TMI Tax Updates - e-Newsletter
March 13, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
Income Tax
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Addition made on outstanding liability - Labour charges as bogus suspicion howsoever grave, cannot take place of proof - AT
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Reduction in computation of deduction u/s 80IA - the role of the assessee's Pondicherry unit was to supply only the products - it has no role in manufacturing - allocation of expenses is not correct - AT
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Sale of property POA was cancelled - assessment in the hands of assessee as an agent or as property owner - the contents of a registered document cannot be disbelieved by a letter particularly without any other supporting evidence - AT
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Valuation of property FMV of a property at Nacharam cannot be determined on the basis of few instances of sale at Banjara Hills as it is not in the immediate vicinity - AT
Customs
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Waiver of Customs Duty - Merely because the Unit has applied for registration with BIFR, does not grant any immunity from duty legally payable by the Company - AT
Service Tax
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Renting of premises with certain facilities - Prima facie the activity undertaken by the appellant is one of renting of immovable property and not Business Auxiliary Services. - AT
Central Excise
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Eligibility to CENVAT Credit - Invocation of extended period of limitation - when the issue of eligibility of credit was in dispute during the impugned period, the extended period is not invocable - AT
VAT
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Nature of transaction of sale - stock transfer or central sale - to the extent the Tribunal had recorded that the authorities can go behind the form F declarations is not correct law - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (3) TMI 368
Nature of Contract - Whether it is a case of composite contract Held that:- A composite price has been given as per Article 2 of the Contract Agreement as Contract Price, but it is a sum total of the clearly demarcated prices for onshore supplies and services and offshore supplies and Designs - the AO was initially not correct in holding that the contract was a composite one devoid of any bifurcation towards onshore and offshore supplies and services, which stand was subsequently altered to the correct position - it is wide off the mark to categorize the contract agreement as a composite one since all its major four components are distinctly identifiable with separate consideration for each. Income from offshore supply of equipment - Where title to the goods passed Held that:- There is material on record to indicate that apart from imparting training to employees of SAIL in India, the assessee was obliged to carry out certain activities associated with the installation and commissioning of such equipment in India - merely because the risk passed in India, it cannot be said that the sale took place in India - no income can be said to have arisen in India the title to goods shall be considered to have passed outside India when delivery was made on high sea and the payment was also received outside India thus, the title of goods in respect of said offshore supply of equipment was transferred outside India. Whether sale price includes any consideration for services rendered or to be rendered in India - Held that:- The assessee undertook to incur some expenses towards test and inspection at site that is in India, conduct repair during defect liability period again in India etc. -These expenses are to be borne by the assessee - The possibility of compensation for such things being included in foreign supervision charges cannot be ruled out without verification - It is palpable that if the charges for such things are not included in any other component of price, then these have to be considered as part and parcel of the sale price, which would require its splitting up to determine the amount attributable to such testing charges etc. in India - thus, the sale price of offshore supply of equipment also includes some consideration for services rendered or to be rendered by the assessee in India - As such details are not readily available, the order on this issue is set aside and the matter is remitted back to the AO. Taxability of offshore supply of equipment - Taxability of price for offshore supply of equipment and compensation for services rendered in India Held that:- No income was chargeable to tax because no part of the consideration was towards the services to be rendered in India, in CIT & Anr. VS. Hyundai Heavy Industries Co. Ltd. [2007 (5) TMI 196 - SUPREME Court] it has been held that no such taxability can also arise in the present case as there was no allegation made by the Department that the price at which billing was done for the supplies included any element for services rendered by the PE - income for which everything is done in India is fully taxable but the principle of apportionment applies to tax that part of the composite income which is relatable to operations carried out in India, leaving aside that part of income which is not so - the sale price of offshore equipments, which is quid pro quo for services rendered in India is chargeable to tax in India. Attribution of income to services rendered in India Held that:- The nature of services to be rendered may be quite cost or labour intensive, while in another case, it may not be so - There cannot be any straitjacket sacrosanct formula for such attribution thus, it would be appropriate if the AO after such determination gives value to such services if these are included in the sale price of offshore supply of equipments - As regards training expenses, it has already been held that compensation for such training in India is part and parcel of the sale price of offshore supply of equipments - The value to such training is directed to be assigned by the AO after considering the number of man days and rate per man day for such training and considered for taxation. Income from onshore supply of equipments Income from on shore services Held that:- Assessee received ₹ 15.03 crore from SAIL through NCC during the financial year relevant to the assessment year - This amount has been included by the Assessing Officer in the total income of the assessee - The assessee agrees in principle that the income from onshore supply of equipment is chargeable to tax in India - As it has been accepted by the assessee that such amount is chargeable to tax in the correct year the amount is correctly chargeable to tax in the correct year - The assessee agrees that `Foreign supervision charges' are for the services rendered in India - The word `Foreign' has been used qua the assessee, being a non-resident - As it has been accepted by the assessee that such amount is chargeable to tax in the correct year thus, in principle the amount is chargeable to tax in the correct year. Income from design & engineering services Held that:- It is totally incorrect to say that such Drawings and designs for which consideration of Euro 150900 was received be considered as offshore supply of equipments and hence exempted from taxation The decision in Director of Income Tax Vs Rio Tinto Technical Services (2012)340 ITR 507 - in the absence of any bifurcation, an estimated allocation has to be made for tax purposes - The 'fees for technical services' shall be deemed to accrue or arise in India and shall be included in the total income of the non- resident, whether or not the non-resident has rendered services in India - With the retrospective substitution of the Explanation, also covering the year under consideration - the consideration for Designs and drawings is liable for inclusion in the total income of the assessee u/s 9(1)(vii) of the Act. Computation of Income - How much is income for the current year Held that:- There was fallacy in the assessee's contention that it did not supply any equipment or render any services to SAIL and the entire amount received by it was in the nature of advance - Thus income attributable to such services rendered in India is chargeable to tax during the year in question - no income can be charged to tax simply on the receipt of advance, similarly the taxability cannot be postponed to the `release' of the amount for which invoice is made much after the supply of goods - The relevant point of taxation is the actual supplying of goods and actual rendering of services and not when the invoice is raised as per the peculiar terms of the contract or the amount is received - As the relevant dates of actual supply of equipments are not available, this aspect is also directed to be examined by the AO and resultantly charging income to tax for the period during which actual goods were supplied or services rendered thus, the order is set aside and the matter remitted back to the AO for working out the income for the year under consideration. Transfer pricing adjustment Held that:- It is axiomatic that when the delegated legislature provides in unequivocal terms that the `total operating costs' should to be considered, the TPO or the assessee cannot at their sweet-will choose to substitute such base with any other suitable base as per their convenience thus, the calculation of OP/OC set aside and the AO/TPO is directed for fresh adjudication for computing OP/TC of the assessee as well as comparables by considering `net operating profit margin' as numerator and `total operating costs' as denominator Decided partly in favour of Assessee.
