TMI Tax Updates - e-Newsletter
March 5, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Distribution expenses disallowed - assessee is distributor of a mobile service provider - once the AO himself has failed to verify the entries, there is no reason to disallow the distribution expenses. - HC
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Income Tax:
Land acquisition - Agriculture land or not - HUDA is a local authority in terms of Section 3 of the Haryana Urban Development Authority Act, 1977. - the expression ‘Municipality’ in Section 2 (14) of the Act would include a local authority - HC
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Income Tax:
Rejection of Books of Accounts - mere disclosure of a low net profit would not enable the AO to invoke the provisions of section 145(1) - HC
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Income Tax:
Accounting - Even if mere dispatches to the stockists did not amount to sales, the unsold amount not treated as part of the stock - it distort the picture for the purpose of ascertaining the taxable income - HC
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Income Tax:
Valuation of closing stock - inclusion of excise duty element - AO adopted the gross method at the time of purchase, and the net method of valuation at the time of valuation of the stock on hand which is an erroneous approach - HC
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Customs:
DEPB Credit - arbitrary conditions - Permission for export - it would be unreasonable and unfair for the respondents, to continue to insist that the Bank guarantee for the amount of Rs. 2 crores - HC
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Customs:
Conversion of shipping bill - Advance Licence Scheme to duty drawback scheme - Board has iclarified the legal position that such a conversion is permissible - assessee is entitled to duty drawback - AT
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Indian Laws:
Service Tax on Renting of Immovable Property - Demand for the period prior to Retrospective Amendment made by Finance Act, 2010 - Extended period of limitation be not be invoked.
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Service Tax:
ST on renting of immovable property with retrospective amendment - Parliament’s right to legislate and create liabilities or rights with retrospective effect can be curtailed only by a restriction placed upon the legislative power, of Parliament by one or the other provision of the Constitution of India - HC
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Service Tax:
Since there was confusion prevalent in interpretation of law during material period and owing to fact that assessee had discharged service tax liability for period from 18-4-2006, extended period of limitation cannot be invoked - AT
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Central Excise:
Inadmissible Cenvat Credit and Education Cess - it cannot be concluded that the credit had been taken knowing very well that the same was not admissible, unless there is some evidence in this regard - AT
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VAT:
Reassessment orders - the failure to deduct tax by the petitioner in accordance with Section 7(3) of the WC Act cannot amount to “turnover of sale” escaping assessment as TDS is only a mode of collecting the tax payable by the recipient of the money, the deductor of the tax acts as the agent of the Revenue. - HC
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VAT:
Imported goods - No local sale - No requirement for detention of goods at check post for non declaration of value on the basis floor rate fixed by the Commissioner of Commercial Taxes - HC
Articles
Notifications
FEMA-
256/2013-RB - dated
6-2-2013
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FEMA
Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2013
Income Tax-
17/2013 - dated
26-2-2013
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IT
Section 120(1) and (2) of the Income-tax Act, 1961 - Jurisdiction of income-tax authorities
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16/2013 - dated
26-2-2013
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IT
Section 120(1) and (2) of the Income-tax Act, 1961 - Jurisdiction of income-tax authorities
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15/2013 - dated
26-2-2013
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IT
Section 118 of Income-tax Act, 1961 - Control of income-tax authorities - Notified subordinate Officers
SEZ-
S.O.490(E) - dated
26-2-2013
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SEZ
Amendment in S.O. 302(E), dated the 29th January 2013 - for multi product Special Economic Zone at Villages Regadichelika, Racharlapadu, Chowduputtedu, Uchaguntapalem, North Ammuluru, Bodduvaripalem, Mandals Kodavaluru, Dagadharthi, Allur, District Nellore in the State of Andhra Pradesh by M/s. IFFCO Kisan SEZ Limited
VAT - Delhi-
F.7 (433)/Policy-II/VAT/2012/1297-1307 - dated
28-2-2013
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DVAT
Notification regarding regarding submission of information in Form T-2
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2013 (3) TMI 54
Distribution expenses disallowed - assessee is distributor of a mobile service provider - ITAT allowed the claim to the extent of 60% as agianst 40% allowed by CIT(A) - Held that:- CIT(A) recorded a finding that the AO has reported that the voluminous nature of entries cannot be verified. Thus once the AO himself has failed to verify the entries, there is no reason to disallow the distribution expenses. The Tribunal has allowed the expenses to the extent of 60%. As AO himself has not verified the entries though, it recorded finding that the distribution expenses to the extent of Rs.75,43,120/- as genuine. There was no reason, without verification of the record to decline the remaining amount as well. Therefore, the distribution expenses have rightly been allowed by the Tribunal. Such finding does not give rise to any question of law as it is finding of fact as to whether the assessee is entitled to the entire claimed amount as distribution expenses or not.
