TMI Tax Updates - e-Newsletter
April 9, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
TDS u/s 194I - the upfront payment made by the assessee for the acquisition of leasehold rights over an immovable property for a long duration of time say 99 years could not be taken to constitute rental income at the hands of the lessor - No TDS liability - HC
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Income Tax:
Deemed dividend u/s. 2(22)(d) - redemption of the preference shares at face value - there is no reduction in the authorised share capital of the company - not taxable u/s 2(22)(d) - AT
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Income Tax:
The activity of breeding of horses is similar to that of poultry or piggeries etc. where the animals are bred for the purpose of selling. Section 74A is not applicable for such breeding activity - AT
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Income Tax:
TDS u/s 194C - transportation charges - the supply of sugarcanes at the gates of factories of the respective assessees was a part of sale transaction, and therefore, we are of the opinion that the assessees are not liable to deduct TDS - AT
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Income Tax:
Long Term Capital Gain - loss claimed by the assessee - In the instant case the transaction was with the group company and at the price less than the book value. - this observation of the AO does not make the transaction as colorable device to reduce the tax burden. - AT
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Income Tax:
Fees for technical service was liable to tax in India under section 44BB of the Act only if the appellant had Permanent Establishment ("PE") in India in the relevant assessment year - HC
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Income Tax:
Fees for technical services - activity of 2D/3D seismic survey carried on by the appellant in connection with exploration of oil, was in the nature of "fees for technical services" in terms of Explanation 2 to section 9(1)(vii) - HC
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Customs:
Eligibility for refund of SAD - Appellant (SEZ unit) was an importer of the goods when imported into India and paid VAT at the time of sales to DTA units. The SAD paid has not been recovered from the DTA buyers - refund allowed - AT
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Indian Laws:
Guideline Issued by The Institute of Chartered Accountants of India - Notification
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Wealth-tax:
Entitlement to exemption under Section 5 (1) (i) of WT Act - Petitioner was fully aware that it did not comply with the essential conditions for claiming exemption. Therefore, it could not be heard to say that it must be refunded the wealth tax voluntarily paid by it. - HC
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Service Tax:
Claim of interest on delayed refund - the petitioner was required to unnecessarily litigate in two rounds; in the first round, up-till the Tribunal and in the second round, upto this court, for the purpose of availing of the statutory interest payable to it. Under such circumstances, the petitioner is entitled to the grant of compensatory costs, which are quantified at ₹ 25,000/-. - HC
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Service Tax:
Change of classification of the service from “Management Consultancy Service” to “Business Auxiliary Service” - change of classification at the end of IHCL would be prospective and cannot have retrospective operation - AT
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Service Tax:
Entitlement for the benefit of VCES Scheme - Respondent applied for registration, obtained assessee code number and attempted to deposit 50% amount on 31/12/2013 however due to system fault the amount could not be deposited - Benefit of VCES allowed - AT
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Central Excise:
Inclusion of value of gunny bags for determination of assessable value of manufactured goods - obligation taken by the appellant to refund the value of the gunny bags to the Buyer in terms of any arrangement between the parties not found. - Value to be included - SC
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Central Excise:
Excise duty on the waste and scrap - Since the job worker is manufacturer, excise duty liability, if any arises it will be on job worker and not on principle manufacturer i.e. appellant who supplied inputs. - AT
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Central Excise:
Inter-unit transfer of goods for captive consumption - Valuation - whether the cost of production of the goods - the packaging material that is manufactured by the Chennai unit of the appellant should be computed at 115%/110% of the cost of production/manufacture of the raw material - Held No - AT
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Central Excise:
Moulds manufactured and captively used - the exemption for captive consumption cannot be denied if the capital goods are used within the factory or production - AT
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Central Excise:
Area based exemption - expansion of an eligible unit after the cut off date of sun set clause - , the applicant proposes to effect expansion wherefrom the new unit had started commercial production w.e.f. 26.03.2010 - exemption to continue - AAR
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Central Excise:
Adjudication of Show Cause Notices issued on the basis of CERA/CRA objection - Circular
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Central Excise:
Inclusion of value of gunny bags for determination of assessable value of manufactured goods - Arrangement between appellant and buyers of soda ash - there is no arrangement to return the gunny bags - value to be included in the transaction value. - SC
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Central Excise:
Area based exemption - expansion of an eligible unit after the cut off date of sun set clause - Notification No. 50/2003-C.E - acquiring an adjacent plot of land and installing new plant and machinery on such land, is akin to expansion by way of installing new plant and machinery inside the existing plot/premises - Exemption would continue - AAR
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VAT:
Waiver of pre-deposit - GVAT - no dealer can demand as a matter of right that his appeal should be heard without payment of tax or penalty and it is for such dealer to satisfy the Tribunal that a case has been made out for total exemption from payment of tax with penalty. - HC
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VAT:
Default assessment - DVAT - barring the default notices of assessment pertaining to the months of February and March 2010, all the other notices of default assessment issued for the remaining months of AY 2009-10 by the impugned notices dated 31st March 2014 are barred by limitation and deserve to be set aside. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (4) TMI 317
Fees for technical services - establishment of permanent establishment ("PE") in India - Assessee's contention that services in question fell within the scope of "construction, assembly, mining or like project" - Held that:- Prospecting for or extraction or production of mineral oil could be termed as 'mining operations' and consequently provided that expression "mining projects” or like projects" as occurring in Explanation 2 to Section 9(1)(vii) of the Act would also cover "rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas". And, after examining various contracts involved in the appeals before the contracts were inextricably connected with prospecting, extraction or production of mineral oil and, accordingly, proceeded on the basis that consideration for such services was not fees for technical services. Even though there may be certain ancillary works contemplated under the contracts in question but since the dominant purpose of each of such contract is for prospecting, extraction or production of mineral oils, the income from such services were to be computed under Section 44BB of the Act. Question as whether the Tribunal erred in law in holding that the activity of 2D/3D seismic survey carried on by the appellant in connection with exploration of oil, was in the nature of "fees for technical services" in terms of Explanation 2 to section 9(1)(vii) of the Act – must be answered the affirmative, that is, in favour of the Assessee and against the Revenue. We accept the contention advanced on behalf of the Assessee that since it is clearly engaged in business of providing services in connection with prospecting for mineral oils, its income - if it falls within the ambit of Section 44DA(1) of the Act - would be taxable under Section 44BB(1). Tribunal was right in finding that the consderation received by the Assessee from BG and RIL was fees for technical services, in our view, the Tribunal’s decision to remit the matter to the AO for determining whether the Assessee had a PE in India and whether the consideration received by it was connected with that PE, would have to be sustained. Accordingly the second question - Whether on the facts and circumstances of the case, the Tribunal erred in law in holding that income of the appellant, in the nature of "fees for technical service" was liable to tax in India under section 44BB of the Act only if the appellant had Permanent Establishment ("PE") in India in the relevant assessment year – is answered in the negative, that is, in favour of the Revenue and against the Assessee.
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2016 (4) TMI 316
Qualification for exemption under Section 10(15)(iv)(c) - CBDT rejecting the prayer of the Petitioner for refund being the excess tax withheld at source on the penal interest paid by the Petitioner to Sanwa International Finance Limited (SIFL), Hong Kong - whether the payment by the Petitioner of penal interest and other charges would fall within the definition of ‘Interest’ under Section 2(28A)? - Held that:- It must be noticed that its claim for refund was actually never rejected on merits since the order of the CIT(A), which substituted the order of rejection by the ITO advised the Petitioner to approach the CBDT. In fact, even the CIT advised the Petitioner likewise. It was pursuant to both these orders, the Petitioner approached the CBDT. At the time of making of the application to the CBDT on 21st August, 1998, the circular dated 6th August, 1998 had been issued. The whole idea was to provide a remedy for excessive or wrongful deduction of TDS, the refund of which was sought. This circular was beneficial to the person who had deducted TDS and was seeking refund. Therefore, there was no question of the CBDT not considering the applicability of the said circular as far as the Petitioner was concerned. These decisions, therefore, do not come to the aid of the Revenue to justify its rejection of the application made by the Petitioner. There is only one ground on which the CBDT rejected the Petitioner’s application for refund. This was that the penal interest was paid by the Petitioner as a result of violation/transgression of the Agreement and was, therefore, not exempt under Section 10(15)(iv)(c) of the Act. This is factually incorrect since Clause 27 of the Agreement itself provides for waiver, in the event of default, by SIFL subject to certain conditions. The penal interest was imposed as part of the conditions of the Agreement itself. Therefore, the payment of penal interest cannot be said to be for breach of the terms of the conditions but in terms of the conditions imposed for condoning such breach. The impugned order of the CBDT, therefore, proceeds on an erroneous interpretation of the clauses of the Agreement. The order of the CBDT does not state that the Petitioner otherwise does not satisfy the conditions contained in the CBDT’s circular dated 6th August, 1998. It also does not state that the said circular would not apply to the Petitioner’s application for refund. This is yet another reason why the Court is not prepared to entertain the plea of the Revenue to the above effect because that was not the ground on which the CBDT rejected the Petitioner’s application. In the considered view of the Court, therefore, the impugned order dated 8th December 1998 of the CBDT rejecting the Petitioner’s application for refund is unsustainable in law. Since it is not the case of the Revenue that the Petitioners prayer for refund of the sum of ₹ 64,53,214 is not admissible in terms of Circular No. 769 dated 6th August, 1998 of the CBDT, a direction is issued to the DCIT to pass appropriate orders granting refund to the Petitioner for the said sum together with whatever interest is admissible in accordance with law within a period of four weeks from today. - Decided in favour of assessee
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2016 (4) TMI 315
Recover proceedings - pre deposit - Held that:- Since the petitioner had paid 25% of the demand, which was also admitted by the standing counsel appearing for the respondents, the impugned order dated 30.09.2015 is modified as follows: There shall be an order of interim stay till the disposal of the appeal, preferred by the petitioner on payment of 25% of the demand, which was already paid by the petitioner. The first respondent is directed to decide the appeal and pass orders in the appeal, on merits and in accordance with law within three months from the date of receipt of a copy of this order and till such time, there shall be an order of interim stay.
