TMI Tax Updates - e-Newsletter
May 27, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
Income Tax
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Rejection of extension of approval u/s 10(23C)(vi) - original order of approval dated 20.12.2007 still continues to remain in force inspite of the rejection of the assessee's application - HC
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Assessment u/s 147 - period of limitation u/s 153(2) - contention of the Revenue that the limitation will start again only when the order is communicated to the Department thus cannot be accepted - HC
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Tribunal has recorded the categorical finding that no apparent mistake has been committed by the tribunal and no case is made out for rectification - No interference is required - HC
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Penalty u/s 271(1)(c) - assessee has accepted the additions made in the assessment does not by itself justify the imposition of penalty for concealment - AT
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Entitlement for exemption u/s 11 - the placement and distribution of Bible and New Testament is for the benefit of the general public is one of the charitable purposes referred to in S.2(15) - AT
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Deduction u/s 80P(2)(a)(i) - objections of the Revenue that the ‘members’ defined in sub-clause(i) of section 80P(2) should only include voting members would amount to a classification within classification which is beyond the purview of tax statute - AT
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If a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination - AT
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Advances to subsidiary company – Allowability as bad debt – the loss of advance by the assessee company to its 100% subsidiary company is to be allowed as a business loss - AT
Customs
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Duty demand - DEPB Scrips obtained by fraud - Confiscation of goods - No exports, on the basis of which DEPB scrips were issued, had actually taken place - recovery to be made - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (5) TMI 822
Assessment of rental income from property – Income from business or Income from house property – Held that:- Relying upon Universal Plast Ltd. vs. Commissioner of Income-Tax [1999 (3) TMI 15 - SUPREME Court] - both the properties are owned by the assessee - the appellant is carrying on his own business without any break - Only certain portion of two properties in question were let down by the assessee due to certain financial crisis - The properties were business assets and used by the assessee for his own business - the Tribunal was rightly of the view that letting out of the commercial asset was business income - whether a particular letting is a business has to be decided in the circumstances of each case and each case has to be looked into from the businessman's point of view to find out whether letting was the doing of business or exploitation of his property by an owner - letting out was for the purposes of business - the premises City Centre, the Mall, has been taken back by the assessee and further in major portion of the premises assessee is already carrying out his own business - the asessee has rightly show his income as business income – Decided against Revenue. Deletion of disallowance of interest on borrowed capital – Facts not properly appreciated – Held that:- The Tribunal was of the view that the assessee had claimed that the opening balance of advances from the customers was Rs. 36.92 lakhs as on 1.4.1996 - if the assessee has claimed the deduction of interest it has to prove that the borrowed funds have been utilized by it in its business but if part of the interest bearing funds have been diverted to other parties on which no income was being earned, the proportionate interest has to be disallowed - Revenue has to prove that the interest bearing funds have been diverted to other concerns for non-business purposes - the interest free advances with the assessee were far in excess of advances/investment made in purchasing the shares - CIT(A) was rightly appreciated the facts and deleted the addition - interest free advance with the assessee were far in excess to the investment made in purchasing the share, it is proved that borrowed funds have been utilized in business - the order of the Tribunal is upheld – Decided against Revenue.
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2014 (5) TMI 821
Rejection of extension of approval u/s 10(23C)(vi) of the Act – Held that:- Relying upon Family Planning Services Project Agency vs. Union of India and others [2013 (9) TMI 767 - ALLAHABAD HIGH COURT] and CBDT circular No.7 of 2010 has clearly held that it would also be applicable for approval granted under clause (vi) and (via) of the Act - the approval can be withdrawn by the competent authority on certain conditions being satisfied and after giving a reasonable opportunity of show cause to the assessee - the application filed by the petitioner for extension of the approval u/s 10(23C)(vi) of the Act for the AYs 2008-09, 2009-10 and 2010-11 was a redundant application as there was no requirement to apply for extension of the approval as the approval in the case of the assessee was granted after 1.12.2006 on 20.12.2007 - The approval so granted by the Chief Commissioner of Income Tax was a one-time affair, which was to continue till it was withdrawn under the proviso - the order dated 17.3.2009 was otiose having no effect in law - The order only rejects the application for extension of the approval for the AYs 2008-09, 2009-10 and 2010-11 - The original order of approval dated 20.12.2007 still continues to remain in force inspite of the rejection of the assessee's application – thus, the order of the CCIT is set aside – Decided in favour of Assessee.
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2014 (5) TMI 820
Validity of reassessment order u/s 147 - Bar of limitation as per proviso to Explanation 1 to 153(2) of the Act – Held that:- For computing the period of limitation the period during which the assessment proceedings is stayed shall be excluded - the concept of communication of the order of the Court cannot be imported - The exclusion of the period has been provided because of stay or injunction by any Court during which the assessment proceedings are stayed - The intention is clear that when the limitation for assessment has started it can be stayed only by an order or injunction of any Court and as soon as the order or injunction of the Court is vacated, the period of limitation shall re-start since after the vacation of the order of the Court, there is no embargo on the authorities to proceed with the assessment - The contention of the Revenue that the limitation will start again only when the order is communicated to the Department thus cannot be accepted. Explanation 1 (v) and (vi) to Section 153 of the Act, 1961 are also part of the same statutory scheme - In Explanation 1 (v) and (vi) to Section 153 of the Act, 1961 the statutory scheme provides for computing the period of limitation from the date when the order under sub-section (1) of Section 245D and 245Q is received by the Commissioner - the legislature has provided for excluding the period from the date of communication of the order where they so intended - The use of concept of communication of receiving the order in the same provision which is absent in Explanation 1 (ii) concerned clearly indicates that for the purposes of Explanation 1 (ii), the communication of the order of the Court vacating the stay order or injunction is not contemplated - The provisions of Section 153 (3) (ii) of the Act, 1961 are clear and explicit - where the assessment, re-assessment or re-computation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act, the provisions of sub-section (1) (1a) and (1b) of the Act, shall not apply. Where the assessment, re-assessment or re-computation is made on the assessee or any person in consequence of or to give effect to any finding or direction in an order of any Court in a proceeding otherwise than by way of appeal or reference under this Act, the period of limitation as provided under Section 153 (2) of the Act, shall not be attracted - Relying upon Rajinder Nath Vs. Commissioner of Income Tax, Delhi [1979 (8) TMI 3 - SUPREME Court] - In the order dated 01/8/1995, neither there is any finding nor there is any direction which can be relied on by the AO for framing the assessment - There being neither any direction nor any finding within the meaning of Section 153 (3) (ii) of the Act, the contention of the revenue the Revenue that there shall be no limitation for making assessment cannot be accepted – Decided against Revenue.