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2013 (3) TMI 53
Land acquisition - Whether land acquired is agricultural land or a capital asset within the meaning of Section 2(14) - land of the assessee the subject matter of present assessment, was intended to be acquired by way of a notification dated 04.05.1995 issued under Section 4 of the Land Acquisition Act, 1894 - whether the compensation shall be assessed in the year of receipt or as and when the matter is finally resolved ? - Held that:- From the perusal of the affidavits filed by the assessee the part of the land owned by the assessee was acquired in the year 1989 i.e. for development of Sectors 24 to 28, Panchkula. Sector 28 is at a distance of seven and half kilometers from the District Headquarter i.e. Majri Chowk, which has been treated as a zero point by the assessee themselves in the matter pertaining to determination of compensation. The land acquired, the present subject matter, is at a distance of 1 Km from such zero point. In land acquisition cases, the assessee have projected that the land has a potential for being developed as a residential and commercial area located in close proximity of developed Panchkula city. Haryana Urban Development Authority is a local authority in terms of Section 3 of the Haryana Urban Development Authority Act, 1977. It is a corporate body, authorized to develop property, make plots, allot plots, carve out zones in planning, construct plots and delegate its authority of construction to other agencies. As decided in Union of India & others Vs. R.C.Jain & others [1981 (2) TMI 200 - SUPREME COURT OF INDIA] the local authority in terms of Section 3 (31) of the General Clauses Act means a Municipality. Therefore, conversely, the expression ‘Municipality’ in Section 2 (14) of the Act would include a local authority. Sub-clause (a) of clause (iii) of Section 2 (14) deals with an area which falls within the jurisdiction of a Municipality, whereas clause (b) enable the Central Government to declare an area situated within 8 kms from the local limits of any Municipality referred to in clause (a) to notify having regard to extent and scope for urbanization of that area. The notification dated 06.01.1994 takes into its ambit an area within 5 kms of the Municipality in the expression ‘capital asset’. Therefore, the urban area developed by the Authority forms part of a Municipality. Considering the expression ‘Municipality’ as defined in Black’s Law Dictionary, the Court observed that the tests were, the administration of the provisions the Kerala Municipalities Act, 1960 was vested with the standing committee consisting of chairman and commissioner etc. Such members are elected by the residents of the area. The Chairman and vice-chairman of the municipality are elected by the members of the council. The Commissioner is appointed by the Government in consultation with the council. The expression ‘by any other name’ appearing in Item (a) of clause (iii) of Section 2 (14) has to be read ejusdem generis with the earlier expressions i.e. municipal corporation, notified area committee, town area committee, town committee. The Court has also not considered the scope and ambit of Section 3 (31) of the General Clauses Act defining local authority. Thus in view of the above discussion it is held that the land, subject matter of acquisition, is a capital asset falling within the scope of clause (iii) of Section 2 (14) of the Act - the question of law is answered in favour of the Revenue and against the assessee.
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2013 (3) TMI 52
Rejection of Books of Accounts & invoking the provisions of section 145(1) - AO applied a net profit of 6% which was disclosed by the other assessees in the same business as the net profit disclosed by the assessee was too low - Held that:- The provisions of section 145(1) could be invoked only when any defect is pointed out in the maintenance of books of account and other documents. Thus mere disclosure of a low net profit would not enable the AO to invoke the provisions of section 145(1) in all cases unless and until any defect has been pointed out in the maintenance of books of account otherwise, in the cases where the business has been running in loss, in all such cases, the AO would be entitled to invoke the provisions of section 145(1) and hold that the business is always running on profit which is not the scheme of the Act - in favour of assessee.