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2016 (4) TMI 314
TDS u/s 194I - upfront payment made by an assessee for the acquisition of leasehold rights over an immovable property for a long duration of time say 99 years - whether constitute rental income at the hands of the lessor, obliging the lessee to deduct tax at source under Section 194-I of the Act? - assessee in default - Held that:- It is crystal clear that the One Time Non-refundable Upfront Charges paid by the assessee was not (i) under the agreement of lease and (ii) merely for the use of the land. The payment made for a variety of purposes such as (i) becoming a co-developer (ii) developing a Product Specific Special Economic Zone in the Sriperumbudur Hi-Tech Special Economic Zone (iii) for putting up an industry in the land. The lessor as well as the lessee intended to treat the lease virtually as a deemed sale giving no scope for any confusion. In such circumstances, we are of the considered view that the upfront payment made by the assessee for the acquisition of leasehold rights over an immovable property for a long duration of time say 99 years could not be taken to constitute rental income at the hands of the lessor, obliging the lessor to deduct tax at source under Section 194-I. Hence, the first substantial question of law is answered in favour of the appellant/assessee. Once the first substantial question of law is answered in favour of the appellant/assessee, by holding that the assessee was not under an obligation to deduct tax at source, it follows as a corollary that the appellant cannot be termed as an assessee in default - Decided in favour of assessee
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2016 (4) TMI 313
Reopening of assessment - Held that:- It is undisputed that pursuant to the notices dated 25 November 2013 and 4 October 2013 issued by the Assessing Officer annexing therewith the reasons, the assessee submitted objection dated 19 November 2013 (Annexure-8) in which the details of interest received from various persons and the interest income disclosed in the tax return for the assessment year 2008-09 have been mentioned It has also been stated that there is no suppression as alleged in the notice and in this connection the assessee placed the Income Tax return and the disclosure made therein in Schedule TDS-2. Therefore, the Assessing Officer could not have in such circumstances observed in the order dated 7 February 2014 that the objections were vague and infructuous. GKN Driveshafts (India) Ltd. v. Income Tax Officer [2002 (11) TMI 7 - SUPREME Court ] we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order.
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2016 (4) TMI 312
Fees paid to Clubs - revenue v/s capital expenditure - Held that:- The issue of membership fees paid to the Club being allowed as Revenue expenditure stands has concluded against the Revenue and in favour of the Respondent-Assessee by the decision of this Court in Otis Elevator Co. (India) Ltd. V/s. Commissioner of Income Tax (1991 (4) TMI 53 - BOMBAY High Court ) . Deductibility of interest payments - these payments were capitalized in the books of the company - Held that:- The proviso to Section 36(1)(iii) of the Act which prohibits claiming interest expenditure in respect of amounts borrowed for acquisition of capital assets till such time as it is first put to use has to be capitalized was introduced into the Act by Finance Act 2003 with effect from 1st April, 2004. We are concerned with assessment year 1997-98 i.e. much before the proviso to Section 36(1)(iii) of the Act was introduced. Thus there was no prohibition to claiming of interest paid on funds borrowed for acquisition/purchase of capital asset till such time it is first put to use in the subject assessment year.Tribunal was correct in upholding the deductibility of interest payments. Qualification of accessories to a windmill for 100% depreciation - Held that:- This Court on almost identical facts in CIT V/s. CTR Manufacturing Industries Ltd. (2016 (4) TMI 265 - BOMBAY HIGH COURT) has dismissed the Revenue’s Appeal from the order of the Tribunal allowing the claim for depreciation at the full rate on windmills
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2016 (4) TMI 311
Reopening of assessment - non filing of Form No.10 resolution on or before the time allowed under section 139 of the Act as per section 11(2)(a)- Held that:- In view of the clear language of sub-sections (2) and (3) of section 11 of the Act, sub-section (3) of section 11 of the Act would be applicable only in case certain funds have been set apart or accumulated in terms of the provisions of clauses (a) and (b) of sub-section (2) of section 11 of the Act. In the absence of any funds having been set apart under rule 17 of the Income Tax Rules, 1962 by filing Form No.10 in assessment years 2002-03, 2003-04, 2004-05 and 2006-07, such amount cannot be considered to be the deemed income of the petitioner after the lapse of a period of five years thereof in the assessment years under consideration. In the aforesaid premises, in the opinion of this court, on the reasons recorded by the Assessing Officer, he could not have formed the belief that income chargeable to tax has escaped assessment in the assessment years under consideration. The assumption of jurisdiction by the Assessing Officer under section 147 of the Act by issuing the impugned notices under section 148 is, therefore, without any authority of law. Consequently, the impugned notices cannot be sustained. Insofar as assessment year 2008-09 is concerned, there is an additional factor which renders the impugned notice unsustainable. As pointed out by the learned counsel for the petitioner, for assessment year 2002-03, the petitioner had filed computation showing surplus of ₹ 95,917 only and for this it had filed Form No.10. Evidently, therefore, the Assessing Officer has not properly verified the facts from the record of assessment. This court in Sagar Enterprises v. Assistant Commissioner ( 2001 (12) TMI 18 - GUJARAT High Court ) has held that when the officer concerned has taken into consideration an irrelevant fact, it cannot be said with certainty as to which factor would have weighed with him for the purpose of arriving at the belief that income chargeable to tax has escaped assessment and to what extent the decision is vitiated. The Assessing Officer, having taken into consideration facts which are contrary to the record for the purpose of forming the belief that income chargeable to tax has escaped assessment, for this reason also it cannot be said that he could have formed the belief that income chargeable to tax has escaped assessment so as to assume jurisdiction under section 147 of the Act. - Decided in favour of assessee
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2016 (4) TMI 310
Addition on rental income of Kormangala Property - annual rateable value - Held that:- Tribunal has followed the decision of the High Court of Gujarat in case of Bipinbhai Vadilal Family Trust Vs. Commissoner of Income-Tax reported at (1994 (1) TMI 71 - GUJARAT High Court ) whereby it was held that the reasonable return at the rate of 8.5% on the investment can be considered as the annual rateable value. Interest on the loan borrowed - Held that:- Tribunal was justified in allowing interest on the loan borrowed. It is hardly required t o be stated that the Tribunal is the ultimate Court for the finding of fact and when once such finding is confirmed by the Tribunal, we do not find that any question of law would arise for consideration as sought to be canvassed Deemed dividend addition u/s 2(22) - Held that:- Tribunal after having considered the legal provisions of law of Section 2(22)(e) of the Income Tax Act, has negatived the contention of the Revenue on the factual premise the at the assessee in the present case was not a shareholder in the lender Company. Further, the Tribunal has al so relied upon the decision of Rajasthan High Court in case of Commissioner of Income Tax Vs. Hotel Hilltop reported at (2008 (3) TMI 310 - RAJASTHAN HIGH COURT ).
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2016 (4) TMI 309
Disallowance u/s 14 A - Held that:- We find that the assessee had earned dividend income of ₹ 1. 08 lacs, that it had made a disallowance of ₹ 17, 503/- on its own as per the provisions of Sec. 14A of the Act, that the AO had made a dsisallowance of ₹ 2. 02 lakhs, that the AO had not mentioned as to how much expenditure was incurred by the assessee for earning exempt income, that submission made by the assessee was not considered properly by the AO. We are of the opinion that disallowance u/s. 14A can be made, if an assessee claims an expenditure for earning exempt income. In other words, if no expenditure is claimed by the assessee in its P&L account for earning tax free income no disallowance can be made. Secondly, the disallowance cannot exceed the exempt income. In the case under consideration the assessee had incrred an expenditure of ₹ 17, 503/-(DMAT charges) and that was the only item which could have been disallowed. The AO himself had mentioned that assessee in its computation of income had made the said disallowance. In these circumstances, we are of the opinion that order of the FAA was not justified. Reversing his order, we decide first Ground in favour of the assessee . Addition on notional interest - Held that:- We find that the AO had added a sum of ₹ 34, 038/- to the income of the assessee on notional basis. In our opinion, if the income has not accrued/received by the assessee it cannot be added to its income, unless provided in the provisions of the Act. We agree with the assessee that the Act does not provide for taxing the notional interest income. Secondly the AO is not supposed to step into the shoes of the assessee to decide as to how much interest it should charged. Therefore, reversing the order of the FAA we decide Ground in favour of the assessee .
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2016 (4) TMI 308
Deduction/ claim under section 80 HHC - non netting of the loss of trading export with profit from manufacturing export - Held that:- We find that at the time of filing of return there was ambiguity about netting off of profits/loss of the Export trada/businesses, that during the course of hearing the assessee agreed that it had no objection if the matter was decided in the light of the judgment of IPCA Laboratories(2004 (3) TMI 9 - SUPREME Court ), then later on retrospective amendment was introduced with regard to section 80HHC of the Act, that in the case of Avani Exorts (2015 (4) TMI 193 - SUPREME COURT ), the Hon'ble Supreme Court has laid down certain guidelines. We find that all such material was not available to the AO/FAA when they had passed the assessment order/appellate order. As they did not have the benefit of important legislation, so in the interest of justice, we are remitting back the file to the AO for fresh adjudication. The AO is directed to decide the issue afresh after affording reasonable opportunity of hearing to the assessee - Decided in favour of assessee in part by way of remand.
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2016 (4) TMI 307
Deemed dividend u/s. 2(22)(d) - redemption of the preference shares at face value - Held that:- Respectfully following the decision of the Coordinate Bench of this Tribunal in the case of Parle Biscuits Pvt. Ltd. [2011 (8) TMI 1176 - ITAT MUMBAI], which is factually and legally similar and therefore applicable in the factual and legal matrix of the case on hand, we hold that in terms of section 80(3) of the Companies Act, 1956, there is no reduction in the authorised share capital of the company, M.s Enviro Control Associates India Pvt. Ltd. by virtue of the redemption of the aforesaid preference shares at face value, which were acquired by the assessee for valuable consideration in lieu of its credit balance in his capital account with the erstwhile firm and therefore this amount does not fall within the definition of deemed dividend under section 2(22)(d) of the Act and cannot be treated as such. We, therefore, delete this addition made under section 2(22)(d) of the Act by the AO - Decided in favour of assessee.
