TMI Tax Updates - e-Newsletter
March 28, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Correction of statement cum challan relating to TDS on sale of property u/s 194IA - CPC-TDS has enabled functionality for online correction in form 26QB from 29/02/2016.
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Income Tax:
TDS u/s 194I - whether the tour operators/travel agents were required to deduct TDS under Section 194-I of the Act while making payments to the hotels on behalf of foreign tourists? - Held Yes - HC
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Income Tax:
Exemption u/s 13A - ITAT was justified in denying exemption to the INC under Section 13A of the Act and refusing to condone the delay that had occurred in the audit of some of the state units by holding that the ITAT was right in its conclusion that the INC failed to fulfil the three conditions envisaged under clauses (a), (b) and (c) of Section 13A of the Act - HC
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Income Tax:
Exemption u/s 13A - As long as a political party continues to avail the exemption from payment of income tax, there can be no excuse for not maintaining its account whether it has one or more state units. - no valid reasons have been given by the ITAT for overturning the reasoned and detailed orders of the AO and CIT (A). - HC
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Income Tax:
Entitlement to claim carry forward loss - delay in filing the return - when the petitioner as a litigant is entitled to claim carry forward loss, mere delay should not defeat the claim of the petitioner - CBDT should have condoned the delay of one day in filing the return by the petitioner.- HC
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Income Tax:
Minimum Alter Tax (MAT) - Forfeiture of share warrants being a capital receipt - adjustment need to be made to the disclosures made in the notes on accounts forming part of the profit and loss account of the assessee and the profits arrived after such adjustment, should be considered for the purpose of computation of book profits u/s 115JB - AT
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Income Tax:
Disallowance of excess depreciation claimed on Iris Cameras - Iris camera without the aid of software is obsolete and it cannot be used in the normal course of business. The assessee has rightly claimed 50% depreciation over a period of two years - AT
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Income Tax:
The order has been passed by the Learned AO by taking one of the possible views and hence the order cannot be termed as erroneous warranting initiation of revision proceedings u/s 263 - AT
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Income Tax:
Penalty u/s 271(1)(c) - by disallowing 80% of the claim, the Assessing Officer has allowed 20% of expenditure attributable to earn the business income. - levy of penalty is not warranted - AT
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Income Tax:
Penalty u/s 271E - Company has directly repaid the loan taken from Director to Bank - violation of section 269T - The assessee has demonstrated that under the compulsion the payment was directly credited in the bank account of the Director. Strictly it was not paid in cash - No penalty - AT
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Income Tax:
Non collection of TCS (tax collection at source) - main husk is a by-product and the same cannot be considered as scrap and waste as provided in the Explanation to Section 206C of the Income-tax Act. - AT
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Income Tax:
Non collection of TCS (tax collection at source) - DOC is a by-product and it certainly cannot be categorized as scrap and waste and it has its own market value - AO has erred in categorizing DOC as scrap within the meaning of Explanation to Section 206C - AT
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Customs:
Classification - Used damaged cut rails for melting (melting scrap) - to be classified under CTH 72.04 denying benefit of exemption benefit under Notification No.12/2012 or under CTH 73.02 allowing benefit - the goods are to be classified under CTH 73.02 - exemption allowed - AT
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Customs:
Demand of Safeguard duty - thickness of Aluminium foils - It is to be noted that the samples were re-tested twice with a request and concurrence of the assessee in approved laboratories. Therefore, the assessee is liable to pay safeguard duty. - AT
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Service Tax:
Liability of Service tax - Rendering of Business auxiliary service - for reasonableness of doubt that individuals may not be 'commercial concerns', section 80 of Finance Act, 1994 be invoked and penalty imposed under Section 78 is set aside. - AT
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Service Tax:
Demand of Service tax at the rate of 6%/8% of the value of exempted goods - As per Sub-Rule (3A) of Rule 6(3), the Cenvat Credit required to be reversed is as per the formula prescribed. Here, as the appellant have reversed the entire credit availed on common input service, the demand of 6%/8% of the value of exempted goods is not sustainable. - AT
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Service Tax:
Cenvat credit - Appellant constructed various malls and rented the same to various parties and discharge of service tax on rent received. Also availed the Cenvat Credit of input services which are used for construction and maintenance of the various malls - credit allowed - AT
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Service Tax:
Waiver of penalty imposed under Section 76 of the Finance Act, 1994 - appellant have discharged the entire service tax along with interest prior to issuance of show cause notice as clearly appearing in the show cause notice itself. - penalty waived - AT
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Service Tax:
Imposition of penalties under Section 78 & 77(1a) and 77(2) of the Finance Act, 1994 - Taxable services of 'Erection, Commissioning or Installation' service received from outside India - No intention of assessee for non-payment of service tax - penalty set aside - AT
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Central Excise:
Validity of order against the dead person - once the factum of death of the sole proprietor has come to the knowledge of the learned Commissioner, the learned Commissioner should have dropped the proceedings rather than passing the impugned order - AT
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Central Excise:
100% EOU - though dross and skimming do arise during the process of manufacture but these are not manufactured products. An article is not exigible to tax only because it may have some saleable value - the contention that in the event of the impugned goods were found to be non-excisable, then customs duty is payable is not maintainable - AT
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VAT:
Determination of classification and rate of tax - Deciding the higher rate of tax at the instance of a new manufacturer, who is exempted from tax to make the Ruling applicable to those who are not exempted from tax was not a correct approach. - HC
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (3) TMI 880
TDS u/s 194I - whether the tour operators/travel agents were required to deduct TDS under Section 194-I of the Act while making payments to the hotels on behalf of foreign tourists? - Held that:- The Revenue is right in its contention that applicability of Section 194-I does not depend upon whether the income of the hotel from room charges is assessed under "profits and gains of business or profession" or "income from house property". Section 194-I is applicable at the time of payment of rent or at the time of crediting such amount to the payee, if the other conditions laid down under the said provision are fulfilled. It is for the Assessee to decide whether it seeks to retain the hotel as an investment or as a business asset. The income therefrom could be taxed as business income if it is exploited as a business asset. Rental income can also be taxed under the head "Income from other sources". This, however, does not affect the constitutional validity of the provision or the liability of the person (other than an individual or HUF) making payment to deduct TDS at the time of making such payment. Question whether any part of the payment received by the hoteliers, who are members of FHRAI, from persons other than individuals and HUFs, can be construed as ‘rent’ within the meaning of Section 194-I of the Act is answered in the affirmative. The contention of the Petitioners that no part of the payment received by them as room charges falls within the ambit of 'rent' under Section 194-I of the Act is hereby rejected. The Court nevertheless clarifies that it will depend on the facts of every case, and the onus would be on the concerned hotel to show, whether the payment made by the customers to the hotel includes any payment that can be said to be outside the ambit of 'rent' as defined under Section 194-I of the Act. fall outside the ambit of Explanation to Section 194-I of the Act.
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2016 (3) TMI 879
Exemption u/s 13A - Political party registered as such under Section 29A of the Representation of People Act, 1951 - whether Assessee INC is a political party registered under the RP Act and satisfies the description of a 'political party' for the purpose of Section 13A of the Income Tax Act, 1961? - Held that:- ITAT was correct in law in holding that the audited accounts filed by the INC before the CIT (A) could not be accepted as evidence since they were not audited till the assessment was framed and, therefore, the INC was not entitled to exemption under Section 13A of the Act. ITAT was justified in denying exemption to the INC under Section 13A of the Act and refusing to condone the delay that had occurred in the audit of some of the state units by holding that the ITAT was right in its conclusion that the INC failed to fulfil the three conditions envisaged under clauses (a), (b) and (c) of Section 13A of the Act. - Decided against assessee
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2016 (3) TMI 878
Entitlement to exemption under Section 13A - Held that:- The finding of the ITAT that the Assessee satisfied the mandatory conditions for availing the exemption under Section 13A of the Act is nothing short of perverse as it is wholly contrary to and unsupported by the documents on record. A political party which seeks to avail of the exemption cannot be heard to say that it is not possible for it to maintain its accounts on a consolidated basis. As long as a political party continues to avail the exemption from payment of income tax, there can be no excuse for not maintaining its account whether it has one or more state units. Where in any particular FY, a political party is unable to maintain its accounts for any reason whatsoever, or satisfy the pre-conditions set out in the proviso to Section 13A of the Act, an exemption cannot be possibly be granted from payment of income tax for that FY. The Court finds that no valid reasons have been given by the ITAT for overturning the reasoned and detailed orders of the AO and CIT (A). In the circumstances, the question framed is answered in the affirmative by holding that the finding of the ITAT is perverse and contrary to evidence on record in so far as applicability of Section 13A of the Act is concerned, i.e., in favour of the Revenue and against the Assessee.
