduction under section 80HHC of the Act, only the profits arising on the transfer of DEPB credit are to be excluded – However, the amount received by the assessee on the transfer of DEPB credit is includible as business profit in the hands of the assessee under section 28(iiid) of the Act – Appeal dismissed. Charging of interest u/s 234D – Assessee submitted that interest is not chargeable in re-assessment proceedings as held in the case of Dredging Corporation of India Ltd[2011 (7) TMI 584 - ITAT VISAKHAPATNAM] – Also submitted that interest u/s 234D is also not chargeable in order u/s 143(3) read with sect ion 254 of the Act, which is an order only to give effect to the Tribunal’s directions.
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Corporate Laws
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2013 (2) TMI 596
Overriding preferential payments - Whether the petitioners are entitled to restrain the proceedings initiated under the SARFAESI Act or to claim priority in distribution with respect to amounts realised in proceedings under the SARFAESI Act or under the RDBFI Act. The fourth respondent-company availed financial assistance from the first respondent-bank by mortgaging its assets, including the factory building and land appurtenant thereto – directors of the company are co obligants in the loan transaction and properties belonging to them were also mortgaged – Consequent to default committed by the fourth respondent in repayment, respondents Nos. 1 and 2 initiated proceedings under SARFAESI Act and the assets of the fourth respondent-company were put to auction – petitioners are seeking to quash the proceedings under the SARFAESI Act as well as the proceedings initiated by the first respondent-bank before the Debts Recovery Tribunal, Chennai – On the alternative the petitioners are seeking directions for payment of benefits due to them, in case of closure of the company. Held that:- Section 13(9) clears that the workmen of a company, who claim priority in distribution of assets by virtue of section 529A of the Companies Act, are not entitled to raise any objection against proceedings initiated by the secured creditor against the secured assets of the company, unless the company is ordered to be wound up or any proceedings for winding up of the company is pending – Further in Allahabad Bank v. Canara Bank [2000 (4) TMI 757 - SUPREME COURT OF INDIA] held that if a company, which is implicated as a defendant in a proceedings under the RDBFI Act, against which no order of winding up has been issued, is only like any other defendant, and priority in distribution should be decided bearing in mind only the principles underlying in section 73 of the Code of Civil Procedure, 1908. Further section 22 of the RDBFI Act confers wider powers on the Tribunals to decide such questions of priorities, subject only to principles of natural justice – In a case where there is no proceedings pending before the company court or in case where the company is not under liquidation, any claimant or the workmen, that too with respect to un-liquidated amounts, are not entitled to cause any hindrance against proceedings under the SARFAESI Act or under the RDBFI Act - Therefore the writ petition deserves no merit and the same is accordingly dismissed.
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Service Tax
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2013 (2) TMI 612
Attachment orders - stay application pending Held that:- As Tribunal had passed an order granting interim stay on the matter till the disposal of the stay application the department is not allowed to issue an attachment notice to the banker - As the said demand draft has been deposited in the credit of the exchequer the Revenue is directed to refund the amount received from the HDFC and not to proceed with recovery measures during the pendency of the stay application forthwith.