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2016 (4) TMI 306
Agriculture income - Held that:- As decided in assessee's own case 7/12 extracts reflected that mango trees, coconut trees, guava, jamun, rice, cashew nut etc. are being grown. The finding recorded by the learned CIT(A) has not been controverted by the learned D.R. by bringing any positive material on record, we, therefore, find no reason to interfere with the findings recorded by the learned CIT(A) holding that the assessee had earned agricultural income of ₹ 9,97,800/-. Disallowance u/s 14A - Held that:- As decided in assessee's own case with regard to lease rent expenditure incurred by the assessee, the learned CIT(A) has disallowed the same on the plea that the expenditure was incurred for earning exempt income. We also find that the lease rent was paid to the directors of the assessee company for leasing the lands to the assessee which deserves to be disallowed u/s 14A of the Act to the extend attributable to earning of exempt income. Applicability of section 74A - CIT(A) recorded a categorical finding to the effect that it constitutes only around 15% of the gross receipt, therefore, only loss incurred thereon is liable to be disallowed u/s 74A to be set off against other income - Held that:- As decided in assessee's own case Section 74A is not applicable for the activity of breeding of horses since these horses are maintained for breeding and selling and not for running horse races. The activity of breeding of horses is similar to that of poultry or piggeries etc. where the animals are bred for the purpose of selling. Section 74A is not applicable for such breeding activity. The ld. CIT(A) also found that during the remand proceedings, the A.O. reported that income and expenditure pertaining to breeding activity and racing activity were found to be captured under two different accounting codes in respect of both the assessment years. The ld. CIT (A) also found that an amount of ₹ 1.94 crores is recovered on account of livery expenses from other horse owners, who have utilized the stables and other services of the stud farm of the assessee. After considering the remand report and corroborative evidences filed before him, the ld. CIT(A) reached to the conclusion that only the business loss in respect of horse breeding activity was liable to be set off against business income whereas loss of ₹ 1,18,63,894/- is from horse racing activity not eligible for set off against business income in view of provisions of section 74A of the Act. The findings recorded by the ld. CIT(A) are as per material on record, thus we do not find any reason to interfere in the findings of ld. CIT(A) and accordingly we confirm the same
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2016 (4) TMI 305
Deduction under section 80P(2)(a)(i) for the interest earned from deposits in banks denied - Held that:- Assessee is entitled for deduction of interest income derived from investment of surplus funds with banks also. See M/s. The Totgars´ Cooperative Sale Society Limited Versus Income Tax Officer. Karnataka [2010 (2) TMI 3 - SUPREME COURT] - Decided in favour of assessee
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2016 (4) TMI 304
Disallowance of prior period expenses - crystallization of expenses in the present year - Held that:- As the liability to pay the expenditure crystallized during the assessment year in question. Similarly, in assessment year 2004-05 the payment to employees was made based upon the performance of the employees in the earlier year. The liability crystallized during the assessment year in question, because the working of the incentives based on performance was cleared for payment in the month of July, 2003 which falls during the assessment year under appeal i.e. assessment year 2004-05. Since the liability to pay the expenditure crystallized during the assessment year under appeal, therefore, the learned CIT(A) was justified in deleting the addition. The learned DR has not produced any material contrary to the findings of the learned CIT(A). Thus, the Revenue has failed to rebut the findings of the learned CIT(A). We, therefore, do not find any infirmity in the order of the learned CIT(A) in deleting the disallowance of the expenditure. - Decided in favour of assessee Disallowance u/s 14A - Held that:- Looking to the huge base of capital and free reserve and surplus vis-à-vis minor investment it can be easily inferred that most probably non-interest bearing funds have been invested in the Investments. Accordingly, we delete the addition made u/s 14A Decided in favour of assessee
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2016 (4) TMI 303
Penalty order u/s 271D - Held that:- The case of the assessee squarely falls under the provisions of section 269SS of the Act and a clear contravention has been made by the assessee of the provisions of section 269SS of the Act as the assessee has accepted loan and was deposited which exceeded ₹ 20,000/- i.e. ₹ 76,000/- otherwise by account payee cheque or draft or by electronic transfer through bank account during the year. It is pertinent to note that assessee is based at Surat and the sister concern from whom loan was taken is also based in Surat and there was no reason for taking loan in cash and as the assessee has made contravention of section 269SS of the Act then penalty proceedings u/s 271D has been rightly imposed because there was no reasonable cause put forward by the assessee before the lower authorities and before us which could have proved that there was a reasonable cause due to which the loan was taken in cash. We are of the view that penalty u/s 271D has been rightly imposed and confirmed by ld. CIT(A). - Decided against assessee
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2016 (4) TMI 302
TDS u/s 194C - contractual payments of cutting and transporting the sugarcane from fields to the factory gate - assessee in default - Held that:- There is no dispute with regard to the fact that the payment @ ₹ 185/- P.M.T. was given as advance purchase price to farmers to enable them to meet the expenditure of harvesting, cutting and transporting. Therefore, in our considered view, the Assessing Officer was not justified in making the assessee liable for deducting the tax on such payments as the payments were not given for carrying out the work of harvesting, cutting and transporting on behalf of the assessee. As decided in assessee's own case in the case on hand, the supply of sugarcanes at the gates of factories of the respective assessees was a part of sale transaction, and therefore, we are of the opinion that the assessees are not liable to deduct TDS. - Decided in favour of assessee
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2016 (4) TMI 301
Disallowance at the rate of 20% of the business expenses - Held that:- If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we note that keeping in view, the totality of facts and magnitude of the business of the assessee, the expenses of ₹ 63,101/- as staff welfare expenses is not towards higher side. Identically, octroi charges is allowable deduction and transportation charges are also seems to be genuine. The accounts of the assessee are audited one and the total turnover of the assessee is approximately ₹ 29 crores. The assessee before the ld. Assessing Officer produced the ledger of expenses and the payment of expenses are to the reputed transportation. The ad-hoc disallowance has been made purely on guess work and it has not been mentioned in the assessment order that such expenses were not incurred. As mentioned earlier, the ld. Assessing Officer himself has mentioned that possibly the expenses have been incurred, thus, since, the incurring of expenses is not in doubt, the ad-hoc disallowance made by the ld. Assessing Officer cannot be said to be justified, more specifically, when no defect was pointed out in the books of accounts of the assessee, therefore, this ground of the assessee is allowed. Addition on account of purchases - Held that:- The assessee even after asking by the ld. Assessing Officer neither furnished the list of persons from whom purchases were made and even did not explain the genuineness of the purchases from the aforementioned three parties. The assessee was issued notice u/s 142(1) dated 18/03/2003 asking the assessee to explain the purchases but the same was neither explained nor the parties were produced at any stage. The totality of facts, clearly indicates that the onus cast upon the assessee to explain the genuineness of the claim was not discharged, therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). So far as, cases relied upon by the assessee is concerned, they are on different facts, therefore, may not help the assessee. So far as, burden upon the Department is concerned, we are of the view that the initial burden is upon the assessee which has not been discharged, therefore, there is no question of shifting the burden upon the Revenue. So far as, violation of principle of natural justice is concerned, due opportunity was provided to the assessee, therefore, there is no violation as such, consequently, this ground of the assessee is having no merit, therefore, dismissed. Ageing analysis of sundry creditors - Held that:- We are of the view that one more opportunity needs to be provided to the assessee, so that true facts can be ascertained and then may be decided in accordance with law. The assessee is directed to furnish the necessary evidence before the ld. Assessing Officer so that it can be examined. Opportunity be provided to the assessee to substantiate his claim, thus, this ground of the assessee is allowed for statistical purposes
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2016 (4) TMI 300
Long Term Capital Gain - loss claimed by the assessee - Held that:- Assessee has sold shares to its group company and booked a loss of ₹ 56,76,211/- under the head "capital gains". The Assessing Officer found that the purpose of selling share at a price less than market value/ book value was to escape from the tax liability therefore, it was disallowed by AO. However, from the above facts, we understand that genuineness of the transaction of sale and purchase of share with assessee and buyer-company has not been doubted by AO. The ld. DR could not bring anything on record that the transaction was a colorable device to reduce the tax liability. There has to be cogent reasons for holding a transaction as colorable device to reduce the tax liability. In the instant case the transaction was with the group company and at the price less than the book value. In our view this observation of the AO does not make the transaction as colorable device to reduce the tax burden. Disallowance u/s 14A - Held that:- Special Bench of the Tribunal in the case of Cheminveste Ltd. v. CIT reported in [2009 (8) TMI 126 - ITAT DELHI-B ] had held that disallowance u/s 14A could be made even in a year in which no exempt income was earned or received by the assessee. But this decision has been overruled by Bangalore Tribunal, Hon'ble Gujarat High Court and Hon'ble Allahabad High Court as stated supra. Moreover, we also find that the Special Bench decision in Cheminvest Ltd. (supra) has been overruled by the recent decision of the Hon'ble Delhi High Court in Cheminvest Ltd. (supra) case itself and hence it is no longer good law. Hence, we hold in favour of the assessee the alternative argument of the Ld. AR that only investments yielding dividend income during the year should be considered for disallowance u/s. 14A of the Act. Respectfully following the aforesaid judicial precedents, we have no hesitation in directing the AO to delete the addition made u/s. 14A of the Act. Disallowance u/s. 14A made to book profit computed u/s.115JB - Held that:- We find lot of force in the argument of the Ld AR that computation of disallowance under Rule 8D of the IT Rules can be used only for computation of income under normal provisions of the Act and not for book profits u/s. 115JB of the Act. Unless an item is debited in the profit and loss account, the same cannot be the subject-matter of addition to book profits under clause (f) of explanation to Sec. 115JB of the Act. The disallowance made u/s 14A of the Act read with Rule 8D of the IT Rules is only artificial disallowance and obviously the same is not debited in the profit and loss account of the assessee and same cannot be imported into clause (f) of Explanation to Sec. 115JB of the Act. We have already held that no disallowance u/s. 14A of the Act would operate in the facts and circumstances of the case. Accordingly, we reverse the orders of authorities below and allow ground raised by assessee.