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2016 (3) TMI 877
Reopening of assessment - whether notice issued under Section 148 of the Act is perfectly correct and no notice will be issued under Section 143(2) of the Act for the return of income filed under Section 139 of the Act? - Held that:- No notice will be issued under Section 143(2) of the Act prior to the issuance of notice under Section 148 of the Act. Only after filing of return, pursuant to the notice issued under Section 148 of the Act dated 04.12.2015, the question of issuing notice under Section 143(2) of the Act will arise. When the petitioner has not submitted their return pursuant to the notice issued under Section 148 of the Act, question of issuing notice under Section 143(2) of the Act, would not arise.
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2016 (3) TMI 876
Short deduction of tax from the payment of commission paid by BSNL/MTNL to their public call office franchises - ITAT deleted the demand - Held that:- The issue involved in all these appeals is similar and the Punjab and Haryana High Court titled as The Commissioner of Income Tax (TDS), Chandigarh versus M/s Bharat Sanchar Nigam Limited [2013 (3) TMI 199 - PUNJAB & HARYANA HIGH COURT ] wherein held no substantial question of law arises for consideration, inter alia, for the reason that the Central Board of Direct Taxes vide circular dated 12.03.2008 has taken a stand that the demands are not to be enforced on BSNL and MTNL offices except in the cases where taxes have been deducted at source but not paid over to the revenue. The proviso is clarificatory in nature though it was inserted by the Finance Act, 2007 w.e.f. 01.06.2007. The nature of the amendment and the purpose which it seeks to achieve make it abundantly clear that it is a clarificatory amendment and would be applicable even in respect of assessment years prior to insertion of the said amendment. It is apt to record herein that the Apex Court in a latest judgment in the case titled as Neon Laboratories Limited versus Medical Technologies Limited and others, reported in (2016 (3) TMI 787 - SUPREME COURT) has directed that every High Court must give due deference to the law laid down by other High Courts - Decided in favor of assessee.
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2016 (3) TMI 875
Entitlement to claim carry forward loss - delay in filing the return - Held that:- Petitioner has satisfactorily explained the delay in filing the return on 16.10.2010 instead of 15.10.2010. Further, it is not the case of the respondents that the petitioner is not entitled to claim the carry forward loss under Section 139(3) of the Act. When the petitioner is entitled to claim the carry forward loss under Section 139(3) of the Income Tax Act, it cannot be stated that the delay in filing the return had occurred deliberately or on account of culpable negligence or on account of mala-fides. Further, the petitioner do not stand to benefit by resorting to delay as held by the High Court of Bombay. In fact, they runs a serious risk. Moreover, when the petitioner had satisfactorily explained the delay in filing the said return, the approach of the first respondent should be justice oriented so as to advance the cause of justice. In this case, when the petitioner as a litigant is entitled to claim carry forward loss, mere delay should not defeat the claim of the petitioner. The judgments relied on by the learned counsel for the petitioner squarely applies to the facts and circumstances of the present case. In these circumstances, it is of the view that the first respondent should have condoned the delay of one day in filing the return by the petitioner.
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2016 (3) TMI 874
Acquisition proceedings under Chapter XX-A of the Act of 1961 were initiated against the petitioner society in the year 1985. The petitioner society participated in the proceedings, raised the objections and a necessary order as per Section 269-F(6) of the Act of 1961 was passed on 16.10.2002. The petitioner never questioned validity of the provision in which proceedings were initiated and were to be dealt with. The petitioner, if had any genuine grievance with the provisions of Constitutional correctness of the provisions of Section 269-J(1) of the Act of 1961 - Held that:- Section 269-J(1) of the Act of 1961, then validity of the same should have been challenged immediately on initiation of the proceedings under Chapter XX-A of the Act of 1961. The petitioner never agitated this cause before any legal forum, though the order passed by the competent authority was also subject matter of an appeal before the Income Tax Appellate Tribunal and then before the High Court. A Special Leave Petition was also filed before the Apex Court, but while availing these remedies also the petitioner never agitated the cause which is subject matter of present writ petition. We are of considered opinion that after getting the entire issue threshed as per Chapter XX-A of the Act of 1961, it is not open for the petitioner now to challenge the validity of the provision concerned. In view of it, we are not inclined to examine merits of the issue agitated in this writ petition. The writ petition is dismissed accordingly.
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2016 (3) TMI 873
Addition u/s 14A - Held that:- AO without appreciating the various contentions raised by the assessee had mechanically applied the provisions of Rule 8D(2)(ii) of the IT Rules without recording his satisfaction in terms of Rule 8D(1) of IT Rules as to why the disallowance made voluntarily by the assessee u/s 14A of the Act is incorrect. It is not in dispute that the assessee had voluntarily disallowed a sum of ₹ 1,37,12,550/- u/s 14A of the Act towards 0.5% of average value of investments applying the third limb of Rule 8D(2) of the IT Rules. The language of Rule 8D(1) is very clear in this regard. Thus addition u/s 14A of the Act deleted by the Learned CITA does not require any interference - Decided in favour of assessee Entitelment for reduction being the lower of unabsorbed depreciation or business loss as per books of accounts from the computation of book profits u/s 115JB - Held that:- We are in agreement with the arguments of the Learned AR that the losses ( both cash loss and depreciation loss) would continue to remain in the books of accounts till it is wiped off by earning profits by the assessee company and accordingly the same would be available for reduction from book profits u/s 115JB of the Act. We hold that the least of the cash loss or depreciation loss once adjusted / reduced from book profits in earlier assessment years, do not vanish out of the books until it is wiped out by profits in subsequent years. Till such time, the losses would only continue to remain in the books. We hold that for the purpose of computation of book profits u/s 115JB of the Act, every year the situation of least of cash loss and depreciation loss needs to be worked out and reviewed and accordingly the understanding of the Learned AO that such loss once adjusted in earlier year is no longer available for set off is misconceived - Decided in favour of assessee Forfeiture of share warrants being a capital receipt - whether would be liable for taxation u/s 115JB just because it has been credited in the profit and loss account as an extraordinary item? - Held that:- The assessee has duly disclosed the fact of forfeiture of share warrants in its notes on accounts vide Note No. 6 to Schedule 11 of Financial Statements for the year ended 31.3.2009. Hence respectfully following the aforesaid decision of the Mumbai Tribunal, the profit and loss account prepared in accordance with Part II and III of Schedule VI of Companies Act 1956, includes notes on accounts thereon and accordingly in order to determine the real profit of the assessee as laid down by the Hon’ble Apex Court in the case of Indo Rama Synthetics (I) Ltd vs CIT reported in (2011 (1) TMI 1 - Supreme Court of India), adjustment need to be made to the disclosures made in the notes on accounts forming part of the profit and loss account of the assessee and the profits arrived after such adjustment , should be considered for the purpose of computation of book profits u/s 115JB of the Act and thereafter, the Learned AO has to make adjustments for additions / deletions contemplated in Explanation to section 115JB of the Act. - Decided in favour of assessee
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2016 (3) TMI 872