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2014 (5) TMI 819
Agreement to sell amounts to transfer or not - Whether the Tribunal was justified in holding that the agreement to sell amounts to transfer by virtue of Section 2 (47)(v) and (vi) of the Act – Held that:- The tribunal had given cogent reasons for setting aside the order of CIT(A) – there was no illegality in the tribunal's proceeding to examine the case in the light of Section 2(47) (vi) - All the facts being on record whether transaction is covered by Section 2(47)(v) or 2(47) (vi) was well within the domain of the tribunal – the Tribunal was fully justified in holding that agreement of sale dated 7.9.1991 amounts to transfer of capital assets by virtue of Section 2(47) (vi) of the Act. - Decided against the assessee. Rectification of order – Mistake apparent on record - Assessee relied upon the decision of Apex Court in Honda Siel Power Products Ltd. Vs. Commissioner of Income Tax [2007 (11) TMI 8 - Supreme Court of India] - Held that:- It is well established that no party appearing before the tribunal should suffer on account of mistake committed by the tribunal. In the said case, the tribunal admitted its mistake and rectified the order which order was upheld by the Apex Court. In the present case the tribunal has recorded the categorical finding that no apparent mistake has been committed by the tribunal and no case is made out for rectification. – Decided against the assessee.
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2014 (5) TMI 818
Order of settlement commission - Failure to make full and true disclosure - Interpretation of the receipt – Held that:- Revenue was of the view that the receipt indicates an amount by way of interest whereas the assessee contended that it was not received by way of interest and was the principal amount of loan which was received - the Settlement Commission has taken the view that the amount of ₹ 6.00 crores as mentioned in the receipts were loans taken by assessee payable @1.25% for the period of six months. As to what degree can the Court interfere when two possible interpretations are placed before it with regard to a document which is of vital importance and when one of the interpretations has been accepted by the Settlement Commission – Held that:- Relying upon R.B. Shreeram Durga Prasad v. Settlement Commission & Another [1989 (1) TMI 4 - SUPREME Court] - in the exercise of power of judicial review of a decision of the Settlement Commission, the Court is concerned with the legality of procedure followed and not with the validity of the order - the Supreme Court observed that the High Court ought not to gone into a factual issue while exercising writ jurisdiction and should not have substituted its opinion against the opinion of the Settlement Commission. The scope of review under Article 226 of the Constitution insofar as an order passed by the Settlement Commission u/s 245 D (4) of the Act is concerned, is a very limited one - This Court cannot substitute its view in place of the Settlement Commission particularly on point of interpretation of a particular document - Interference can only be made if there is a fault in the decision making process and not with the decision itself - The interpretation which has been placed by the Settlement Commission on the documents, first of all, results in a finding of fact which cannot be interfered with - the interpretation is not so outlandish to be categorized as arbitrary or perverse so as to call for interference - the interpretation sought to be placed by the Revenue may be a possible interpretation but, so, too, would be the interpretation placed by the Settlement Commission which has also been espoused by the learned counsel for respondent No.1. In such a situation no interference with the Settlement Commission’s order is warranted. - Decided against the revenue.
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2014 (5) TMI 817
Disallowance u/s 37 of the Act - Sale promotion expenses – Held that:- The assessee has not paid any royalty for availing services of BAIL for promotion of its products and the BAIL being pioneers in Pasta, Macroni and other instant food products` in India and they have rendered services to assessee in marketing assessee’s product - BAIL is in the business since 25 years and comparison of assessee to BAIL is not at all feasible – The lower authorities have not brought any record to establish the falsity of the assessee's claim with regard to the services rendered by the marketing agents in question - the matter has to be looked from businessman's point of view and in the absence of any material brought on record, it is not fair and proper to allege diversion of funds by the assessee or question the engagement of marketing agents by the assessee on grounds of commercial expediency - Payment of sales promotion expenses by the assessee to BAIL cannot be doubted and it is to be allowed in toto – the order of the CIT(A) is set aside and the AO is directed to set aside the disallowance made on account of sales promotion expenses paid by the assessee to BAIL – Decided in favour of Assessee.
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2014 (5) TMI 816
Penalty u/s 271(1)(c) of the Act - Addition on account of purchase and sale of various properties – Held that:- The source of income of the assessee is from business of real estate up to the AY 2005-06 and for the AY 2006-07 and 2007-08, the source of income is salary income - It is not that the bona fide belief claimed by the assessee is without any basis - there is a reasonable cause for the non-disclosure of the relevant income by the assessee - it is not a fit case for the levy of penalty on account of concealment u/s 271(1)(c) of the Act - the assessee has accepted the additions made in the assessment does not by itself justify the imposition of penalty for concealment - the amounts involved in the AY 2006-07 and 2007-08 are very meager, there was no justification for the imposition of penalty u/s 271(1)(c) of the Act – the order of the CIT(A) is set aside – Decided in favour of Assessee.