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2014 (3) TMI 367
Opportunity of being heard - Sufficient time to collect and produce document not given Held that:- At the far end before the assessment order was passed few opportunities were granted to the assessee - but, the time granted to the assessee could not be sufficient for her to collect all the documents necessary to corroborate and substantiate her claim and satisfy the Assessing Officer thus, the matter is remitted back to the AO for fresh adjudication Decided In favour of Assessee.
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2014 (3) TMI 366
Addition made on outstanding liability - Labour charges as bogus Held that:- The decision in CIT Vs. Bhogilal Ramjibhai Atara [2014 (2) TMI 794 - GUJARAT HIGH COURT] followed - For invoking the provisions of section 41(1), there has to be cessation or remission of liability during previous year relevant to the Assessment Year under consideration - where the liability itself seems to be under serious doubt, the liability as it stands, perhaps holds that there was no cessation or remission or liability and therefore the amount in question cannot be added back as deemed income u/s 41(1) of the Act - The outstanding labour charge which was added by the Assessing Officer to the income of the assessee was the brought-forward opening balance of earlier years - No material was brought on record by the Revenue to show that either the liability was actually discharged by the assessee during the year from some undisclosed source or the liability ceased to exist or remitted during the year under consideration Additions made are set aside. Addition of labour charges Held that:- Both the lower authorities have doubted that the liability for labour charges was bogus as the same was outstanding for more than one month - the suspicion, they have brought no material on record after examination that the liability was not genuine or that the assessee did not make the payments for the same in the subsequent years - suspicion howsoever grave, cannot take place of proof - the payment outstanding was of labour contractor and not labour - there cannot remain outstanding liability to labour contractor for more than one month thus, disallowance sustained by the CIT(A) out of labour charges cannot sustained Decided in favour of Assessee.
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2014 (3) TMI 365
Disallowance of interest u/s 24(b) of the Act - Whether the said amount advanced by Saraswat Bank to the assessee in the form of rent advance could be considered as amount borrowed by the assessee from the said Bank for purchase of the property Held that:- It was a loan advanced by Saraswat Bank Cooperative Ltd to the assessee which was utilized by the assessee for purchase of first floor of the premises and the said rent/advance carried interest at the rate of 12% per annum with monthly rest - though the amount advanced to the assessee is termed as rent advance but in all form it is an advance of loan to the assessee and a part of the said loan has been utilized by the assessee for purchase of first floor of the premises which was later on let out by the assessee to Saraswat Bank Cooperative Ltd. and the rental income has been derived by the assessee - the assessee utilized the sum for purchase of the immovable property i.e. first floor of Sailor building at Fort, Mumbai, and the assessee is entitled to get the deduction of the interest paid thereon u/s 24(b) of the Income Tax Act - thus, the assessee is allowed to have a deduction of interest u/s 24(b) of the Act Decided in favour of Assessee. Set off of business loss against income from house property not allowed Held that:- When the assessee resumed his business of purchase and sale of shares, it is not known whether the assessee sold any of shares held as stock-in-trade - It might be possible that the assessee when resumed trading in shares, he started with fresh purchase and sale of shares - All the facts need verification - The assessee will furnish requisite details of the shares held as stock-in-trade to the AO and the AO will verify the said details and decide the issue as to whether the assessee had temporarily suspended his business or there was complete stoppage of business by assessee the assessee has not filed requisite details of total loss claimed by assessee thus, the AO is directed for fresh adjudication Decided in favour of Assessee.
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2014 (3) TMI 364
Addition made by treating the supplementary claim as income accrued Whether the CIT(A) was justified in disallowing the proportionate expenditure - Held that:- CIT(A) has given finding that since the supplementary claim was not accepted by the FCI that the income did not accrue during the year, hence the same cannot be taxed during the current year thus, The CIT(A) is justified in making the disallowance of the expenditure since the assessee himself has not offered the corresponding income for taxation the CIT(A) ought to have given a finding about the quantum of expenditure incurred by the assessee on such expected receipt - thus, the matter is remitted back to the CIT(A) for fresh adjudication for disallowance of expenditure Decided in favour of Assessee. Disallowance of business expenditure Held that:- The FCI issued certain show-cause notices and a substantial amount has already been recovered by the FCI thus, the CIT(A) was not justified in disallowing the entire expenditure and the order of the CIT(A) on the issue is set aside to verify in respect of those expenses which have been accepted by the assessee as his liability during the year under consideration and payment thereof recovered by the FCI - In respect of the expenses, where FCI has rejected the representation of the assessee, such expenditure be allowed in the year in which representation of assessee is rejected by FCI Decided in favour of Assessee.