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2013 (3) TMI 51
Entitlement to depreciation - ITAT entitled the assessee with the depreciation claim only in respect of commercial vehicles acquired and leased out by it in the last week of the accounting period - Held that:- It is not the respondent-assessee who is plying those vehicles. The respondent- assessee's business is only to lease out those vehicles, which it did. Therefore, the moment the respondent-assessee entered into the agreement with the lessees for leasing the vehicles to them and transferred possession for that purpose to the lessees, the respondent/assessee would be deemed to have utilized those vehicles for the purposes of its business, which was leasing of vehicles. If any authority for this proposition were needed, the same would be supplied by the decision of this Court in CIT Vs. Bansal Credits Ltd(2002 (11) TMI 76 - DELHI HIGH COURT) - this question is answered in favour of the assessee and against the revenue. Point of sale of the lottery tickets - Tickets sent to the stockist - whether becomes a sale on their despatch or on the happening of various events including the draw taking place? - Held that:- After going through the agreement the arrangement by which the assessee sent tickets to the stockists who in turn sold the same to their agents did not indicate that the sale took place at the point of dispatch of tickets to the stockists. Also the unsold tickets are to be returned to the organizing agent of the assessee at least one day before the actual date of the draw and any tickets received thereafter would not be accepted and treated as sold by the stockists. This makes it clear that those tickets which are returned by the stockists cannot be treated as having been sold. The corollary to this is that mere dispatch of tickets to the stockists would not entail a sale. Thus, till the date of the draw or just prior to the date of the draw it cannot be ascertained as to whether the dispatched tickets were actually sold or not -in favour of the assessee. Changed method of accounting adopted by the assessee - whether give a distorted picture of the business for the purpose of computing the taxable income or was acceptable even though the opening stock and closing stock were valued by different methods - Held that:- Even if mere dispatches to the stockists did not amount to sales, the unsold amount should have been treated as part of the stock of the respondent-assessee which has not been done by the respondent-assessee in the accounting method adopted by it. It cannot maintain the position that it has not sold the tickets and that those tickets are also not part of its stock. Therefore, to that extent, the accounting method adopted by the respondent-assessee does, in fact, distort the picture for the purpose of ascertaining the taxable income - in favour of the revenue. Interest income received from the Bank on Short Term Fixed Deposit shown as other income - whether eligible for deduction u/s 32 AB - Held that:- As decided in CIT Vs. Bokaro Steel Ltd [1998 (12) TMI 4 - SUPREME COURT] CIT Versus Koshika Telecom Limited[2006 (2) TMI 140 - DELHI HIGH COURT] where income is received from deposits made by the assessee are deposits which are inextricably linked to the business of the assessee, such income cannot be treated as income received from other sources. As in the present case, the Tribunal has held that the interest received by the assessee was inextricably linked to the business of the assessee this is so because the margin money requirement was an essential element for obtaining the bank guarantee which was necessary for the contract between the State Government of Sikkim and the assessee. If the respondent-assessee had not furnished the bank guarantee it would not have got the contract for running the said lottery - in favour of the assessee.
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2013 (3) TMI 50
Whether Tribunal is right in holding that the Trust is a charitable whereas the matter on this point in earlier years is still subjudice before the Supreme Court? - Held that:- Respectfully following the decision inter-se party CIT Vs. Shervani Sugar Sindicate Ltd. [1992 (3) TMI 34 - ALLAHABAD HIGH COURT], the present reference on the same terms and conditions answered i.e. in favour of the Revenue, and the matter is sent back to the Assessing Officer to make fresh assessment in accordance with law after ignoring rectification made in the trust deed.
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2013 (3) TMI 49
Non-inclusion of excise duty element in closing stock - ITAT deleted the addition - Tribunal held that if the Department wants to add the excise duty in the closing stock for valuation purposes, the department should also add the excise duty paid on the raw material as the assessee was claiming MODVAT - Held that:- As decided in Commissioner of Income-Tax Versus Indo Nippon Chemicals Co. Ltd. [2003 (1) TMI 8 - SUPREME COURT] unable to accept the view of the AO that merely because Modvat credit is an irreversible credit available to the manufacturers upon purchase of duty paid raw material, it would amount to income which is liable to be taxed under the Act. AO adopted the gross method at the time of purchase, and the net method of valuation at the time of valuation of the stock on hand. By this method, which is wholly erroneous he assumed that the income, to the extent of the Modvat credit on the unconsumed raw material, was generated, which was not reflected in the accounts and attempted to bring it to charge under the Act - no substantial question of law is involved in the appeal.