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2014 (5) TMI 815
Entitlement for exemption u/s 11 of the Act – Charitable activities u/s 2(15) of the Act - Revenue contended that the main activity of the assessee was propagation of Christianity by printing of the holy bible and its distribution through various places - Held that:- Just because of the main activity of the assessee, ignoring the other activities of the assessee, it cannot be said that the assessee is merely pursuing a religious activity - this activity cannot disentitle the assessee to the claim for exemption – Relying upon Commissioner of Income-Tax Versus Social Service Centre [2001 (2) TMI 69 - ANDHRA PRADESH High Court] - the placement and distribution of Bible and New Testament is for the benefit of the general public is one of the charitable purposes referred to in S.2(15) of the Act, being ‘advancement of any other object of general public utility’- exemption u/s 11 is available for trusts which are charitable or religious or partly charitable and partly religious - even if the income is earned by trust, which is charitable as well as religious and part of the income is applied for religious purposes, exemption u/s 11(1)(a) is still available - the assessee is entitled to exemption u/s 11 of the Act – Decided against Revenue.
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2014 (5) TMI 814
Disallowance of VSAT charges – Transaction charges paid to stock exchange u/s 40(a)(ia) of the Act – Failure to deduct TDS on composite charges paid for professional and technical service - Held that:- Following CIT vs. Angel Capital & Debit Market Ltd [2014 (5) TMI 584 - BOMBAY HIGH COURT ] - VSAT and lease Line Charges paid by the assessee to Stock Exchange were merely reimbursement of the charges paid / payable by the Stock Exchange to the Department of Telecommunication - the VSAT and Lease Line Charges paid by the assessee do not have any element of income, deducting tax while making such payment do not arise. In Asstt. /Dy. Commr. of Income-tax (LTU) Versus DICGC Ltd. [2012 (4) TMI 240 - ITAT MUMBAI] it was held that both parties has proceeded on the footing that tax was not deductible u/s 194J - the provisions of section 40(a)(ia) could not be invoked - The VSAT and Lease Line Charges are not payments, which come in within the domain of “fees for technical services” and they are also not for “any work” done by the BSE or BSE for the member broker - The stock exchange does not provide any managerial services and the fees paid by the member to the Stock Exchange is not for any technical services rendered – thus, TDS is not required to be made on such payments – there was no infirmity in the order of the CIT(A) – Decided against Revenue.
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2014 (5) TMI 813
Entitlement for deduction u/s 80P(2)(a)(i) of the Act - Society cooperative bank or not – Held that:- Held that:- Following M/s.SL(SPL) 151, Karkudalpatty Primary Agricultural Cooperative Credit Society Ltd. Vs. ITO [2014 (5) TMI 556 - ITAT CHENNAI] - it is evident from the definition of ‘member’ u/s 2(16) that the same includes an ‘associate member’ u/s 2(6) - the ‘nominal’ members also enjoy statutory recognition as per the Act - once the ‘nominal’ members or non-voting members are themselves included in the definition of ‘members’, they satisfy the relevant condition imposed by the legislature u/s 80P(2)(a)(i) - the objections of the Revenue that the ‘members’ defined in sub-clause(i) of section 80P(2) should only include voting members would amount to a classification within classification which is beyond the purview of tax statute; unless provided specifically by the legislature - the assessee is entitled to claim benefit of deduction u/s.80P of the Act – Decided in favour of Assessee.
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2014 (5) TMI 812
Penalty u/s 271(1)(c) of the Act – Disallowance u/s 14A of the Act – Interest on delayed payment – Held that:- The authorities have not recorded any finding that the explanation offered by the assessee before the AO was found to be false – Following COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] – where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty u/s 271(1)(c) - A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - Such a claim made in the return cannot amount to furnishing inaccurate particulars - the sole ground of the assessee is allowed and the penalty order as well as order is set aside – Decided in favour of Assessee.
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2014 (5) TMI 811
Cash credit - Addition made on loan raised – Genuineness of transaction - Held that:- The assessee produced all creditors before the AO and their statements were recorded on oath - The disputed creditors also supported the version of the assessee by filing their affidavits and other documents explaining the source of amount which was provided to the assessee as loan wherein the creditors have duly affirmed the transaction with the assessee - the primary onus on the assessee to prove the nature and source of cash credits was discharged by the assessee and further onus was shifted on the revenue to bring out relevant and cogent material on record for not accepting such cash credit as shown by the assessee - the AO has made a subjective remark about the creditworthiness of the creditors but no positive material has been brought on record by him for not accepting the cash credit shown by the assessee - the assessee has shown source of cash creditors and the creditors came forward to the desk of the Assessing Officer to support the version of the assessee by way of giving statement of oath and also submitted the affidavits and other relevant documents, explaining the circumstances and source of amount given to the assessee as loan – revenue has not brought any relevant or cogent material to establish any doubt about the truthfulness of the creditors - the addition made cannot be sustained – Decided in favour of Assessee.
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2014 (5) TMI 810
Cancellation of penalty u/s 271C of the Act – Payment made for services rendered - Liability to deduct TDS u/s 194J of the Act on rent paid for hiring crane – Held that:- Following M/s Oil India Limited Versus Dy. CIT. (TDS), Jodhpur [2013 (11) TMI 1237 - ITAT JODHPUR] - the very basis for levying the tax liability does not exist anymore and as such the penalty imposed by the AO itself becomes infructuous – the penalty u/s 271C of the Act was not leviable and the CIT(A) was fully justified in setting aside - there was no reason to interfere in the order of the CIT(A) – Decided against Revenue.
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2014 (5) TMI 809
Disallowance u/s 40(a)(ia) of the Act – Non-deduction of TDS u/s 194C(1) of the Act – Held that:- Following Commissioner of Income-tax Versus Hatish Ramanlal Patel [2013 (8) TMI 241 - GUJARAT HIGH COURT] - where no individual payment made to any subcontractor exceeded Rs.20,000 at a time nor total payments to an individual exceeded Rs.50,000 in a year, no TDS liability would arise u/s 194C - the assessee had produced copy of the accounts of carting paid during the year - the AO without discarding such stand of the assessee, proceeded to make disallowance u/s 40(a)(ia) of the Act on the premise that tax was not deducted at source - the assessee is not liable to deduct TDS u/s. 194C(1) of the Act, invocation of provision of section 40(a)(ia) of the Act is against the provisions of law – the order of the CIT(A) is upheld – Decided against Revenue.
