TMI Tax Updates - e-Newsletter
March 1, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Levy of additional tax u/s 143(1A) in respect of computation under Section 115J - the demand of additional tax under Section 143(1A) of the Income Tax Act on the regular assessment proceedings does not arise - HC
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Income Tax:
Refusal for rectification of order u/s 254(2) - Tribunal is not expected to unearth evidence or material to which its attention was not drawn by the parties, nor to explore the arena to find out what possible contentions the parties could have taken - HC
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Income Tax:
Search u/s 132 of the Act - Block Assessment – In the absence of any seized material and solely on the basis of the report of the DVO, there cannot be any finding with regard to the undisclosed income - HC
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Income Tax:
Nature of Capital gain – LTCG or STCG – The mere fact that possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter - HC
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Income Tax:
Revision u/s 264 in favor of assessee - an order/ intimation passed u/s 143(1) passed by the AO is equally an order, which can be questioned and be made subject matter of revision u/s 264 before CIT - HC
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Income Tax:
Disallowance - The extra depreciation allowable u/s 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage - The so earned incentive must be made available in the subsequent year - AT
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Income Tax:
Allowance of TDS credit – The department cannot deny the credit when the assessee is following the system consistently from earlier years - What is required to be done is only reconciliation of the mobilization advances and TDS claims, so that there is no double claim in any of the years - AT
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Income Tax:
Denial of deduction u/s 80IA - the amount written back on account of reversal of provision made in financial year 2006-07 cannot be held to be a profit derived from eligible business for computing deduction under S.80IA - AT
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Income Tax:
Set off of loss u/s 70(1) - the assessee is not eligible to claim unabsorbed depreciation of the firm against incomes of the assessee who is partner of the firm and assessed in individual capacity - AT
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Income Tax:
Deletion of Penalty u/s 271(1)(c) – assessee has offered an explanation with regard to this claim, but has failed to substantiate it by bringing any material on record - penalty confirmed - AT
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Income Tax:
Valuation of the property - Department has not made any independent investigation and simply adopted the guideline value as provided by the Sub-Registrar and accepted by the AO for determining the fair market value, which in our opinion, is found to be incorrect - AT
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Customs:
Valuation of goods - Rejection of transaction value - Revenue has failed to prove otherwise apart from import of spare parts the value of the imported goods has been influenced being related person. - AT
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Corporate Law:
As the lodgement of a caveat is merely a right to be informed of the hearing date and it has no effect by way of curtailing the powers of a Civil Court to pass an appropriate order on the merits of the case - no reason to review or recall judgment dated 01.10.2013 - HC
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Service Tax:
Valuation of goods - Goods sold in the execution of works contract of repair and maintenance - - value of goods not to be included - AT
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Service Tax:
Valuation of goods - divisible contract of repair and maintenance - benefit of Notification no. 12/2003-ST dated 28th June, 2003 - value of goods not to be included - AT
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Service Tax:
Maintanability of appeal before High Court - Jurisdiction - The words “rate of tax” in relation to rate of tax would include the question whether or not the activity is exigible to tax under a particular or specific provision. - HC
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Service Tax:
Classification - GTA service or Site formation and clearance, excavation - There is no evidence before us to show that transportation activity was the predominant activity - demand with interest and penalty confirmed - AT
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Service Tax:
Sale and purchase of coal or Commission agent - BAS - the appellant is a buyer and seller of coal and cannot be held to be providing any service to M/s. Coal India Ltd - stay granted - AT
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Central Excise:
Once the legislature has stipulated that the period of limitation under Section 35B (3) commences only upon the communication of the order which is sought to be appealed against, the Tribunal ought to have applied its mind to precisely when the order under appeal was communicated. - HC
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Central Excise:
Classification - natural marble slabs - a Chapter note was inserted in Chapter 68 declaring such activities as deemed manufacture, such declaration and chapter note inserted w.e.f. 26-2-2010 will be effective from that date and cannot be applied to an activity for the earlier period - AT
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Central Excise:
SSI Exemption - Clubbing of clearance - Merely because the two owners of the units were husband and wife and the profits earned by them came into same household, does not mean that clearances of all the units is required to be clubbed - AT
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Central Excise:
Duty demand - Availment of Cenvat credit on “RAILS” falling under Chapter 73 of CETA - rolls are the components of the capital goods - they are eligible for Cenvat credit. - AT
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VAT:
Since the commodity in question is covered by two entries, specific entry “vegetable oil“ will prevail over entry “edible and oilcake“ and therefore, the commodity in question is taxable under Entry 2331 i.e. “Vegetable oil including gingili oil and bran oil“- HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (2) TMI 1131
Estimation of net profit - Whether the action of the CIT(A) in directing the AO to rework the net profit of the assessee at the lower rate of 0.14% as against the 0.99% estimated by the AO is correct – Held that:- Powers of the AO to re-open an assessment u/s. 147 is subject to limitation of time period as prescribed u/s. 149 of the Act - whether the return was processed u/s. 143(1) or u/s. 143(3), if the AO has a reason to believe that any income chargeable to tax has escaped assessment, he can re-open the assessment u/s. 147 by issuing notice u/s. 148 but within the time limit as prescribed u/s. 149 of the Act - The return was processed u/s. 143(1) of the Act but it has attained finality due to the expiry of limitation period of twelve months from the end of the month in which the return was filed - the assessment is deemed to be completed and not pending on the date of search on 14.08.2008 - no incriminating material was found from the premises of the assessee during the search u/s. 132 of the Act. Assessment u/s. 153A can be made on the basis of incriminating material found during the search – Relying upon Jai Steel (India) v. ACIT [2013 (6) TMI 161 - RAJASTHAN HIGH COURT] - in case nothing incriminating is found on account of search or requisition, the question of reassessment of the concluded assessment does not arise - Once assessment u/s. 143(3) had been annulled by higher authorities on the ground of legality of notice u/s. 143(2) of the Act, re-opening u/s. 147 on that very ground would mean nothing else but the abuse of process of law - the contention of the Revenue cannot be accepted that as the return was processed u/s. 143(1) and it was a mere intimation, the AO had reason to believe that income had escaped assessment and it was open to the AO to re-assess the income u/s. 153A, even without any incriminating material found during the search action – decided against Revenue. Validity of assessment proceedings u/s 153A of the Act – Held that:- There is no condition in section153A that additions should be strictly made on the basis of evidence found during the course of search or other post search material or information available with the AO which can be related to the evidence found and that the seized material can be relied upon to also draw inference that there can be similar transactions throughout the relevant period, yet, at the same time it has been further observed that this however, does not mean that assessment u/s 153 A can be arbitrarily made without any relevance or nexus with the seized material. The reassessments made by the AO under section 153A, without any incriminating material being found during the search action conducted u/s. 132 of the Act, were not in accordance with law - the same are hereby set aside and the consequential result is that the return/original assessments which have acquired finality are to be reiterated. Since the cross-objections of the assessee have been allowed, the dispute relating to the additions made in consequence of the reassessments made u/s. 153A does not survive – Decided in favour of Assessee.
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2014 (2) TMI 1125
Notice u/s 148 of the Act – Reopening of Assessment - Interpretation of the term reason to believe - Whether there was reason to believe that any income chargeable to tax had escaped assessment – Held that:- The expression 'reason' has been explained by the Supreme Court in Assistant CIT Vs. Rajesh Jhaveri Stock Broker Pvt. Ltd. [2007 (5) TMI 197 - SUPREME Court] means a cause or justification - the order of assessment passed by the AO u/s 143(3) does not indicate that the AO had brought his mind to bear - there is nothing in the reply filed by the assessee to the notice under Section 142(1) that would indicate a full disclosure of facts in regard to either the credit worthiness of the companies which made the investments or the genuineness of the transaction - From the reply which was furnished by the assessee during the course of the assessment proceedings, it does not emerge that the assessee had discharged the onus of establishing the credit worthiness of the companies which had ostensibly invested the amount or in regard to the genuineness of the transaction - though the reopening of the assessment is beyond the period of four years but the Assessing Officer was satisfied that the condition stipulated in the first proviso to Section 147 was duly fulfilled – thus, there was no illegality in the order of the AO or in the Notice issued u/s 148 r.w section 147 of the Act – Decided against Assessee.