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2014 (3) TMI 363
Transfer pricing adjustment Selection of comparables Capital Trust comparable - Held that:- The TPO has observed that primary business of the company is automobiles sales and service - a company cannot be excluded from the comparables merely for the reason of having low turnover - It is to be appreciated that no turnover filter was applied by either of the parities - The analysis needs to be carried out on the basis of functional profile and not on an arbitrary or adhoc criteria - the functional profile of Capital Trust Limited's consultancy segment is similar to that of Nortel India the same needs to be included in the final comparables for working the ALP thus, the AO is directed to apply this comparable while working out the ALP Decided in favour of Assessee. Comparability and the exclusion of Choksi, Rites and WAPCOS Held that:- The decision in Deputy Commissioner of Income-tax, Circle 17(1), New Delhi Versus MCI Com India(P.) Ltd. [2012 (10) TMI 790 - ITAT DELHI] followed - Companies like EIL, Rites, Wapsos and TCE are engineering companies which provide end to end solutions thus, they cannot be compared with assessees who provide marketing support services to the parent company - They were held to be functionally not comparable with thee engineering companies these companies are functionally different and cannot be applied as appropriate comparable to the assessee thus, they are to be excluded from TP adjustment while determining the ALP. Exclusion of Saket Projects Ltd Held that:- Relying upon Exxon Mobil Company India (P.) Ltd. Versus Deputy Commissioner of Income-tax, Circle 3(1), Mumbai [2011 (6) TMI 385 - ITAT, MUMBAI] - The specific characteristics of services provided, assets employed, risk assumed i.e. the FAR of the comparable is decisive and inclusion or exclusion of comparables - The higher or lower rate of profit is nowhere prescribed as the determinative factor in this behalf - Higher profits achieved due to factors not mentioned in the rule then such case shall be continued to find place in the list of comparables. No comparable can be rejected merely on the basis of high margins if it is functionally comparable to the assessee or there is miner variation in functional similarity - The case of Saket Projects Ltd. has functional dissimilarity as it is organizing events with various kinds of sponsorships - The company in the division is earning revenue from selling event fees and offering space for rent which cannot be comparable with provision of marketing and sales support services - Saket Projects Ltd. has been rightly held as not an appropriate comparable. Working capital Adjustments Held that:- Working capital adjustments are required to be made because these do impact the profitability of the company - Rule 10B(2)(d) also provides that the comparability has to be judged with respect to various factors including the market conditions, geographical conditions, cost of labour and capital in the market - Accounts receivable/payable effect the cost of working capital - Working capital adjustment cannot be denied to the assessee only on the ground that it had not made any claim in the TP study if it is possible to make such adjustment - Working capital adjustments are required as they will improve the parameters of comparability - the AO/TPO to make the working capital adjustment after necessary examination. Corporate additions Excess revenue recognized error in recomputation of total estimated revenue Held that:- Assessee contended that the matter for AY 2006-07 has not yet been re-adjudicated by the AO as ordered - the relevant details submitted by the assessee have been overlooked by the AO and DRP thus, the matter is again remitted back to the AO foe re-adjudication. Addition on account of expenses claimed in revised return Held that:- The DRP directed the AO to merely check the records regarding the figure of revised income, there is no directions of any further enquiry - Thus AO has erred in exceeding her powers by going beyond the directions of the DRP and instead of verifying the figure went ahead to review the draft order - Thus AO's action in making an addition in this behalf i.e. disallowing expenses claimed by the assessee in its revised return of income is justified. Deduction u/s 40(a)(i) of the Act Held that:- The decision in COMMISSIONER OF INCOME TAX Versus SMCC CONSTRUCTION INDIA FORMERLY MITSUI KENSETSU INDIA LTD [2010 (1) TMI 10 - HIGH COURT OF DELHI] followed - even if there was no claim in the return of the year in which the expenditure was incurred by the assessee, the deduction can be claimed in view of the provisions of Section 40(a)(i) in the year in which the tax has been deducted at source and paid to the government account thus, the expenses are allowable Decided in favour of Assessee. Claim of 'Warranty Expense Held that:- As decided in assessees case in the earlier assessment years, as a normal rule when the provision for warranty is disallowed in earlier years, deduction then should be allowed in the year when actual expenses are incurred thus, the ,atter remitted back to the AO for re-adjudication Decided in favour of Assessee. Legal and professional fees paid to KPMG/ BSR & Co Deduction u/s 40(a)(ia) of the Act - Held that:- Assessee contended that the requisite tax has already been deducted and deposited at the time of booking of actual expenses on receipt of the invoice - there is no default at the assessee's end and no disallowance is warranted in such a case - there cannot be a double levy of taxes on same income. Since the assessee duly deducted and deposited TDS on the basis of invoice received and any disallowance u/s 40(a)(ia) will lead to a double levy of taxes on the same income thus, in accordance with section 40(a)(ia) of the Act, AO is directed to allow deduction for the expense in Assessment Year when tax was deducted and deposited by the assessee qua these expenses Decided in favour of Assessee.