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2016 (4) TMI 299
Reopening of assessment - reasons recorded - Held that:- From the above analysis of the relevant provisions, it is evident that section 148 envisages issuance of a notice where income has escaped assessment. This notice, as is clear from the above analysis of the relevant provisions, need must be on the AO's reason to believe escapement of income from assessment. Now, since the mandate of the first proviso to section 147 is that in a case of expiry of four years from end of the relevant assessment where assessment, has been made u/s 143(3), it has to be the failure of full and true disclosure by the assessee, of all material facts necessary for the assessment, which has led to escapement of income from assessment, the assessee obviously, requires to be made aware of the fact of such non-disclosure on his part. The contention of the department in this regard does not validate the reopening of the completed assessment of the present assessee. This is so, since the express requirement of the proviso to section 147 of the Act is the specific mention of the AO in the reasons recorded, as to the failure on the part of the assessee. In the present case, there is not even a whisper of an allegation by the AO in the reasons recorded that escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. - Decided in favour of assessee.
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2016 (4) TMI 298
Status of the assessee as non-resident - Held that:- CIT(A) didn't erred in holding the status of the assessee as “non-resident”.
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2016 (4) TMI 297
Disallowance u/s 40(a)(ia) - TDS u/s.194C - Held that:- No payment was made to the transporter by the assessee and thus the assessee is not liable to pay/ deduct the TDS is convincing, hence the present appeal on this ground is accepted. - Decided in favour of assessee.
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2016 (4) TMI 296
Penalty under section 221 r.w.s. 140A(3) - levy the maximum penalty - Penalty payable when tax in default - Held that:- Examination by the learned CIT(A) of the assessee's bank account, for the period under consideration, evidenced that the assessee did not have sufficient funds therein and that the payment of taxes in six installments from 22.11.2011 to 09.03.2012 were made by margin moneys deposited with various brokers being withdrawn by the assessee. Before us, except for reiterating the ground raised, Revenue had not been able to controvert the above factual findings of the learned CIT(A) that the assessee was in severe financial hardship in the said period, as evidenced by the fact that when the AO attached the assessee's bank account, the balance therein was only ₹ 48,487/-. Financial hardship is further buttressed by the observation of the CIT(A) that for making the payment of taxes the assessee had withdrawn margin money placed by it with various brokers. Revenue has also not been able to justify before us, as to why, in these factual circumstances, the AO proceeded to levy the maximum penalty, i.e. to the extent of tax arrears. In these above factual circumstances, we concur with the view of the learned CIT(A) that the AO's action in levying the penalty under section 221 r.w.s. 140A(3) of the Act on the maximum amount of tax payable appears to be excessive, especially considering the severe financial constraints faced by the assessee and the fact that the payment of tax in six installments from 22.11.2011 to 09.03.2012 was made by withdrawing margin money kept with various brokers. In this view of the matter, we uphold the order of the learned CIT(A) in confirming the penalty levied on the assessee under section 221 r.w.s. 140A(3) of the Act to the extent of ₹ 1,00,000/- only. - Decided against revenue
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2016 (4) TMI 295
Status of the assessee as “non-resident” - period of stay - resident or non resident - Held that:- The assessee furnished certain copies of documents, evidencing that during F.Y. 2002-03 to 2008-09, he was domiciled in U.K. The documents relates to school certificate of his daughter, son, electricity bills, club cards, property documents, etc. It is also noted that for A.Y. 2007-08, the contention of the assessee as well as other details, contention of the Assessing Officer were considered holding that the period of stay of the assessee in India was 173 days as against 178 days determined by the Assessing Officer, meaning thereby, the period of stay was less than 182 days, therefore, in view of the terms of section 6(1)(c) of the Act read with Explanation (b) his status was non-resident, therefore, the global income cannot be taxed in India Addition u/s 68 - unexplained cash deposits in Indian Bank Accounts - Held that:- Commissioner of Income Tax (Appeals) himself examined the evidence with respect to remittance which were supported by FIRC, issued by bank in India, remittance advice of a foreign bank, confirmation of each companies, confirming that remittance were made at the instance of the assessee to whom substantial amounts were owed by them, certificate of incorporation of the said companies, confirmation that the amounts are not loans but were own funds, due from the said companies, thus, in the absence of any adverse material, we affirm the finding of the ld. Commissioner of Income Tax (Appeals). Even otherwise, addition u/s 68 can be made only when the three ingredients, contained in the section, are not satisfied by the assessee. The Revenue has not produced any material that the assessee violated the provision of the Act. Even otherwise, we are satisfied that the assessee has fulfilled the conditions enshrined in section 68 of the Act as identity, capacity and genuineness of the transaction has been satisfactorily explained by the assessee. The assessee has proved the source of receipt of the impugned amounts. We are aware that initial burden is upon the assessee to prove the source of such receipts but once it is discharged, no addition can be made u/s 68 of the Act. Even otherwise, if the Assessing Officer was still not satisfied with the explanation of the assessee, then the onus shifts to the Revenue to prove otherwise, consequently, we find no merit in the argument of the Department with respect to the impugned ground. The stand of the ld. Commissioner of Income Tax (Appeals), on this issue, is affirmed. - Decided in favour of assessee Status of resident but not ordinarily resident as defined u/s 6(6)(a) - Held that:- The assessee was practically residing abroad, therefore, it can be concluded that the controlling management of the assessee during the aforesaid period remained abroad and further the factual finding recorded by the ld. First Appellate Authority was neither controverted by the Department nor any adverse material was produced before us, in support of the assertion made by the Revenue, consequently, the assessee is not an ordinary resident, thus, we affirm the stand of the ld. Commissioner of Income Tax (Appeals).
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Customs
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2016 (4) TMI 278
Availment of benefit under Notification No.01/2011-CE, dated 1.3.2011 - Appeal dismissed on the ground that the review petition is pending and the matter is sub judice and it would be premature to decide the appeals without a final decision on the issues raised in the Supreme Court - Held that:- the impugned order, dated 23.11.2015, which the respondent No.3 has passed, is wholly misconceived inasmuch as mere fact of filing of the review petition, in the Supreme Court, seeking review of the Supreme Court decision, in M/s SRF Ltd. –v-Commissioner of Customs, Chennai [2015 (4) TMI 561 - SUPREME COURT], could not have been a ground for dismissing the appeals. In fact, this legal position could not be disputed on behalf of the respondents. Therefore, the impugned order is set aside. - Application disposed of
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2016 (4) TMI 277
Burden on whom to establish that the goods are smuggled into the country - Seized certain quantities of Canvas Shoes and Chappals of foreign origin - licit import of the seized goods - Revenue contended that when marks and numbers on the seized goods did not tally with the documents furnished by the Respondent, then the onus is shifted to the respondent herein to establish the licit possession of the goods - Held that:- similar goods are being imported into India where marks and numbers are not specified in the invoices/packing list and accordingly can not be described in the Bill of Entry. Once such goods are cleared into the country without raising any objection, regarding brand name etc., then at the time of interception it cannot be seized on the grounds that the goods are of smuggled nature. The goods seized are also not notified under Section 123 of the Customs Act, 1962 and no investigation is conducted by the Revenue to indicate that the goods seized in the present proceedings were of smuggled nature. When goods are not notified under Section 123 of the Customs Act, 1962, then the burden is on the Revenue to establish that the goods are smuggled into the country. - Decided against the revenue
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2016 (4) TMI 276
Eligibility for refund of SAD when supplied/sold in DTA clearances from SEZ - Notification No.102/2007-CUS - Goods were originally imported by the appellant for use in the SEZ Unit and such imports are considered to be warehousing of goods after importation, so, the responsibility of payment of duty on such warehoused goods when cleared lies on the importer. Held that:- as per definition of importer in Section 2(26) of the Customs Act, 1962, appellant remained an importer till the goods are cleared for home consumption i.e. sale to DTA unit in the present proceedings. As per Rule 48(1) of SEZ Rules, 2006 a Bill of Entry for home consumption is required to be filed by Domestic Tariff Area buyer. The proviso contained in this Rule 48(1) mentions that Bill of Entry for home consumption may also be filed by SEZ Unit on the basis of authorization from a DTA buyer. For the purpose of interpreting a Notification issued under Section 25(1) of the Customs Act, 1962 the definition of importer given in Section 2(26) of the Customs Act, 1962 is required to be followed, according to which the Appellant was an importer of the goods when imported into India and paid VAT at the time of sales to DTA units. The SAD paid has not been recovered from the DTA buyers. The conditions of Notification No.102/2007-CUS are, therefore, fulfilled and the ratio laid down by the case law Adinath Trade Link v. Commissioner of Customs, Kandla [2013 (8) TMI 430 - CESTAT AHMEDABAD] is squarely applicable to the facts of the present case. Hence, the appellant is eligible for refund. - Decided in favour of appellant with consequential relief
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2016 (4) TMI 275
Confiscation of goods and imposition of penalty - Mis-declaration of quantity of goods - Import of Gold, Platinum and Silver Jewellery (Plain) - Jewellery purchased in auction in Italy - Held that:- it is not a regular case of import of jewellery, the declarations in the bill of entry were made based upon the invoice issued by M/s Graser, Italy (exporter), which has the stamp of approval by the Court of Bassano Del Grappa, Italy as also by the official liquidator. It is the total cost of the entire consignment, which stands paid by the assessee to the foreign exporter in terms of the auction bid accepted by the Court and the entire consignment is covered by the letter of the official liquidator. Hence, no mis-declaration as regards quantity of the goods can be attributed to the assessee. In as much as the value of the entire consignment [including the value of the alleged excess found quantity] stands declared by the appellant, the said factor cannot be made a ground either for confiscation of the goods or for imposition of penalty upon the appellant. - Decided in favour of appellant with consequential relief
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Corporate Laws
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2016 (4) TMI 270
Scheme of Arrangement in the nature of Demerger and Transfer of the demerged Undertaking - Held that:- As the contentions raised in the affidavits and reply affidavits, the undertakings provided vide the additional affidavit dated 31st March 2016 and the consent letters of the Secured Lenders placed on record vide the affidavit dated 1st April 2016, this Court is satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs, have been suitably addressed and no longer survive. From the material on record, it appears that the present Scheme of Arrangement is in the interest of its shareholders and creditors, as well as in the public interest, therefore, the same deserves to be sanctioned. The prayers in terms of Paragraph 18(a), (b) and (c) of Company Petition No.34 of 2016 for the Demerged Company including the reduction of capital as proposed vide clause 12 of the Scheme are hereby granted. The minutes under Section 103(1) in terms of Paragraph12 are hereby granted. Similarly, the prayers made in terms of Paragraph17(a) of Company Petition No.35 of 2016 for the Resulting Company are also granted. The petitions are disposed of, accordingly. Insofar as the costs to be paid to the Central Government Standing Counsel are concerned, they are quantified at ₹ 7,500/per petition. The same may be paid to Mr.Devang Vyas, learned Assistant Solicitor General of India.
