TMI Tax Updates - e-Newsletter
April 25, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
No TDS required to be deducted from the payment made to any corporation whose income is exempt under section 10(26BBB) since their income is anyway exempt - Circular
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Income Tax:
TDS u/s 194A not deducted on interest paid on deposits - Special provision for deduction of TDS in case of Co-operative bank - ground that assessee is not liable to deduct tax at source dismissed - AT
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Income Tax:
Charitable hospital - it could not provide free medical relief to large numbers of indigent / poor patients - in the absence of any limit being provided in the Income-tax Act, violation, if any, of the said limit does not entitle the Revenue authorities to disallow the claim of exemption u/s 11 - AT
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Income Tax:
Claim of higher depreciation on drilling Rigs - Rig claimed as Heavy motor vehicle (Lorry) - Transport Authority has registered the workover/servicing mobile rig under the category Heavy Goods Vehicle Drilling Rig - higher depreciation @ 40% on Rigs allowed - AT
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Income Tax:
Capital gain on exchange of some property - when an arrangement is made between the family members, being Directors of the company, the rate so adopted for this purpose cannot be compared to prevailing market rate and the difference in rate cannot be adopted for the purpose of capital gains - AT
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Income Tax:
A unit which is not approved by the Board appointed by the Central Govt. in exercise of powers conferred under section 14 of the Industries (Development and Regulation) Act, 1951 is not entitled for exemption under section 10B of the Act - AT
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Income Tax:
Addition u/s 40A(3) of the Income Tax Act,1961 - Exceptions under Rule 6DD of the Income Tax Rules - Cash payment made due to cheque bounced - payment made in cash does not match with the amount of cheques bounced - additions confirmed - AT
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Income Tax:
Addition on account of unpaid dividends - Cessation of of liability - Additions u/s 41 - Unclaimed dividend transferred to General Reserve - the dividend so declared is not actually disbursed and were to be added back to the taxable income, it would mean a double taxation. - AT
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Income Tax:
Addition u/s 68 - addition has been sustained on the basis that the assessee could not discharge its onus with regard to the creditworthiness of the creditors - However, de hors the said provision, it is not possible to state with certainty that the said sums would be “concealed income” - No Penalty - AT
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Customs:
If the interpretation suggested by the appellant that "degaussing coil" is" inductor" that shall defeat the spirit of the public grant and also run counter to the legislative mandate - one is not substitute of the other - AT
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Central Excise:
Withdrawal of exemption notification in the North Eastern Region from goods under Chapter 21.06 (Pan Masala) and Chapter 24 (tobacco and tobacco substitutes), including cigarettes chewing tobacco etc. - Principle of promissory estoppel not applicable in the present case - SC
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Central Excise:
Demand of differential duty - In a number of other invoices though the pre-printed rate of duty is mentioned as 18%, but the same has been cancelled and modified as 15% and accordingly the duty had been charged @ 15% only. - differential duty may not be demanded - AT
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Central Excise:
100% EOU - Concessional rate of duty - concessional Notification No. 23/2003 CE could not have been denied to the appellant only for the reason that they have not obtained the specific permission for sale of by-product under DTA - AT
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VAT:
Whether the renting out of tents, cutlery, furnitures and carpets by a “tent house” is liable to Value Added Tax (VAT) - Held Yes - The definition of sale is wide enough. It covers even goods transferred on short duration - HC
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (4) TMI 825
Revision of assessment order - CIT observed huge amount of withdrawn, transfers & receipts from different accounts - CIT must have strong material/evidence before him, which could indicate that non-consideration of those issues has not only made the assessment order erroneous, but, has also caused prejudice to the interests of revenue - Held that:- On a perusal of revision order, we find that CIT in specific terms has not disapproved the rejection of books of account by AO. The CIT has pointed out various issues, which according to him was not examined by AO in course of assessment proceeding. However, when the books of account were found to be not reliable and rejected by AO and he invoked the provisions of section 145(3), it is not understood how and why AO should have gone into the specific issues on the basis of books of account. Further, CIT himself has observed in para 5.6 of the order that though AO has called upon assessee in his letter dated 06/01/11 to furnish various information but assessee did not comply to the same. In our view, that itself is reason enough for the AO to reject books of account and estimate the income. When assessee has failed to furnish informations/evidences to support the entries made in the books of account, there is no other course left open to AO, but, to compute the income of assessee on estimate basis. Once, AO rejected the books of account there is no need to again refer to the very same books of account for deciding the individual issues of expenditure/deduction claimed. Therefore, in our view, CIT was not justified to invoke power u/s 263 of the Act by holding the assessment order as erroneous and prejudicial to the interests of revenue. Further, CIT though raised certain issues, which according to him were not examined by AO during assessment proceeding, but, he has not established or substantiated with facts and materials that non-consideration of those issues has adversely affected the interests and revenue or has made the assessment order erroneous. While conducting assessment proceeding, AO is the best judge of the situation and has to proceed for completing assessment according to his own wisdom. Unless there are material to indicate to that effect, assessment order cannot be held to be erroneous and prejudicial to the interests of revenue empowering CIT to revise it u/s 263. In this context, a reference can be made to the judgment of the Hon’ble Delhi High Court in case of Jyothi Foundations [2013 (7) TMI 483 - DELHI HIGH COURT] wherein the Hon’ble Delhi High Court after analyzing several other decisions held that if the revising authority feels that AO has not conducted proper/adequate enquiry, then, he himself should have conducted enquiry to record a finding that the assessment order was erroneous. He should not have set aside the order and directed the AO to do the said enquiry. In the facts of the present case, there is no doubt that AO after examining the books of account and other materials on record has come to a definite conclusion that books of account are not reliable, hence, after rejecting the same has estimated the profit. In fact, the CIT himself observed that AO vide letter dated 06/01/11 had called upon assessee to produce evidences and to clarify certain issues. That being the case it cannot be said that AO has not conducted any enquiry and there is non-application of mind by AO. Further, CIT while setting aside the assessment order has also not given any specific direction, but, has simply directed the AO to re-do the assessment denovo after examining the issues. This, in our considered view, is nothing but in the nature of roving and fishing enquiry. Further, one more aspect needs to be mentioned, as rightly pointed out by learned AR, CIT in para 5.1 of the order has considered the P&L account and figures relating to assessment year 2008-09 whereas he is in session of revision proceeding for AY 2009- 10. This itself shows non-application of mind by learned CIT. For this reason alone, revision order becomes vulnerable and can be held to be invalid. - Decided in favour of assessee.
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2015 (4) TMI 804
Treatment of other income while calculating deduction u/s 80HHC of Income Tax Act, 1961 - Netting off of interest income against interest expenditure under deduction u/s 80HHC - Held that:- The said issues are squarely covered by the decision of the Hon'ble Supreme Court in the case of ACG Associated Capsules (P.) Ltd.[2012 (2) TMI 101 - SUPREME COURT OF INDIA]. It is held by the Hon'ble Supreme Court in this decision that 90% of not the gross interest but only the net interest, which has been included in the profits of the business of the assessee as computed under the heads "Profits and gains of business or profession" is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of business. Applying the law laid down by the Hon'ble Supreme Court in the case of ACG Associated Capsules (P.) Ltd. the aforesaid questions are held in favour of the assessee and order passed by the ITAT in ITA No.2053/Ahd/2004 for AY 1997-98 is hereby quashed and set aside. Now, the AO to recompute the deduction under Section 80HHC of the Income-tax Act considering the law laid down by the Hon'ble Supreme Court in the case of ACG Associated Capsules (P.) Ltd. [2012 (2) TMI 101 - SUPREME COURT OF INDIA]. - Decided in favour of assessee.
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2015 (4) TMI 803
Transfer pricing adjustment - Determination of Arm's length price in international transactions - Adjustment in Software development services transaction - Selection / Rejection of comparables companies - Comparable collected from public domain u/s 133(6) - Risk adjustment - Depreciation on net working equipments - Interest u/s 234B & 234D - Penalty u/s 271(1)(c) - Held that:- The common ground for rejection of comparable companies are - Non-furnishing the information obtained under section 133(6) of the Act to the assessee has vitiated the selection of this company as a comparable - Functionally different from the assessee in the case on hand - to exclude this company from the list of comparables as it is engaged both in software development and product development, owns IPR’s, intangibles, etc. and cannot be held as comparable to a pure software service provider - it is predominantly engaged in a variety of functions like product designing services and not purely software development services. Accordingly companies selected/ rejected for comparables. Risk adjustment - We have heard both the learned Authorised Representative and the learned Departmental Representative in the matter and perused and carefully considered the material on record. While the submission of the assessee may be based on principles, we find that it has merely put forth its claim but has not filed any basis of the quantification of the risk adjustment either before the authorities below or before us. In this view of the matter, the assessee's claim for risk adjustment is rejected. Interest u/s 234B & 234D - The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld by the Hon'ble Apex Court in the case of Anjum H Ghaswala 252 ITR 1. In this view of the matter, we uphold the action of the Assessing Officer in charging the assessee the said interest. The Assessing Officer is, however, directed to recompute the interest chargeable under Sections 234B and 234D of the Act, if any, while giving effect to this order. Penalty proceedings under Section 271(1)(c) of the Act - This ground is not maintainable in this appeal as no penalty has been levied on the assessee under Section 271(1)(c) of the Act for any cause of grievance to arise in the assessee's case and for us to adjudicate upon in the impugned order. This ground being not maintainable is dismissed accordingly. Depreciation on net working equipments -Following the above decision of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08, we remand the issue back to the file of the Assessing Officer for fresh consideration, after affording the assessee adequate opportunity of being heard and to file details / submissions required. It is ordered accordingly. Consequently, the Grounds at S.Nos.3.1 to 3.3 are treated as allowed for statistical purposes only. Following the above decision of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08, we admit the additional ground raised by the assessee for adjudication and remand the matter to the file of the Assessing Officer for his examination and consideration of the issue in the light of the directions issued by the Tribunal at paras 49 and 50 of its order for Assessment Year 2007-08 in the assessee's own case. - Decided partly in favour of assessee.
