TMI Tax Updates - e-Newsletter
May 1, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Disallowance of businesses expenditure - previous year begins from the date of setting up of the business. Therefore, it is only after the business is set up that the previous year of that business commences and in that previous year the expenses incurred in the business can be claimed as permissible deductions. - HC
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Income Tax:
Hundi Discounting charges - interest paid for the purpose of or in the course of carrying on business is allowable in the year in which the liability arose. - HC
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Income Tax:
Rectification of mistake - Merely because the assessee has challenged the order of the Tribunal in an Appeal under section 260A of the Income Tax Act, 1961 before the High Court does not mean that the power under section (2) of section 254 cannot be invoked either by the assessee or by the revenue/Assessing Officer - HC
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Income Tax:
Reopening of assessment - non deduction of tds on payment credit to foreign companies, on account of ‘software services‘ - there remained no omission or failure on the part of the assessee to disclose truly and fully all material facts - reassessment proceedings set aside - HC
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Income Tax:
Unexplained investment - Treatment to the bottles of liquor - Tribunal treating the bottles of liquor, a consumable article, as a 'valuable article or thing' - occasional social as well as official gifts can not be ruled out - additions deleted - HC
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Income Tax:
Charitable purpose - Non applicability of section 2(15) - whether advancement of any other object of general public utility shall not be a charitable purpose? - occasional sales or the trust's own fund generation are for furthering the objects but not indicative of trade, commerce or business - HC
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Income Tax:
Commercial expediency - whether the amount paid by the assessee in terms of the decree passed by the Bombay High Court falls within the words 'commercial expediency' - the said expenditure falls within Section 37 of the Act - HC
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Income Tax:
Assessment u/s 158BD - section 158BD enables assessment of any person, other than the searched person.section 158BC prescribes the procedure for making block assessment of the searched person and section 158BD enables assessment of any person, other than the searched person. - HC
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Income Tax:
Disallowing the claim of the assessee as 'slump sale' - No evidence on records to show entries regarding transfers of current assets & liabilities - evidence brought on record does not clearly suggest that this is ’slump sale’ - matter remanded back - AT
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Customs:
Refund claim - Reassessment - assessee having not challenged the order of assessment, cannot at a belated stage, claim refund by pressing into service another Notification- HC
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Service Tax:
Scope of Continental Shelf and Exclusive Economic Zone of India for the purpose of service tax - Legislative intent - prospecting mineral oil - the activity was not taxable befre 2010 Notification came into effect - HC
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Service Tax:
Valuation - Commercial Coaching or Training Service - Students make 100% payment to M/s Aptech Ltd. - Assessee gets only 80% of such fees and discharge service tax on 80% - Whether appellant is required to discharge service tax liability on an amount which represents 20% as retained by M/s. Aptech Ltd. - Held No - AT
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Service Tax:
Penalty u/s 78 - non-discharge of service tax liability is not due to ulterior motive but due to financial difficulties that was faced by the appellant. In our view it is a fit case for us to invoke the provisions of Section 80 - penalty waived - AT
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Service Tax:
Manufacturing activity or Packaging Services - activities of bottling, labelling, affixing the hologram stickers and sealing of glass bottles of country liquor - for a manufacturer of goods, packing them (prior to their clearance) is a process of manufacture and not provision of service - AT
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Central Excise:
Prosecution proceedings may continue ever where demand of duty was set aside on the ground of period of limitation since there is no limitation period for initiation of prosecution proceedings - HC
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Central Excise:
Whether the Hon'ble Tribunal has jurisdiction to put a condition of depositing an amount while remanding the issue back to the Commissioner - Held Yes, tribunal has the jurisdiction but the same can be done only in a judicious manner - HC
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Central Excise:
CENVAT Credit - Bogus invoices - entire investigation was conducted under impression that it is not commercially viable for any manufacturer to manufacture copper scraps out of copper ingots/ wires/ bars - the contention of the Adjudicating authority on this issue cannot be accepted - AT
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Central Excise:
Cenvat Credit - Bogus invoices - Burden of proof - When material evidence are on record then the burden of not receiving the goods by the appellant shifts on the revenue which revenue failed to do so. - AT
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Central Excise:
Denial of refund claim - Unjust enrichment - while granting discount to their customers, the appellant included the prices reduction plus duty component and same has been ignored by the lower authorities while examining their refund claim - refund allowed - AT
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Central Excise:
Clandestine removal of goods - Merely on the basis of the entries in the notebook recovered from Shri Manoj Gupta under the heading of Kimti coupled with his statement, it cannot be concluded that those entries represent clandestine clearances of the consignments of Kimti Brand Gutkha by RPPL and on this basis duty demand of ₹ 57,51,000/- cannot be confirmed against RPPL. - AT
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VAT:
Refusal to grant registration certificate - GVAT - on apprehension and that too on the basis of some other dealers indulging into the bogus billing activities, registration certificate cannot be denied to the respondent - dealer. - HC
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VAT:
Classification - Processed vegetables namely, Vegit-Aloo hara bara kebab, vegit aloo veg cutlet, vegit aloo yummy cheese balls, vegit mazedar bonda and vegit aloo jatpat tikki, falls under the residuary entry, liable to be taxed at a higher rate under KVAT - HC
Articles
Circulars / Instructions / Orders
News
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Amendments to Finance Bill, 2015 - Govt withdraws PDMA, RBI Bill provisions from Finance Bill
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First meeting of Chief Ministers Sub-Group on Swachh Bharat Abhiyaan at NITI Aayog on 30th April, 2015
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Index of Eight Core Industries (Base: 2004-05=100), March, 2015
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Prime Minister to Launch Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) AND The Atal Pension Yojana (APY) on 9th May 2015 at Kolkata
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India and Japan Sign Action Agenda for India-Japan Investment and Trade Promotion and Asia-Pacific Economic Integration
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Non-submission of mandatory Annual Returns (FC-6) for 2009-2010, 2010-2011 and 2011-2012 by associations registered under FCRA 2010
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15th Meeting of the FSDC Sub-Committee – Mumbai
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RBI Reference Rate for US $
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Export Made Through EOUs
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Introduction of Merchant Shipping (Amendment) Bill, 2015 and accession to the International Convention for Control and Management of Ships' Ballast Water and Sediments, 2004 of International Maritime Organization
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Minimum pension of ₹ 1,000/- per month in perpetuity to Pensioners of Employees’ Pension Scheme, 1995
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Conversion of two additional battalions of Sashastra Seema Bal for National Disaster Response Force (NDRF) and for strengthening existing NDRF battalions
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Compensatory Afforestation Fund Bill, 2015
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Proposal to move Official Amendments to the Prevention of Corruption (Amendment) Bill, 2013
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Union Cabinet decides to reimburse amount of value cut on wheat procurement price to States
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Import duty on sugar increased from 25 percent
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Union Cabinet approves Atal Mission for Rejuvenation and Urban Transformation and Smart Cities Mission to drive economic growth and foster inclusive urban development
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RBI imposes Monetary Penalty on Three Banks; cautions Eight
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Minutes of the April 1, 2015 Meeting of the Technical Advisory Committee on Monetary Policy
Case Laws:
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Income Tax
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2015 (4) TMI 1007