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2014 (3) TMI 362
Reduction in computation of deduction u/s 80IA of the Act - Conversion and service charges apportioned Held that:- The AO had not examined the books of accounts of the respective units of the assessee before arriving at the conclusion that the amount of ₹ 1crore received by the assessee as know-how fees are to be apportioned - AO had also not examined to the nature of work executed by the assessee and the unit which imparted the know-how he merely came to the conclusion on the basis of certain presumptions inferred from some of the communications transacted between the assessee and its client though, the CIT (A) has examined the issue in detail and arrived at the conclusion that the assessee had engaged its Pondicherry unit for technical knowhow services - There was nothing brought to suggest that the Chennai/Trichy unit of the assessee has extended any know-how to the client of the assessee thus, there is no reason to interfere n the findings of CIT(A) Decided against Revenue. Apportionment of labour charges to Pondicherry unit Held that:- The entire labour charges was incurred by the assessee at the work site Nagda - The assessee's Pondicherry unit was a specialized unit for manufacturing the critical items such as Saturator, Reactors, Clarifier, Filters, and Tanks & Pumps - Though the work undertaken by the assessee is a composite contract, the role of the assessee's Pondicherry unit was to supply only the above products - the assessee's Pondicherry unit did not have any role in the fabrication work undertaken by the assessee in the site also, no materials were brought to show that the assessee's Pondicherry unit had any role in the execution of the activities rendered at the assessee's clients' site thus, it is not necessity to allocate the expenses incurred by the assessee for the payment made to M/s.KRR Engineering Pvt. Ltd., by the Madras unit, to Pondicherry unit there is no infirmity in the order of the CIT (A) Decided against Revenue. Restriction of disallowance u/s 35AB of the Act Technical know-how Held that:- Disallowance of technical know-how fees of ₹ 10 lakhs which is restricted to 1/6th in view of Sec.35AB of the Act:- CIT (A) held that the amount paid by the assessee was only for rendering services for the manufacturing of specialized machinery parts for barium sulphet plant and since the appellant is a manufacturer of chemical equipments, the amount was paid for assisting the assessee in the manufacture of specialized machinery for Ashok Organics Industries Ltd. - the entire expenditure as allowable deduction by observing that Sec. 35AB of the Act is inapplicable considering the facts of the case - no further explanations were tendered by the Revenue to establish that the expenditure incurred by the assessee was a lump sum payment made for acquiring technical know-how - the assessee is a manufacturer of specialized equipments in chemical industry Decided in favour of Assessee.
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2014 (3) TMI 361
Assessment of income against declared loss Held that:- First appellate authority has upheld the additions made by the Assessing Officer on the ground that the assessee has not provided details of expenditure incurred by the assessee-trust on various activities undertaken to achieve its aims and objects and even no details of purchase and expenditure has been submitted before the Assessing Officer as well as before the learned first appellate authority there is no need for interference in the well-reasoned order passed by first appellant authority Decided against Assessee. Income of trust treated as business income Rejection of applicability of exemption of income u/s 11 of the Act Held that:- The decision in Assistant Commissioner of Income Tax, Circle-V, Amritsar Vs. Amritsar Improvement Trust [2013 (10) TMI 745 - ITAT AMRITSAR] followed - the details furnished by the assessee pertain to the expenditure incurred in respect of various residential/commercial schemes floated by the assessee trust from time to time and perusal of the activities undertaken by the Amritsar Improvement Trust reveals that except for acquiring land and developing the same into residential/commercial projects like any other private builder have done little for achieving the aims and objectives for which it is created - the income of the assessee from various activities does not qualify for exemption under Section 11 of the Act and the same is brought to tax as income from business, as per provision of Income Tax Act, 1961 Decided against Assessee. Deletion made on account of difference in value of unallotted properties understatement of assets Held that:- The first appellant authority has passed a well-reasoned order and no interference is called for in the order the addition made on account of variation in the value of unallotted property is upheld - once the payment has been made it was required that the properties purchased through the process of compulsory acquisition, the same ought to have been accounted for on the receipt side thus, the first appellate authority has rightly upheld the addition made on account of understatement of the assets Decided against Assessee.
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2014 (3) TMI 360
Addition on account of sum not disclosed as per the return - Disallowance u/s.14A of the Act r.w rule 8D of the Rules Investment in shares - Held that:- The matter is principally factual - The disallowance is statutory, so that it would follow where the onus cast by law has not been discharged by the assessee, while no disallowance would arise where it has been - That is, the presumption in law as to incurring of expenditure under rule 8D(2)(iii)) would arise only where the onus had not been discharged by the assessee Relying upon CIT vs. Citicorp Finance (India) Ltd. [2006 (11) TMI 362 - ITAT MUMBAI] thus, the matter remitted back to the AO for fresh adjudication Decided partly in favour of Assessee.
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2014 (3) TMI 359
Jurisdiction of the AO Order passed u/s 153A of the Act Held that:- The jurisdiction of the AO in the assessment proceedings pursuant to a search is to assess the total income for each of the assessment years falling within the period of six years immediately preceding the assessment year relevant to the previous year in which the search is conducted or the requisition is made - Relying upon CIT vs. Anil Kumar Bhatia [2012 (8) TMI 368 - DELHI HIGH COURT] - there are no fetters on the power of the AO to assess any income that in his view forms part of the total income of the assessee for the relevant year/s, and would thus include the income as well, including as to its nature/character. Treatment of the loss - Derivative trading treated as a speculative loss Held that:- There was conflict of judicial opinion, but for the reason that the A.O. has admittedly not altered either the nature or the quantum of addition as made in the regular assessment, since sustained in appeals - the assessment does not in law abate, and the AO has merely adopted the same in the section 153A assessment, the same ought to be reflected therein as such - an addition in the section 153A assessment is thus inconsistent with the law in the facts of the case thus, the contention of the assessee is accepted and the AO is directed to modify the order Decided Partly in favour of Assessee.
