TMI Tax Updates - e-Newsletter
April 16, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Nature of Lease rents paid - there was no real distinction between mischief of such a transfer in perpetuity and a transfer for the long period of 96 years - a permanent lease is as much an alienation as a sale - expenditure is of capital in nature - HC
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Income Tax:
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 - HC
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Income Tax:
A company, whose principal business is that of banking or financing, is excluded from the provisions of Section 73 - there is no definition of the word “principal business“ - HC
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Income Tax:
Meaning of education u/s 2(15) - Charitable purpose - mere conducting of classes for open university / distance education cannot be construed as charitable activity within meaning of section 2(15) - AT
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Income Tax:
Deletion of penalty u/s 271(1)(c) - Issues on basis of which ALP shown by the assessee has been rejected are debatable - No penalty - AT
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Income Tax:
Deduction u/s 54/54F - Dwithdrawing benefit for default of builders not to allow possession of residential flat within stipulated time - no connivance or collusion can be read into the Agreement - exemption allowed - AT
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Customs:
Waiver of pre deposit - valuation - whether separate import of software is a dummy transaction - import of Mobile Switching Centre and other equipment - prima facie case is against the assessee - AT
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Corporate Law:
Dishonour Cheques received as advance payment - cheque cannot be said to have been drawn for an existing debt or liability - Not amounts to an offence under Section 138 of the N.I. Act. - SC
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Service Tax:
Demand of service tax - Service of supply of tangible goods such as excavators, rollers, pavers etc. - the conclusion on the basis of five work orders only is not correct - Matter remanded back - AT
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Service Tax:
Demand of service tax - Business Auxiliary Service - evaluation of market trends and identification of prospective customers in India for the overseas entity held as export of services - AT
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Service Tax:
Demand of Service tax - discrepancy in the figures in the balance sheet and service returns - there was no suppression of fact on the part of the respondent - AT
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Central Excise:
Rejection of the refund claim - Notification No. 108/95-CE - Benefit of exemption notification should be extended if eligible irrespective of the stage at which the claim is made. - AT
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Central Excise:
Prima facie case has been made out by the appellant on the ground that the show-cause notice has been issued under a wrong Section and in the absence of issuance of show-cause notice invoking extended period u/s 11A, the demand could not have been sustained- AT
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Central Excise:
Manufacture activity or not - It cannot be said that filling of liquid ammonia from tanker into smaller cylinders does not amount to repacking of gas from bulk packing - stay granted partly - AT
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Central Excise:
Valuation of goods - Whether the value of such dish ends is required to be included the assessable value of the tanks manufactured by the appellant - held No - AT
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VAT:
Evasion of Tax – Reduction in sale amount - determination of sale on the basis of receipts of two days collected from inspection - AO did not jump to a conclusion without any rhyme or reason - SC
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VAT:
Revisional Jurisdiction - Once it is determined by the assessing authority by applying his mind on the basis of facts brought on record by the dealer, then Commissioner in his suo motu jurisdiction could not substitute his own opinion - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (4) TMI 486
Nature of expenses – Revenue or capital – Lease rents paid - Whether the Tribunal was right in holding that a lump sum paid by the assessee being lease rentals paid to Maharashtra Industrial Development Corporation is a revenue expenditure – Held that:- The transfer in favour of the assessee was absolute i.e., all rights, title and interest, which were derived by IFML were absolutely transferred in favour of the assessee – the decision in Palshikar (HUF) vs. CIT (S.C) [1988 (5) TMI 3 - SUPREME Court] followed - the lease for a long period namely 99 years, and the assessee has parted with an asset of an enduring nature, namely, the rights to possession and enjoyment of the properties leased for a period of 99 years subject to certain conditions on which the respective lease could be terminated - the grant of leases amounts to a transfer of capital assets as contemplated u/s 12B of the Income Tax Act, 1922 - thus, the nature of transaction amounts to a transfer of a capital assets. The assignment deed is of much leasehold interest, such assignment must be approved by MIDC and on approval, assessee had admittedly paid a further sum to the Corporation - it is difficult to draw inference of the agreement only to be treated as a sub-lease and not an assignment - the assignment deed itself does not say anything about the reversion of the property back to the hands of the assigner namely, IFML - On the other hand, the rights of the assignor on approval of the assignment comes to an end in toto - mere use of the word 'lease' or the fact that a long term is fixed would not by itself make the document in lease - there was no real distinction between mischief of such a transfer in perpetuity and a transfer for the long period of 96 years - a permanent lease is as much an alienation as a sale - the lump sum amount paid does not make a permanent lease any the less an alienation than a sale – thus, the order of the Tribunal is set aside – Decided in favour of Revenue.
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2014 (4) TMI 485
Amount to be treated as cash credits u/s 68 of the Act or not – Held that:- The Tribunal has found that entries on the basis of cash books were written and maintained systematically - they were in the books of accounts of the assessee in respect of his unaccounted business - it cannot be said that the books indicated any amount in the nature of cash credit in the hands of the assessee as defined by Section 68 of the Act - the Tribunal found that the assessee acted as a conduit - He had no obligation to the investor, inasmuch as the investor came to him only to seek a proposed borrower or an introduction to him - The Tribunal rightly came to the conclusion that the provision of Section 68 could not have been invoked - findings of fact do not raise any substantial question of law – Decided against Revenue.