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2016 (4) TMI 269
Approval of the scheme of arrangement - Held that:- In view of the approval accorded to the scheme by the shareholders of the petitioners and creditors (i.e. secured and unsecured) of the demerged company and, given the fact, that the concern raised by the RD has been duly met, as indicated above, in my opinion, there appears to be no impediment in the grant of sanction to the scheme. Consequently, sanction is granted to the scheme in terms of Section 391 and 394 of the Act. The petitioners will, however, comply with all statutory requirements, as mandated in law.
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Service Tax
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2016 (4) TMI 292
Waiver of pre-deposit - Order passed without considering the contentions of the appellant - Requiring the appellant to deposit ₹ 1.8 crores as pre-deposit along with proportioned interest - Held that: - in a similar appeal by a sister concern of the appellant, this Court noted a similar contention of the appellant and remanded the matter to the CESTAT for consideration of the appellant’s application for waiver of the pre-deposit afresh in accordance with law. Hence, as the contentions of appellant have not been considered by the CESTAT when it passed the impugned order, the impugned orders dated 28th July 2015 and 9th February 2016 are set aside. - Appeal disposed of
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2016 (4) TMI 291
Entitlement for payment of interest for the period from 03.06.2008 to 10.03.2010 - Refund claim was made on 24.01.2005 and the amount was refunded on 12.11.2010, hence delayed refund - Section 11BB of the Central Excise Act, 1944 - Respondent submitted that with effect from 03.06.2008, the amount had been transferred to the Consumer Welfare Fund and therefore, the liability of the revenue to pay any interest was discharged. Held that:- such contention of revenue cannot be countenanced for the reason that the section 11BB of the Central Excise Act provides for payment of interest after a period of three months from the date of application till the date of actual payment. The statute does not provide for curtailment of the period for which the interest has to be paid on account of any superwinning circumstances, like transfer of the amount to the Consumer Welfare Fund. The learned counsel for the respondents is not in a position to point out any provision of law which shows that when the amount is transferred to the Consumer Welfare Fund, the period for which the assessee would be entitled to interest under section 11BB of the Central Excise Act would stand curtailed. It is a settled legal position that insofar as the taxing provision is concerned, the same has to be construed strictly and one has to look merely at what is said in the relevant provisions; there is nothing to be read in; nothing to be implied and there is no room for any intendment. On a plain reading of section 11BB of the Central Excise Act, it is evident that the object behind such provision is to provide for payment of interest to a party commencing from a period after three months from the date of application till the date of actual refund. The reason is not far to see, namely, that a party should not be prejudiced on account of any delay in deciding the application or on the ground that the party might have to challenge the order of refund before any other forum. As regards the transfer of the amount to the Consumer Welfare Fund, the order passed by the Commissioner (Appeals) holding that there was unjust enrichment, was held to be erroneous and has been set aside, under such circumstances, no prejudice ought to be caused to the petitioner on account of any erroneous order passed by the respondents authority, without there being any default on part of the petitioner. Therefore, the petitioner is entitled to interest from 24.04.2005 till the actual payment i.e. upto 10.03.2010 and the Tribunal was, not justified in holding that from the date of transferring the sum to the Consumer Welfare Fund, the petitioner was not entitled to payment of interest on the refund amount. Entitlement of compensatory costs for late payment of interest - Petitioner submitted that petitioner should be compensated for the prejudice caused to it due to inordinate delay in payment after the lapse of statutory period - Held that:- the petitioner was required to unnecessarily litigate in two rounds; in the first round, up-till the Tribunal and in the second round, upto this court, for the purpose of availing of the statutory interest payable to it. Under such circumstances, the petitioner is entitled to the grant of compensatory costs, which are quantified at ₹ 25,000/-. - Decided in favour of petitioner
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2016 (4) TMI 290
Change of classification of the service from “Management Consultancy Service” to “Business Auxiliary Service” - Providing hospitality services under Management or Business Consultant's Service - Held that:- the nature of service provided by IHCL is of the kind of advice, consultancy and assistance which are directly in connection with management of the respective hotels. It is clear from the submissions and the records that IHCL is not managing or conducting the hotel business of Piem on their behalf, but are only providing the management consultancy and advice by posting only key senior personnel to assist Piem to conduct their hotel business with their own infrastructure and manpower. Further, it is noticed that IHCL is not providing any service on behalf of Piem to Piem's customers, nor are IHCL promoting the hotel business of Piem. Therefore, the services provided by IHCL to Piem cannot be termed as Business Auxiliary Service and the services provided by IHCL is squarely covered under Management or Business Consultant's Service, classifiable under Section 65(105)(r) of Finance Act, 1994, supported by the Tribunal judgments in RPG Enterprise Ltd. Vs CCE, Mumbai [2008 (4) TMI 168 - CESTAT MUMBAI] and Shervani Indus Syndicate Vs CCE, C & Service Tax, Allahabad [2009 (1) TMI 44 - CESTAT, NEW DELHI]. Also, the change of classification at the end of IHCL would be prospective and cannot have retrospective operation, as held by this Tribunal in various judgments. So, the services provided by IHCL is correctly and appropriately classifiable under Management & Business Consultant's Services and not under Business Auxiliary Service and the jurisdictional officers at recipient's unit are not empowered to review or revise the classification at supplier/ provider's end. Denial of Cenvat credit - Being recipient of such service, appellant took the credit of service tax paid on such services under Rule 6(5) of Cenvat Credit Rules - Held that:- since Piem Hotels have taken credit during the period April 2005 to September 2010 and the classification has been changed at IHCL's end, such change in classification would not affect the credit taken by Piem during the period prior thereto. Therefore, the jurisdictional authorities at Piem Hotels have committed an apparent error in denying the credit and it is well settled position of law that jurisdictional officers at recipient's end are not empowered to question or change the classification or valuation at supplier's end based on various judgments of Hon'ble Apex Court. So, Cenvat credit cannot be denied. - Decided in favour of appellant
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2016 (4) TMI 289
Entitlement for the benefit of VCES Scheme notified under Finance Act, 2013 - Respondent applied for registration, obtained assessee code number and attempted to deposit 50% amount on 31/12/2013 however due to system fault the amount could not be deposited and report is on record which shows that ‘assessee code invalid' - Held that:- it is observed that on 31/12/2013 respondent's bank account in IDBI bank shows credit balance of more than 50% amount which was to be deposited. In view of this, respondent has scrupulously followed the procedure and complied with condition i.e. applied for registration and attempted to deposit the amount on the due date i.e. 31/12/2013 but only due to system fault online, the respondent could not deposit the amount which is beyond their control. Therefore, it can be construed that there is no delay on the part of the respondent, hence though the payment finally made on 01.01.2014 the same can be treated as if, payment was made on 31/12/2013. - Decided against the revenue
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Central Excise
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2016 (4) TMI 288
Inclusion of value of gunny bags for determination of assessable value of manufactured goods - Arrangement between appellant and buyers of soda ash - Held that:- if an arrangement exists between the seller and the buyer of excisable goods for return of the packing materials by the buyer to the seller, carrying an obligation on the seller to return the value of the packing materials to the buyer on such return, such value is not liable to be included in the assessable value of the finished product. Furthermore, if such an arrangement exists, the question of actual return is not relevant. As per material placed, it cannot be concluded that the appellant has succeeded in establishing that such an arrangement of return of the packing materials of the gunny bags with the obligation on the part of the seller to refund the value thereof existed between the parties. Also, obligation taken by the appellant to refund the value of the gunny bags to the Buyer in terms of any arrangement between the parties not found. - Value to be included - Decided against the assessee.