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2013 (3) TMI 48
Addition u/s 68 - cash credit - nature and source of the deposits - held that:- In the case of Anil Rice Mills (2005 (7) TMI 44 - ALLAHABAD HIGH COURT ), this Court has held that the assessee cannot be asked to prove the source of source or the origin of origin. Tribunal had erred in holding that the amount deposited by the two partners is liable to be added under section 68 of the Act on the ground that the gifts received by the respective partners from the various persons could not be explained as the credit-worthiness of the donors had not been established. The Tribunal had wrongly drawn an adverse inference upon the fact that the donors had filed their Income Tax Return for the Assessment Years 1988-89 to 1991-92 on a single day and further the return for the Gift Tax was filed on 25.08.1992, which was well within the due date. - Decided in favor of assessee.
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Customs
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2013 (3) TMI 47
DEPB Credit - arbitrary conditions - Permission for export - Valuation of fabrics - Petitioner had initially sought to export consignments through three shipping bills. The Customs authorities did not permit them, and allowed provisional clearance subject to furnishing of 100% bond of the goods’ value, and a bank guarantee for the sum of Rs. 2 crore. The later set of shipping bills too, were sought to be withheld and a condition to furnish 100% bond with security to the extent of 25% of the value of the goods, by way of bank guarantee was insisted upon. Held that:- the respondents in this case are, in effect, undermining the permission granted earlier by the customs authorities by permitting export as far back as on 11-7-2011. The petitioner could not take advantage of the clearance due to an oppressive condition imposed, i.e. furnishing 25% guarantee (in relation to the declared value of the goods). There can be no two opinions about the indefensible and utterly arbitrary position taken by the customs authorities, that the petitioner is disentitled to the benefit of the DEPB scheme by virtue of a restriction imposed on 22-9-2011, made effective nine days later. The goods were exported and the consideration was received in respect of the earlier shipments covered by the three bills; bank realization certificate towards export proceeds in respect of the said shipping bills were received on 6-7-2011. In the circumstances, it would be unreasonable and unfair for the respondents, to continue to insist that the Bank guarantee for the amount of Rs. 2 crores should be maintained. - Decided in favor of assessee.
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2013 (3) TMI 46
Conversion of shipping bill - Advance Licence Scheme to duty drawback scheme - held that:- As per the provisions of Section 149 ibid, the Customs officer has discretion to authorise any shipping bill to be amended on the basis of documentary evidence which was in existence at the time when the goods were cleared/exported. From mere reading of the said provisions, it can be ascertained that there is no time limit prescribed for conversion of shipping bills from one scheme to another. The time limit observed by the Hon'ble High Court in the case of Terra Films Pvt. Ltd [2011 (4) TMI 13 - DELHI HIGH COURT] is not applicable to the facts of the present case. It is not in dispute that the Board has issued a circular clarifying the legal position that such a conversion is permissible. Once such a conversion is permissible, the assessee is entitled to duty drawback and benefit of duty drawback is a matter required to be calculated by the Appellate Commissioner. - Decided in favor of assessee.
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Service Tax
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2013 (3) TMI 58
Constitutional validity of levy of service tax on renting of immovable property - retrospective amendment - held that:- Even if it is assumed for the sake of argument that the amendment is not merely clarificatory but creates a substantive liability or right, the Parliament’s right to legislate and create liabilities or rights with retrospective effect can be curtailed only by a restriction placed upon the legislative power, of Parliament by one or the other provision of the Constitution of India, for example, the restriction of creating an offence with retrospective effect or the restriction from enhancing the punishment for an offence with retrospective effect as found in Article 20(1) of the Constitution of India. - Writ petition dismissed - Decided against the assessee.