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2014 (4) TMI 484
Segregation of metal scrap from cable scrap – Deemed export - Whether the Tribunal erred in treating the processes employed by the assessee in segregating the metal scrap from cable scrap as 'Manufacture or produce' within the meaning of section 10B of the Income-tax Act – Held that:- Where the change or series of changes brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognised as a distinct and new article that has emerged as a result of the process, it would amount to manufacture of an article or thing – Relying upon Reference in this respect may be made to the decision of the Supreme Court in the case of M/s. Ujagar Prints and others (II) vs. Union of India and others [1988 (11) TMI 106 - SUPREME COURT OF INDIA] - the word “manufacture” implies a change but every change in the raw material is not manufacture - There must be such a transformation that a new and different article must emerge having a distinct name, character or use. The assessees would put the imported material to series of manual and mechanical processes and through such exercise so undertaken, bring into existence entirely new, distinct and different commodities which are marketable – the Tribunal correctly came to the conclusion that this process amounted to manufacturing - the assessee, as an EOU is required to carry out manufacturing activity and on its DTA sales is also required to pay excise duty which admittedly, the assessee paid and excise department collected - It would be a dichotomy if on the same activity the assessees were to pay excise duty on the ground that the same amounted to manufacturing activity but would be declined deduction under the Income Tax Act on the ground that the same did not - the Tribunal has merely remanded the entire issue before the AO for fresh consideration - The assessing officer shall examine whether on DTA sales by the assessee, claim of deduction u/s 10B of the Act would be allowable. Deduction u/s 80IB and u/s 80HHC of the Act – Held that:- Any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts necessary to examine such ground, contention or claim are already on record - In such a case the situation would be akin to allowing a pure question of law to be raised at any stage of the proceedings - This is precisely what has happened in the present case - The Appellate Commissioner and the Tribunal did not need to nor did they travel beyond the materials already on record, in order to examine the claims of the assessees for deductions under section 80IB and 80HHC of the Act – Decided against Revenue.
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2014 (4) TMI 483
Allowability of deduction u/s 80IB of the Act – Requirement to set off of losses - Whether the assessee has disproportionately allocated the common expenses to arrive at more profits for the "eligible units" in order to claim more relief u/s 80IB of the Act – Held that:- This is a factual issue and the assessee was bound to place before the AO necessary documents to establish that the common expenses have not been disproportionately allocated so as to claim more relief u/s 80IB of the Act - no other record was produced by the assessee before the AO - When the matter was considered by the FAA, the FAA had erroneously shifted the burden on the AO stating that the AO did not bring on record any material or evidence to support its conclusion that the expenditure was disproportionately allocated. The onus is on the assessee to produce sufficient records to show that there were no disproportionate allocations and they were under an obligation to show as to how the profits were arrived at in respect of 12 units and particularly in respect of BNR-I and BNR-II for the purpose of claiming deduction u/s 80IB of the Act - The assessment order also does not state as to whether the common expenses were with reference to the 12 units or with reference to the two units alone, which was disproportionately distributed. Relief u/s 80IB of the Act - the order of the Tribunal is set aside and the matter is remitted back to the AO so as to work out the relief properly, particularly with reference to the expenses allocable to BNR-I and BNR-II units – Decided in favour of Revenue.
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2014 (4) TMI 482
Deduction u/s 80IB r.w. Section 80IB(1) of the Act – Works contract - Nature of agreement not appreciated - Profit derived from sale of unutilized FSI - Whether the ITAT was right in allowing the deduction u/s. 80IB (10) read with Section 80IB(1) of the Act – Held that:- The decision in Commissioner of Income-Tax v. Radhe Developers, reported in [2011 (12) TMI 248 - GUJARAT HIGH COURT] followed - Section 80IB(10) provides for deductions to an undertaking engaged in the business of developing and constructing housing projects under certain circumstances - It does not provide that the land must be owned by the assessee seeking such deductions - from the terms and conditions it can be conferred that the assessee had taken full responsibilities for execution of the development projects and have not acted only as a works contractor. The assessee had, in part performance of the agreement to sell the land, was given possession thereof and had also carried out the construction work for development of the housing project - Combined reading of Section 2(47)(v) and Section 53A of the Transfer of Property Act leads to conclusion even for limited purpose of Income tax that assessee had satisfied the condition of ownership also - 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 - The assessee, in the process of developing two housing projects, had utilized 9595.64 sq.m of buildable area against the maximum permissible area of 13004 sq.m and in other cases, put up construction of 5997.28 sq.m against maximum permissible construction on 8127.75 sq.m. Underutilization, if at all was in the marginal range of 25% to 30% - marginal underutilization of FSI would not be hit by disallowance of deduction u/s 80IB of the Act – Decided against Revenue.
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2014 (4) TMI 481
Applicability of Explanation to section 73 of the Act - Set off of interest on amounts borrowed for purchase of shares – Speculation business - Whether a particular company dealing in shares could be brought within the mischief of Explanation or saved by the excluded categories specified under the Explanation - Held that:- A company, whose principal business is that of banking or financing, is excluded from the provisions of Section 73 – the business of the assessee was finance and granting of loans and advances, which fell under the excepted clause in Explanation to Section 73 - merely because the loss is more than the income earned from the business of loans and advances, the AO would not be justified in looking at the results alone for the purpose of invoking Explanation to Section 73 of the Income Tax Act – Explanation to Section 73 is in the nature of deeming provision and has to be strictly construed - the onus is on the Department to show that the assessee falls within the mischief of the provisions Section 73. The Tribunal rightly observed that when the assessments for the years had become final, it is not open to the AO to disturb those findings in a subsequent assessment proceedings and hence the same was binding on the AO - there is no definition of the word "principal business", which is of relevance, particularly to a company carrying on the business of banking or granting loans and advances - in the absence of a definite definition of what a "principal business" is, one has to go only by the memorandum of articles of association of a company - its principal business is finance and granting loans and advances - The memorandum of the Company clearly points out the nature of business as an investment and finance company – Decided against Revenue.
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2014 (4) TMI 480
Stay application - Coercive steps to recover the disputed tax by the Revenue – Held that:- The transaction is of a gift which is a capital receipt in the hands of the assessee and therefore it cannot be said to be a case of any benefit or perquisite arising from business –no direct nexus could be established by any tangible material brought on record by the CIT (A) - Simply because both the donor and the donee happened to belong to the same group cannot ipso facto establish that they have any business dealings - it is a case of a valid gift which is to be treated as capital receipt in the hands of the assessee, in the absence of any specific provision taxing a Gift as a deemed business income, provisions of sec. 28(iv) cannot be applied on the facts of the case - The transaction involved is nothing but a Gift and thus it is a capital receipt not taxable under the provisions of the Act. The Assessee has more than just a strong prima-facie case for a stay – the assessee held 1.59% and 1.44% of the equity shares of UPL & UEL respectively - After the transfer the assessee holds 21.35% and 47.88% of the equity shares in UPL & UEL respectively - A refusal to grant a stay would in all probability entail a sale of the shares to meet the demand – thus, partial stay granted to the assessee.