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2014 (3) TMI 358
Works contractor Interest and contract receipts not disclosed TDS certificate not received Held that:- The assessee has not been able to show that at any stage, that he has taken up the matter either with the bank or with the contractees for rectification of the excess deducting of tax at source the Counsel has made an alternate prayer to remit the file back to the Assessing Officer for verification of the facts it is not appropriate to grant second innings to the assessee for mere verification of the TDS amounts from the bank or the contractees - The assessee could have done this exercise with due diligence in the first stage itself Decided against Assessee.
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2014 (3) TMI 357
Exclusion of the amount of internet expenses from export turnover as well as total turnover Held that:- The Assessing Officer has excluded an amount of Rs. 11,23,288/- being internet expenses for export of software from export turnover without excluding the same from total turnover - The Decision in ITO Vs. M/s. Saksoft Ltd [2009 (3) TMI 243 - ITAT MADRAS-D] followed - the eligible expenditure has to be excluded from export turnover as well as total turnover thus, the expenditure incurred on account of the internet expenses for export of software is to be excluded from export turnover as well as total turnover Decided in favour of Assessee. Dis-allowance u/s.10A of the Act splitting up or/and re-construction of the business activities already in existence Held that:- The assessee has not been formed by splitting up of the existing business or re-construction of the business at a new place by splitting up of existing business - Decided in favour of the assessee. Method of computation of deduction u/s.10A of the Act Deduction claimed before setting off of unabsorbed depreciation and brought forward losses Held that:- For un-absorbed depreciation,the decision in M/s.Himatsingka Seide Ltd., Vs. CIT [2013 (10) TMI 823 - SUPREME COURT] followed - un-absorbed depreciation has to be set-off before computing the exemption allowable u/s.10A for setting-off of the brought forward losses, the decision in CIT Vs. Yokogawa India Ltd. 2011 (8) TMI 845 - Karnataka High Court] followed thus, the assessee can claim deduction u/s.10A before setting off of brought forward losses Decided partly in favour of Assessee. Upward adjustment made by DRP - Difference in PLI of the assessee viz-a-viz PLI of comparables Held that:- The decision in Assistant Commissioner of Income-tax Versus SRA Systems Ltd. [2013 (9) TMI 334 - ITAT CHENNAI] followed - the PLI of the assessee is determined at 7% - While determining the PLI for the AY.2007-08, the Tribunal had also taken into consideration the directions of the DRP for the AY.2008-09 thus, it would be appropriate to adopt the PLI at 7% as against 13.35% determined by the DRP - the quantum of ALP has to be re-calculated in accordance with the PLI Decided partly in favour of Assessee. Value of operating cost Held that:- There is a factual error which is to be rectified after referring to the books of accounts of the assessee thus, the matter remitted back to the Ao foe adoption of the correct value of operating cost Decided in favour of Assessee.
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2014 (3) TMI 356
Sale of property Power of Attorney (POA) was cancelled - assessment in the hands of assessee as an agent or as property owner - Assessment of capital gain u/s 50C of the Act Fair market value of the property for the purpose of indexation whether the capital gains in question have been rightly assessed in assessees hands or not - Assessee contended that he had acted as power of agent on behalf of the actual owner/vendor and the sale price of the property has been wrongly increased and even the property sold has been inappropriately valued without any basis - Held that:- As per the recitals in the registered power of attorney dated 01.09.2006, no consideration had been paid by the assessee to the actual owner - In the sale deed as well, the assessee had merely acted as an agent - the stand adopted by the actual owner of having received Rs.25,00,000/-, at the time of executing power of attorney does not inspire confidence the contents of a registered document cannot be disbelieved by a letter particularly without any other supporting evidence - earlier also the same owner had executed similar power of attorneys and revoked them later on thus, the assessee could not have been treated as owner of the property sold on 23.10.2008 resulting in computation of capital gains in his hands Decided in favour of Assessee.
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2014 (3) TMI 355
Addition on undisclosed income Sale of land Held that:- The contention of the assessee that no addition can be made on the basis of unsigned documents is not tenable because unsigned documents are not the only evidence but they are corroborated by entries made in the books of accounts of M/s Sainath Estates thus, assessees contention that it has not received sale consideration of Rs.16.20 crores is not believable - when assessee was given opportunity to cross examine Sri Prema Sagar Rao, neither the assessee nor Sri Prema Sagar Rao appeared - The entries made in the books of accounts of Sainath Estates and payments reflected in seized payments vouchers coupled with the fact that assessee himself has also accepted a part of the cash payment clearly establish that sale consideration of Rs.16.20 crores recorded in the books of accounts of M/s Sainath Estate is the actual amount received by the assessee and his son - The payment vouchers are corroborated by other evidences which demonstrate payment of sale consideration of Rs.16.20 crores thus, there was no infirmity in the order of the CIT (A) Decided against Assessee. Valuation of property Fair market value Held that:- Neither the Assessing Officer nor the CIT (A) have correctly adopted the FMV of the property as on 1-4-1981 - While the CIT (A) was correct in rejecting the FMV of Rs.10 per sq. yard adopted by Assessing Officer on the basis of SRO guidelines, but the FMV of Rs.100 per sq. yard as on 1-4-1981 adopted by him is also without any basis - Neither the Assessing Officer nor the CIT (A) conducted necessary enquiry and brought on record comparative instances of sale of land in that locality or nearby area which could have thrown some light on the FMV of the property as on 1-4-1981 - FMV of a property at Nacharam cannot be determined on the basis of few instances of sale at Banjara Hills as it is not in the immediate vicinity - Revenue as well as the assessee have failed to factually establish the FMV of the land as on 1-4-1981 the matter is remitted back to the AO for ascertain the FMV of the land as on 1-4-1981 Decided in favour of Assessee. Claim of deduction u/s 54F of the Act Held that:- The CIT (A) held that as the built up areas registered under two separate sale deeds were contiguous and adjacent and were having a common wall, deduction u/s 54F cannot be restricted to one of such residential built up area The CIT (A) has allowed the deduction claimed by the assessee u/s 54F of the Act by directing the Assessing Officer to treat it as one residential house thus, it is totally unnecessary to go into the issue whether it is actually one residential house registered as two units under two separate documents by the builder M/s Sainath Estates for claiming deduction u/s 80IB there was no infirmity in the order of CIT(A) Decided against Assessee. Allowability of deduction u/s 54F of the Act on all the flats Held that:- The computation of income filed along with the return of income the assessee had claimed deduction u/s 54F in respect of one house - During the assessment proceeding also assessee never claimed deduction u/s 54F in respect of all flats - Even before the CIT (A) the assessee never raised any issue with regard to deduction u/s 54F in respect of all the flats - at the belated stage the assessee cannot be permitted to raise this issue before us for the first time - investigation into/ consideration of new facts cannot be done in an additional ground as held in National Thermal Power Company vs. CIT [1996 (12) TMI 7 - SUPREME Court] Decided against Assessee.