Disallowance of excess depreciation claimed on Iris Cameras - Held that:- The Iris recognition system, the software to be used for the purpose and the grabber card are supplied by the Government for the use of Iris recognition system to be used only for the purpose of issue of various types of ration cards. The assessee categorically stated that this camera cannot be used in normal course of business and it can be used only for the specified purpose of capturing Iris. The assessee taken this contract for the first time and after completion of the project he did not enter into any other contract of similar type. The cameras become obsolete once the work is over. We find force in the argument of the assessee for the reason that on perusal of details, we find that the assessee has used this cameras supplied by the principals for the specified purpose of execution of its work contract. As per the agreement, the software used for capturing Iris should be returned to the principals. Therefore, we are of the opinion that the Iris camera without the aid of software is obsolete and it cannot be used in the normal course of business. The assessee has rightly claimed 50% depreciation over a period of two years. Hence, we direct the A.O. to allow the depreciation as claimed by the assessee. - Decided in favour of assessee TDS u/s 194J - disallowance of franchisee fees u/s 40(a)(ia) on non TDS - A.O. was of the opinion that the payment of franchisee fees is in the nature of technical fees - CIT(A) held that the assessee was right in not deducting TDS as the payment was not made during the relevant financial year, however, held that the amount is not allowable u/s 37 of the Act, as the subject payment was not pertaining to the financial year under consideration - Held that:- The assessee filed a paper book containing the copy of agreement entered into with the Software echnology Group of India Limited, wherein find that the agreement was entered on 18.4.1999 and ended on 17.4.2005. As per clause 3.9 of the agreement, it was specifically mentioned that the date of termination of the agreement is 17.4.2005. We further noticed that the clause 7 of agreement provides for termination of agreement. As per clause 8 of the agreement, it was specifically mentioned that the date of termination of the agreement is as per clause 3.9 of the agreement i.e. on 17.4.2005. Therefore, we are of the opinion that the CIT(A) was recorded incorrect findings of the facts to state that the agreement was terminated on 17.4.2006 and hence the impugned amount was not eligible for deduction for the year under consideration. the fact clearly shows that the assessee debited the impugned amount during the previous year relevant to assessment year 2006-07. Though the subject payment was made in the financial year 1999-2000, the assessee charged the amount to the P&L account during the financial year 2006-07, since the agreement was terminated and business was closed during the financial year 2005-06 relevant to assessment year 2006-07. Though, the expenditure has been paid in earlier years and considered as prior period expenditure, still it can be claimed as expenditure deductible for the year under consideration as long as it was incurred for business purpose. When the prior period expenditure/liability claimed as business expenditure for the relevant assessment year, the point to be considered is whether the claim was ascertained and crystallized during the year under consideration or not. In the present case on hand, the assessee proved that the subject agreement was terminated during the financial year 2005-06 and he has not claimed the expenditure in earlier years. Therefore, we are of the opinion that the CIT(A) was not correct in disallowed the franchisee fees u/s 37 of the Act. - Decided in favour of assessee
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2016 (3) TMI 871
Deduction claimed on account of provision made in the books of account for bad and doubtful debts u/s 36 - Held that:- The assessee was engaged in the business of banking and in terms of section 36(1)(viia) of the Act, was entitled to claim the deduction in respect of provision made for bad and doubtful debts, on account of aggregate average advances made by the rural branches of the assessee bank. Section 36(1)(viia) of the Act provides that such deduction shall not exceed 7.5% of the total income i.e. income computed before making any deduction under this clause and Chapter VI-A of the Act and the assessee for the year under consideration claimed deduction of ₹ 1.95 crores under section 36(1)(viia) of the Act in its return of income on account of bad and doubtful debts relating to advances made by the rural branches. However, as against the said claim made in the return of income, the assessee had made provision for bad and doubtful debts of ₹ 56 lakhs. On account of this, the assessee’s claim was restricted to ₹ 56 lakhs and the balance was disallowed. The issue arising before us is identical to the issue before the Tribunal in assessment year 2009-10 and following the same parity of reasoning, we dismiss the ground of appeal No.1 raised by the assessee. Deduction claimed on account of amortization of premium in respect of HTM investments - Held that:- The assessee is entitled to the claim of deduction on account of amortization of premium paid on Government securities held in HTM category - Decided in favour of assessee. Treatment of interest income arising on Non-Performing Assets (NPAs) - Held that:- Interest accrued on NPAs is not taxable in the hands of assessee, in view of the guidelines issued by the RBI. Thus we hold that no addition is warranted on account of interest accrued on NPAs. See Vasantadada Nagari Sahakari Bank Ltd. case [2015 (1) TMI 1218 - BOMBAY HIGH COURT] - Decided in favour of assessee. Disallowance of loss on account of sale of Available for Sale (AFS) securities - Held that:- Loss arising on account of sale of AFS securities as per directions of the RBI is allowable in the hands of assessee.r. The perusal of assessment order reflects that while computing the assessed income in the hands of assessee, the Assessing Officer had disallowed the provision debited to Profit & Loss Account of ₹ 49,99,457/- which comprises of provision of ₹ 41,70,140/-. In view of our order, we direct the Assessing Officer to allow the claim of deduction on account of loss of ₹ 41,70,140/- arising on sale of AFS investments.- Decided in favour of assessee. Addition made on account of disallowance of contribution to Education Fund - Held that:- In view of the proposition laid down by the Hon’ble Bombay High Court in Krishna Sahakari Sakhar Karkhana Ltd. Vs. CIT (1997 (7) TMI 97 - BOMBAY High Court), wherein similar expenditure claimed by the assessee was held as allowable. Where the assessee is following the mercantile system of accounting, the expenditure relatable to the year under consideration though not paid is to be allowed in the hands of assessee. Further, the provisions of section 43B of the Act are not attracted in respect of such payments to the State authorities. Accordingly, we direct the Assessing Officer to allow the contribution - Decided in favour of assessee. Deduction under section 36(1)(viii) - Held that:- The assessee had failed to create a special reserve in its books of account out of eligible profits of the year and in view thereof, the assessee was not entitled to the claim of benefit of deduction under section 36(1)(viii) of the Act in view of the ratio laid down by the Pune Bench of Tribunal in Shree Sharada Sahakari Bank Ltd. Vs. ITO (2015 (6) TMI 34 - ITAT PUNE) - Decided against assessee
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2016 (3) TMI 870
Revision u/s 263 - disallowance of proportionate depreciation on Aircraft - Held that:- The order passed by the Learned AO in allowing the depreciation on aircrafts could not be treated as erroneous much less prejudicial to the interests of revenue. In this regard, we place reliance on the decision of the Hon’ble Apex Court in the case of CIT vs Max India Ltd reported in (2007 (11) TMI 12 - Supreme Court of India) wherein held the phrase ‘prejudicial to the interest of the Revenue’ in section 263 of the IT Act, 1961, has to be read and in conjunction with the expression ‘erroneous’ order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, when the AO adopts one or two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue , unless the view taken by the AO is unsustainable in law. - Decided in favour of assessee Disallowance of lease rentals on principal repayment of vehicle loan - Held that:- merely because the lease arrangement has been considered as finance lease for the purpose of AS 19 , that itself does not render the lessee (assessee herein) as the owner of asset for IT Act for claiming depreciation. We find that AS 19 provides for various situations in order to decide as to whether the lease can be considered as finance lease or operating lease for the limited purpose of such AS 19. We find that the assessee had duly complied with the Circulars laid down in this regard more so when the CBDT has itself clarified vide Circular No. 2/2001 dated 9.2.2001 that the AS 19 will have no implication on the allowance of depreciation on assets under the provisions of IT Act. It is well settled that the CBDT Circulars are binding on the revenue. As per this Circular No. 2/2001 dated 9.2.2001, in a lease transaction, the owner of the assets is entitled to depreciation. In the instant case, the lessor (Orix Auto) being the owner had the right to claim depreciation and the assessee has not claimed any depreciation as per the provisions of the IT Act and instead had claimed the entire lease rental as revenue expenditure.. Thus safely concluded that the order has been passed by the Learned AO by taking one of the possible views and hence the order cannot be termed as erroneous warranting initiation of revision proceedings u/s 263 of the Act. We also find that the issue is accepted by the revenue in assessee’s own case for the Asst Year 2011-12 pursuant to the directions of the Hon’ble DRP. In these circumstances, we hold that the order passed by the Learned AO cannot be considered as erroneous. Hence the grounds raised by the assessee on the issue of allowability of lease rentals are allowed.- Decided in favour of assessee