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2014 (4) TMI 479
Validity of Notice for reopening of assessment – Held that:- It does emerge that the notices were issued within a period of 4 years from the end of relevant assessment years - It is equally true that in the scrutiny assessments, the AO had not addressed the question of such deduction under section 35D of the Act - if assessing officer’s reason to believe lacks validity, the reopening of assessment would not be permissible - the words used are “reason to believe” and that therefore, the same must be based on subjective satisfaction of the assessing officer - if the proposed addition on the basis of which the entire notice of reopening is founded, lacks legal validity, surely, such notice cannot be sustained - additions sought to be made by the assessing officer through this process of reopening of the assessment previously closed after scrutiny has not been approved by the Court – thus, the reopening of the assessment is set aside – Decided in favour of Assessee.
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2014 (4) TMI 478
Validity of reassessment u/s 147 of the Act – Held that:- The AO reopened the case u/s 147 by issuing notice u/s 148 and completed the assessment - Till the assessment was completed and till the matter reached the Tribunal, the assessee did not make any grievance whatsoever - Even before the Tribunal, though the ground of jurisdiction was raised, it was not seriously pressed by the assessee and in this view of the matter, the Tribunal proceeded to consider merits of the case – there was no reason to interfere with the order passed by the Tribunal - the AO has option to proceed against the assessee by issuing notice u/s 148 of the Act – Decided against Assessee.
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2014 (4) TMI 477
Validity of reopening of assessment – Mere change of opinion - The entire issue on the basis of which the assessment is sought to be reopened was examined by the AO in the original assessment - The additional requirement flowing from proviso to section of such income chargeable to tax having escaped assessment for the failure of the assessee to disclose truly and fully all material facts, therefore need not be satisfied - if an issue had been examined by the AO in the original assessment proceedings, any reopening on the basis of such issue without any additional material would be a mere change of opinion – relying upon Gujarat Power Corporation v. Asst. CIT [2012 (9) TMI 69 - Gujarat High Court] - even when the AO in an order of assessment had accepted the assessee’s stand and granted the claim as put forth, reopening on the same issue would not be permissible on the basis of selfsame material on record. In the return filed itself, the petitioner had produced Form 10 as well as the resolution of the Trust setting apart such amount for a period of five years to be utilized for the purpose of the Trust - It was after scrutinizing the claim of deduction under section 11(2) of the Act that the AO framed the assessment - He made no disallowance on such claim - He disallowed part of the depreciation claimed by the assessee - Though there was no reason given by the AO for making any disallowance on this score, it cannot be stated that he had not scrutinized the assessee’s claim for deduction – thus, the notice can be said to be based on mere change of opinion on the part of the AO and is set aside – Decided in favour of Assessee.
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2014 (4) TMI 476
Penalty u/s 271(1)(c) of the Act – Disallowance u/s 40(a)(ia) of the Act – Held that:- The assessee furnished return declaring a loss of Rs. 7,96,49,700 - The AO determined the loss at Rs. 54,51,48,532 - though the certain disallowances were made u/s 40(a) and 40(a)(i), the set off given by the AO on account of disallowances made in the preceding year was much more than the disallowances made in the year under consideration - major disallowances have been made because of the assessee’s failure to deduct and pay the tax in time - though the deduction claimed has been disallowed in one year, the same has been allowed in the subsequent year - The head office expenses have been disallowed on the ground that the assessee could not give satisfactory explanation to substantiate the claim of expenditure – Relying upon COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] - merely because certain claim of expenses is disallowed cannot be sufficient for levying the penalty u/s 271(1)(c) – Decided against Revenue.
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2014 (4) TMI 475
Transfer Pricing adjustments confirmed by DRP and the directions which are not complied TPO – Held that:- The TP adjustments made to assesses ALP is not justified - Assessee furnished its split financials along with AE - Whereas the appellant has earned profit in India, its AE has continuously sustained losses - with no element of profit in the hands of the AE, in all fairness there is no case of shifting of profits, practicable or probable - AE is resident in USA which has a higher tax rate in India, therefore, there was little commercial prudence to shift profit out of India - The Far has not been properly evaluated by TPO and DRP - Proper justifications for applying TNMM method have not been assigned by lower authorities - No objective justifications are provided by lower authorities as to why and how, PSM method applied by assessee in the above peculiarities of business was not an appropriate method – Relying upon DCIT vs. Indo American Jewellery Ltd [2010 (5) TMI 530 - ITAT, MUMBAI] and CIT Vs. KRMTT Thiagaraja Chetty & Co. [1953 (10) TMI 7 - SUPREME Court] – the TP adjustments added to the income of the assessee are set aside – Decided in favour of Assessee. Disallowance of depreciation on computer peripherals – Held that:- The decision in COMMISSIONER OF INCOME TAX Versus BSES YAMUNA POWERS LLD. / BSES RAJDHANI POWERS LTD. [2010 (8) TMI 58 - DELHI HIGH COURT] followed - the asseessee is eligible for depreciation @60% on the items – Decided in favour of Assessee.
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2014 (4) TMI 474
Condonation of delay in filing the cross objections – Assessment u/s 253A - Assessee being an NRI – Absence of incriminating material - Held that:- The assessee is an NRI as is apparent from the facts narrated in the file relating to appellate proceedings - in the year 2013 the Delhi Tribunal in a number of cases has held that in the absence of incriminating material found at the time of search no addition can be made in the years in which assessments were completed - The issue raised in the cross objections being legal in nature and in view of the fact that assessee is an NRI who used to visit India on few occasions only, the delay in filing of cross objections is condoned - Relying upon MGF Automobiles Ltd. v. ACIT [2013 (9) TMI 439 - ITAT DELHI] - no additions were to be made without any incriminating material – Decided in favour of Assessee.