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Customs
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2014 (3) TMI 354
Waiver of Customs Duty - Penalty u/s 112(b(ii) and personal penalty - Exemption Notification No.204/92-Cus dated 19.5.1992 - Held that:- it is not the case of the Applicant Company that they could not fulfill the export obligation due to recession, but the fact is that they had diverted the duty-free imported materials to the local market and did not use the same for the intended purpose. So far as the non-fulfillment of export obligation is concerned, the Board vide its Circular No.21/95-Cus. dated 10.03.1995 had clarified that show cause notice be issued for failure to comply with fulfillment of export obligation and demand of duty should be confirmed only after a definite conclusion is arrived at by the Development Commissioner. However, in case of diversion of duty-free imported materials, there is no such stipulation. It is evident from the above conditions of Notification No.204/92-Cus., dated 19.05.1992 that in failure to utilize the imported duty materials for use in export obligation, duty leviable on such materials is payable. Merely because the Unit has applied for registration with BIFR, does not grant any immunity from duty legally payable by the Company - Applicant Company is not able to make out a case for full waiver of the dues adjudged - Conditional stay granted.
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2014 (3) TMI 353
Interest on delayed payments - Refund claim sanctioned by Tribunal in previous order - However Refund was not granted due to dispute - Held that:- refund become due to the appellant vide order dated 12-3-2001 passed by this Tribunal and the refund was also granted to the appellant vide order dated 29-9-2008 passed by the Asstt. Commissioner of Customs. However, payment of the refund was not made due to dispute in this regard raised by the department and the same was settled against the Revenue and in favour of the appellant vide order dated 16-11-2010 and, thereafter, the refund was paid to the appellant on 9-6-2011. Therefore, the amount deposited by the appellant under protest, which was not challenged, is liable to be returned to the appellant along with interest w.e.f. 29-9-2008. Accordingly, the appellant would be entitled for the benefit of interest prescribed under Section 27A of the Customs Act, 1962 for the period 29-9-2008 to 9-6-2011 - Decided in favour of assessee.
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Service Tax
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2014 (3) TMI 372
Denial of refund claim - Non fulfillment of condition of Notification 41/07 dated 6.10.07 as amended - Held that:- In the case of Hemlines Textiles Exports (2012 (11) TMI 353 - CESTAT, AHMEDABAD), this tribunal has laid down the procedure for availment of refund claim i.e. whether service tax has been paid or not, whether service has been used or not, whether service falls within the Notification or not. Admittedly, in this case service tax has been paid, service has been used and all the services fall within the Notification. Therefore I hold that appellant is entitled for refund claim as per Notification 41/07 - Decided in favour of assessee.
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2014 (3) TMI 371
Condonation of delay - Appeal dismissed as beyond limitation - Held that:- assessee, if, had filed an application for condonation of delay, the same could have been allowed by the first appellate authority. In our view, a delay of ten days in filing the appeal before the first appellate authority could have been condoned as it lies within the power vested with the first appellate authority. Suffice to say that such power vested with the first appellate authority should have been exercised and the matter should have been disposed of on the merits of the case, we are constrained to set aside the impugned order and remand the matter back to the first appellate authority. We set aside the impugned order, condone the delay filed before the first appellate authority though the delay application was not filed, and direct him to restore the appeal to its original number and dispose the same on merits by speaking order - Decided in favour of assessee.
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2014 (3) TMI 370
Classification of service - Business Auxiliary Services or rending of immovable property - Held that:- As per the Franchise agreement, the appellant has rented out their premises to M/s Amalgamated Bean Coffee Trading Co. Ltd. along with certain facilities, for which the appellant received the consideration. Prima facie the activity undertaken by the appellant is one of renting of immovable property and not Business Auxiliary Services. In view of the above, we are of the view that the matter has to go back to the lower appellate authority for reconsideration of the entire issue on merits without insisting on any pre-deposit - Decided in favour of assessee.