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2014 (5) TMI 808
Reopening of assessment u/s 147 of the Act - Addition u/s 68 of the Act – Unexplained cash credits - Held that:- In the previous case of the same assessee it has been held that the reopening of assessment u/s. 147 of the Act and also the consequent assessment framed u/s. 147/143(3) of the Act are invalid - after the reassessment proceedings have been held invalid, whatever follows thereafter must also necessarily be invalid and none of the additions can be sustained – Relying upon Rawatmal Harakchand vs. CIT [1978 (3) TMI 10 - CALCUTTA High Court] – Decided against Revenue.
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2014 (5) TMI 807
Disallowance of broken period interest – Held that:- The Tribunal has reversed the finding of the CIT(A) - the AO is directed to delete the addition made on account of broken period interest – Decided in favour of Assessee. Disallowance of depreciation on leased assets – Held that:- The entire claim has been declined solely on the basis of the statement recorded at the time of the search - the Assessee was never allowed any opportunity of cross-examination - right to cross-examine the witness who made adverse report, is not an invariable attribute of the requirement of the dictum, ‘audi alteram partem’ - The principles of natural justice do not require formal cross-examination - Formal cross examination is a part of procedural justice - It is governed by the rules of evidence, and is the creation of Court - It is part of legal and statutory justice, and not a part of natural justice - it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross-examination - if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination - The finding of CIT(A) is based on incorrect understanding of the law - the issue needs to be decided in the light of the principles of natural justice – thus, the matter relating to the transactions with M/s. Rajendra Steels Ltd. is remitted back to the AO – Decided in favour of Assessee.
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2014 (5) TMI 806
Deletion of claim of expenses - Amortization of premium on investment – Held that:- The AO from the P&L account of bank, observed that an amount was debited under the head Investment Premium Amortization - Following ACIT Vs. Bank of Rajasthan Ltd. [2010 (12) TMI 894 - ITAT, Mumbai] - in the case of bank premium paid in excess of the face value of investments classified under HTM category which has been amortized over a period till maturity is allowable as revenue expenditure since the claim is as per RBI guidelines and CBDT has also directed to allow the said premium - instruction and guidelines issued by the CBDT and RBI, amortization of premium paid on government securities is allowable expenditure - CIT(A) was justified in deleting the disallowance – Decided against Revenue. Disallowance of expenses claimed under education fund – Held that:- The assessee is a cooperative bank, has paid contribution to the Education Fund of State Government as per guidelines of Commission of Cooperative Department - The contribution fund is mandatory on the part of every cooperative bank registered in the State of Maharashtra - The assessee has demonstrated that as per Cooperative Society Act, any order or instruction issued by the Govt. of Maharashtra is mandatory on the part of cooperative society / cooperative bank - the bank has to work under the control of Commissioner of Cooperation, Maharashtra - the order issued by the Commissioner is obligatory on the bank - CIT(A) rightly held that the contribution paid by bank is a business expenditure wholly exclusively incurred for the purpose of business and accordingly, allowable u/s.37(1) of the Act – the reasoned finding of CIT(A) has deleted the addition made on account of contribution to the Education Fund – Decided against Revenue.
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2014 (5) TMI 805
Deletion of advances to subsidiary company – Allowability as bad debt – Held that:- M/s. AIR Engineering Co. is a 100% subsidiary of the assessee - a holding company has a deep interest in its subsidiary therefore if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purpose, money has been advanced to sister concern for commercial expediency - The AO has not doubted the genuineness of the loss but has simply disallowed holding that it is not an allowable revenue expenditure as well as bad debt – Relying upon Turner Morrison And Co. Ltd. Versus Commissioner Of Income-Tax [2000 (3) TMI 34 - CALCUTTA High Court] - claim of advance given on interest on being written off has been allowed as a bad debt u/s. 36 of the Act - the loss of advance by the assessee company to its 100% subsidiary company is to be allowed as a business loss – there was no error or infirmity in the order of the CIT(A) – Decided against Revenue. Deletion of interest – Held that:- The AO has not demonstrated that the assessee has advanced money out of its borrowed capital - the assessee was having its own capital with Reserves and Surplus aggregating to Rs. 656.42 lakhs - The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - the assessee was charging interest on advance to AIR Engineering Co. in past year which was assessed as business income in the hands of the assessee which has been brought to our notice that similar additions were deleted by the CIT(A) in A.Y. 2009-10 and the Revenue has accepted the order of the CIT(A) - the advances are coming from earlier years – revenue could not show sum advance which was given fresh during the year under consideration nor it has been mentioned in the assessment order – there was no reason to interfere with the findings of the CIT(A) – Decided against Revenue.