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2014 (2) TMI 1124
Deletion of addition made u/s 68 of the Act – Unexplained credits – Onus to prove the genuineness - Whether the ITAT has erred in giving relief on account of addition being unexplained credits on wrong appreciation of law and without any basis substituting its own satisfaction in place of AO's satisfaction despite the fact that the assessee company has not discharged the onus as provided in Section 68 of the I.T. Act, 1961 – Held that:- Both the CIT(A) and the Tribunal had noted that the assessee had established all the three aspects by producing, during the course of the assessment, necessary documentary material such as the share application forms, copies of bank accounts, income tax returns and balance sheet – Relying upon Commissioner of Income Tax Vs. Lovely Exports (P) Ltd. 2008 (1) TMI 575 - SUPREME COURT OF INDIA] - the assessee had discharged the onus of establishing the identity, credit worthiness and genuineness of the transactions which had formed the basis of the addition that was made under Section 68 - whether the documentary materials which had been produced by the assessee were sufficient to displace the onus is a matter to be decided upon the facts of each case - Both the CIT(A) and the Tribunal having held that the assessee had duly discharged the onus, thus, there is no substantial question of law arises – Decided against Revenue.
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2014 (2) TMI 1123
Broken period interest on securities – Claim of Expenditure - Banking business – Held that:- The decision in M/s. Indian Bank Versus The Deputy Commissioner of Income-tax Special Range-I [2012 (12) TMI 418 - MADRAS HIGH COURT] followed - payment of extra interest through M/s.Chandrakala & Co to various PSUs as entitled for deduction - the amount paid to the PSUs were properly accounted for disclosing before the Income Tax Authorities - the assessee was entitled to claim deduction on the expenditure incurred by way of payment of broken period interest - Decided in favour of Assessee. Validity of the reopening of assessment u/s 147 of the Act - Power of the AO to reopening of assessment u/s 147 of the Act – Held that:- The decision in Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] followed – there was no materials placed by the Assessing Officer for assumption of jurisdiction under Section 147 proceedings - Thus, in the absence of any material, the contention of the revenue cannot be accepted that the reopening u/s 147 of the act was within the parameters – thus, the order of the ITAT set aside – Decided in favour of Assessee. Levy of additional tax u/s 143(1A) – Held that:- The levy of additional tax in respect of computation under Section 115J of the Income Tax Act is already a subject matter in an appeal filed by the assessee and that the present assessment is not concerned about computation under Section 115J of the Income Tax Act, but under the regular procedure, the question of thus adding additional tax in the regular assessment proceedings does not arise – thus, the demand of additional tax under Section 143(1A) of the Income Tax Act on the regular assessment proceedings does not arise – Decided in favour of Assessee.
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2014 (2) TMI 1122
Waiver of pre-deposit - stay - Partial hearing of appeal before CIT(A) – Application for unconditional stay of balance demand of tax rejected – Held that:- There was considerable substance in the submissions made by the Petitioner that both the Assistant Commissioner of Income Tax and the Commissioner of Income Tax have ignored the parameters laid down in KEC International Limited Vs. B.R.Balkrishnan and others [2001 (3) TMI 32 - BOMBAY High Court] - It is apparent that neither the Assistant Commissioner of Income Tax nor the Commissioner of Income Tax has referred to the Petitioner's case nor has given some short prima facie reasons for requiring the Petitioner to deposit 50% of the tax liability - Prima facie, there appears to be substance in the Petitioner's contention that in view of specific provision for deduction of tax on account of brokerage being provided in Section 194H of the Act, the occasion to apply Section 194J of the Act would not arise. The Petitioner's alternative submission that if subbrokerage paid by the Petitioner to its holding company is considered excessive or unreasonable, then in that event, as in the earlier years the sub-brokerage paid @ 50% be allowed as an admissible expenditure - On that basis, the Petitioner would not be liable to pay anything more than about Rs.60.00 lakhs based on the detailed calculations given by the Petitioner – thus, interim stay on recovery is granted during the pendency of appeal before the CIT(A) – Decided in favour of Assessee.
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2014 (2) TMI 1121
Validity of Miscellaneous application filed by stranger – Held that:- The Assessee rightly contended that ITAT entertained the application from a stranger and reviewed it resultantly passed an order without the notice to the appellant which is contrary to law - The order passed by the Tribunal set aside with a direction to rehear the application moved by Sheshnarayan – Decided in favour of Assessee.
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2014 (2) TMI 1120
Charging of interest u/s 139(8) and 215/217 of the Act – Effect of amendment u/s 139(8) w.e.f. AY 1985-86 - Whether the ITAT is right in law in reversing the order of the learned DCIT(A) who upheld the order of the Assessing Officer passed under Section 154 holding that no mistake was apparent from records – Held that:- The decision in COMMISSIONER OF INCOME-TAX Versus KD. PRABHAKAR (HUF) [2007 (8) TMI 335 - PUNJAB AND HARYANA HIGH COURT] followed – the amendment was applicable from 1985-86 and subsequent years – thus, the interest for the assessment year 1981-82 is not valid – Decided against Revenue.
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2014 (2) TMI 1119
Refusal for rectification of order u/s 254(2) of the Act – Addition made u/s 68 of the Act – Held that:- The ITAT's order clearly show that the ground of appeal in respect of the addition was general and did not advert to a double entry or a double taxation - As held in Omar Salay Mohamed Sait V. CIT [1959 (3) TMI 2 - SUPREME Court] the Tribunal is duty-bound to consider all the grounds, the evidence pro and con, the contentions of the parties before it and all other material brought to its notice in a judicial spirit and should not feel incommoded by technicalities - It would be placing an impossible burden on the Tribunal if it is ordained to rule upon aspects and contentions which were not raised by the parties before it or to deal with pleadings, evidence or material to which its pointed attention was not drawn in the course of the proceedings, and which lies buried in the forest of papers filed by the parties. Whether there was a double addition is a factual question and the Tribunal can deal with it only upon its attention being drawn to it by the aggrieved party - the Tribunal is not expected to unearth evidence or material to which its attention was not drawn by the parties, nor to explore the arena to find out what possible contentions the parties could have taken, and grant them relief on the basis of such an expedition in exercise of the limited jurisdiction u/s 254(2) which confers upon the Tribunal only a power to rectify a mistake apparent from the record and not to indulge in a review – Decided against Assessee.
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2014 (2) TMI 1118
Search u/s 132 of the Act - Block Assessment – Reference made to DVO for valuation u/s 133(6) of the Act - Notice under Section 158-BD of the Act issued – Held that:- During the course of search, no incriminating documents were traced – As on the date of search, the building was not completed and there was no income from the building - There was no positive comments from the DVO with regard to suppression of material facts by the assessee which would amount to undisclosed income - The difference in the cost of construction cannot constitute undisclosed income for the block period - On verification of the revised report submitted by the DVO, the differences between the valuation of the assessee- Firm and the DVO is less than 15% - There is no specific finding by the Assessing Officer with regard to any concealment - there was no material found during the search indicating that there were expenses incurred on construction by the assessee that were not recorded in the books of accounts - In the absence of any seized material and solely on the basis of the report of the DVO, there cannot be any finding with regard to the undisclosed income - No material has been found at the time of search for initiating proceedings under Section 158-BD of the Act. Rectification of mistake u/s 154 of the Act – Held that:- Solely on the basis of the Valuation report, block assessment cannot be made - it is not open to the appellant to tax again in the guise of undisclosed income – Relying upon the decision in the case of M/s. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA]- the undisclosed income unearthed as a result of search - The scope and its ambit is limited in that sense to materials unearthed during the search - The Appellate Authority as well as the Tribunal after considering the matter in detail corrected the mistake committed by the Assessing Officer – thus, there was no infirmity or irregularity in the order passed by the Appellate Authority and the Tribunal – Decided against Revenue.