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2014 (4) TMI 473
Deletion of Additions u/s 40(a)(ia) - CIT(A) deleted addition made by AO invoking provisions of section 40(a)(ia) of Act for assessee's failure to deduct tax at source in respect of payments towards contract, commission and professional fee – Held that:- Following decision of Calcutta High Court, Bangalore Bench of Tribunal in case of ACIT v. M.K. Gurumurthy [2012 (6) TMI 293 - ITAT, Bangalore] held that tax deducted at source, if it is paid on or before due date for filing return of income, will not attract disallowance u/s. 40(a)(ia) of the Act - In said case order of CIT(A) has to be upheld - Delhi High court in case of Rajinder Kumar [2013 (7) TMI 454 - DELHI HIGH COURT] dated 01.07.2013 has also taken a similar view - Order of the CIT(Appeals) does not call for any interference – Decided against Revenue.
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2014 (4) TMI 472
Meaning of "education" u/s 2(15) - Charitable purpose - coaching classes - Whether conducting coaching classes for students would fall within meaning of "education" as provided in section 2(15) of Act – Held that:- Apex Court had an occasion to consider provisions of section 2(15) of Act in Sole Trustee, Loka Shikshana Trust v. CIT [1975 (8) TMI 1 - SUPREME Court]- After considering provisions of sections 2(15) of Act, Apex Court found that all kinds of acquiring knowledge will not come within meaning of "education" - What "education" connotes in section 2(15) is processing of training and developing knowledge, skill, mind and character of students by normal schooling - Mere coaching classes may provide some kind of knowledge to the students - But that kind of acquisition of knowledge through coaching classes cannot fall within the meaning of "education" as provided in section 2(15) of the Act - Patna High Court in case of Bihar Institute of Mining And Mine Surveying vs C.I.T. [1993 (12) TMI 50 - PATNA High Court] held that mere conducting of classes for open university / distance education cannot be construed as charitable activity within meaning of section 2(15) of Act – Decided against Assessee. Rejection of application for registration u/s 12AA of Act – Held that:- taxpayer is conducting coaching classes - Therefore, it cannot be treated as a charitable institution as provided in section 2(15) of Act - This Tribunal is of the opinion that the taxpayer is not eligible for registration u/s 12AA of Act - Assessee is not entitled for registration – Decided against Assessee.
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2014 (4) TMI 471
Deletion of penalty u/s 271(1)(c) - Penalty u/s 271(1)(c ) imposed on basis of addition made on account of difference between ALP determined by TPO – CIT(A) deleted penalty imposed u/s 271(1)(c) of Act – Held that:- difference in ALP arose only on account of difference of opinion between assessee and TPO with regard to use of multiple year data and selection of certain companies as comparables - CIT (A) is correct in holding that difference in value of ALP was due to difference of opinion with regard to certain issues in context of interpretation of statutory provisions and not due to lack of good faith and due diligence - Issues on basis of which ALP shown by the assessee has been rejected are debatable - Hence cannot be said to be leading to concealment of income or furnishing inaccurate particulars of income when the assessee has obtained the TP report from an external expert - CIT (A) was justified in deleting penalty u/s 271(1)(c) of Act - Ratio laid down by Appellate Tribunal, Mumbai Bench in case of DCIT vs. RBS Equities India Ltd. [2011 (8) TMI 459 - ITAT MUMBAI] squarely applies to facts of present case – No infirmity in order of CIT (A) in deleting penalty imposed u/s 271(1)(c ) of Act – Decided against Revenue.
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2014 (4) TMI 470
Grant of deduction u/s 54B - CIT(A) granted deduction u/s 54B by holding that transfer took place on 17-03-2007 – Held that:- CIT(A) found that under Income-tax Act, there was a transfer on 17-03-2007 when physical possession of property was handed over - This finding of CIT(A) is not disputed by the revenue - Assessee invested Rs.56,00,006 on 17-04-2007 for purchase of the property - Though the investment was made for purchase of another property, it is not known whether the assessee has actually purchased the property or not - Assessing officer has to reconsider matter and find out when actually sale was completed under Income-tax Act for purchase of property investing sale consideration - In absence of any material, Tribunal is not in a position to conclude when actually the purchase transaction completed for claiming exemption u/s 54B of the Act - Accordingly, order of lower authorities are set aside and the assessing officer is directed to find out the date on which assessee has actually purchased another agricultural land - Thereafter decide the issue of exemption u/s 54B of the Act in accordance with law – Decided partly in favour of Revenue.
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2014 (4) TMI 469
Addition on valuation of stock and excess cash by A.O. - Margin of profit @ 27% was reduced from value of stock - Held that:- Inventory was made at MRP during survey operation - After making adjustment @ 27%, actual difference in stock worked out at Rs.27,49,000/- and after adding cash difference a lump-sum discloser of Rs.30 lacs was made - Considered the assessee's plea regarding adjustment for VAT which was 12.5% during relevant period on the goods sold by assessee - Considering totality of facts, CIT (A) was justified in deleting the addition and directing the Assessing Officer to reduce the addition on account of valuation of stock to be restricted by allowing margin of 26.88% from value of excess stock inventorised at MRP during the survey operation – Decided against Revenue.
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2014 (4) TMI 468
Benefit u/s 92C(2) - CIT(A) gave benefit of safe-harbour of 5% under 2nd proviso to Section 92C(2) – Held that:- Ld. DR has no objection to restore matter to CIT(A) to decide same afresh on merits by a speaking order - Set aside impugned order of CIT(A) and restore matter to file of CIT(A) with direction to decide issue/grounds of appeal taken by assessee on merits by reasoned order after giving due opportunity of hearing to parties as per law - Hence, Grounds of appeal taken by Revenue as well as by assessee in cross-objection are allowed – Decided partly in favour of Revenue.