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2014 (5) TMI 804
Disallowance of entertainment expenses – Held that:- The assessee has kept and furnished the details of entertainment expenses - he has perused the details of the entertainment expenses and the copies of the bills in support of the expenses - neither the AO nor the CIT(A) has pointed out any defect in the details/bills/vouchers presented before them in support of the claim - the assessee has hived off its advertisement business during the current year - The business has been hived off some 8 years ago - The findings of the CIT(A) appear to be on the wrong appreciation of fact – the AO is directed to delete the entire addition made on account of entertainment expenses – Decided in favour of Assessee. Disallowance of write off of deposits with MTNL – Held that:- The deposits were given to MTNL in the ordinary course of business - the CIT(A) has given a finding that the assessee itself has disallowed Rs. 78,000/- which was claimed by it being outstanding amount of telephone bills adjusted by MTNL from the refund - the deposits were given in the ordinary course of business, the write off deserves to be allowed as business expenditure – Decided in favour of Assessee. Disallowance of deduction of society charges – Held that:- Following The Commissioner of Income-Tax-V Versus RJ. Wood Pvt. Ltd [2011 (1) TMI 889 - DELHI HIGH COURT] - the maintenance and other charges paid by the assessee were deductible from the rent while computing the annual letting value - in the absence of any contrary decision on record by the Revenue, the society charges paid by the assessee in respect of the let out property are allowable while computing the annual letting value of the property – the AO is directed to allow the claim of society charges by the assessee – Decided in favour of Assessee. Disallowance of deduction of Municipal taxes – Held that:- The Municipal taxes are allowable deduction while computing the annual letting out value – the matter is remitted back to the AO for fresh adjudication after verifying the payment of Municipal Taxes – Decided in favour of Assessee.
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Customs
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2014 (5) TMI 828
Duty demand - DEPB Scrips - Confiscation of goods - Redemption fine - Whether the Respondents are liable to pay duty that was saved by them as a result of using the DEPB scrips - Held that:- When the Assessee acquired DEPB scrips from market without being an original acquirer, as an abundant caution, to avoid evil consequence of fraudulently obtained scrips, could have safeguarded its interest causing enquiry from JDGFT as to genuineness of the scrips. But that was not done. The appellant failed to acquire no title over the scrips but became beneficiary of ill got scrips. Notificational benefit was availed at the cost of public exchequer which is required to be surrendered for the undue gain made. Bona fides was not established by the appellant failing to cause enquiry from JDGFT. When such bona fide is not established the appellant shall not avail the benefit - there is no evidence to show that the Respondents had made any inquiries with the DGFT authorities who had issued the scrips so as to prove their bona fide - order of the Commissioner (Appeals) is not sustainable and the Appeal of the Revenue has to be allowed so far as recovery of duty is concerned. No exports, on the basis of which DEPB scrips were issued, had actually taken place and there was no entitlement to DEPB benefit even to the party to which the DEPB scrip was originally issued on the basis of forged documents. The Revenue, therefore, cannot be made to suffer the consequence of a transaction where no exports actually took place and duty entitlement was secured on the basis of forged documents - Decided partly in favour of assessee.
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2014 (5) TMI 827
Denial of benefit of Notification No. 93/2004 - Diversion of material - violation of the conditions of Notification No. 93/2004 - Held that:- It is a fact on record that in this case diversion of the material to their own unit took place in June, 2008 and the Notification was amended on 16-7-2008. The effect of the Notification is to be given prospectively and not retrospectively. Therefore, the demand on the basis of amended Notification is not sustainable against the appellant - Decided in favour of assessee.
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2014 (5) TMI 826
Refund of pre deposit - Unjust enrichment - Bar of limitation - Held that:- doctrine of unjust enrichment would come into operation only subsequent to the stage the refund claim is held to be sanctionable. Furthermore, the doctrine of unjust enrichment cannot be a ground for rejecting the refund claim. Undisputedly, the assessments were provisional in this case and they were finalised on 9-1-2007 after various rounds of litigation. As per Rule 18(2) of the Customs Act, 1962, the date of final assessment cannot be taken as 1996 when the first Order-in-Original was passed since the same was under challenge which was finally resolved by the Commissioner (Appeals) vide order dated 9-1-2007 whereby he finally upheld the case in favour of the appellant, which has not been challenged by the department. Under these circumstances, refund of pre-deposit cannot be held to be time bar. There is no other ground for rejecting the refund of pre-deposit. Therefore, we find that the same is sanctionable, so far as unjust enrichment is concerned. The period involved is prior to 2006 - Decided in favour of assessee.
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Corporate Laws
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2014 (5) TMI 825
Scope of Companies Act, 2013 - Elimination of all meetings except those required in certain limited circumstances - whether in view of the provisions of Section 110 of the Companies Act, 2013 and SEBI Circular dated 21st May 2013, a resolution for approval of a Scheme of Amalgamation can be passed by a majority of the equity shareholders casting their votes by postal ballot, which includes voting by electronic means, in complete substitution of an actual meeting - Held that:- Section 110 is an evolution of old Section 192A. Where old Section 192A contain a non-obstante clause relating to the "foregoing" sections of the 1956 Act, i.e., sections before old Section 192A, Section 110 of the 2013 Act contains a broad and omnibus non-obstante clause. The frame of Section 110 of the 2013 Act is that for such items of business as the Central Government notifies, a company must transact that business only by postal ballot. A clue as to what is intended by this clause, Section 110 (1)(a) of the 2013 Act is to be found in Rule 22 of the Companies (Management and Administration) Rules, 2014. As presently advised, these Rules are yet to be gazetted; this is another matter on which I will comment a little later. Absent evidence of any such gazette notification, they are referred to here only for such interpretive value as they might have. Rule 22(xvi) contains a very long list of ten items of business that, apparently, are intended to be transacted only by means of a postal ballot. All provisions for compulsory voting by postal ballot and by electronic voting to the exclusion of an actual meeting cannot and do not apply to court-convened meetings. At such meetings, provision must be made for postal ballots and electronic voting, in addition to an actual meeting. Electronic voting must also be made available at the venue of the meeting. Any shareholder who has cast his vote by postal ballot or by electronic voting from a remote location (other than the venue of the meeting) shall not be entitled to vote at the meeting. He or she may, however, attend the meeting and participate in those proceedings. The effect, interpretation and implication of the provisions of the Companies Act, 2013 and the relevant SEBI circulars and notifications, to the extent that they mandate a compulsory or even optional conduct of certain items of business by postal ballot (which includes electronic voting) to the exclusion of an actual meeting are matters that require a fuller consideration. The Central Government, through the Additional Solicitor-General, and SEBI will both need to be heard. The Company Registrar shall send an authenticated copy of this order to both the learned Additional Solicitor General and to SEBI requesting them to appear before the Court when this matter is next taken up for a consideration of this issue. On a prima-facie view that the elimination of all shareholder participation at an actual meeting is anathema to some of the most vital of shareholders' rights, it is strongly recommended that till this issue is fully heard and decided, no authority or any company should insist upon such a postal-ballot-only meeting to the exclusion of an actual meeting. Since this is evidently a matter of some importance, the Company Registrar is directed to make a submission and obtain necessary directions on the administrative side to have the matter placed before an appropriate Bench. At such a hearing, further safeguards can also be evolved. For instance, it is entirely possible to have a Company Scheme Petition, one that follows an order on and compliance with a Company Summons for Direction, uploaded to the case status system of this Court. All such Company Scheme Petitions must have appended to them the report of the Chairman of the court-convened meeting and the scrutineers' report. Making the petition available in its full form on a free and publicly accessible website such as the High Court, in addition to reports now being uploaded to the websites of the company and the stock exchanges would go a long way to ensuring the necessary information spread. Till such time as these rules are gazetted, or there is some provision made for the dispensation of official gazette notification, none of the rules in the Ministry of Corporate Affairs PDF document that are not yet gazetted can be said to be in force.