Revision u/s 263 - assessee's plea that the assessment u/s 153A was completed under the monitoring of the CIT/CCIT/ CBDT and such order could not be regarded as erroneous much less prejudicial to the interest of revenue - Held that:- As per the directions of the Hon'ble High Court fresh notice was issued and the proceedings under section 263 have been initiated for giving assessee opportunity to respond. The fresh order u/s 263 is being passed after considering all the submissions of the assessee and with an independent mind without being influenced by the observations made in the earlier order. In these circumstances the relevance of showing old files containing interdepartmental correspondence, has no relevance. Therefore, the assessee's stand that while passing the fresh order the Commissioner will again be influenced by the alleged correspondence, cannot be accepted. Whether the present proceedings are fresh proceedings or the continuation of earlier proceedings, initiated vide issue of show cause notice dated 23-7-2007? - Held that:- in the order passed by the Hon'ble High Court on 11-12-2009, it was specifically clarified in para 24 of its order that since the writ petitions were pending before the Hon'ble High Court, issue of limitation could not be raised by the assessee. Therefore, it cannot be inferred that the directions were only in regard to passing of the order u/s 263 and not for taking up fresh revisional proceedings. There is no separate limitation prescribed for initiation and passing of order u/s 263. As a matter of fact, Hon'ble High Court granted liberty to ld. CIT to appropriately deal with the matter and pass fresh order, after giving opportunity of being heard to the assessee on various points, canvassed before him, or which it intended to raise at the time of fresh hearing. This implied that ld. CIT had to apply his mind independently and for appropriately dealing with the matter had to re-examine the records before embarking upon to take revisional proceedings. Whether issues which had been discussed and scrutinized by the AO in detail while framing the assessment u/s 143(3)/ 153A could not be set aside to AO? - CIT exercised powers u/s 263 on the ground that while passing the assessment order, the AO did not consider whether the expenditure in question was revenue or capital expenditure - Held that:- An inquiry which is just farce or mere pretence of inquiry, cannot be said to be an inquiry at all, much less an inquiry needed to reach the level of satisfaction of the AO on the given issue. The level of satisfaction would obviously mean that he has conducted the inquiry in a manner whereby he places on record the material enough to reach the satisfaction, which a rational person, being informed of the nuances of tax laws would reach after due appreciation of such material. If this component is missing, it will always be a case of lack of inquiry and not inadequate inquiry. We find that ld. Commissioner, while considering this argument of assessee has observed that the representative of the assessee was assured that this issue will be considered with independent application of mind while passing the order u/s 263. Therefore, when specific issues will be considered, it will be examined whether the AO had reached the level of satisfaction by carrying out necessary inquiries qua that issue or not. Ground is disposed of accordingly. Whether exercise of jurisdiction by CIT u/s 263 on the ground that the various claims, which were duly supported by judicial precedents, could, at best, be said to be debatable ousting jurisdiction of Commissioner under the said section? - Held that:- Issues in hand have to be examined in the light of various decisions relied by both the sides including the decision of Hon'ble Delhi High Court in the case of Goetz India (2013 (12) TMI 607 - DELHI HIGH COURT). The main thrust is on the level of inquiries conducted by AO to arrive at a particular conclusion. A possible view taken by AO after due appreciation of evidence on record particularly found during course of search, in present context, will not render the Assessment Order erroneous and prejudicial to the interest of revenue merely because another view could be taken which was beneficial to the interest of revenue. However, the position will be entirely different if AO merely raises various queries and accepts the assessee's explanation without proper appreciation of evidence on record.This aspect will be taken into consideration while deciding the various issues, keeping in view the arguments of both the sides. Whether jurisdiction u/s 263, in respect of issues, which were beyond the jurisdiction of the AO, while framing the original assessment u/s 143(3)/ 153A, cannot be exercised? - Held that:- In the present case material in the form of e-mails, copies of a/cs, documents etc., was seized during search and statements were also recorded, which have been filed before us by way of compilation and the same had direct nexus with the issue raised by ld. CIT. Therefore, assessments had to be made after proper scrutiny of those documents as well as on the basis of books of a/c found in course of search. There is no quarrel with the proposition advanced by ld. counsel for the assessee, as fairly accepted by ld. Special Counsel, that the bar which apply to the AO equally applies to the CIT for the purposes of section 263 of the Act, as was held by the Hon'ble Kerala High Court in the case of CIT Vs. Paul John, Delicious Cashew Co. [2010 (1) TMI 646 - KERALA HIGH COURT ] Whether Commissioner erred in setting aside the various issues without recording any prima facie finding on the merits of the issue? - Held that:- Ratio laid down in the case of Gee Vee Enterprise [1974 (10) TMI 29 - DELHI High Court] as well as DG Housing Projects Ltd. [2012 (3) TMI 227 - DELHI HIGH COURT ] have to be taken into consideration depending upon the facts obtaining in a particular case while deciding various issues. The broad principle that emerges from various decisions is that if AO has merely accepted the assessee's explanation on various issues without proper inquiry then the same would come within the ambit of 'lack of enquiry'and not ' inadequate inquiry' . If a particular issue comes within the ambit of complete lack of inquiry then the order is to be considered as erroneous as well as prejudicial to the interests of revenue but if the case is of inadequate inquiry, then ld. CIT has to demonstrate that how the order was erroneous and prejudicial to the interests of revenue. This aspect we will take into consideration while deciding various issues on merits. In the result, this ground is disposed of accordingly. Setting aside the claim for exemption u/s 10B as erroneous and prejudicial to the interests of the revenue on the ground that the same was not examined by the AO while passing the order u/s 143(3)/153A - Held that:- Admittedly the deduction u/s 10B was being claimed and allowed to assessee since AY 1994-95. In response to the AO's notice dated 17-3-2006, the assessee had furnished vide letter dated 24-3-2006 all the approvals received from STPI authorities of relevant states, where the EOU unit was established along with note on various business units including EOU units, the nature of operations carried out by them. Ld. Counsel has rightly relied on the decision of Tribunal dated 30-5-2014 in the case of HCL Technologies Ltd. Vs. ACIT (2014 (10) TMI 356 - ITAT DELHI) wherein it had been held that it is beyond the power of the AO to examine whether the undertakings were formed in the earlier years by splitting up or reconstruction of existing business. Therefore, this could not be held to be a case where AO had not applied his mind to the assessee's claim regarding eligibility u/s 10B and, therefore, this, in our opinion, does not come within the revisionary powers of ld. CIT. Therefore, we hold that , as regards the eligibility of claim u/s 10B, the revisional proceedings taken were not in accordance with law. Determination of assessee's claim u/s 10B - Held that:- Ld. CIT's main objection was that the common expenses had not been allocated on an appropriate basis. He also, after considering the assessee's reply, observed that assessee's reply was quite dumb and it had not given any bifurcation or specific distribution of expenses between EOU and non EOU units. The contention of ld. CIT was that even as per the submission of the assessee there was no consistent method of distribution of expenses. Ld. CIT had arrived at this conclusion after observing that assessee had, inter alia, claimed that service expenses were charged on the basis of revenue of EOU and non EOU units and had in other reply stated that service expenses had been allocated on the basis of man power. Thus, there was no consistency in assessee's claim. AO failed to bring even primary facts on record to justify his conclusion in accepting the assessee's claim particularly when assessee never provided any bifurcation of common expenses amongst EOU and non EOU units. Thus, AO failed to examine whether the expenses had been distributed in proportionate manner on the basis of some specific and scientific basis between EOU and non EOU units. As regards the plea of assessee on the basis of doctrine of merger in principle, we do not agree with Ld. Special Counsel's submission that if a particular aspect permeates through all the assessment years within the block period then, if, in one year the issue has been examined by ld. CIT(A), then doctrine of merger will not apply to other assessment years. However, ld. CIT has clearly demonstrated that the issue of allocation of expenses was not examined in assessment year 2001-02. In view of above discussion, we concur with the finding of ld. CIT on this issue. Non maintaining separate books of account for each eligible undertaking - Held that:- The assessee's submission was that the accounts were maintained through FAMS/ SAP software, which contained separate code for each head of expenditure and for each of the units of the asessee. We find that this reply of assessee was sufficient enough for dropping the objection raised on this count by ld. CIT. We further find force in the submission of ld. counsel for the assessee that in view of the decision of Hon'ble Supreme Court in the case of Bongaigaon Refinery and Petrochemical Ltd. [2012 (9) TMI 371 - SUPREME COURT] and CBDT Circular no. 01/13 dated 17-1-201, in any view of the matter, non- maintenance of separate books of a/c was not detrimental to the claim of deduction u/s 10B. We, accordingly, reverse the finding of CIT on this aspect. Acceptance by the AO of revenue of the export oriented unit without calling for any details on this ground - Held that:- The AO was required to verify whether software was actually exported or the payments were in realty in regard to transaction not amounting to export of software. The AO failed to conduct the basic and preliminary inquiry with regard to nature of the so called export revenue. The AO had disallowed the claim of ₹ 25.20 lacs on the ground that the amount received from Kwetliso Holdings was in lieu of technical know how fees as opposed to export of technical reference material Softec. These findings were reversed by ld. CIT(A). The AO was required to bring the primary facts on record in respect of all the invoices and not bringing the said details on record resulted into error creeping into the assessment order, which caused prejudice also to the revenue.We do not find much substance in the submission of ld. counsel for the assessee that it is a case of merger with CIT(A)'s finding because CIT(A) deleted the disallowance made by AO. The same finding will be relevant only with reference to the invoices considered by AO and not with respect to invoices in respect of rest of the parties. We accordingly uphold the order of CIT on this aspect. Non allocation of foreign exchange fluctuation loss to EOU unit - Held that:- Admittedly, the AO had not made any inquiries on this count. Assessee failed to furnish transactions which resulted into loss on account of foreign exchange fluctuations. Considering the fact that assessee was having EOU and non EOU units and was regularly exporting the software and getting the profits in foreign exchange, it was incumbent upon the AO to at least bring the primary facts on record so as to reach the level of satisfaction where he could come to the correct conclusion as to whether the foreign exchange loss pertained to EOU or non EOU units. We, therefore, sustain the finding of ld. CIT on this count. Netting off of interest income and expenses in the order passed u/s 143(3)/153A - AO failed to appreciate that this issue had already been examined and scrutinized in detail during the original assessment proceedings u/s 143(3)/153A - Held that:- The assessee had netted this interest income against the interest expenditure of ₹ 17,03,49,186/-. This claim of netting off of interest made by assessee was accepted by the AO without examining the primary details regarding nexus of interest received against interest paid. Interest expenditure incurred for the purpose of business could be adjusted against business profits and not against income from other sources and, therefore, the AO was required to examine this aspect. Further, when assessee was claiming exemption u/s 10B in respect of certain EOUs, it was incumbent upon AO to carry out basic inquiry as to against which business unit expenses were to be allocated. Ld. Counsel has demonstrated that interest relating to EOU was debited in the particular unit. But the fact remains whether AO enquired into this aspect to find out the correctness of claim or