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2014 (4) TMI 467
Deduction u/s 54/54F - Deletion of addition made on a/c of Long Term Capital Gain - CIT(A) stated that appellant is eligible to get benefit u/s 54/54F as claimed and AO is not legally correct in withdrawing benefit for default of builders not to allow possession of residential flat within stipulated time – Held that:- Certificate given by assessee has not been disputed by Revenue despite a specific query - Considering grounds agitated by Revenue on merit, no substance in them - As admittedly payments were made by assessee on specific dates pursuant to agreement entered with M/s Golden Gate Properties Ltd, Banglore on 18.12.2008 i.e within specified time - Delivery was scheduled to take place before 30.09.2009 i.e very much within the stipulated time - The fact that there was no relationship between the assessee and the builder has not been assailed by Revenue as such no connivance or collusion can be read into the Agreement - In these peculiar circumstances looking at the settled legal position on the said issue as considered by the Jurisdictional High Court amongst others, no infirmity in impugned order - Satisfied with reasoning and finding of CIT(A) – Decided against Revenue.
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Customs
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2014 (4) TMI 497
Import of steel rails as scrap - Classification and valuation of the old and used railway tracks - restricted item - rate of duty - Held that:- there is no evidence on record that the imported goods, declared as re-melting scrap was not meant for re-melting, or was not used for re-melting but was required for re-rolling only. It has been correctly observed by the first appellate authority that CA's certificate also convey that scrap is not re-usable - Decision in Indo Deutsche Trade Links and Uni Interlinks Versus Commissioner of Customs (Imports) Chennai [2014 (2) TMI 779 - CESTAT CHENNAI] followed - Decided against Revenue.
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2014 (4) TMI 465
Waiver of pre deposit - valuation - whether separate import of software is a dummy transaction - import of Mobile Switching Centre and other equipments - Revenue contends that value of the equipment should have been assessed by including the value of software and duty on the combination of the software and hardware should have been paid at the rate applicable to hardware - Held that:- Prima facie the facts suggest that the applicant had not disclosed that software was pre-loaded in the system. Further there was an attempt to show separate import of software in media when such software was not put to use. So prima facie we see force in the argument of Revenue in this matter. If the import of software was a sham transaction the argument that it had value appears to be prima facie unsustainable - applicants have failed to make out of case for waiver of pre-deposit - Conditional stay granted.
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Corporate Laws
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2014 (4) TMI 464
Dishonour of P.D. Cheques - Cheques received as advance payment - Whether the post-dated cheques issued by the appellants as an advance payment in respect of purchase orders could be considered in discharge of legally enforceable debt or other liability - Held that:- If at the time of entering into a contract, it is one of the conditions of the contract that the purchaser has to pay the amount in advance and there is breach of such condition then purchaser may have to make good the loss that might have occasioned to the seller but that does not create a criminal liability under Section 138. For a criminal liability to be made out under Section 138, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque - issuance of cheque towards advance payment at the time of signing such contract has not to be considered as subsisting liability and dishonour of such cheque amounts to an offence under Section 138 of the N.I. Act. The Delhi High Court has traveled beyond the scope of Section 138 of the N.I. Act by holding that the purpose of enacting Section 138 of the N.I. Act would stand defeated if after placing orders and giving advance payments, the instructions for stop payments are issued and orders are cancelled. If a cheque is issued as an advance payment for purchase of the goods and for any reason purchase order is not carried to its logical conclusion either because of its cancellation or otherwise and material or goods for which purchase order was placed is not supplied by the supplier, in our considered view, the cheque cannot be said to have been drawn for an existing debt or liability - Decided in favour of Appellant.
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FEMA
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2014 (4) TMI 466
Condonation of delay - decision to file appeal was taken at various levels which consumed valuable time - Held that:- Apparently, the present appeal has been filed after an inordinate delay of 775 days. Section 35 of FEMA permits the appeal to be filed within 60 days from the date of communication of the decision or order of the Appellate Tribunal on any question of law arising out of such order. The proviso authorises High Courts to extend the appeal to be filed within next 60 days, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal. Since the impugned order was passed by the Appellate Tribunal constituted under FEMA, in my view, the provisions of Section 35 of the FEMA are attracted and the period of limitation for filing the appeal cannot be extended beyond 120 days - Condonation denied.
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Service Tax
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2014 (4) TMI 491
Demand of service tax - Service of supply of tangible goods such as excavators, rollers, pavers etc. - Held that:- Commissioner selected five work orders and all of them give an impression that they are for supply of tangible goods. Further, we find that there are definitely some work orders which in our opinion may not be considered as for supply of tangible goods at all. In any case, we feel that once the statement is given and work orders were given, Commissioner could have asked his subordinate officers to go through the orders and prepare a verification report if he himself could not do so before proceedings to pass the order. In such a case, after verification of each order, officers could have given a report as to why the item should be treated as supply of tangible goods contract or otherwise and such a report could have been made available to the appellant, thereafter adjudication could have been completed. Neither, the Commissioner has examined all the work orders and has recorded the conclusion nor all the work orders have been examined and on the basis of examination of all the work orders he has come to the conclusion. Based on five work orders he has come to the conclusion. In our opinion this is not a correct practice. We also find that the transportation charges have simply been assumed to be cost of transportation of the equipment. In our opinion this also requires to be re-examined by the Commissioner - Matter remanded back - Decided in favour of assessee.
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2014 (4) TMI 490
GTA service recipient of services - payment of service tax by using cenvat credit Held that:- Following decision of CCE vs. Nahar Industrial Enterprises Limited [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] - respondents were well within their right to utilize the Cenvat credit for the purpose of payment of service tax - Decided in favour of assessee.
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2014 (4) TMI 489
Demand of service tax - Business Auxiliary Service - Export - evaluation of market trends and identification of prospective customers in India for the overseas entity - Held that:- Following decision of M/s GAP International Sourcing (India) Pvt. Ltd. vs. CST, Delhi [2014 (3) TMI 696 - CESTAT NEW DELHI] and Paul Merchants Ltd. vs. CCE, Chandigarh [2012 (12) TMI 424 - CESTAT, DELHI (LB)] - Decided in favour of assessee.