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2014 (2) TMI 1117
Nature of Capital gain – LTCG or STCG – Sale of residential property – Held that:- The decision in Vinod Kumar Jain v. Commissioner of Income Tax, Ludhiana and others [2010 (9) TMI 850 - Punjab and Haryana High Court] and Circular No.471, dated 15.10.1986 followed - The allottee gets title to the property on the issuance of an allotment letter and the payment of instalments is only a consequential action upon which the delivery of possession flows - the provisions of Sections 2(14), 2(29A) and 2(42A) encompasses within its ambit those cases of capital asset which are held by an assessee. The flat was allotted to the appellant on 07.06.1986, vide letter conveyed to the assessee on 30.06.1986 - The assessee paid the first installment on 04.07.1986, thereby conferring a right upon the appellant to hold a flat, which was later identified and possession delivered on a later date - The mere fact that possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter - The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter – thus, the ITAT has erred in holding that the transaction does not envisage a long term capital gain – Decided in favour of Assessee.
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2014 (2) TMI 1116
Maintainability of Revision petition u/s 264 of the Act – Held that:- The decision in C. Parikh & Co. vs. Commissioner of Income Tax, Baroda 1979 (7) TMI 50 - GUJARAT High Court] followed - scope of revision under Section 264 is wider and different than the scope of revisionary powers exercised by the Commissioner under Section 263 - an order/ intimation passed under Section 143(1) passed by the Assessing Authority is equally an order, which can be questioned and be made subject matter of revision under Section 264 before the commissioner for deciding the issues raised by the assessee on merits. Indeed the expression “In the case of any order other than an order to which Section 263 apply”, occurring in Section 264, would include an order/intimation passed under Section 143(1) and hence, it can be made subject matter of challenge in Revision by the assessee before Commissioner under Section 264 of the Act - In order to raise any kind of grievance after the issue is dealt with by the Assessing Authority, one of the remedies available to the assessee in such circumstances, apart from any other remedy as may be available under the Act, is to invoke the revisionary powers of Commissioner under Section 264 of the Act against such grievance to call upon the Commissioner to examine the same on merits in its revisionary jurisdiction in accordance with law – thus, the order of the Commissioner set aside – the matter remitted back to the Commissioner to decide the revision on merits – Decided in favour of Assessee.
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2014 (2) TMI 1115
Relief of liability on account of interest expense - Calculation of book profit U/s. 115JB of the Act - Changeability of interest u/s. 234A, 234B and 234C of the Act - Held that:- Matter remitted back to the CIT(A) for fresh consideration - Decided in favour of Assessee. Correctness of taxability of income in the hands of the company - Held that:- The assessee cannot be permitted to blow hot and cold - the matter is subjudice before the Hon'ble Supreme Court and thus it cannot be said that the facts are settled finally - None of the issues were taken up before the AO or the CIT(A) and hence it cannot be said that the facts concerning the so called legal issue are already on the record of the Tax Authorities - The expression "Record" means the record of the year under consideration and not the history of the assessee spanning over several years - Since the issue was not urged before the Tax Authorities and the facts concerning the same are not established or available before the AO/CIT(A), the assessee cannot be permitted to raise additional ground for the first time before the Tribunal - the facts were not on record of the Tax Authorities for the assessment year - the assessee is making counter claims would suggest that the facts are not finally settled and on such an issue additional ground cannot be admitted - Decided partly in favour of Assessee.
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2014 (2) TMI 1114
Disallowance of the additional depreciation u/s 32(1)(iia) of the Act - Held that:- The decision in Deputy Commissioner of Income-tax, Circle 3(1), New Delhi Versus Cosmo Films Ltd.[2012 (9) TMI 281 - ITAT DELHI] followed - The additional benefit in the form of additional allowance u/s 32(1)(iia) is one time benefit to encourage the industrialization - This additional benefit is to give impetus to industrialization and the basic intention and purpose of these provisions can be reasonably and liberally held that the assessee deserves to get the benefit in full when there is no restriction in the statute to deny the benefit of balance of 50% when the new plant and machinery were acquired and use for less than 180 days - One time benefit extended to assessee has been earned in the year of acquisition of new plant and machinery - In section 32(1)(iia), the expression used is "shall be allowed" - Thus, the assessee had earned the benefit as soon as he had purchased the new plant and machinery in full but it is restricted to 50% in that particular year on account of period of usages - Such restrictions cannot divest the statutory right - Law does not prohibit that balance 50% will not be allowed in succeeding year - The extra depreciation allowable u/s 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage - The so earned incentive must be made available in the subsequent year - The overall deduction of depreciation u/s 32 shall definitely not exceed the total cost of plant and machinery - thus, the order is set aside and the authority directed to extend the benefit - Decided in favour of Assessee. Disallowance made u/s 14A of the Act - Held that:- The assessee had not claimed any exempt income - provisions of section 14A were applicable in that year and AO was entitle to make disallowance - But, he should not have invoked the provisions of Rule 8D - thus, the matter remitted back to the AO for fresh adjudication - Decided partly in favour of Assessee.
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2014 (2) TMI 1113
Claim of depreciation - Road constructed by the assessee – Held that:- The decision in Commissioner of Income Tax Versus M/s Noida Toll Bridge Co Ltd [ 2012 (10) TMI 841 - ALLAHABAD HIGH COURT] followed - The assessee is entitled to the depreciation claimed on Building - BOT Bridge - the depreciation represents the diminution in value of a capital asset when applied to the parties of making profit or gain - The land is held on lease and the road as capital asset has been built on it with exclusive ownership of the road, and the bridge in the assessee-company for the concession period, and which also includes the right to collect tolls and to regulate use of the bridge - Section 32 would apply for the purpose of providing depreciation to be worked out in accordance with the law – thus, the order of the CIT(A) upheld – Decided against Revenue. Disallowance of interest on mobilization advances – Held that:- CIT(A) was of the view that in mercantile system of accounting which is a system of accounting specified u/s. 145 of the I.T. Act, the liabilities and income that accrue have to be taken into account for arriving at the profits - The accrued incomes even if not received has to be taken into account - Liabilities that have fallen due has at the end of the accounting year have to be provided for - The CIT(A) pointed out that the provisions such as 43B or 40(2) and such like statutory disallowances are applicable - Disallowance made by the AO cannot be sustained and CIT(A) was correct in allowing the amount. Quantification of interest – Held that:- The method of quantification of interest payable on mobilization advances was not examined by the CIT(A) – thus, the matter for the limited purpose of quantification is remitted back to the AO – Decided partly in favor Assessee. Disallowance under section 14A of the Act – Held that:- The order of the CIT(A) is reasonable and according to the facts on record - the AO did not examine the issue under section 14A at all - May be he wanted to invoke the provisions of section 36(1)(iii) i.e., diversion of funds borrowed for the purpose of business for non-business activities - The CIT(A) confirmation of disallowance of interest on diversion of ₹ 13.32 crores was also on similar lines, even though stated to have been done under section 14A - disallowance of the interest pertaining to ₹ 13.32 crores stated to have been invested out of borrowed funds, as accepted in earlier years, should have been considered under section 36(1)(iii), which is the relevant section applicable to the above amount - even though the disallowance was wrongly considered under section 14A – the assessee has accepted diversion of borrowed funds to the extent of the above amount in earlier years – thus, the interest on that amount has to be disallowed, if not under section 14A but under section 36(1)(iii) – Decided against both assessee and revenue. Allowance of TDS credit – Held that:- There was no merit in the revenue ground - Obviously on the system of accounting being followed by the assessee, in earlier years TDS credit was given on the mobilization advances - The department cannot deny the credit when the assessee is following the system consistently from earlier years - What is required to be done is only reconciliation of the mobilization advances and TDS claims, so that there is no double claim in any of the years – Decided against Revenue.