not. There is nothing on record to suggest that this issue at all was examined by AO. The lack of necessary inquiries being made by AO resulted in passing of an erroneous order, which was prejudicial to the interest of revenue. We accordingly, sustain the findings of ld. CIT on this count. Interest free advances/ loans/ investments having been made by the assessee for non-business purpose out of interest bearing funds - AO having failed to examine the aforesaid issue - Held that:- The present issue is to be examined with reference to the decision of Hon'ble Delhi High Court in the case of GeeVee Electronics (supra), as it is a case of complete lack of inquiry. We, accordingly, sustain the findings of ld. CIT on this count. Repair expenses claimed by the assessee and allowed by the AO without any verification or enquiry - Held that:- Assessee in his submissions has submitted that ld. CIT did not give any finding/ pin point any expenditure or gave reasons as to why and on what basis particulars of the repairs expenses were to be considered as capital expenditure. In our opinion since the present issue comes within the ambit of lack of inquiry, therefore, ld. CIT was justified in setting aside the issue to the file of AO for examining the entire issue as per law. In the result, this ground is rejected. Steep rise in course execution charges incurred by the assesee was accepted by the AO without any verification and inquiry - Held that:- CIT did not take into consideration the further query raised by AO vide letter dated 8-2-2006, contained at page 959 of PB wherein he has specifically required the assessee to give justification for increase, inter alia, in course execution expenses. This was duly replied by assessee vide reply dated 27-2-2006 contained at pages 900-961, wherein assessee, inter alia, specifically pointed out as to why the percentage of expenses worked out 30-32% as compared to 22% in the FY 1997-98. Therefore, the very premise of ld. CIT, in holding the order as erroneous and prejudicial to the interest of revenue, does not survive. Once the AO had applied his mind to this issue, then at best this issue could be held to be a case of inadequate inquiry and, therefore, ld. CIT was required to give his findings as to how the assessment order was erroneous and prejudicial to the interest of revenue. Ld. CIT has not given any such finding and, therefore, we are not inclined to accept the finding of ld. CIT on this issue. Setting aside the assessment on the issue of deduction on account of bad debts on the ground that same had been allowed without any verification or enquiry by the AO - Held that:- CIT has not disputed that the bad debts had been written off in the books of account. It is now settled law that post 1-4-1989, the only requirement for allowing bad debts is that the same should have been written off in the books of account. The assessee in its replies had given the details of bad debts written off. Ld. CIT has not disputed that the impugned debts were trade debts. Therefore, it could not be said that the assessment order was erroneous, in any view of the matter, as the assessee's claim was legally sustainable. If assessee's claim is legally allowable and the quantum of amount claimed is not disputed by ld. CIT, then it cannot be said that the assessment order was erroneous and prejudicial to the interest of revenue AO failed to verify whether any expenses were incurred for earning exempt income, which were required to be disallowed u/s 14A - order of the AO was erroneous and prejudicial to the interests of revenue - Held that:- Admittedly no query qua applicability of section 14A was raised by the AO during the course of assessment proceedings and, therefore, it was a case of lack of enquiry which justified the action of the CIT. Section 14A is a specific section for making disallowance in respect of exempt income. Therefore, the AO was duty bound to consider the applicability of section 14A, particularly because the assessment was finalized by AO on 1- 6-2006, which date fell after the date given in the Circular no. 14 of 2001.The AO has to pass a fresh assessment order u/s 153A and in doing so he has to consider the applicability of all relevant provisions of Act. Even otherwise, ld. CIT has elaborately considered as to why the said decision is not applicable. We concur with his findings noted earlier. We, therefore, uphold the order of ld. CIT on this count. Technical service fee paid to various non- residents without deduction of tax at source - Held that:- If we closely examine the queries raised by AO on different dates, we find that queries were raised on 2-11-2005, 10-2-2006 and then on 1-3- 2006, which were replied by assessee. In its query letter the AO specifically stated that assessee was acting as distributor but the distributorship agreement was not brought on record by assessee. It is pertinent to note that in letter dated 1-3-2006, the AO had referred to various documents leading to conclusion that the payments were towards AMC. In regard to payment to M/s Conversant Group Corporation, the AO had referred to agreement dated 22-9-2000, E-mail dated 17-11-2000 and note of Rajesh Mathur to NIIT GIS Ltd. The assessee in its reply did not give specific replies on these counts and only gave a general reply. Similarly, AO had raised specific queries with respect to M/s Relativity Technologies and payment to M/s Prosoft Training Company. The assessee did not give specific replies and yet AO accepted the replies without assigning any reason. The AO was required to give proper reasoning before coming to any conclusion. This aspect definitely can be examined by ld. CIT because if AO has not properly appreciated the facts on record, which is demonstrated by ld. CIT in his order, then ld. CIT can resort to revisionary proceedings u/s 263. We find that ld. CIT has given his finding with reference to various e-mails to come to the conclusion that bogus purchase orders were raised to remit money for AMC contract. Therefore, it is clear that AO had not arrived at a rational conclusion. He has merely accepted the assessee's plea on this issue without proper scrutiny of documents found during the course of search. We, accordingly, confirm the order of CIT setting aside the assessment order on this issue and restore the matter to the file of AO for fresh consideration 'Net Varsity' from NIIT USA was fictitious, the order of the AO allowing depreciation on the value of Net Varsity, was erroneous and prejudicial to the interest of the revenue - Held that:- The AO was required to record a finding how the allegation of 'Net Varsity' software being developed in India, on the basis of details found at web site of NIIT were met by assessee and whether the same was duly rebutted asessee or not. The AO was also required to give his specific findings with reference to queries raised by him in connection with e-mail dated 8-2-2000 from Mr. Nicholas George to Ms. Nilangana Paul. 83.2. The findings of Enforcement Directorate were recorded on 30-4-2004 and search took place on 10-11-2004. Therefore, though ED's findings could not be ignored, but they had to be considered by AO along with material found during course of search. We, therefore, uphold the order of ld.CIT on this issue. Assessee had imported obsolete CBTs from NETg (UK) in order to remit payments in the nature of 'royalty' to NETg - AO having failed to examine the said issue, the assessment order in this regard was erroneous and prejudicial to the interest of the Revenue - Held that:- During search operations certain e-mails were found and the statement of employees was gathered. The detailed scrutiny of these e-mails was necessary to find out the true import of the e- mails as to whether the payment made was towards royalty or towards purchase of software. Ld. Counsel submitted that payment made to NETg was in terms of distributorship agreement and in respect of physical import of CBTs only for which invoices relating to import were produced before AO. However, in course of search proceedings, certain evidences were brought on record, which suggested a contrary state of affair and, therefore, it was incumbent upon the AO to resort to detailed inquiry and not accept the assessee's contention based on documents available with it on the basis of which it had earlier advanced its claim. Proper appreciation of evidence on record is sine qua non under such circumstances.Merely bringing the evidence on record without proper appreciation of import of such documents cannot be said to be a case of proper inquiry. Under such circumstances, ld. CIT was fully justified in restoring the matter to the file of AO. AO having allowed deduction u/s 35D of the Act in respect of public issue expenses without verification/ inquiry the assessment order was erroneous and prejudicial to the interest of revenue - Held that:- It is not disputed that the claim of assessee was accepted in AY 1993-94 and, therefore, we are in agreement with ld. Counsel for the assessee that mere non-examination of this issue by AO will not render the assessment order as erroneous and prejudicial to the interest of revenue, particularly when assessee's claim was legally allwoable. We, accordingly, do not concur with the finding of ld. CIT on this issue. Setting aside the issue of loan transactions between the assessee and various business and other parties - CIT(A) alleging that the said issue was not examined by the AO - Held that:- The AO merely accepted the assessee's contention without carrying out necessary inquiries in this regard. Ld. CIT, as noted earlier, has pointed out that in none of the cases details of PAN were given. Therefore, it cannot be said that ld. CIT has restored the matter without recording any specific finding as to how the assessment order was erroneous and prejudicial to the interest of revenue on account of inadequate inquiries carried out by the AO. We, accordingly, confirm the order of ld. CIT on this issue for the detailed reasons given by the ld. CIT in his order. Credit for taxes paid/ deducted abroad was claimed by the assessee and allowed by the AO without verification - Held that:- The assessee had claimed credit of ₹ 47,81,828/- in respect of tax paid in foreign jurisdiction as per the applicable laws of the said countries. The AO had not verified this claim and allowed relief to assessee and, therefore, ld. CIT rightly held that assessment order was erroneous and prejudicial to the interest of revenue, in the absence of proper verification. We, accordingly, uphold the finding of ld. CIT on this issue. - Appeal decided partly in favour of assessee.
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2015 (4) TMI 983
Disallowance of businesses expenditure - ITAT allowed the claim - commencement of business - whether assessee has not commenced business operations during the previous year (the assessment year being 2007-08)? Held that:- As decided in Western India Vegetables Products Ltd. v. CIT [1954 (3) TMI 59 - BOMBAY HIGH COURT] the important question that has got to be considered is from which date are the expenses of this business to be considered permissible deductions and for that purpose the section that we have got to look to is section 2(11) and that section defines the “previous year‟ and for the purpose of a business the previous year begins from the date of setting up of the business. Therefore, it is only after the business is set up that the previous year of that business commences and in that previous year the expenses incurred in the business can be claimed as permissible deductions. Any expenses incurred prior to setting up a business would obviously not be permissible deductions because those expenses would be incurred at a point of time when the previous years of the business would not have commenced. Thus the decision of the ITAT does not call for any interference - decided against revenue.
