TMI Tax Updates - e-Newsletter
April 14, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax
Recovery of tax dues from the buyer of property - defaulter sold certain properties to various persons including the petitioners - The action of the TRO in declaring the transfer of property to be void was without jurisdiction - HC
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Assessability of capital gains of property Development agreement - no deemed transferred could be inferred and no capital gains could be brought to tax in the hands of the assessee - AT
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Confirmation of additional claim of depreciation Provisions of section 32(1)(iia) of the Act, do not requires that the P&M has to be put into use in the year in which it is acquired for the purpose of claiming AD - AT
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Business loss Loss specifically covered u/s 73 of the Act business activity of institutional stock broking in shares - losses are in the course of business and should be allowed as such u/s 28 - AT
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Allowability of depreciation @10% as against 100% claimed by the assessee - nature of expenditure on Civil work, flooring work, and finishing work, etc incurred as tenant - only 10% depreciation allowed - AT
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A residential house does not mean a single residential house - Even where the assessee constructs or receives a number of flats adjacent to each other or in different floors of the same building then also the assessee would be entitled for exemption u/s 54F - AT
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Sale of software and maintenance services Royalty - The right to make a backup copy purely as a temporary protection against loss, destruction or damage does not amount to acquiring a copyright in the software - AT
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Customs
Rate of duty - import of Gloves Exemption from Tax - Classification goods are not medical examination gloves and therefore not eligible for the claimed duty exemption - HC
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Removal of warehoused good based on photo copy of the duty paying Bill of Entry - Penalty levied on Storage terminal as they have not put in place the correct system for clearance of warehouse goods - AT
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Service Tax
The fact that the assessee is paying VAT on the sale of goods on the supply of food and beverages, would not exclude the liability for the payment of service tax in respect of a taxable service provided by the assessee as an outdoor caterer - HC
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Jurisdiction of Commissioner (Appeals) - under section 85(4) of the Finance Act, 1994, the Commissioner (Appeals) would have power to remand a case to the adjudicating authority for fresh consideration. - HC
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Maintainability of appeal before tribunal - The fact that the Chief Commissioners did not, on the record, record independent reasons for concurring with their respective subordinates does not render the authorization void - HC
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Central Excise
Duty demand - even if certain suspicion was raised by the statements recorded by the investigation made by the officers of DGCEI but the same are not sufficient to hold clandestine manufacturing and clearance of excisable goods - AT
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Classification of the product Di Calcium Phosphate - Animal Feed Grade - chapter 23 or chapter 28 - prima facie, the product would fall under Chapter 28 and liable to duty - AT
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Clandestine removal of goods - Manufacture of manmade fabrics - Mere reliance on note books/ diaries or statements cannot be considered as enough evidence for clandestine manufacture and clearances. - AT
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Remission of duty - After destruction, Revenue issued SCN that remission was granted erroneously - The goods consequently were not available for removal from the factory - Commissioner to hear appeal without pre-deposit - AT
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Manufacture - Excisable goods - marketability - Saw dust - Prima facie, it is not a manufactured product. For any commodity to be called excisable goods, it should satisfy cumulatively both the conditions viz. manufacture and marketability. - stay granted - AT
Articles
News
Case Laws:
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Income Tax
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2014 (4) TMI 411
Recovery of tax dues from the buyer of property - defaulter sold certain properties to various persons including the petitioners. - Validity of transfer u/s 281 of Income Tax Act Unpaid tax Creation of Charge Held that:- Judgment in T.R.O. v. Gangadhar Vishwanath Ranede [1998 (9) TMI 1 - SUPREME Court] followed wherein it was held that, "the Tax Recovery Officer is required to examine whether the possession of the third party is of a claimant in his own right or in trust for the assessee or on account of the assessee. If he comes to a conclusion that the transferee is in possession in his or her own right, he will have to raise the attachment. If the Department desires to have the transaction of transfer declared void under Section 281, the Department being in the position of a creditor, will have to file a suit for a declaration that the transaction of transfer is void under Section 281 of the Income-tax Act" The action of the TRO in declaring the transfer of property to be void was without jurisdiction. - no hesitation in striking down the order dated 8th November 1995 - Rule is made absolute accordingly Decided in favour of petitioner.
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2014 (4) TMI 402
Validity of AOs action - Demand to submit 100% tax by the AO Appeal pending before the CIT(A) Held that:- Part of the addition made by the AO is not agreed to by the CIT (A) in the earlier years - only to keep the issue alive, the AO has made the additions - Rest of the additions are disputed by the assessee and similar issues for earlier years are pending before the Tribunal - the discretion lies with the AO to impose such conditions, as found justified in the facts of the case the discretion was not governed by the fact whether the assessee agreed to deposit a certain percentage of the tax demand or not - The AO had to decide independently whether and to what extent relief was justified thus, the assessee shall deposit 50% of the tax demand before the authorities also, the Tribunal decides the tax appeals concerning the assessee for the earlier years decided partly in favour of Assessee.
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2014 (4) TMI 401
Validity of rectification order u/s 254(2) of the Act Held that:- When the Tribunal found that there is no obvious and patent mistake nor does it appear apparently from the records the correction under the Section is not called for thus, there was no reason to interfere with the order - the earlier order remains as there was no mistake and in exercise of the power u/s 254(2) of the Act Decided against Assessee.
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2014 (4) TMI 400
Claim of exemption u/s 11 of the Act Society registered u/s 12A of the Act without approval u/s 10(23C) of the Act Held that:- The AO is not correct in denying exemption to the assessee - even in absence of approval u/s 10(23C)(vi) of the Act, the assessee can make an alternative claim of exemption u/s 11 of the Act if, otherwise, it satisfies the conditions laid down - the CIT(A)s order being is upheld. Verification and allowability of exemption u/s 11 of the Act Held that:- If the assessee has not collected any money by whatever name called over and the prescribed fees for admission of the student the AO is directed to verify the claim of the assessee and if the assessee has not collected any money over and above the prescribed fees for admission of the student by whatever name called and if the assessee otherwise has fulfilled the conditions prescribed u/s 11 to 13 of the Act, then, it will be eligible for exemption u/s 11 of the Act thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Revenue.