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Central Excise
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2014 (3) TMI 352
Recovery proceedings where the stay application is pending - Disallowance of CENVAT Credit - Held that:- Provisions contained in the circular dated 1 January 2013 mandating the initiation of recovery proceedings thirty days after the filing of an appeal, if no stay is granted, cannot be applied to an assessee who has filed an application for stay, which has remained pending for reasons beyond the control of the assessee. Where however, an application for stay has remained pending for more than a reasonable period, for reasons having a bearing on the default or the improper conduct of an assessee, recovery proceedings can well be initiated as explained in the earlier part of the judgment - we dispose of the petition by requesting the CESTAT to dispose of the stay application filed by the petitioner, within a period of eight weeks of the receipt of a certified copy of this order - In the meantime, no coercive action against the petitioner for recovery of the demand will be taken - Following decision of Larsen & Toubro Ltd. Vs. Union of India [2013 (1) TMI 555 - CESTAT, CHENNAI] - Decided partly in favour of assessee.
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2014 (3) TMI 351
Eligibility to CENVAT Credit - Invocation of extended period of limitation - Held that:- appellant have no case. But on limitation, they are having a case in spite of the decision of ITC Ltd. (2013 (1) TMI 555 - CESTAT, CHENNAI). As the issue whether the appellant are entitled to take CENVAT Credit on the impugned items during the period or not was in dispute and the same was referred to the Larger Bench of the Tribunal and this Tribunal in Vandana Global (2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) ) decided the mater against the assessee. Therefore, when the issue of eligibility of credit was in dispute during the impugned period, the extended period is not invocable. Accordingly, I hold that in this matter, the extended period of limitation is not invocable - Decided in favour of assessee.
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2014 (3) TMI 350
Waiver of pre-deposit of input service credit - Manpower Recruitment Agency Services - Held that:- in this case appellant has taken the credit on the strength of duty paid invoice of service received by them which is not in dispute. Further if this Tribunal decides in favour of the revenue that the job worker is required to pay service tax then also, the appellant is entitled to take input service credit. In these circumstances, appellant has made out a case for 100% waiver of pre-deposit. Accordingly, I waive the requirement of pre-deposit of the impugned demands - Matter remitted back - Decided in favour of assessee.
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2014 (3) TMI 349
Availment of CENVAT Credit - Availment after default - whether the credit accumulated during defaulting period could be used for paying duty after coming out of default - Held that:- During the defaulting period there is no bar on taking credit. There is bar only on utilization of credit. Whenever a demand is confirmed against an assessee, the assessee can pay the duty liability through cash or CENVAT credit so long as there is no specific prohibition against such payment through CENVAT credit. Such prohibition exists as per Rule 8(3A) only when the assessee is in default. Once they come out of the default by paying the defaulted amounts in cash, they can pay the duty liability using CENVAT credit. The fact that they had used it prior to coming out of default can result in payment of interest on such amount and no demand on such amount again - At any rate, it is obvious that there will be some interest liability on the applicant since the duty paid through Cenvat credit during defaulting period cannot be taken as proper discharge of duty. This interest amount is not seen quantified. Further a penalty also is payable - Conditional stay granted.
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2014 (3) TMI 348
Denial of CENVAT Credit - Absence of any evidence to show that the inputs were neither used in the manufacture but diverted to elsewhere - Bills of entry which were in the name of the transferor of the inputs not being endorsed in the name of the transferee/appellant - Held that:- Boards Circular above has no embargo to prohibit transfer nor it says that endorsement is mandatory. It has no doubt prescribed procedure to safeguard interest of revenue so as to ensure that double claim of Cenvat credit is not made on same goods. There exists no evidence on record to show that the goods which came through the bills of entry transferred to the present appellant did not reach factory of appellant nor unused in the manufacture. So also, there is no evidence on record to show that there was abuse of the imports made by bills of entry. Nor also there exists any evidence to show that there were double claim of the Cenvat credit made. Once such situation is absent the Cenvat credit claimed by the appellant is undeniable. Revenue relates to the case of denial of Cenvat credit against endorsed bills of entry. Tribunal held against Revenue. In the case of the present appellant there was no endorsement at all. So also there was no evidence at all on record to show that goods have gone elsewhere for double claim of the Cenvat credit. When such feature is present, denial of relief to the appellant shall result in taxing input again in the finished goods making value addition - Decided in favour of assessee.
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2014 (3) TMI 347
Waiver of pre deposit - Held that:- attention was drawn by appellant to product chemistry and submitted that above two goods are used in medicinal preparations. Nascopine is British Pharmacopea standard. It is Note 9 of the Chapter 29 excludes opium and narcotic drugs from scope of excise duty levy - Prima facie, it appears that calling for pre-deposit in both appeals shall cause undue hardship to the appellant - Temporary stay granted.
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2014 (3) TMI 346
Waiver of pre deposit - Denial of CENVAT Credit - Credit denied on items used for repairs or maintenance of capital goods in the appellants cement plant - Appellant contends that they have used the steel items for such repairs or maintenance of capital goods - Adjudicating authority have proceeded on the premise that the steel items were claimed to have been used in the fabrication/manufacture of capital goods - Held that:- It is true that the appellant was consistently claiming Cenvat credit on the aforesaid items by treating them as capital goods falling under Rule 2(a)(A) ibid. They took the credit in question in RG 23C Part II, 50% thereof in one financial year and the rest in a subsequent year. At no stage before did they make any alternative claim - The steel items in question are claimed to have been used for repairs/maintenance of capital goods by way of replacement of old/worn out parts/components of such capital goods. This factual plea is to be seen throughout the records - If findings of Revenue is presumed to be correct for a moment, then there is a prima facie case for holding that the steel items were used in the manufacture of capital goods and, hence, by virtue of the aforesaid Explanation to the definition given under Rule 2(k), such steel items could be considered as inputs. In this prima facie view of the matter, we have found a good case for waiver and stay - Stay granted.