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2015 (4) TMI 982
Entitlement to claim deduction under Section 80-IA - Held that:- The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee
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2015 (4) TMI 981
Hundi Discounting charges - ITAT deleted the addition - Held that:- Three conditions had to be satisfied to claim deduction in respect of interest on borrowed capital and that the expression "for the purpose of business" under Section 36(1)(iii) and Section 37 is wider than the expression “for the purpose of earning income, profits and gains” under Section 57(iii). Therefore, it was held that interest paid for the purpose of or in the course of carrying on business is allowable in the year in which the liability arose. This Court is also of the opinion that given the dictates of consistency, the view adopted by the ITAT is fair and reasonable. Having regard to the reasoning adopted by the ITAT, this Court finds no cause to interfere with - as it is in conformity with the judgment of the Supreme Court in Madhav Prasad Jatia’s case (1979 (4) TMI 2 - SUPREME Court ). - Decided in favour of the assessee. Net amount of current assets of the manufacturing division transferred to its subsidiary company - ITAT deleted addition - Held that:- The entire net current assets too were valued and transferred. It was the aggregate of the book value and the net current value which constituted the sale price of ₹ 2,02,40,560/-towards which shares were in fact allotted. Given these facts, the AO appears to have assumed that the other liabilities and assets too had been transferred - which was an inaccurate assumption. The CIT (A) too appears to have ignored this important feature. Given these factors, no fault can be found with the ITAT’s conclusion that regardless of how the assessee treated the transaction, i.e., either reflecting in the P&L account or omitting to do so, in sum, no gain or income arises which can be brought to tax - Decided in favour of the assessee. Notional interest - ITAT deleted addition - Held that:- As the Revenue urges that no material was placed before the AO to support the contention that the advances were made from the assessee’s own funds and that in these circumstances, the CIT (A) fell into error in considering fresh materials. The submissions appear to be attractive considering that the CIT (A) has stated that the appellant placed before him copies of the relevant bank accounts. However, this Court sitting in second appeal against the decision of the lower authorities has to be circumspect in such matters. This ground does not appear to have been urged before the ITAT articulating that the CIT (A) omitted to give any opportunity to it to re-examine such materials. Such ground also does not appear to have been urged during the hearing. Furthermore, this has not been raised as a ground of appeal before this Court. In the circumstances, we see no reason to depart from the rule of consistency which is also accepted in all the previous years. - Decided in favour of the assessee. Expenditure towards brokerage and commission - Held that:- It is not disputed by the Revenue that for the other years, the assessee’s treatment of such expenses has been in his favour and the Revenue has not chosen to challenge it. Even otherwise, we are of the opinion that such expenditure has to be allowed. - Decided in favour of the assessee
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2015 (4) TMI 980
Rectification of mistake - powers of Tribunal u/s 254(2) - appeal against the order of tribunal pending before HC - Held that:- Merely because the assessee has challenged the order of the Tribunal in an Appeal under section 260A of the Income Tax Act, 1961 before the High Court does not mean that the power under section (2) of section 254 cannot be invoked either by the assessee or by the revenue/Assessing Officer. Such a power enables the Tribunal to rectify any mistake apparent from the record and make amendments. That in a given case would not only save precious judicial time of the Tribunal but even of the higher Court. Only when the assessee or the Assessing Officer calls upon the Tribunal to undertake an exercise which is not permissible within the meaning of section (2) of section 254 that the Tribunal can rely on the principle of judicial propriety or its reluctance or refusal to take upon itself the powers of the higher Court of Appeal. We can understand if the Tribunal had passed an order after considering the application made by the peritioner-assessee on its merits and in accordance with law. However, the refusal of the Tribunal to go ahead and reject the application only on the ground that the petitioner-assessee has invoked the appellate powers of higher Court cannot be sustained. That is contrary to the plain language of the two statutory provisions and which have been brought to our notice. Nothing contrary having been pointed out and such a view of the Tribunal may affect and prejudicially the interest of the revenue that all the more we cannot sustain the impugned order. The Writ Petition is allowed. The petitioners misc. application seeking to invoke the powers under subsection (2) of section 254 shall now be heard by the Tribunal and it shall be decided in accordance with law.
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2015 (4) TMI 979
Reopening of assessment - non deduction of tds on payment credit to foreign companies, on account of ‘software services‘ - Held that:- In the original assessment, full particulars with respect to “Software License Fees” by the assessee to the foreign companies was disclosed. Not only that the assessee claimed the same as revenue expenditure. The notice was issued under section 143(3) of the Act and the Assessing Officer also vide communication / notice dated 12/11/2010 called upon the assessee to furnish necessary documents which include the complete details of “Software License Fees”. The assessee was also directed to furnish relevant documentary evidences to establish and prove that “Software License Fees” is in nature of revenue. The assessee submitted complete details of “Software License Fees” and justified its claim that the “Software License Fees” is in the nature of revenue expenditure and not capital expenditure. Thus it cannot be said that the assessee did not disclose fully and truly all material facts necessary for the assessment with respect to Software License Fees paid to foreign companies and therefore, the income chargeable to tax has been escaped due to the failure on the part of the assessee to disclose fully and truly all material facts. Under the circumstances, the condition precedent for invoking powers under section 147 of the Income Tax Act to initiate reassessment proceedings beyond the period of 4 years are not at all satisfied. Once the case of the assessee is covered by the 1st proviso to section 147 of the Act, the reassessment proceedings beyond the period of 4 years from the end of the relevant assessment year would be without any jurisdiction and bad in law, if all material facts are furnished and there remained no omission or failure on the part of the assessee to disclose truly and fully all material facts. Thus the impugned reassessment proceedings of reopening assessment for the A.Y. 2007-2008 are hereby terminated. See Niko Resources Ltd. (2014 (9) TMI 892 - GUJARAT HIGH COURT) as well as Gujarat Lease Financing Limited (2013 (10) TMI 101 - GUJARAT HIGH COURT) - Decided in favaour of assessee.
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2015 (4) TMI 978
Unexplained investment - Treatment to the bottles of liquor - Tribunal treating the bottles of liquor, a consumable article, as a 'valuable article or thing' - whether Tribunal was right in law by denying the relief of ₹ 2,00,000/- on bottles of liquor granted by the Commissioner of Income Tax (Appeals)? - Held that:- The learned Tribunal, according to us, applied wrong standards in the matter of appreciation of facts. The case of the assessee that the bottles of liquor were purchased during the foreign tours undertaken by the assessee and his family members was not even attempted to be countered to demonstrate why such explanation was not, in the opinion of the Assessing Officer, satisfactory. The fact that the assessee got some bottles of liquor by way of gift has been accepted by the assessing officer. It is sheer misapprehension on the part of the learned Tribunal when they observed that the price at ₹ 2000/- per bottle was not disputed by the assessee. Reference in this regard may be made to the judgment of the CIT (A) quoted above. It is not also a fact that the assessee had failed to offer an explanation. The fact on the contrary is that the assessee did offer an explanation and the circumstantial evidence did not militate against the same. A question of fact has to be considered on the touchstone of probability. The relevant question to ask is "has the assessee been able to probabilize the defence taken by him?" If his defence is a probable defence and the revenue has failed to adduce any evidence to show that the defence is either untrue or is inconsistent with the admitted facts and circumstances of the case that should ordinarily be the end of the matter. The Assessing Officer misdirected himself in holding the assessee liable for an undisclosed income of a sum of ₹ 2,00,000/- purely on the basis of a guess work that each bottle must have been bought at ₹ 2000/- after having accepted the case of the assessee that "occasional social as well as official gifts can not be ruled out." Liquor after all is a consumable item and a person of ordinary prudence is not expected to preserve the cash memos in connection therewith. The Commissioner of Income Tax (Appeals) applied the correct standard for appreciation of facts - Decided in favour of assessee.
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2015 (4) TMI 977
Penalty u/s 271(1)(c) - borrowing/advances towards ancestral share in the property not proved - Tribunal confirming the order of CIT(A) in deleting penalty - Held that:- Commissioner of Income Tax (Appeals) and the Tribunal by the impugned order have accepted the explanation offered by the respondent-Assessee. Consequently holding that inability to prove a liability would not amount to furnishing of inaccurate particulars for the purpose of imposing penalty under Section 271(1)(c) of the Act. Moreover, it is pertinent to note that the appellant-Revenue has proceeded on the basis that there was in fact a sale of property as is evident from the fact that the reopening notice under Section 148 of the Act was issued on 22/03/2012 seeking to reopen the assessment for AY 2007-08. This notice for reopening dated 22/03/2012 is identical to the basis of the explanation offered by the respondent-Assessee viz. that there was a sale of property which resulted in the Assessee being paid ₹ 92.00 lakhs. Thus, there is no reason shown to us to disturb the concurrent findings of fact arrived at by the Commissioner of Income Tax (Appeals) and Tribunal . No substantial question of law - Decided against revenue.