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2015 (4) TMI 802
Dis-allowance of expenses u/s 40(a)(ia) of the Income Tax Act, 1961 - TDS u/s 194A not deducted on interest paid on deposits - Special provision for deduction of TDS in case of Co-operative bank - Payee shown interest in return of income and paid tax - Held that:- The assessee is liable to deduct the tax at source on the term deposit of members and cooperative societies as per the provisions of sec. 194A(3)(vii)(b) of the Act. Section 194A(3)(vii)(b) deals with cooperative societies engaged in the business of banking. If the amount paid or credited to any depositor during the year exceeds ₹ 10,000/-, the provisions of sec. 194A(1) of the Act shall apply to the cooperative society engaged in the banking business shall have to deduct tax on such payment. From the facts of the case, it is seen that the ITO has categorically brought out the material on record to prove that the assessee bank is covered by the provisions of sub-clause (b) of clause (viia) of sec. 194A(3) of the Act. We have taken the consistent view taken by the ITAT, Panaji Bench in the case of Saraswat Co-operative Bank Ltd. [2015 (1) TMI 743 - ITAT PANAJI].Following the this decision, we hold that the assessee in these assessment years has paid interest above ₹ 10,000/-, to each of the depositors, therefore it is liable to deduct tax at source and the assessee is deemed to be default. Our view was confirmed by the Hon'ble Bombay High Court vide decision in the case of The Marathawada Urban Bank Co-op Association Ltd. [2015 (4) TMI 374 - BOMBAY HIGH COURT]. We dismiss the ground that assessee is not liable to deduct tax at source. We hold that if the amount more than ₹ 10,000/- is credited as an interest on time deposits, then the urban cooperative Bank is liable to deduct the TDS as is laid down in the said provisions of section 194A and that urban co-operative Bank is not liable to deduct TDS if the interest accrued on time deposits is less than ₹ 10,000/-. Therefore, we reverse the finding of Ld. CIT(A) and restore this issue back to the file of Assessing Officer to verify this fact as per the decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages P. Ltd. [2004 (3) TMI 333 - ITAT DELHI] and also the decision of CIT Vs. Eli Lilly & Co. reported in [2009 (3) TMI 33 - SUPREME COURT] whether payee has paid tax on the interest income received from the assessee society and shown the same in his income tax return. The Assessing Officer is directed to verify the same and pass the order in accordance with law. - Accordingly disposed off.
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2015 (4) TMI 801
Charitable hospital - Non-fulfilment of conditions prescribed in section 2(15) of the Income Tax Act, 1961 - Denial of deduction u/s 11 of the Income Tax Act, 1961 - Violation of provision of section 13(1)(c) rws 13(2)(b) and 13(2)(g) of the Income Tax Act, 1961 - No concessional treatment to poor peoples - Whole income not applied for trust object i.e. to provide medical relief - Held that:- Where the assessee was engaged in carrying on the activities for attaining the objects of providing medical relief to people at large and surplus was generated from hospital activities for doing charitable work in the hands of the assessee, does not establish the case of the Assessing Officer that it was not engaged in charitable activities. Further, the assessee trust was established for the purpose of granting medical relief and the activities having been carried out as per the terms of settlement and the said activities having been recognized as charitable under the provisions of the Act, even recognition given by the Bombay Public Trust Act and also by the registration granted under section 12AA of the Act, we find no merit in the order of Assessing Officer, in this regard. Similar ratio was laid down by Delhi Bench of the Tribunal in Manav Bharati Child Institute & Child Psychology [2007 (9) TMI 446 - ITAT DELHI], that merely because there was some surplus in the activities carried on by the society, the same would not dis-entitle to claim exemption under section 11 and 12 of the Act. Similar proposition has been laid down by the Delhi Bench of the Tribunal in ITO Vs. Dharamshila Cancer Foundation & Research Centre [2009 (3) TMI 233 - ITAT, DELHI], wherein it has been laid down that the profitability is not the sole criteria to judge the charitable nature of a society and where the Assessing Officer has failed to take into consideration that income was only applied for the purpose of charity, there was no justification in non-grant of benefit under section 11 of the Act. The Hon’ble Kerala High Court in Pulikkal Medical Foundation (P) Ltd. [1993 (8) TMI 16 - KERALA High Court] had also laid down similar proposition that merely because the assessee was running a hospital on commercial lines, it would not be dis-entitled to the exemption under section 10(22) of the Act. The Hon’ble Supreme Court in Surat Art Silk Cloth Manufacturers Association [1979 (11) TMI 1 - SUPREME Court] had also laid down the proposition that for the accomplishment of object or means to carry out the object, it is not necessary that it should not involve any activity for profit, in cases, where the predominant object of the trust is to carry out the activity for charitable purposes and not to earn profit. Further, it was held that the trust would not lose its character of a charitable purpose merely because some profit arises from the activities. Reference was made to the exclusionary clause applicable at that time and it was held that the same does not require that the activity must be carried on in such a manner that it does not result in any profit. We find no merit in the objection of the Assessing Officer, where Dr. Kandekar acting as managing trustee of the assessee trust had supervise the activities of the trust and had devoted time for not only the medical consultancy, but also for administrative work. The assessee had also made available the services of the company Cathlab (I) Pvt. Ltd. for the patients of trust hospital at concessional rates and in such circumstances, it could not be said that the provisions of section 13(1)(c) of the Act are attracted. In any case, under section 13(2)(c) of the Act, the provision is attracted where the amount paid is in excess what may be reasonably paid for such services. The provisions of section 13(2)(c) of the Act are not to be applied where any amount is paid by way of salary, allowance or other to any interested person out of reserves of the trust or institution, for services rendered by such person to trust or institution. The clauses are attracted in case the amount so paid is in excess of what may be paid for such services. Also we find no merit in the order of Assessing Officer in holding that the said medical shop being rented out to interested party attracts the provisions of section 13(1)(c) of the Act. In comparison, part of the building measuring 250 sq. ft. was allotted to M/s. Samarth Diagnostics Pvt. Ltd. on a monthly rent of ₹ 5,000/- and as per the Assessing Officer, both the directors were wholly unrelated either to the managing trustee or any other trustee. As per MoU, the services were provided to the patients of hospital at rates 10% less than market rate. In case, we compare the two agreements for letting out the premises of the assessee trust, the premises handed over to the interested party is fetching high rentals to the trust and it could not be said that the provisions of section 13(1)(c) of the Act, have been violated. Another aspect of the denial of deduction under section 11 of the Act to the assessee was that the assessee had failed to provide concessional treatment to indigent / poor patients. Admittedly, this was the first year of operation of the hospital and the plea of the assessee was that it could not provide free medical relief to large numbers of indigent / poor patients. However, in the absence of any limit being provided in the Income-tax Act, violation, if any, of the said limit does not entitle the Revenue authorities to disallow the claim of exemption under section 11 of the Act to the assessee trust, which otherwise had carried out the activities as per its objects and hence, is entitled to the deduction under section 11 of the Act. - Decided against the revenue.