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2014 (2) TMI 1112
Inflated expenditure – Held that:- The AO and CIT(A) erred in resorting to mathematical jugglery so as to deny the expenditure claimed by the assessee - There is no basis for AO disallowance of the so called inflated expenditure and CIT(A) also did not apply his mind in restricting the amount on an adhoc basis to Rs.1 crore and Rs.1.10 crores without any basis – Relying upon CIT vs. Dalmia Cement (Bharat) Ltd. [2001 (9) TMI 48 - DELHI High Court ] - Without doing anything on record, this sort of disallowance of expenditure claimed by the assessee cannot be accepted or justified - thus, the disallowance of expenditure resorted by the Assessing Officer is cancelled - AO is directed to allow expenditure as claimed – Decided in favour of Assessee. Disallowance u/s 40(a)(ia) of the Act - Non genuine expenditure – Held that:- The payments made to M/s. Apollo Consulting Services Corporation USA does not come within the purview of provisions of section 195 – payments made to M/s. Apollo Consulting Services Corporation USA cannot be treated as fees for included services within the meaning of Article 12(4)(b) of DTAA and provisions of section 90(2) are applicable even if the payments constitute fees for technical services under section 9(1)(vii) - Since they are not chargeable under the IT Act, provisions of section 195 are not attracted and assessee has no liability to deduct tax at source - the CIT(A) did not consider fit enough to consider the issue of genuineness of the expenditure, when there are already findings on the issue which was examined in detail by the CIT(A) in another proceeding – thus, it cannot be held that the expenditure is not genuine – there is no merit in the appeal of the revenue – Decided in favour of assessee.
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2014 (2) TMI 1111
Disallowance of 'in- house Research and Development activities' and capital expenditure of R&D – Held that:- As per the powers and duties of the employees Scientists B to G level are entrusted with work related to policy making formulation and implementation of plan segments in the field of scientific and industrial research and Scientist-G is specifically delegated for exercising powers of Head of the Department as the Secretary – thus, there is no reason not to accept the certificate given by 'Scientist-G' just because it is not signed as 'Secretary, DSIR' - the authorities are directed to accept the certificate and allow the claim as made by the assessee – Decided in favour of Assessee. 100% depreciation on pollution control equipment – Held that:- The findings of the CIT(A) is upheld - Since the assessee has installed pollution control equipment, as per Appendix-III of the new depreciation schedule, assessee is entitled for depreciation at 100% on the assets capitalized before 30th September and 50% on the balance of the capitalized installed after 30th September – Decided against Revenue.
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2014 (2) TMI 1110
Denial of deduction in respect of accrued leave salaries – Held that:- The decision in Commissioner of Income-tax Versus West Coast Paper Mills Ltd.[1991 (3) TMI 386 - BOMBAY HIGH COURT] followed - There was no reason for not allowing the claim on the basis of changed method so far as the change was concerned and on the earlier method if the liability in regard thereto had not already been allowed as deduction – thus, the assessee was entitled to the deduction in the year – the AO is directed to allow the claim of leave salary – Decided in favour of Assessee. Recovery of Guest House Expenses under Rule 6D of the Rules – Held that:- As decided in assessee’s own case for the previous assessment years, the user of guest house facilities provided by the company to the employees of the company in connection with discharge of their official duties does not alter the basic character of the expenditure - Ultimately such expenses are connected with the travelling by such employees and, therefore, should be treated accordingly, irrespective of the fact that such employees stayed in the guest house of the company - the AO is directed to allow the deduction of amount received from parent departments as expenditure in the nature of travelling expenses and in accordance with Rule 6D of the IT Rules – Decided in favour of Assessee. Disallowance made under Rule 6B of the Rules – Expenditure on Calendars and Diaries – Held that:- The decision in Commissioner Of Income-Tax Versus Allana Sons Private Limited [1993 (4) TMI 13 - BOMBAY High Court] followed - presentation articles bearing the logo of the assessee would fall within the ambit of Rule 6B as expenditure in the nature of advertisement – Decided against Assessee. Disallowance of Annual General Meeting Expenses – Held that:- As decided in assessee’s own case for the previous assessment years - the definition of entertainment expenditure was inserted by the Finance Act, 1983 with retrospective effect from 1. 4. 1976 - the expenditure incurred on serving tea, coffee and soft drinks is covered by the Explanation 2 to section 37(2A)/(37(2) - In the Explanation 2 it is stipulated that the expenditure on provision of hospitality of every kind by the assessee to any person whether by way of provision of food or beverages or in any other manner, whatsoever, would be entertainment expenditure – Decided against Assessee. Disallowance of expenditure u/s 37(2A) of the Act – Expenses on tea and coffee served to visitors –Held that:- As decided in assessee’s own case for the previous assessment years, the Tribunal made a disallowance of 25% of entertainment expenses on this ground would be reasonable –thus, the AO is directed to restrict the disallowance to 25% of the expenses - Decided partly in favour of Assessee. Disallowance u/s 37(2A)of the Act - Business meetings and conferences of the employees – Expenditure on food at employees get together – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that as per Explanation 1 to section 37(2A), the entertainment expenditure includes the amount of any disallowance in the nature of entertainment allowance paid to the employee - the entertainment expenditure also includes the expenditure incurred by the employee for the purpose of business or profession – Decided against Assessee. Disallowance u/s 40A (5) of the Act - Deemed perquisites – Held that:- The disallowance was estimated by it on account of non-availability of information readily at the time of furnishing of the returns, that the auditors had also not quantify the disallowance u/s. 40A(5) – the quantification of the expenses incurred towards maintenance of property, sweeper, wages, repairs, depreciation, soft furnishings etc. were correct - The decision in Lubrizol India Limited Versus Commissioner Of Income-Tax [1990 (7) TMI 45 - BOMBAY High Court] followed – the estimate of disallowance u/s. 40A(5) as made by the CIT(A) is proper and has to be upheld – Decided against Assessee. Expenditure on Partly Convertible Debenture – Held that:- The decision Brooke Bond India Limited Versus Commissioner of Income-Tax [1997 (2) TMI 11 - SUPREME Court] followed - the expenditure incurred by a company in connection with the issue of shares with a view to increase its share capital was directly related to the expansion of the capital base of the company and was a capital expenditure even though it might incidentally help in the business of the company and in the profit making, that the action of the AO was as per the provisions of law – Decided against Assessee. Disallowance of Tata Steel Rural Development Society (TSRDS) expenditure – Disallowance of Annual Contribution to Steel Plants' Sports Board and Tata Sports Club - Contributions to various Institutions - Contribution to the society for sports and stadium – Contribution made to Beldih and United clubs Held that:- The decision in TELCO ITA/6003 to 6008/Mum/98 followed – the payments were made keeping in mind business expediency viz. , to have a motivated work force – thus, the expenditure in question has to be allowed as a deduction u/s. 37(1) – MOU makes the facts and circumstances of the case peculiar – thus, the deduction is to be allowed – Decided in favour of Assessee. Disallowance u/s 35D of the Act - Fees paid to consultants for feasibility studies – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the expenditure incurred on report for increasing production capacity and future development – thus, the expenditure was not a capital expenditure and allowed deduction of same as a revenue expenditure –Decided in favour of Assessee. Disallowance of allowances - Investment Allowance and Extra Shift Allowance on Town Division assets, investment allowance on various items Plant and Machinery and Investment Allowance on items of P&M of Tubes Division – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the main works and the township formed an integral part of the whole industrial complex, one of which cannot exist without the other - the plant and machinery installed even for providing the necessary facilities to the employees which does not apparently have any connection with the manufacturing activity is directly needed for the running of the priority industry - investment allowance is admissible to the assessee on the plant and machinery in the Town Division, particularly when on the items like light and fan installations the assessee had itself not claimed any investment allowance - additional depreciation, extra shift allowance and investment allowance are admissible to the assessee on the plant and machinery in the Town Division – Decided in favour of Assessee. Deduction u/s 35(1)(iii) of the Act - Contribution to Xavier Labour Relations Institute – Held that:- contribution to XLRI is allowable on the same principles that we have followed in allowing the earlier grounds, but same is subject to production of evidence of payment of contribution by the assessee – thus, the matter remitted back to the AO for verification – Decided partly in favour