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2015 (4) TMI 976
Charitable purpose - Non applicability of section 2(15) - whether advancement of any other object of general public utility shall not be a charitable purpose? - Held that:- The motive of the assessee is not the generation of profit but to provide training to the needy women in order to equip or train them in these fields and make them self confident and self reliant. There is nursing training, which is also being managed and administered by the assessee. The details of income and expenditure accounts shows that the assessee had received donation of ₹ 36,88,634/- and nursing school fees of ₹ 4,46,088/-. The assessee pointed out that this nursing training provided at the centre of the assessee at Panvel is free of costs. Once the essential nature of the activities carried on by trust is considered, then, the larger question need not be decided. The Tribunal found that the trust may be set up for advancement of any other object of general public utility, but that will not cease to be charitable purposes in this case, because, the activities in which the trust is involved cannot be termed as carrying on of trade, commerce or business. This is to impress upon the women the need to be self reliant and self supporting and to instill in them the confidence that they can make a livelihood for themselves if they rely on the skills as afore-noted, that the activity has been undertaken. It does not partake the character of trade, commerce or business nor of rendering of any service in relation thereto. It is only to teach or impart skills and to instill confidence that the produced goods or articles are sold. To that extent also deficit has occurred. In the circumstances, the Tribunal took a view that occasional sales or the trust's own fund generation are for furthering the objects but not indicative of trade, commerce or business. In the circumstances, the proviso does not apply. Trust has been set up and is functional for the past several decades and it has not deviated or departed from any of its state object and purpose, utilisation of the income, if at all generated, does not indicate carrying on of any trade, commerce or business. The Tribunal's view deserves to be upheld. It is a possible view and cannot be termed as perverse - Decided in favour of assessee.
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2015 (4) TMI 975
Commercial expediency - whether the amount paid by the assessee in terms of the decree passed by the Bombay High Court falls within the words 'commercial expediency' and therefore entitled to deduction? - Held that:- The amount paid by the company in terms of a decree passed by the High Court cannot be construed as either prohibited by law or is an offence. Even if the assessee was in no way benefited by the said transaction and even if the Managing Director without the authority has bound the assessee and when once a decree is passed by a competent Court, there is a threat to the business of the company. If the decretal amount is not paid, the decree holder could have executed the decree against the property of the company; could have attached the property of the company and the creditors in the alternative also could have filed for winding up of the company. In those circumstances, to avoid such legal complications, if the decretal amount is paid, it cannot be construed that there was no 'commercial expediency' in payment of such amount. All the appellate authorities on careful consideration of the entire material on record has rightly held that the said expenditure falls within Section 37 of the Act and rightly directed the assessing authority to delete the said amount. - Decided in favour of the assessee
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2015 (4) TMI 974
Assessment u/s 158BD - assessment of other person who was not searched - Tribunal found that the assessee did not co-operate with the Assessing Officer by filing a block return and did not furnish any information and, therefore, the Assessing Officer was constrained to complete the assessment to the best of judgment. - Held that:- The Supreme Court in Assistant Commissioner of Income Tax and another v. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] clearly specifies that section 158BC prescribes the procedure for making block assessment of the searched person and section 158BD enables assessment of any person, other than the searched person.section 158BC prescribes the procedure for making block assessment of the searched person and section 158BD enables assessment of any person, other than the searched person. In this case, we have no hesitation to hold that searched person is M/s. Harbour Syndicate and, therefore, as far as M/s. Harbour Syndicate is concerned, the Assessing Officer was justified in issuing notice under section 158BC and in respect of V. H. Yahiya, the Assessing Officer was justified in issuing notice under section 158BD. The question of law raised in this regard is answered in favour of the Revenue.
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2015 (4) TMI 973
Addition on account of concealment of income - Rejection of books of account - AO observed Variation in the rates of bullion in a single day - Estimated the profit @ 0.5% of the total turnover of pure gold - Held that:- We find that the average gross profit as a percentage of turnover of Pure Gold was less than 0.098% as returned by the assessee for the current A.Y except for the assessment year 2008-09 where the gross profit return was 0.1%. In view of the consistent profitability of the assessee is less than the percentage offered for this year (except for a marginal increase in the AY 2008-09), no specific circumstances was brought to our notice by the Revenue for adopting a higher rate of gross profit as adopted by the AO or the CIT (A). Therefore, we allow the cross objection filed by the assessee and dismiss the appeal of the Revenue. - Decided in favour of assessee.
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2015 (4) TMI 972
Computation of Capital gain - Disallowing the claim of the assessee as 'slump sale' - No evidence on records to show entries regarding transfers of current assets & liabilities - Held that:- The assessee put a contention that the he had sold all the assets and liabilities including current assets and liabilities in respect of business of processing of profile grinding operations to M/s. S.R.P. Tools Limited and being so it is considered as “slump sale’’. If the argument of the assessee is correct there should be transfer of inventories, sundry debtors, cash and bank balances, interest receivable, loans and advances and also current liabilities and provisions. However, in the present case, assessee has not placed any evidence to suggest the current assets and liabilities has been transferred to purchaser by passing appropriate entries in its books of accounts. If this current assets have been transferred the assessee should have furnished the details of the same. Being so, in our opinion evidence brought on record does not clearly suggest that this is 'slump sale'. Hence, it is appropriate to remit the issue in dispute back to the file of the Assessing Officer with a direction to examine the books of accounts of the assessee so as to verify whether all the assets and liabilities including current assets and liabilities have been duly transferred to the purchaser as per MOU dated 03.10.2005 and also examine relevant parties herein including the person who has issued certificate in form No.3CEA dated 02.11.2006. With these observations, we are remitting the entire issue back to the file of the Assessing Officer for fresh consideration. - Appeal filed by assessee is allowed for statistical purpose.
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Customs
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2015 (4) TMI 990
Refund claim - Reassessment - Whether re-assessment can be permitted at the refund stage when the order of assessment is final and not appealed against or not - Held that:- New notification is pressed into service, at a belated stage, for claiming refund of the excess duty paid and without challenging the order of assessment. The facts in the present case are clearly distinguishable as we find that a new plea is taken at the time of refund by placing reliance on Notification No.18/2000-Cus. The assessment made in the Bill of entry is totally a different claim from the one made in the refund application. We, therefore, have no hesitation to hold that the 1st respondent, having not challenged the order of assessment, cannot at a belated stage, claim refund by pressing into service another Notification and, therefore, the rejection of the refund claim by the Assessing Officer and rightly held by the Commissioner (Appeals) is clearly sustainable. - decision of the Supreme Court in Flock (India) Pvt. Ltd. case [2000 (8) TMI 88 - SUPREME COURT OF INDIA] and Priya Blue Industries case (2004 (9) TMI 105 - SUPREME COURT OF INDIA) are squarely applicable to the facts of the present case. - Decided in favor of revenue.
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2015 (4) TMI 989
Benefit of concessional rate of duty - Imports from Srilanka under the Indo-Srilanka Free Trade Agreement - Held that:- Respondent authorities have not, in the impugned communications, referred to any instances of defaults or irregularities in the imports effected by the petitioners. The sole reason, on the basis of which a provisional assessment is contemplated, is the fact that there are investigations currently under way in respect of certain other imports of betel nuts,at Cochin. - mere existence of an investigation in respect of other persons cannot be the basis for a detention of goods that have been imported by the petitioners, more so, in a case where the respondent authorities have not been able to identify any irregularity in the imports effected by the petitioners. I do take note, however, of the fact that, the investigation that is currently underway is essentially one that is undertaken to determine whether there is any irregularity in the certificates issued by the Government of Srilanka, to support the contention of the importers that they are entitled to the benefit of the concessional rate of duty. In that sense, therefore, there is an interest of the revenue, that needs to be protected while permitting clearance of imported consignments of arecanut. - on the petitioners complying with the aforesaid conditions, which are in modification to the conditions specified in Exts.P6 and P7 communications, the respondent authorities shall forthwith release the imported consignments to the petitioners. - Decided partly in favour of assessee.
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2015 (4) TMI 988
Denial of refund claim - SAD - Notification No. 102/2007 dt. 14.9.2007 - Bar of limitation - Held that:- As far as filing of refund claims within the statutory time limit but filed before the wrong authority is concerned, the issue already stands decided by the Tribunal in the case of Singh International Vs. Commissioner of Customs (General), Mumbai and Polyglass Acrycle Mfg. Co. Pvt. Ltd. Vs. Commissioner of Customs (Import), Mumbai [2015 (4) TMI 937 - CESTAT MUMBAI], in which reliance was placed on the Hon'ble High Court of Gujarat judgement in the case of Commissioner of Central Excise Vs. AIA Engineering Ltd [2010 (9) TMI 555 - GUJARAT HIGH COURT ]. Therefore, refund of ₹ 2,58,412/- is allowed. - As regards the remaining 2 Bills of Entry in which the refund claim was filed beyond the period of 1 year the refund is rejected, in view of the statutory time limit laid in the law. - Decided partly in favour of assessee.
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Corporate Laws
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2015 (4) TMI 987
Application for sanction of the Scheme of Amalgamation under Sections 391(2) & 394 of the Companies Act, 1956 - No objection received from any of the party i.e. Regional Director, Northern Region, and the Official Liquidator - Held that:- Considering the approval accorded by the equity shareholders, secured and unsecured creditors of the petitioner companies to the proposed Scheme of Amalgamation and the affidavits filed by the Regional Director, Northern Region, and the Official Liquidator not raising any objection to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under Sections 391 and 394 of the Companies Act, 1956. The petitioner company will comply with the statutory requirements in accordance with law. Certified copy of this order be filed with the Registrar of Companies within 30 days. It is also clarified that this order will not be construed as an order granting exemption from payment of stamp duty as payable in accordance with law. Upon the sanction becoming effective from the appointed date of Amalgamation, i.e. 1st April, 2014, the transferor company shall stand dissolved without undergoing the process of winding up. - Scheme of amalgamation approved.