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2015 (4) TMI 800
Deduction u/s 80HHC of Income Tax Act, 1961 on DEPB receivables & accruals - Denial of deduction u/s 80HHC on 90% of other income - Treatment of insurance claim received and C&F Stockist interest for the purpose of deduction u/s 80HHC - Addition on account of staff welfare expenses, selling & distribution expenses in absence of complete bills & vouchers - Treatment of Deferred revenue expenditure - Held that:- In the case of Topman Exports [2012 (2) TMI 100 - SUPREME COURT OF INDIA], apex court has held that DEPB is a kind of assistance given by the Government of India to an exporter to pay customs duty on its imports and it is receivable once exports are made and an application is made by the exporter for DEPB. We have, therefore, no doubt that DEPB is "cash assistance" receivable by a person against exports under the scheme of the Government of India and falls under cl. (iiib) of s. 28 and is chargeable to income-tax under the head "Profits and gains of business or profession" even before it is transferred by the assessee. We are, thus, of the considered opinion that while the face value of the DEPB will fall under cl. (iiib) of s. 28 of the Act, the difference between the sale value and the face value of the DEPB will fall under cl. (iiid) of s. 28 of the Act and the High Court was not right in taking the view in the impugned judgment that the entire sale proceeds of the DEPB realized on transfer of the DEPB and not just the difference between the sale value and the face value of the DEPB represent profit on transfer of the DEPB. where the export turnover of an assessee exceeds ₹ 10 crores, he does not get the benefit of addition of ninety per cent of export incentive under cl. (iiid) of s. 28 to his export profits, but he gets a higher figure of profits of the business, which ultimately results in computation of a bigger export profit. The High Court, therefore, was not right in coming to the conclusion that as the assessee did not (sic) have the export turnover exceeding ₹ 10 crores and as the assessee did not fulfill the conditions set out in the third proviso to s. 80HHC(3), the assessee was not entitled to a deduction under s. 80HHC on the amount received on transfer of DEPB and with a view to get over this difficulty the assessee was contending that the profits on transfer of DEPB under s. 28(iiid) would not include the face value of the DEPB. It is a wellsettled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Expln. (baa) to s. 80HHC read with the words used in cls. (iiid) and (iiie) of s. 28, the assessee was entitled to a deduction under s. 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee.” Therefore, this ground is restored to the file of AO to decide it afresh in the light of judgement of Hon’ble Gujarat High Court rendered in the case of Avani Exports [2012 (7) TMI 190 - GUJARAT HIGH COURT] and the judgement of Hon’ble Apex Court in the case of Topman Exports [2012 (2) TMI 100 - SUPREME COURT OF INDIA]. This ground of assessee’s appeal is allowed for statistical purposes. Denial of deduction u/s 80HHC on 90% of other income - In the case of ACG Associated Capsules Pvt. Ltd. [2012 (2) TMI 101 - SUPREME COURT OF INDIA], it was held that only ninety per cent, of the net amount of any receipt of the nature mentioned in clause (1) of section 80HHC which is actually included in the profits of the assessee is to be deducted from the profits of the assessee for determining "profits of the business" of the assessee under Explanation (baa) to section 80HHC. It is contended by the ld.Sr.Counsel for the assessee that the issue is covered by the judgement of Hon’ble Apex Court in the case of ACG Associated Capsules Pvt.Ltd., wherein the Hon’ble Supreme Court held that ninety percent of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profits of the business of the assessee as computed under the head “profits and gains of business or profession” is to be deducted under clause(1) of Explanation (baa) to section 80HHC for determining the profits of business. Therefore, respectfully following the ration laid down by the Hon’ble Apex Court, we hereby restore the issue to the file of the AO for re-computation of deduction u/s.80-HHC in the light of the judgement of Hon’ble Supreme Court rendered in the case of ACG Associated Capsules Pvt.Ltd.(supra). - Accordingly, this ground of assessee’s appeal is allowed for statistical purposes. In the case of Milton Laminates Ltd. [2015 (4) TMI 804 - GUJARAT HIGH COURT], the same issue was raised whether the Income Tax Appellate Tribunal was right in law in excluding 90% of the ' Other Income' viz. Interest, Misc. Income and Insurance Claim from the profits of the Business while calculating the deduction u/s. 80HHC of the Act - it was held that Applying the law laid down by the Hon'ble Supreme Court in the case of ACG Associated Capsules (P.) Ltd. (supra) the aforesaid questions are held in favour of the assessee and order passed by the ITAT in ITA No.2053/Ahd/2004 for AY 1997-98 is hereby quashed and set aside. Now, the AO to recompute the deduction under Section 80HHC of the Income-tax Act considering the law laid down by the Hon’ble Supreme Court in the case of ACG Associated Capsules (P.) Ltd. Therefore, respectfully following the judgement of Hon’ble Gujarat High Court in the case of Milton Laminates Ltd. [2015 (4) TMI 804 - GUJARAT HIGH COURT], we hereby dismiss this ground of the Revenue’s appeal. In the result, appeal of the Revenue is dismissed. - Assessee appeal allowed for statistical purpose and revenue appeal dismissed.
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2015 (4) TMI 799
Application of the provisions of section 145(3) - Reduction in the Gross Profit rate from 18.5% to 16% by CIT(A) - Addition on account of unexplained cash - Addition on account of unexplained stock - Held that:- It is undisputed fact that the assessee has been indulging in unaccounted sales/purchases. The major expenses on account of trading of fireworks have already been debited by the assessee in P&L account except unaccounted purchase. Therefore, in unaccounted purchase resultant to unaccounted sales, the assessee has more profitability. The learned counsel has not controverted the finding given by the learned CIT(A). In case of comparable Rajan fireworks and Emporium case, the G.P. shown by it @ 17% to 18%, who is dealing in wholesale/retail fireworks. Therefore, the learned CIT(A) has reasonable to apply 16% G.P. on recorded sales as well as unrecorded sales. Thus, we confirm the order of the learned CIT(A). Therefore, the revenue's appeal and assessee's C.O. on this issue are dismissed. Addition on account of unexplained cash - The assessee has already disclosed excess undisclosed income over undisclosed investment in the return itself. It is a fact that the assessee has admitted additional income on account of cash found during the course of search. The statement recorded U/s 133A of the Act has no evidentiary value as held by the Hon'ble Supreme Court but the statement recorded U/s 132(4) has evidentiary value, which is also rebuttable presumption as held by the Hon'ble Apex Court in various cases. It is fact that Shri Madan Mohan Gupta in question to answer No. 21 in statement U/s 133A dated 22/10/2008 had admitted that the cash of ₹ 20 lacs was found at residence, had disclosed additional income. The learned AR for the assessee's argument that the excess cash found during the course of search at residence was result of unaccounted sale made in preceding years. The learned CIT(A) also analysed the whole facts with reference to cash and unaccounted investment found and has given detailed findings on this issue, which has not been controverted by the learned CIT DR. Therefore, we confirm the order of the learned CIT(A). Addition on account of unexplained stock - The learned AR considered the reconciliation in his submission and excess stock has been calculated at ₹ 77,289/- in place of addition confirmed by the learned CIT(A) at ₹ 2,80,238/-. The facts and figure mentioned by the assessee are required to be verified from the record of the assessee and seized material, therefore, we set aside this issue to the Assessing Officer to re-verify these facts and figure reproduced above in conciliation of stock. Accordingly, this ground of appeal is set aside to the Assessing Officer. - Decided against the revenue.
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2015 (4) TMI 798
Claim of higher depreciation on drilling Rigs - Rig claimed as Heavy motor vehicle (Lorry) - In case of two conflicting views, favourable to the assessee to be adopted - Held that:- CIT(A) has applied the judgment of the Hon’ble Madras High Court rendered in the case of Popular Borewell Service [1991 (4) TMI 59 - MADRAS High Court].However, in our considered view, the CIT(A) was not justified in disallowing the claim by not following the judgment of Hon’ble Jurisdictional High Court in the case of Gujco Carriers [2002 (2) TMI 48 - GUJARAT High Court]. In this case, it was held that the mobile crane of the assessee which admittedly was registered as a heavy motor vehicle, would clearly fall within the expression “motor lorries” which means motor trucks) in entry IIIE(1A) of the Table in Appendix I under rule 5 of the Income-tax Rules, 1962, since it was used by the assessee in its business of running the crane on hire. The assessee was entitled to depreciation at the rate of 40 per cent on the mobile crane.” In the case in hand also, as per the photograph given by the assessee, it is observed that the workover/servicing mobile Rigs specifically designed for such purpose. Moreover, as per proforma invoice enclosed at Page Nos. 24-28, it is evident that it pertains to 100 ton workover/servicing mobile rig. Therefore, the contention that the workover rig remains static is not correct. It is also noteworthy that the assessee-company has raised invoices per kilometer in respect of the movement of the Rig from one place to another. It is not the case that where the bill has been raised solely on the basis of static operations. As per ld. CIT(A) that the depreciation at higher rate would be available if crane is given on hire in view of the judgment of Hon’ble Gujarat High Court in the case of Gujco Carriers [2002 (2) TMI 48 - GUJARAT High Court] but it would not be available to workover mobile rig. We are unable to accept this reasoning as in both the cases there is mobility from place to another and both are designed for rendering specific services. The fact that State Transport Authority has registered the workover/servicing mobile rig under the category Heavy Goods Vehicle Drilling Rig. The Hon’ble jurisdictional High Court in the case of Gujco Carriers (supra), after examining the functions etc., held that motor vehicles like fire trucks, fork lift trucks and crane trucks which are designed for special services fall within the category of “Motor Trucks” (also called “”Motor Lorries”). The Hon’ble Andra Pradesh High Court has allowed higher rate of depreciation on Rig in the case of Super Drillers [1988 (2) TMI 24 - ANDHRA PRADESH High Court]. However, the Hon’ble Madras High Court in the case of Popular Borewell Service [1991 (4) TMI 59 - MADRAS High Court] has taken a different view. Hence, there are conflicting views of the Hon’ble Andra Pradesh High Court and the Madras High Court. Therefore, two views are possible; hence the view which is favourable to the assessee has to be adopted in view of the Judgment of the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME Court]. Therefore, we are of the considered view that the ratio laid down by the Hon’ble Gujarat High Court in the case of Gujco Carriers is squarely applicable in the facts of the present case. Therefore, respectfully following the same we hereby direct the Assessing Officer to allow higher depreciation @ 40% on Rigs as claimed by the assessee. - Decided in favour of assessee.
