TMI Tax Updates - e-Newsletter
March 7, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
MAT - the retention money cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s.115JB - AT
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Income Tax:
Addition u/s 68 - addition as share capital receiver from shell/paper company - assessee miserably failed to bring any strong evidence to justify its plea of genuineness and creditworthiness of the alleged cash credit - additions confirmed - AT
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Income Tax:
AO being an investigator and adjudicator, when coming to an adverse finding against the assessee, was required to record such finding adequately as duly supported by material and evidence taking into account that principles of preponderance of probabilities applies. - HC
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Income Tax:
TDS u/s 194I - non deduction of TDS - compensation paid for the use of the building / premises / place of the members for construction activities - it would be highly unjustified to treat this amount as payment of rent and to make it liable for deduction of tax at source u/s 194-I. - invoking of provisions of section 40(a)(ia) is unjustified - AT
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Income Tax:
Assessee has rightly claimed short term capital loss which is eligible to be set off against long term capital gain and the impugned transaction is neither “sham” nor speculative in nature - AT
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Income Tax:
Expenditure of software stock and maintenance charges is required to be treated and / or considered as revenue expenditure and not as capital expenditure - HC
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Income Tax:
Addition as unexplained cash credit u/s 68 - addition on the basis of a witness who examined at the back of the assessee - genuineness of the purchases - Revenue cannot make any addition on the basis of a witness who examined at the back of the assessee - AT
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Income Tax:
Disallowance u/s 40A(3) - payments made in cash to land owners - expenses were incurred in the villages to develop the land, where there is no banking facilities - claim of expenses allowed - AT
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Customs:
SEZ unit - Levy of penalty for violating LoA - While pendant is termed as a piece of jewellery that hangs from a necklace chain, medallion is also termed as a piece of jewellery in the shape of a medal worn as pendant. Therefore, it is clear that there is no distinction or difference between the meaning given to the commodities 'pendant' and 'medallion' - Since there is positive value addition, No penalty - HC
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Customs:
Cancellation of Advance licence - fulfilment of export obligation - The RBI has clarified that the ‘transaction in question pertains to exports from India against liquidation of rupee balance of the erstwhile USSR.’ - The contention of the revenue that the EXIM Policy did not permit the discharge of export obligation in Indian Rupees, is untenable - HC
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Customs:
Refund of SAD - what is manufactured and sold by the appellant is "Proflex Roof" and on such "Proflex Roof" VAT is paid. Therefore, it cannot be said the assessee has paid the VAT on the goods imported, on which, Special Additional Duty has been paid - what is sold by the appellant to his client is not the same goods which is imported - No refund - HC
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Service Tax:
CENVAT credit - input services - Legal services - Chartered Accountant services - Cenvat credit cannot be denied on the ground of nexus - AT
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Service Tax:
Extended period of limitation - That an Explanation had to be inserted in 2010 in the charging provision of section 65 (105) makes it apparent that confusion about the scope of this tax existed in the minds of not just institutions but also tax officers - demand beyond normal period set aside - AT
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Service Tax:
Interest liability - merely because the credit is available in the books of account does not mean that the tax has been paid. Therefore, the liability to pay interest has to be computed from the due date of payment of tax to the actual date of payment - AT
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Service Tax:
100% EOU - Refund of cenvat credit - The rent paid for car parking as well as the maintenance charges paid for the premises is part and parcel of the rent agreement, though the amounts are paid as rent towards car parking and maintenance charges. The disallowance of refund of these services is not proper - AT
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Service Tax:
CENVAT credit - construction of residential quarters for the employees of the respondent company - input service or not? - the period involved is prior to 01/04/2011 when the definition of input service during the relevant period had a wide ambit as it included the words 'activities related to business - credit allowed - AT
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Service Tax:
Refund - CENVAT credit in respect of service tax paid by the appellant to the sub-contractor makes the appellant eligible to claim that as a refund, if otherwise not deniable by law. - AT
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Service Tax:
Levy of penalty - The service tax collected if not deposited with the government automatically leads to an inference that there was an intention on the part of the appellant to evade the tax - benefit of Section 73(3) not available - penalty confirmed - AT
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Central Excise:
Refund - There is no concept of not passing on the duty to the ultimate consumer and as such, as the buyers have been passed on the benefit of reduction of duty, the same would satisfy the principles of unjust enrichment - refund allowed - AT
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Central Excise:
Classification - Chenille fabric or Cotton fabric - Clearly, Section Note 2 (A) of the Section XI is not applicable to Tariff Heading 5801 - It cannot be classified as unprocessed cotton fabric - AT
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Central Excise:
Valuation - special packing used for ‘physician samples - costs must be computed of the sample including the special packaging cost for computing assessable value - this incremental cost has been subject to duty - AT
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Central Excise:
The appellant has reversed the credit taken on inputs used in production of goods cleared under end-use exemption notification - rule 6(3) is not applicable to appellant - AT
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VAT:
Section 6A of CST Act, 1956 is a procedural provision, the submission that amendment in Section 6A of the CST Act creates an irrebutable presumption of “sale” in absence of declaration in Form F and therefore, unconstitutional has no substance - HC
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VAT:
Release of seized goods - goods were being transported with a valid Transit Declaration Form (TDF) - invoices mentioned Tin numbers, which were found to be non-existent - the direction issued by the Tribunal to release the goods upon deposit of 10% amount of the estimated value in cash or bank guarantee cannot be said to be bad in law. - HC
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VAT:
Inter State sale or not? - The goods were of specific quality and description for being used in the works contract awarded on turnkey basis to the assessee and there was no possibility of such goods being diverted by the assessee for any other purpose - pre-deposit set aside - DVAT Tribunal re-adjudicate the matter- HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (3) TMI 207
Leave encashment allowance u/s. 43B - Held that:- It is no doubt true that the assessee in the present case did not file the evidence regarding payment before the due date of filing the return of income u/s 139(1) of the Act by the assessee for the relevant assessment year along with the return of income. Nevertheless the assessee had filed the details of payment of leave encashment before the due date of filing the return of income before the due date. The requirement of furnishing evidence of payment along with the return of income is only directory and is not mandatory. The ld. DR however submitted that the evidence of actual payment should be directed to be verified by the AO. We are of the view that it would be just and proper to uphold the order of CIT(A), however, with a direction that the payments said to have been made by the assessee as given in annexure-1 to this order should be verified by the AO and if the claim is found to be correct the deduction to that extent should be allowed. With these observations ground raised by the revenue is dismissed. Expenditure incurred on issue of debentures - Nature of expenditure - Held that:- The debentures whether convertible or non convertible are in the nature of loan at the time of their issuance and any expenditure incurred on issue of such debentures or bonds had to be regarded as part of the borrowing cost and have to be allowed as a deduction and as a revenue expenditure. This expenditure cannot be regarded as capital. We do not find any infirmity in the order of CIT(A) and accordingly ground raised by the revenue is dismissed. Treatment to loss - loss incidental to the business or capital loss - Held that:- As the Assessee did not acquire any capital asset and merely paid advance for acquiring capital asset. CIT(A) was of correct view that the loss in question was a loss incidental to the business and was not a capital loss. Disallowance made by the AO cannot be sustained Exclusion of retention money in computing total income under normal provision as well as in computing Book Profit u/s. 115JB - MAT - Held that:- As on the date when the bills were submitted, having regard to the nature of the contract, no enforceable liability accrued or arose and, accordingly, it could not be said that the assessee had any right to receive the entire amount on the completion of the work or on the submission of bills. The assessee had no right to claim any part of the retention money till the verification of satisfactory execution of the contract. Therefore, the Tribunal was right in holding that the retention money in respect of the jobs completed by the assessee during the relevant previous year should not be taken into account in computing the profits of the assessee for the assessment year in question. The admitted factual and legal position in the present case is that retention money is not in the nature of income till such time the contractual obligations are fully performed to the satisfaction of the customer by the Assessee. Therefore the retention money cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s.115JB of the Act. We hold accordingly and confirm the order of the CIT(A) in this regard TDS u/s 194J - fees for professional or technical services - Held that:- AO has accepted that the disputed income as shown in the TDS certificate has been included in the contract sales already disclosed by the assessee. Thus we are of the view that there is no merit in ground no.3 raised by the revenue. Corporate advances written off - Held that:- The amount in question represented the money given in relation to contracts and had nexus with the business of the assessee. The amounts due from the aforesaid two companies were irrecoverable. It is evident from the fact that neither the interest nor the principal amount had been settled by the two companies right form A.Y.2004-05. The advances were therefore written off in the books of accounts of the assessee. Therefore the conclusions of CIT(A) that the advances written off have to be allowed as deduction u/s 28 r.w.s. 37(1) of the Act are correct and does not call for any interference. As far as the remaining sum being old government deposits are concerned the details of old government advances off are given at page-66 of the assessee’s paper book. The old Govt deposits which were written off were so written off owing to the smallness of the amount and the efforts involved in recovering these deposits. We are satisfied that the claim for deduction on account of write off of these sums had to be considered as allowable expenditure u/s 28 r.w.s. 37(1) of the Act. As far as the advance written off of Kumardhubi division is concerned, these advances were given for business purpose to various parties for purchase of goods , consumable stores and electrical installation. These advances had nexus with the business of the assessee and their write off in the books of accounts has to be considered as allowable deduction u/s 28 r.w.s. 37(1) of the Act. We therefore are of the view that CIT(A) was fully justified in allowing deduciton claimed by the assessee. We also find that the arguments advanced by the assessee before us clearly supports the conclusion arrived at by CIT(A). Provision for doubtful debt added back while computing Book Profit u/s 115JB - whether the debit in the profit and loss account under the head “provision for doubtful debts is really a provision for doubtful debts or write off of doubtful debts as bad debts? - Held that:- It is clear from a perusal of the Schedule-9 to the Balance Sheet as well as profit and loss account and debtors on the asset side of the balance sheet that the assessee had in fact written off a sum as bad debts. In view of the above, the amount in question cannot be considered as provision for doubtful debts which is to be added to the net profit as per the profit and loss account to arrive at the book profit. In other words the sum in question was a bad debt written off which had to be reduced even while arriving at the profit as per profit and loss account and was accordingly reduced. Addition of the said sum to the net profit as per profit and loss account for the purpose of arriving at book profit u/s.115JB of the Act was therefore not warranted. We therefore accept the plea of the assessee in this regard and hold that a sum be excluded for the purpose of computing book profits u/s 115JB of the Act. MAT computation - provisions made for employee benefit - Held that:- Since the amount in question was an obligation of the assessee as an employer the liability arising on account of such obligation should also be considered while arriving at the book profit for the purpose of Sec.115JB of the Act. Thus on the principle laid down in the decisions on which the ld. Counsel has placed on reliance, we are of the view that CIT(A) was justified in accepting the plea of the assesses. With regard to the directions of CIT(A) to verify whether the account of the provisions made for employee benefit has already been debited in the profit and loss account, the directions of CIT(A) his order is correct and is for the assessee to explain as to how the sum in question are not debited in the profit and loss account but nevertheless need to be excluded . We do not find any merits in the grounds raised by the assessee also.