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2015 (4) TMI 986
Application for Scheme of Amalgamation - Dispensation of convening the meetings of their equity shareholders, secured and unsecured creditors - Held that:- The transferor company has 02 equity shareholders. Both the equity shareholders have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meeting of the equity shareholders of the transferor company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. There is no secured or unsecured creditor of the transferor company, as on 11th March, 2015. - Scheme of Amalgamation approved.
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FEMA
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2015 (4) TMI 985
Detention of petitioner - Prevention of smuggling of goods - Held that:- Detaining authority, after passing the detention order dated 27th February, 1989 was indifferent in securing the detenu by not taking proper action with great caution. It further appears that the police authorities of the Respondent No.4 were also not prompt in their action in executing the said detention order and the execution of the said detention order was unduly delayed, which allowed the detenu to remain at large for a long period and has consequently defeated the very purpose of the impugned order. The Respondent Nos.1 and 2 have failed to satisfactorily explain the delay occurred in executing the order of detention after a lapse of abut 26 years. As has been held by the Supreme Court in the case of P.U. Iqbal (1991 (12) TMI 269 - SUPREME COURT), the delay throws a considerable doubt on the genuineness of the requisite subjective satisfaction of the detaining authority in passing the detention order and consequently renders the detention order bad and invalid because of the 'live and proximate link' between the grounds of detention and the purpose of detention is snapped in arresting the detenu. The Petition, therefore, deserves to be allowed thereby setting at liberty the detenu forthwith - Decided in favour of appellant.
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Service Tax
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2015 (4) TMI 1006
Scope of Continental Shelf and Exclusive Economic Zone of India for the purpose of service tax - Legislative intent - Interpretation of Notification No.1/2002-Service Tax dated 1.3.2002, as amended by Notification No.21/2009-ST dated 7.7.2009 and the Notification No.14/2010-ST dated 27.2.2010 - whether the Notification No. 14/2010-ST dated 27.2.2010 is clarificatory / declaratory in nature - whether during the aforesaid period, the appellant was also liable to pay the service tax on the services rendered by these vessels for the purpose of prospecting mineral oil and as such for the services consumed by continental shelf of India or exclusive economic zone of India. Held that:- If the statute uses the words "it is declared" or "it is clarified for removal of doubts", then it will be presumed that the amending law is declaratory or clarificatory. However, merely using the said words would not be sufficient to conclusively hold that the Act is declaratory. Even by use of such words, a statute may introduce new rules of law and that in such case, it would amount to substantial change in the law and will not be necessarily retrospective. It has been held that for determining the nature of the Act regard must be had to the substance rather than the form. It has been held that if a new Act is to explain an earlier Act, it would be without object unless construed retrospectively. It has been further held that an explanatory act is generally passed to supply an omission or to clear up doubts as to meaning of previous Act. However, in the absence of clear words indicating that the meaning of the Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. 2002 Notification was issued under the provisions of the Maritime Zones Act on 1.3.2002 thereby extending provisions of Chapter V of Finance Act to the designated areas in the continental shelf and exclusive economic zone of India as declared by the Notification of the Government of India in the Ministry of External Affairs dated 18.7.1986 and 19.9.1996 with immediate effect. It would thus be seen that for the first time from 1.3.2002, the areas in respect of which the notifications were issued in 1986 and 1996 were brought under the purview of the service tax. However, the notification only extended the applicability of service tax to the areas which were covered under the said notifications of 1986 and 1996. Even after issuance of 2002 notification, the provisions of Chapter V of the said Act did not apply to the other areas in the continental shelf and exclusive economic zone of India which were not covered by the said notifications. Plain reading of the 2009 Notification would give a clear meaning and it cannot be said to be obscure. The words are clear and plain capable of giving only one meaning that the provisions of Chapter V of the Finance Act are extended to the installations, structures and vessels in the continental shelf and exclusive economic zone of India. We find that the words used in the said notification are not capable of giving two meanings. - the 2010 Notification cannot be said to be clarificatory in nature, but it brings about substantive change in law. Whereas the 2002 Notification as amended by 2009 Notification is applicable only to the services rendered to installations, structures and vessels, the 2010 Notification widens the tax scope and amongst various other services also brings into the service tax net the services rendered to or by the installations, structures and vessels. It can thus be seen that the present transaction, which is in the nature of providing services by the vessels of the appellant for the purpose of prospecting mineral oil and as such is a service consumed by the seabed of Continental Shelf of India would come in the tax net only after 2010 Notification came into effect. We are of the considered view that the said service cannot be said to be a service rendered to the installations, structures and vessels. Not only this, but the Respondent also in the order- in-original has noted that the appellant is discharging applicable service tax on the services received by installations, structures and vessels in the Continental Shelf and Exclusive Economic Zone of India but was not discharging the service tax on services consumed by the seabed of Continental Shelf of India. - Decided against the revenue.
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2015 (4) TMI 1005
Valuation - Commercial Coaching or Training Service - Students make 100% payment to M/s Aptech Ltd. - Assessee gets only 80% of such fees and discharge service tax on 80% - Whether appellant is required to discharge service tax liability on an amount which represents 20% as retained by M/s. Aptech Ltd - held that:- students issue the cheques for the payment of fees in the name of M/s. Aptech Ltd. It is on record that appellant is not receiving any amount from the students directly. The provisions of Section 67 of the Finance Act, 1994 envisage for considering the gross value for discharge of service tax liability. The said section specifically provides that the gross value which is charged for the services has to be considered for payment of service tax liability. In the case in hand, the amount received by the appellant for the provision of services under the category of ‘Commercial Coaching or Training Services' is the 80% of the amount paid by the students, as students make 100% of the payment directly in the name of M/s. Aptech Ltd. If that be so, appellant has correctly discharged the service tax liability on an amount received by him for the services rendered under the category of ‘Commercial Coaching or Training Services'. - impugned orders are unsustainable and liable to be set aside - Decided in favour of assessee.
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2015 (4) TMI 1004
Penalty u/s 78 - waiver of penalty u/s 80 demand of differential service tax leviable on sugarcane transportation charges and inward freight charges - Held that:- During the material period i.e. upto August 2008, the issue was being agitated and the appellant had also taken a plea that due to financial crisis they were not able to pay the balance amount on transportation of sugarcane and inward transportation of stores material. We find that in this case, non-discharge of service tax liability is not due to ulterior motive but due to financial difficulties that was faced by the appellant. In our view it is a fit case for us to invoke the provisions of Section 80 of the Finance Act, 1994 and we do so. By invoking the provisions of Section 80 we set aside the penalty imposed by the adjudicating authority and upheld by the first appellate authority while upholding the confirmation of demand of service tax liability and the interest thereof. - Decided partly in favour of assessee.
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2015 (4) TMI 1003
Manufacturing activity or Packaging Services - appellants, manufacturers of country liquor, were also engaged in the activities of bottling, labelling, affixing the hologram stickers and sealing of glass bottles of country liquor - Held that:- Appellants had been manufacturing and clearing alcoholic beverages. It is also not the Revenue s case that the appellants were only doing packaging activities and the processes prior to packaging were done by someone else. In these circumstances, the appellants are clearly manufacturers of liquor. Indeed manufacturers of any product which involves packaging for clearance are never held to be providing packaging services because while every process of manufacture may not amount to manufacture, Manufacture includes any process incidental or ancillary to the completion of a manufactured product as per Section 2(f) of Central Excise Act, 1944. Thus for a manufacturer of goods, packing them (prior to their clearance) is a process of manufacture and not provision of service. In the case of Maa Sharada Wine Traders (2008 (3) TMI 319 - MADHYA PRADESH HIGH COURT), the M.P. High Court has categorically held that manufacturing process does not necessarily include excisable goods, but also includes process incidental or ancillary to completion of manufactured product. - Following this decision - Decided in favour of assessee.
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Central Excise
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2015 (4) TMI 998
Prosecution proceedings where demand of duty was set aside on the ground of period of limitation - non-petitioners were discharged mainly on the ground that separate proceedings for imposition of penalty were decided in favour of the non-petitioners - Held that:- Perusal of Section 11 of the Act of 1944 shows as to when and for what purpose, it can be invoked. It is for recovery of excise duty which is not paid for various reasons or could not be recovered. Section 11 of the Act of 1944, however imposes limitation for initiation of the proceedings. In the first category of cases, limitation to issue notice is only of 6 months, whereas in the second category, it is for 5 years. So far as Section 9 of the Act of 1944 is concerned, it operates for the offences and consequential penalties. No limitation for initiation of prosecution has been given therein. The facts aforesaid are relevant as proceedings in pursuance to Section 11 of the Act of 1944 were terminated as the notice was found beyond the period of limitation for recovery of excise duty. The Tribunal found case to be falling in first category having limitation of 6 months and not in second category having limitation of 5 years. The order was passed in favour of the assessee after recording finding on the issue of limitation, thus it becomes clear that determination of the issues by the Tribunal was not on merit but on limitation. It may be that arguments were made even on merit but no finding has been recorded, if the order of the Tribunal is perused. Determination of issue by the Tribunal is not on merit but on a technical ground of limitation. The same is the position regarding reference whether determination of the issue was not made but reference was dismissed on account of default in appearance of the parties concerned. - In absence of determination of issues on merit, the non-petitioner cannot take shelter of judgment of Apex Court in the case of K.C. Builders (2004 (1) TMI 7 - SUPREME Court). In the instant case, Section 9 of the Act of 1944 does not provide any limitation to initiate the proceedings though there may be limitation for taking cognizance of offence under Cr.P.C. The issue aforesaid is not raised before me. When the Tribunal so as High Court has not touched the merit, there was no reason for the revisional court to discharge the non-petitioners by setting aside the order of learned Magistrate. The non-petitioners were definitely entitled to take the benefit of delay in issuance of notice for recovery of excise duty if It was beyond the period of limitation. So far as prosecution under Section 9 of the Act is concerned, it has not provided limitation. The revisional court failed to make distinction between two proceedings and the effect of the order passed by the Tribunal and the High Court where merit of the case was not touched. - Decided in favour of Revenue.