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2015 (4) TMI 797
Transfer pricing adjustment - Arm's length price adjustment on account of reimbursement of expenses - Expenses incurred for the brand building of Associated Enterprises - Held that:- It is clear that the assessee itself has claimed as an agent for its AE for providing advertising support services and distribution of the ten sports channel. There is no quarrel on the point that any expenditure even on the advertisement of the assessee’s own business activity and assessee’s own brand name is an allowable expenditure and would not fall in the category of the expenditure for the promotion of brand of AE. However, in this case the expenditure has been incurred for organizing cricket match at UAE which has been sponsored by the AE and its Ten Sports channel. Therefore, prima facie it appears that the expenditure has been incurred for brand promotion of the AE of the assessee. An identical issue has been considered and decided by the Special Bench of this Tribunal in the case of of L.G. Electronics India (P) Ltd. [2013 (6) TMI 217 - ITAT DELHI] Thus it is clear that the amounts spent on an international transaction is required to be taken out for processing under TP provisions to find out its taxability in the hands of the Indian assessee. The amount incurred towards its own business expenses shall be considered for taxability as per regular provisions of the Act including section 37 of the Income Tax Act. In view of the fact that when a transaction falls in the ambit of International Transaction even if part of the expenditure is relevant to the expenses for the purpose of the assessee’s own business activity the remaining of the expenses has to be tested under the provisions of section 92 for its taxability in the hands of the assessee. In the case in hand, the assessee has not filed the relevant agreements so as to give a findingn on the nature of relationship between the assessee and its AE as well as the respective cotractual obligations and rights of the parties. Further the authorities below have also not examined and discussed the agreements entered into between the assessee and AE. Accodingly in the facts and circumstances of the case and in the interest of justice, we set aside this issue to the record of TPO/AO to reconsider and decide the samer after verification of all the facts and in the light of decision of Special Bench in the case of L.G. Electronics India (P) Ltd. [2013 (6) TMI 217 - ITAT DELHI]. - Decided in favour of assessee.
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2015 (4) TMI 796
Dis-allowance of interest paid on borrowed capital - No expenditure incurred for earning exempted income, dis-allowance under section 14A not stand - Interest free advances given on the principles of business prudence and commercial expediency - Treatment of sale of investments - Capital gain vs Business income - Additions on account of sale of ground floor below market rates - Family arrangement does not liable for capital gain - Held that:- Dis-allowance of interest paid on borrowed capital - Following assessee's own case [2011 (10) TMI 573 - ITAT HYDERABAD] for the Ay 2005-06, we find no infirmity in the order of CIT(A). The ground raised by the Revenue is dismissed. Treatment of sale of investments - We find that the shops let out by the company were shown as investment in the books and when the investment were sold the same were offered as capital gains. An amount of ₹ 1,34,83,600 was shown under the head "investment capitalized". Relying on the decision of Radhaswamy Satsang [1991 (11) TMI 2 - SUPREME Court], wherein it was held that consistency is a virtue to be followed both by the assessee and the Revenue and applying the ratio of the this decision & taking into consideration that the shops have been reflected in the books of accounts from the very beginning, we are of the opinion that the income generated on the sale of the same should be treated as capital gain and not as business income. We confirm the order of the CIT (A) in deleting the addition. Ground Nos. 3 & 4 of appeal of the Revenue are dismissed. Additions on account of sale of ground floor below market rates - According to this agreement, Directors of the assessee company exchanged some properties and in the process the ground floor is to be given to Shri Ahok Kumar Malpani and 2nd, 3rd and 4th floors were to be handed over to Shri Girish Malpani, Shri Manish Malpani and Shri Ashish Malpani respectively. The CIT (A) has held that when an arrangement is made between the family members, being Directors of the company, the rate so adopted for this purpose cannot be compared to prevailing market rate and the difference in rate cannot be adopted for the purpose of capital gains. In fact, the CIT (A) relied on the decision of the Hon’ble Madras High Court in the case of KAY ARRT Enterprises [2007 (7) TMI 171 - MADRAS HIGH COURT], the wherein the High Court held that "the Tribunal had rightly found that the transfer of shares by way of family arrangement would not attract capital gains tax, as the same was a prudent arrangement to avoid possible litigation among the family members and was made voluntarily and not induced by any fraud or coercion and therefore, could not be doubted. The Tribunal was justified in arriving at the conclusion that the family arrangement among the assessees did not amount to any transfer and hence was not exigible to capital gains tax. - Decided against the revenue.
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2015 (4) TMI 795
Transfer pricing adjustment in relation to international transactions - Adjustment on account of provision of non binding investment advisory and related services - Rejection of comparables - Dis-allowance of expenses incurred related to bonus u/s 36(1)(ii) of Income Tax Act, 1961 - Bonus was part of employee agreement & based on performance - Held that:- We find that payment of bonus to shareholder-employees had resulted in payment of more taxes in comparison to tax payable had the same amount been paid as dividend to shareholders.We have gone through the chart giving details of tax paid the assessee-company and the shareholders with respect to the bonus payment.So,it cannot be held that it was a device to evade taxes.Not only this,it is found that the shareholders were professionally highly qualified.Payment of bonus is a business decision and till it is not proved that same was not paid actually,it cannot be disallowed.The assessee had claimed that it was based on performance evaluation and the AO had not contravened the fact.The assessee had deducted tax at source on the bonus paid to the shareholder directors and they have shown the receipt of bonus in their respective returns. Here,we would also like to refer the decision of Shahzada Nand and Sons [1977 (4) TMI 4 - SUPREME Court] wherein the Hon’ble Apex Court has laid down some principles with regard to payment of commission.In our opinion same principles are applicable to payment of bonus also. In this case supreme court held that it is not necessary, for commission paid to an employee to be allowable under section 36(1)(ii), that it should be paid under a contractual obligation and it is now well-settled that the mere fact that the commission is paid ex gratia would not necessarily mean that it is unreasonable. In the case under consideration condition of payment of bonus was part of the employment agreement and it was a performance based payment. Considering the above discussion and the peculiar facts and circumstances of the case,we are deciding first effective ground of appeal in favour of the assessee. Transfer pricing adjustment in relation to international transactions - It is found that the assessee is engaged in providing nonbinding research,advisory and other ancillary support services whereas ICSL is providing advisory and consulting services in the specialised area of M&A,TRAS,that activities of ICSL are in the nature of Investment banking,that the assessee is not representing any company in India,but ICSL represents the Indian Companies.We have noticed that the assessee-company is not involved in business plan with lenders, restructure, implementation, M&A.Thus the activities carried out by the assessee and the comparable i.e. ICSL are not similar-there is functionally substantive difference in their job profile.In our opinion activities of ICSL are akin to the job of a merchant banker.We find that the Ho’ble Court has,in the case of CIAIPL [2013 (4) TMI 486 - BOMBAY HIGH COURT],held that merchant banking and investment banking services were functionally different from investment advisory services.Therefore,we are of the opinion that ICSL has to be excluded for TPA for the year under consideration.Once ICSL is excluded from the TP comparision,the arithmetic mean OP/TC of comparables would be 24.24% as against the mean of 20.73 shown by the assessee.As it is within the 5% range available to the assessee and it meets the arm’s length standard,so,we decide second ground of appeal in favour of the assessee. - Decided in favour of assessee.
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2015 (4) TMI 794
Dis-allowance u/s section 40(a)(i) of Income Tax Act, 1961 - Non deduction of TDS on Internet charges paid to non-resident - DTAA between USA and India - Deduction under section 10B available to 100% EOU - Held that:- As per order of CIT(A),the amount paid to the non-resident is towards hiring of storage space. The payment has been made to a person whose business is to make available storage space to various parties. Therefore.the payments made to the non-resident only constitutes its business income. The business income earned by a non resident who does not have a Permanent Establishment (PE) in India cannot be taxed in India as per DTAA between USA and India. On going through the CIT(A) order, we do not find any good reason to interfere with the findings of the Commissioner of Income Tax (Appeals) in deleting the disallowance made under section 40(a)(i) of the Act. The findings of the Commissioner of Income Tax (Appeals) have not been rebutted with any evidence by the Revenue. We have also gone through the assessment order and find that the Assessing Officer has not given any finding as to how data storage charges paid by the assessee are falling either under royalty or fees for technical services so as to deduct TDS on such payments made to non-resident outside India. In the circumstances, we uphold the order of the Commissioner of Income Tax (Appeals) in deleting the disallowance and reject the grounds raised in all the appeals of the Revenue on this issue. Deduction u/s 10B of Income Tax Act, 1961 - As could be seen from the definition of 100% EOU, in order to be 100% export-oriented undertaking and claim exemption under section 10B, an undertaking must have been approved by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 and the rules made under that Act. In this case, the assessee is a unit recognized by the STPI. Nothing is placed on record to suggest that this is a hundred percent export oriented undertaking approved by the Board appointed by the Central Government under section 14 of the Industries (Development and Regulation) Act, 1951. An identical situation arose in the case of CIT Vs. Regency Creations Ltd. [2012 (9) TMI 627 - DELHI HIGH COURT] that units set up under STP scheme are different from those that govern units set up as hundred percent export oriented undertaking and so approved by the Board. The Hon’ble High Court held that a unit which is not approved by the Board appointed by the Central Govt. in exercise of powers conferred under section 14 of the Industries (Development and Regulation) Act, 1951 is not entitled for exemption under section 10B of the Act. The Hon’ble High Court held that assessee holding approval under Software Technology Park Scheme is not entitled to exemption under section 10B of the Act. This decision squarely applies to the assessee in the absence of any approval placed on record by the assessee from the Board appointed by the Central Govt. Neither the Assessing Officer nor the Commissioner of Income Tax (Appeals) considered whether the assessee is entitled for deduction under section 10A of the Act in the proceedings before them. In view of our above findings, we set aside the order of the Commissioner of Income Tax (Appeals) and remit the matter back to the file of the Assessing Officer to examine the claim of the assessee under section 10B of the Act in the light of the decision of the Hon’ble Delhi High Court in the case of Regency Creations Ltd. (supra) after providing adequate opportunity to the assessee. The alternative plea made by the assessee may also be examined by the Assessing Officer in case the assessee is not entitled for exemption under section 10B of the Act. - Decided partly in favour of revenue.