of Assessee. Bad and doubtful debts written off – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the write off of the debt as bad has to be construed as a bonafide write off - It was based on commercial providence – the deduction claimed is allowed – Decided in favour of Assessee. Restriction of claim made u/s. 80HHC of the Act – Held that:- The decision in Karimjee (P.) Ltd. Versus Deputy Commissioner of Income-Tax And Another [2002 (9) TMI 5 - SUPREME Court] followed - the assessee should be allowed to have an opportunity to create the reserve for the additional amount – thus, the matter remitted back to the AO for adjudication – Decided partly in favour of Assessee. Allowability of deduction on account of provision for leave salaries – Allowability of 20% of initial contribution as deduction - Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the department had not challenged the order of the Tribunal before the Hon'ble High Court while filing appeal for that AY – the whole of initial contribution to the ASF was deductible u/s. 36(1 )(iv) in computing the business income of the assessee in the year of contribution itself, that there was no provision in the Act which stipulated disallowance of a part of the contribution to ASF and spreading over the balance amount over a period of five years - Decided against Revenue. Deduction on account of guarantee amount paid to Ahmedabad Advance Mills Ltd. (AAML) – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the assessee in terms of the agreement entered into a commercial transaction and thereby incurred expenses in first three years, that commercial expediency compelled the assessee to make the payment, that the sums paid by the assessee to AAML were admissible as deduction - the transactions with the AAML were in the revenue field – Decided against Revenue. Payment for holiday plan at hotels as guest house expenses u/s 37(4) of the Act – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the assessee had employed more than 100 whole time employees during the previous year and the hotels were used exclusively for the benefit of the employees while on leave - the assessee's case was covered by the second proviso to section 37(4) and the expenditure incurred could not be called as expenditure incurred on the maintenance of a guest house – Decided against Revenue. Allowability of remuneration to chairman and MD – Held that:- FAA held that the assessee had denied having provided any furniture or air conditioners at the residence of the CMD, that the power was supplied to the CMD from its own resources, that the car was provided to him for official purposes only, that the assessee had provided accommodation to the CMD but rent was collected from him - the assessee had admitted that accommodation let out to him was maintained by it - the estimation made by the AO towards perquisites was deleted - the FAA has given a categorical finding of fact that certain facilities were not provided to the CMD and rent was collected from him – Decided against Revenue. Contribution to Tata Services for maintenance of Horniman Circle gardens as an advertising campaign – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the contribution was towards beautification of the garden – the assessee along with the other companies was allowed to put up their logos in and around the garden - the expenditure was incurred on advertisement campaign – Decided against Revenue. Investment allowance and Extra shift allowance on town division, Investment allowance on P& M installed at stock yard and Investment allowance on various items of P&M – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that The investment allowance is admissible to the assessee on the plant and machinery in the Town Division, particularly when on the items like light and fan installations the assessee had itself not claimed any investment allowance - additional depredation, extra shift allowance and investment allowance are admissible to the assessee on the plant and machinery in the Town Division – Decided against Revenue. Investment Allowance on P&M of stock yard – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the claim of the assessee on account of investment allowance on railway sidings at stock yard allowed - in absence of any contrary material brought to notice against the decision of the Tribunal- there was no infirmity in the order of the CIT(A)allowing the investment allowance on the plant and machinery installed by the assessee in the stock yard – Decided against Revenue.
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2014 (2) TMI 1109
Denial of deduction u/s 80IA of the Act - Reversal of provision made and written back – Held that:- Section 80IA is a code by itself and not dependent upon other provisions of the Act - sub-section 5 of S.80IA has an overriding effect and excludes application of any other provision of the Act - the eligible business is generation of electricity - only profits derived from any activity directly linked with generation of electricity would be eligible for deduction u/s 80IA - the amount written back on account of reversal of provision made in financial year 2006-07 cannot be held to be a profit derived from eligible business for computing deduction under S.80IA – there is no reason to interfere in the findings of the CIT(A) in the respect – Decided against Assessee. Deduction allowed u/s 80IA of the Act on sale of waste oil – Held that:- There was no infirmity in the order of the CIT(A) - waste oil is bye-product or waste product in the process of generation of power and has direct link with the eligible business of the assessee – Thus, the CIT(A) was justified in holding that income from sale of waste oil will be eligible for deduction under S.80-IA of the Act – Decided against Revenue. Netting of excess premium paid against refund of premium – Exclusion from income the differential amount for computing deduction u/s 80- IA of the Act – Held that:- The CIT(A) has allowed the netting off following the order passed by his predecessor in assessee's own case for the assessment year 2002-03 and 2006-07 - The Tribunal in M/s GVK INDUSTRIES LTD Versus ASSTT COMMISSIONER OF INCOME TAX [2012 (6) TMI 573 - ITAT HYDERABAD] has upheld the order of the CIT(A) – the benefit of netting of the excess premium received against the insurance premium amount paid during the year, for taking into account only the differential amount for exclusion from the income eligible for relief under S.80IA of the Act – Decided against Revenue.
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2014 (2) TMI 1108
Set off of loss u/s 70(1) of the Act - Whether the assessee being partner in a partnership firm is entitled to set off the loss of firm qua his share (unabsorbed depreciation) against his other business income (in individual capacity) as per the provisions of section 70(1) of the Act – Held that:- AO held that the partnership firm is a separate entity and the assessee who is a partner cannot claim depreciation on the asset of the firm in view of the provision of section 32 of the Act, while computing his individual income - the AO disallowed the claim of unabsorbed depreciation while computing the income of the assessee - The Apellant is not justified in setting off proportionate share of unasborbed depreciation of his partnership firm from his income. If the partners have got other than the share income from that firm, such allocated depreciation shall be set off against their respective income of that year from any other source - But with amendment in provisions of the Act as regards to taxation of firms w.e.f. 01.04.1993 i.e. for and from AY 1993-94 the concept of registered firm was abandoned and it is the same position as a member of AOP or BOI that of the partner of the firm - The profits of partnership firm are itself taxed and whatever remains will be distributed among partners to the extent of proportion of their shares as tax free share – The decision in ITO Vs. Ch. Atchaiah [1995 (12) TMI 1 - SUPREME Court] relied upon - The firms as assessed u/s. 184 and 185 of the Act w.e.f. 01.04.1993 because the profit of the firm is taxed in the hands of the firm and share of the partner is never taxable in their individual assessment – thus, the assessee is not eligible to claim unabsorbed depreciation of the firm against incomes of the assessee who is partner of the firm and assessed in individual capacity – Decided against Assessee.
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2014 (2) TMI 1107
Deletion of Penalty u/s 271(1)(c) of the Act – Disallowance of claim of TDR purchase expenses - Held that:- Assessee contended that it has consumed the base land FSI in the projects already completed by it and the balance portion of the project shall be completed on the basis of TDR purchased by it - When the assessee is computing income on the completed projects, it is not known as to how it could claim land cost pertaining to unfinished projects against those completed projects - When it was pointed out to the assessee that its claim is not correct, the assessee has accepted for the addition of a part of land cost proportionate to uncompleted project. The assessee has made an inaccurate or erroneous claim of land cost in its return of income, which has resulted in furnishing of inaccurate particulars of income - Further, the assessee has offered an explanation with regard to this claim, but has failed to substantiate it by bringing any material on record - the assessee has failed to prove that the explanation was bona find one - It is also not the case of the assessee that the claim was in accordance with the accounting practice regularly followed by it or in the trade circles – thus, the assessee has failed to discharge the burden placed upon him under Explanation 1 to sec. 271 of the Act - the assessee shall be deemed to have concealed particulars of income in respect of this addition – the order of CIT(A) set aside in respect of the addition also and the penalty levied by the AO is restored – Decided in favour of Revenue.