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2014 (4) TMI 399
Assessability of capital gains of property Development agreement - Whether it is assessable in the year in which the development agreement was entered into or in the relevant subsequent year in which the area duly developed and constructed coming to the share of the assessee-owner has been handed over to the assessee - Held that:- The decision in Ms. K. Radhika Versus Deputy Commissioner of Income-tax, Central Circle-2 [2011 (9) TMI 257 - ITAT HYDERABAD] followed - Without accrual of the consideration to the assessee, the assessee is not expected to pay capital gains on the entire agreed sales consideration - Though it has been noted by the AO that the assessee has handed over the possession of the property for development within a week of entering into the development agreement, it appears from the material available on record, there is no activity undertaken by the developer during the year, to discharge the obligations cast upon it by the development agreement - no deemed transferred could be inferred and no capital gains could be brought to tax in the hands of the assessee - the CIT(A) was justified in deleting the addition made by the AO in that behalf thus, the order of the CIT(A) upheld Decided against Revenue. Determination of sale consideration Rejection of claim with regard to cost of improvement Validity of re-computation of capital gain Held that:- The assessee was disputing the adoption of anything other than the disclosed sale consideration for the semi-finished apartment sold, and thus disputing the SRO rate as per S.50C, in terms of sub-section (2) of S.50C - the CIT(A) should have directed the AO to refer the matter to the Valuation Officer - Having failed to do so, the order of the CIT(A) cannot be sustained the CIT(A) has not adhered to the procedure as per S.50C in its totality, which mandated, in the event of dispute by the assessee as to the adoption of value as per SRO, a reference to the valuation cell thus, the order of the CIT(A) set aside and the matter is remitted back to the AO for examination of the matter after following the procedure envisaged in S.50C of the Act Decided partly in favour of Revenue. In view of the above discussion in the impugned order of the CIT(A) and the remand report of the Assessing Officer to him, which discussed at length the overwhelming evidence against the assessee, and in the absence of any evidence brought on record by the assessee, to counter the findings and observations of the Revenue authorities for denying the claim of the assessee with regard to the expenditure incurred on improvement, i.e. rock cutting, there was no justification to interfere with the order of the CIT(A) - thus, the order of the CIT(A) is upheld in denying the assessees claim with regard to expenditure incurred on the improvement of the asset Decided partly in favour of Assessee.
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2014 (4) TMI 398
Non-appearance of the parties Change of address - Applicability of section 69 of the Act Held that:- In view of change of the address by the assessee, the notices issued by the AO could not be served upon the assessee - assessee was prevented by reasonable cause and did not appear before AO - the assessee has sufficient material to prove that the investment in mutual fund is explainable thus, the matter is required to be remitted back to the AO for re-adjudication Decided in favour of Assessee.
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2014 (4) TMI 397
Confirmation of additional claim of depreciation Held that:- Provisions of section 32(1)(iia) of the Act, do not requires that the P&M has to be put into use in the year in which it is acquired for the purpose of claiming AD - what is important and material is the year of acquisition in the case of ships or aircraft and the year of installation in the case of machinery or plant - If the installation of a plant is spread over more than a year, the relevant year for the grant of allowance would be the year in which the installation is completed Relying upon Commissioner Of Income-Tax Versus Surama Tubes Pvt. Limited [1991 (1) TMI 9 - CALCUTTA High Court] - Till a machine is not assembled in a manner that it could be used to manufacture, it cannot be held that it had been installed - Mere purchasing or shifting it to factory premises is not enough. It is a common phenomenon that in big projects, installation of machinery takes very long time because of the sheer volume of the work to be carried out - If an assessee is not successful in installing P&M in one year and carries forward the installation work in subsequent year/years it cannot be denied any benefit on the ground that it had acquired the P &M in earlier year - The intent of the legislature was to attract investment the production started from 01. 01. 2006 - Before that fabrication and completion of P&M was going on - Treatment given by the assessee in the books of accounts to the P&M was in accordance with the Accounting Standards (AS)and the AO/FAA has not denied the fact that the assessee was following AS - assessee was entitled to claim AD @of 10% - the order of the FAA is reversed Decided in favour of Assessee.
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2014 (4) TMI 396
Disallowance of expenses on repairs of building Expenses debited to other operating expenses Held that:- M/s Inga Laboratories Pvt. Ltd. Versus Dy. Commissioner of Income Tax 8(2), Mumbai [2013 (8) TMI 751 - ITAT MUMBAI] followed - the expenditure incurred by the assessee in relation to the premises for complete renovation to suit the requirements of licencee is a capital expenditure and the assessee is entitled to depreciation - Explanation to section 32(1) of the Act also stipulates that all the expenditures incurred by the assessee in relation to lease premises for renovation or extension or improvement is entitled to depreciation as is shown by the assesse - the assessee had incurred additional expenditure of Rs. 24.08 lacs during the year in addition to the expenditure amounting to Rs. 59 lacs, incurred last year - Expenditure of both the AYs prove that same was not of revenue nature thus, the order of the FAA does not suffer from any legal infirmity Decided against Assessee.
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2014 (4) TMI 395
Allowability of business loss Loss specifically covered u/s 73 of the Act business activity of institutional stock broking in shares - Loss has occurred in respect of error trade - Held that:- CIT(A) was of the view that the amount was allowable as business loss to the assessee - Due to dispute with the clients, for the transaction, it does not change the relation of principal and the agent - The assessee for business consideration chooses not to recover the losses - These losses are in the course of business and should be allowed as such u/s 28 of the Act - The AO has not brought any material on record to suggest that the contentions of the assessee are either false or incorrect - No material has also been brought on record that these losses are on account of assessees own trading in shares - If it is so, the loss accrued to the assessee will be governed by the aforementioned decisions of Tribunal where consistent view has been taken that loss occurred to share broker on account of client disowning transaction is business loss and not speculative loss - the CIT(A) did not commit any error in accepting the claim of the assessee Decided against Revenue. Disallowance u/s 14A of the Act r.w.r. 8D(2)(iii) of the Rules Held that:- The third component to compute disallowance u/s 14A as described in Rule 8D(2)(iii) is an amount equal to ½ % of the average of the value of investment, income from which does not or was not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year - the third component which to be is taken into consideration while calculating the disallowance is prescribed in the Rules - In absence of concrete material made available by the assessee to show that such component was not warranted, the case of the assessee cannot be accepted - no concrete material has been brought on record by the assessee to come out of the component described in Rule 8D(2) (iii) to content that the same was not applicable thus, there is no reason to interfere in the order of CIT(A) Decided against Assessee.