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2014 (4) TMI 488
Demand of Service tax - discrepancy in the figures in the balance sheet and service returns - Banking and financial service - Bar of limitation - Held that:- To invoke the extended period of limitation, the following ingredients are to be ascertained - fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of section or rules with intent to evade payment of service tax. In this case, the allegation against the respondent is that they have suppressed the material fact which was came to the knowledge of the department during the audit. After going through the facts of the case, I find that during the impugned period, service tax is required to be paid at the time of receipt of the remuneration towards the service provided. In service tax returns, there is no column for receipt, what the services has been provided and how much has been received for the service provided. Every service tax returns has to shown amount of recovery towards the service provided not on accrual basis. But the respondents are maintaining their books of accounts on accrual basis as per Income Tax and Banking Regulation. So these two documents cannot be clubbed together to ascertain the fact in the absence of service tax returns and there is no duty cast on the assessee in the Finance Act that he is to provide the details of service provided and service receipt during the impugned period. In these circumstances, I hold that there was no suppression of fact on the part of the respondent - Matter remanded back for computation of demand for normal period only - Decided partly in favour of Reveune.
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2014 (4) TMI 487
Demand of service tax - Work contract or site formation service - inclusion of the value of land - Held that:- one of the main grounds taken by learned counsel before the original adjudicating authority that the service rendered by the appellant is to be classified as ‘works contract’ and not as ‘site formation’ has not been discussed but not accepted. This should have been considered in detail by the Commissioner based on the submissions made by the appellants - Therefore, matter remanded back - Decided in favour of assessee.
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Central Excise
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2014 (4) TMI 463
Demand to the duty - Shortage in stock - Clandestine removal of goods - opportunity of cross examination of the witnesses - Held that:- From the record, it reveals that the first date was fixed on 24.08.2009. On 17.09.2009 the respondent wrote a letter to the department asking for the copy of the relied upon documents and the statements of the witnesses. The next date fixed was 24.09.2009. On 22.10.2009 the copies of the statements and the relied upon documents have been provided to the respondent. On the receipt of such documents, the respondent filed the reply on 17.11.2009 and requested for cross examination of the witnesses, whose statements were sought to be relied upon in the show cause notice. The said request was within the reasonable time and cannot be said to be after unreasonable delay. 20.11.2009 was the date fixed. On 19.11.2009 again the request was made for giving the opportunity of cross examination. If the authority wants to rely upon the statement of any witness, the opportunity of cross examination ought to have been given to enable the party to prove its case. Non providing of the opportunity of cross examination amounts to violation of the natural justice and in absence of denial of natural justice, such documents cannot be relied upon - order of tribunal remanding the matter back sustained - Decided against Revenue.
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2014 (4) TMI 462
Maintainability of appeal - Bar of limitation - Held that:- Order dated 21.1.2011 was dispatched to the petitioner by registered post. Be that as it may, in order to attract deeming provision regarding service under sub-section (2) of Section 37C of Act, 1944, date of tendering or delivery of such decision/order sent by post has to be ascertained since it is only that date on which delivery of order sent by post shall deemed to be the date of service. In the present case no such date has been ascertained by Appellate Authority and it has simply presumed that since order was sent by registered post, it must have been served upon petitioner and appeal filed in 2013, is thus barred by limitation - Matter remanded back - Decided in favour of assessee.
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2014 (4) TMI 461
Duty demand - Non Alloy Steel - compounded levy scheme - Whether the appellant is liable for the duty for the Financial Year 1999-2000 on the actual production or on the deemed production under Rule 96 ZO (3) - Held that:- Tribunal has not considered the plea of the appellant that for the Financial Year 1999-2000 under Rule 96 ZO(3) the option has required under Sub Rule 3 of 1996 ZO has not been given by the appellant - matter is relegated only for the determination of the liability for the Financial Year 1999-2000 and not for any other year - matter remanded back.
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2014 (4) TMI 460
Rejection of the refund claim under Section 11B - Reversal of CENVAT Credit - Notification No. 108/95-CE dated 28.8.95 - Unjust enrichment - Held that:- appellant was directed to supply indigenously produced goods against advance licence. So the contention of the learned counsel that the impugned goods are trading goods cannot be accepted. However, it is seen that the adjudicating authority observed that the goods supplied are not entitled for any exemption and hence payment of duty on the said clearance was correct in law. It is also observed that the concept of supply against AROs is not germane to excise. Supplies made against the ARO is considered as deemed export in para 8 of EXIM Policy 2004 - 09 and the DGFT has to be approached for any relief on that account. The learned counsel fairly submits that they have produced the Project Import Certificate which was not properly dealt by the adjudicating authority. In my considered view, if the Department is treating the impugned goods as manufactured goods, the claim of exemption should be examined by the lower authority in the light of the exemption notifications. Benefit of exemption notification should be extended if eligible irrespective of the stage at which the claim is made. Since both the authorities have held that the impugned goods are manufactured goods, it is appropriate that the matter should be remanded to the adjudicating authority to examine the eligibility of exemption notifications. Accordingly, the matter is remanded to the adjudicating authority to examine the eligibility of the refund claim in view of the exemption notifications including the unjust enrichment, if any - Decided in favour of assessee.
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2014 (4) TMI 459
Waiver of pre deposit - recovery of CENVAT Credit wrongly taken - demand of interest - show-cause notice seems to have not been issued under appropriate Sections of Central Excise Act. - Held that:- prima facie case has been made out by the appellant on the ground that the show-cause notice has been issued under a wrong Section and in the absence of issuance of show-cause notice invoking extended period under Section 11A, the demand could not have been sustained. Even though several other submissions were made, I consider that it is not necessary to go into all those submissions in view of the fact that appellant has made out a prima facie case for waiver on this preliminary ground. Accordingly, the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal - Stay granted.