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2017 (3) TMI 206
Addition u/s 68 - addition as share capital receiver from shell/paper company - Held that:- As regards Cap Vanijya (P) Ltd. revenue is believed to prove that the activities undertaken by the alleged company are not meeting commercial prudence and the working of this company is merely to provide accommodation entries. Against the counter evidence of the Department proving the company to be a paper company, assessee miserably failed to bring any strong evidence to justify its plea of genuineness and creditworthiness of the alleged cash credit of ₹ 18,00,000/-. We are, therefore, of the firm view that ld. Commissioner of Income Tax(A) has rightly confirmed the addition u/s 68 of the Act of ₹ 18,00,000/- received as share capital and premium from Cap Vanijya (P) Ltd. which is a shell/paper company. As regards remaining two companies namely Newjet Trexim (P) Ltd. and Sadasukh Dealers (P) Ltd. the issue relating to share capital/premium received needs to be remitted back to the file of Assessing Officer for making further investigation with the help of well equipped Govt. machinery and the power to make commission to the counter part in the city where the alleged companies are existing so as to substantiate its plea that the alleged two companies are paper companies and also to find out the actual modus operandi of these companies qua investments in share capitals of other companies qua their business operation qua the income earned during the year. Needless to mention that assessee will have a proper opportunity of being heard for putting forth its arguments and submissions against the information collected by the Revenue authorities. - Decided partly in favour of assessee for statistical purposes.
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2017 (3) TMI 205
Application of the income for charitable purpose under section 11 - repayment of loan - Held that:- In this case the appreciation of facts is based only on the evidence furnished by the assessee. It is not a case where the assessee did not disclose the identities of the persons who had given the loan and had received the repayments as claimed. The fact that the books and bank account of the assessee stood seized in the relevant period cannot be lost sight of in adjudicating whether the assessee had prima facie proved its claims. AO, however, had come to a finding that this was really transfer of trust funds to the trustees or their relatives, for their benefit, and hit by the mischief of section 13(1)(c). This was an adverse finding against the assessee. AO being an investigator and adjudicator, when coming to an adverse finding against the assessee, was required to record such finding adequately as duly supported by material and evidence taking into account that principles of preponderance of probabilities applies. He did not discharge his role of investigator by relying upon any material or evidence to support his adverse finding. We, therefore, answer the first question in the negative, in favour of the assessee. Accumulated deficit shown - Held that:- We think it proper to also remand this claim to the Assessing Officer for adjudication. In that view of the matter the question need not be answered. The impugned order is accordingly set aside.
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2017 (3) TMI 204
Entitlement for deduction u/s 80IB(10) - Held that:- HC order confirmed [2014 (11) TMI 556 - MADRAS HIGH COURT] the provisions nowhere require that developers who are the owner of the land alone would be entitled for grant of deduction under Section 80IB(10) - Assessees were entitled to the benefit u/s 80IB(10) even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners - It is not necessary that the assessee, engaged in developing and construction of housing project, should be the owner of the property – Decided against revenue.
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2017 (3) TMI 203
Tender of amount of consideration “to the person or persons entitled thereto" - purchase by Central government on immovable property in certain cases of transfer - whether the person or persons entitled thereto would only mean to transferor or transferors would require re-consideration? - Held that:- In the detailed show cause filed by the petitioner before the appropriate authority, there was no objection raised that the amount paid by the petitioner was required to be paid by the Revenue to the petitioner or that the petitioner has paid the amount as stated in the present writ application. The agreement was executed on 15th November, 1989 and Form 37-I was filed on 30th November, 1989. Therefore, in the absence of the factual basis before the appropriate authority that any amount was paid by the petitioner, the appropriate authority was not required to examine the consequences of non-payment of such amount by the Revenue to the petitioner. It is no doubt true that in terms of Section 269 UG, the amount of consideration is required to be tendered to the person or persons entitled thereto which would include the transferee provided the transferee proves that certain payments were made by it in pursuance of the agreement to sale executed. Since no dispute was raised before the appropriate authority regarding non-payment of alleged payment made by the transferee, therefore, it cannot be said that payment made by the Revenue to the transferor is any way illegal and therefore, the petitioner is entitled to re-vesting of the property. We may also say that in terms of Section 269UH, if the amount is not paid within the time fixed, the property shall re-vest after the expiry of the aforesaid period. We find that re-vesting can be claimed only by the transferor and not by the petitioner, who is a transferee in terms of Section 269 UH (1) of the Act. The sale in favour of the petitioner in pursuance of agreement dated 15th November, 1989 would not be deemed to be complete on account of intervening action of the Revenue in terms of Chapter XX-C of the Act. Thus, we do not find any merit in the present writ application. The same is, thus, dismissed.
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2017 (3) TMI 202
Disallowance of depreciation in respect of software purchased - bogus purchase - Held that:- The opinion formed by the AO that the purchases were bogus was on mere fact that the notices issued to the parties u/s 133(6) were not served and returned back unserved and the Inspected deputed to verify the facts could not find them on the given addresses cannot be considered as sufficient ground for treating the purchases being bogus one and consequently disallowing the depreciation claimed by the assessee. A similar issue has been decided in the case of H R Mehta (2016 (7) TMI 273 - BOMBAY HIGH COURT) wherein it has been held that once it was established that the payments were made through banking channels it is not fair on the part of the AO to came to the conclusion that the transactions were bogus without confronting the assessee that the material used against him and without allowing the cross-examination by the department to the assessee. In the present case also, the report of the Inspector has been used against the assessee and the assessee was not allowed to rebut the finding of the Inspector. In view of this factual aspect are of the opinion that the order of the ld.CIT(A) deserves to be set aside. Accordingly, we set aside the order of the ld.CIT(A) and direct the AO to allow depreciation as prayed by the assessee. - Decided in favour of assessee Addition on account of commission and brokerage charges under the head prior period expenses - Held that:- We find merit in the argument of the ld. AR that part of the expenses incurred pertaining to next year and were not claimed in that year but separated and shown under the head prepaid expenses as on 31.3.2006” which were reversed in the financial year 2006-07 and charged to the profit and loss account under the head prior period expenses. The ld. AR vehemently pointed out that these in fact are not prior period expenses but the expenses which related to the current year but incurred in the previous year. We find from the facts before us that the assessee has incurred and paid commission and brokerage expenses which were rightly accounted for by the assessee by debiting partly in the financial year 2005-06 and showing the balance under the head prepaid expenses which were duly charged to the profit and loss account though under wrong head “prior period expenses”. The depiction of expenses in the profit and loss account under wrong head would not disentitle the assessee from claiming the expenses when the expenses pertain to the current year. Accordingly, we are inclined to set aside the order of the ld.CIT(A) and direct the AO to allow the claim of the assessee of commission and brokerage expenses - Decided in favour of assessee Disallowance of amount made on account of lease rent paid to the subsidiary - Held that:- We find that the AO has failed to bring on record any material which proved that the transaction of advancing money, use thereof for the purchase of premises which was in turn leased out to the assessee on rental, assessee receiving interest to the tune of ₹ 59,20,361/- on the loan advanced was a sham. The ld. CIT(A) has rightly came to the conclusion that it is the commercial transaction which entered purely out of business exigency and commercial consideration and therefore correctly deleted by the ld.CIT(A). Moreover, the AO has failed to bring on records another angle of the transactions that the interest received by the assessee and rentals paid were not at the market rate and therefore, we are inclined to uphold the order of the ld.CIT(A) by dismissing the appeal of the revenue on this issue. Postponement of the recognition of the revenue thereby violating the matching principle of accountancy - Held that:- We find that during the year under consideration the assessee has changed system of revenue recognition qua the course fee received from the students in cinematic training division from billing basis to only to the system which recognized the revenue basis on the training imparted/services rendered. In our opinion, the assessee has every right to change the method of accounting provided the same is consistently following the subsequent years. Moreover, the ld. CIT(A) called for the remand report from the AO which confirmed that the assessee was following the said system of accounting in the subsequent years. We are therefore in agreement with the conclusion drawn by the ld. CIT(A) that the AO was not right in rejecting the method of accounting followed by the assessee and therefore we uphold the same. Accordingly, the ground taken by the revenue is rejected - Decided in favour of assessee Prior period expenses disallowance - Foreign Travel liability was ascertained and stood incurred during the Financial Year 2007-08 - Held that:- It is clear from the orders of authorities below that the expenses were incurred and charged by the assessee to the profit and loss account as the amounts were settled during the year in the case of advertisement expense, foreign travel expenses, repair and maintenance, franchisee. We find that these expenses could not be charged to the profit and loss account as the bills were not settled due to dispute and finally due to interference of higher authorities of the assessee, the bills were settled during the year which in our opinion were rightly charged to profit and loss account as the final quantification of the amount of expenses took place during the year. In view of these facts, we are of the considered view that the order of the ld.CIT(A) was not correct and is set aside and accordingly and we direct the AO to allow the expenses as pertaining to current year by deleting the disallowance.- Decided in favour of assessee
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2017 (3) TMI 201
Registration granted u/s 12AA(3) - denial of natural justice - ITAT allowed claim as CIT-A not allowed an opportunity to cross examine the witnesses whose statements were relied against the assessee - Held that:- While we find no fault to the reasoning given by the Tribunal to set aside the order of the Commissioner of Income Tax for reason of violation of principles of natural justice, the conclusion reached by the Tribunal to set aside that the order in entirety is wholly unjustified inasmuch as it was necessary in such facts to allow the assessee an opportunity to cross examine the witnesses relied upon by the department and to direct the petitioner to pass a fresh order in accordance with law, thereafter. It was also the case of assessee that the statements relied upon by the department are contradictory inasmuch as those persons had given statements adverse to the assessee before the Ludhiana authority, in their original assessment proceedings but had got recorded statements favourable to the assesse before the Meerut authority. The cross examination of such witnesses was therefore even necessary for this reason also. Accordingly we the answer reframed question in favour of department and against the assessee. The matter is remanded to the Commissioner of Income Tax for passing a fresh order in accordance with observations made above.