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2014 (4) TMI 394
Disallowance u/s 14A of the Act Held that:- As decided in assessees own case for the previous assessment years, it has been held that the decision in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] followed and the matter is required to be remitted back to the AO to determine the reasonable disallowance. Addition made u/s 14A of the Act Computation of book profits u/s 115JB of the Act Held that:- As decided in assessees own case for the previous assessment years, it has been held that the provisions of Rule 8D are not applicable to the present AY thus, disallowance of expenditure by applying Rule 8D is not justified - no actual expenditure was debited in the profit and loss account relating to the earning of exempt income - the provisions of Sec. 14A cannot be imported into while computing the book profit u/s. 115JB of the Act inasmuch as clause (f) of Explanation to Sec. 115JB refers to the amount debited to the profit and loss account which can be added back to the book profit while computing book profit u/s. 115JB of the Act - the disallowance of expenses confirmed by the CIT(A) is set aside while computing book profit u/s. 115JB of the Act - no addition to the book profit shall be made for the expenditure of Rs. 113 crores while computing income u/s. 115JB Decided in favour of Assessee.
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2014 (4) TMI 393
Allowability of depreciation @10% on certain items as against 100% claimed by the assessee - nature of expenditure on Civil work, flooring work, and finishing work, etc incurred by assessee as tenant - Held that:- If the expenditure were to be considered as capital expenditure in the hands of the owner, it has to be considered as capital expenditure in the hands of the tenant, who is the assessee so far depreciation and other benefits are concerned - if the expenditure has to be treated as revenue expenditure in the hands of the owner, it would amount to revenue expenditure even in the hands of the assessee tenant - In no uncertain terms that the capital expenditure incurred, whether by the owner on his premises or by a nonowner on the premises taken on rent or lease etc. for carrying on his business, shall not be allowed as deduction in full in the year of its incurring, but will be capitalized entitling it to depreciation the expenditure incurred by the assessee on `Civil work, flooring work, and finishing work, etc,, the same does not pass the test of revenue expenditure to be deductible in full - the amount has been rightly capitalized by the AO as well as CIT(A) making the assessee eligible for depreciation on it Decided against Assessee.
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2014 (4) TMI 392
Maintainability of the disallowance of interest Held that:- The CIT (A), while proceeding correctly, adopted the wrong balance-sheet, i.e., as at the close of the year, and also did not draw the correct inference from his working - the entire capital of the firm as well as the borrowed capital is utilized toward business assets it may not either be liquid or generate income would be by itself not relevant Relying upon Veecumsees v. CIT [1996 (4) TMI 6 - SUPREME Court] - the assessees reliance on the allowance of interest for earlier years is only indicative and not determinative of the matter - The borrowed capital must continue to be utilized for business purposes for the period for which the interest is being claimed as a business expense - the disallowance at Rs.140950/- only, is allowed for allowance for the balance Decided partly in favour of Assessee.
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2014 (4) TMI 391
Validity of order u/s 263 of the Act - Direction of the CIT in determination of assessees share in property and capital gain Held that:- The case on which the reliance was placed has been dismissed thus, the basis on which the CIT has held the assessment order to be erroneous and prejudicial to the interests of Revenue has become redundant - it is a fact on record that the issue with regard to sharing of the property between the co-owners is still pending before the Civil Court - the CIT cannot determine the share of the assessee in the disputed property when the matter is still pending for decision in Civil Court which alone is competent to decide the right, title and interest of the parties in respect of the property in question thus, the CIT cannot direct the AO to determine assessees share in property as well as in capital gain as 1/3rd thus, the order of the CIT is modified Decided partly in favour of Assessee. Adoption of cost of acquisition Held that:- The assessee during the revision proceeding before the CIT had produced certified copies of the sale deeds in case of two comparable instances of sale of land in the same survey number at Rs.6/- per sq. yard - the CIT has refused to take cognizance of them on a flimsy ground that the assessee has failed to produce the original sale deeds the reasoning of the CIT is not at all acceptable - When the assessee is producing certified copies of the sale deeds, the CIT is bound to accept them and cannot insist upon the assessee to produce the original sale deeds which is an impossible act to do - the CIT cannot determine the cost of acquisition solely relying upon the SRO rate Decided in favour of Assessee. Payment of brokerage Held that:- CIT was not justified in holding the assessment order to be erroneous and prejudicial to the interests of Revenue the AO has not only applied his mind but has also made necessary enquiry while bringing the capital gains to tax - The CIT(A) has dealt in detail with the various issues relating to capital gain in course of disposal of the appeal preferred by the assessee and has ultimately passed an exhaustive order wherein he has considered all the aspects relating not only to the computation of capital gain but also with regard to the various expenses claimed by the assessee including brokerage - the assessment order on the issue of capital gain having merged with the order passed by the CIT(A) and ITAT, will not be amenable to revisionary proceeding under section 263 of the Act in view of the specific bar contained under section 263(1) Explanation (c) thus, the order passed by the CIT under section 263 of the Act is set aside Decided in favour of Assessee.