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2014 (4) TMI 458
Manufacture activity or not - receiving the hydrogen gas directly into the cylinders - apart from receiving the gas under pressure directly into the cylinders, no other activity of labelling, relabeling etc. is being done by them. - Held that:- It cannot be said that filling of liquid ammonia from tanker into smaller cylinders does not amount to repacking of gas from bulk packing - Decision in Surya Air Products Pvt. Ltd. Vs. CCE [2012 (12) TMI 503 - CESTAT, NEW DELHI] followed - stay granted partly.
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2014 (4) TMI 457
Valuation of goods - Whether the value of such dish ends supplied by M/s ACC Machinery Co. Ltd. is required to be included the assessable value of the tanks manufactured by the appellant - Held that:- Factual position does not stand assailed by the Revenue. If that be so, dish ends supplied by M/s ACC Machinery cannot held to be a part of the MS tanks so as to include the value of the same in the value of the tanks. The same were required only for matching dimensions of the two ends of the tank and were tack welded - Decided against Revenue.
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2014 (4) TMI 456
Denial of CENVAT credit - credit has been denied on the ground that these inputs were used in making structurals for supporting capital goods used in the plant and machinery and on such goods cenvat credit cannot be allowed - Held that:- Conditional stay granted.
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2014 (4) TMI 455
Denial of CENVAT credit - structural steel items, like steel rib, HR coil, MS angles, MS beam, MS channel, MS plates etc. - credit has been denied on the ground that structural steel items were used as structurals for supporting capital goods used in the plant and machinery - Held that:- prima facie CENVAT credit cannot be taken on structural's - stay granted partly.
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2014 (4) TMI 454
Reversal of CENVAT Credit at the rate of 8% of their value of exempted final product - Rule 6(3) of Cenvat Credit Rules - No separate accounts were maintained by the appellant in respect of the raw material used for dutiable as also exempted goods - appellant had taken a stand that in as much as the entire input credit involved on dutiable as well as exempted goods stand reversed by them, there is no justification for confirmation of demand in terms of Rule 6 - Held that:- Reversal of cenvat credit figures have been verified and found to be correct. The said letter also accepts the payment of interest by the assessee. Verification report of the jurisdictional Range officer also stands enclosed. The said letter accepts the application in terms of the amended Rule 6 of Cenvat Credit Rules, 2004 - In as much as the applicant has reversed the entire credit along with interest, as is very clear from the letter of Commissioner, demand set aside - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (4) TMI 496
Evasion of Tax – Reduction in sale amount -Absence of bills - Method of recording receipt - No specific method to record receipt - Representative sample - Representative sample of 2 days bills - Business of manufacture and sale of sweets, namkeens and other eatables - Held that:- It appears from the record that when an individual customer was buying eatables of a nominal value, possibly bill was not being issued - There was no specific method whereby each and every receipt from the buyers was recorded by the assessee - On the basis of the receipts of two days collected from inspection, considering them as a representative sample, AO had come to a conclusion that the sale proceeds or sales of assessee for the year should have been a particular amount and, in fact, the amount reflected in the books of accounts was much less than the calculations arrived at by AO. Issuance of Notices – Maintenance of Books of accounts - Oblique motive – Imposition of Penalty - Held that:- AO did not jump to a conclusion without any rhyme or reason - There was a reasonable basis for him to arrive at the said conclusion, especially when the assessee did not offer any satisfactory explanation in spite of issuance of notice - Assessment orders refer to notices issued to the assessee and they also record the fact that no satisfactory explanation had been offered by assessee to make out a case that there was some special reason for which sale of sweets, namkeen etc. on 9th and 10th March, 2000 was exceptionally more – Once AO had rightly come to the conclusion that the books of accounts were not properly maintained and were not reflecting each and every transaction - Once it is found that with some oblique motive, effort was made to show lesser sale proceeds than the actual, the orders imposing penalty can not be questioned - Therefore, This court is not inclined to interfere even with the quantum of penalty - The impugned judgment delivered by the High Court is just and proper - Appeals are dismissed – Decided against assessee.
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2014 (4) TMI 495
Disposal of Stay/interim relief - Liability of tax – Tax on the sale of SIM cards and on the rentals received on the fixed telephone service – Tax under U.P. Tax on Entry of Goods in the Local Area Act, 2007 – Held that:- Judgment in I.T.C. Ltd. vs. Commissioner (Appeals), Custom & Central Excise, Meerut-I [2003 (10) TMI 70 - HIGH COURT OF JUDICATURE AT ALLAHABAD] followed - While considering the application for interim relief, the Court must examine all pros and cons involved in the case and further examine that in case recovery is not stayed, the right of appeal conferred by the legislature and refusal to exercise the discretionary power by the authority to stay/waive the pre-deposit condition would be reduced to nugatory/illusory - Undoubtedly, the interest of the Revenue cannot be jeopardized but that does not mean that in order to protect the interest of the Revenue, the Court or authority should exercise its duty under the law to take into consideration the rights and interest of an individual. Relying upon M/s Pennar Industries Ltd. vs. State of A.P. and others [2009 (2) TMI 457 - SUPREME COURT OF INDIA] - SC observed that if on cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or even substantive part of the demand and the stay application should not be disposed of in a routine manner unmindful of the consequences - Appellate authority and Tribunal have not indicated its mind so far as the existence of the prima facie case on merits on appeal as well as the financial condition which are to be considered by them (appellate authority/tribunal) while passing the impugned orders on an application for stay pending in the first appeal - The said mandatory condition is to be taken into consideration while disposing of an application for interim relief moved by the assessee by the appellate authority as well as tribunal during the pendency of appeal - Therefore, revision is disposed of and Remitted back to the first appellate authority to decide the appeal filed by the assessee – Decided in favour of Assessee.