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2014 (2) TMI 1106
Valuation of the property - Property sold by the assessee – Held that:- There is lot of variation on the guideline value furnished by the Sub-Registrar and adopted by the Assessing Officer to that of the value adopted by the assessee of registered valuer's valuation –the guideline value of the Registration Department regarding valuation of the property has evidentiary value and they are only intended to give information or instruction to the registering authorities but the guideline value alone is not a deciding factor - the Department has not made any independent investigation and collected any information with respect to any sale transaction in neighbouring land for determining the fair market value of the land and simply adopted the guideline value as provided by the Sub-Registrar and accepted by the Assessing Officer for determining the fair market value, which in our opinion, is found to be incorrect – thus, the order of the CIT(A) set aside and the matter remitted back to the AO for examination – Decided in favour of Assessee.
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Customs
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2014 (2) TMI 1105
Condonation of delay - Resignation of officer in-charge of matter - Held that:- The only ground adduced in the COD application is that Shri Hiresh Dhakan, who was dealing with the mater left the company and therefore, nobody else was aware of the pendency of the appeal and only when Mr. Pinglay joined in May 2013 the matter was brought to the notice. There is no explanation why after Mr. Hiresh Dhakan left anybody else could take necessary action in filing the appeal. Even after Mr. Pinglay joined in May 2003, there is a delay of six months and the appeal has been relied only in 18/10/2013. From the records, it is seen that Mr. Pinglay was with the appellant firm all through and therefore, the excuse offered is only an afterthought and cannot be accepted. Thus, there is no satisfactory explanation for the delay - Condonation denied.
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2014 (2) TMI 1104
Valuation of goods - Rejection of transaction value - Whether there can be two prices for import of the same goods for manufacture or as spare parts - Held that:- When undervaluation is alleged, the department has to prove it by evidence or information about comparable imports. For proving undervaluation, if the department relies on declaration made in the exporting country, it has to show how such declaration was procured. We may clarify that strict rules of evidence do not apply to adjudication proceedings. They apply strictly to the courts proceedings. However, even in adjudication proceedings, the AO has to examine the probative value of the documents on which reliance is placed by the department in support of its allegation of undervaluation. Once the department discharges the burden of proof to the above extent by producing evidence of contemporaneous imports at higher price, the onus shifts to the importer to establish that the invoice relied on by him is valid. Therefore, the charge of under-invoicing has to be supported by evidence of prices of contemporaneous imports of like goods. Section 14(1) speaks of “deemed value”. Therefore, invoice price can be disputed. However, it is for the department to prove that the invoice price is incorrect. Revenue has failed to prove otherwise apart from import of spare parts the value of the imported goods has been influenced being related person. Therefore, the impugned order is bad in the eyes of law. Accordingly, the same is set aside - Decided in favour of assessee.
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2014 (2) TMI 1103
Suspension of CHALR License - Retirement of partner - whether Shri Anil Sharma who was qualified to be a licensee under CHALR, 1984 shall cease to be so upon retirement of the partner Shri Harinder Pratap Singh w.e.f. 7-10-2010 - Held that:- Perusal of Regulation 3 of CHALR, 2004 throws light that a natural person who is qualified to be a licensee appearing the examination in that behalf and qualifying therein is considered to be a CHA Licensee in terms of Regulation 9 of CHALR, 2004. Such a legal proposition does not oust the appellant from the purview of law to be recognised as CHA licensee who was recognised by 1984 Regulations aforesaid. In fact under Regulation 15, the appellant is specifically allowed to continue his business. There is nothing contrary on record to show that Shri Anil Sharma is incompetent under law of CHALR, 2004. Record also does not reveal as to issuance of any show cause notice questioning his eligibility. Therefore, we do not find any incompetency of the present appellant to continue to be a CHA licensee. Once the eligibility or competency to be a licensee is not found to be contrary to law, the appellant continues to be a licensee as CHA - Decided in favour of appellant.
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Corporate Laws
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2014 (2) TMI 1102
Recall of order - Regulation of Caveat filings - writ petition for directions to be sought, inter alia, to the Company Law Board to frame regulations in respect of lodging caveats before that CLB as well as to this Court, to regulate filing of caveats, under Section 148-A of the Code of Civil Procedure - Held that:- Court without giving a notice to the caveator cannot be treated as a nullity. If a statute intends to demolish the ordinary powers of a Civil Court, it is well settled proposition of law that it can only be done by a direct piece of legislation enacted for that purpose and not by the effect of an indirect legislation as if it were by a side wind. The powers of a Civil Court are too sacrosanct to be allowed to be diluted or to be curtailed by a mere remote implication. I, therefore, hold that as there is no specific provision declaring any action taken by the Court contrary to its mandatory duty under Sub-section (3) to give a notice would be void, the order passed by the Court below on 30-10-1980 is not a nullity. In other words, il appears to me that the mere lodgement of a caveat would not deprive the Court of its power to pass an order even if the caveator was not informed of the dale of hearing of the matter. As the lodgement of a caveat is merely a right to be informed of the hearing date and it has no effect by way of curtailing the powers of a Civil Court to pass an appropriate order on the merits of the case - no reason to review or recall judgment dated 01.10.2013 - Decided against Petitioner.
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Service Tax
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2014 (2) TMI 1137
Valuation of goods - Goods sold in the execution of works contract of repair and maintenance - Held that:- Finance Act, 1994 is not a Commodity Taxation Law. As a result of which the goods which were deemed to be sold in the execution of works contract that shall not enter into the purview of the levy of the service tax. What that is intended by Finance Act, 1994 is levy of service tax on the taxable service provided - Following decision of CCE Vs. M/s Kailash Transformers [2014 (2) TMI 1136 - CESTAT NEW DELHI] - Decided in favour of assessee.
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2014 (2) TMI 1136
Valuation of goods - inclusion of price of goods - divisible contract of repair and maintenance - benefit of Notification no. 12/2003-ST dated 28th June, 2003 - Held that:- there was breakup of the consideration received by the respondent towards labour charges, and price of goods. This establishes that contract was divisible, and there was transfer of property in the execution of work contract of repair. - Exemption under Notification No. 12/2003-ST dated 28th June, 2003 allowed - Decided against Revenue.
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2014 (2) TMI 1133
Maintanability of appeal before High Court - Jurisdiction - what is meant by the term “determination of any question having relation to rate of duty (for service tax) or value (of service) for the purpose of assessment” - Invocation of extended period of limitation - revenue prayed to refer the matter to larger bench - Held that:- Determination of any question relating to rate of tax would necessarily directly and proximately involve the question, whether activity falls within the charging Section and service tax is leviable on the said activity. The said determination is integral and an important injunct to the question of rate of tax. In case service tax is not to be levied or imposed and cannot be imposed under the charging Section, no tax would be payable. The said determination would be direct or proximate to the issue of rate of tax, which will include nil tax, when no tax is chargeable. The words “rate of tax” in relation to rate of tax would include the question whether or not the activity is exigible to tax under a particular or specific provision. This will be a reasonable and appropriate interpretation and will not cause or result in confusion or ambiguity regarding the appellate forum. Line between exigibility and rate of tax as propounded can be rather thin and superfluous in the present statutory context. Prayer of the Revenue to refer the matter to Larger Bench rejected - We are bound by the decision of the Division Bench of this Court in the case of Delhi Gymkhana Club Ltd. (2009 (8) TMI 65 - DELHI HIGH COURT) and respectfully following the ratio for the reasons set out above. We shall now examined facts of each of the present appeals to decide and determine whether they are maintainable under Section 83 of the F. Act read with Section 35G of the CE Act. In an present appeal the primary issue and question is whether Section 65(105) (r) was applicable in respect of the said activities and in case it was not applicable, no service tax was payable. The rate of tax would be “Nil”. As held above, Section 83 of the F. Act read Section 35G of the CE Act is not applicable and, therefore, the present appeal is not maintainable before the High Court. - all appeals dismissed involving similar cases - Decided against Revenue.