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2014 (4) TMI 390
Difference in valuation of stock Held that:- The assessee explained the difference of stock and the difference was on account of stock being valued at MRP instead of at cost - the assessee also produced the purchase bills and invoices - Considering the purchase invoices and bills, the value of stock was reduced to Rs.1.08 crores i.e., by adopting the gross profit rate of 11.5% - the difference in stock was determined at Rs.27 lakhs - what the assessee offered at the time of survey on 30.03.2009 is an income of Rs. 60 lakhs including the difference in stock, contract receipts etc., and not additional income of Rs. 60 lakhs over and above the regular income as alleged by the AP the addition sustained by the CIT(A) more or less is in conformity with the income of Rs. 60 lakhs promised to be offered by the assessee at the time of survey - the conclusion arrived at by the CIT(A) needs no interference Decided against Assessee. Addition on account of contract receipts out of total addition Held that:- The contention of the assessee that in sanitary contracts the labour component is major needs to be accepted as most of the time the customer himself purchases the sanitary items - the CIT(A) was not justified in making addition of Rs. 4 lakhs on account of investment in working capital thus, the addition of Rs. 4 lakhs is set aside - the total income offered by the assessee at the time of survey at Rs. 60 lakhs also includes the additional income from difference in stock as well as contract receipt Decided in favour of Assessee.
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2014 (4) TMI 389
Non-allowance of deduction u/s 80IA(4) of the Act Held that:- The assessee is a developer and not only a works contractor with respect to other projects - the assessee is converting the area entrusted to it into more useful and more profitable area and handing over the developed one to the Government/Government Bodies - the activity of the assessee is "to develop" an existing two lane road into four lane road thereby making the road more useful and profitable - The decision in M/s. KMC Constructions Ltd. Versus Dy. Commissioner of Income-tax, Circle 2(1), Hyderabad [2013 (8) TMI 831 - ITAT HYDERABAD] followed - Assessee should not be denied deduction u/s 80IA of the Act as the contracts involves, development, operating, maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract - Contracts needs to be segregated and on this deduction u/s. 80IA has to be granted and the other agreements which are pure works contracts hit by the explanation section 80IA(13), those work are not entitled for deduction u/s. 80IA of the Act - The profit from such is to be computed by assessing officer on pro-rata basis of turnover thus, the assessee is entitled for deduction u/s 80IA(4) the order of the CIT(A) upheld Decided against Revenue.
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2014 (4) TMI 388
Disallowance u/s 14A of the Act Non-consideration of the issue - Whether the disallowance of ½% should be on the average value of investment of Rs. 4,26,87,166/- as shown by the assessee or it should be on the amount of Rs. 18,89,57,476/- as made by the AO - Held that:- There is absolutely no discussion made by the CIT(A) in this regard - She has simply sustained the disallowance of Rs. 9,44,787/- without uttering even a single word thus, the matter is required to be remitted back to the AO for fresh adjudication Decided in favour of Assessee.
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2014 (4) TMI 387
Denial of claim of exemption u/s 54F of the Act - Whether the building constructed by the assessee on which exemption u/s 54F of the Act has been claimed is a residential building as claimed by the assessee or a building constructed for commercial use Held that:- The primary fact which is required to be examined is whether the building has been constructed for residential use or not - This can be verified from the approved plan and architectural design of the building - the plan of the constructed building has not been brought on record thus, it is difficult to arrive at a conclusive finding with regard to the nature of the building thus, it is required to be remitted back to the AO to conduct necessary enquiry to find out the exact nature of construction. A residential house does not mean a single residential house - Even where the assessee constructs or receives a number of flats adjacent to each other or in different floors of the same building then also the assessee would be entitled for exemption u/s 54F of the Act Relying upon In this context, we rely on a decision of the Honble Jurisdictional High Court in case of CIT vs. Syed Ali Adil [2013 (6) TMI 278 - ANDHRA PRADESH HIGH COURT] - the matter is remitted to the file of the AO for fresh adjudication - Decided in favour of Assessee.
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2014 (4) TMI 386
Valuation of opening stock Ascertainment of cost of sale Held that:- The total area supposed to have been sold by the assessee comes to 78,322 sq. ft. in the project, assessee could furnish total area sold only up to 64,998 sq. ft. and the area sold in A.Y. 2003-04 could not be furnished the assessee was unable to furnish the complete details of area sold year-wise in the entire project even at this point of time - In the absence of any explanation or details by the assessee the order of the AO is found to be reasonable and he has given relief from the original amount of Rs. 52 lakhs made as an addition in the first round of assessment to Rs.32,46,099/- as a result of his own working, whatever shortcomings may be - there is no reason to set aside again to the AO for fresh examination in the light of analysis - Assessee is not forthcoming with any information and in fact, asked for specific details of year-wise constructed area and the total area sold which is also not forthcoming from the assessee thus, there was no option than to confirm the order of the AO Decided against Assessee.
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2014 (4) TMI 385
Determination of income @8% - Addition u/s 68 of the Act - Civil contractor assessee contended that for the current year assessee has maintained books of account which were duly audited and audit report obtained. Therefore, the provisions of sec. 44AD could not be invoked. Held that:- Date of audit was noted as 29th September, 2008 - there was no reason for assessee to withhold the production of books of account - In A.Y. 2006-07, the assessees receipts were only Rs. 15,50,381/- which increased to 58,88,389/- in A.Y. 2007-08 and Rs. 65,85,531/- in A.Y. 2008-09 thus, the assessee was required to get its account audited from A.Y. 2007-08 onwards and hence must have maintained books of account - As regards addition of Rs. 5,02,000/-, the AO has observed that vide notice u/s 142(1) dated 22/12/2010, the assessee was asked to explain source of cash and hence assessee did not get sufficient opportunity to explain the deposit particularly when assessment got completed on 27/12/2010 - in order to impart substantial justice to assessee the matter needs to be remitted back thus, the matter is remitted back to the AO foe fresh consideration Decided in favour of Assessee.