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2015 (4) TMI 997
Waiver of pre deposit - Jurisdiction of Tribunal - Whether the Hon'ble Tribunal has jurisdiction to put a condition of depositing ₹ 40 lakhs while remanding the issue back to the Commissioner of Central Excise for fresh adjudication - Held that:- Tribunal has dealt with the merits of the case at length, and held that there was no discussion or evidence available on record to show excess consumption of raw material and electricity, or any other material to show that the appellant removed the products clandestinely. It has also been recorded in the impugned order that in the audit which was conducted, no discrepancy was found in the records of the company. The Tribunal has also held that there was no indication to show that there was excess consumption of raw material, or there was misdeclaration of consumption by the appellant. After giving a detailed finding of fact that the Adjudicating Authority had not considered the various evidences which were led, and that no proper opportunity of cross-examination or hearing was afforded to the appellant, the Tribunal has set-aside the order passed by the Adjudicating Authority which had imposed liability of over ₹ 26.00 crores on the appellant. It is clear that though for setting-aside the order passed by the Adjudicating Authority and remanding the case for fresh decision, sufficient reasons have been given, but no reason, whatsoever, has been given for imposing a precondition of deposit of ₹ 40.00 lakhs by the appellant. There is even no justification for quantifying the amount ₹ 40 lakhs to be deposited by the appellant. - Tribunal may, for some specific and valid reason, have the jurisdiction to impose the condition of deposit of certain amount while remanding the case back to the Adjudicating Authority, but the same can be done only in a judicious manner and not in arbitrary manner and without justification. In the present case, the same is totally lacking. - Decided in favour of assessee.
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2015 (4) TMI 996
CENVAT Credit - Bogus invoices - entire investigation was conducted under impression that it is not commercially viable for any manufacturer to manufacture copper scraps out of copper ingots/ wires/ bars - transporters had not availed to route through RTO check post - Held that:- Probative value of the document needs to be established by independent corroboration. In the said case, the Tribunal set-aside the demand of duty and observed that there being a conspicuous absence of actual diversion of the goods in the domestic market and flow-back of funds; a demand of duty cannot be sustained on the basis of mere statements made by the transporters of goods. In the present case, we have already stated that there is absence of evidence of the huge quantity of material of 103 consignments were sold in the open market, flow back of funds, etc. In such situation, CENVAT Credit can not be denied, on the basis of statements of the transporter, evidence of third party and the goods were not transported through the check post. As per Section 14AA, if the Commissioner of Central Excise has reason to believe that the credit of duty availed of or utilized under the rules made under this Act by a manufacturer of any excisable goods; has been availed of or utilized by reason of fraud, collusion or any willful mis-statement or suppression of facts; he may direct such manufacturer to get the accounts of his factory, office, depot, distributor or any other place, as may be specified by him, audited by a cost accountant or Chartered accountant nominated by him. The cost accountant or Chartered accountant so nominated shall, within the period specified by the Commissioner of Central Excise, submit a report of such audit duly signed and certified by him to the said Commissioner mentioning therein such other particulars as may be specified. The manufacturer shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit and proposed to be utilized in any proceeding under this Act or rules made thereunder. Adjudicating authority had not directed to get the account of Appellant would be audited by a Cost Accountant or a Chartered Accountant as per the provisions of Central Excise Act, 1944. On the other hand, the appellant produced Cost certificate, Chartered Accountant certificate of utilization of input in the manufacture of final product. Therefore, the contention of the Adjudicating authority on this issue cannot be accepted. - demand of duty along with interest and penalty cannot be sustained. Accordingly, the impugned order is set aside - Decided in favour of assessee.
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2015 (4) TMI 995
Imposition of penalty - Whether the penalty under Rule 26 on the co-appellant can be waived if main appellant against whom duty interest and penalty has been confirmed, has paid duty, interest and 25% penalty in terms of proviso to Section 11A(2) - Held that:- Immunity provided under the proviso is available to only those persons to whom the notice is issued under Section 11A(1A). In the present case penalty on the appellant was proposed in the notice and imposed in the impugned order under Rule 26 of Central Excise Rules, 2002. Therefore the appellant is not covered under the category of the "other persons" as mentioned, under the proviso. Therefore in my view the immunity provided under the proviso is not applicable to the present appellant. From the said proviso, I am of the opinion that the term "person" and "any other persons" used in the proviso under Section 11A(2) means if in any case in the common show cause notice, if the duty demand was raised against more than one person under Section11A(1A) and duty interest and 25% of penalty proposed in the show cause notice is paid by both the person then against those both the persons proceedings will stand concluded, but if any other person on whom only penalty under Rule 26 of Central Excise Rules, 2002, or any other person is proposed then the proviso to Section 11A(2) is not applicable - However, considering the fact that total amount of duty confirmed is ₹ 2,79,803/- and also on the fact that entire duty, interest and 25% of penalty has been paid by the main appellant. I am of the view that the personal penalty of ₹ 50,000/- imposed on the appellant is higher side, therefore I reduce penalty of ₹ 50,000/- to ₹ 25,000 - Following decision of Commissioner of Central Excise, Raipur vs. Anand Agrawal [2013 (2) TMI 569 - CESTAT NEW DELHI] - Decided partly in favour of assessee.
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2015 (4) TMI 994
Cenvat Credit - Bogus invoices - Burden of proof - Held that:- Assessee is required to find out while taking Cenvat Credit to ensure that the input on which Cenvat Credit is taken, the relevant document is accompanied by them or not. Admittedly, in this case the appellant is able to produce the invoice against which appellant has availed Cenvat Credit and same has been entered in their RG -23 Register. Therefore, the burden cast on the revenue to prove that this is only a paper transaction and goods have not been received by the appellant at all. To ascertain this fact that appellant has not received the goods. The statement of transporter is very much relevant to find out the truth. Moreover, investigation at the end of investigation, manufacturer supplier also reveal the truth whether the manufacture supplier has supplied the goods to the appellant through the registered dealer or not. - appellant has produced invoice on the strength of which they have availed Cenvat Credit and the goods have been entered in their RG -23 register and same has been supported by the weightment slips which were produced by the appellant before the authorities below. When these material evidence are on record then the burden of not receiving the goods by the appellant shifts on the revenue which revenue failed to do so. - Decided in favour of assessee.
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2015 (4) TMI 993
Denial of refund claim - Unjust enrichment - Commissioner (A) held that as appellant has failed to produce any tangible evidence that they have passed the bar of unjust enrichment - Held that:- On perusal of the calculation sheet provided by the appellant and the invoices we find that while granting discount to their customers, the appellant included the prices reduction plus duty component and same has been ignored by the lower authorities while examining their refund claim. In these circumstances, we hold that it is the fact in record which is evident that the appellant has been able to prove that they have not recovered excess duty from their customers. Therefore, we hold that appellant has discharged the burden of unjust enrichment and consequently, is entitled for refund claim. - Decided in favour of assessee.
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2015 (4) TMI 992
Clandestine removal of goods - imposition of penalty u/s 11AC - Held that:- Excess stock of 259.50 KG of Supari, 690.20 KG of Gutkha and 4039 KG of Packing material by itself cannot be treated as an evidence of unaccounted manufacture of clearance of Kimti Brand Gutkha by RPPL during the period to which the entries in the notebook recovered from Shri Manoj Gupta pertaining for that period, there is no evidence of unaccounted purchase of principal raw material like Supari etc. As regards, the recovery of cash of ₹ 17,64,870/- from the residential premises of Shri Babu Lal Maqkhija and Shri Hira Lal Makhija and recovery of cash of ₹ 19 lakh from the residential premises of Shri Harish Makhija, in both the cases the stand of the appellant has been that this cash was meant for purchase of some property and was not for the sale proceeds of unaccounted Gutkha. In any case, in view of the judgment of the Apex Court in the case of Commissioner vs. Pandit DP Sharma reported in [2003 (5) TMI 507 - SUPREME COURT] the onus to prove that the currency represented sale proceeds of the clandestinely removed goods in on the department and it is the department which has to lead cogent evidence in this regard. But there is no such evidence. Therefore, the currencies recovered from the residential premises of Shri Babu Lal Makhija/Hira Lal Makhija Delhi and from the residential premises of Shri Harish Kumar Makhija -Kanpur cannot be held to be sale proceeds towards the clandestinely cleared goods. Merely on the basis of the entries in the notebook recovered from Shri Manoj Gupta under the heading of Kimti coupled with his statement, it cannot be concluded that those entries represent clandestine clearances of the consignments of Kimti Brand Gutkha by RPPL and on this basis duty demand of ₹ 57,51,000/- cannot be confirmed against RPPL. In this regard, we are supported by the judgements of the Tribunal in the cases of Charriot Cement Company vs. CCE (2003 (1) TMI 213 - CEGAT, KOLKATA) and Hira Enterprises and others vs. CCE Belgaon (2011 (5) TMI 896 - CESTAT BANGALORE), wherein it has been held that merely on the basis of the Railway receipts without being corroborated by other independent evidence like unaccounted procurement of raw material, unaccounted manufacture, the duty demand cannot be confirmed against the assessee. In this case, even the railway receipts under which the consignments of Kimti Brand Gutkha are alleged to have been clandestinely cleared, had been booked are also not on record and it is not known as to whether the RR numbers mentioned in the notebook of Shri Manoj Gupta under the heading Kimti represent the actual railway receipt or not. Therefore, the duty demand of Rs, 57,51,000/- against the RPPL is not sustainable. Since, the duty demand is not sustainable against RPPL, there is no question of imposition of penalty on Shri Hira Lal Makhija and Shri Harish Kumar Makhija under Rule 26 of the Central Excise Rule 2002 - Decided in favour of assessee.