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2016 (4) TMI 287
Demand of excise duty - Supply of 4 Horton Spheres which do not attract any excise duty to Indian Oil Corporation - Even no excise duty was payable but same was collected by the respondent from the Indian Oil Corporation - Held that:- the cost of the Horton Spheres was worked out as per the details agreed upon between the assessee and the Indian Oil Corporation. Therefore, it is clear that no excise duty had been collected and hence, no demand can be made. - Decided against the revenue
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2016 (4) TMI 285
Monetary limits for filing the appeals - Amount involved is less than ₹ 15 lacs - Held that:- the limits specified may not apply to certain exceptions, at the same time, the Circular dt.01/01/2016 which is in furtherance of the circular dt.17/12/2015, clearly envisages that the present instructions will apply retrospectively to all the pending appeals and appeals to be filed henceforth in High Courts/Tribunals, subject to exceptions where the monetary limits if is less than ₹ 15 lacs, can be preferred in High Courts. Taking note of the CBEC Circular dt. 17/12/2015 & 01/01/2016, the monetary limits in these appeals is less than ₹ 15 lacs, which is much less than what has been prescribed for filing appeal before the High Courts and deserve to be dismissed as not pressed. - Decided against the revenue
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2016 (4) TMI 284
Utilization of unutilized input credit amount - Manufacture of dutiable and exempted goods and had availed Modvat Credit in respect of inputs used - Held that:- it is evident that the non-utilization of the input credit were solely on account of the pending dispute between the parties which had arisen due to the failure of the Excise authorities to come up with a proper procedure in the matter of utilization of input credit coupled with the restraint order as a result of which the respondent could not utilize the said amount and the same continued to remain lying in it’s account except for an amount of ₹ 46 lacs which the respondents had taken out in the year 1994. Thus, the Tribunal has taken a correct view in the matter and allowed the said credit to be taken in the CENVAT account of the respondent. Also, sub-rule (7) of Rule 57H has been brought into force, as stated on enquiry by learned counsel for the Revenue itself, on 1.3.1997 and thus the same was not at all in existence on 1.1.1997 when the respondents had opted out of the Modvat credit. In the circumstances, it is not at all open for the appellant to place reliance upon the said rule for denying the benefit of the input credit lying in the Account of the respondent on the basis of the said sub-rule.
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2016 (4) TMI 283
Demand of duty - PP bags procured duty free under Notification No. 43/2001-CE(NT) for packing of export goods - Manufacturer of vegetable oil and De Oiled Cake (DOC), exempt from Central Excise duty - Demand confirmed on the ground that at the port at the time of loading of goods on to the ship, DOC was taken out of these bags and loaded on the ship bulk and these bags were discarded as scrap at the port and therefore as the bags were not exported the duty foregone in terms of Notification No. 43/2001-CE(NT) became recoverable. Also DOC was also exported by train to Pakistan and in respect of such export DOC crossed the border in PP bags. Held that:- as regards the exports to Pakistan by train there is no evidence that the goods did not cross the border packed in PP bags and therefore if there is any demand in respect of the same, the same would not be sustainable. Regarding export of DOC by ships, the PP bags were used for manufacture/processing of the export goods as packing is certainly a process. The condition of the notification is that the goods (DOC) for the processing of which the bags were procured duty free should be exported. There is no dispute that DOC was exported and it is not the allegation that DOC was not exported. Even the evidence to that effect has been given in the form of Customs endorsed AREs. The said notification nowhere stipulates that the goods which were procured duty free under Notification No. 43/2001-CE(NT) are required to be exported. Therefore, the demand is not sustainable. - Decided in favour of appellant
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2016 (4) TMI 282
Confiscation of seized goods - Rule 25 of the Central Excise Rules, 2002 - Manufacture of Khandsari Sugar - In January 2005 appellant put up a boiler and vaccum pan for manufacture of sugar. After enquiry the stock of sugar in the factory and the state warehousing corporation and molasses in the factory were seized - Held that:- There is no determination of any duty liability or any violation of the provisions which will occur on such duty liability not being discharged. Regarding non-registration after switching over to khandsari sugar to vaccum pan based sugar production it is the case of the appellant that the said registration is required after reaching threshold limit of turnover for duty liability only. It is found that the seizure was effected and the Department proceeded with a prima facie belief of possible non-payment of duty on sugar as well as violation of provisions relating to registration of the unit etc. None of these purported violations stand decided when the Original Authority confirmed the correctness of seizure and ordered the confiscation. Also there is no justification of such action without a clear finding about the violations committed by the appellant. More specifically the liability of the appellant to Central Excise duty itself has not been established categorically. In these circumstances, the impugned order is not sustainable and accordingly, set aside. Matter is remanded back to the original authority to examine the evidences regarding violation, if any, of various provisions of law by the appellant, their duty liability, if any, during the impugned period which will be relevant to decide the correctness of confiscation. - Appeal disposed of
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2016 (4) TMI 281
Excise duty on the waste and scrap - job work in the premises of manufacturer of intermediate goods i.e. job worker - appellant being principle supplier and manufacturer of final product - Held that:- Appellant has supplied input to the job worker and at the job worker's end during the process of job work waste and scrap arises. Since the job worker is manufacturer, excise duty liability, if any arises it will be on job worker and not on principle manufacturer i.e. appellant who supplied inputs. As decided in assessee's own case [2011 (9) TMI 139 - CESTAT, MUMBAI ]. - Decided in favour of assessee
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2016 (4) TMI 280
Inter-unit transfer of goods for captive consumption - Valuation - whether the cost of production of the goods - the packaging material that is manufactured by the Chennai unit of the appellant should be computed at 115%/110% of the cost of production/manufacture of the raw material procured from its Bhadrachalam Unit or at the actual cost of such raw material since there was only a stock transfer and not a sale of these goods by the Bhadrachalam Unit to the Chennai unit? - Held that:- Since Rule 8 mandates loading of specified percentage (15% or 10% as the case may be) on the cost of production of goods cleared to another unit for captive consumption in the later unit for computing excise duty payable by the first unit, the cost of production (in the present case, packaging material manufactured by the Chennai unit) must only be considered in terms of CAS -4 as mandated by Board's circular dt. 13.2.2003. None of the clauses, in particular clause 5.1 of CAS -4 deal with excisable value of captively consumed goods. The CAS -4 sets out standards for computation of captively consumed goods. Loading of a percentage of the cost of production (mandated by Rule 8 of the Valuation Rules) is clearly not a requirement of CAS -4. The cost of production must therefore be computed strictly and invariably only under CAS -4. On the aforesaid analyses, we are compelled to the conclusion that in determining the cost of production of packaging material, the cost of paper and paper board (the raw material procured from the Bhadrachalam unit of the appellant for captive consumption at the Chennai unit) must be taken as the actual cost of production determined in terms of CAS -4 and as set out in Appendix-I of the said standard; and would not include loading of the notional amount, of 15%/10% to the cost of production of the raw material, which loading is solely pursuant to mandate of Rule 8 of the Valuation Rules and for remittance of excise duty by the Bhadrachalam unit. This loading would not constitute the procurement cost of the raw material manufactured by the Bhadrachalam unit, for the Chennai unit, which used these goods for manufacture of the packaging material. In the case of Inter-unit transfer of goods for captive consumption, the actual cost of production (100% of the cost of production), of the raw material procured from the Bhadrachalam unit of the appellant [excluding the national loading under Rule 8 - 15%/10%] is the cost of raw material in the hands of the Chennai unit, for determining the cost of production of packaging material manufactured by the Chennai unit. The percentage of loading on such cost of production, mandated by provisions of Rule 8 for remittance of excise duty by the Bhadrachalam unit cannot not however be considered as comprised in the cost of the raw material consumed for manufacture of packaging material and thus constituting the cost of production at the Chennai unit; In view of the conclusions recorded we hold that the decision of the Chennai Division Bench of CESTAT in the Final Order dt. 11.5.2010 in Revenue's appeal in Eveready Industries and the subsequent decision of the same Regional Bench in the judgment reported in [2011 (4) TMI 141 - CESTAT, CHENNAI ] represent the correct position in law, the decision of the Mumbai Division Bench in Tata Iron and Steel Co, Ltd, Vs CCE Thane-II (2013 (8) TMI 461 - CESTAT MUMBAI ) does not represent correct view regarding application of Rule 8 of the Valuation Rules and the same is overruled.