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2014 (4) TMI 384
Validity of order u/s 263 of the Act Revision - Disallowance of proportionate expenses under Rule 8D of the Rules Evidenced not furnished for Rebate of STT Held that:- Revenue rightly contended that Rule 8D has a specific mechanism and methodology to arrive at the proportionate disallowance based on cost of average investment and assets - the benefit of security transaction tax issue cannot be given unless the assessee produces relevant evidence - Any relief without bringing evidence on record and due verification thereof, also becomes illegal and erroneous - The assessee could not demonstrate any average investment and as mandated by Rule 8D in specific terms besides, the security transaction tax issue also, the relief appears to have been given without there being any evidence on record which is not produced also despite specific query thus, there was no infirmity in the order of CIT(A) u/s 263 Decided against Assessee.
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2014 (4) TMI 369
Sale of software and maintenance services Payments to be taxable as Royalty u/s 9(1)(vi) of the Act Article 12 of DTAA between India and US - The decision in DIT v. Infrasoft Ltd. [2013 (11) TMI 1382 - DELHI HIGH COURT] followed - For a payment to qualify as royalty payment, it is necessary to establish that there is transfer of all or any rights (including the granting of any licence) in respect of copyright - It is to be established that the licensee, by making such payment, obtains all or any of the copyright rights - Distinction has to be made between the acquisition of a "copyright right" and a "copyrighted article" - Copyright is distinct from the material object, copyrighted. Copyright is an intangible incorporeal right in the nature of a privilege, quite independent of any material substance. The license granted to the licensee permitting him to download the computer programme and storing it in the computer for his own use is only incidental to the facility extended to the licensee to make use of the copyrighted product for his internal business purpose - The licence agreement between the Assessee company and its customers stipulates that all copyrights and intellectual property rights in the software. The incorporeal right to the software i.e. copyright remains with the owner and the same was not transferred by the Assessee - The right to use a copyright in a programme is totally different from the right to use a programme embedded in a cassette or a CD which may be a software and the payment made for the same cannot be said to be received as consideration for the use of or right to use of any copyright to bring it within the definition of royalty as given in the DTAA - The right to make a backup copy purely as a temporary protection against loss, destruction or damage does not amount to acquiring a copyright in the software - What has been transferred is not copyright or the right to use copyright but a limited right to use the copyrighted material and does not give rise to any royalty income - The consideration received on grant of licences for use of software is not royalty within the meaning of Article 12(3) of the Double Taxation Avoidance Agreement between India and the United States of America the addition made for sale of software and provisions of maintenance/other support services to the customers in India is not taxable - Decided in favour of Assessee.
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Customs
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2014 (4) TMI 383
Classification of goods - Classification of Dant Manjan Lal (DML) - Held that:- Following decision of assessee's own previous case in [2011 (3) TMI 1499 - SUPREME COURT] - Decided against assessee.
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2014 (4) TMI 382
Rate of duty - import of Gloves Exemption from Tax - Classification Whether imported goods qualify to attract the benefit of S.N. 28 of Central Excise notification 002/2011 - No evidence to prove - Import procedure not followed - No Basic details mentioned Held that:- Medical examination gloves are disposable gloves used during medical examinations and procedures that help to prevent contamination - Medical Examination gloves need to be kept in a hygienic atmosphere unlike protective gloves used for other purposes - The import documents submitted by the importer give the description as 'Latex Examination Gloves' only - None of the documents describes the goods as medical examination gloves - As per the Import procedure, every package of imported goods should mention basic details such as the name of Manufacturer, description, quantity, specification etc of the commodity - The said consignment has come in gunny bags without any details or markings which state the true nature of the goods. No logo or markings regarding the manufacturer or of any quality standards have been seen either on the goods or packages - As such there is no material evidence to show that the impugned goods are not general purpose gloves widely used in many areas of life - Therefore, the goods are not medical examination gloves and therefore not eligible for the claimed duty exemption under S.N. 28 of Central Excise Notification 002/2011 Decided against assessee. Release of goods - Demurrage charges Held that:- Assessee is ready to satisfy the dues payable in terms of Ext.P2 and that, in respect of the disputed amount and he is ready to furnish Bank Guarantee - If the petitioner wants to have the goods released, it will be open for the petitioner to move the appellate authority by filing necessary I.A in this regard as well, and if any such proceeding is filed forthwith, the same shall be considered along with the I.A preferred to waive the pre- deposit Decided partly in favour of assessee.
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2014 (4) TMI 381
Removal of warehoused good based on photo copy of the duty paying Bill of Entry - Responsibility of Storage terminal - Defrauding of Customs Duty to the exchequer - Levy of Penalty / Personal Penalty u/s 112 and u/s 117 - Held that:- action of the importers or their employees in paying an amount for which was shown by the individuals who master minded the entire fraud, can at the most be an act of erroneous business diligence, on their part. In my view, such an action is not covered under the provisions of Section 112 (a) of the Customs Act 1962 in as much as the importers or their employees never could have had a doubt that their goods are liable for confiscation, as the said goods were removed on BOE on which there was payment of duty. In any case, importers having discharged the customs duty and the interest thereof on all the goods imported by them, the question of visiting them with penalty does not arise. In the case in hand, the importer cannot be charged with the commission of omission which made the goods liable from confiscation. Penalties imposed on the CHA and the proprietors of CHA, I find that the Adjudicating Authority has specifically recorded that one Shri Malleshwar Rao is the master mind of the entire fraud committed on the Revenue. There is nothing on record which indicates that the CHA or power of attorney holder or the proprietor of CHA were aware the actions of the individuals who committed the fraud. It is on record that Shri Malleshwar Rao committed the fraud for his personal gain. In my view penalty imposed on the appellant who are CHS or Power of Attorney holders or authorised signatories or proprietors does not arise, hence that portion of the order is unsustainable and is being set aside. Storage terminal have not put in place the correct system for clearance of warehouse goods, in as much as they have allowed clearance of warehoused goods based on photo copy of the duty paying Bill of Entry which is not in accordance with the rules and regulations. To that extent the storage terminals have contravened the provisions of the Customs Act 1962 and the Rules made there under. In my view Storage Terminals having not put in place the correct system due to which warehoused goods were cleared on photocopy of B.O.E; have contravened the provisions of customs Act, for which a penalty can be imposed on them under the provisions of Sec 117 of the Customs Act 1962. Invoking the said provisions, I hold that the warehouse storage terminals need to be visited with a penalty of an amount of ₹ 1 lac each under the provisions of Section 117 of Customs Act 1962 and the Rules made there under - Decided partly in favour of appellant.