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2016 (3) TMI 869
Penalty u/s. 271(1)( c) - wrong claim of exemption towards long term capital gains on sale of shares of M/s. Vishal Retail Ltd - claim for exemption u/s. 10(38) - Held that:- We find that the assessee was under bonafide belief that on off market share transaction of trading in listed company share, no capital gains would arise. We hold that this bonafide belief cannot be doubted in the facts of the case. We also hold that the assessee had duly come forward to rectify the mistake in not mentioning the long term capital on sale of listed company’s shares on off market in his original return of income, and on noticing the same the assessee immediately filed revised computation of income during assessment proceedings and as entered in the order sheets by the ld.AO. Thus, the assessee offered the same voluntarily before detection by the department. We also find that the version of the ld.AO in his penalty order that assessee was confronted with the specific issue on taxability of long term capital gain on sale of shares of M/s. Vishal Retail Ltd is factually incorrect. The assessee had furnished the explanation to the assessee by filing a revised computation of income offering long term capital gains voluntarily. We also find that the assessee had also given explanation for not offering the same in the original return of income due to his bonafide belief. His bonafide explanation has not been found to be false by the ld. AO. From the above, it could be safely concluded that as per Explanation 1 to section 271 (1) ( c ) of the Act, no penalty could be imposed on the assessee in the facts of the case. - Decided in favour of assessee
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2016 (3) TMI 868
Depreciation on intangible assets - Held that:- The assessee has not purchased any good will but has purchased license, interest, privilege, franchise etc. from M/s. DKD which are undisputedly covered by section 32(1)(ii) and, therefore, the depreciation is allowable and the ld. CIT (A) has allowed the depreciation on these intangible assets, and we have no hesitation in confirming the order of ld. CIT (A) on this aspect. Accordingly we confirm the order of ld. CIT (A). - Decided in favour of assessee
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2016 (3) TMI 867
Denial of relief under Section 80IA(4) - AO denied exemption u/s 80IA(4)(iii) on the ground that the building-in-question had been constructed prior to 15-09-1999 and that Assessee had been already deriving rental income from it - Held that:- deduction can be allowed only if there is income from the head Business. Sub-Section (4) applies to any enterprise carrying on business of (i) developing or (ii) operating and maintaining (or) (iii) developing, operating and maintaining any infrastructure facility which fulfills the conditions laid down. Since Assessee has not challenged the head of income under which income was directed to be assessed, nature of income has been crystallized as ‘income from house property’. The provisions Section 80-IA does not apply to the income from house property. As Assessee has accepted the incomes as ‘income from house property’, question of allowing deduction u/s. 80-IA does not arise. In view of this, the above grounds raised have become academic. Moreover, AO did not make any enquiry into the present state of affairs of Assessee establishing a Cyber Centre as ‘Industrial Park’ and the extent of property leased and the nature of incomes earned which may effect in claim of deduction. In our view further enquiry may be required, if the claims are to be allowed. Since incomes are assessed under the head ‘income from house property, there is no need to set aside the orders of AO and CIT(A) on the issue of claim under Section 80IA and adjudicate the claim. - Decided in favour of assessee for statistical purposes.
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2016 (3) TMI 866
Penalty levied under section 271(1)(c) - disallowance of expenditure - Held that:- Other than particulars furnished by the assessee in the return of income, the Revenue does not have any other material to substantiate that the assessee has concealed the particulars. It is established law that not all additions would justify penalty as a matter of course. But addition is the basis for penalty. Mere admission does not justify penalty even in the light of the Explanation to section 271(1)(c) of the Act in view of the judgement in the case of CIT vs. Saran Khandsari Sugar Works (1999 (9) TMI 15 - ALLAHABAD High Court). In the instant case, the penalty order passed by the Assessingus we are of the opinion that levy of penalty is not warranted in the present case and accordingly, we delete the penalty levied by the Assessing Officer Officer is purely based on the assessment made under section 143(3) of the Act. Thus incurring expenditures during the course of business by the assessee was not rejected by the Assessing Officer, but the assessee could not file any valid evidence for claiming the expenditure before the Assessing Officer and therefore by disallowing 80% of the claim, the Assessing Officer has allowed 20% of expenditure attributable to earn the business income. Thus we are of the opinion that levy of penalty is not warranted in the present case and accordingly, we delete the penalty levied by the Assessing Officer - Decided in favour of assessee
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2016 (3) TMI 865
Profit on sale of shares - chargeable to tax under the head "capital gains" or "profits and gains from the business or profession" - Held that:- A perusal of the relevant balance-sheet of the assessee also shows that the investment in shares was made by the assessee out of her own funds and the only source of income of the assessee for the year under consideration was interest from small savings as well as loan given to one Company. There is nothing in the relevant financial statements filed by the assessee for the year under consideration to indicate that any expenditure necessary to carry on any business activity was incurred by the assessee. Having regard to all these facts of the case, I am of the view that the relevant shares were purchased by the assessee as investor and the profit arising from sale thereof was chargeable to tax in her hands as short-term capital gains and not business income. In that view of the matter, set aside the impugned order of the ld. CIT(Appeals) on this issue and direct the Assessing Officer to bring to tax the profit of the assessee from sale of shares in her hands as short term capital gain. - Decided in favour of assessee
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2016 (3) TMI 864
Disallowance u/s 14A - Held that:- The assessee has incurred interest expenditure for earning exempt income. As per the balance sheet placed on record, the assessee was holding shares as stock-in-trade as well as investments. While working out disallowance u/s.14A the AO had worked out disallowance under rule 8D taking into account entire shares held by assessee treating the same as investments. In the interest of justice, we restore this issue back to the file of AO for recomputing the disallowance to be made under Rule 8D by excluding the shares held as stock-in-trade while working out the average investment. Thus, no disallowance can be made in respect of funds involved in shares and securities held as stock-in-trade. We direct accordingly.