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2016 (4) TMI 279
Duty liability and imposition of penalty - Moulds manufactured and captively used - Demand is for payment of duty on the various invoices raised by the appellant to receive payment from the buyers in respect of such moulds - Moulds not cleared out of the appellant's unit - Held that:- in view of the decision of Tribunal in the case of Elcon Clipsal India Ltd. vs CCE, Ahmedabad [2002 (9) TMI 140 - CEGAT, COURT NO. II, NEW DELHI], the exemption for captive consumption cannot be denied if the capital goods are used within the factory or production. The ownership of the goods is not relevant. The only criteria for grant of exemption is the capital goods manufactured in a factory are used within the factory of production which is being satisfied. It should be noted that on the first part of notice the demand is not for amortization of mould's cost, and hence, not giving any finding on that aspect. Therefore, the demand of duty on moulds is not sustainable and the penalties imposed based on such demand are also not sustainable. - Decided partly in favour of appellant
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2016 (4) TMI 266
Availability for benefit of Notification No. 50/2003-C.E. dated 10.06.2003 - Area based exemption - expansion of an eligible unit after the cut off date of sun set clause - Goods manufactured from the unit established from expansion of the existing unit - Manufacture of footwear - Premises where the benefit of Notification No. 50/2003-CE dated 10.6.2003 is already being availed and where the applicant proposes to effect the substantial expansion, are the same and one premises - Revenue submitted that since the proposed new unit will come into existence after sun set clause i.e. after 31.3.2010, the said unit will not be eligible to enjoy the benefit of the said exemption notification and shall have to pay duty at the applicable rates. Held that:- it is noticed that the Circular No. 939/29/2010-CX dated 22.12.2010 issued by CBEC has clarified that Notification No. 50/2003-CE does not place a bar or restriction on any addition / modification in the plant or machinery or on the production of new products after the cut-off date. In the instant case, applicant proposes to manufacture shoes of different brand and design by installing fresh plant/machinery. Further, the contention of Revenue that the applicant proposes to take separate factory license, ESI No. and PF Codes for expanded Haridwar Plant II, therefore, it will not fall under the category of existing unit, is not correct. Relevant Notification No. 50/2003-CE, as also CBEC Circular dated 22.12.2010 and 17.02.2012, do not envisage such condition. In view of said clarifications issued by CBEC, applicant can continue to avail the benefit of excise exemption. Also it is observed from the Circular No. 960/03/2012-Cx dated 17.02.2012 that the situation of expansion of an eligible unit by acquiring an adjacent plot of land and installing new plant and machinery on such land, is akin to expansion by way of installing new plant and machinery inside the existing plot/premises. CBEC clarified that in such cases, the exemption should continue to be available from the residual period of exemption. Here, the applicant proposes to effect expansion wherefrom the new unit had started commercial production w.e.f. 26.03.2010. Therefore, in view of Circular dated 17.02.2012, applicant is eligible for said exemption. - Decided in favour of appellant
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CST, VAT & Sales Tax
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2016 (4) TMI 274
Waiver of pre-deposit - Total liability of the petitioner under the assessment order exceeds ₹ 4,00,00,000/- against which Tribunal, by the order dated 18.9.2015, had directed the petitioner to deposit an amount of ₹ 10,00,000/- under the GVAT Act and ₹ 1,00,000/- under the CST Act by way of pre-deposit as a condition precedent for entertaining the appeals - Held that:- Sub-section (4) of section 73 of the GVAT Act provides that no appeal against an order of assessment shall ordinarily be entertained by an appellate authority, unless such appeal is accompanied by satisfactory proof of payment of tax in respect of which an appeal has been preferred. Thus, ordinarily an appeal cannot be entertained unless the tax assessed under the assessment order is paid and proof thereof is submitted along with the appeal. Sub-section (4) of section 73 of the GVAT Act, however, carves out an exception by vesting in the Tribunal the discretion to entertain an appeal, if it thinks fit, for reasons to be recorded in writing, inter alia, without payment of tax with penalty (if any) or, as the case may be, of penalty. Thus, no dealer can demand as a matter of right that his appeal should be heard without payment of tax or penalty and it is for such dealer to satisfy the Tribunal that a case has been made out for total exemption from payment of tax with penalty. However, the Tribunal, while considering an application for waiver of tax and penalty for the purpose of hearing the appeal is required to exercise discretion in a judicious manner. In the present case as the petitioner has not produced any documentary evidence in support of its case, as well as considering the meagre amount that the Tribunal has directed the petitioner to pay as compared to the total demand, it is not possible to state that the exercise of discretion on the part of the Tribunal is in any manner arbitrary or illegal. - Waiver not granted
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2016 (4) TMI 273
Period of limitation - Demand notices of default assessment of tax and interest - Section 32 of the DVAT Act, 2004 - Petitioner sold IT related TFT/LCD/LED Monitors by charging VAT at 4% or 5% although the said item is not covered under the Third Schedule to the DVAT Act. Pursuant to the receipt of the assessment and penalty notices, the Petitioner sent a letter dated 24th April 2014 to the VATO stating, that no show cause notice was issued to them asking why LCD/LED/TFT Monitors should not be treated as unclassified and charged VAT at 12.5%, that they were not confronted with the determination in the case of M/s. NEC India Pvt. Ltd. Where the a dealer has not furnished returns as envisaged under Section 32 (1) (a) of the DVAT Act, then the Commissioner, for reasons to be recorded in writing, can ‘assess’ the taxable turnover using his 'best judgment' . Where in terms of Section 32 (1)(b), (c) or (d) of the DVAT Act, the dealer has furnished incomplete returns that do not satisfy the requirements of the Act or for any reason the return filed is not satisfactory then the Commissioner will ‘reassess’ to the best of his judgment the amount of net tax due for the tax period. Section 34 of the DVAT Act spells out the maximum period within either an assessment or, where the circumstances so warrant, a reassessment under Section 32 of the DVAT Act can be made. The outer limit for either is four years from “the end of the year comprising of one or more tax period for which the person furnished a return under Section 26 or 28 of the Act or the date on which the Commissioner made an assessment of the tax for the tax period whichever is earlier”. In the present case, the Assessee was filing monthly returns and, therefore, the limitation for the purposes of Section 34 of the DVAT Act would have to be reckoned from the date of the filing of the return by way of self assessment. The notices for reopening of the assessment for the months comprising the Assessment Year 2009-10 ought to have been issued before the expiry of the respective dates as shown in the above table. Barring the reopening of the assessments for February and March 2010, where the dates of the notices of default assessment were prior to the completion of four years, i.e., 26th March and 23rd April 2014, in respect of all other returns by way of self-assessment made by the Petitioner from April 2009 to January 2010, the re-opening of the assessment was sought to be done on a date after the expiry of the four-year period. Here, since the first proviso to Section 34 of the DVAT Act has not even been invoked, there was no possibility of invoking the extended period of limitation, i.e., beyond the expiry of four years. The phrase ‘whichever is earlier’ occurring in Section 34 (1) of the DVAT Act is an indication that the date on which the Petitioner makes an assessment in terms of Section 31(1)(a) of the DVAT Act is crucial for determining the expiry of the limitation of four years for completion of the reassessment. Therefore, the Court is satisfied that barring the default notices of assessment pertaining to the months of February and March 2010, all the other notices of default assessment issued for the remaining months of AY 2009-10 by the impugned notices dated 31st March 2014 are barred by limitation and deserve to be set aside. Another ground on which the default notices of assessment require to be quashed is the photocopy of the original signed order issued by the VATO was perused by the Court. It showed that none of the above alternatives were specifically tick marked by the VATO. It is, therefore, unclear as to the precise ground on which the VATO was proceeding to exercise its powers under Section 32(1) of the DVAT Act. Classification of 'Monitors' - Whether the monitors sold by the petitioner fall within the entry ‘Monitors’ in terms of Item 3 below Entry 41A of the Third Schedule - Held that:- the Court would like to observe that the determination by the Commissioner in the case of NEC under Section 84 of the DVAT Act was not binding on the present Petitioner as it was not a party to those proceedings. In the present case the DT&T has not been able to persuade the Court that LCD/LED/TFT monitors sold by the petitioner during the period under consideration is not classifiable as ‘Monitors’ under Item 3 below Entry 41A of the Third Schedule to the DVAT Act. Violation of principles of natural justice - Default notice of assessment - Held that:- the notices under Section 59(2) of the DVAT Act issued to the Petitioner asked for additional information in respect of the LCD/LED/TFT Monitors. There was no indication in the said notices regarding any erroneous classification of the monitors as forming the basis for reopening the assessments. There was also no whisper of the determination under Section 84 of the DVAT Act in the case of NEC which, as it transpired, was one of the reasons for reopening the assessments. In other words, the Assessee was not put on notice as to the grounds on which the assessments were sought to be reopened. Existence of Alternative Remedy - Held that:- in the present case the entire proceedings for the months of AY 2009-10 (barring February and March 2010) are barred by limitation. There has also been an obvious violation of the principles of natural justice. Therefore, the impugned notices of assessment dated 31st March 2014 issued to the Petitioner as well as notices of default assessment of penalty of the same date are hereby quashed. - Decided in favour of petitioner
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2016 (4) TMI 272
Levy of entry tax - Appellant had withdrawn the writ petition in the first round without seeking liberty to institute fresh proceedings - Held that:- since the matter relating to the levy of entry tax is a matter that requires consideration, it would have been more appropriate for the High Court to have entertained the application for recall of the order withdrawing the writ petition. Therefore, the order passed by High Court is set aside and remand the matter back to the High Court for admitting the writ petition and for deciding it on its own merits. The High Court will consider the case of the appellant provided the appellant has paid the tax in dispute and provided the appellant pays costs of ₹ 50,000/- to the State Government within six weeks from today. - Appeal disposed of
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2016 (4) TMI 271
Cancellation of eligibility certificate - Misutilisation - Section 4A(3) of U.P. Trade Tax Act - Held that:- it is clear from Section 4A(3) ibid that power can be exercised by the Commissioner to cancel the eligibility certificate only when misuse of the certificate is found in any manner whatsoever. It is found that in the show cause notice there was no allegation of misuse of eligibility certificate which was granted to the respondent. On the contrary, the case was sought to be made out that the eligibility certificate itself was granted wrongly, inasmuch as the Unit has installed a second hand Pouch Sealing Machine purchased from M/s. Gorakhpur Grah Udyog Kendra, Gorakhpur. In these circumstances, it is opined that the High Court has rightly held that this fact was known to the appellant when the eligibility certificate was granted and there was no misrepresentation. In any case, no case was set up by the appellant in the show cause notice that there was misuse of the eligibility certificate. Therefore, it could not have been cancelled in exercise of powers confirmed under Section 4A(3) of the Act. - Apex court dismissed the appeal
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Wealth tax
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2016 (4) TMI 294
Entitlement to exemption under Section 5 (1) (i) of WT Act - Non filing of wealth tax returns - entitlement to Section 11 - Held that:- It appears to the Court that the Petitioner is not entitled to any reliefs as claimed in the petition. Under the Finance (No. 2) Act of 1991, an amendment was brought about in Section 13 (1) (d) of the IT Act whereby clause (iia) was inserted in the proviso with retrospective effect from 1st April 1983 which provided that for a charitable trust to retain its exemption under Section 11 (5) of the IT Act, it was required to disinvest its shares/assets, after the expiry of one year from the end of the previous year in which such asset is acquired or 31st March 1992, whichever was later. This was later extended till 31st March 1993. It was in view of the above amendment that the Petitioner filed its revised return on 18th January 1992 under the IT Act claiming exemption under Section 11 of the IT Act. However, for the reasons best known to it, the Petitioner did not file a wealth tax return. The Respondent is right in contending that there was no valid reason given by the Petitioner in not filing the wealth tax return within the stipulated time when it had filed its income tax return on 28th June 1991 and a revised return on 18th January 1992. As rightly pointed out by Mr. Manchanda, learned Senior standing counsel for the Revenue, the conduct of the Petitioner in filing the wealth tax return belatedly and much after the date by which it was required to disinvest the shares held in the prohibited modes, and the fact that it did not do so, should disentitle it to any of the reliefs prayed for. On the date of filing of the wealth tax return, the Petitioner was fully aware that it did not comply with the essential conditions for claiming exemption. Therefore, it could not be heard to say that it must be refunded the wealth tax voluntarily paid by it.