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2015 (4) TMI 793
Addition of income on sale and purchase of shares - Treating as Business income - Classification of shares held as Investment in books of accounts - Held that:- We have heard rival parties and have gone through the material placed on record. We find that the assessee is engaged in the business of agro products and its total turnover from the said business is around ₹ 365 crores. We further find from the facts noted in Ld. CIT(A)'s order that assessee had carried out transaction in 5 scripts and holding period of which ranged from 8 days to 126 days. Moreover, it is observed that the assessee had classified the investment in the balance sheet as investment. We find that in previous years and in succeeding years, the income of assessee from similar activities has been held to be on account of capital gain and not on account of business income. Ld. CIT(A) has passed a detailed and exhaustive order in which we do not find any infirmity. - Decided against the revenue.
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2015 (4) TMI 792
Revision of assessment order - Applicability of Dis-allowance @ 20% u/s 40A(3) of Income Tax Act, 1961 on transport charges - Held that:- The sole ground for setting aside the assessment order passed u/s 143(3) is that, the assessing officer has not examined the transportation charges which was paid in cash from the angle of disallowance u/s 40A(3). As discussed above, it is evident from the material placed on record that during the course of the assessment order proceedings, the assessing officer has called for the entire details of transportation charges, which included party-wise ledger accounts, bill and vouchers, etc. specifically to examine the nature of cash payment made to the various transporters. From the perusal of such ledger account and bills and vouchers which have been placed before the AO, it is seen that none of the payment made by the assessee at a time has exceeded ₹ 20,000/- in cash. This fact is corroborated by the bills issued by transporters and also the vouchers issued by the assessee. These transportation charges are in the nature of advances paid to the drivers and transporters once the assessee books the trucks for the purpose of the purchases outside Maharashtra. If all these details have been verified and examined by the AO, then it cannot be held that AO has not made any enquiry or verified the evidences. Here in this case, the Ld. CIT has not pointed out that there is any actual violation of section 40A(3) as per the law prevalent in the A.Y. 2007-08. Prior to A.Y. 2009-10, section 40A(3) provided that, where the assessee incurs any expenditure in respect of which payment is made for sum exceeding ₹ 20,000/-, then no deduction shall be allowed. The statute did not envisaged that the aggregate amount of payments made to a person on a day should exceed ₹ 20,000/-. This specific amendment has been brought in the statute w.e.f. 01.04.2009. This proposition that no disallowance u/s 40A(3) should be made if the payment at a time is less than prescribed limit, is fully supported by decision of Hon’ble Allahabad High Court in the case of Ashok Iron and Steel Rolling Mills [2009 (10) TMI 414 - ALLAHABAD HIGH COURT] and decision of Orissa High Court in the case of Aloo Supply Company [1979 (12) TMI 60 - ORISSA High Court]. Thus, the AO has rightly not invoked the provision of section 40A(3) while completing the assessment u/s 143(3). On these facts, it cannot be held that the assessment order passed by the AO is erroneous so far as it is prejudicial to the interest of the revenue. The Ld. CIT has not given any specific finding from the records as to how there is a violation of section 40A(3) with regard to the payments made by the assessee. Thus, we quash the impugned order passed by Ld. CIT u/s 263 and the grounds raised by the assessee is treated as allowed. - Decided in favour of assessee.
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2015 (4) TMI 791
Revision of assessment order - Claim of provision for development expenses - Held that:- The first finding of the ld. CIT is to the effect that assessment order has been passed in a casual manner and without application of mind. In our consideration with the above correspondence, evidence and discussions during the course of assessment proceedings do not substantiate these adverse observations of ld. CIT. Consequently we are unable to agree that assessment order is erroneous or prejudicial to the interest of revenue on this score. The allowability of JDA development charges as business expenditure, ld. CIT has no objection on assessee’s following mercantile system of accounting in that eventuality even the accrued liabilities are to be allowed. Assessee has demonstrated that per square yard working of JDA expenses was provided to ld. AO during the assessment proceedings which is part of the record. Once the liability is accrued as per JDA circulars and AO allows the claim based on working provided by assessee; it demonstratively means that AO allowed the claim after due application of mind. Ld. CIT has not even disputed that liability is allowable as clearance has been give about liability qua the sale proceeds offered. It has been lost sight of that assessee follows mercantile method, liability is statutory and working of quantum is provided. With all this available on record we hold that the assessment order can neither be called as erroneous or prejudicial to the interest of revenue. Our views are fortified by the catena of judgment in DLF Ltd. [2012 (9) TMI 626 - DELHI HIGH COURT],Max India Ltd. [2007 (11) TMI 12 - Supreme Court of India] and Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME Court], consequently the 263 order is quashed and assessee’s grounds are allowed. - Decided in favour of assessee.
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2015 (4) TMI 790
Penalty u/s 271(1)(c) for furnishing of inaccurate particulars of income - Inadvertent and bona fide error - Existence of bona fide reasons and cause for filing the revised return - Held that:- As per ratio of the decision of Hon’ble Jurisdictional High Court of Delhi in the case of Arvind Nagpal [2015 (4) TMI 706 - DELHI HIGH COURT] wherein it has been held that the calibre and expertise of the assessee has little or nothing to do with the inadvertent error. Their lordships further held that the assessee should have been careful. But the absence of due care in a case such as the present does not mean that the assessee is guilty of either furnishing inaccurate particulars of attempting to conceal its income. Following the decision of Hon’ble High Court in the case of Arvind Nagpal [2015 (4) TMI 706 - DELHI HIGH COURT], we are inclined to hold that in the present case, the assessee filed its return of income as an individual without any professional assistance. Subsequently, the assessee filed a revised return reclassifying the income and the AO assessed the income of the assessee at the income declared in the revised return filed on 27.2.2007. The detailed explanation submitted by the assessee on 2.4.2008 (Paper Book page 9 to 13) clarify entire facts and circumstances in which original return of income and revised return of income were filed. We further note that during the course of assessment proceedings, the assessee submitted detailed justification and reasons for filing the revised return which were placed on record. We further note that the reasons offered by the assessee during penalty proceedings on the same line cannot be held as an afterthought and these submissions support the existence of bona fide reasons and cause for filing the revised return. We further note that the assessment stood framed on the revised return figure itself which also support the bona fide intention of the assessee. Under the facts and circumstances as noted above, it cannot be validly held that either the assessee furnished inaccurate particulars of its income or the assessee has concealed particulars of its income and thus, penalty u/s 271(1)( c) cannot be imposed. - Decided in favour of assessee.
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2015 (4) TMI 789
Dis-allowance of Interest on loan - Remand report submitted by AO - Undisclosed income - Best judgement assessment, notice not served due to change in address of assessee - Held that:- So far as disallowance of interest is concerned, it is seen that AO has verified the loan confirmation and the copy of TDS certificate deducted on such a payment. Even the capacity of the lenders has also been accepted. Thus, there is no reason for confirming the disallowance of interest payment made by the assessee to the loan creditors from whom loans were taken in earlier years. Regarding ad hoc disallowance on account of expenses, it is seen that in the remand report the assessing officer has not given any adverse comment with regard to the genuineness of the expenses or has given any adverse comment that they are unverifiable. He has simply stated that it is not clear as to, from where the figure of ₹ 5,11,926/- has been taken by the AO in the original assessment order, when the assessee has debited the amount in the P/L account at ₹ 7,16,723/-. In the absence of any adverse comment with regard to un-verifiability of expenses, we do not find any reason to sustain any part of the disallowance on ad hoc basis. Thus, the finding of the Ld. CIT(A) which is completely based on remand report of the AO is upheld. Accordingly, the ground raised by the department stands dismissed. we find that in the P/L Account under the head "indirect income", amount of loans received of ₹ 45,387/- has duly been credited. Such a payment received is also corroborated by confirmation of account by M/s. S.A. Jewells Mumbai and Jayant I. Jain, wherein details of interest received and also the TDS deducted on such loans has been given. Thus, in wake of these evidences, it cannot be held that interest income shown by the assessee is unexplained income. Accordingly, the assessee's ground no. 3 is allowed.In the result the Cross Objection filed by the Assessee is partly allowed.