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2016 (3) TMI 863
Addition u/s 41(1) - amount payable by the assessee company to 5 creditors - Held that:- Hon’ble Supreme Court in the case of CIT Vs Sugauli Sugar Works (P) Ltd. (1999 (2) TMI 5 - SUPREME Court) held that mere unilateral entry made by the assessee in accounts, there is no cessation of liability. In the case on hand, the assessee has not even written back the creditors in its accounts. The Hon’ble Bombay High Court in the case of Indian Rayon & Industries (2010 (3) TMI 299 - BOMBAY HIGH COURT) held that there is no remission or cessation of liability within the meaning of Sec. 41(1) of the Act on unilateral entry of write back of the unclaimed credit balances by the assessee. In view of the above, we hold that the addition made by the AO u/s. 41(1) of the Act is to be deleted. - Decided in favour of assessee Addition towards decrease in stock - Held that:- The appellant has claimed reduction in stock on account of damage of stock in the heavy rains and selling of' goods on minimal prices. The fact of loss to appellant on account of heavy rains occurred in Mumbai, in July 2005, and consequently damage of appellant's stock was also subject matter of appeals of earlier years. In A.Y. 2006-07, the appellant's claim of gross loss of ₹ 8.25 crore was disallowed by the AO. In appeal order, the disallowance made by AO was deleted. The Sales Tax Authorities have also considered the effect of heavy rains of 2005, on appellant's business and loss to the appellant in their sales tax assessment order. It has been mentioned in such sales tax assessment order that the Insurance Company also rejected the appellant's claim and the dealer (appellant] closed down its business. In the facts and circumstances, the appellant's claim of selling the stock at throwaway price appears to be convincing. Moreover, the AO has not brought on record any evidence that the appellant sold the stock outside the books of accounts. In the facts and circumstances, there was no case for rejecting the appellant’s claim. The disallowance made by AO is therefore, deleted. - Decided in favour of assessee
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2016 (3) TMI 862
Penalty u/s. 271(1)(c) - outstanding excise duty - Excise Department has carried out an inspection on the premises of the assessee - Held that:- The stand of the assessee is that invoice value shown by it was of ₹ 9,33,500/-. This invoice value has been revised by the Excise Authorities to the figure of ₹ 15,69,724/-. It puts a tax liability of ₹ 1,03,832/-. Keeping in view the smallness of the amount involved the assessee did not litigate with the Excise Authorities. According to the assessee, it does not mean that he has accepted the calculation made by the Excise Authorities, even for the purpose of visiting the assessee with penalty. We have perused the assessment orders, i.e., dated 04.02.2007 as well as 29.12.2010 passed u/s 143(3) and 143(3) r.w.s. 263 of the Income-tax Act. We find that the Assessing Officer nowhere independently analyzed the material or the evidences collected by Excise Authorities. He simply proceeded against the assessee on the basis of information collected from Excise Authorities. The nature of that information has never been analyzed for the purpose of making addition to the income of the assessee. That type of evidence cannot be relied upon for the purpose of visiting the assessee with penalty. The degree of evidence ought to be of a little higher standard, because the penalty proceedings could expose the assessee with prosecution also. Merely the assessee did not dispute with Excise Authorities does not mean that, in case of penalty proceedings if it challenges the very basis of addition, it will be denuded from his rights to challenge the nature of evidence. In our opinion, the evidence relied upon by the Assessing Officer does not falsify the explanation of the assessee as discernable from the note no.2 of the Auditors’ Report prepared u/s 44AB of the Act. In view of the above discussion, we allow the appeal of the assessee and delete the penalty. - Decided in favour of assessee
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2016 (3) TMI 861
Stay petion - Delay in disposal of the appeal - Held that:- On due consideration of the facts and circumstances, we are of the view that the assessee was always willing and ready to get its appeal disposed off on an early date. The issues involved in the appeal are dependent and interlinked with A.Ys. 2006-07, 2007-08 & 2008-09. Hearings in those assessment years have already been completed. The order is awaited. Considering these facts, we allow the application of the assessee and stay the recovery of outstanding demand for a period of 180 days from today or till the disposal of the appeal, whichever event occurs first. The assessee shall not seek adjournment unless unavoidable circumstance warrants so. In the result, Stay Application filed by the assessee is allowed.
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2016 (3) TMI 860
Penalty proceedings u/s 271E - Company has directly repaid the loan taken from Director to Dakor Nagarik Sahakari Bank - violation of section 269T - Held that:- The assessee has demonstrated that under the compulsion the payment was directly credited in the bank account of the Director. Strictly it was not paid in cash. On due consideration of these facts in the light of case of Mahmood Associates (P) Ltd. vs. Joint Commissioner of Income-tax [2015 (4) TMI 1077 - ITAT KOLKATA] we are of the view that the assessee has demonstrated a reasonable cause for not visiting it with penalty. Therefore, we allow the appeal of the assessee and delete the penalty. - Decided in favour of assessee
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2016 (3) TMI 859
Additions made u/s. 206C(6)/206C(7) - non collection of TCS on sale of DOC (de-oiled cake), maize husk and cotton waste nspite of the fact that those items were scrap as defined u/s 206(c) - Held that:- To elaborate, perusal of manufacturing process of DOC amply testifies that the entire manufacturing process is designed to obtain two main products which are usable as such, namely, oil and DOC. This DOC which is high in protein content is used as a fertilizer or chicken feed or cattle feed. This DOC also is pass through various other manufacturing stages to suit the customers as is required by them. The enormous economical value of DOC is testified by the fact that more than 80% is generated and out of such generation, around 90% is exported to different countries. All the aforesaid facts indicate that DOC is a by-product and it certainly cannot be categorized as scrap and waste and it has its own market value. Generally, the scrap is either thrown out or sold at cheaper rate because it cannot be used as raw material for manufactured or different items. In the case of a by-product, it has its own market value and can be used as such. In view of above, we find that the CIT(A) was justified in holding that the Assessing Officer has erred in categorizing DOC as scrap within the meaning of Explanation to Section 206C. Regarding the raw cotton being treated as scrap we find raw cotton is only a part of raw material which is of lower quality (lower count cotton) from which the thin yarn cannot be manufactured such thick quality cotton was separated at the initial warehousing stage and sold off to other yarn manufacturers including that for export. So, the CIT(A) was justified in holding that such raw cotton does not arise from manufacturing or mechanical working as it is merely a segregation of raw material as was pointed out by the assessee. Therefore, these reasoned finding of the CIT(A) need no interference from our side, which is confirmed. Regarding Maize Husk (Fiber)percentages of husk as a by-product is close to 10% and it is mainly used in poultry farm, animal food and pharma industries. Since maize husk fiber is itself subjected to various manufacturing stages and as enormous economic value, it is one product manufactured and cannot be considered as a waste or scrap within the manufacturing process. In view of the above, the CIT(A) was justified in holding that main husk is a by-product and the same cannot be considered as scrap and waste as provided in the Explanation to Section 206C of the Income-tax Act. TDS u/s 194C OR 194j - short deduction of tds - non deduction of tax at source on payment of port charges - TDS @ 10% OR 2% - Demand u/s 201/201(1A) for non-deduction of tax at source on the differential amount - Held that:- CIT(A) rightly found that C&F agents were nowhere remotely indicated in the explanation to section 194J of Income tax Act nor has been explained by the AO that how C&F was covered u/s. 194J of the Income-tax Act. Therefore, under the given facts and circumstances of the case, the CIT(A) was justified in holding that the action of Assessing Officer invoking provision u/s 194J in respect to port charges payment for all the assessment years as unsustainable in law. Therefore, the order of the CIT(A) in this regard does not require any interference from our side, which is confirmed.