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2016 (4) TMI 293
Penalty proceedings u/s 17 of the Wealth-tax Act, 1957 - Held that:- From going through the submissions of the ld. AR as well as the observations made by ld. CWT(A) we find that assessee company passed through scrutiny assessment u/s 143(3) of the I.T. Act, 1961 and during the course of assessment proceedings ld. Assessing Officer observed that assessee company owns motor cars (vehicles having WDV at ₹ 1.51 cr.) and also assessee company owns Guest House. There was no record available showing that any wealth tax return has ever been filed and in view of these reasons and notice u/s 17 of the W.T. Act was issued and he further found that ld. CWT(A) has accordingly issued proper notice and duly disposing the objection raised by the assessee and had communicated to the assessee. Therefore, we are of the view that ld. CWT(A) has rightly dismissed the ground of assessee in accordance with law. We uphold the same.- Decided in favour of assessee. Denial of deduction claimed of debt against the value of movable and immovable properties - Held that:- Looking to the disparity of facts appearing in the submissions of assessee and the orders of lower authorities and also observations of ld. Assessing Officer and ld. CWT(A) that assessee has not been able to prove proper nexus of the vehicle loan taken as well as ECB in regard to the movable and immovable wealth shown in the computation of wealth, it will be proper that the matter arising in this ground of appeal to be restored back to the file of Assessing Officer for fresh adjudication with clear instruction that ld. Assessing Officer will provide sufficient and reasonable opportunity of being heard to the assessee and we also instruct the assessee to produce all necessary documents as discussed above before the Wealth Tax Officer in support of his claim of deduction of debts against the value of taxable assets for wealth tax purposes. Accordingly, this ground is allowed for statistical purposes.
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Indian Laws
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2016 (4) TMI 286
Whether “Ramanjot Singh Dhuri & Company” and “Ramanjot Singh & Company Dhuri” is the one and same firm or different entities - The petitioner is doing business under the name and style of “M/s Ramanjot Singh and Company Dhuri” and a partnership deed was executed in which the petitioner and private respondents are partners and the name and style of partnership business is mentioned as “M/s Ramanjot Singh Dhuri & Company” - Held that:- petitioner had moved application, which is signed by petitioner Ramanjot Singh alone, however, over it three photographs have been annexed which do not bear the signatures of anyone. The photographs have been annexed to indicate that photos of three persons on application means that they are applicants in the application. There is no photo of Ramanjot Singh on the application, only photos are of three persons. On the application signature is only of Ramanjot Singh. Mere affixing photos on the application of three persons do not make them applicants and partners of the applicant. Even on those photos there are no cross signatures nor their names have been mentioned. There is no explanation as to why the photo of actual applicant i.e. Ramanjot Singh has not been annexed. The learned counsel for the respondents failed to explain the purpose of such photos when they have not signed the application. By affixing photos on the application, an attempt appears to have been made to project them as applicants. The said application was given on 23.03.2015 and the partnership deed is of 01.04.2015 meaning thereby there was no partnership existing between the petitioner and private respondents and the licenses have been issued only in pursuance of the application dated 23.03.2015 and the fee was also deposited under the same name and the Income Tax Department account number is also issued in the name of Ramanjot Singh & Company, Respondent No.4 who has been impleaded by name has partnership deed executed between the petitioner and private respondents and the name and style of the partnership firm has been mentioned as “M/s Ramanjot Singh Dhuri & Company” and it apparently appears to be altogether different entity as the applicant is “M/s Ramanjot Singh & Company Dhuri” not “M/s Ramanjot Singh Dhuri & Company”. Whether respondent No.4 could issue a letter to the Senior Superintendent of Police for restraining the petitioner from carrying out its business on the application of private respondents and under what authority he is proceeding to issue such a letter/notice - Held that:- there is no relationship between the Punjab Excise Department and the private respondents. The relationship of the Punjab Excise Department is with “M/s Ramanjot Singh & Company” through Ramanjot Singh sole proprietor. Respondent No.4 in connivance with the private respondents has issued impugned letter to Senior Superintendent of Police for extraneous reasons without any justification against all the settled principles of law and liability which is not sustainable in the eyes of law. The action of respondent No.4 and other officials in supporting the private respondents is against the law and is not sustainable. - Decided in favour of petitioner
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2016 (4) TMI 268
Property sold in auction - confirmation of sale - whether sale certificate issued in the auction of the immoveable property on the orders of the Debts Recovery Tribunal falls within the ambit of compulsory registrable document as per Section 17(4) of the Indian Registration Act, 1908? - Held that:- Sale certificate was issued by the authorized officer, who was neither civil or revenue officer, therefore, the registration of sale certificate was not exempted under Section 17(2)(xii) of the Act and thus it requires registration.
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2016 (4) TMI 267
Recovery proceedings - Auction sale - rejection of application for deferment of the confirmation of sale - Held that:- Immovable property sold in execution of a Recovery Certificate - Held that:- The bid of the highest bidder viz. IPCA Laboratories Ltd. (Respondent No.2) was kept for consideration whereas the other bids were returned. It was also made clear that the sale of the mortgaged property would be concluded only after seeing the order of the Industrial Court. Thereafter, the matter was adjourned to 1st July 2015. It is not in dispute that the bids were accepted by the Recovery Officer on 22nd August, 2005 which is after the date when the order of the injunction granted by the Industrial Court was vacated by it. In these facts, we are unable to agree with the submission of the Petitioners that the Recovery Officer's actions of opening the bids for sale of the mortgaged property was in the teeth of the stay order granted by the Industrial Court and therefore illegal and / or vitiated. As mentioned earlier, on the date when the bids were opened, a copy of the said order of the Industrial Court was not placed before the Recovery officer as is categorically recorded in the roznama. We therefore have no hesitation in rejecting this argument. Whether the sale of the mortgaged property was vitiated on the ground that the Recovery officer had not followed the mandatory provisions of rule 15(2) of Second Schedule to the Income Tax Act, 1961 which inter alia provides that when the sale is adjourned for a period of more than one month, then a fresh proclamation of sale is to be issued? - Held that:- The provisions of rules 60 and 61 are clear and unambiguous. In a nutshell, these rules provide that a defaulter is not allowed to challenge the sale of the immovable property sold in execution of a Recovery Certificate unless an application for setting aside the sale is preferred before the Recovery Officer and the amount sought to be recovered under the Recovery Certificate is deposited with the Recovery Officer. In the facts of the present case, as mentioned earlier, no such application was ever preferred by the Petitioners and no deposit has been made. The reason for the same is not far to see. It is because the Petitioners were aware that before their application to set aside the sale could be entertained by the Recovery Officer, they would be required to deposit the decretal amount. Since they had no intention to deposit the decretal amount, the Petitioners preferred not to challenge the sale of the mortgaged property but instead only made an application for deferment of the confirmation of sale. Having chosen this course of action all throughout, we cannot permit the Petitioners to place reliance on rule 15 and in an indirect fashion challenge the sale and give a complete go-by to the mandatory provisions of rules 60 and 61 of the Second Schedule to the Income Tax Act, 1961. If we were to accept the submissions of the Petitioners, it would effectively mean that the Petitioners are now allowed to challenge the sale of the mortgaged property without complying with the mandatory provisions of rules 60 and 61 and which sale was never challenged till the filing of this Writ Petition. In this view of the matter, we find absolutely no substance Whether Recovery Officer erred in confirming the sale of the mortgaged property under rule 56 of the Second Schedule to the Income Tax Act, 1961 and hence was liable to be set aside - Held that:- It is not in dispute that no application for setting aside the sale was ever preferred by the Petitioners. In this view of the matter, no fault can be found in the actions of the Recovery officer in confirming the sale in favour of the auction purchaser. This is more so, in view of the fact that the application made for deferment of confirmation of sale was filed before the Recovery Officer after the sale had already been confirmed. We must also mention here that the OTS sanctioned by the Respondent – Bank stipulated that the payment of ₹ 3.03 crores had to be made on or before 20th September, 2005. This amount admittedly was not deposited by the aforesaid date and in fact has not been deposited even till date. The facts of this case would clearly reveal that the Petitioners have no intention of paying the dues of the Respondent – Bank and are only seeking to thwart the sale of mortgaged property on one pretext or the other. We therefore find no substance in this argument. Equally, we find that the reliance placed by the Petitioners on a decision of the Supreme Court in the case of Mohan Wahi v/s CIT, Varanasi and others, reported in (2001 (3) TMI 4 - SUPREME Court) is wholly misplaced. The issue before the Supreme Court was whether the Tax Recovery officer could have confirmed the sale on a particular date when in fact the demand for tax for which the property was sold, had ceased to exist. It was in those facts that the observations of the Supreme Court have to be read and understood. In the facts of the present case, admittedly, the dues of the Respondent – Bank have not been satisfied. We therefore have no hesitation in rejecting this argument of the Petitioners. The Respondent – Bank, has on an earlier occasion, sought to settle the dues with the Petitioners without any success. Despite this, the Respondent – Bank once again gave an opportunity to the Petitioners to settle their dues by paying a sum of ₹ 3.03 crores by 20th September, 2005. Admittedly, no payment was made. In these facts, we cannot find any fault with the actions of the Recovery Officer or any of the authorities below in proceeding with the sale of the mortgage property to ensure recovery of the Respondent – Bank's dues. No violation by the Respondent – Bank of the RBI guidelines issued on 3rd September, 2005 mandating all Public Sector Banks to settle the dues of all NPAs below ₹ 10 crores by entering into a One Time Settlement Scheme. We do not read the RBI guidelines to mean that irrespective of the fact that the debtor has already defaulted in making payment of an earlier sanctioned OTS, would still continue to get the benefit of the RBI guidelines indefinitely. In any event, this argument (regarding the OTS being in violation of the RBI guidelines) has been dealt with by the authorities below in great detail and we do not think that the findings of these authorities are in any way perverse and / or arbitrary requiring interference in our extraordinary, equitable and discretionary jurisdiction under Article 226 of the Constitution of India. We therefore do not find any substance in this argument.
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