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2013 (3) TMI 57
Seeking waiver of penalty - assessee submitted that since the liability is determinable after 18-2-2006 it has discharged tax liability with interest in respect of both the appeals although it sought registration after the impugned period - Held that:- Assessee were not able to assess service tax liability before the notified date to levy service tax on reverse charge mechanism in respect of services provided from abroad as decided in UOI v. Indian National Ship Owners Association [2009 (12) TMI 850 - SUPREME COURT OF INDIA] - Since there was confusion prevalent in interpretation of law during material period and owing to fact that assessee had discharged service tax liability for period from 18-4-2006, extended period of limitation cannot be invoked - entire demand was upheld, but, penalty under section 78 set aside, as there was no deliberate case of fraud and prejudice caused to Revenue - Partly in favour of assessee
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2013 (3) TMI 56
Service tax demand on rental immovable property - invoking extended period under proviso to Section 73 (1) of the Finance Act, 1994 - also interest on the service tax beside penalty u/s 76 as well as Section 78 - period of dispute is from 2007-2008 to 2008-2009 - Held that:- Though "service in relation to renting of immovable property" had been brought within the service tax net w.e.f 1/6/07 by introducing Section 65 (105) (zzz) and as decided in Home Solution Retail India (2009 (4) TMI 14 - DELHI HIGH COURT) that mere renting of immovable property by itself cannot be regarded as service and would not attract service tax. It is only by retrospective amendment introduced w.e.f. 1/6/07 by Finance Act, 2010, that the renting of immovable property by itself became a taxable service neutralising the judgment of judgment of Hon'ble Delhi High Court. In these circumstances the appellant cannot be accused of suppressing the relevant information from the department as during the period of dispute there was doubt about the levy of service on the renting of immovable property till the dispute was put to an end by retrospective amendment made by Finance Act, 2010. As decided in Continental Foundation Jt. Venture [2007 (2007 (8) TMI 11 - SUPREME COURT OF INDIA] that when during the period of dispute there was doubt about interpretation of some provisions of law on account of conflicting judgments, which were later on resolved by a Larger Bench, the extended period under proviso to Section 11A (1) cannot be invoked - the penalty under Section 78 of the Finance Act, 1994 also would not be attracted, as the elements required for invoking longer limitation period under proviso to Section 73 (1) are the same as those required for imposing penalty under Section 78 of the Finance Act, 1994. Thus, the entire service tax demand is time barred - in favour of assessee.
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2013 (3) TMI 55
Penalty u/s 76 is also leviable alongwith section 78 - Held that:- Do not approve simultaneous penalty to be ordered under sections 76 and 78 of the Finance Act, 1994 thus agree with the Commissioner (Appeals) to the extent of waiving the penalty under section 76 by him and his order is approved. Cum-tax benefit claimed by assessee - Held that:- This point does not need further consideration at this stage for no evidence led to show that the gross value was inclusive of service tax. So far as the taxability is concerned that was not before Commissioner (Appeals), thus such issue not been raised nor decided no pleading at this stage is entertainable in second appeal. Cross-objection is dismissed accordingly.
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Central Excise
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2013 (3) TMI 45
Iron Ore Cess - seeking waiver of pre deposit of Iron Ore Cess and equal amount of penalty - Held that:- The appellant made a categorical statement that the cess has already been paid by M/s. Usha Martin in support of which they have annexed the letter dt. 29.2.2012 along with relevant challans but could not be produced before the authorities below for the reason that the said challans were received after the order-in-original was passed by the adjudicating authority on 28/12/11 and the Commr. (Appeal) has passed an ex parte order. Order of the Commr. (Appeal) set aside and the matter is remanded to back for considering the issue afresh.
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2013 (3) TMI 44
Inadmissible Cenvat Credit and Education Cess - SCN issued invoking extended period of limitation - confirmation of demand and equivalent penalty under Section 11AC - Held that:- Admittedly the credit availed by the assessee was reflected in the monthly returns. If there is no column in the monthly return to show the nature of service on which the credit was availed, the assessee cannot be blamed for not disclosing the said fact. For invoking the longer period of limitation, there has to be a suppression or mis-statement with an intent to evade payment of duty. When the respondents have reflected the amount of credit availed by them in their monthly returns, it cannot be said that there was any positive act of suppression on mis-statement on their part. The respondent had availed cenvat credit on various input services on the bonafide belief that the same are admissible to them under the definition of inputs services contained in Rule 2(l) of Cenvat Credit Rules, 2004 and declared the quantum of cenvat credit in the ER I Returns. The respondent disputed the allegation of suppression and the same is neither admitted nor established. Once ER-I Return is filed, even though it is filed under self-assessment system, the officers are supposed to scrutinize the same. Just because the respondent had taken Cenvat credit in respect of certain input services, which according to the Department was not admissible to them, it cannot be concluded that the credit had been taken knowing very well that the same was not admissible, unless there is some evidence in this regard. Hence, the principle of law laid down in Neminath Fabrics Pvt. Ltd. case (2010 (4) TMI 631 - GUJARAT HIGH COURT), is not applicable to the facts of the present case - in favour of assessee.