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2017 (3) TMI 200
Short term capital loss - whether a sham transaction or speculative in nature - all these transactions were executed “off market” and not through recognized Stock Exchange. - transactions with related parties - Held that:- Respectfully following the judgment in the case of ACIT v. Biraj Investment Pvt. Ltd. (2012 (8) TMI 805 - GUJARAT HIGH COURT ) and Hasmukh M. Patel vs. ACIT (2011 (4) TMI 643 - ITAT, AHMEDABAD) we are of the view that assessee has rightly claimed short term capital loss which is eligible to be set off against long term capital gain and the impugned transaction is neither “sham” nor speculative in nature - Decided in favour of assessee Disallowance of interest paid on unsecured loan - Allowance of interest expense as against interest free advance to group company - Held that:- Assessing Officer has made an estimated addition without proving the nexus between the interest bearing funds and interest free advances whereas assessee had sufficiently demonstrated to have enough interest free reserve and surplus and interest free unsecured loan to cover up the interest free advances along with order of Hon. Gujarat High Court about merger of assessee with Suraj Stainless Ltd. to whom interest free advances were given. We, therefore, set aside the order of ld. CIT(A) and allow this ground of assessee.- Decided in favour of assessee Rent Exp. Of Mumbai Office - treated as Business expenses - Held that:- There is fair possibility of situation when a company plans its future business trend and may have to explore various avenues with relation thereto. It seems that assessee with the fore-sightedness and in order to improve and expand business and also to save extra hotel charges thought it amicable to take flats on lease in Mumbai. In the given facts and circumstances of the case and in absence of any contrary reasons brought on record by the Revenue against the impugned expenditure booked by the assessee except a casual approach, we are inclined to believe that assessee has claimed genuine expenditure of rent. We set aside the order of ld. CIT(A) and allow this ground. - Decided in favour of assessee
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2017 (3) TMI 199
Validity of reopening of assessment - deposits in the UTI Bank and the interest earned thereon not disclosed - Held that:- Once the additional income declared by the assessee was processed u/s. 143(1), we are unable to understand on what basis the AO formed a belief that additional income has escaped assessment. We are therefore of the view that there was no substantive material before the AO to form a belief that income has escaped assessment. Under these facts, we are of the considered view that reopening was not based on requisite cogent material. Accordingly we hold the reopening to be bad in law. TDS u/s 194H - supplying arrack to different vendors at different vending points - non-deduction of tax at source - Held that:- Since the assessee has a taken a categorical stand that it is supplying arrack to different vendors at different points or locations in the respective operational areas as permitted by Govt. of Karnataka and the shops of vendors are duly authorised by Govt. of Karnataka, it is all the more necessary to examine the facts whether the assessee has sold arrack on principal to principal basis to these vendors, or vendors were acting as commission agents of the assessee. If it is established that assessee has issued invoices in the name of vendors and supplied arrack to them, the transaction would be on principal to principal basis and the vendors cannot be held to be commission agents of the assessee. Nomenclature to the difference in receipt of sale proceeds and sale consideration is irrelevant. But these aspects were not examined by the lower authorities. Since the assessee has taken a categorical stand before the CIT(Appeals) that the vendors were duly authorised and approved by the Govt. of Karnataka to transact in arrack, the CIT(A) should have examined as to how sale of arrack was effected and in whose favour invoice was raised. Therefore, we are of the opinion that this issue requires fresh adjudication by the AO. Disallowance of interest - Held that:- We have carefully examined the order of CIT(A) for AY 2005-06 where the issue was examined in detail and we find that the CIT(A) has directed the AO to recompute the interest disallowance as per opening debit balances in the partners capital account. We do not find any infirmity in the directions of the CIT(A). TDS u/s 194H - bank guarantee commission - Held that:- CIT(Appeals) is right in holding that bank guarantee commission is basically in the nature of interest for a credit facility which may or may not be utilised and it does not create any type of principal-agent relationship so as to attract the provisions of section 194H of the Act Assessee in default - Held that:- We find that now the provisions of section 201(1) and section 40(a)(ia) has been toned down by subsequent amendments and as per second provisio to section 40(a)(ia), when the assessee is not in default, it is to be presumed that assessee has deducted and paid the taxes. This aspect was not examined by the CIT(A). Therefore, we are of the view that let this issue be examined in the light of the amended provisions of section 40(a)(ia) of the Act by the Assessing Officer. Accordingly, this issue is restored to the file of the Assessing Officer. Disallowance of telephone expenses - Held that:- AO has disallowed 20% of the total claim towards telephone expenses on account of personal use. Since the possibility of personal use of telephone cannot be ruled out, some disallowance has to be made. However, the disallowance made by the AO is on the higher side and we restrict the same to 10% of the total claim of expenses.
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2017 (3) TMI 198
TDS u/s 194I - non deduction of TDS - compensation paid for the use of the building / premises / place of the members for construction activities - Held that:- The assessee has merely paid compensation to the members of the society. It is for them to utilise this amount for payment of rent or otherwise. Even if it has been paid as rent, the contract of rent/lease would be between the members and their respective landlords from whom these members would take premises (alternative accommodation) on rent/lease, and then the amount payable by these members to their respective landlords may be liable for deduction of TDS u/s 194-I, if applicable upon them. As far as assessee is concerned, there was no transaction, much less, transaction of rent between the assessee and the new landlords of members of the society. Therefore, it would be highly unjustified to treat this amount as payment of rent and to make it liable for deduction of tax at source u/s 194-I. Thus invoking of provisions of section 40(a)(ia) is unjustified. Thus, the disallowance made by the lower authorities is illegal and therefore, directed to be deleted. Addition on account of difference in closing balance of the assessee and one of the buyers of the property sold by the assessee - Held that:- It is noted that a confirmation has been placed by the assessee on record on behalf of Ms. Rakhi Sawant which is claimed to be signed by one, Shri Dewal Modi. On our enquiry, it was replied by Ld. Counsel that Shri Dewal Modi, happened to be the accountant of Ms. Rakhi Sawant. But nothing was brought on record to support the said claim. However, he requested for giving one more opportunity to bring proper documentary evidence on record. In our considered view also, this issue should go back to the file of the AO. The assessee should place on record confirmation signed by the customer only, i.e. Ms. Rakhi Sawant. If it is signed by some other person, then it has to be established that the said person is duly authorised to sign confirmation on behalf of Ms. Rakhi Sawant.
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2017 (3) TMI 197
DRP power or authority to direct the TPO to decide the percentage of risk adjustment - Held that:- DRP has no authority either to direct the Assessing Officer or TPO to make further enquiry and decide the matter. The DRP at the best call for remand report from any income tax authority namely either the TPO or the Assessing Officer and decide the issue arises for adjudication by itself. It is also open to the DRP to make further enquiry by itself. However, the DRP has no authority or jurisdiction to direct the TPO to make any enquiry. Thus the order of the lower authorities including the DRP is set aside. The DRP shall decide the issue afresh after considering the relevant material on record.
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2017 (3) TMI 196
Disallowance of claim on bad debt/ trading loss - Held that:- It is not in dispute that as such the assessee himself written off the aforesaid amount as bad debt / trading loss. The said amount is irrecoverable during the year and the loss is arising during the year under consideration. In that view of the matter and aforesaid undisputed facts, it cannot be said that the learned Tribunal has committed any error in treating the same and / or considering the same as trading loss. When the assessee itself in his books of account shown and written of said amount, the same is rightly considered as bad debt / trading loss. Under the circumstances, no error has been committed by the learned Tribunal in confirming the order passed by the learned CIT(A) in deleting the addition - Decided in favour of the assessee. Treatment to software expenses - revenue expenditure or capital expenditure - Held that:- Expenditure of software stock and maintenance charges is required to be treated and / or considered as revenue expenditure. See Commissioner of Income-tax-I Versus NJ. India Invest (P.) Ltd.[2013 (7) TMI 738 - GUJARAT HIGH COURT ] - Decided in favour of the assessee.
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2017 (3) TMI 195
Profit on sale of shares - whether assessed as long term capital gains exempt u/s. 10(38)? - CIT(A) has given a finding that the assessee firm has been formed as a Partnership firm - Held that:- We notice that the AO has not examined the provisions of Partnership Deed before coming to the conclusion that the status of the assessee cannot be taken as partnership firm in AY 2007-08. Hence the view taken by the AO is against the Partnership Deed as well as the assessment record relating to AY 2007- 08. In any case, the AO has not disturbed the assessment relating to AY 2007-08, i.e., the status of the assessee has been accepted as Partnership firm in AY 2007-08. In that case, it would not be proper for the AO to take the view that the holding period of the shares of M/s Assam Company Ltd can be recognized from 1.4.2007 only. AO has taken the view that M/s Reliance Capital Ltd has formed this assessee firm only to generate long term capital gains and he has further observed that the same income would have been assessed as business profits, had it purchased the shares of M/s Assam Company Ltd on its account. The Ld A.R furnished copies of Profit and Loss account as well as the assessment order of M/s Reliance capital Ltd to show that M/s Reliance capital Ltd has declared Short term capital gains and also Long term capital gains in purchase and sale of shares, meaning thereby, the presumption entertained by the AO has been proved to be wrong. Accordingly the Ld A.R submitted that there was no restriction for M/s Reliance Capital Ltd to hold the shares as its Investment. Regarding the observation made by the AO that the assessee was the major share holder in “Public shareholding” category and further the assessee has invested in shares of M/s Assam company Ltd, the assessee has submitted that it did not get any controlling interest in the above said company and further the shares have actually been sold within 15 months. Hence, in our view, the above said factual position cannot change the character of the shares. On the contrary, in our view, it may support the case of the assessee that it had actually made investment in the shares of M/s Assam Company Ltd. CIT(A) was correct in holding that the gain arising on sale of shares of M/s Assam Company Ltd should be assessed as Long term capital gain. - Decided against revenue
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2017 (3) TMI 194
Penalty u/s 271(1)(c) - loss from trading of commodities through MCX exchange, a Speculation loss wrongly been set off by the assessee against his business income - Held that:- We find that it is a matter of record that the addition made by the A.O in the quantum proceedings by observing that the loss suffered by the assessee on trading of commodities through MCX exchange, being in the nature of speculation loss was thus not entitled to the set off against his business income, had been set aside by the CIT(A) with a clear direction to the A.O to treat the said loss as a business loss and allow set off of the same against the business income of the assessee. We further find that as the appeal of the department against the aforesaid order of the CIT(A) had been dismissed by the Tribunal, therefore, the same had attained finality. Thus as now when the very quantum addition in itself had been deleted on merits by the CIT(A), and the said order on having been dismissed by the Tribunal had thereafter got the stamp of finality, the penalty pertaining to the said addition therefore cannot survive - Decided in favour of assessee
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2017 (3) TMI 193
Reopening of assessment - information received from the Directorate of Income Tax - Held that:- AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In my view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s. 148 of the I.T. Act, 1961 on the basis of information allegedly received by him from the Directorate of Income Tax (Inv.), New Delhi. - Decided in favour of assessee.