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2014 (4) TMI 494
Whether tribunal erred despite the fact that the principal order under challenge was a notice u/s 44 and not the assessment order – Jurisdiction of Tribunal – Notice for recovery u/s 44 of Gujarat VAT Act – Opportunity of hearing - Held that:- It is undisputed position that before issuing recovery notice dated 25.5.2009 purportedly in exercise of powers u/s 44, no assessment, adjudication or final order quantifying the liability of the assessee was passed by AC - Thus notice for recovery dated 25.5.2009 was a unilateral ex-parte action on his part without any hearing or opportunity of hearing given to the assessee - Section 44 is only a mode of recovery and not the power of authority to pass any order deciding the liability of an assessee for payment of tax or any other monies due to the Government under the VAT Act - Such recovery therefore, necessarily shall have to be provided by such order as may be passed by the competent authority in terms of provisions of VAT Act - Only once the demand is quantified the question of recovering either through the special mode as provided in section 44 or through any other mode under the Act would arise. When admittedly no order of assessment or any other order of quantification of the assessee’s liability was passed, straightway ordering recovery without any opportunity of hearing to the assessee was wholly not permissible - Tribunal’s final conclusion that notice of recovery and the appellate order confirming such notice must be quashed, was perfectly in order - However, while doing so the tribunal could not have gone into the validity of merits and de-merits of rival stands - Such a stage had not yet arisen - Tribunal committed an error in striking down the Government demand holding that the assessee was entitled to retain all export benefits without curtailment of VAT incentive limit - This is not to suggest that on merits this Court disagrees with the view of the tribunal, This is only to suggest that the tribunal could have refrained from entering into such arena when the stage of doing so had not yet arrived - To this limited extent, thus, appeal of the Revenue would be allowed – Decided partly in favour of Revenue.
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2014 (4) TMI 493
Validity of Tribunal Order – Scope of appeals – Scope before tribunal - Held that:- The scope of appeals before tribunal being first and second appeal are laid down in section 73 of GVAT Act – u/s 73(6), tribunal would pass such order on the appeal as it seems just and proper - Since that portion of the order of AO which was in favour of assessee was not the subject matter of appeal, in terms of section 73(6), Tribunal could not have set aside the said order - The matter would have perhaps be different, had there be any cross objections before the tribunal by the Revenue - The scope of the appeal before the tribunal was therefore, confined to finding out whether AO was correct in confirming central sales tax demand of Rs. 6.77 lakhs and further whether the first appellate authority was justified in rejecting the appellant’s appeal – Therefore, appeals of the appellant are allowed - The order of AO dated 30.10.2012 is restored - The appellant’s appeal before the tribunal being Second Appeal No.235/2013 is restored to tribunal and shall be decided afresh – Decided in favour of assessee.
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2014 (4) TMI 492
Validity of Board Order – Evasion of tax – Suppression of Turnover – Recalling of the assessment orders – Revisional Jurisdiction - Show Cause Notice u/s 36(1) Assam General Sales Tax Act 1993 - Object and scope of Section 36 - Held that:- Judgment in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax [2000 (2) TMI 10 - SUPREME Court] - Since the object and scope of Section 36 of the Act is in pari materia with the object and scope of Section 263 of the Income Tax Act, the principle laid down by the Supreme Court in the case of Malabar Industrial Co. Ltd. can be applied to the facts of this case - The only grounds on which the Commissioner invoked his suo motu revisional jurisdiction for recalling of the assessment orders was that Assessee had shown low profit margin and therefore it seemed unreasonable to him and Assessee was alleged to had suppressed sales to the extent of ₹ 11,39,132.24 in two years - No basis is found in these grounds for invoking suo motu powers under Section 36 more than one reason - Primarily, there was no factual basis for forming the opinion that two grounds exists for invoking Section 36 against assessee - Neither the Commissioner and nor the Board took into consideration the detail explanation offered by the petitioner with a view to find out as to whether any ground had been made out to withdraw the show cause notice - This being the legal error in the proceedings, the impugned orders are not legally sustainable. Evasion of tax – Intention to Evade – Whether assessment order was erroneous and prejudicial to interest of revenue – Invocation of power u/s 36(1) Assam General Sales Tax Act 1993 - Held That:- Mere perusal of the explanation given by the petitioner would go to show that they had disclosed in their reply all sales both (inter-state and intra- state) and had also filed their price lists applicable for the North East Region - It clearly indicated that looking to their market strategy applied for North East Region due to long distances from other part of the country, coupled with a separate price list for sale of the products, the explanation offered deserved acceptance for withdrawal of the show cause notice issued u/s 36 - It was for the manufacturer to decide as to what should be their profit margin ratio - It was only when AO or/and Commissioner had been able to notice some kind of manipulation or false entries made in the books of accounts made with an intention to evade the payment of taxes, the issue could have been examined – Lastly, no order of assessment could be said as being erroneous and prejudicial to interest of revenue only because in the opinion of the Commissioner, the dealer claimed low profit margin - It was for the reason that it is bound to vary from manufacturer to manufacturer and depends upon various market and financial strategy. Once it is determined by the assessing authority by applying his mind on the basis of facts brought on record by the dealer, then Commissioner in his suo motu jurisdiction could not substitute his own opinion - To this Court, it appears that Commissioner acted like an Appellate Court over the decision of the Assessing Authority for examining the findings - It was not permissible in law while invoking powers u/s 36 - There was no reason for the petitioners to have suppressed their sales to the extent of ₹ 11,39,132. 24 because petitioner’s yearly sales were in crores - If the petitioner’s intention was to evade the payment of taxes, then they would have indulged in suppression in crores rather than in few lacs - It is apart from the fact that even the revised tax liability after invoking the powers under Section 36 ibid was not found to be such so as to satisfy the phrase “prejudicial to the interest of revenue“ - The petition succeeds and is allowed - The impugned orders dated 24.7.2003 passed by Board in case no 15 STA and 16 STA of 2001 which in turn arise out of the order dated 14.7.2000 passed by the Commissioner of for the assessment year 96-97/97-98 are quashed by issuance of writ of certiorari – Decided in favour of assessee.
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Indian Laws
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2014 (4) TMI 498
Appearance of private Respondent - Held that:- workman, the private respondent, has approached the Labour Court by filing an application under Section 33 C (2) of the Industrial Disputes Act, 1947 and is being represented by the lawyer - Therefore, Petitioner is directed to serve notice upon the learned advocate representing the said private respondent before the Labour Court indicating that this matter shall be listed under the heading “Motion” in the supplementary list.
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