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2014 (2) TMI 1132
Valuation - inclusion of value of replaced parts such as HV/LT leg coils, transformer oil and other goods used in the process of repair/ maintenance of old/ damaged transformers. - Waiver of pre-deposit - Held that:- The agreement between the parties catalogues a break-up of the total cost of repair and maintenance, under several heads such as labour charges and value of items to be replaced - Tribunal in the final order passed in vide the final order [2014 (2) TMI 1136 - CESTAT NEW DELHI] and in the final order [2014 (2) TMI 1137 - CESTAT NEW DELHI] has consistently ruled that goods which are deemed to have been sold in execution of works contracts, including in the process of rendering the taxable repair / maintenance service cannot be included within the ambit of the taxable value for the service provided. The decision of this Tribunal in Balaji Tirupati Enterprises vs. CCE, Meerut-II is confirmed by the decision of the Allahabad High Court. Revenue's appeal there against was rejected in CC&CE vs. Balaji Tirupati [2014 (1) TMI 404 - ALLAHABAD HIGH COURT]. Order of Commissioner (Appeals) set aside - stay granted - Matter remanded back - Decided in favour of assessee.
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2014 (2) TMI 1130
Classification of service - GTA service or Site formation and clearance, excavation and earthmoving and demolition activity - removal of all materials in all kinds of strata with its drilling, excavation, loading, transport and dumping, spreading and dozing at specified places as per instructions of the client - Held that:- There is no evidence before us to show that transportation activity was the predominant activity, nor any attempt has been made by the appellant as to the amount received in respect of transportation activity or that transportation was predominant activity and the other activities undertaken by the appellant were ancillary to transportation. In the absence of any evidence in this regard, we are unable to accept the contention of the appellant that they are not liable to discharge service tax liability on the aforesaid activity - Penalty imposed also sustainable - Decided against assessee. Levy of penalty - non collection of service tax from the recipient of services - Held that:- Merely because the service recipient did not pay the service tax liability initially, that would not take away/obliterate the liability on the service provider to discharge the tax. If this plea is accepted, it would make the taxable event as receipt of service tax from the recipient of the service which is not the law. The law envisages payment of service tax on rendering of taxable service and it has nothing to do with the receipt of service tax from the service recipient. Therefore, this plea of the appellant that the service-recipient did not reimburse service tax and hence the appellant did not pay service tax is not acceptable or satisfactory explanation. - Levy of penalty confirmed.
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2014 (2) TMI 1129
Waiver of pre-deposit of Service tax - Sale and purchase of coal or Commission agent - Business auxiliary services - Held that:- appellant is purchasing coal from the CIL under the cover of invoices raised by CIL on payment of Sales Tax. Further the coal purchased is being sold by them to small consumers in the country on the basis of invoices raised by the appellants and on payment of Sales tax. This fact, by itself, is sufficient to reflect upon the nature of the relationship being enjoyed by the appellant with M/s. Coal India Ltd. This shows that the appellant is a buyer and seller of coal and cannot be held to be providing any service to M/s. Coal India Ltd. - Following decision of Ahmedabad Stamp Vendors Association vs. Union of India [2002 (6) TMI 32 - GUJARAT High Court] - Stay granted.
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2014 (2) TMI 1128
Waiver of pre-deposit - Stay recovery of the tax - Site formation and clearance excavation and earth moving and demolition service - Held that:- site formation and clearance excavation and earth moving and demolition service became taxable with effect from 16.6.2005. We also find from the order in original that the third work order was dated 17th June 2005 and amount of Rs.1,20,37,101/- was the gross amount against the services rendered by the applicant. Out of which Rs.86,28,180/- had been received by the applicant towards services rendered after 16th June 2005. Prima facie this amount is a taxable as the work order itself is after 16th June 2005. Therefore the applicant does not have a case for complete waiver of pre-deposit - Conditional stay granted.
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2014 (2) TMI 1127
Waiver of service tax - Adjustment of Excess tax paid - Held that:- there is no provision under the Finance Act or under Service Tax Rules which provides such adjustment. The adjustment is provided only under Rule 6(3) of Service Tax Rules where the taxable service was not provided. In the present case applicant provided service and short paid the tax. In these circumstances, I find that applicant has not made out a total waiver of the amount of service tax - Conditional stay granted.
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2014 (2) TMI 1126
Waiver of pre-deposit - applicant is providing Air Travel Agent Service. They utilized a software system developed by M.S. Galileo and M/s. Amedus during the course of providing the said service - Business Auxiliary Service - Held that:- Prime facie, the applicant activity appears to be marketing and promotion of services of M/s. Amedus and M/s. Galileo. It is seen that on an identical issue the Tribunal allowed the stay petition partly. The learned counsel for the applicant pleads that the demand is barred by limitation, which would be looked into at the time of final hearing of the appeal. As such, the appellant is directed to pre-deposit 25% of the tax - Conditional stay granted.
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Central Excise
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2014 (2) TMI 1101
Denial of refund claim of predeposit - Clearance of goods in excess of the limit prescribed - Exemption Notification No.08/2003-CE dated 01.03.2003 - Section 11A(2B) - exteneded period of limitation - Held that:- revenue department’s argument stems from its understanding that the refund claim was not tenable in view of Section 11A(2B) and that the demand could have been made during the extended period by virtue of Section 11A without issuing a notice. However, a careful reading of the appeal grounds would indicate that the plea of the assessee was that the facts found were not such so as to indicate fraud or misrepresentation as to attract the main provisions of Section 11A. Viewed from that perspective, there is no infirmity with the findings of the orders of the Tribunal. No substantial question of law arises - Decided against Revenue.
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2014 (2) TMI 1100
Waiver of pre-deposit of duty and penalty - Held that:- since the Additional Commissioner Central Excise has adjudicated upon the issue of liability, at this stage there is no occasion to doubt it particularly by this Court where the issue is not for decision on merit. Therefore, in safeguard of the interest of the Revenue, we are of the view that the learned Tribunal has rightly exercised its discretionary power which does not require interference of this Court - Petitioner is permitted to make pre deposit in installments - Decided partly in favour of assessee.
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2014 (2) TMI 1099
Cenvat Credit - Use of capital goods to manufacture exempted goods - Demand u/s 11A - Extended period of limitation - Held that:- Machine which was installed in the factory was used both for manufacture of exempted goods as well as dutiable goods. Dutiable goods were manufactured since October, 2006 which fact has been noted in Paragraph No. 8 of the judgment of the Tribunal. The Tribunal had denied the benefit on the pretext that " the certificate of the manufacturer relied upon by the appellant also confirms that the plant is usable for manufacture of aerated waters only after modification" - The manufacture had certified that machine is designed to handle carbonated/aerated soft drinks by software changes and minor adjustments. The certificate never said that the object can be achieved only after modification. The certificate did not use the word 'modification' which has crept in the order of the Tribunal. More so, before us now the appellant has filed certificate dated 25.09.2009 which indicates that no modification in the machine can be done in India since it is manufactured at Germany and imported in India - Thus, the appeal is allowed by setting aside the judgment of the Tribunal dated 01.05.2008 and the matter is remitted back to the Tribunal to decide the appeal afresh in accordance with law taking into consideration the certificate dated 25.09.2009 - Decided in favour of assessee
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2014 (2) TMI 1098
Penalty u/s 11AC read with Rule 25(1) - Suppression of facts - Willful misstatement or fraud or evasion of duty - Held that:- The Commissioner came to the finding that there was no willful misstatement or fraud or any contravention or any evasion of duty nor was there any suppression of fact. The aforesaid view of the Commissioner was upheld by the learned Tribunal. The question whether there has been any willful misstatement or fraud or any contravention or any evasion of duty or there is any suppression of fact are essentially questions of fact. These questions are concluded by the views expressed by the learned Tribunal. There is no question of law involved in this appeal - Decided against Revenue.