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2016 (3) TMI 858
Addition U/s 40A(2)(b) - interest in excess of 3.25% more than the bank rate - expenses had increased substantially compared to preceding year - Held that:- The assessee had explained the reasons for increase in the expenses under all the heads and also produced the relevant bill vouchers at the time of assessment proceedings. The ld Assessing Officer had not found any non-genuine payment under these heads, no specific discrepancy has pointed out in the bills and vouchers maintained by the assessee. It is not necessary that increase in expenses automatically raised the sales/production. The assessee has explained the increase in the expenses on the basis of evidence, which has not been controverted by the ld DR. The assessee's manufacturing activities comes under the excise item and also had sales tax registration. The assessee's case is auditable in the income tax law and no qualifying remark had been made by the auditor on expenses claimed by it. The ld Assessing Officer has not brought out on record any material to substantiate his addition. - Decided in favour of assessee
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Customs
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2016 (3) TMI 844
Classification - Used damaged cut rails for melting (melting scrap) - Whether goods to be classified under CTH 72.04 denying benefit of exemption benefit under Notification No.12/2012 or under CTH 73.02 allowing benefit - Held that:- by relying on the earlier decision of this Tribunal in the appellant's own case on similar facts HINDUJA FOUNDRIES LTD. Versus COMMISSIONER OF CUS. (IMPORT), CHENNAI [2013 (9) TMI 422 - CESTAT CHENNAI], the goods are to be classified under CTH 73.02. - Decided in favour of appellant with consequential benefit
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2016 (3) TMI 843
Admissibility of refund claim - Special Addittional Duty (SAD) of Customs - Notification No. 102/2007-Cus. dated 14.09.2007 - Appellants made the payment of SAD which is in lieu of VAT after the sale of the imported goods in the domestic tariff area - Refund claim rejected on non-submission of original papers with the customs and could be a chances of misuse of those original papers - Held that:- in this special situation Customs must accept the documents produced as a compliance of the conditions mentioned in para 2(e) of Notification No. 102/2007-Cus. for sanctioning the refund of SAD to the appellant. The decision of CESTAT, Bangalore in the case of Kajaria Ceramics Ltd. Vs. CC, Cochin [2013 (11) TMI 1042 - CESTAT AHMEDABAD] and in the case of Mridul Timbers and others Vs. CC, Cochin [2015 (3) TMI 1074 - CESTAT BENGLALORE] support the stand of the appellant-importer. Also the refund claim has been filed within time which is supported by CESTAT, Delhi’ s decision in the case of CC, ICD, TKD, New Delhi Vs. Marvel Polymers Pvt. Ltd. [2014 (1) TMI 121 - CESTAT NEW DELHI]. Therefore, refund claim is admissible. - Decided in favour of appellant with some condition
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2016 (3) TMI 842
Exercise of Tribunal's power granted under provisions of Rule 4 and 41 of CESTAT (Procedure)Rules - Seeking provisional release of vessel - Extended on execution of bond and bank guarantee - Held that:- applicant has not made out any case for exercising our inherent power, as the option which was extended to him for payment of redemption fine in lieu of confiscation should have exercised by him when the order-in-original was passed. Also the law is very clear that the redemption fine has to be paid by the applicant in lieu of confiscation as the applicant is still using the vessel and in possession of the said vessel. Therefore, this is not a fit case for us to exercise the powers granted to us under the provisions of Rule 4 and 41 ibid. - Decided against the appellant
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2016 (3) TMI 841
Maintainability - CHALR license - Rejection of - Held that:- this issue has been decided by this bench in the case of Naresh Jaisingh and others as reported as [2016 (3) TMI 379 - CESTAT MUMBAI], and is not appealable before the Tribunal. - Dismissed
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2016 (3) TMI 840
Demand of Safeguard duty - In terms of notification no.71/2009-Cus dated 10,06.2009 - Whether thickness of Aluminium foils imported is 7 micron or above or not - Assessee asked department to conduct test 3 times as he is not satisfied - Held that:- the argument of the assessee is not fully convincing regarding variation in different reports and it is not so easy to correctly determine the exact thickness of Aluminium Foil. While the thickness in microns is to be ascertained by the accurate scientific methods, it is not contested that the competent labs including a private independent competent lab is not having facility or expertise to conduct such tests. None of the reports indicated any figures nearer to 6 Micron as declared by the assessee while importing the impugned goods. Also the assessee placed a reliance of 8% tolerance limit prescribed by the Bureau of Indian Standards of Aluminium Foil but the standards prescribed there are for the quality purpose and have no relevance to determine the correct thickness and thereupon tax liability based on such thickness. It is to be noted that the samples were re-tested twice with a request and concurrence of the assessee in approved laboratories. Therefore, the assessee is liable to pay safeguard duty. Imposition of penalty - Section 114A of the Customs Act, 1962 - Held that:- penalty against the managing director of the assessee is not reduced. But the penalty imposed on Authorised Signatory is not justifiable being a salaried employee of the assessee and has been discharging assigned duties as per the direction of the Managing Director, There has been no allegation of personal gain to him in this transaction. He acted as an employee of the assessee company and it is not established that he abetted any offence of the assessee. Therefore, the penalty imposed on him is not sustainable. - Decided against the assessee
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Corporate Laws
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2016 (3) TMI 835
Invalid CIS scheme - non seeking registration with SEBI - collection of subscription amount after the ex-parte interim order - refund to investors - Held that:- While upholding the decision of SEBI that the Appellants have floated and operated CIS without registering with SEBI and hence in violation of CIS Regulations, since the schemes are closed by the Appellants voluntarily and substantial amount is refunded to the investors, we grant extension of two years time from the date of this order to the Appellants to enable them to pay the balance amount refundable to the investors. Looking to the conduct of the Appellants before and after 31/3/2012 which is fair, we restrict the debarment imposed against the directors from the date of the impugned order i.e. from 21st August, 2015 till the date of present order.
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Service Tax
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2016 (3) TMI 857
Recovery of dues - attachment of bank accounts - recovery from third parties - Seeking withdrawal of notices dated 27th March, 2015 as well as dated 5th October, 2015 for freezing the bank accounts and all their facilities and direction to other clients of the petitioner not to pay any amount due to the petitioner but to directly pay the same to the Department on behalf of the petitioner in view of the dues - Petitioner deposited 50% of the amount directed by the Tribunal and 50% not deposited because of financial crisis - Held that:- Subject to M/s. Bridge & Roof Co. (India) Ltd. agreeing that an amount of ₹ 52 lakhs is outstanding and payable to the petitioner and being willing to pay such amount, the respondents shall directly recover such amount from M/s. Bridge & Roof Co. (India) Ltd. towards the dues of the petitioner. Upon such amount being recovered, the impugned notice dated 27th March, 2015 as well as the notice dated 5th October, 2015 shall forthwith be withdrawn and the respondent No.4 – Bank shall forthwith release the attachment on the bank accounts of the petitioner qua the service tax dues. The petitioner shall deposit the balance amount, as may be agreed between the parties upon verification of the amount of interest, with the respondents within a period of two months from today. - Petition disposed of
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2016 (3) TMI 856
Liability of Service tax - Rendering of Business auxiliary service - Amounts received as 'commission agent' subject to a minimum of ₹ 1,10,000/- per month falls within the definition of 'business auxiliary service' in section 65 (19) of Finance Act, 1994 - Held that:- the claim of the appellant for immunity from taxability under section 65(105) (zzb) is not tenable. Therefore, the impugned order is modified by recomputing the tax liability along with appropriate interest. Seeking setting aside of penalty imposed under Section 78 - Invokation of Section 80 - Whether the appellant is a 'commercial concern' - Appellant contended that notwithstanding the title of the agreement, it had merely rented out space to M/s Style Spa and that the building space was owned by the kartha and co-parceners of the Hindu Undivided Family (HUF) as an asset which could not be considered as a commercial activity - Held that:- HUFs can also be commercial concerns is no longer res integra as decided by Tribunal in the case of re Infinity Credit. Therefore, for reasonableness of doubt that individuals may not be 'commercial concerns', section 80 of Finance Act, 1994 be invoked and penalty imposed under Section 78 is set aside. Cum-tax computation - Rental of immovable property - Appellant is the custodian of the goods intended for sale - Held that:- the remuneration that was to be made over to the appellant is based on quantum of sale. Guarantee of minimum payment of ₹ 1,10,000/- per mensem does not detract from the connection with sale. This is squarely within the ambit of 'commission agency' which became taxable for non-agricultural produce in the hands of provider of 'business auxiliary service' vide notification of 9 th July 2004. Appellant is eligible for exemption from February to July 2004. It is observed that, during the period of dispute, appellant was in receipt of only the minimum guaranteed amount of ₹ 1,10,000/-. The agreement also makes it clear that M/s Style Spa is responsible for discharge of tax liability. In view of these facts, the plea of the appellant for 'cum-tax' computation is justified. - Appeal disposed of