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2017 (3) TMI 192
Addition u/s.41(1) -liability towards ex-employees - bogus and unproved liabilities - Held that:- When the assessee had reversed the aforesaid provisions of ₹ 2,18,34,299/- in the succeeding years, and had resultantly reduced the same to Rs. Nil as on 31.03.2013 which factual position had thereafter been scrutinized and accepted by the department in the course of regular assessments framed u/s 143(3) in the hands of the assessee company for A.Y 2012-13 and A.Y 2013-14, which respective years had witnessed a reversal of provision of ₹ 60 lac and ₹ 1,09,17,273/-, therefore we are of the considered view that in the backdrop of the aforesaid facts no adverse inferences as regards the genuineness of the aforesaid provision for salary and statutory dues payable of ₹ 2,18,34,299/- is liable to drawn in the hands of the assessee company. No addition of the said amount would be called for in the hands of the assessee during year under consideration, for the reason that even if the said liabilities were found to be bogus, the same could only be assessed as an unexplained credit in the hands of the assessee in the year of its genesis, viz. the year in which the same were found to be generated as a credit in the books of accounts of the assessee, and thus could not be whimsically related to and added as the income of the assessee for the year under consideration in which the same had only figured as a B/forward balance. Thus in light of our aforesaid observations, now when we are of the considered view that the aforesaid liabilities can neither be characterized as bogus liabilities, nor any adverse inferences as regards the same are liable to be drawn in the hands of the assessee company during the year under consideration - Decided in favour of assessee
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2017 (3) TMI 191
TPA - loans and share application money advanced by the assessee to its AE - ALP of international transaction of interest-free loans and share application advanced by the assessee to its AE by applying net margin of 2.3% - Held that:- We have observed that the Hon’ble Bombay High Court in the case of CIT v. Tata Autocomp Systems Limited (2015 (4) TMI 681 - BOMBAY HIGH COURT) has held that in case the tax-payer advances loans to its AE in Germany , then rate of interest for TP purposes shall be applied based upon the rates prevailing in the Germany where loans are consumed. Thus we hold that the rates applied by the authorities below based on net margin on borrowing costs of the assessee to compute ALP of international transactions of the assessee in granting interest-free loans and share application money cannot be sustained and the matter is set aside and restored back to the file of the A.O. for de-novo determination of the ALP of international transaction of assessee with AE on merits w.r.t. to loans and share application money advanced by the assessee to its AE
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2017 (3) TMI 190
Denying the exemption u/s 10(23C) (iiiad) - denal of claim as activity undertaken by the appellant was in the nature of commercial activity and not in furtherance of education - Held that:- The activities of the trust are very much falls within the ambit of education activities. If surplus made by the assessee trust was utilized and consumed for the purposes of furtherance of its object of education , it would also be considered that the trust is existing for the purpose of educational purposes only and not otherwise. We are not in agreement with conclusion drawn by the ld CIT(A) which is not correct. Accordingly, we set aside the order of the ld. CIT(A) and direct the AO to allow the benefit u/s 10(23C)(iiiad) of the Act as the gross annual received is less than ₹ 1 crores as the activities of the trust are for the educational purposes. - Decided in favour of assessee
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2017 (3) TMI 189
Disallowance of ‘additional depreciation’ on windmill - whether the assessee is entitled to additional depreciation @ 20% concerning assessment years prior to AY 2013 -14 with reference to business of generation and distribution of power in terms of S. 32(1)(iia) as it stood prior to its amendment effective from 01.04.2013 ? - assessee engaged in business of generation and distribution of power - Held that:- Madras High Court in the case of CIT v. Atlas Export Enterprises [2015 (3) TMI 846 - MADRAS HIGH COURT] wherein considered the provisions of section 32(1)(iia) of the Act holding that the power generated by windmill was entitled to the benefit of depreciation as contemplated by Sec.32(1)(iia) as aforesaid. Restricting the depreciation to 10% on cost of temporary approach road and fencing, in view of admission of assessee is decided against the assessee following the ratio laid down in Poonawala Finvest & Agro Pvt. Ltd. [2008 (6) TMI 586 - ITAT PUNE ]
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2017 (3) TMI 188
Revision u/s 263 - Addition u/s 40A - Held that:- Direction by the Ld. CIT-A to the assessing officer to redo the assessment denvo is not in accordance with his observation earlier. It is noted that Ld. CIT has found the order by the assessing officer to the prejudicial in as much as a sum of ₹ 15,55,000/- were paid in violation of Section 40A (3). In this regard it is the submission of the assessee that there were no payments in violation of Section 40A (3). However, this aspect has not been substantiated and needs verification and the level of AO. The assessee’s approach in not responding to the show cause notice of Ld. CIT is also not appropriate. Accordingly, we modify the order of LD.CIT and direct the AO to confine his examination to the verification of payments in violation Section 40 A(3) as referred in para 2 of the order of LD. CIT u/s. 263.
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2017 (3) TMI 187
Transfer pricing adjustment - corporate guarantee fee adjustment - Held that:- The details of loans vis-à-vis the security thereof had already been reproduced above. It has also been brought on record that State Bank of India has charged bank guarantee commission to assessee by giving 50% concession on the rate of 1.75% which works out to approximately 0.875%. If various factors and risk involved are evaluated which is quite normal under the foreign guarantee like, country risk, currency risk and entity risk etc., then charging of corporate guarantee commission would fall down below 0.5%. Thus, this constitutes a kind of internal CUP available to the assessee to benchmark the transaction of giving corporate guarantee/letter of undertaking. Moreover, there are catena of decisions wherein this Tribunal has held that corporate guarantee commission around 0.50% can be accepted as ALP. Accordingly, we hold that the corporate guarantee commission fee which is to be recovered from AE should be 0.50% which would meet the arms length requirement. Thus, under the facts and circumstances of the case, we direct the TPO/Assessing Officer to take the corporate guarantee fee @ 0.50% and make the adjustment accordingly. Thus, the issue of corporate guarantee as raised vide ground nos. 1.1 to 1.5 is treated as partly allowed. Disallowance u/s. 14A read with rule 8D - Held that:- The ratio and the principle laid down by the Hon'ble Bombay High Court in the case of Reliance Utilities Ltd (2009 (1) TMI 4 - BOMBAY HIGH COURT) and HDFC Bank, (2014 (8) TMI 119 - BOMBAY HIGH COURT) are clearly applicable, wherein their Lordships have reiterated several times that if the assessee has surplus funds in the form of reserves & surplus or share capital, then presumption is that investment would have been made from surplus funds/interest free funds and not from the borrowed funds. Accordingly, we direct the AO to delete the disallowance of interest expenditure as worked out under rule 8D (2)(ii). Now coming to issue of disallowance of indirect expenditure u/r 8D (2)(iii), we agree with Ld. Counsel that the investments from where income is taxable or the investments which are for business or strategic reasons need to be removed from the working of the average value of investments as contemplated in rule 8D(2)(iii). The later proposition has been consistently held in catena of cases by this Tribunal as referred to by ld. Counsel before us. Thus, respectfully following the ratio we also hold accordingly. Further ld. Counsel has given the working of disallowance under rule 8D (2)(iii) in light of various judicial decisions and propositions which needs verification. Accordingly, we direct the AO to examine the same and compute the disallowance of indirect expenditure. Since our decision on disallowance of interest is based on direct Jurisdictional High Court decisions, therefore, we do not deem fit to go into the various propositions made by the Ld. CIT, DR in his written notes which is more on intention and purpose for insertion of section 14A. On the issue of indirect expenditure also, we are following the decisions of the coordinate decisions as relied upon before us. Disallowance u/s. 14A should be added as part of the book profit, the same too is now a settled proposition that if any disallowance under sec. 14A is made in the normal computation, then the same would be added to the book profit u/s. 115 JB. Accordingly, we order that, whatever disallowance is made under rule 8D, the same should be added to the book profit. Additions on bogus purchases - Held that:- We are of the opinion that the entire purchase cannot be disallowed by the department solely on the basis of first statement of Shri Suresh A. Parekh. As regards the submission and contention of the Ld. CIT, DR that there is lack of documentation in respect of purchases made from the hawala operators because supply of goods could not be proved, in this regard, one has to see the other attended facts and circumstances also which are that, the purchase of materials are backed by firstly, entry in the gate pass at factory premises; and secondly, entry in the books of account and manufacturing account showing item wise material purchase, material consumed, addition in the plant and machinery, inventory of parts etc. Once the factum of material consumed in the manufacturing or inventory is not disputed then no addition of purchases can be made even if the material have been purchased through the hawala operator. The crucial point to see here is that, the source of purchases have gone through books of account and in lieu of payments made material has been purchased which are proven from item wise inventory prepared and entered in the books of account and is reflected from material consumed in manufacturing or credited to capital WIP, etc.,( which stands unrebutted or undisputed), then no adverse inference qua the purchases can be made, because instead of registered dealers assessee has made purchase from grey market. As regard the other discrepancies as highlighted by ld. CIT DR by referring to AO’s order qua the delivery part, the same loses its credibility whence it has been shown that material purchases are appearing in the books of account and consumption of the same has not been doubted. AO should have carried further this information to examine the entries in the books of account and the consumption details. As reiterated above at various places, the factum of purchase so far as the assessee is concerned cannot be disputed when the hawala person himself had admitted that he had arranged the purchases from grey market and got them supplied. This statement before the AO cannot be discarded at all. Thus, in the totality of the facts and circumstances of the case, we hold that the addition on account of so called alleged bogus purchases cannot be added as income of the assessee and the same as directed to be deleted.