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2014 (2) TMI 1097
Whether in the facts and circumstances of the case there can be a deemed service of the order on the appellant merely because it was sent under registered cover and no acknowledgment was received more so than there was a specific rebuttal in the form of affidavit filed by the appellant - Denial of CENVAT Credit - Held that:- since the appellant was heard through its representative by the Commissioner (Appeals) after which the appellate order was passed on 23 November 2009, the appellant ought to have checked up with the office of the Commissioner (Appeals), if the order was not received. This in our view, begs the question of when the order of the Commissioner (Appeals) was communicated. Once the legislature has stipulated that the period of limitation under Section 35B (3) commences only upon the communication of the order which is sought to be appealed against, the Tribunal ought to have applied its mind to precisely when the order under appeal was communicated. Tribunal was not justified in dismissing the appeal. Moreover, if an appeal is not filed within the period of three months, the Tribunal has the power to condone the delay under Sub section 5 of Section 35B if sufficient cause is shown. The question of condonation would of course, arise only, when the Tribunal comes to the conclusion that the appeal was not filed within three months from the date of communication of the order. - appropriate order to pass in the appeal is to quash and set aside the order of the Tribunal dated 24 September 2013 and to restore the proceedings back to the Tribunal for consideration afresh - Decided in favour of assessee.
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2014 (2) TMI 1096
Denial of CENVAT Credit - Supplier of input has wrongly paid duty - Whether activity of appellant amounts to manufacture - Held that:- credit cannot be denied on the ground that activity undertaken by the supplier of input did not amount to manufacture. In these circumstances, as the supplier of input is not party to the present proceeding and the assessment cannot be reopened at the recipient end - Following decision of C.C.E., Delhi-III v. Neel Metal Products Ltd. [2009 (1) TMI 155 - PUNJAB & HARYANA HIGH COURT] - Decided in favour of assessee.
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2014 (2) TMI 1094
SSI Exemption - Clubbing of clearance - two units held by husband and wife separately - Clandestine Removal - Held that:- Held that:- adjudicating authority has nowhere referred to any mutuality of interest between the units of husband and units owned by wife. He has observed that lack of mutuality of interest or financial flow back can be only one of the important consideration but cannot be made sole basis for arriving at the decision. Merely because the two owners of the units were husband and wife and the profits earned by them came into same household, does not mean that clearances of all the units is required to be clubbed. All the units were separately registered with income tax as also sales tax authorities. Their locations of business were at separate places. In fact one of the unit was located in Delhi itself. There was no financial inter-twining and all the units were working with their own independent financial resources. There is no evidence on record to show that there was any mutuality of interest between the units except for the fact that Shri Pradeep Khanna was sometimes looking after the affairs of the units belonging to his wife which, as already discussed by us, cannot be made the basis for clubbing the clearances of the units owned by husband and wife. - Benefit of SSI exemption allowed - Decided in favor of assessee. Clandestine Removal - Air-Conditioners / Compressors - sale through dealers - accounting entries of the dealers considered - realizations of unaccounted money - Held that:- When there are dealers appointed by the manufacturers with appropriate price margins who are engaged in such trading activity, an OEM could not have indulged in parallel sales of such large number of compressors because of the market forces and if they indulge in such activity it would have come to the notice of the manufacturer and the representative of the manufacturer testifies that no such trading had come to their notice. So this claim of trading in compressors is a very weak defence. Contention of the appellant that the case is made on assumptions and surmises is not acceptable. Every case is to be decided based on inference to be drawn by a prudent judge from the evidence available. - In a clandestine activity, it is not possible to unearth every piece of evidence and such standard of proof is not required for proving evasion of tax. - Revenue has proved their case in respect of 606 air-conditioners held to be cleared without payment of duty by the appellant - demand of duty and penalty confirmed - Decided against the assessee.
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2014 (2) TMI 1093
Duty demand - Availment of Cenvat credit on “RAILS” falling under Chapter 73 of CETA - Held that:- appellant availed Cenvat credit on Rails as capital goods. The appellants are engaged in the manufacture of Fish Plates, etc. They have to send the material in the furnace and hot rolled fish plates come after moving on the Rails. Therefore the rolls are the components of the capital goods and they rightly fall under the purview of capital goods. The Department could not produce any evidence that these rolls are used for structural or for installation purposes. Therefore, they are eligible for Cenvat credit. The appellant have paid the interest on the 50% of the Cenvat credit availed by them as they were not entitled for full 100% of Cenvat credit - Decided in favour of assessee.
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2014 (2) TMI 1092
Collection of Excise duty from the customers, on account of fluctuation in rates of the petroleum products on the stocks lying at various depots - Demand u/s 11D - assessee being only a “dealer” and not a “manufacturer” - Held That:- It is clear that the petroleum products being marketed by the appellant depot had been manufactured by various oil companies. We also find that the provisions of Section 11D are applicable only to the person liable to pay the duty who in respect of any goods sold has collected from his customers an amount in excess of duty assessed and paid on the goods. This provision obviously would not be applicable to a dealer who sells the duty paid goods purchased from other manufacturers. The appellant, a HPCL Depot were admittedly selling duty paid petroleum products purchased from different oil companies. Therefore, the provisions of Section 11D are not applicable to the appellant - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (2) TMI 1135
Classification of goods - Whether item manufactured by revisionist-assessee would be covered by entry "Edible oils & oilcake" at serial no.687 or "Vegetable oil" at serial no.2331 in the Schedule of Rates under Value Added Tax Act, 2008 - Held that:- Looking to the meaning of term "edible" and "edible oil", I have no hesitation in holding that commodity in question, which admittedly was a cooking medium, and consisted of various fats etc., is covered by term "edible oil". The mere fact that assessee claims various qualities of the aforesaid commodity, for the purpose of claiming a better marketability, that would not make any difference so as to take away from the ambit of "edible oil". The mere fact that commodity in question was mentioned on the packet as a blended fat as a healthier cooking medium will be of no relevance to take away from its basic concept of edible oil. The further fact that it is a proprietary food also would not result in any consequence of excluding the commodity in question from the wide term "Edible oil" under entry 43. Under the Act, 2008, the commodity in question is an "edible oil" under entry 687 of the Schedule and also a "vegetable oil" under Entry 2331. Since the commodity in question is covered by two entries, in my view, specific entry "vegetable oil" will prevail over entry "edible and oilcake" and therefore, question, referred to above, is answered by holding that commodity in question is taxable under Entry 2331 i.e. "Vegetable oil including gingili oil and bran oil" - Decided in favour of assessee.
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2014 (2) TMI 1134
Disallowance of ITC - Objection not filed within time - Held that:- Objection were not made due to misplacement of notice - considering the plea made by the petitioner to give him an opportunity to file objections to the demand notice dated 25.10.2013 and the reasons assigned by him for not filing the same, the petitioner is directed to file his objections to the demand notice dated 25.10.2013 within a period of two (2) weeks from the date of receipt of a copy of this order. On such objections being made, the respondent shall consider the same in accordance with law after affording an opportunity of personal hearing to the petitioner and on verification of documents, pass appropriate orders within a period of four (4) weeks. Till such time, status quo of the impugned proceedings shall be maintained - Decided in favour of assessee.
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