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2015 (4) TMI 991
Condonation of delay - Change in office address - Held that:- Any dismissal of appeal at the threshold may turn an meritorious appeal into demeritious. So also the appellant shall be deprived of principles of natural justice. While we appreciate the principle laid down by apex court in Collector, Land Acquisition Anantnag and another Vs MST Katiji and others - [1987 (2) TMI 61 - SUPREME Court] and in N.Balakrishnan Vs M. Krishnamurthy - [1998 (9) TMI 602 - SUPREME COURT OF INDIA] and the reason stated in the dates and events chart filed by appellant, it does not appeal to the common sense how a litigant could be silent after participation in a proceeding without being for vigilant of outcome of the proceeding to act expeditiously for redressal of any wrong done to him. In the absence of vigilant attitude of the appellant, it is not possible to allow the application for condonation of delay for which that is dismissed. - Decided against assessee.
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CST, VAT & Sales Tax
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2015 (4) TMI 1002
Refusal to grant registration certificate - Held that:- Registering authority cancelled/withdrawn the provisional registration certificate under the VAT Act to the respondent - dealer mainly on the ground that commodity in which the respondent - dealer is to deal is a sensitive item, and in a particular area where the respondent - dealer is carrying on business, there are large number of bogus billing activities and therefore, apprehending that the respondent - dealer may also indulge into such bogus billing activities, the registering authority has refused the registration certificate. - On the basis of some other dealers indulging into the bogus billing activities, the dealer, who has applied for the registration certificate cannot be branded or labeled with the dealer indulging into the bogus billing activities. After granting registration certificate, if it is found that a particular dealer is indulging into the bogus billing activities and/or has indulged into the bogus billing activities, in that case after following due procedure as required, its registration certificate can be cancelled. However, on apprehension and that too on the basis of some other dealers indulging into the bogus billing activities, registration certificate cannot be denied to the respondent - dealer. - No substantial question of law arises in the present tax appeal - Decided against Revenue.
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2015 (4) TMI 1001
Disallowance of the benefit of payment of tax at compounded rates under Section 6(1) of the Tamil Nadu Value Added Tax, 2006 - petitioner had effected inter-state purchases - Held that:- When respondent has accepted the contention of the petitioner that all the purchases were effected locally, still proceeded to levy tax on a new reasoning that the petitioner has not filed any documentary evidence for having exercised the option to pay tax at compounded rates, which was not there in the show cause notice, cannot be said to be correct in law and hence the impugned order has got to be interfered with. - Decided in favour of assessee.
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2015 (4) TMI 1000
Classification of goods - Clarification of the rate of tax applicable - Whether the commodities (a) to (e) namely, Vegit-Aloo hara bara kebab, vegit aloo veg cutlet, vegit aloo yummy cheese balls, vegit mazedar bonda and vegit aloo jatpat tikki, are covered by Entry 3 to the third Schedule of the Act attracting levy of tax @ 4% or falls under the residuary entry, liable to be taxed at a higher rate - Held that:- While construing the provisions relating to commodity classification, the understanding of the commodity in its popular and commercial sense, the predominant test, has to be applied. Applying the said test, it could be construed that the commodities in question are understood in common parlance or trade parlance, as snack mix - a different commercial commodity from that of dehydrated potato flakes. It is settled principle of law that an entry in a fiscal statute has to be read as it is. Nothing could be added to enlarge the meaning of the entry. "Processed vegetables" denotes the ordinarily understanding of the phrase by a common man. Normally, 'processed vegetables' can be accepted as an alternative to 'fresh vegetables'. The 'processed vegetables' generally available in the market are in different forms viz., canned, frozen, dried, juiced. The benefits of these processed vegetables and fruits is for convenience, longer shelf life and availability around the year. - The commodities (a) to (e) referred to above are classified as, 'commodities falling under residuary entry to the Act and exigible to the appropriate rate of tax applicable thereon' and do not fall under Entry 3 of Third Schedule to the Act - Decided in favour of Revenue.
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2015 (4) TMI 999
Denial of input tax credit - Demand of differential tax - Held that:- Tax Board, after appreciation of evidence and factual finding, has come to the conclusion that the assessee sold goods to the ultimate consumers on discounted amount and it was none of the business of the Revenue to interfere in the affairs of the assessee. Even if the assessee sells goods at a loss at least revenue should not have grudge or concern. It is also not debarred under the sales tax law and/or VAT law to sell the goods below the invoice value. Once a whole seller has issued an invoice , then Input Tax Credit is allowable as per VAT invoice alone and the same requires to be allowed to the assessee. - sales tax law does not debar if the assessee chooses to sell the goods keeping in view the prospective discount or rebate which may be received by the assessee and in passing the same to the consumer on account of the business expediency or otherwise. - Tax Board has basically come to a finding based on the appreciation of evidence on record and I do not find any infirmity or perversity in the order impugned so as to call for interference of this Court - Decided against Revenue.
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Indian Laws
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2015 (4) TMI 984
Re-auction of property - default committed by the Plaintiff in payment of the balance sale consideration/bid amount - Defendant Bank proceeded to forfeit the Earnest Money Deposit made - permanent injunction - whether a suit against the measures taken under Section 13 of the SARFAESI Act is maintainable has once again attracted the attention of this Court - Held that:- Defendant in the auction notice and in terms of the conditions of the auction has not disclosed or suppressed the factum of there being an attachment of the Income Tax Department on the secured asset. The plaint does not contain any complicated facts leading to the case of fraud or how the action of the Defendant Bank is fraudulent. There are therefore no complicated issues of fact which are to be tried. It would have to be borne in mind that the auction was on “as is where is basis” and “as is what is basis”. The intending participant in the said auction is therefore expected to make necessary inquiries if one can say so having regard to the general practice adopted at the time of auction. In fact in the instant matter the Plaintiff in Paragraph 6 of the plaint accepts the position that the attachment of the Income-Tax Department does not mean that there is a bar for the sale of the said property which is under attachment. In so far as the conduct of the auction is concerned, Rule 8 applies and in terms of clause (f) thereof the authorized officer is required to disclose any other thing which the authorized officer considers it material for a purchaser to know. Hence assuming that there was a non-disclosure by the Defendant of the attachment of the Income¬Tax Department at the time of auctioning the secured assets, the same at the highest may amount to the auction being conducted in violation of Rule 8 of the Rules of 2002, and for the said reason also the instant suit does not fall within the exception carved out by Mardia Chemicals Ltd.'s case (2004 (4) TMI 294 - SUPREME COURT OF INDIA). Rules of 2002 are mandatory in nature and if the requirements of the Rules have not been waived by the borrower, the consequences would have to follow. As indicated above, in the instant case though it has been alleged against the Defendant that the sale was carried out without disclosing the attachment of the Income¬Tax Department, the Plaintiff has thereafter alleged that the re¬auction is sought to be carried out by deceit and in criminal breach of trust as a right has already been created in favour of the Plaintiff by virtue of the acceptance of the offer of the Plaintiff in the first auction. As observed in the earlier part of this order, non-disclosure of the fact of there being an attachment of the Income¬Tax Department, assuming it be so, can at the highest amount to the breach of clause (f) of Rule 8 and may therefore amount to auction sale being carried out in violation and in breach of the Rules of 2002. The Debts Recovery Tribunal is therefore vested with the jurisdiction to adjudicate whether the measures taken are in accordance with the Act and Rules. Hence apart from the fact that in the light of the averments made in the plaint of the instant suit, they cannot be said to fall in the exception carved out in Mardia Chemicals Ltd.'s case (2004 (4) TMI 294 - SUPREME COURT OF INDIA). It would also have to be held that in the instant case the suit is not maintainable in view of the fact that in the instant case there is no issue which cannot be adjudicated upon by the Debts Recovery Tribunal. - Trial Court has committed an error of jurisdiction by coming to a conclusion that the suit filed is maintainable. The impugned order is therefore required to be set aside in the revisionary jurisdiction of this court and is accordingly set aside. It is held that the suit filed by the Plaintiff is not maintainable and is accordingly dismissed. However, it would be open for the Plaintiff to take recourse to Section 17 of the SARFAESI Act and adopt appropriate proceedings before the concerned Debts Recovery Tribunal, Pune. - Appeal not maintainable.
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