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2017 (3) TMI 186
Reopening of assessment - accommodation entries - Held that:- A fresh and tangible incriminating material was stated to have come into possession of the AO from the investigation wing wherein Mr Rajendra Bhimrajka stated to be controller of M/s Akon Management Consultancy Pvt. Ltd. had deposed that M/s Akon Management Consultancy Pvt. Ltd. is a paper entity engaged in providing accommodation entries and it did not do any business but was a merely engaged in providing accommodation entries. The assessee had transaction of ₹ 58,62,940/- with said Akon Management Consultancy Private Limited which was admitted by Sh. Rajendra Bhimrajka to be an accommodation entry. However , the statement of Sh. Rajendra Bhimrajka was not furnished by the AO to the assessee nor cross examination was allowed. It is the averment of the assessee that reasons were supplied to the assessee at the fag end of the assessment when the assessment was getting time barred and also objections raised by the assessee were not disposed of by the AO. The assessee has filed cross objections before tribunal challenging re-opening of the concluded assessment u/s 147 of the Act and the said objections were stated by the assessee to be not disposed off by the Revenue. The ld. DR could not controvert that the AO did not dispose of the objections filed by the assessee. Hence, keeping in view facts and circumstances of the case , we are inclined to set aside and restore the issue of challenge to reopening of the concluded assessment by the assessee to the file of the AO for de-novo determination of the issue on merits in accordance with law.
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2017 (3) TMI 185
Addition u/s 14A - Held that:- The assessee as well A.O. has not undertaken any exercise to work out the disallowance having regard to the accounts of the assessee and the AO merely applied Rule 8D of Income-tax Rules, 1962 in an mechanical manner which Rule 8D of Rules of 1962 cannot be applied for the assessment year 2007-08 and earlier years in view of decision in the case of Godrej and Boyce Manufacturing Company Limited (2010 (8) TMI 77 - BOMBAY HIGH COURT). The assessee has not submitted any details of the expenses incurred in relation to earning of dividend income , and instead claimed that no expenditure has been incurred which could be attributable to the earning of exempt income. In our considered view keeping in view facts and circumstances of the case, the matter needs to be set aside and restored to the file of the A.O. for deciding this issue de-novo on merits in accordance with mandate of Section 14A of the Act. The assessee is directed to produce all necessary details of expenses incurred for earning dividend income u/s 10(34) of the Act and other evidences/explanations in its defense and also to enable A.O. to make the disallowance of expenditure incurred in relation to earning of exempt income in accordance with mandate of Section 14A of the Act . Marked to market loss - Held that:- The eligible transactions are carved out of speculative transactions vide insertion of clause (d) to Section 43(5) of the Act by Finance Act, 2005 w.e.f. 01-04-2006. Hence, the matter needs to be set aside to the file of the A.O. for the denovo determination of the issue on merits for verifying whether the said transactions carried out by the assessee falls within the mandate of Section 43(5)(d) of the Act read with explanation 1 to be covered as business loss vis-à-vis speculative loss and the assessee is directed to produce all relevant cogent evidences and explanations to support its contention. The assessee is in business of trading in shares and stocks. The marked to market loss arising out of derivative contract entered into by the assessee shall be allowed arising due to adverse movement of share prices on the last date of previous year. The AO is also directed to verify that the said marked to market losses so allowed to the assessee are duly factored / reflected by way of reduction in the opening stock of derivative contract valuation for the succeeding year so that there is no duplicity in claiming the said loss by the assessee in the immediately succeeding year when the said derivative contracts are finally concluded/completed. In the result, appeal of the assessee is allowed for statistical purposes. Transaction of shares - determination of income - capital gain or business income - Held that:- As observed that the assessee is in business of trading in shares. The assessee has sold shares of ₹ 13,38,36,535.62 against scrips bought of ₹ 12,71,09,491.62 , the ld. CIT(A) held that the holding period was not very large and in many cases it varies from 28 to 84 days. It was also observed by the authorities below that huge amount of interest bearing funds were raised by the assessee which increased from ₹ 21 crores to ₹ 82 crores during instant assessment year. We do not find any infirmity in the well reasoned order of the ld. CIT(A) treating the profit of ₹ 67,27,044 /- shown by the assessee as business income and not short term capital gain keeping in view the factual matrix of the case and more-so the assessee is engaged in the business of trading in shares and stocks. Thus, we are not inclined to interfere with the well reasoned order of learned CIT(A) which we confirms/sustain
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2017 (3) TMI 184
Income from transactions in shares - capital gain OR business income - Held that:- From the plain reading of clause (a) of the said Notification No.6/2016 dated 29.02.2016, we find that it has been instructed that if the assessee is irrespective of the period of holding treat the transaction for sale-purchase of the share as stock-in-trade then the Department shall not dispute on this matter. Accordingly, in this case, assessee has been treating the income arising from the sale-purchase of the share as STCG/LTCG, therefore, AO cannot dispute the same as “business income”. Magnitude of the transactions do not alter the nature of the transactions. Therefore, magnitude of transactions carried out by the assessee in our view should not be very material in coming to the conclusion that income in question is income from “business”. Though the res judicata is not applicable but the principal of consistency will definitely apply and on that basis the claim of the assessee should be held proper. - Decided in favour of assessee Addition as unexplained cash credit u/s 68 - addition on the basis of a witness who examined at the back of the assessee - genuineness of the purchases - Held that:- The absence of proof regarding the existence of the parties cannot, in our opinion, be confused with the question of genuineness of the purchases. If the goods purchased had been accepted by the Department, it would not, in our opinion, be possible for the Department to turn round and say that the debits appearing on account of these purchases in the name of parties were cash credits. But the lower authorities do not challenge the correctness of the trading profit, and in doing so, they impliedly accept the genuineness of the purchases. As purchases were on credit, corresponding debits for them should appear in some accounts. Such credits in those accounts would not be for cash but for goods and it would be wrong to call them cash credits. The names of the suppliers may be wrong, but the supplies of the goods were reality. For wrong names of suppliers, the reality of purchases cannot be negative. It is a case of purchases having been made by the assessee without properly disclosing the identity of the suppliers. Such a situation is not covered by s. 68 of the Act. We, therefore, delete the addition made on account of such credits. We also find that the statement of SPK recorded during assessment proceedings was not cross examined by the AO though the assessee made very specific request. While holding so we rely in the judgment in the case of CIT v. Eastern Commercial Enterprises (1993 (12) TMI 26 - CALCUTTA High Court ) wherein it was held that the Revenue cannot make any addition on the basis of a witness who examined at the back of the assessee. - Decided in favour of assessee
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2017 (3) TMI 183
Disallowance u/s 40A(3) - payments made in cash to land owners - Held that:- Rule 6DD(g) excludes the payment, which is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town. In the above rule, with regard to the person who receives the payment, it prescribes two situations wherein first situation, rule allows the payer to pay in the place of residence and in the second situation, the payment made in the place of the dealing or place of registration in which the person carries the business, profession or vocation. In the given case, the assessee claims that the payment was made in the place of vocation and the revenue infers that the payment was made in the place of residence due to the fact that the banking facilities are available in the place of residence. The revenue has not substantiated its claim that the payments were actually made in the place of residence. In the absence of such evidence, we are inclined to accept the contention of the assessee that these payments were made in the place of vocation i.e., the payments were made in villages where the agricultural lands are situated. Thus we set aside the orders of CIT(A) and allow the appeals of the assessee in both the years under consideration. With regard to land development expenditure, these expenses were incurred in the villages to develop the land, where there is no banking facilities. Hence, we are inclined to accept the contention of the assessee that these payments were made directly to the employees of the company to carry out the development work. Accordingly, these expenses are also not hit by the provisions of section 40A(3). With regard to payment of commission, we have noticed that the AO has disallowed the payment to agents due to the fact that genuineness of the payments were not proved due to non-compliance to the notices of AO and mismatch of the signatures on the confirmation letters submitted by the assessee. The ld. AO had accepted the payments which are properly documented. Hence, we accept the findings of the AO and accordingly grounds raised by the assessee in this regard are dismissed.
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Customs
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2017 (3) TMI 218
SEZ unit - Imposition of penalty u/s 11 (2) of the Foreign Trade (Development & Regulation) Act, 1992 - Proceedings initiated 3 years after the assessee was wounded up - violation of the conditions of the Letter of Approval (LoA) - petitioner was given LoA on 10.02.2008 for manufacture of 'gold bangles and pendants' within MEPZ-SEZ, Chennai. On the basis of such approval, the petitioner firm continued to manufacture 'gold medallions' and exported the same. Subsequently, since the Government withdrawn the income tax concessions hitherto conferred to the persons like the petitioner who carry out the manufacturing activities inside MEPZ-SEZ, on and from 31.03.2012, the export activities carried on by the petitioner have come to a close - whether the petitioner has violated the terms and conditions of the LoA and whether the commodity 'medallion' and 'pendant' are one and the same? Held that: - the Dictionary meaning of the word 'Pendant' and 'Medallion' can be considered. While pendant is termed as a piece of jewellery that hangs from a necklace chain, medallion is also termed as a piece of jewellery in the shape of a medal worn as pendant. Therefore, it is clear that there is no distinction or difference between the meaning given to the commodities 'pendant' and 'medallion'. The handbook of procedure only prescribes norms for value addition. As per clause 4A 2 and 2.1 of the Handbook of Procedure relied on by the respondent, the wastage norms and value addition norms relates to plain jewellery to have a maximum wastage of 3.5% while in the case of medallions it is permitted upto 0.25%. When the petitioner has admittedly achieved 7% of value addition, even the invocation of the guidelines contained in the handbook of procedure will not confer any jurisdiction to the respondent to impose the penalty on the petitioner. These aspects have not been taken note of by the respondent while passing the impugned order imposing penalty on the petitioner and therefore the impugned order cannot be sustained. Alternative remedy - Held that: - there was an appellate remedy but without availing it, the petitioner has approached this Court. Merely because the petitioner failed to avail the alternative remedy available, this Court cannot refuse to entertain this writ petition as alternative remedy is always not a bar and this Court, in exercise of it's power under Article 226 of The Constitution can always entertain a writ petition depending upon the facts and circumstance of each case - merely because the petitioner failed to avail the alternative remedy, it will not be a ground to dismiss the writ petition at the threshold. Penalty - Held that: - In the absence of any ill-intention or mens rea on the part of the petitioner to gain unlawfully by exporting goods which are not permitted to be exported by them as per the LoA, the respondent is not justified in imposing penalty. Petition allowed - decided in favor of petitioner.