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2013 (2) TMI 611
Management, Maintenance or Repair Service - period from 16-6-2005 to 30-9-2008 - activities connected with roads, which included repairs, restoration, improvement and re-asphalting of the existing roads - held that:- The rival contentions with reference to the definition of the three services viz. ‘commercial or industrial construction service’, ‘works contract service’ and ‘management, maintenance or repair service’ indicate that the question whether the roads repaired/renovated/maintained/asphalted by the appellant could be considered to be an ‘immovable property’ within the meaning of this expression found in the definition of ‘management, maintenance or repair service’ is highly debatable. - stay granted
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2013 (2) TMI 610
Franchise service - right to collect toll in respect of Yenam-Yedurulanka in Bridge - bridge was constructed by the appellant under a ‘Build-Operate-Transfer’ (BOT) Agreement - assignment of the work to the subsidiary - held that:- On a perusal of the definition of “franchise” given under Section 65(47) under the Finance Act, 1994, we note that it refers to an agreement by which the franchisee is granted representational right to provide service identified with the franchisor whether or not any ‘service mark’ is involved. Prima facie, in the absence of such an agreement, the appellant themselves would have provided the service to the people/State Government in respect of the bridge under the BOT agreement. They did provide this service for nearly 41/2 years also. For the rest of the period, this right was granted to the subsidiary-company with all the obligations and rights associated with it and that company has been rendering the same service, apparently, in exercise of representational right granted by the appellant. Prima facie, therefore, the arrangement between the appellant and the subsidiary-company would fit in the definition of ‘franchise” and, for that matter, the appellant and the subsidiary- company should be appropriately called franchisor and franchisee. - pre-deposit ordered for an amount of Rs. 3 crores - stay granted partly.
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2013 (2) TMI 609
Suo motu credit of the differential amount of service tax - lesser payment made by the customers - held that:- In view of clause (ii) of Rule 4B, the monetary limit of Rs. 50,000/- for taking suo motu adjustments cannot also be applied in respect of the appellants. - Technically, there is a violation of Rule 4A inasmuch as the credit has not been adjusted in the succeeding period but the appellants have provided a reasonable explanation as to why this could not be done since the settlement of the value of the services was arrived only on 28-6-2008. - The only other violation is regarding not providing intimation to the jurisdictional officers within 15 days of making adjustment. At the most, for the minor infraction of the rule, some penalty could have been imposed on the appellants but the lower appellate authority has set aside the penalty in its entirety and the Department is not in appeal against the same. The appellants cannot be denied adjustment of the excess tax paid by them as such denial would amount to recovering tax for the same services twice. - Decided in favor of assessee.
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Central Excise
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2013 (2) TMI 613
Manufacturing - Immovable - Proviso to Section 11A(1) of the Central Excise Act attracted relying on decision of CCE, Visakhapatnam v. Mehta and Co. [ 2011 (2) TMI 2 - SUPREME COURT OF INDIA] - assessee contested that as on the date when the impugned order was passed i.e. 31.1.2011, the Supreme Court did not pass such an order as it was passed on 10.2.2011 - Held that:- There appears to be an error apparent on the face of the records, as the authority could not have relied upon a Supreme Court decision which has not been pronounced on the date when the impugned order was passed by the authority. Writ petition allowed and the matter is remanded to the respondent for passing fresh orders on merits - in favour of assessee.
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2013 (2) TMI 595
Short payment of Central Excise duty - applicant cleared Superior Kerosene Oil to various Oil Marketing Companies - seeking waiver of pre-deposit of duty, interest and penalty - Held that:- On the same issue the Tribunal in the case of Oil and Natural Gas Corporation Ltd vs CCE (2010 (9) TMI 907 - CESTAT, MUMBAI)relying on CCE vs Mazagon Docks Ltd [2005 (7) TMI 105 - SUPREME COURT OF INDIA] referred the matter to the Larger Bench. Thus as the issue is before the Larger Bench, the applicant is entitled for stay. The applicants were clearing the goods on payment of duty and the same were reflected in their monthly returns and the invoices which had been specifically mentioned the duty. Therefore, the allegation of suppression with intent to evade payment of duty is not sustainable - Pre-deposit of the dues is therefore waived and recovery thereof stayed for hearing of the appeal.