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2015 (4) TMI 788
Addition u/s 40A(3) of the Income Tax Act,1961 - Exceptions under Rule 6DD of the Income Tax Rules - Cash payment made due to cheque bounced - Held that:- We note that the assessee has raised two contentions to the action of the authorities below first, the payment was made in cash exceeding the prescribed limit because the cheques issued to M/s Keshav Motors by the assessee had bounced and the said supplier on certain occasions refused to provide diesel to out gone vehicles and insisted for cash payment in lieu of the bounced cheques and under these exceptional circumstances driver/person as accompanying the vehicle on some occasions had to make payment in cash. The 2nd contention of the assessee company is that the payment so made by the assessee exceeding prescribed limit prescribed by the Act falls under exception (g), (j) & (k) of Rule 6 DD of the Rules. Coming to the issue of payment against bounced cheques is concerned, we note that the copy of the bank statement available on page no. 12 to 19 of the paper book of the assessee. We note that as many as five cheques has been returned / bounced and the assessee has made payment of ₹ 4,68,655/- in cash in violation of provisions of the Act on number of occasions and the payment made in cash does not match with the amount of cheques bounced. Be that as it may, we also note that the payment made by the assessee does not fall any circumstances prescribed in Rule 6 DD of the IT Rules, 1962. We may note that the words used Rule 6DD are specified the cases on circumstances and no case or circumstance can be employed or interpreted which is not specifically provided in Rule 6DD. - Decided against the assessee.
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2015 (4) TMI 787
Penalty for unaccounted income - Income disclosed in the return of income & paid tax with interest thereon - Penalty for unaccounted Investment in land - Held that:- We have considered rival submissions and perused the orders of the lower authorities. We find that the issue is covered in favour of the assessee, by the order of this Tribunal [2015 (4) TMI 664 - ITAT AHMEDABAD], dated 30-1-2015 in the case of the assessee itself. Further, in the present case, it appears from the record that the assessees had satisfied all the conditions which are required for claiming immunity from payment of penalty under section 271(1) of the Act. The provision does not specify any time limit during which the aforesaid amount i.e. the amount of penalty with interest has to be paid. Admittedly when the assessees herein have paid the entire amount with interest, the Assessing Officer ought to have granted them immunity available under Section 27I(1)(C) of the Income Tax Act. In view of the aforesaid facts of the case and also the principle laid down in the decisions relied upon by the learned senior counsel for the appellant more particularly the principle laid down in the case of Gebilal Kanhailal [2004 (7) TMI 86 - RAJASTHAN High Court] and Abdul Rashid [2013 (5) TMI 328 - CHATTISGARH HIGH COURT], we are of the considered opinion that the penalty under Section 271(1) (C) of the income Tax Act cannot be levied on the income shown in the return filed under Section 153 of the I.T. Act. Before us, Revenue has not brought any binding contrary decision in its support. We therefore respectfully following the decision of Hon’ble Gujarat High Court in the case of Kirit Dayabhai Patel [2015 (1) TMI 201 - GUJARAT HIGH COURT], hold that no penalty is leviable in the present case and thus direct its deletion. - Decided against the revenue. In the case of Hon'ble Gujarat High Court decision of Kirit Dahyabhai Patel [2015 (1) TMI 201 - GUJARAT HIGH COURT], it was held that considering the facts and circumstances of the case and also considering the decisions relied upon by learned senior advocate for the appellant, we are of the considered opinion that the view taken by the Tribunal is erroneous. The CIT(A) rightly held that it is not relevant whether any return of income was filed by the assessee prior to the date of search and whether any income was undisclosed in that return of income. In view of specific provision of Section 153A of the I.T. Act, the return of income filed in response to notice under Section 153(a) of the I.T. Act is to be considered as return filed under Section 139 of the Act, as the Assessing Officer has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under Section 271(1) (c ) of the I.T. Act and the penalty is to be levied on the income assessed over and above the income returned under Section 153A, if any. Following the this decision, we set aside the order of the CIT(A) and delete the penalty. - Decided in favour of assessee.
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2015 (4) TMI 786
Addition on account of unpaid dividends - Cessation of of liability - Additions u/s 41 - Unclaimed dividend transferred to General Reserve - Department treating it as extinguishment of liability - Treatment of amortization of premium paid for acquisition of securities, Held till maturity - Held that:- We have carefully considered the rival stands and find no merit in the stand of the Revenue. Quite clearly, the dividend is paid by the bank out of tax paid profits. Dividends are declared out of such profits and is to be understood as an apportionment of income. If for any reason, the dividend so declared is not actually disbursed and were to be added back to the taxable income, it would mean a double taxation. Therefore, there is no justification for taxing unclaimed dividend as a ‘cessation’ of liability. No doubt, cessation of liability may be a taxable event but only in situations where such liability has entered the computation of taxable income on an earlier occasion. Quite clearly, the declaration of dividend does not enter the computation of taxable income as the dividend is declared out of the profits remaining after taxation. It cannot be anybody’s position that the unclaimed dividend is a receipt by the assessee in the course of its trading transactions. In-fact, the unclaimed dividend amount, does not reflect any receipt at all. Therefore, in our view, the reliance placed by the CIT(A) on the decision of the Hon’ble Supreme Court in the case of TVS Sundaram Iyengar and Sons Ltd. [1996 (9) TMI 1 - SUPREME Court] is erroneous. - Decided in favour of assessee. The issue arising in the present appeal is identical to the issue decided by the Pune Bench of the Tribunal in the case of Pune District Central Co. Operative Bank Ltd.[2015 (4) TMI 662 - ITAT PUNE]and also the Hon’ble Bombay High Court in the case of HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT],and following the same parity of reasoning, we hold that the assessee is entitled to the deduction of ₹ 11,38,000/- being the premium on Amortization of Securities. Accordingly, we hereby affirm the action of CIT(A) in deleting the disallowance of ₹ 11,38,000/- representing amortization of premium paid on Government Securities under the HTM category. Thus on this aspect, Revenue fails. - Decided against the revenue.
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2015 (4) TMI 785
Addition u/s 68 of the Income Tax Act,1961 - Failed to prove creditworthiness of the creditors - Penalty u/s 271(1)(c) - Furnished inaccurate particulars of income - Held that:- It is settled principle of law that the assessee is required to prove genuineness of transaction, identity of creditors and creditworthiness of such creditors. In the absence of such proof, the Assessing Authority would be justified in making addition by invoking provisions of section 68 of the Act. In the case in hand, admittedly, the assessee could not furnish the evidences for proving creditworthiness of the creditors. Therefore, we do not find any infirmity in the order of the ld.CIT(A), same is hereby upheld. Thus, grounds of assessee’s appeal are rejected. - Decided against the assessee. Levy of penalty for the additions made u/s 68 - Held that:- There is no finding by the authorities below that the money belonging to the assessee has been circulated through the socalled creditors. The addition has been sustained on the basis that the assessee could not discharge its onus with regard to the creditworthiness of the creditors. - However, de hors the said provision, it is not possible to state with certainty that the said sums would be “concealed income” of the assessee for the year under consideration. - it cannot be said with certainty that the sum received from the creditors would be “concealed income” of the assessee. - Following the judgment of National Textiles [2000 (10) TMI 19 - GUJARAT High Court] and Jalaram Oil Mills [2001 (6) TMI 15 - GUJARAT High Court] and of CIT vs. Khoday Eswarsa and Sons [1971 (9) TMI 19 - SUPREME Court] it is held that penalty cannot be sustained. - Decided in favour of assessee.
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Customs
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2015 (4) TMI 808
Denial of Exemption Notification No.21/2002-Cus., dated 01.03.2002 - Whether benefit of exemption Notification would be available at the time of assessment of the goods at the port of import while filing into-bond Bill of Entry or when ex-bond Bill of Entry was filed - Held that:- Section 15 of the Customs Act, 1962 provides date for determination of rate of duty and tariff of valuation of the imported goods - Clause (b) of sub-section (1) of Section 15 provides that the rate of duty of the imported goods in which case the goods are cleared from a warehouse under Section 68 on the date on which a bill of entry for home consumption in respect of which goods are presented under that section. In our opinion, as per Section 15(1)(b) of the Act, 1962 the respondent is liable to pay duty at the rate on the date on which the bill of entry is presented for home consumption, which would cover the claim of benefit of exemption notification. - appellant would be eligible to avail the benefit of notification subject to fulfillment of condition of the Notification and Rules, 1996. We clarify that as per Section 15(1)(b) of the Customs Act, 1962, the respondent may claim the benefit of exemption Notification prevailing at the time of clearance of the goods for home consumption subject to fulfillment of the condition to the Notification - Appeal disposed of.
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2015 (4) TMI 807
Challenge to assessment order - appeal made to Commissioner (Appeals) - Bar of limitation - Held that:- Following decision of REDINGTON INDIA LIMITED Versus COMMR. OF CUSTOMS (APPEALS), CHENNAI [2007 (1) TMI 190 - HIGH COURT OF JUDICATURE AT MADRAS] - appeal was filed before the Commissioner (Appeals) within the condonable period. Accordingly, we set aside the impugned orders and the matter is remanded to the Commissioner (Appeals) to decide afresh the application for condonation of delay in filing of appeal. - Decided in favour of assessee.