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2017 (3) TMI 217
Cancellation of Advance licence - Duty Exemption Scheme - During the pendency of the writ petition, the petitioner was heard by the Advance Licensing Committee on 21.09.1999 which decided that because of quantitative factors relating to non-fulfilment of export obligation under the Advance Licence and absence of evidence about use of packing material, the exports made by the petitioner was not eligible for grant of the relief of conversion of the exports into the duty drawback system - Held that: - the EXIM Policy itself makes ample provision for discharge of export obligation in non-convertible India Rupees apropos exports ‘from India against liquidation of Rupee balance to the credit of erstwhile RPA countries’. The RBI had permitted release of advance payment in the petitioner’s account for the agreed exports - The petitioner has affected exports of the relevant amount. It neither mis-represented nor mis-declared any information for the grant of the Advance Licence. The RBI has clarified that the ‘transaction in question pertains to exports from India against liquidation of rupee balance of the erstwhile USSR.’ Therefore the respondents’ contention that the EXIM Policy did not permit the discharge of export obligation in Indian Rupees, is untenable - petition allowed - decided in favor of petitioner.
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2017 (3) TMI 216
Refund of SAD - N/N. 102/2007Cus dated 14.09.2007 - denial on the ground that the assessee has not paid the VAT on the imported goods i.e. coils and what is sold subsequently by the assessee and on which VAT is paid is altogether different goods i.e. roof - Held that: - for claiming refund under the said Notification, the importer has to satisfy that the Value Added Tax / Sales Tax, as the case may be has been paid on the goods imported and only those goods imported are sold and the VAT is paid on such imported goods - In the present case, what is imported by the appellant is coil sheets. The Special Additional Duty is paid on such imported goods namely coil sheets. Thereafter, what is manufactured and sold by the appellant is "Proflex Roof" and on such "Proflex Roof" VAT is paid. Therefore, it cannot be said the assessee has paid the VAT on the goods imported, on which, Special Additional Duty has been paid. Even in the invoice the rate of laying of "Proflex Roof" is also charged on per square meter including the value of the material. There is no separate invoice / bill issued for coil sheets. Therefore, it cannot be said that what is sold by the appellant to his client is same goods which is imported i.e. coil sheets. Under the circumstances and one of the condition of N/N. 102/2007Cus dated 14.09.2007 has not been complied with - appeal dismissed - decided against appellant.
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2017 (3) TMI 215
Maintainability of appeal - Held that: - the dispute in the present Tax Appeal is with regard to N/N. 203/92-Cus dated 19th May 1992 value based advance license scheme, the goods imported against which relates to rate of customs duty to be charged, and therefore, in view of Section 130 [E](b) of the CA, 1962, with respect to such dispute, an appeal before this Court shall not be maintainable and it shall lie only before the Hon'ble Supreme Court - appeal dismissed as not maintainable.
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2017 (3) TMI 214
Denial of DEPB benefit - penalty u/s 114(iii) of the CA, 1962 - export of almost 110 cartons of 100% cotton knitted men and women shirts - the containers loaded on vessel MV Mac Andrews America sailed from Mundra Port at 13.30 hours on 28.6.2006, without examination and assessment of documentation; also without Let Export Order permitting clearances by the proper officer - whether penalty on each of the appellants is justified in the facts and circumstance of the case? Held that: - the principle laid down for imposition of penalty on the exporter and the CHA in various judgments is consistent in observing that once the factory stuffed container is gated in, no control remains with the exporter and/or CHA, hence , in the event of sailing of the vessel with the container of exported goods before issuance of LEO, imposition of penalty on the exporter and the CHA is unwarranted - In the present case, there is no substantial evidence either against the exporter or the CHA brought on record attributing their involvement for loading of the container and thereafter sailing of the vessel,l without LEO, resulting into contravention of relevant provisions of the Customs Act namely 34, 40 and 51 of the said Act - penalty on the appellant exporter M/s Arvind Mills Limited and the CHA M/s Chinubhai Kalidass & Bros cannot be sustained, accordingly, set aside. Penalty on surveyor - On behalf of surveyor, M/s Master Marine Services Pvt. Ltd it is vehemently argued that only because they prepared the Form No.6, therefore, they cannot be penalized - Held that: - the CHA addressed a letter to CFS, Mundra providing the details of the container seal number etc. for issuance of Form No.6 to offload of the container. Also in the daily activity report dated 25.6.2006 prepared by the surveyor, it records the container number, destination etc. but no way these documents could be considered as indicating or allowing loading of the container on the vessel and thereafter for its export - the container was loaded and later sailed without the LEO and in violation of the relevant provisions of Customs Act,1962, without the involvement of surveyor - penalty imposed on them is also set aside. Penalty on shipping agent - Held that: - considering the active role of the shipping line agent, in discharging/loading the export cargo on the vessel, ld. Commissioner has rightly arrived at the conclusion that for sailing/export of the said container on 28.6.2006 without LEO, the shipping line agent is at fault and accordingly penalized them - penalty imposed on the shipping line agent is too harsh as no evidence for intentional violation of the provisions of the Act has been brought on record, but their act or omission attributes to negligence or lack of co-ordination/communication - penalty on the shipping line is reduced to ₹ 50,000/-. Penalty on the terminal operator M/s MICT - Held that: - imposition of penalty not justified, as as before loading the container in the vessel they had been communicated by the shipping line agent through the advance export list mentioning therein the list of containers that were to be loaded - penalty set aside. Appeal disposed off - decided partly in favor of appellant.
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Service Tax
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2017 (3) TMI 250
CENVAT credit - input services - Legal services - Chartered Accountant services - denial on account of nexus - Held that: - The Department has proceeded to deny credit stating that the due diligence reports were not acted upon by the appellant for which it was sought for. This cannot be a ground for disallowing credit - Whether due diligence report has been accepted and acted upon, is wholly an internal matter of the company which the Department cannot dictate - The appellants are engaged in providing stock broker services and therefore the due diligence report obtained before committing the purchase of share warrants is definitely a service which qualifies as input service - appellant eligible for credit - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 249
Demand of tax - extended period of limitation - commercial coaching or training service - Held that: - Appellant is a public body that is without profit motive. The intent to evade tax is not apparent; nor is there any evaluated finding to that effect in the orders of the original and first appellate authority - there was no reason for appellant to entertain the notion that they were liable to treated as a ‘commercial coaching or training centre’ considering the nature of their activities. That an Explanation had to be inserted in 2010 in the charging provision of section 65 (105) makes it apparent that confusion about the scope of this tax existed in the minds of not just institutions but also tax officers. The assessing officer is directed to ascertain the claim of the appellant that the data submitted constitutes the sum total of receipts from beneficiaries of training programmes and restrict the levy to such collections within the normal period of limitation u/s 73 of FA, 1994 from the date of issue of SCN - appeal allowed by way of remand.
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2017 (3) TMI 248
Interest liability - the credit of the Cenvat amount ought to have been adjusted from the month of August, 2005 onwards as shown and reflected in their ST-3 Returns - whether the appellant is required to pay interest? - Held that: - reliance placed in the case of Commissioner of Service Tax, Mumbai Vs. Toyo Engineering Corpn. Ltd. [2014 (10) TMI 475 - CESTAT MUMBAI], where it was held that merely because the credit is available in the books of account does not mean that the tax has been paid. Therefore, the liability to pay interest has to be computed from the due date of payment of tax to the actual date of payment - appeal rejected - decided against appellant.
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2017 (3) TMI 247
100% EOU - Refund claim - Rule 5 of CCR, 2004 - rent in regard to car parking - maintenance charges - Chartered Accountant services, Manpower Recruitment and .Supply Agency Services, Telecommunication services, Management or Business Consultant Services, Security Agency services - denial on account of nexus - Held that: - The rent paid for car parking as well as the maintenance charges paid for the premises is part and parcel of the rent agreement, though the amounts are paid as rent towards car parking and maintenance charges. The disallowance of refund of these services is not proper - refund allowed. Chartered Accountant services - Manpower Recruitment and Supply Agency Services - Telecommunication services - Management or Business Consultant Services - Security Agency services - Held that: - The Tribunal in the case of M/s Alliance Global Services IT India Pvt Ltd., Versus CC, CE & ST, Hyderabad-IV [2017 (2) TMI 574 - CESTAT HYDERABAD] has discussed and analysed the eligibility of refund in respect of services, and held that these services are eligible for refund. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 246
Late payment of tax - failure to obtain registration - appellant claim that there was no intention to evade tax, and the failure was only due to ignorance - Held that: - the appellant has paid dues after much delay. The delay has been of various period ranging upto 36 months. Invoice shows that the said receiver was availing credit of the same. The service provider has operated for almost two years without taking registration - the registration was obtained on 12/11/2008 only after the visit of Central Excise Officers - the intention to evade duty cannot be denied - appeal dismissed - decided against appellant.
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2017 (3) TMI 245
Levy of tax - reverse charge mechanism - services received from outside India - claim of appellant that section 66A, for levy of service tax on ‘reverse charge basis’, was incorporated in Finance Act, 1994 with effect from 18th April 2006, and ‘reverse charge mechanism’ became law only after such incorporation - Held that: - the tax itself was not leviable during the disputed period. The manner of discharging that tax liability cannot be the subject of a demand u/s 73 read with rule 14 of CCR, 2004 - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 244
CENVAT credit - construction of residential quarters for the employees of the respondent company - input service or not? - Department claim that the definition only included the words 'setting up' of factory and does not extend to the construction / setting up of residential colony for the employees of the factory - Held that: - the period involved is prior to 01/04/2011 when the definition of input service during the relevant period had a wide ambit as it included the words 'activities related to business' - the factory is located in an extremely remote location where it is the assessee/respondent who provides for the accommodation as well as other welfare activities like hospitals, schools etc. for the employees of the factory - following the judgment in the case of M/s. Reliance Industries Ltd.[2015 (11) TMI 100 - CESTAT MUMBAI], the respondent is eligible for credit - appeal dismissed - decided against Revenue.