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2016 (3) TMI 855
Demand of Service tax at the rate of 6%/8% of the value of exempted goods - Rule 6(3)(i) of Cenvat Credit Rules, 2004 - Held that:- the appellant reversed the entire credit on the common input service along with interest following the option available under Rule 6(3)(ii) of the Cenvat Credit Rules. As per Sub-Rule (3A) of Rule 6(3), the Cenvat Credit required to be reversed is as per the formula prescribed. Here, as the appellant have reversed the entire credit availed on common input service, the demand of 6%/8% of the value of exempted goods is not sustainable. Also, on reversal of Cenvat Credit attributed to the exempted services along with interest, the demand is not sustainable. - Decided in favour of appellant with consequential relief
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2016 (3) TMI 854
Availment of Cenvat credit - Whether the appellant had availed the Cenvat Credit of input service of construction services and other services is correct or otherwise - Appellant constructed various malls and rented the same to various parties and discharge of service tax on rent received. Also availed the Cenvat Credit of input services which are used for construction and maintenance of the various malls - by taking the view of decision taken by Tribunal in the case of Navaratna S.G. Highway Properties (P) Ltd. [2012 (7) TMI 316 - CESTAT, AHMEDABAD] and various other judgments, the appellant can avail the Cenvat Credit of input service of construction services and other services. - Decided in favour of appellant with consequential relief
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2016 (3) TMI 853
Waiver of penalty imposed under Section 76 of the Finance Act, 1994 - Show cause notice was served under Section 73(1) before the enactment of Finance Bill 2015 but no order has been passed before the date of enactment - Appellant discharged the entire service tax along with interest prior to issuance of show cause notice - Held that:- the provision of amended Section 76 shall be applicable. As per amended Section 76 w.e.f. 14.5.2015, if the Service Tax and interest is paid within 30 days from the date of service of notice under Sub-section (1) of Section 73 of the Act, no penalty shall be payable and proceedings in respect of such service tax and interest shall be deemed to have been concluded. Here, the show cause notice was issued on 16.10.2014 and the adjudication order was passed on 18.8.2015 and the appellant have discharged the entire service tax along with interest prior to issuance of show cause notice as clearly appearing in the show cause notice itself. Therefore, in view of the aforesaid amended provision in terms of Section 78B(1) (b) read with Section 76 (1) proviso clause (i), the appellant is not liable to penalty under Section 76 of the Act. Therefore, the penalty imposed under Section 76 is waived. - Decided in favour of appellant
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2016 (3) TMI 852
Imposition of penalties under Section 78 & 77(1a) and 77(2) of the Finance Act, 1994 - Taxable services of 'Erection, Commissioning or Installation' service received from outside India - No intention of assessee for non-payment of service tax as when pointed out that there was liability on them to pay service tax for the above services, they immediately made the payment along with interest - Held that :- the provisions of Section 73(3) of the Finance Act, 1994 say that when the liability of tax has been paid by an assessee before service of notice on him under Section 73(1) and when the said assessee has informed the department of such payment in writing, the Department was not to serve any notice under Section 73(1). However it is right that Section 73(4) also makes it clear that wherever there has been such non-payment by reason of fraud, or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, an assessee cannot take the benefit of provisions of Section 73(3) of Finance Act 1994. But the Department has completely failed to prove the same. Also it was entitled to take CENVAT credit for payment of service tax, therefore, the intention to evade payment of service tax do not arise and the penalties imposed are set aside. - Decided in favour of assessee
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Central Excise
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2016 (3) TMI 851
Supplies of excisable goods to SEZ developer - whether attracts the provision of Rule 6(3)(b) of Cenvat Credit Rules 2004 and whether the respondent is liable to pay 10% of the value of the goods so supplied? - Held that:- The issue whether Rule 6(3) (b) of Cenvat Credit Rules 2004 is applicable from the supplies made to SEZ developers, has been settled. Even prior to the amendment the supplies made to SEZ is considered as export only and therefore the assessee is not required to pay an amount of equal to 10% value of the goods supplied to SEZ developers. See Commr. of C.Ex. & S.T. Bangalore Vs. Fosroc Chemicals (India) Pvt. Ltd. (2014 (9) TMI 633 - KARNATAKA HIGH COURT)
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2016 (3) TMI 850
Validity of order against the dead person - Held that:- We find that the learned Commissioner was aware of the fact while passing the impugned order that the proprietor of M/s. Canan Domestic Appliances had already expired on 12.11.2003 whereas the impugned order was passed on 29.9.2006. In fact this case was remanded by the Tribunal vide its order dated 15.2.2005 setting aside the order of the Commissioner of Central Excise and remanding the matter for de novo adjudication. Even at that time the proprietor was no more, but in spite of this, the learned Commissioner passed the impugned order against the dead person who was the sole proprietor of M/s. Canan Domestic appliances, which is against the settled position of law as held by various decisions of the Tribunal We are of the considered opinion that once the factum of death of the sole proprietor has come to the knowledge of the learned Commissioner, the learned Commissioner should have dropped the proceedings rather than passing the impugned order, but he chose to pass the impugned order against the dead person, which is not sustainable in law.
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2016 (3) TMI 849
Valuation adopted by the assessee in respect of the exempted pipes cleared - the total value realized by the assessee should be considered for quantification of 8% and since this amount of 8% reversed in terms of Rule 6 (3) (b) is not a tax, no deduction is available while arriving at the value for the same - Held that:- The Original Authority found that the Cenvat Credit Rules talks about total price, the amount of 8% which is not an excise duty cannot be deducted from the total price consideration. We notice that the appellants were bound by provisions of Rule 6 (3) (b) to reverse an amount of 8%/10%, when they clear exempted products. This is a statutory obligation. It is an admitted fact that this is not an excise duty. However, this statutory payment is recovered by the appellant from the buyers. In this connection, we find that the Honble Supreme Court in the case of CCE, Meerut vs. Kisan Sahkari Chinni Mills (2001 (8) TMI 119 - SUPREME COURT OF INDIA.) examined the scope of the terms “other taxes” mentioned in Section 4 (4) (d) (ii) of Central Excise Act for exclusion from assessable value. The Hon’ble Supreme Court held that taxes as such are not defined in the Central Excise Act. If the expression “tax” is to be understood in the absence of any definition, it would certainly cover any levy. It was held that any compulsory exaction made under an enactment is a duty or impost and such impost must be held to be in the nature of tax covered by the aforesaid provisions. In the present situation also we find that the reversal of 8% or 10% amount on the value of exempted goods is a statutory requirement and when the assessee collected the same from the buyer, the same cannot be included while arriving at the value for calculating that 8/10%. Whether or not the assessee is correct in paying 8/10% of value of captively consumed HDPE pipes - Held that:- As we find that in the assessees own case the matter was decided in their favour earlier vide Final Order No.52258/2015 dated 10.07.2015. The Tribunal held that when the appellant assessee is paying 10% of the value of HDPE pipes used for manufacturing sprinkler system they are not required to pay 10% of value of the sprinkler system, relying on the earlier decision in the appellant/ assessees own case. Thus we find that the demand for an amount of 8% or 10% on the sprinkler system is not justified.
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2016 (3) TMI 848
Export price of yarn to Norway and Dubai to arrive at the assessable value rejected - Held that:- The value of sale of yarn to independent buyers for export has been rejected solely on the ground that the said sales to unrelated buyers to DTA for subsequent period covered by the show-cause notice. For the purpose of rejecting the export price of yarn to Norway and Dubai, it has been said that the export price are for Dubai and Norway, which is not relevant to goods imported to India. These observations run contrary to the circular of the CBE&C. The circular specifically mentions that the export price of the similar/identical commodity would be a relevant factor in determining the clearance to DTA. It is seen that the Commissioner (Appeals) order runs contrary to the Circular of CBE&C. The order of Commissioner (Appeals) is set aside and the matter is remanded to the Commissioner (Appeals) to re-adjudicate the matter in light of Circular of CBE&C without ignoring the export price of yarn.
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2016 (3) TMI 847
Maintainability of appeal - Loss of goods cleared for export laying at Central Warehousing Corporation (CWC), as per Section 35B first proviso to clause (a) of the Act - Held that:- This Tribunal has no jurisdiction to hear these appeals, as has been decided by Larger Bench of this Tribunal in the case of Supercoats Industries vs. Commissioner of Central Excise, Thane-II (2004 (9) TMI 137 - CESTAT, MUMBAI). Therefore the appeals are dismissed as non-maintainable. The appellants have liberty to file revision application before the Joint Secretary (RA) to the Government of India.