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Service Tax
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2014 (4) TMI 407
Demand of Service tax - Outdoor catering service - Assessee paying Vat and Sales Tax - Whether assessee liable for services tax when he is already paying VAT - Held that:- the assessee is a caterer. The assessee is a person who supplies food, edibles and beverages for a purpose. The purpose is to cater to persons who use the facility of a canteen which is provided by NTPC or, as the case may be, by LANCO within their own establishments. NTPC and LANCO have engaged the services of the assessee as a caterer. The assessee is an outdoor caterer because the services which he provides as a caterer are at a place other than his own. The place is provided by NTPC and LANCO. The inclusive part of clause (76a) expands the definition to a place provided by way of tenancy or otherwise by the person receiving such services. NTPC and LANCO have engaged the services of the assessee as an outdoor caterer and the assessee is an outdoor caterer because services in connection with catering are provided by it at a place other than a place of the assessee. We find no merit in the contention that since the assessee is liable to pay Value Added Tax on the sale involved in the supply of goods at the canteen, it is not liable to the payment of service tax. The charge of tax in the cases of VAT is distinct from the charge of tax for service tax. Entry 54 of the State List to the Seventh Schedule to the Constitution empowers the state legislatures to impose a tax on the sale of goods. Article 366 (29A) was introduced by the Forty Sixth Constitutional Amendment so as to provide a deeming definition of the expression ''sale' to comprehend situations within the purview of its several sub-clauses including the sale of goods involved in the execution of a works contract. The charge of service tax is not on the sale of goods but on a taxable service provided. Unlike a tax which is imposed on the sale of goods, the charge of service tax is on the provision of a taxable service provided by the assessee. Hence, the fact that the assessee may be paying VAT on the sale of goods on the supply of food and beverages to those who consume them at the canteen, would not exclude the liability of the assessee for the payment of service tax in respect of a taxable service provided by the assessee as an outdoor caterer - However, penalty imposed is set aside - Decided partly in favour of assessee.
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2014 (4) TMI 406
Jurisdiction of Commissioner (Appeals) - Power to remand - whether the Commissioner (Appeals) exercising powers under section 85 of the Finance Act, 1994 has the power to remand the proceedings back to the adjudicating authority - Held that:- by virtue of sub-section (5) of section 85, the same limitation on the Commissioner (Appeals) to remand a proceedings contained in section 35A(3) of the Central Excise Act, 1944 must not apply in the appeals under section 85 of the Finance Act, 1944 also. This is so because, sub-section (5) of section 85 though requires the Commissioner (Appeals) to follow the same procedure and exercise same powers in making orders under section 85, as he does in the Central Excise Act, 1944 in appeals, this sub-section itself starts with the expression subject to the provisions of this Chapter. Sub-section (4) of section 85 itself contains the width of the power of the Commissioner (Appeals) in hearing the proceedings of appeal under section 85. The scope of such powers flowing from sub-section 85(4) therefore cannot be curtailed by any reference to sub-section (5) of section 85 of the Finance Act, 1994 - Decided against Revenue.
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2014 (4) TMI 405
Waiver of pre deposit - Whether Tribunal is justified to order to deposit whole amount of tax and interest? - Held that:- appellant has been required to predeposit ₹ 9.5 lacs plus the proportionate interest on ₹ 27.54 lacs excluding the component of penalties out of demand of duty of ₹ 27.54 lacs and equal amount of penalty which is reasonable and justified - no substantial question of law arises in this appeal - However, time period to make pre deposit is extended - Decided partly in favour of assessee.
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2014 (4) TMI 404
Waiver of pre deposit - Held that:- respondent-authority would submit the order impugned may be modified but the petitioner may be directed to re-deposit a sum of Rs.30.00 lakhs. The petitioner while willing to deposit that amount seeks reduction - petitioner is directed to re-deposit a sum of Rs.20.00 lakhs, being 50% of the amount so indicated - Decided partly in favour of assessee.
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2014 (4) TMI 403
Maintainability of appeal before tribunal - recording of Satisfaction u/s 86 - clearance from the Committee of Chief Commissioners of Central Excise - Held that:- The fact that the Chief Commissioners did not, on the record, record independent reasons for concurring with their respective subordinates does not render the authorization void. There is no such requirement in Section 86(2), and this Court does not propose to add another layer to these administrative proceedings. Rather, it is important to view the proceedings as a whole - detailed notes considering the issue of appeal were prepared by those in the office of the Chief Commissioner delegated with such tasks, and the final decision or approval was taken by the Chief Commissioner. Short of requiring the Chief Commissioner himself to record independent reasons, there is no deficiency in the administrative action. Indeed, the rationale for Section 86(2) was considered by the Supreme Court in Collector of Central Excise v. Berger Paints [1990 (3) TMI 70 - SUPREME COURT OF INDIA] The precise method and manner of obtaining authorization is not an issue, but only a limited inquiry was permitted to determine whether such authorization was given in accordance with law, which, as discussed, is clearly the case in these proceedings. - Decision in Commissioner of Central Excise v. Ufan Chemicals, [2013 (5) TMI 703 - ALLAHABAD HIGH COURT] followed - Tribunal fell into error in holding that the appeal was not maintainable since the satisfaction as required by Section 86 had not been appropriately recorded. The impugned order is accordingly set aside - Decided in favour of Revenue.