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2017 (3) TMI 243
Refund of interest - interest accrued on excess amount retained by the department, from its payments made by the appellant to the date of refund - Held that: - interest on delayed refund is payable u/s 11BB of the CEA, 1944 on the expiry of three months from the date of receipt of refund application u/s 11B(1) and not from the date of order of refund or the appellate order allowing such refund - appeal dismissed - decided against appellant.
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2017 (3) TMI 242
Refund claim - sub-contract - the service tax credit if permissible, whether the appellant is entitled to the refund thereof? - what shall be the relevant date for filing the refund claim in the case of export of service by a software service exporter? - Held that: - the adjudication order has not brought out that the service received from the sub-contractor for ultimate provision to the overseas service recipient was absent. There was an inextricable link between the input service and the output service. Therefore, the CENVAT credit in respect of service tax paid by the appellant to the sub-contractor makes the appellant eligible to claim that as a refund, if otherwise not deniable by law. The learned adjudicating authority shall count the limitation from the date of realization of the foreign exchange. Appeals are remanded to the adjudicating authority to complete the re-adjudication - appeal allowed by way of remand.
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2017 (3) TMI 241
Levy of penalty - amount received as consideration but did not deposit the same with government account due to shortage of trained staff and lack of awareness of Service Tax Law - whether benefit of Section 73(3) of FA as per which no SCN to be issued once the service tax and interest are paid, shall be available to appellant or not? - Held that: - The appellant who has collected the service tax from the recipients of the service cannot take a plea that there was no willful suppression of facts from the department as collection of service tax from recipient of service implies that tax collected needs to be deposited with the government. The service tax collected if not deposited with the government automatically leads to an inference that there was an intention on the part of the appellant to evade the tax. The apex court decision in the case of Rajasthan Spinning and Weaving Mills [2009 (5) TMI 15 - SUPREME COURT OF INDIA] relied upon, wherein it has been held that once the ingredients spelt out in the Section 11 AC of the CEA, 1944 are present, there is no discretion to the authorities to waive the penalty on the ground that the duty and interest has been paid before the issuance of SCN. Appeal dismissed - decided against appellant.
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Central Excise
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2017 (3) TMI 240
CENVAT credit - Rules 6(3) of the Cenvat Credit Rules, 2004 - the appellant was not maintained separate account of input/input services - demand of 10% of the value of exempted final products - Held that: - As it is clear that the appellant has already reversed the Cenvat Credit attributable to final exempted goods therefore, we hold that the appellant is not required to pay 10% of the value of the exempted goods. Interest - Held that: - since the appellant have reversed the Cenvat credit without utilization, the demand of interest is also not sustainable. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 239
Captive consumption - intermediate producut - Benefit of N/N. 67/95 dated 16.03.1995 - While trimming untrimmed sheets and circles scrap was generated, whether untrimmed circles and sheets of brass were eligible to enjoy benefits of Notification? - Held that: - merely because in the process of trimming, certain wastes have arisen, untrimmed sheets captively consumed, the benefit of exemption under N/N. 67/95 cannot be denied. Prima facie, the applicants shall be eligible for the benefit of N/N. 67/95 - appeal dismissed - decided against Revenue.
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2017 (3) TMI 238
Manufacture - activity of conversion of bare copper wire to winding wire by enamel insulation process - Held that: - drawing, cutting of the wire does not amount to manufacture at the relevant time - since the activity carried out by the appellant does not amount to manufacture no duty can be demanded from the appellant. Time limitation - job-work - Held that: - since the entire activity of supplying the bare copper wire by M/s. Crompton Greaves Ltd to the appellant and the process carried out by the appellant was very much in the knowledge of the department, there is no suppression of facts on the part of the appellant - demand is hit by limitation. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 237
Refund claim - unjust enrichment - rejection on the ground that the credit note has been issued after clearance of the goods - Held that: - As M/s Swaraj Mazda Ltd. has not taken the credit of excess duty claimed as refund by the appellant and the same has been certified by the Range Superintendent, the appellant is entitled for refund claim and as they have passed the bar of unjust enrichment - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 236
Refund claim - CENVAT credit reversed in respect of inputs contained in wool waste cleared at nil rate of duty - Held that: - reliance was placed in the case of RALLIS INDIA LTD. Versus UNION OF INDIA [2008 (12) TMI 46 - HIGH COURT BOMBAY], where on similar issue it was decided that mother liquor arising in the manufacture of dutiable gelatin, is not an exempted final product and, therefore, the petitioner was not liable to reverse any credit of duty availed on inputs or alternatively pay the presumptive amount under Rule 57CC - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 235
Refund claim - duty was paid in excess on clearance of the goods - reduction in price due to post clearance discount - quantum is finalised subsequently on periodic basis - Held that: - The dealer, who received the goods from the manufacturer, may charge to his buyer the full amount of duty ignoring the duty reduced by manufacturer and the said fact cannot be a ground for denying the refund to the manufacturer - There is no concept of not passing on the duty to the ultimate consumer and as such, as the buyers have been passed on the benefit of reduction of duty, the same would satisfy the principles of unjust enrichment. Appeal dismissed - decided against Revenue.
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2017 (3) TMI 234
Reversal of CENVAT credit - assessee availed off Cenvat Credit on the inputs in the manufacture of both, dutiable as well as exempted goods - Held that: - The Finance Act, 2010 makes an amendment of Rule 6 of Cenvat Credit Rules, 2002. Rule 6 was amended and is deemed to have been amended retrospectively, in the manner provided in column (3) of the Seventh Schedule, on and from and up to the corresponding date specified in column (4) of that Schedule, against the rule specified in column (2) of that Schedule - The respondent-assessee, even if it had failed to maintain a separate account in view of the retrospective amendment, it was entitled to reverse proportionate Cenvat Credit - The option of paying an amount equal to 10% sale value of exempted goods, therefore, could not have been enforced on the assessee - appeal dismissed - decided against Revenue.
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2017 (3) TMI 233
Clandestine removal - excess stock of finished stock found in the premises - non-maintenance of registers - confiscation - redemption fine - Held that: - assessee have admitted that they have not maintained statutory records with an intent to remove the same without preparation of invoices and without payment of any duty. They have also admitted that the good found were finished goods. Therefore, proper registers were required to be maintained - confiscation upheld. Redemption fine - Held that: - taking a very lenient view the learned tribunal itself has reduced the redemption fine from ₹ 4,91,000/- to ₹ 1,00,00/- and has also reduced the penalty from ₹ 10,000/- to ₹ 2000/- only. In the facts and circumstances of the case, it cannot be said that the learned tribunal has committed any error. Appeal dismissed - decided against assessee.
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2017 (3) TMI 232
Classification of fire retardant fabrics and chenille fabrics - Chenille fabric or Cotton fabric - Notification 43/2001-CE dt. 26.06.2001 - Revenue neutrality - Held that: - Clearly, Section Note 2 (A) of the Section XI is not applicable to Tariff Heading 5801. Hence, the argument of Ld. Advocate that it should be classified as unprocessed cotton fabric on the basis of predominance of cotton in chenille fabric is untenable. In a recent judgment in the case of Star Industries Vs. Commissioner of Customs (Imports), [2015 (10) TMI 1288 - SUPREME COURT] wherein it was held It is rightly argued by the learned senior counsel for the Revenue that exemption notifications are to be construed strictly and even if there is some doubt, benefit thereof shall not enure to the assessee but would be given to the Revenue - Appeal dismissed.
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2017 (3) TMI 231
Cenvat credit - Capital goods - MS Beams, Channels, Plates etc - Penalty - Time limitation - Held that: - The Hon'ble High Court of Madras in the case of India Cements Ltd., Vs CE, Chennai[ 2015 (3) TMI 661 - MADRAS HIGH COURT ] has held that MS items used for erection of capital goods is eligible for credit - I find that the show cause notice issued invoking the extended period is also unsustainable - Appeal allowed.
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2017 (3) TMI 230
Cenvat credit - Penalty - Whether in the case of merger of two units the PLA of one unit can be transferred to the new unit that has came into existence - Held that: - The amount lying in PLA can be considered as the cash held by the appellant company which definitely falls under the assets of the company. Viewing in this angle, when the assets of one unit merges with the other, the PLA necessarily has to follow - Appeal allowed - decided in favor of the assessee.
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2017 (3) TMI 229
Valuation - Denaturing of goods - whether appellant is liable to pay duty on Ethyl Acetate cleared to sugar factory for denaturing purposes or otherwise? - Held that: - identical issue of the same appellant was decided by this Bench in the case of LAXMI ORGANIC INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., RAIGAD [2007 (7) TMI 491 - CESTAT, MUMBAI], wherein same issue was in dispute before the Division Bench, where it was held that duty is not required to be paid on denaturing of goods - appellant not liable to pay duty - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 228
Imposition of penalty u/s 173Q of CER - deduction of certain expense like sale tax, freight, octroi etc. - whether these expenses should be allowed on actual basis or provisional basis? - Held that: - there was a clear direction in the order of Tribunal dated 05.11.2004 directing the Commissioner to allow the deduction on the actual basis - demand is set aside. The first adjudicating order specifically dropped the charge under 173Q while imposing penalty under 11AC. Tribunal has clearly held that penalty under 11AC cannot be imposed. The charge for imposition of penalty under 173Q has already been dropped in the order of Commissioner dated 26.03.2004 - penalty set aside - appeal allowed by way of remand.
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2017 (3) TMI 227
Change in the annual production capacity - demand - time limitation - Held that: - As regard the change of parameter for re-determination of production capacity was applied by the appellant to the Commissioner on 17-12-1997 wherein appellant have declared that on the revised capacity they will be paying duty w.e.f. 1-1-1998. The appellant have been filing monthly RT12 return wherein the payment of duty as per the revised capacity was declared. With this fact department was well aware that appellant for paying duty on the revised capacity w.e.f. 1-1-1998, therefore I do not see any suppression of facts on the part of the appellant - demand is time barred - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 226
Natural justice - cross examination of the witnesses whose statements were relied upon in the SCN was rejected - Held that: - As per Section 9B of Central Excise Act, 1944 even if the cross examination is not asked for it is obligatory on the part of the adjudicating authority to cross examine the persons whose statements were recorded - the adjudicating authority are directed to conduct the cross examination of the witnesses as requested by the appellant - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 225
CENVAT credit - Rule 8(3A) - Held that: - Rule 8(3A) that had prevented the adjustment of cenvat credit, in certain circumstances, was no longer a barrier. This meant that with respect to the payments towards duty or any other amounts, cenvat credit was available - Furthermore, Section 11AC (2) itself clarifies that in case the determination of the order-in-original of the adjudicating authority undergoes a change at the appellate level where the concerned authority might reduce or grant complete relief that order would prevail for the purpose of determination of any amount or penalty u/s 11 AC - appeal dismissed - decided against Revenue.