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2016 (3) TMI 846
100% EOU - Liability in terms of condition no.7 of notification no.53/97-Cus dated 3.6.1997 - Held that:- Hon’ble Supreme Court in Indian Aluminium Co. Ltd. (2006 (9) TMI 6 - SUPREME COURT OF INDIA) held that though dross and skimming do arise during the process of manufacture but these are not manufactured products. An article is not exigible to tax only because it may have some saleable value. The Supreme Court concluded that dross is not a manufactured product. Also zinc skimming and dross arising as by-products during galvanization are not manufactured excisable products. See SHRI RAM AGRO CHEMICALS (P) LTD. Versus UNION OF INDIA [2008 (10) TMI 95 - PUNJAB & HARYANA HIGH COURT] A perusal of condition no.7 of the said notification will show that customs duty is payable only when imported goods are used for the purpose of manufacture of such articles (here zinc, dross, etc.). The settled legal position is that these are not manufactured items. Hence, on this ground alone, the present impugned order confirming the duty demand will not survive. We noticed further that the various demands issued to the appellants did not specify the legal basis or reason for such demand of customs duties. They indicated that in the event of the impugned goods were found to be non-excisable, then customs duty is payable. Apparently, such conditional and provisional demands are not legally sustainable. - Decided in favour of assessee
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2016 (3) TMI 845
Extension of stay - stay seeked on the ground that their appeals have not come up for disposal for no fault of theirs - Held that:- As the stay in the present case was in force beyond 07.08.2014, the same would continue till the disposal of the appeal.
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CST, VAT & Sales Tax
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2016 (3) TMI 839
Constitutionality of vires of Section 22(12)(db) of the West Bengal Value Added Tax Act, 2003 on the ground it obliges a dealer or an exporter to do something which may be beyond the capabilities of such dealer or exporter - Denial of refund of input tax credit on account of an export - Export of finished leather products - Held that:- the Special Commissioner rejected the claim of refund on the ground that the persons from whom Eco Tanners claimed to have purchased the goods may not have existed. However, the relevant provision under Section 22 (12)(db) does not oblige a dealer or an exporter seeking input tax credit thereunder to take any responsibility for his seller’s sellers. As far as the perceived fictitious addresses of Leather Enterprise and Eco Tanners are concerned and they are alleged to be non-existent, the Special Commissioner cannot be heard to refer to such matters when the official website of the department indicates even this moment that such registered dealers enjoy valid registration and continue to function. Therefore, the Special Commissioner order is set aside as it took irrelevant considerations in to account in passing the order - Matter remanded back
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2016 (3) TMI 838
Determination of classification and rate of tax - Sodium Silicate declared not as a specified item under any of the entries of Part-'C' of IInd Schedule by Commissioner - Taxed as a residuary item @12.5% under Vth schedule of the VAT Act - Reasonable opportunity of hearing not provided to existing manufacturers - Held that:- the items that are listed as industrial inputs in Part-‘C’ of IInd Schedule of the VAT Act do not stand independently but refers to the corresponding entries in the C.E. Tariff Act. Therefore the determination of any question under Section 105(2) of the VAT Act, can’t be made, without due application of mind, to the implication of the entries of the C.E. Tariff Act. The item Sodium Silicate as is understood in common parlance (glass frit or compounds of rare earth metals) is also required to be considered in determination on the taxability of the product, as was represented by the manufacturer Association. Deciding the higher rate of tax at the instance of a new manufacturer, who is exempted from tax to make the Ruling applicable to those who are not exempted from tax was not a correct approach. Therefore as the Commissioner gave the ruling at the instance of an exempted party without affording any hearing to the existing manufacturers who are impacted by the said decision, the Commissioner is directed to re-determine the classification and the rate of tax for Sodium Silicate, by providing a reasonable opportunity of hearing to the Association. - Decidde in favour of appellant
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2016 (3) TMI 837
Demand of VAT and imposition of penalty - Non-payment of VAT by sellers - Held that:- the issue is covered by the judgment in the case of Sri Vinayaga Agencies v. The Assistant Commissioner (CT), Chennai and another [2013 (4) TMI 215 - MADRAS HIGH COURT], therefore, the payment of VAT by sellers is allowed. - Decided partly in favour of petitioner
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2016 (3) TMI 836
Validity of assessment order - Violation of principles of natural justice - 15 days time granted to the petitioner to file their objection but order passed on the 15th day itself without waiting for the expiry of the 15 days time - Held that:- since the 1st respondent had passed the impugned orders even before the expiry of the 15 days time granted in the notice, it clearly establishes that the same is in violation of principles of natural justice. Therefore, the orders passed by the 1st respondent dated 22.06.2011 and 30.06.2011 and the order dated 06.07.2015 passed by the 2nd respondent are liable to be set aside. - Matter remanded back
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Indian Laws
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2016 (3) TMI 834
Infringement of Trademark - injunction application - prayer made to restrain Hamdard from selling the herbal sweeten syrup, using the trademark 'HAMDARD JAM-E-SHIRIN' - Held that:- We have noted the rival arguments, but would not be dealing with the same, for the reason suffice it to capture the rival arguments and bring home the point that the arena of debate is rich with arguments on either side and therefore without pleadings by Hamdard it is not a case where Qarshi has such a strong prima facie case that injunction must ensue as a sequitur thereto. We do not comment upon whether Qarshi is guilty of suppressing relevant facts which a party claiming injunction must disclose i.e. disclaimers made by it in Pakistan for the reason this issue itself needs a full debate after pleadings are completed. We do not comment upon whether the documents filed by Qarshi would entitle it to an injunction against Hamdard in an action for passing off taking into account that Hamdard is a registered proprietor of the trademark which is under challenge for the reason the law is that in an action for passing off, where the defendant is the registered proprietor of a trademark, the slope to be climbed by the plaintiff has a high degree of incline, and for which documents have to be scrutinized and prima-facie opinion formed. It is not a case where an ad-interim injunction must ensue forthwith. The full debate needs to be postponed till Hamdard files the written statement and reply to the injunction application along with documents Hamdard relies upon. Noting that summons in the suit have yet to be served upon Hamdard, but because of notice served in the appeal, Hamdard is aware of the suit and the date of its listing i.e. May 17, 2016 (wrongly typed as May 17, 2015 in the impugned order), we direct that Hamdard shall file a written statement as also a reply to the injunction application within 30 days from today and for which we take on record that the appellant has supplied to learned counsel for Hamdard the suit plaint, application for interim injunction and all documents relied upon and as filed along with the plaint.
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2016 (3) TMI 833
Grant of a higher grade scale to the eligible employees - Held that:- From perusal of the Government Resolution dated 16th August, 1994, it is manifest that the grant of a higher grade scale to the eligible employees who have completed nine years of service is permissible, provided that the employee is eligible to get the promotion on the basis of his overall performance, qualifications and passing the examination if prescribed. It is also material that if the employee gets higher grade scale without passing any competitive examination, he will have to clear the departmental examination otherwise the grant of higher grade scale is to be withdrawn. However, by circular dated 24.11.2004, the Government of Gujarat modified the earlier Resolution taking note of the High Court's order and directed that in cases where for getting higher pay scales a departmental examination is necessary then in such cases it is equally necessary that the departmental examination should be organised in time. Further by Government Order dated 22.06.2006, it was specifically brought to the notice of the Department that if the higher departmental examination is not organised during the eligibility period for getting the higher pay scales then in such case the higher pay scale benefit cannot be stalled on such ground. In the instant case, admittedly, the higher pay scale was ordered to be granted to the appellant after completion of nine years but the same was withdrawn on the basis of earlier circular of 1994. The High Court has not considered the subsequent circular of 2004 and based on the circular of 1994, the order withdrawing the benefit was upheld. The impugned order passed by the High Court on this account cannot be sustained in law. Considering the entire facts of the case, vis-a-vis the Government Resolution time to time issued relating to the condition for giving benefit of promotion, we are of the view that the reasons assigned by the learned Single Judge and the Division
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