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2014 (3) TMI 345
Interpretation of Notification No. 4/2007-C.E. - Manufacturing of Cement - Declaration of retail sale price - Contention of Revenue that retail sale price affixed to avail concessional rate of duty prescribed in the Notification No. 4/2007-C.E. - Held that:- first requirement is that the RSP of the goods is not required to be declared and the second requirement is it is not declared. In this case, because of the provisions of Rule 2A of SWMPC Rules, there is no dispute that appellants were not required to indicate the RSP on the bags. Nevertheless, they declared the RSP. However they are not hit by the proviso because the proviso is attracted only when both the requirements are fulfilled. The letter from the Legal Metrology also considers this aspect and has clarified that APSHCL comes in the institutional category and therefore in respect of the clearances to them RSP need not be declared. For the appellants own consumption also, it comes under the category of industrial consumption. Therefore, RSP may not be required to be declared. What is to be noted is that in the case of cement bags which are of 50 kg. or less, the rule is MRP has to be affixed. Rule 2A is an exception. There is no compulsion on any manufacturer not to affix MRP. Affixing MRP is not compulsory when clearances are made to the categories of consumers specified in Rule 2A. In all other cases, it is mandatory - Following decision in the case of Sagar Cements Ltd. [2010 (4) TMI 418 - CESTAT, BANGALORE] - Therefore, appellants have made out a case for complete waiver and stay. Accordingly, the requirement of pre-deposit is waived and stay against the recovery of dues is granted during the pendency of the appeal - Stay granted.
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2014 (3) TMI 344
Duty demand - Confiscation of goods - Imposition of redemption fine - Held that:- appellant has deposited the entire duty before issue of show-cause notice. Accordingly, we uphold the demand of duty along with interest and reduce the penalty to the extent of 25% of duty to be deposited within 30 days from the date of receipt of this order, if not so deposited, penalty equal to duty will be payable. Confiscation of the goods is upheld and imposition of redemption fine is reduced to Rs.30,000 - penalty imposed on the Managing Director Shri R. Manoharan is also upheld - Decided partly in favour of assessee.
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2014 (3) TMI 343
Rectification of mistake - Disallowance of CENVAT Credit - CENVAT credit on iron and steel products used in fabricating and erecting one crusher plant, one diesel generating set and one conveyor system in their factory premises - Commissioner (Appeals) set aside the adjudication order - Revenue submits that order passed by the Commissioner (Appeals), is erroneous inasmuch as fabricating and erecting of crusher plant and diesel generating set in their factory premises was held to be supporting structure, which was not considered by the Tribunal - Held that:- in terms of sub-section (2) of Section 35C of the Central Excise Act, 1944, the Appellate Tribunal is empowered to rectifying the mistake apparent from the records, amend any order passed by it under sub-section (1) of the said Section and shall make such amendments if the mistake is brought to its notice by the parties to the appeal. Reappreciation of evidence on a debatable point cannot be said to be rectification of mistake apparent on record. Mistake should not be established by a long drawn process of reasoning and mistake apparent on record must be obvious and patent mistake. It is also observed that incorrect application of law can also not be corrected - it would be a total reappreciation of the evidence and would be established a long drawn processes of reasoning, which is not permissible in the application for rectification of mistake. At any event, non-speaking order as contended by the learned authorised representative cannot be rectified within the scope of Section 35(2) of the Central Excise Act, 1944 and it would be rehearing of the appeal - Rectification denied.
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CST, VAT & Sales Tax
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2014 (3) TMI 342
Nature of transaction of sale - stock transfer or central sale - Power of authorities to go behind the Form F - Exemption on certain turnovers under section 6A of the CST Act - Tribunal on appreciation of the facts on records had come to the conclusion that the order of the Deputy Commissioner is totally based on surmises and conjectures and as a matter of fact the assessee was entitled to exemptions granted under section 6A of the CST Act. - Held that:- Inasmuch as the Tribunal on appreciation of facts has found which facts are not challenged in the present tax revision case in our considered opinion within the scope of section 22(4) of the Act, there is no question of law that is required to be answered. In the light of the judgment of the Supreme Court in Ashok Leyland Ltd. Versus State of Tamil Nadu and another (and other appeals and a writ petition) [2004 (1) TMI 365 - SUPREME COURT OF INDIA], to the extent the Tribunal had recorded that the authorities can go behind the form F declarations is not correct law and the tax revision cases are liable to be dismissed. - Decided against Revenue.
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Indian Laws
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2014 (3) TMI 369
Power of CIC or SIC - Levy of penalty on CPIO under Section 20 of RTI Act and and action ction against the CPIO u/s 18 of RTI Act - The scope of the powers of the Commission under Section 18 of the Act - Held that:- while considering a complaint made under Section 18 of the Act, the Commission cannot direct the concerned CPIO to provide the information which the complainant had sought from him. Such a power can only be exercised when a Second Appeal in terms of sub-section (3) of Section 19 is preferred before the Commissioner. As noted earlier, in his complaint, the complainant had specifically referred to the above referred order of the Apex Court [2013 (3) TMI 378 - SUPREME COURT] and had also drawn the attention of the Commission to the legal proposition, as enunciated in the above referred decision. A perusal of the impugned order would show that the Commission either did not at all advert to the above referred decision or for the reasons which cannot be gathered from the order, it decided not to refer to the aforesaid decision of the Apex Court in the impugned order. The impugned order passed by the Central Information Commission is hereby set aside and the Commission is directed to dispose of the complaint of the petitioner within four months from today, in accordance with the procedure prescribed in the Act. It is expected that the Commission henceforth will decide the complaints on merits instead of directing the CPIO to provide the information which the complainant had sought. Of course, it would be open to the Commission to give such a direction while entertaining a second appeal under sub-section (3) of Section 19 of the Act. - Decided in favor of petitioner.
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