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2017 (3) TMI 224
Condonation of delay - delay in reopening of a case - Held that: - where the Tribunal has taken an opinion not to file an appeal and the matter has attained finality then after a lapse of one and half years, the same matter should not be reopened - The delay is to be condoned only in exceptional circumstances and no exceptional circumstances were there in the present case to condone the delay - appeal dismissed - decided against appellant.
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2017 (3) TMI 223
CENVAT credit - MS ingots, angles, channels etc - Held that: - All these items fall either in the definition of capital goods or under the category of parts/components/accessories of capital goods. Without such fabrication of parts/components/accessories of capital goods the activity of manufacture cannot be carried out - In Monnet Ispat and Energy Ltd., Vs CCE, Raipur [2016 (1) TMI 917 - CESTAT NEW DELHI] the Tribunal had occasion to consider the eligibility of credit of MS items used for fabrication of components/accessories of various machineries used in the activity of manufacture - credit on MS items allowed - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 222
Interest for delayed payment of duty - time limitation - Held that: - interest chargeable on delayed payment had to be only at the rate of 2% per month or for the matter 24% per annum as notified by the State Government in terms of the Section 11AB, which is between the permissible limits in terms of Section 11AB. Consequently, the demand notices are quashed and interest on delayed payment has to be recomputed only to the extent it is referred to the rate of interest @2% per month or 24% per annum under Rule 8(3) - matter remanded to adjudicating authority for de-novo adjudication - appeal filed by the Revenue before this forum becomes infructuous and is dismissed.
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2017 (3) TMI 221
Clandestine removal - shortage of stock - Held that: - eye estimation cannot be said to be 100% accurate, but it is also observed that in the present case, the difference in the stock was substantially large and cannot be ignored. The shortage between the physical and the RG-1 stock is 67.59% in respect of Pig Iron. In the case of Pig Iron chips, it is 28.18% - the director of appellant company have deposited the amount of ₹ 6,00,000/-. Penalty on Managing Director of the appellant company - Held that: - The finding of the Commissioner (Appeals) is merely on assumptions and presumptions - No penalty could be imposed on Managing Director. Appeal disposed off - decided partly in favor of appellants.
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2017 (3) TMI 220
Valuation - special packing used for ‘physician samples’ - packing cost to be included in assessable value or not? - Held that: - ‘physician samples’ are liable to duty on removal and that, in view of the special nature of packaging, costs must be computed of the sample including the special packaging cost for computing assessable value - this incremental cost has been subject to duty - in the absence of any reasonable evidence that this cost has not been included or adjusted in the duty paid on ‘physician samples’, appeal allowed - decided in favor of appellants.
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2017 (3) TMI 219
Reversal of CENVAT credit - non-maintenance of separate record for inputs used in dutiable and exempt goods - Held that: - The appellant has reversed the credit taken on inputs used in production of goods cleared under end-use exemption notification. Since rule 6(3) is not applicable to appellant, reversal was the only viable option available to the appellant short of refusing to supply goods to the research institutions - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (3) TMI 213
Constitutional validity of Section 6A of the Act - when the petitioners did not press the challenge to the Constitutional validity of Section 6A of the Act, whether the petitioners may be permitted to again raise the question of validity of Section 6A of the Act in the subsequent proceedings? - Held that: - it cannot be said that Section 6(A)(1) of the Act can be said to be ultra vires to Article 269(3) of the Constitution of India and / or Section 6A(1) of the Act treats the transaction which is not “sale” shall be treated as “sale”(deemed sale). Section 6 is a charging Section and Section 6 A is a procedural Section and therefore, by Section 6A(1) of the CST Act, it cannot be said that by the said provision, the transaction which otherwise is not a sale is treated as sale (deemed sale), it cannot be said that Section 6A (1) of the CST Act is unconstitutional and / or ultra vires to Article 269(3) of the Constitution of India and / or Entry no. 92 A of List I of the Schedule 7 of the Constitution. Section 6A is a procedural provision, the submission that amendment in Section 6A of the CST Act creates an irrebutable presumption of “sale” in absence of declaration in Form F and therefore, unconstitutional has no substance. Petition dismissed - decided against petitioner.
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2017 (3) TMI 212
Release of seized goods - invoices mentioned Tin numbers, which were found to be non-existent - the consignor and consignee were all fictitious persons - Held that: - goods were being transported with a valid Transit Declaration Form (TDF), and at the time when goods were seized, it was en-route, as disclosed in TDF, and period for the vehicle to exit had not expired. The interest of the parties would have to be protected, particularly as proceedings u/s 48 are likely to be initiated in the matter. It is found that goods were being transported pursuant to a TDF, and at the time when goods were seized, they were found to be en-route disclosed in the TDF, and time to exit State had not expired - the direction issued by the Tribunal to release the goods upon deposit of 10% amount of the estimated value in cash or bank guarantee cannot be said to be bad in law. Revision disposed off.
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2017 (3) TMI 211
Set-off u/r 44 of the Gujarat Sales Tax Rules, 1970 - proof of payment - whether while claiming the set off u/r 44 of the Rules, 1970, Form No.40 signed by the dealer, produced by the purchaser can be said to be conclusive proof of payment of tax by the dealer? Held that: - considering the proviso to Rule 44 of the Rules, 1970, if the assessee proves to the satisfaction of the Commissioner that the relevant tax leviable under the Act has been paid or has become payable on an earlier transaction on the same goods and produces a certificate in Form 40 issued by the dealer from whom such goods were purchased by the assessee, stating inter alia that the sale of the same goods has been or will be included in his turnover of sales and the amount of tax payable, if any, by him under the Act, on such turnover has been or as the case may be, will be paid within the time laid down in rule 31, the assessee/purchaser shall be entitled to set off of such tax paid by the original dealer - the onus is upon such assessee who claims set off, to prove to the satisfaction of the Commissioner that the tax of which the set off is claimed has been paid by the original dealer from whom he has purchased the goods. As with respect to other two transactions the learned Tribunal has remanded the matter to the first Appellate Authority which according to the appellant are similar to that of other three transactions for which the learned Tribunal has rejected the appeal and the order with respect to other two transactions has attained the finality, we deem it fit to remand the matter to the adjudicating Authority to consider the set off claimed by the assessee in light of the observations made hereinabove i.e. the assessee has to prove to the satisfaction of the adjudicating Authority / Commissioner that the tax has been paid by the original dealer and that the assessee is also required to produce certificate in Form 40 issued by the dealer. As observed hereinabove when the aforesaid twin conditions are satisfied, then and then only the assessee shall be entitled to the set off, otherwise not. Appeal allowed in part and part matter on remand.
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2017 (3) TMI 210
Waiver of pre-deposit - Inter State sale or not? - nature of the transaction between the petitioners - works contract - contract for supply design, manufacturing, erection and commissioning of electrical systems - Held that: - The salient features flowing out as conditions in the contract and the entire conspectus of law on the issues as notice earlier, leave us with no option but to hold that the movement of goods by way of imports or by way of inter-state trade in this case was in pursuance of the conditions and/or as an incident of the contract between the assessee and DMRC - The goods were of specific quality and description for being used in the works contract awarded on turnkey basis to the assessee and there was no possibility of such goods being diverted by the assessee for any other purpose - pre-deposit set aside - the DVAT Tribunal shall proceed to hear the appeals on merits - appeal allowed by way of remand.
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2017 (3) TMI 209
Waiver of pre-deposit - the default assessment was not preceded either by a notice or hearing and that it appears, apparently, the order was passed on “system generated” pre-determined order and the result of a programme - Held that: - Bhumika Enterprises’s case [2015 (9) TMI 535 - DELHI HIGH COURT] too substantiates that system generated orders cannot stand the test of law - Prima facie the default assessment in this case too appears to follow the same course, of course the appeal is not before the Court–nor can in the present instance, the Court comment either favourably or adversely against the default assessment order - Tribunal is directed to hear the assessee’s appeal, pending before it without insisting upon the pre-deposit - appeal allowed - decided in favor of appellant.
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Indian Laws
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2017 (3) TMI 208
Dshonour of cheque - invoke inherent powers of this Court under Section 482 Cr.P.C - Held that:- The cross-examination to the respondent/complainant(CW 1) on the point of asking for the production of the ITRs though not relevant directly but the learned Metropolitan Magistrate since directed the respondent/complainant to produce the ITRs for the period 2005-2006 to 2011-2012 was made under Section 91 Cr.P.C. and further cross-examination has to be based on its relevancy part only. Here, it is not out of place to mention that the petitioner/accused does not have liberty to further cross-examine the respondent/complainant(witness CW 1) to frustrate the entire objective of the summary trial or harass the respondent/complainant. The contention of the learned counsel for the petitioner that the learned ADJ vide impugned order dated 23.08.2014 has curtailed the scope of further cross-examination is not convincing and cannot be accepted as the petitioner/accused cannot be allowed to further cross-examine the respondent/complainant(witness CW 1) on irrelevant aspects which are not directly relevant for the purpose of determination of the offence committed. The direction given by the learned Metropolitan Magistrate vide order dated 24.05.2014 to the respondent/complainant is an intermediate order passed under Section 91 Cr.P.C. which is in the form of a final order for the purpose of giving the direction for production of the ITRs is concerned. Therefore, the order dated 24.05.2014 is a revisionable order under Section 397 Cr.P.C. and the argument of the learned counsel for the petitioner that the abovementioned order passed by the learned Metropolitan Magistrate is an interlocutory order which is hit by Section 397(2) Cr.P.C. fails. As discussed above find no merit in the contentions of the learned counsel for the petitioner as well as the judgments relied by him are not helpful in the facts and circumstances of the present case as there is no specific material available on record to invoke inherent powers of this Court under Section 482 Cr.P.C.
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