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Central Excise
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2014 (4) TMI 380
Maintainability of appeal - non compliance of pre deposit order - Clandestine removal of goods - Assessee being director of company - Responsibility of assessee - Held that:- findings recorded by the Commissioner shows that at the initial stage, the appellant has admitted that the manufacturing premises was under his control and he was responsible for day-to-day work of the party. Though the appellant has retracted from his earlier statement, but that may be subject matter of adjudication by the Tribunal in the Appeal that whether retraction from earlier statement is acceptable or not - appellant was a Director of the Company and as such in order to substantiate his claim, he would have filed copies of the Profit and Loss Account, his salary statement or the Balancesheet. Tehsildar is not the competent authority to issue such certificate and, therefore, no reliance can be placed on such certificate issued by the Tehsildar, certifying the income of the appellant. Appellant, being the Director of the Company, cannot be absolved from the responsibility of such clandestinely removal of the goods. Prima facie, the material, on record, is against the appellant. The Tribunal, on consideration of entire facts and circumstances, has allowed the application in part and has directed the appellant to deposit a sum of ₹ 7.05 Lakhs, which cannot be said to be unjustified - Time granted to make pre deposit - Decided partly in favour of assessee.
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2014 (4) TMI 379
Denial of refund claim - CENVAT Credit - Interest on delayed refund - Held that:- There is a specific provision in the Act for refund of credit of duty paid on excisable goods used as inputs and while dealing with interest on refund in Section 11BB of the Act, no distinction has been made in between such credit and any other duty referred to in the first proviso to sub-section (2) of Section 11B of the Act - Matter remitted back - Decided in favour of assessee.
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2014 (4) TMI 378
Duty demand - Clandestine manufacture and removal of goods - Revenue contends that appellant M/s. Rajesh Enterprises had illicitly processed and clandestinely removed Cotton Fabrics and Manmade Fabrics (MMF) during 1999-2000, 2000-2001 and 2001-2002 by machine printing but actually showing on papers as if the fabrics have been hand screen printed by one M/s. Gayatri Fabrics, which according to Revenue, was a non-existing firm at the relevant period - Assessee contends that no investigation was carried out - Held that:- It is amply clear from the cross-examination of the investigating officer that no investigations were done with respect to purchase of raw materials by M/s. Rajesh Enterprise, cash amounts received for clandestine removals or the customers to whom the processed fabrics were delivered. There is also no indication in the Panchnamas and searches that any shortage/ excess of raw materials or finished fabrics were found at the registered factory premises of M/s. Rajesh Enterprise. In view of the above observations and the law laid down by various judicial pronouncements, including the judgment of jurisdictional High Court in the case of Commissioner of Central Excise, Customs & Service Tax vs. Vishwa Traders Pvt. Limited [2013 (4) TMI 55 - GUJARAT HIGH COURT], even if certain suspicion was raised by the statements recorded by the investigation made by the officers of DGCEI but the same are not sufficient to hold clandestine manufacturing and clearance of excisable goods by the appellants
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2014 (4) TMI 377
Classification of the product Di Calcium Phosphate - Animal Feed Grade - chapter 23 or chapter 28 - Held that:- prima facie, the product would fall under Chapter 28. The claim of the learned counsel that the product manufactured by them is covered by the IS specification would not carry the case any further at least at the stage of hearing of waiver of the predeposit of the amounts involved. We find from the balance sheet that the appellant is not having any severe financial hardships inasmuch as, there is a profit of ₹ 51 lakhs after all the taxes have been paid and there is also an ample reserve and cash in hand. - stay granted partly.
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2014 (4) TMI 376
Clandestine removal of goods - Manufacture of manmade fabrics - Held that:- evidence of only one diary cannot be made the basis of establishing clandestine manufacture and removal of the fabrics. It has been repeatedly held by the courts that clandestine manufacture and clearance cannot be readily inferred from few documents and statements unless the allegations are also corroborated and established on evidences, relatable to or linked with actual manufacturing operations. As far as the present demand is concerned, there is no such evidence forthcoming in the records before us to suggest clandestine manufacture and clearance by the appellants. Mere reliance on note books/ diaries or statements cannot be considered as enough evidence for clandestine manufacture and clearances. Accordingly, duty demand ₹ 30,18,378/- is not sustainable against the appellant Mahesh Silk Mills, and the same is set aside. Consequently, neither any penalty is imposable upon Mahesh Silk Mills nor their land, plant nor machinery are liable to confiscation under Rule 173 Q of the Central Excise Rules, 1944 - Following decision of M/s Arya Fibres Pvt. Ltd., M/s Nova Petrochemicals Ltd. and others Versus CCE Ahmedabad-II [2013 (11) TMI 626 - CESTAT AHMEDABAD] - Decided in favour of assessee.
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2014 (4) TMI 375
Rectification of mistake - Incomplete order - Held that:- Tribunal had examined the merits in respect of the two services and passed the order. But no such finding is recorded in the order and therefore the order is not complete and nothing can be presumed in the order. Therefore, I am of the view that there is a mistake apparent on record and the matter has to be heard on merits on each of the services and disposed of. Therefore, this ROM application of Revenue is allowed by recalling the final order and restoring the appeal to its original number - Decided in favour of Revenue.
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2014 (4) TMI 374
Waiver of pre deposit - Confiscation of goods - Held that:- Indian currency belonging to M/s. Elpar Electricals P. Ltd. stand absolutely confiscated by adjudicating authority. We also further note that appellants final product worth Rs.10 lakhs stand confiscated and the appellants gives an undertaking not to redeem the same during pendency of the appeal. As such, same gives sufficient security for demands in question. At this stage, by taking into consideration the statement of learned advocate that duty liability if at all would be around Rs.6.5 lakhs, we direct the applicant M/s. Elpar Electricals to deposit further amount of Rs.3.25 lakhs within a period of 12 weeks - Conditional stay granted.
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2014 (4) TMI 373
Amendment of the memo of appeal - Assessee contends that application does not spell out the nature of the required amendment and hence should be considered as incomplete/defective - Held that:- On a comparison of the amended text of appeal memo with the original text of appeal memo, I have been able to find out the' nature of the intended amendment. By this amendment, the appellant seeks to deny CENVAT credit to the respondent on "air travel agent's service" and not on insurance service mentioned in the original appeal memo. The appellant requires the former service to be substituted for the latter in some of the paragraphs appearing under the caption "Grounds of Appeal" - I allow the miscellaneous application and accept the amended memo of appeal - Amendment allowed.