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FEMA
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2014 (5) TMI 824
Violation of Section 8 (1) of the Foreign Exchange Regulation Act, 1973 - allegation that appellant has exported the goods "only for availing export benefits" - levy of penalty - Held that:- From the inquiries purportedly made by CGI, Dubai, as reflected in the correspondence between it and the DRI, the consignment was probably not cleared by APL since there were legal problems regarding the copyright raised by the Dubai Customs. Interestingly, in the "brief investigation report", enclosed with the letter dated 12th April 2002 written by DRI to the ED, it was admitted that in order to establish that money laundering was the main motive behind the whole exercise of export "it is necessary to have on hand the export products, i.e., the cassettes." The report noted that "we do not have any representative sample of the export product and it is also not possible to get a representative sample of the export that is more than one and half year old." It was, therefore, stated that it may not be possible to establish a case of export of sub-standard goods and/or goods not matching the exact description. The report concluded that the non-clearance of goods "gives rise to doubts that the transaction may not be genuine and this indicates that there may be violations of provisions of FERA/FEMA." What is clear from the document is that there were only doubts being expressed and there was no evidence as such to back the suspicion. The AT misdirected itself in shifting the burden of proof of suspicion to the Appellants by invoking Section 106 of the Evidence Act.The reasons for APL not lifting the consignment can, by no stretch of imagination, be said to be within the "exclusive knowledge" of the Appellants. APL was a different legal entity based in Sharjah, UAE. Inquiries could have easily been made with APL itself as to why it did not lift the consignment. The major premise of the entire proceedings was that through non-banking channels NIL paid a sum of ₹ 35,92,512 to APL. There was absolutely no evidence of any kind to back this allegation. In the absence of proof of the above alleged transaction, it could not have been concluded by the AT that NIL had improperly received USD 83,160 and thereby contravened Section 8 (1) FERA. Suspicion in this case was allowed to replace proof and this resulted in an erroneous order being passed by the AT. - Order set aside - Decided in favour of assessee.
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Service Tax
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2014 (5) TMI 841
Availment of inputs credit - Service tax paid on mining, survey and map makings services availed in the appellants mines located away from the factory premises, for excavation of lignite - Held that:- appellant has placed on record the evidence showing that the amount in question were captive mines, having been specifically allocated to them but the lower authorities have not verified the said aspect - Following decision of Vikram Cement vs. CCE, Indore [2006 (2) TMI 1 - Supreme court] as also Madras High Court decision in the case of Deepak Fertilizers & Petrochemicals Corpn. Ltd. vs. CCE, Belapur [2013 (4) TMI 44 - BOMBAY HIGH COURT] - Matter remanded back - Decided in favour of assessee.
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2014 (5) TMI 840
Denial of refund claim - Service received prior to date of registration - export of services - Held that:- Rule 4 of Service tax Rules prescribing registration does not apply to person subject to service tax levy but applies to ‘person liable for paying the service tax’. Appellant was not liable to pay tax and did not take registration. The Department has not been insisting on taking of registration by units, like the appellant, exporting their services fully. So prima facie it appears that units fully exporting their services do not have to take service tax registration. In the case of the appellant a need to take registration arose only when the appellant decided to claim refund. The Hon. Karnataka High Court and the Tribunal has already given two final orders, to the effect that refund under Rule 5 of CENVAT Credit Rules cannot be denied for input services received prior to the date of registration. We note that the department has not raised any matter challenging the receipt of the service, tax payment on such service and export of output services rendered using such input service. So at this stay stage, we do not find any reason to depart from these decisions and deny the benefit of refund of incidence of tax on export activity - Stay denied.
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2014 (5) TMI 839
Demand of service tax - Business Support services - Consideration received for playing match - In the contracts between the IPL on the one hand and ISPL and ESPL on the other hand, the applicant had certain obligation to promote the brand name of ISPL/IPL and ESPL/ICL. However no separate payment made for promoting the brand name of the leagues and its franchisees - Held that:- Prima facie, it appears that the service tax demand is on the entire consideration received by the player which includes consideration for match fee for playing cricket. Nothing has been specifically brought on record to say that he has actually received consideration endorsement/advertisement/marketing of any goods as part of the contractual agreement though such clauses are seen in the agreement. We further note that ‘Business Support Service’ by definition is not very explicit and some amount of haziness exists in the scope of the entry. In such a situation, when the activity gets covered by another entry for taxing the activity subsequently the Tribunal has held that for the period prior to enactment of the new entry the service was not taxable. By this logic, it appears that consideration received by the applicant was not towards, ‘Business Support Service’. Prima facie, we feel that the applicant has made out a case for waiver of pre-deposit for admission of appeal - Stay granted.