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2015 (4) TMI 806
Exemption from Customs duty under Sl. No. 56 - Notification No.25/99-CUS dated 28.02.1999 - whether specific grant of the notification can be interpreted to expand the scope of the grant when duty exemption is granted at the public cost - Held that:- If the interpretation suggested by the appellant that "degaussing coil" is" inductor" that shall defeat the spirit of the public grant and also run counter to the legislative mandate. Both goods being distinct by their character and utility and recognised by two different entries at different serial numbers of the notification, to serve their different purpose, one is not substitute of the other. Once a benefit is confined to a particular grant, that cannot be interpreted to be meant for any other purpose for which the legislature did not extend such grant. So also, the inductor specified in column 4 under Sl. No. 56 of the notification is confirmed to use of the raw-material mentioned in column 3 thereof. Therefore grant of Sl. No.56 is not extendable to any other goods under any fiction which otherwise shall result in abuse of the public grant. - Denial of benefit of notification justified - Decided against assessee.
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Corporate Laws
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2015 (4) TMI 805
Rectification of register of members u/s 59 of the Companies Act, 2013 - Bar of limitation - Held that:- The record reveals that the Respondent No. 1 Company vide its letter dated 31/03/2011 had advised the Petitioner/appellant to approach the competent forum for redressal of its grievances, and therefore, the cause of action lastly arose in the month of March 2011. From perusal of Section 111(4) of the Act, it is noted that the said provision although does not specifically provide the period of limitation, however, in my view, the provisions of the Limitation Act would apply in a petition filed under Section 111/111A of the Companies Act, 1956 as laid down in the case of reported in [2015 (4) TMI 640 - COMPANY LAW BOARD MUMBAI].It is settled law that, if no limitation period is prescribed, in that case Article 137 of the Limitation Act shall be applicable. Therefore, in terms of Article 137 of the Limitation Act, 3 years period with effect from the date of cause of action would be available for an aggrieved party to approach the CLB for relief under Section 111/111A of the Act. It may be seen that the Respondent Nos. 3 to 8 for the last 17 years have not come forward to claim the ownership of the impugned shares. The Petitioner/Appellant is a Public Sector Undertaking. There is no reason to disbelieve the claim of the Appellant in respect of the impugned shares. I am, therefore, of the view that the Appeal/Petition deserves to be allowed.It is declared that the Appellant/Petitioner is the owner of 230 shares of the Respondent No.1 Company along with all incidental benefits like dividend, bonus issue, rights issue, etc. accruing thereon since 1996 and the Respondent No. 1 is directed to rectify the Register of Members to effect the transfer of shares in the name of the Appellant, subject to furnishing an Indemnity Bond in favour of the Respondent No.1 to its satisfaction. - Decided in favour of appellant.
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Service Tax
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2015 (4) TMI 824
Denial of CENVAT Credit - Insurance service - services availed by the appellant from the factory premises to the door steps of the customers - Whether Cenvat Credit of insurance services availed by the appellant from the factory gate till delivery of the goods to the customers premises is admissible or not - Held that:- Appellant is availing insurance services in relation to transport of raw-material plant & machinery and finished goods owned by the appellant. No separate charges on account of transportation of goods, from the factory to the customers premises, have been shown by the Revenue to be recovered from the customers. The fact that transit insurance of the finished goods is borne by the appellant clearly indicates that ownership of the finished goods lies with the appellant till there delivery to the customers premises. In the facts and circumstances of the present appeal, the place of removal shits to the customers premises and Cenvat Credit of insurance services availed in relation to such delivery will be admissible to the appellant as held by this Bench in the case of Priya Industrial Packaging (P) Ltd. Vs. Commissioner of Central Excise Daman (2010 (6) TMI 213 - CESTAT, AHMEDABAD). - Decied in favour of assessee.
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2015 (4) TMI 823
Penalty u/s 70& 77 - goods transport agency services - reverse charge mechanism - Held that:- It is admitted fact that on 13.1.12 appellant took registration and paid service tax along with interest, not for the period in question but for 2006 also. This shows the appellant were under the bonafide belief that they are not liable to pay service tax under reverse charge mechanism as good transport agency service does not exceed ₹ 10 lakhs. Therefore, I hold that the show cause notice was not required to be issued under section 73(3) of the Finance Act, 1994. In these circumstances, penalties are not imposable on the appellant. Further, I find that appellant is not contesting the penalty imposed under section 78 of the Act. Therefore the benefit of this order will not be available for the penalty imposed under section 78 of the Act. In these circumstances, the penalties imposed on the appellant under section 70 and 77 are set aside. - Decided in favour of assessee.
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2015 (4) TMI 822
Business Support Services - appellant is engaged in running a plant for treatment of effluent generated in the industrial area - Held that:- Demand confirmed against the appellant under the category of 'Business Support Services' for operating the effluent treatment plant which has been established under CETP Project, is sustainable in law. We find that the Maharashtra Pollution Control Board in their website has clearly stated that the appellant has been funded by the Central Government as well as the State Government through MPCB for setting up the Butibori CETP Plant. We also find strong contentions as raised by the learned counsel that the retrospective amendment and brought in statute by Section 145 of the Finance Act, 2012 (Act no. 23 of 2012) would squarely cover the issue; as also the rati o laid down by this Bench in the case of Lote Parshuram Environment Protection Co-op Society Ltd. (2013 (1) TMI 141 - CESTAT MUMBAI). - impugned order is not sustainable and liable to be set aside - Decided in favour of assessee.
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2015 (4) TMI 821
CENVAT Credit - Reverse Charge Mechanism - Commission to agents outside India - Held that:- Appellant failed to establish that such commission agent involved in the activity sales promotion, as explained in the decision of the Hon'ble Gujarat High Court [2013 (1) TMI 304 - GUJARAT HIGH COURT]. It is also observed that the appellant only placed the case law in relation to the services rendered, other than the services of commission paid to foreign agent. We find that the appellant in the reply to the show cause notice had taken a definite stand that the foreign agent had rendered the activity of sales promotion - Adjudicating authority should have examined the documents as enclosed with the reply to show cause notice before taking into the decision of the activities of foreign agents - Matter remanded back - Decided in favour of assessee.
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Central Excise
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2015 (4) TMI 816
Valuation of goods - Captive consumption - Misdeclaration of value of goods - Non inclusion of value of administrative overheads, bonus, gratuity, interest, conversion charges and depreciation charges in the assessable value of the yarn - Held that:- While issuing the clarification as to how the Gross Profit, i.e., profit before depreciation and taxation or 'Profit before tax' or any other profit has to be arrived at, it is also clarified that for the purposes of calculation of value of goods captively consumed under Rule 6(b)(ii) of Central Excise (Valuation) Rules, 1975, certain steps are to be taken. - The clarification, pertains to calculation of value of goods captively consumed under Rule 6(b)(ii). It is this Rule which is undoubtedly applicable in the present case. Thus, for the first time, only in October, 1996, it was clarified that the cost of material, labour cost and overheads including administrative cost, advertising expenses, depreciation, interest, etc., would be included in the cost of production. The period with which we are concerned is prior to October, 1996, i.e., April, 1994 to September, 1996. It, therefore, cannot be said that the respondents-companies made intentional misdeclaration with the purpose to avoid payment of correct excise duty. We thus, find that the CESTAT was right in holding that extended period of limitation would not be applicable in the present case. - Decided against Revenue.
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2015 (4) TMI 815
Denial of benefit of Notification No.10/97 CE dated 1.3.1997 - Non fulfillment of conditions of notification - equipments supplied to research institutions or universities, etc. for research purposes as well as non commercial research purposes. - Held that:- respondents, intends to rely upon some material, which she submits has been downloaded from the web sites of the IITs, Universities, etc. to whom the goods were supplied, in order to demonstrate that the goods supplied were meant for research. Since this material was not produced before the commissioner, he did not have any occasion to verify the same or to consider the effect thereof. We are, thus, of the opinion that it would be appropriate to remand the case back to the adjudicating authority to discuss the aforesaid issue in the light of the material that is sought to be produced by the respondents - Matter remanded back - Decided in favour of Revenue.
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2015 (4) TMI 814
Withdrawal of exemption notification in the North Eastern Region from goods under Chapter 21.06 (Pan Masala) and Chapter 24 (tobacco and tobacco substitutes), including cigarettes chewing tobacco etc. - Principle of promissory estoppel - Held that:- After the filing of this appeal, certain subsequent events have taken place and as a result thereof, the issue is not even required to be adjudicated upon in the present appeal. It so happened that vide Section 154 contained in Finance Act, 2003, the withdrawal of the benefit was effected from retrospective effect. Validity of Section 154 was considered by this Court in R.C. Tobacco Pvt. Ltd. And Anr. vs. Union of India and Another [2005 (9) TMI 80 - SUPREME COURT OF INDIA]. This Court has upheld the constitutional validity of the aforesaid provision. The effect thereof would be that the respondent would not be entitled to any such benefit by virtue of Section 154 of the Finance Act, 2003, and the impugned judgment of the High Court loses its validity on the aforesaid ground. - Decided in favour of Revenue.
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2015 (4) TMI 813
Waiver of pre deposit - Constitutional validity of Amendment to Section 35F of the Central Excise Act, 1944 prescribing statutory pre-deposit of 7.5% / 10% and Circular No. 984/08/2014-CX - Held that:- on the date of initiation of proceedings the right to appeal also accrues on that date, as appeal is in continuation of the original proceedings. In other words, on the date of initiation of lis the aforesaid amendment was not in force. However, during the pendency of this matter the aforesaid amendment is made. - The petitioner can very well approach the appellate authority with an application for waiver of pre-deposit. The appellate authority for the time being without insisting upon pre-deposit as per the amended provision, shall consider such application in accordance with law. This order will be effected provided the petitioner prefers an appeal within fifteen days from the date of receipt of a copy of this order and make such application. In case of failure this interim order will stand vacated. - Decided conditionally in favour of assessee.