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2013 (3) TMI 43
Cenvat credit in respect of services denied on the ground that they have maintained separate account for the inputs, whereas they have availed credit in respect of input services in accordance with the formula prescribed in Rule 6(3)(a) - Held that:- Going through the provision of Rule 6(3)(iii), it is found that an assessee can maintain separate accounts for the input and pay an amount determined under Rule 3(a) in respect of input services. The said rule does not stand taken note of by the Commissioner. In any case, the reasons adopted by the Commissioner that the assessee has not exercised his option are not correct inasmuch as there is no requirement of filing a declaration/ option for availing said rule (iii). In any case, it is the assessee's stand that they have filed an option, which the Commissioner has not taken note of. For the reasons recorded above, the impugned order set aside and remand the matters back to the Commissioner for fresh decision after taking into account the appellant's stand that they have maintained separate account for availing the credit for the input services in the first two show cause notices and their plea that they are exempted by the provision of Rule 6(3)(iii).
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2013 (3) TMI 42
CENVAT credit on rent-a-cab service and service of air travel ticket agents - Held that:- The manufacturer is consuming the rent a cab and air travel services for carrying the employees/officials to various zonal offices of the railways and to arrange supply of materials by the suppliers/sub-contractors for the official use as distinct from the conveyance or perquisite account for the employees. Therefore, it can be said that the rent a cab services / tour operator and air travel services are used by the manufacturer and cannot be treated as perquisites for the employees. The other part of the test is whether the activity of business which is treated as a cost to the company is also used in relation or in relation to the manufacture of the final product. As find from the submissions made that the rent a cab and air travel agent s services are hired by the company for specific purposes of use by the officers of the company in coordinating vendors of inputs, sub-contractors engaged in the manufacture and therefore, all these purposes, are closely related to manufacture of the final product. The issue of eligibility for CENVAT credit on rent-a-cab service used for bringing their employees from residence to factory and back is already decided by the Hon ble Karnataka High Court in the case of CCE, Bangalore Vs. Stanzen Toyotetsu India (P) Ltd. (2011 (4) TMI 201 - KARNATAKA HIGH COURT) & case of service of air travel agents are on much better footing because these activities are directly in relation to marketing of their finished goods. Hence, no reason to deny CENVAT credit on such services. - in favour of assessee.
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CST, VAT & Sales Tax
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2013 (3) TMI 60
Reassessment orders - as per department there was turnover that escaped assessment - demand of tax allegedly deductible at source u/s. 7(3) of the WC Act in respect of the payments made by the petitioner to the member-companies, interest thereon and also penalty under Section 7(7) imposed - Non maintainability of Writ petition as per respondent as alternative remedy was available to the petitioner under the relevant provisions of DST Act read with Section 16 of the WC Act - Held that:- Objection of the respondents on non maintainability of writ petitions is not acceptable as it is well settled that where the action of an executive authority acting without jurisdiction is likely to subject a person to dilatory proceedings and undue harassment, the High Courts will issue appropriate writs to prevent such consequences. See Calcutta Discount Co. Ltd. vs. Income Tax Officer and Anr. (1960 (11) TMI 8 - SUPREME COURT) In the reason mentioned at the bottom of Form ST-15 which is the notice of re-assessment, what has been stated by the respondents is that the petitioner was required to deduct tax at the rate of 2% from the payments made to the sub- contractors, but failed to do so. The question is whether this can hold good as the reason to believe that taxable turnover had escaped assessment. It must be remembered that the petitioner does not effect any sales to its sub-contractors, all it does – and this fact has also been accepted by the respondents – is to pass on the monies received from DMRC to the sub-contractors, acting as a conduit. The question of turnover in the hands of petitioner would arise only if it indulges in sale of goods. The petitioner merely transfers the monies received from DMRC to the member-companies. Section 2(t) of the WC Act defines “turnover of sale” . Since the expression “turnover