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2014 (5) TMI 838
Waiver of pre deposit - Information Technology Service - whether the service of this type is one of "Man-power Supply Service" or "Information Technology Service" has to be examined with reference to each of the contracts - Held that:- There are about 20 such contracts involved in this demand. On a preliminary scrutiny, we find both types of contracts. In one type the receiver of service were organisations like banks which hire services of others to develop software or certain modifications software and the agreement specified tasks for development of software and the billing also was in terms of the completed part of the development project. The other type agreements suggest that the service provided is of "Man-power Supply" service, which is evident from bills raised on man-month basis and also from the fact that the receiver of service was also a software developer which would imply that the applicant could not have been developing the software - Conditional stay granted.
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Central Excise
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2014 (5) TMI 835
Denial of CENVAT Credit - Nexus between the services availed and the manufacturing operations undertaken - Held that:- costs of various services availed forms part of the assessable value of the goods manufactured and sold by the appellant. Therefore, there is no reason to deny Cenvat Credit of the duty/taxes paid on the various inputs/input services availed by the appellant for undertaking their business operations. The appellant has also furnished Cost Accountant's certificates certifying the above. For any reason, if the department does not want to place reliance on these certificates, under Section 14AA of the Central Excise Act, they can conduct special audit where the credit of duty availed of or utilised is not within the normal limits or such credit has been availed by reason of fraud, collusion or any willful mis-statement or suppression of facts. - The department has not invoked these powers available to it - Therefore, matter remanded back - Decided in favour of assesee.
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2014 (5) TMI 834
Duty demand - Penalty - Shortage in stock - Commissioner (Appeals) set aside the impugned order of the original adjudicating authority on the ground that the verification report is not correct in as much as the same relates to various varieties of nuts and bolts manufactured by the respondents, whereas, they were maintaining single consolidated RGI register without recording the production on variety-wise basis - Held that:- Revenue’s entire case is based upon the allegedly detected shortages by the visiting officers read with the statement of the proprietor. The assessee is manufacturing different varieties of nuts and bolts and is maintaining only one consolidated RGI register in respect of all the varieties. As such, it is not only difficult, but impossible for the visiting officers to detect the shortages on variety-wise basis. It is not explained as to how the alleged shortages were detected by the officers, without even preparing any inventories. Apart from the said shortages, there is virtually no other evidence to show the clandestine manufacture and removal of the goods by the respondents. The Revenues reliance on the statement of Shri Amrik Singh, given before the visiting officers accepting the shortages and clandestine removal, cannot be pressed into services, in the absence of any independent corroborative evidence. Further, the contention of the respondents is that their production is mainly exported and the indigenous clearances are only to the industrial units is to be accepted in the absence of any contrary evidence to that effect. If that be so, the statement of the proprietor, deposing that the goods were sold in the open market to independent buyers cannot be held to be correct reflection - Decided against Revenue.
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2014 (5) TMI 833
Irregular CENVAT Credit - Applicant availed irregular credit of CENVAT on various inputs which they never received physically in their factory premises and utilized the said irregular credit for payment of duty on the finished goods clerared by them - Held that:- out of total purported clearances of 123 consignments involving Rs.16,43,12,296/, 16 consignments involving Rs.9,80,55,155 (nearly 60%) were purportedly transported to Chattisgarh, Raipur and Orissa. On enquiry with the Check Post authorities, no such consignments crossed the said Checkgate and the stamp put on impugned challans were found fake and not signed by any officer of the Commercial Tax Department. Further M/s.Essel Transport purportedly transported 14 consignments valued at Rs.7,50,26,665/- (approx.) to consignees in Chattisgarh and Orissa, but on enquiry M/s.Essel Transport was found to be a bogus firm. From the facts and circumstances of the case narrated above that the issue involved relates of appreciation of evidences produced by both sides which can be taken up at the time of disposal of their appeals. However, at this juncture , keeping in view the above facts, prima facie, we are of the opinion that the Applicants have not been able to make a case for full waiver of pre-deposit of duty and penalty. In these circumstances keeping in view the interest of Revenue and principle of law settled by Hon’ble Supreme Court and High Courts in disposal of the Stay Applications, we feel it appropriate to direct the Applicant to deposit 25% of the duty confirmed against them within 8(eight) weeks - Conditional stay granted.
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2014 (5) TMI 832
Extension of Stay Order - 180 days has already lapsed from the date of stay order - Held that:- In the context of insertion of sub-section (2A) of Section 35C of the Act provided that if such appeal is not disposed of within the period specified in the first proviso, the stay order shall on the expiry of that period, stand vacated, observed that sub-section which was introduced in terrorem cannot be construed as punishing the assessees for matters which may be completely beyond their control. In the present case, appeal was not disposed of within the stipulated period as specified in section 35C and therefore vacating the stay order amounts to punishing the assessee - Following the judgement of the Hon'ble Supreme Court in the case of CCE Ahmedabad Vs Kumar Cotton Mills Pvt. Ltd. [2005 (1) TMI 114 - SUPREME COURT OF INDIA] - Stay extended
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2014 (5) TMI 831
Penalty imposed u/s 11AC - Duty demand - suppression/mis-declaration of assessable value of the excisable goods - cylinder maintenance charges - Held that:- facts of inclusion of cylinder rental charges, cylinder maintenance charges and Acetone, were not at all disclosed by the appellant in the facts disclosed during the course of their filing of the return in Form RT-12. Not only in the said returns but also later on, when questioned on the basis of the audit undertaken by the audit team of AG Rajasthan, the assessee went on denying the said facts and as observed by the AO, after much persuasion, came with the figures from the books of accounts. The said charges were within special knowledge of the appellant and if two views were possible, as claimed by the appellant, then, at least, it could have disclosed the figures and could have put a note that in view of the view, favourable to the assessee, the said amount is not required to be included and thus no duty is leviable on such amount collected by the appellant. Duty demand has been upheld only on the amounts being collected as Cylinder Maintenance Charges which are the cost of Acetone used for dissolving Acetylene gas and since from the records of the case it is clear that the appellant had suppressed the fact that in case of Acetylene, the bulk of the amount collected as “cylinder maintenance charges” was the cost of Acetone and therefore, there was no infirmity in imposing of penalty and sustaining the same by the CESTAT. The aforesaid penalty has been levied after analyzing the facts on record and is on the material based on appreciation of the facts on record and in our view, the said cannot be said to be involving a substantial question of law much less a substantial question of law - Decided against assessee.