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2014 (4) TMI 372
Remission of duty - Commissioner allowed remission - After grant of remission assessee destroyed goods on which credit was availed - After destruction, Revenue issued SCN that remission was granted erroneously - Held that:- Prima facie, the Deputy Commissioner's order granting remission to the assessee was amenable to review, but it was not reviewed in the Department. That order was carried into effect with the destruction of the goods by the assessee. The goods consequently were not available for removal from the factory. Rule 16(2) presupposed a removal of the goods from the factory - Therefore, appellant can be said to have made out a prima facie case against the impugned demand - Decided in favour of assessee by way of remand.
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2014 (4) TMI 371
Manufacture - Excisable goods - marketability - Saw dust - waiver of pre-deposit - Revenue contends that as per the amendment of the definition of "excisable goods" (Section 2(d) of the Central Excise Act) by the Finance Act, 2008 with effect from 10/05/2008, saw dust generated in the course of manufacture of plywood in the appellant's factory also became excisable goods and consequently, from that date, the appellant was clearing both dutiable and exempted goods and was liable to maintain separate accounts in terms of Rule 6(2), failing which they should pay 10%/5% of the value of the saw dust - Held that:- Explanation was inserted w.e.f. 10/05/2008. Applying the amended provision to the facts of this case, I find that the saw dust is a "marketable product". The question, however, remains as to whether it can be considered to be a "manufactured product". It is not the case of the Revenue that the appellant had obtained registration from the Department for the manufacture of saw dust. Undisputedly, the appellant is a manufacturer of plywood. It is not in dispute that saw dust was generated as a waste during the course of manufacture of the excisable product viz. plywood. Saw dust was not consciously and intentionally manufactured. Prima facie, it is not a manufactured product. For any commodity to be called excisable goods, it should satisfy cumulatively both the conditions viz. manufacture and marketability. The amendment cited by the learned Superintendent (AR) only goes to establish marketability. It does not improve the Revenue's case in so for as the question whether saw dust is a manufactured product is concerned. - Stay granted.
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2014 (4) TMI 370
Waiver of pre-deposit - Denial of benefit under Notification No. 108/1995-C.E. dated 28.8.1995 - Bar of limitation - Held that:- appellants have been able to make out prima facie case on the ground of limitation - appellant had received the certificate from the project authority as required by the notification; the authoritys certificate clearly mentioned details required and also given the name of contractor to whom the goods were supplied and also the name of the appellant besides indicating necessary details while transfer of project and the intention behind the issue of certificate. After receiving the certificate, as per the records, the appellant submitted project authoritys certificate to the Assistant Commissioner who acknowledged the receipt of certificate and also directed the appellant to give the details of clearance to the jurisdictional Range officer under intimation to him. Thereafter, the appellant cleared the goods under invoice and in the invoice also reference of the Assistant Commissioners letter date has been indicated. There is no finding to the effect that the copies of invoice were not submitted or the directions of the Assistant Commissioner while acknowledging letter has not been followed. What emerges from the facts indicated above is that the procedure as prescribed under Notification No. 108/95 appears to have been followed meticulously. Extended period of limitation - Held that:- Even if it is held that the goods have been supplied only to the project, it is doubtful that such a demand could have been made after three years invoking extended period. When all the facts are within the knowledge of department, it is doubtful whether extended period can be invoked. In any case, it is clarified in Explanation 2 of the notification that when the goods brought into the project are not withdrawn by the supplier or contractor and the expression goods are required for the execution of the projectshall be construed accordingly. This prima facie indicates that the supply could be to the contractor also. In these circumstances, we find invoking extended period for demanding duty prima facie cannot be sustained. In these circumstances, the appellant has made out a prima face case for complete waiver of pre-deposit and stay against recovery - Stay granted.
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CST, VAT & Sales Tax
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2014 (4) TMI 410
Transit fee - Method of Realisation of Transit fee Transit Fee on the transportation/imports of misc. marble stones - Held that:- In terms of the directions issued by the Supreme Court on 29 October 2013, the realisation of the transit fee as directed by the Supreme Court will be subject to the final decision of the Supreme Court in the pending Special Leave Petitions against the judgment of this Court - The writ petition is disposed of.
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2014 (4) TMI 409
Assessment Finalization of provisional Assessment - Assessment on the turnover on imported set top boxes on the activation charges Held that:- As against the provisional assessment of April, 2013 and June, 2013 the Tribunal had remanded the matter on the grounds that the assessment was made ex-parte, the question of law, however, in each of the provisional assessment is the same - The assessments are in fact not based on any computation of tax but on the question of law which has been returned against the petitioner in each of the provisional assessment - In view of Section 25(2) providing that assessing authority after filing of the annual return should proceed to make the final assessment, this court is of view that no useful purpose will be served nor the revenue will benefit in making provisional assessments. The question of law raised in each of the assessments is the same, which will arise in making the final assessment and thus it will be more appropriate that the assessing authority may make a final assessment in accordance with the law and to decide the questions of law raised before him - The writ petition is disposed of with directions to the assessing authority to make the final assessment - For a period of three months or until the final assessment is made, the effect and operation of the orders of provisional assessments for the months of September, 2013 and October, 2013 shall remain stayed - The provisional assessment orders, however, will be subject to the result of final assessment orders Decided in favour of Assessee.
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2014 (4) TMI 408
Stay of Recovery proceeding - First Appeal pending - Disputed amount of tax - Judgment in M/s Food Corporation of India, Lucknow Vs. Commissioner of Commercial Tax Lko. and others [2009 (11) TMI 822 - ALLAHABAD HIGH COURT] followed - On the basis of material on record, the recovery proceedings initiated against the revisionist for recovery of the disputed amount of tax shall remain stayed for a period of four months or till the decision taken by the First Appellate Authority filed by assessee u/s 9 of the U.P. Trade Tax Act, 1948, whichever is earlier - Revision is disposed of finally Decided in favour of Assessee.
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