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2013 (2) TMI 594
Valuation of the goods under Sec. 4A - assessable value calculated as per Notification No. 2/05 dated 7.1.2005 - assessee contested against invoking extended period of limitation - Held that:- As per Notification 2/05 abatement of 35% is to be taken on the retail sale price of the goods and there is no provision under this Notification that the abatement is to be taken from the retail sale price excluding duty. As find in the Table given in the Enclosures to assessee's letter dated 10.1.2005 addressed to the Asstt. Commissioner of Central Excise in which they have specifically mentioned that the manner of determination of assessable value they have shown the MRP of the product but there is no column showing the assessable value after deducting abatement from the MRP. In the absence of which there is no assessable value shown of the products manufactured by them in the table though on the top of the table it is shown assessable value calculated on the retail sale price as per Notification No. 2/05. Therefore, non-mentioning of correct assessable value as per Notification No.2/05 is clearly a willful mis-statement by the appellants and the extended period under Sec. 11A is clearly invokable in this case - interest and penalty rightly been imposed on the appellants - against assessee.
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2013 (2) TMI 593
Condonation of delay - Negligence of employee caused the delay - thereafter employee resign - Held that:- Negligence of employee cannot be considered as sufficient cause for not filing the appeal within the normal period. In favour of revenue
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2013 (2) TMI 592
Valuation - Inclusion in assessable value - Whether the cost of label supplied by the customers is to be included in the assessable value of the plastic containers - labels receive free of cost from their customers - Held that:- Following the decision in case of JAUSS POLYMERS LTD. (2003 (9) TMI 87 - SUPREME COURT OF INDIA) that if the manufacturer asks the customer to bring his own container and does not charge anything therefor, packing cost cannot be added to the price at which the goods are sold by the manufacturer - Decides against Revenue.
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2013 (2) TMI 591
Waiver of Pre-deposit - Stay Petition - Penalty under Rule 15 of CCR, 2004 - CENVAT Credit on the strength of photocopies of the invoices - Goods which were considered neither input nor the capital goods, availed 100% credit on the capital goods instead of availing 50% credit - Held that:- Appellant is not disputing the in eligible CENVAT Credit availed by them and has reversed the same along with interest. It seems to be unwarranted as the appellant would not have any reason to utilize the amount as he has enough balance in CENVAT account. Therefore, penalty imposed on the appellant is unwarranted and needs to be set aside. In favour of assessee
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2013 (2) TMI 590
Place of removal - CENVAT credit on storage and warehousing charges paid at the depot - Held that:- Appellant is selling from the depot and depot is the place of removal as defined in Section 4(3)(c) of the Central Excise Act, 1944. If depot is the place of removal, service tax paid on services received upto the place of removal is an eligible input service under Rule 2(1) of the CENVAT Credit Rules, and the appellant is entitled for credit of service tax paid on storage and warehousing charges incurred at the depot - In favour of assessee
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CST, VAT & Sales Tax
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2013 (2) TMI 615
Bank guarantee for release of boat detained - order for levying penalty forwarded to the Bank and the Bank guarantee encashed - assessee contested against non communication of penalty order to him - Held that:- Penalty order was issued from the office of the 1st respondent only on 7/1/13. However, respondents have no material to prove that this order has so far been served on the petitioner. Therefore, prima facie, there is force in the contention of the petitioner that it was without serving a copy of the order on the petitioner, the bank guarantee furnished by them is sought to be enforced. In such circumstances directing that further proceedings in pursuance to Ext.P4 for the encashment of the bank guarantee will stand stayed for a period of one month from today. In the meantime, it will be open to the petitioner to obtain a copy of Ext.P4 and pursue the statutory remedies that are available to them. It is also directed that, if the period of the bank guarantee expires in the meanwhile, petitioner shall keep the bank guarantee alive.
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2013 (2) TMI 614
Liability to pay tax on a club - contention of the petitioner that the club paying tax under Section 4(2A) is not liable to pay tax under Section 4(2) Kerala Tax on Luxuries Act, 1976 - Held that:- Provision of Section 4(2A) renders members of clubs also liable for tax at the rate as indicated therein and the tax liability of the members is in addition to the liability of the clubs under Section 4 of the Act. Therefore, this provision will not be of any assistance to the petitioner. The judgment of this Court was confirmed by the Division Bench in Trivandrum Club v. Sales Tax Officer(2013 (1) TMI 606 - KERALA HIGH COURT) - against the petitioner/ assessee.
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