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2014 (5) TMI 830
Waiver of pre deposit - Undue hardship - Held that:- adjudicating authority has in its order confirmed duty demands totalling into Rs. 27,59,95,034/-. Such order of the adjudicating authority is in appeal before the Tribunal. Various issues have been raised before the Tribunal. Pending the appeal, some of these issues were considered for the purpose of examining whether the petitioners have made out a strong prima facie case as to waive the entire pre-deposit. - before the Tribunal, petitioner has not been able to show any case of financia1 hardship as to waive the entire pre-deposit requirement. Tribunal otherwise also noted that financial condition of the petitioner cannot be stated to be such as would permit waiver of the entire pre-deposit unconditionally. Before us, also no submissions were made on behalf of the petitioner to contend that looked from the financial angle, the conditions imposed by the Tribunal are unjust and not possible for the petitioners to weigh Insofar as the question of extended period of limitation and penalties are concerned, petitioners have made out a strong prima facie case. It may be that the petitioners were required to pay certain excise duty which according to the Department was payable but not paid. That by itself would not ipso-facto amount to any fraud, collusion or any wilful misstatement or suppressing of fact with a view to evading payment of duty. - Pre deposit order modified to the extent of reduction in amount - Decided partly in favour of assessee.
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2014 (5) TMI 829
Interest u/s 11AB - Penalty u/s 11AC - whether the assessee would be absolved from the liability to pay interest and penalty in view of their payment of differential duty before the issuance of show cause notice - Held that:- - Held that:- Section 11AB deals with interest on delayed payment of duty. Similarly Section 11AC deals with penalty for short-levy or non-levy of duty in certain cases. Both these provisions indicate that in case the duty has not been levied or paid or has been short levied or short paid or erroneously refunded by reasons of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of the Central Excise Act or the Rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty shall also be liable to pay penalty equal to the duty so determined. The assessee is also liable to pay interest for the period in question. When the assessee is having the benefit of payment of penalty at 25% of the duty determined, in case the duty is paid within a period of thirty days after the issuance of show cause notice, it is beyond logic as to why they should not be given the indulgence to pay penalty at 25%. The prompt payment of duty after pointing out suppression and before issuance of show cause notice cannot be taken as a negative factor against the assessee to claim penalty at 100%. In case the penalty is paid even before issuance of show cause notice, necessarily, the assessee should be given the benefits of the first proviso to Section 11AC of the Act - Penalty reduced to 25% - Decided partly in favour of Revenue.
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CST, VAT & Sales Tax
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2014 (5) TMI 837
Denial of exemption or remission in disregard of s. 36 (3) (a) - Failure to produce evidences - Violation of principle of natural justice - whether the items mentioned in the proforma invoices were already covered by the said invoice Nos.001 and 002 - Held that:- The appellant's explanation for proforma invoice Nos.1 to 114 require consideration in the light of the evidence already on record. The order of the Tribunal notes that an opportunity had also been given by the Tribunal to reconcile the statement, but that the appellant had not availed the same. - If they were, the appellant would not be liable under the proforma invoice Nos.1 to 114 - The appellant has admittedly paid the entire tax along with penalty and interest. The revenue is therefore, entirely protected. In the facts and circumstances of this case, the appellant ought to be afforded an opportunity of establishing its case for a refund - Order set aside - Matter remanded back - Decided in favour of assessee.
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2014 (5) TMI 836
Entertainment of additional evidence - Whether Tribunal is right in dismissing the appeal without considering the objection filed by the Department w.r.t. admissibility of new records before the Appellate Assistant Commissioner (CT) which is violation u/s 39-B(2) of the Tamil Nadu General Sales Tax Act, 1959 – Held that:- Judgment in State of Tamil Nadu v. Shah Moolchand Kasthurchand and Another [2009 (10) TMI 826 - MADRAS HIGH COURT] followed - Certain documents which were produced, considered and taken into account by the Appellate Assistant Commissioner while the appeal was heard were not produced by the assessee before the AO - Tribunal, without answering the said issue had proceeded to decide the appeal on merits and ultimately dismissed the appeal - A reading of the Appellate Assistant Commissioner's order does not indicate of any consideration with regard to application of the provisions of Section 39B(2) - The documents produced by the assessee before the Appellate Assistant Commissioner should not have been relied upon - Since Tribunal has also not considered the issue and there is no answer - Both the orders the Appellate AC and Tribunal set aside – Decided in favour of Revenue.
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Indian Laws
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2014 (5) TMI 823
Condonation of delay - Held that:- It is the right time to inform all the government bodies, their agencies and instrumentalities that unless they have reasonable and acceptable explanation for the delay and there was bona fide effort, there is no need to accept the usual explanation that the file was kept pending for process. The government departments are under a special obligation to ensure that they perform their duties with diligence and commitment. Condonation of delay is an exception and should not be used as an anticipated benefit for the Government Departments. The law shelters everyone under the same light and should not be swirled for the benefit of a few. - there was no proper explanation offered by the Department for the delay except mentioning of various dates, according to us, the Department has miserably failed to give any acceptable and cogent reasons sufficient to condone such a huge delay - Condonation denied.
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