of sale” is defined in the WC Act, it is not permissible to look at the definition of “turnover” in Section 2(o) of the DST Act, because Section 16(1) of the WC Act does not incorporate the definition sections of the DST Act into the WC Act. It is not in dispute that the petitioner, who is a dealer registered under the WC Act has not received any amount of sale price from the sub-contractors in respect of any transfer of property in goods involved in the execution of any works contract, whether executed fully or partly during any period.On the contrary, the petitioner has transferred or paid monies to the sub-contractors & did not deduct tax under Section 7(3) of the WC Act at the rate of 2% of the payment because the payment was not “for the transfer of property in goods . The payment was merely by way of passing the monies received from DMRC to the sub-contractors. Moreover, the petitioner had obtained Form VI from the sub-contractors in terms of Rule 5(1)(b) of the Delhi Sales Tax on Works Contract Rules, 1999 & submitted to the respondents when the petitioner's assessments were made. It was in these circumstances and by virtue of the relevant statutory provisions that the petitioner did not deduct tax. Thus the failure to deduct tax by the petitioner in accordance with Section 7(3) of the WC Act cannot amount to “turnover of sale” escaping assessment as TDS is only a mode of collecting the tax payable by the recipient of the money, the deductor of the tax acts as the agent of the Revenue. There is, therefore, no basis to reopen the assessment on the ground of the whole or part of the turnover having escaped assessment. The reason given for reopening the assessment does not establish any escapement of turnover. It only refers to the alleged failure on the part of the petitioner to deduct tax from the payments made to the sub- contractors. Even assuming for the sake of argument that there was such a failure, it does not amount to turnover escaping assessment in the petitioner's hands - reassessment notices appear to be issued without any application of mind and without having regard to any of the statutory provisions. Penalty imposed under Section 7(7) of the WC Act - Held that:- No reasonable opportunity was given to the petitioner of being heard nor was a separate order imposing the penalty passed. The petitioner filed the returns for the assessment years 2003-04 and 2004-05 and had also furnished Form-VI with all the relevant particulars showing the payment of tax by the sub-contractors. Refund claim rejected - Held that:- There is nothing on record to show that DMRC denied having issued the Forms No.IX to the petitioner certifying to the deduction of tax at source. The respondents have not also found any irregularities or fault with the Forms No.VI filed by the petitioner, being declarations of the sub-contractors that they have paid the tax.The refund claims had also been made in the prescribed form by the petitioner on 13.1.2008. Despite all this and without finding any fault in the certificates or pointing out any lack of compliance on the part of the petitioner, the respondents have refused to grant the refund, for the only apparent reason that verification has to be done from DMRC. That verification has been pending since March, 2006 when letters were purportedly written by the respondents to DMRC. Such circumstances, coupled with the fact that in May, 2009 steps were taken to reopen the assessments of the petitioner to raise demands of not only tax and interest but also of penalty, and that too without affording any hearing to the petitioner, make it clear that the conduct of the respondents in withholding the refund was unwarranted and contrary to law. A writ of mandamus is accordingly issued in terms of prayer (i) - all the writ petitions are allowed - respondents to pay costs to the petitioner at ₹ 40,000/-
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2013 (3) TMI 59
Consignments detained as the value declared by the petitioners in respect of betel nuts was lower than the floor rate fixed by the Commissioner of Commercial Taxes - KVAT Act - Held that:- Petitioners specifically aver that these are imported goods, and that they have no local sales in Kerala and the goods are taken out of the State on consignment basis. Therefore, as far as their transactions are concerned, there is no implication of tax justifying the demand for advance tax from them. If that be so, in the nature of the transactions undertaken by the petitioners, there is no warrant for insisting that the floor rate fixed by the Commissioner should be mentioned in the delivery notes nor could the consignments have been detained at the check post for not declaring the value on the basis of the circulars issued. Therefore, the refusal to endorse the delivery notes cannot be approved. Therefore, these writ petitions deserve to be allowed.
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