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2015 (4) TMI 812
SSI Exemption - Clandestine removal - The appellants are engaged in manufacture and trading of excisable goods - Statements of some suppliers - Invocation Section 9D - Held that:- While the allegation of duty evasion against the appellant is based on the statements of suppliers, admittedly their cross examination has not been allowed. If the adjudicator wants to invoke clause (a) of Section 9D(1), a finding has to be given that the situations mentioned in this clause exist after hearing the appellant. In this case admittedly neither a finding has been given after hearing the appellant that the witness whose statements are sought to be relied upon by the Department in support of the allegation of duty evasion against the assessee are either dead, or cannot be found, or are incapable of giving evidence, or are being kept out of way by the adverse party, or their presence cannot be obtained without an amount of delay, or expense which is unreasonable nor the witnesses who are available, have been made available for cross examination which, in our view, is necessary. - Impugned order is set aside and the matter is remanded to the Commissioner for De novo adjudication in accordance with our observations in this order. - Decided in favour of assessee.
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2015 (4) TMI 811
Demand of differential duty - Classification under heading 730290 or under heading 3810 - Rate of duty - 18% or 15% - Held that:- Department s allegation that during the period from June 1998 to February 1999, the appellant while paying duty to the Department @ 15% in respect of clearances of Thermit portion had recovered from customer railways @ 18% is based only on one tender document dated 27/5/98 to M/s IRCON wherein the rate of duty applicable in respect of supplies of Thermit portion is mentioned as 18%. However, it is seen that the M/s IRCON s letter accepting the tender does not mention the rate of duty and from some of the invoices issued to Railways during this period, which have been placed on record, it is seen that while the rate of duty is mentioned 18%, the duty actually shown in the invoices has been calculated @ 15%. In a number of other invoices though the pre-printed rate of duty is mentioned as 18%, but the same has been cancelled and modified as 15% and accordingly the duty had been charged @ 15% only. In our view, merely on the basis of the DRM, Ajmer s letter, the copy of which was not supplied to the appellant, it is not correct for the Department to conclude that during the period of dispute the appellant had recovered duty from railways @ 18%. - Matter remanded back - Decided in favour of assessee.
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2015 (4) TMI 810
100% EOU - Concessional rate of duty - Notification No. 23/2003-CE dated 31/3/2003 - DTA Clearances - Held that:- It is clear that for the purpose of DTA sale of by-product, specific permission is not required. If LOP in respect of by-products is obtained, it is sufficient requirement for sale of by-product in DTA as envisaged in Para IV. Sale of by-products is permitted under clarification issued on 19/8/1992. On going through the LOP, we observed that the LOP was issued in respect of by-product namely Hydrochloric Acid. Therefore, in terms of clarification, it provides that the sale of such by-product in the DTA may be made if such sale is permitted in the letter of permission (LOP)/letter of intent (LOI). Accordingly, a separate and specific permission is not warranted. - concessional Notification No. 23/2003 CE could not have been denied to the appellant only for the reason that they have not obtained the specific permission for sale of by-product under DTA. However, the appellant is required to comply with other conditions of policy and notification such as the total sale in DTA should not exceed 50% of FOB value of export clearance, achievement of positive NFE etc. We therefore remand the matter to the original adjudicating authority with the direction that the benefit of Notification No. 23/2003-CE should not be denied for want of specific permission. - Matter remanded back - Decided in favour of assessee.
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2015 (4) TMI 809
Waiver of pre deposit - Denial of CENVAT Credit - Non Maintenance of separate accounts - Penalty u/s 78 - Held that:- The appellant had used certain common input services in or in relation to providing of taxable and exempted service. Since they had not maintained separate accounts and inventory of the input services meant for taxable and exempted service, the department invoking Rule 6(3)(i) has demanded an amount equal to 8%/6% of the value of the exempted services i.e. 8%/6% of the rent received from letting out of the immovable property for residential purposes. However, during the period of dispute, in this case, Rule 6(3) had been amended w.e.f. 1.3.2008 to provide an additional option to a manufacturer / output service provider to reverse the credit attributable to the inputs/input services used in or in relation to the manufacture of exempted final products /provisions of exempted services. In this case, there is no dispute that the appellant have already revered the cenvat credit of ₹ 74,177/- along with interest of ₹ 18,730/- attributable to the input services used in or in relation to providing the exempted service. - In view of this, the impugned order confirming the demand of ₹ 78,57,162/- from the appellants under Rule 6(3) (i) of the Cenvat Credit Rules, 2004 along with interest and imposing penalty of equal amount is prima facie incorrect, more so, in view of the judgment of the Karnataka High Court in the case of CCE, Mangalore Vs. Kudremukh Iron & Steel Co. Ltd. (2011 (4) TMI 950 - KARNATAKA HIGH COURT ) - Stay granted.
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CST, VAT & Sales Tax
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2015 (4) TMI 820
Levy of tax with retrospective effect - Held that:- petitioner that the petitioner company started its factory at Anjar in the year 2004 and even obtained the sales tax registration in the year 2004 and therefore, they are not liable to pay the tax for the period prior to 2004. However, for the aforesaid, the petitioner is required to place relevant material before the appropriate Authority and the appropriate Authority is required to be satisfied with respect to the date on which the petitioner actually brought the aforesaid vehicles into the State of Gujarat and thereafter, after holding necessary inquiry, from the date on which the petitioner brought the vehicles into the State of Gujarat, the liability to pay the tax from that day is required to be determined and the petitioner is liable to pay the tax from that date - Decided conditionally in favour of assessee.
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2015 (4) TMI 819
Whether the renting out of tents, cutlery, furnitures and carpets by a “tent house” is covered by the definition of sale in Section 2(35)(IV) of the Rajasthan Value Added Tax Act, 2003 and exigible to VAT levied under the Act of 2003 - Held that:- Even transfer of the right to use goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; can fall within the definition of sale. It also prescribes that transfer of property and goods could be from one person to another even for cash, deferred payment or other valuable consideration. - If the dealer like the assessee sends for installation of Pandal, shamiyanas, kanats, sofa, table and crockery through its employees for installation as per desire by its customers and later on the employees of the respondent-assessee brings back the aforesaid items, it will not come within the purview of sale, in my view, is not correct as it does not make any difference as to whether the customer carries the goods on his own for installation and brings back the same through its labourers/employees or otherwise. In my view, there is hardly any distinction in between the two and it is one and the same thing. Very thin line of conclusion has been drawn by the Tax Board and in my view under both propositions it would certainly fall within the definition of sale. Section 2(35)(iv) does not envisage a situation, that if the goods are being carried on by the customers it will come within the purview of sale or if the aforesaid items are sent by the respondent assessee to customers through its employees then it will not come within the ambit and definition of sale. The definition of sale is wide enough. It covers even goods transferred on short duration. The Honble Apex Court in the case of Agarwal Brothers (1998 (9) TMI 532 - SUPREME COURT OF INDIA) considering the case where shuttering material was provided by the dealer for use in construction of building for a limited period was held liable to sales tax as during intervening period it remained in the possession of builders, fell within the definition of “sale” as there was transfer of goods. - Language under the Haryana General Sales Tax vis a vis the definition under the Rajasthan VAT Act,2003 which has been quoted hereinabove is identical and therefore the judgment rendered by the Apex Court supports the contention of the counsel for the revenue - Decided in favour of Revenue.
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2015 (4) TMI 818
Imposition of penalty u/s 78(5) of RVAT Act - Evasion of duty - Held that:- Penalty has rightly been imposed by the learned AO and both the lower authorities i.e. DC(A) and Tax Board were not justified in deleting the penalty, in the light of the judgment of Apex Court rendered in the case of M/s Guljag Industries (2007 (8) TMI 344 - SUPREME Court) wherein it has categorically been observed by the Hon'ble Apex Court that if there is a blank declaration Form or material particulars have been left to be filled in then there is every apprehension that it could be reused and as such penalty could be imposed. On perusal of the finding of the lower authorities in the instant case, it transpires that even the bill no. and date were left blank, in the declaration Form ST 18-A, which, in my view, in the light of the judgment of Hon'ble Supreme Court(2007 (8) TMI 344 - SUPREME Court) are material particulars. Therefore, once, these columns were left unattended or to be filled in, in my view, the AO was well justified in coming to the conclusion that Form was incomplete and the goods were being carried on with an intention of evasion of tax - Decided in favour of Revenue.
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2015 (4) TMI 817
Denial of input tax credit - Sale of furniture to third parties - Held that:- assessee has produced at Annexure-15, the particulars which according to the assessing authority was required to be furnished. Those particulars were not taken into consideration by the First Appellate Authority while passing the impugned order. Same mistake is committed by the Tribunal also. Both the appellate authorities proceeded on the assumption that no documents are produced, which they can take note of to consider the claim of the assessee for input tax credit. The error is apparent on the face of the record. It is a clear case of nonapplication of mind by both the appellate authorities to the materials which were produced before them and therefore the said orders cannot be sustained and it is a fit case where the impugned orders are to be set aside - Matter remanded back - Decided in favour of assessee.
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